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Cost Plus Incentive Fee - A PMP Definition
July 5, 2009 | Author: PM Hut | Filed under: Cost Management, PMP
Cost Plus Incentive Fee - A PMP Definition
By Sivaraj Dhanasekaran
This is part of the Cost Reimbursable Contract which is one of the tools and techniques of the Plan Purchases and Acquisitions.
As per Cost Reimbursable contract, all the allowable costs to produce the products or services (deliverable) of the project is charged to the buyer of the contract. As a nature of this contract buyer carries the bigger risk as the total cost is uncertain.
The Cost Plus Incentive Fee (CPIF), the seller is reimbursed all the allowable cost and an incentive fee if they exceed the pre-defined performance. Cost is uncertain and Fee is fixed in this contract.
Pros:
- Encourages the seller for better cost control to improve the project performance
- Motivates the seller to improve project performance
- Moderate risk for buyer
Dhanasekaran, Sivaraj is a certified PMP and works as a Senior Project Manager in one of the leading MNC banks in Singapore. He has over 13 years IT experience and handled banking projects as well as managed production support team for complex Treasury applications for various MNC banks.
He loves to share his experience and knowledge gained as Project Manager and also providing guidance to people who wanted to obtain PMP certification. He runs a project management forum at www.sgpm.wordpress.com.
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