# Fixed Price Incentive

Fee
Contract - Seller Fee
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

(of cost overrun)

Point of Total Assumption

(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