Cost Plus Inventive Fee Contract
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1. Given the following data, develop an appropriate CPIF pricing arrangement.
Cost Fee
Target $100 $10
Optimistic $ 80 $12
Pessimistic $120 $ 7
a. What should be the maximum fee?
b. What should be the minimum fee
c. What should be the under-target share ratio?
d. What should be the over-target share ratio?
e. What is the range of incentive effectiveness?
2. Given the following data for CPIF pricing arrangement
Target Cost $200
Target Fee $ 16
Share Ratios:
Under target 80/20
Over target 85/15
Maximum Fee $ 26
Minimum Fee $ 10
What is the range of incentive effectiveness?
3. Given the following information regarding a CPIF contract, what would be the final contract price at the different final cost amounts.
Target Cost $2,000,000
Target Fee $ 150,000
Share Ratio:
Under Target 90/10
Over Target 80/20
Maximum Fee $ 240,000
Minimum Fee $ 60,000
a. Final cost is $1,000,000
b. Final Cost is $1,800,000
c. Final cost is $2,150,000
d. Final cost is $2,400,000
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The solution examines the cost plus inventive fee contracts.
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1. Given the following data, develop an appropriate CPIF pricing arrangement.
Cost Fee
Target $100 $10
Optimistic $ 80 $12
Pessimistic $120 $ 7
a. What should be the maximum fee?
Maximum fee should be the fee at the optimistic cost. That fee is $12.
b. What should be the minimum fee
Minimum fee should be the fee at the pessimistic cost. That fee is $7.
c. What should be the under-target share ratio?
Under target share ratio
Contractor share = Scu = (Pt - Po)/(Ct-Co)*-100=(10-12)/(100-80)*-100=10
Government share = 100-Scu=90
under-target share ratio as 90/10.
d. What should be the over-target share ratio?
over target share ratio
Contractor share = Sco = (Pt - Pp)/(Ct-Cp)*-100=(10-7)/(100-120)*-100=15
Government share = ...
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