Cost Plus Fixed Fee(CPFF)

Overview

A Cost Plus Fixed Fee (CPFF) contract reimburses the contractor for all allowable, allocable, and reasonable costs incurred during performance, plus a fixed dollar amount as profit (the "fee"). The fee does not change regardless of actual costs, giving the contractor limited financial risk while keeping the government responsible for cost overruns.

Why It Matters in GovCon

CPFF contracts are used when the scope of work is too uncertain to establish a firm fixed price. They are common in research and development, complex IT projects, and advisory services where requirements evolve. Understanding cost accounting standards is essential for contractors performing under CPFF arrangements.

Key Details

• Allowable Costs: Only costs that comply with FAR Part 31 cost principles are reimbursable. Unallowable costs (entertainment, lobbying, etc.) are excluded.
• Fixed Fee: Negotiated at award and does not change unless the contract scope changes. Typically ranges from 6% to 10% of estimated costs.
• Variants: CPFF contracts come in completion form (a defined deliverable) and term form (a level of effort over a period).
• Auditing: DCAA audits are common to verify that billed costs are allowable and properly allocated.

Related Terms

• Firm Fixed Price (FFP)
• Cost Accounting Standards (CAS)
• Defense Contract Audit Agency (DCAA)
• Allowable Costs