Hi All,

I have a doubt about the Cost Plus Incentive Fee contract problem mentioned below.

A project is contracted as a Cost-Plus-Incentive-Fee (CPIF) type of contract. The project is negotiated such that if the final costs are less than expected costs, the sharing formula for cost savings is 80:20. The targeted cost is US$ 500,000 with a 10% fee. If the project comes in at US$ 450,000, what would be the cost of the total contract

------------------------------------------------------

While calculating the Incentive Fee should we consider the % of Target Cost or the % of Actual cost.

i.e. 10% of US$500,000

                         OR

 10% of US$450,000

Please clarify my doubt.

Regards,

Nikhi