level of effort is identified and agreed upon in advance, and there is reasonable assurance that the intended result cannot be achieved by expending less than the stipulated effort. The estimated price of a FFP/LOE term contract must be $150,000 or less, unless approved by the chief of the contracting office. [FAR 16.207]
CON091 CONFUN 13 Module 3 v2.8R Cost-Reimbursement Contract Types The following are the CR cost or pricing arrangements listed in regulation [FAR subpart 16.3]: Cost Cost-Sharing (CS) Cost-Plus-Incentive-Fee (CPIF) Cost-Plus-Award-Fee (CPAF) Cost-Plus-Fixed-Fee Cost A cost contract type is a CR cost arrangement in which the contractor receives no fee. It may be appropriate for R&D work, particularly with nonprofit educational institutions or other nonprofit organizations. [FAR 16.302] Cost-Sharing In a CS cost arrangement, the contractor receives no fee and is only reimbursed for an agreed upon portion of the allowable costs incurred. A CS contract type may be used when the contractor agrees to absorb a portion of the costs in the expectation of substantial benefits. [FAR 16.303] Cost-Plus-Incentive-Fee A CPIF pricing arrangement provides for the initially negotiated fee to be adjusted later by the fee adjustment formula based on the relationship of total allowable costs to total target costs, which is intended to incentivize the contractor to manage the contract effectively. At award, this contract type includes a target cost, target fee, minimum and maximum fees, and fee adjustment formula. After contract performance, the fee
CON091 CONFUN 14 Module 3 v2.8R payable to the contractor is determined in accordance with the formula. When the total allowable costs are less than the target cost, the formula provides for increases in fee above the target fee, up to the maximum fee. When the total allowable costs exceed the target cost, the formula provides decreases in fee below the target fee, down to the minimum fee. [FAR 16.405-1(a)] Cost-Plus-Award-Fee A CPAF pricing arrangement is a cost-reimbursement contract type that provides for a fee that consists of a base amount that is fixed at contract award, if applicable and at the discretion of the contracting officer, and an award-fee amount that the contractor may earn in whole or in part during contract performance to motivate the contractor to provide exceptional performance [FAR 16.405-2]. Unlike other incentive contract types (i.e., FPIF, FPIS, and CPIF), CPAF contracts use subjective criteria to evaluate the contractor’s performance rather than objective targets. The performance evaluation criteria and other procedures for evaluating the award-fee are stated in the award-fee plan that is included in the contract. [FAR 16.401(e)] Cost-Plus-Fixed-Fee A CPFF pricing arrangement is a cost-reimbursement contract type that includes a negotiated fee that is fixed at the time of contract award. The fixed fee does not vary based on actual costs incurred, but can be adjusted as a result of changes in the contract requirements. As discussed earlier, this contract type provides the least incentive for the contractor to control costs.