A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
Cost-plus-fixed-fee tends to me more advantageous to the buyer as opposed to the seller as it caps the fee and the fee will not swell or grow based on the future expansion or fluctuations of the budget. However, it also can protect the seller because, in the event the budget tightens, it provides a fixed fee.
Are There Other Types of “Cost Plus” Contracts?
There are other types of cost-plus contracts in addition to the cost-plus fixed fee contracts: 1.
Cost Plus Incentive Fee Contract (CPIF):In this type of contract, the buyer reimburses the contractor for actual costs and also pays an incentive fee if the contractor meets defined performance criteria.
The incentive fee is adjustable, usually based o.
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Are They Common Aspects of A Breach of Construction Contract?
CPFF contracts, while providing flexibility in adjusting costs, may still be subject to breaches.
A breach of construction contractcould happen, for instance, if there are disagreements about what constitutes “actual costs” or if the buyer feels the seller is not managing costs effectively due to the guarantee of cost coverage.
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What are the different types of cost-plus contracts?
There are other types of cost-plus contracts in addition to the cost-plus fixed fee contracts:
Cost Plus Incentive Fee Contract (CPIF): In this type of contract the buyer reimburses the contractor for actual costs and also pays an incentive fee if the contractor meets defined performance criteria. ,
What is a cost plus fixed fee contract?
At No Cost! What Is a “Cost Plus Fixed Fee Contract”.
A “Cost Plus Fixed Fee Contract” is a type of contract where the buyer agrees to cover the actual costs, risks, and a fixed fee payment that is usually calculated as a percentage of the initial estimated project costs.
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What is a cost-plus percentage of cost contract (CPPC)?
Cost Plus Percentage of Cost Contract (CPPC):
This is a type of cost-plus contract where the buyer agrees to cover the actual costs plus a percentage of these costs as the contractor’s fee.
This type of contract can be risky for buyers because it provides little incentive for contractors to control costs. ,
What Is The Difference Between Cost-Plus and Fixed Price Contracts?
While both types of contracts are used in various industries, they have significant differences in terms of risk allocation, price determination, and flexibility.
1) Risk Allocation: In a cost-plus contract, the risk largely falls on the buyer because if the project’s actual costs exceed initial estimates, the buyer is responsible for covering thes.
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When Is A Cost Plus Fixed Fee Contract used?
CPFF contracts are typically used in circumstances where it’s difficult to estimate the project’s overall costs due to a lack of clarity about the project’s scope, unpredictable variables, or the likelihood of changes in project requirements.
They provide a measure of flexibility and adaptability that other contract types, like fixed-price contract.
