What type of contract establishes a price ceiling at which point all additional costs are the responsibility of the seller?
A) Cost Plus Incentive Fee (CPIF)
B) Time and Material (T&M)
C) Firm Fixed Price (FFP)
D) Fixed Price Incentive Fee (FPIF)
This week’s correct answer is:
Fixed Price Incentive Fee Contracts (FPIF)
This fixed-price arrangement gives the buyer and seller some flexibility in that it allows for financial incentives tied to achieving agreed upon metrics. Typically such financial incentives are related to cost, schedule, or technical performance of the seller. Under FPIF contracts, a price ceiling is set, and all costs above the price ceiling are the responsibility of the seller, who is obligated to complete the work.
A Guide to the Project Management Body of Knowledge, (PMBOK® Guide)- Sixth Edition, Project Management Institute, Inc., 2017 (page 471)
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