Cost-Plus-Fixed-Fee (CPFF) Contract

The cost-plus-fee contract is also referred to by the abbreviation of CPFF, and represents a variant of a cost reimbursable contract in which the buyer provides reimbursement to the selling party for the allowable costs that have been accrued by the seller in the commission of the service, the creation, manufacture, delivery of the product, or in any other performance of the contracted work. However, unlike a standard cost-plus-fee contract, the additional fee is not intended to be calculated as a percentage measure of the total costs, in which the fee in these situations would vary based on the actual costs. Instead, the cost-plus-fixed fee contract provides for a pre-determined fixed fee reimbursement. 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.

This term is defined in the 3rd and the 4th edition of the PMBOK.

1 Comment

  1. How does a CPFF approach on contracts ease the concern for the buyer relative to project risk and cost? I understand the later, but not the former.

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