Cost-plus-award-fee (CPAF) contracts are ideal for driving down costs and improving performance because they incentivize the contractor to perform to its maximum capability and efficiency. Before engaging in a CPAF contract, however, the CO should determine if another contract type is better suited for the effort, as surveillance of a CPAF contract is administratively burdensome and expensive. The CO should perform a cost-benefit analysis to ensure the benefits (e.g., tighter cost control, enhanced technical capability) outweigh the costs. If that is determined to be the case, a CPAF contract is an excellent vehicle for motivating the contractor to perform.
A CPAF contract is “a cost-reimbursement ...