Cost-Plus Incentive Fee

Cost-Plus Incentive Fee (CPIF) is a type of contract used in projects where the contractor is reimbursed for their costs plus an additional fee. The key feature is that the fee increases if the contractor can keep costs below a predetermined budget. This encourages efficiency because the contractor benefits from saving money. If costs exceed the budget, the contractor may receive less. Essentially, CPIF aligns the interests of both parties: the client wants to control costs, while the contractor is motivated to work efficiently to increase their earnings.