Cost-Reimbursable Contract
A contract that pays the seller's actual costs plus a fee, placing more risk on the buyer.
A cost-reimbursable (CR) contract reimburses the seller for allowable, allocable, and reasonable costs incurred, then adds a fee for profit. PMBOK recognizes three variants: Cost Plus Fixed Fee (CPFF), a set dollar fee; Cost Plus Incentive Fee (CPIF), where a sharing ratio adjusts the fee against a target cost; and Cost Plus Award Fee (CPAF), where the buyer subjectively scores performance to set the award. CR suits work too uncertain to price up front, but cost risk shifts largely to the buyer. A common trap is confusing CR with Time and Material (T&M), a hybrid using negotiated rates with no defined scope, best for smaller jobs.
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