The government uses cost-reimbursement contracts when the work to be performed involves indeterminate labor hours, a labor mix, or unspecified supplies. In essence, a cost-reimbursement contract is issued when the price cannot be accurately estimated as it can for an FFP contract. It is imperative that the CO and anyone working with the CO understand the nuances of the cost-reimbursement contract—its characteristics, the contract types it comprises, and how its variations differ in terms of fee, use, financial requirements, and associated risks.
The six types of cost-reimbursement contract are (1) cost, (2) cost-sharing, (3) cost-plus-fixed-fee (CPFF), (4) cost plus-a-percentage-of-cost (CPPC), (5) cost-plus-award-fee (CPAF), and (6) cost-incentive. ...
