Confusion on Cost Plus Incentive Fee vs. Award Fee

Saf -

I'd agree with Rami on this - CPIF contracts have an objective driver for the incentive such as coming in below the target cost whereas CPAF contracts are at the whim of the buyer.

Since the question indicated the benefit was tied to buyer happiness, that makes the better of the two answers a CPAF contract.

Kiron

Saf

The question is a bit vague for me as there is a fine line between both types of contract. In principal, both are cost reimbursable type of contracts where the contractor is being reimbursed for work done plus a fee for representing profit (Profit can be tangible or intangible and this is agreed to in the contract).

On the other hand, the difference between both type of contracts is as follows:

Award Fee: The amount is not predetermined in the contract and the fee is determined by the owner subjectively evaluating the contractor's performance.

Incentive Fee: The amount is predetermined in the contract based on achieving certain objectives agreed to in the contract.

Hope this helps.

RK

Rami,
I agree, question is a bit vague. Following line creates a confusion for me on choosing between CPIF and CPAF. This line creates a room for both choices:

"....plus a monetary benefit if you are happy with the work and the contractor fulfills some conditions set in the contract"

If you are happy with the work: CPAF
Contractor fulfills some conditions set in the contract [i.e.,incentive is based on the objective evaluation] : CPIF