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  • Question

    What are the formulas for calculating final incentive fee on a CPIF contract?


    Answer

    There is a good chance that your contract already has the formula, but it is not in the format you would expect to see it.  The formula for calculating the final incentive fee in a Cost Plus Incentive Fee contract is expressed in words via paragraph (e) of FAR clause 52.216-10, Incentive Fee. 
     “(e) Fee payable.
    (1)  The fee payable under this contract shall be the target fee increased by _____ [Contracting Officer insert Contractor’s participation] cents for every dollar that the total allowable cost is less than the target cost or decreased by ______ [Contracting Officer insert Contractor’s participation] cents for every dollar that the total allowable cost exceeds the target cost. In no event shall the fee be greater than ____________ [Contracting Officer insert percentage] percent or less than _________________ [Contracting Officer insert percentage] percent of the target cost.”


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