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Types of Contract

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Types of Contract

Postby umeshbww Sat Sep 06, 2014 3:04 pm

Is there any post about types of Contract with number examples for good understanding?

I really liked the way Saket explained here :

saket wrote:
A project is contracted as a Cost-Plus-Incentive-Fee (CPIF) type of contract. The
project is negotiated such that if the final costs are less than expected costs, the
sharing formula for cost savings is 75:25. The targeted cost is US$ 100,000 with an
8% incentive fee on the targeted cost. If the project comes in at US$ 80,000, what
would be the cost of the total contract?

Cost-Plus-Incentive-Fee (CPIF) : It mean seller will get repayment of all the money he spend and plus some incentive. In this incentive is fixed. it is 8% of the target cost which is 100,000*.08 = 8,000

The actual cost was 80,000 , so seller also gets this money, 80,000 + 8000 = 88,000

Now time to look at sharing, this question is not giving explicit idea of who gets 75% and who 25% in general such rations are written as buyer: seller ratio. so we get that 25% is what seller get from saving of 20,000 which mean 5,000

so total money seller gets is 80,000+8,000+5,000 = 93,000
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