Fixed Price Incentive

Fee
Contract - Seller Fee
Share
Buyer's Share Seller's Share
S.No
.

Target
Cost

TC

1
2
3
4
5
6
7
8
9

Seller's
Fee

Target
Price

Ceiling
Price

SF TP = TC + SF CP

Actual
Cost

AC

Ratio

Ratio

Ratio

(for
cost
overrun)

(for cost
overrun)

(for cost
overrun)

SR

BSR

SSR

###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
###
###
###
###
###
60/40
0.6
0.4
Row 1
When Actual Cost is equal to Target Cost, Seller gets the full fee, and Buyer pays the T
Row 5
Point of Total Assumption is NOT the same as point of zero profit/loss (for the Seller).
Row 6
Seller may be in losses even before the Actual Cost hits the Point of Total Assumption
Row 7
When Actual Cost equals Point of Total Assumption, Buyer Price equals Ceiling Price. I

ct - Seller Fee Calculations
under Cost Overruns
Seller's Share
Cost Overrun

Buyer's Share

(of cost overrun)

Point of Total Assumption

Buyer's Price

(of
cost overrun)

BP = TP + BS
or = CP
CO = AC- TC BS = CO x BSR
SS = CO xPTA
SSR= ( ( CP - TP ) / BSR ) + TC
Whichever is
Lower
$
$
$
$101,667
$75,000

$10,000
$20,000
$30,000
$37,500
$40,000
$41,667
$50,000
$60,000

$6,000
$12,000
$18,000
$22,500
$24,000
$25,000
$30,000
$36,000

$4,000
$8,000
$12,000
$15,000
$16,000
$16,667
$20,000
$24,000

$101,667
$101,667
$101,667
$101,667
$101,667
$101,667
$101,667
$101,667

$81,000
$87,000
$93,000
$97,500
$99,000
$100,000
$100,000
$100,000

Input Columns
, and Buyer pays the Target
Price.
Calculation Columns

t/loss (for the Seller).

nt of Total Assumption.

equals Ceiling Price. In other words, at or beyond Point of Total Assumption, Buyer Price equals Ce

uns
Seller's
Profit/Loss

SP = BP - AC

$15,000
$11,000
$7,000
$3,000
$
$1,000
$1,667
$10,000
$20,000

ption, Buyer Price equals Ceiling Price

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