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
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