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Paul Naybour Discussion started by Paul Naybour 5 years ago
A contractor is conducting a $100,000 contract using a cost plus incentive fee of $10,000. It is agreed to split the pain : gain 80:20 between the buyer : seller (i.e. the seller carries 20% of the pain of gain). On completion the supplier advices that the work cost $90,000. What are you obliged to pay the seller.

As a cost plus contract you pay the cost of $90,000

The saving on the costs in $100,000 - $90,000 = $10,000

This is shared 80:20 with the seller. So they get 20% of $10,000 = $2,000

Hence the adjusted fee is $10,000 + $2,000 = $12,000.
Replies
Paul Naybour
Paul Naybour There is a four step process to these questions

Step one) Work out the pain (over or under spend)
Step two) work out the split of this pain or gain...
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5 years ago
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Colin Bryce
Colin Bryce Cheers Paul 5 years ago
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