Cost Plus Fixed Fee

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harin4627
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Cost Plus Fixed Fee

Postby harin4627 Sun Jun 15, 2014 5:10 pm

In this type of contract, the fixed fee is based on what? Is it based on the initial estimate or actual cost incurred finally?
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Re: Cost Plus Fixed Fee

Postby namita Sun Jun 15, 2014 6:14 pm

All cost plus aka cost reimburse contracts have actual cost incurred plus either fixed fee or incentive fee or award fee etc. Depending on type of contract. In this case it's normal cost plus pre agreed fees for services provided by contractor.
harin4627
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Re: Cost Plus Fixed Fee

Postby harin4627 Sun Jun 15, 2014 6:58 pm

PMBOK page 364 says " the seller is reimbursed for all allowable costs for performing the contract work, and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs" . Some question banks says "final costs"...that is where the confusion is. Does the PMBOK refers general practice? If the question says just "cost plus fixed fees" what stand we should take?
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saket
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Re: Cost Plus Fixed Fee

Postby saket Mon Jun 16, 2014 2:15 am

can you please share the question in discussion , it will help in knowing the intent
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harin4627
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Re: Cost Plus Fixed Fee

Postby harin4627 Mon Jun 16, 2014 7:12 pm

question attached
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namita
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Re: Cost Plus Fixed Fee

Postby namita Tue Jun 17, 2014 5:36 am

As far as this question is concerned, Option highlighted is the appropriate answer because we fix the fees and not the percentage. This concept should be clear from the definition.

Now coming to your confusion, I am still not sure on what exactly is troubling. Final cost generally comes in to picture where award fee or incentive fee (ideally where fee is variable on the basis of different factors). May be if some one is using Final Cost for CPFF type contract as well its just to use the same terminology across Cost Plus type of contracts
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Re: Cost Plus Fixed Fee

Postby sandipfasate Tue Jun 17, 2014 10:45 am

Practically fixed fee is the the % of actual cost incurred. But I am not sure, is the fix fee is mentioned in the contract or not?
harin4627
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Re: Cost Plus Fixed Fee

Postby harin4627 Tue Jun 17, 2014 2:16 pm

I am still not clear.
It is talking about the calculation of fixed fee based on a percentage of costs. PMBOK says it is calculated as a percentage of the intial estimated cost. But this answer says it as a percentage of actual cost.
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Re: Cost Plus Fixed Fee

Postby namita Tue Jun 17, 2014 5:05 pm

Hari, questions is asking untrue statement
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Re: Cost Plus Fixed Fee

Postby harin4627 Tue Jun 17, 2014 5:09 pm

Thanks....Now I got it.....Oh my brain :!:
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Re: Cost Plus Fixed Fee

Postby namita Tue Jun 17, 2014 5:12 pm

You are welcome. This is a common catch in exam to overlook...not true, except kind of words in question :)

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