Cost Incentive Contracting Star Chart

Once share ratios have been determined for a prospective buy, regardless of the methodology as to how they were determined or calculated, this chart will help you select the appropriate cost incentive contract arrangement. As you can see from the chart, there is an area of overlap between suggesting use of a Cost Plus Incentive Fee (CPIF) or Fixed Price Incentive Firm (FPIF) from share ratios of 75/25 to 80/20.  The primary consideration as to whether you would choose and FPIF or CPIF contract in those share ranges is the presence and degree of technical risk. If there is a high degree of technical risk present, recommend using a CPIF type contract where the contractor is required to provide best efforts vs using a FPIF contract where the contractor is required to “deliver or default”.