Cost-Plus-Fixed-Fee (CPFF)
A cost-plus-fixed-fee (CPFF) contract reimburses allowable costs and pays a fee negotiated and fixed at inception. The fee does not vary with actual cost, though it may adjust when the work changes. FAR 16.306 governs; statutory caps limit the fee.
CPFF takes two forms. The completion form defines an end product the contractor must deliver within the estimated cost; the term form buys a stated level of effort for a stated period, with fee payable on satisfactory performance. The FAR prefers the completion form whenever the work can be defined well enough to estimate (FAR 16.306).
The fee is capped by statute: 10 percent of estimated cost in the general case, 15 percent for experimental, developmental, or research work, 6 percent of estimated construction cost for architect-engineer design (FAR 15.404-4(c)(4)(i); 10 U.S.C. 3322(b); 41 U.S.C. 3905). Before award, the contractor needs an adequate accounting system and the government needs surveillance resources (FAR 16.301-3); the type is prohibited for commercial products and services.
The structural weakness is incentive. The fee is earned whether costs run to estimate or past it, so cost control depends on government surveillance most buying offices understaff.
Regulatory Reference
FAR 16.306; FAR 16.301-3; FAR 15.404-4(c)(4)(i); 10 U.S.C. 3322(b); 41 U.S.C. 3905
RFO Status
The current Part 16 model deviation carries CPFF at section 16.304 in a condensed subpart 16.3, and new section 16.104 (Executive Order 14402) requires written justification — with agency-head approval above set thresholds — before any new cost-reimbursement award.
Category
Contract Types & Vehicles
How AcqBot Helps
AcqBot checks the CPFF preconditions before the package moves — accounting-system status, the 16.301-3 approvals, fee math against the 15.404-4 caps — and drafts the justification a cost-reimbursement selection now requires under the Part 16 deviation.
Related glossary entries
Other Transaction Authority (OTA)
Other Transaction Authority (OTA) lets certain agencies enter agreements for research, prototypes, and follow-on production that are not standard procurement contracts — largely exempt from the FAR — to attract nontraditional contractors and move faster than conventional acquisition allows.
Indefinite Delivery/Indefinite Quantity (IDIQ)
An Indefinite Delivery/Indefinite Quantity (IDIQ) contract buys an unspecified quantity of supplies or services, within stated minimum and maximum limits, over a fixed period. The government buys through task or delivery orders under FAR 16.504, with a preference for multiple awards.
Firm-Fixed-Price (FFP)
A firm-fixed-price (FFP) contract sets a price that is not subject to adjustment based on the contractor's cost experience in performance. FAR 16.202 places maximum cost risk on the contractor, who absorbs every overrun and keeps every underrun.
Time-and-Materials (T&M)
A time-and-materials (T&M) contract pays fixed hourly labor rates — wages, overhead, G&A, and profit built in — plus materials at actual cost. FAR 16.601 permits it only when the extent or duration of the work cannot be estimated accurately at award.