CPFF

A Cost-Plus-Fixed-Fee contract reimburses the contractor for allowable costs incurred in performing the work plus a fixed fee (profit) that does not vary with actual costs. CPFF contracts are used when costs cannot be estimated with sufficient accuracy to use a fixed-price contract.

The fee is established at contract award and remains fixed unless the scope changes. The contractor assumes minimal cost risk but must have an accounting system adequate to track and segregate costs by contract. CPFF is common in research and development and other efforts where outcomes are uncertain. Contractors must follow FAR cost principles and may face audit.