Cost Plus Fixed Fee Contracts
Q. We would like to incentivize our CPFF contractors to perform their contracts in a timely manner. Can we structure our CPFF contracts to pay the fixed fee upon submission of contract deliverables instead of as a percent of cost incurred on a monthly basis?
A. We believe this would be an excellent approach to motivating the contractor to complete the contract on time. In fact the fixed fee is only fully earned when the contract is completely performed. It is not earned simply for incurring costs. Your approach recognizes the contractor’s responsibility under the contract to successfully perform as consideration for the payment of fee. Payment of costs, however, is made on the basis of “best efforts” as the costs are incurred. (Posted: February, 2013)