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    What is the difference between the terms above? contract value, total estimated cost, contract funding amount? Is the term total estimated cost used only for cost contracts are can it be used for all types of contracts?


    Answer

    You are correct, these terms are used interchangeably and occasionally incorrectly.  The use of these terms do depend on the type of contract.  The following explains these terms and other terms associated with different contract types. 
     
    Cost Plus Fixed Fee (CPFF) contract:  "Total Estimated Cost" would be the total of allowable direct and indirect costs estimated to complete the effort.  Adding the negotiated fixed fee to the total estimated cost would provide a "Contract Value".  "Contract Funding Amount" is the amount of funds obligated on the contract.  A contract can be fully funded or incrementally funded.  On a CPFF contract, the contractor will be paid allowable actual costs.  If the total allowable actual costs are different than the "Total Estimated Cost" on the contract, an increase or decrease of the "Contract Funding Amount" is required. 
     
    Firm Fixed Price (FFP) contracts:  "Total Estimated Cost" might be used prior to contract award when the contractor develops a proposal or when the government develops a negotiation objective.  Once the contract is negotiated a contract amount which includes a profit becomes the "Contract Value" or often referred to as the contract amount.  Once again the "Contract Funding Amount" is the amount of funds obligated on the contract.  The total "Contract Funding Amount" will equal the "Contract Value" on a FFP contract.  A contractor will never be paid more than the contract amount. 
     
    Occasionally, "Total Estimated Cost" and "Contract Value" are improperly used for incentive contracts. The following terminologies are associated with cost reimbursement and fixed price incentive contracts. 
     
    Cost Plus Incentive Fee (CPIF) contracts:  These contracts include a "Target Cost", a "Target Fee", a "Target Price" (the target cost plus the target fee), a "Fee Adjustment Formula (Over/Under Share Ratios), a Minimum Fee, and a Maximum Fee. 
     
    Fixed Price Incentive Firm (FPIF) contracts:  These contracts include a "Target Cost", a "Target Profit", a Target Price", a "Profit Adjustment Formula" (Over/Under Share Ratios), and a "Ceiling Price". The contractor will never be paid more than the "Ceiling Price."

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