A fixed-price contract type that motivates the contractor to control costs and achieve performance objectives by linking profit to actual contract costs. The contract establishes a target cost, target profit, price ceiling, and a formula for sharing cost overruns or underruns between the government and the contractor. As actual costs vary from the target cost, the contractor’s profit is adjusted according to the agreed share ratio until a final contract price is determined, subject to the contract’s ceiling price. The most common form used under the Federal Acquisition Regulation (FAR) is the Fixed-Price Incentive (Firm Target) (FPIF) contract.
Fixed-Price Incentive (FPI)
A fixed-price contract linking profit to actual costs through a target cost, ceiling, and share formula to motivate cost control.
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Related Glossary Terms
The official compilation of permanent U.S. federal laws, providing the statutory basis for many contracting requirements.
A global classification system used to categorize products and services for procurement and spend analysis.
A unique 12-character identifier assigned via SAM.gov to organizations doing business with the federal government, replacing the DUNS number.
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