Cost-Plus-Incentive-Fee Contract

A Cost-Plus-Incentive-Fee (CPIF) contract is an agreement where the buyer agrees to pay the seller for the project's actual costs plus an additional fee as an incentive for the seller to control costs and perform efficiently. The fee is usually fixed but can vary based on how well the seller manages expenses and meets performance targets. This type of contract encourages collaboration, as both parties share the risks and rewards related to cost savings or overruns, aligning their interests toward completing the project efficiently and within budget.