Cost-Plus-Fixed-Fee (CPFF)

A cost-reimbursement contract type under which the Government reimburses the contractor for all allowable, allocable, and reasonable costs incurred in performing the contract, together with a fixed fee negotiated at the time of award. Unlike incentive or award-fee contracts, the fixed fee does not vary based on the contractor’s performance, provided the contract is completed satisfactorily. CPFF contracts are commonly used for research, development, engineering, and other projects where the scope or technical uncertainty makes it impractical to estimate costs accurately in advance. Proposal teams should focus on developing realistic cost estimates, demonstrating technical capability, and justifying proposed staffing and indirect rates, as the fee is generally established during contract negotiations rather than through performance incentives.