1

Fixed price incentive fee-: If seller exceed specificed performance criteria like getting work done fasterr, cheaper, then seller gets incentive.

Fixed price award fee-: If seller exceed specificed performance criteria like getting work done fasterr, cheaper, then seller gets award. The difference between FPAF vs FPIF is that here possible award amount is determined in advance.

Am I right? If I am not right, what is the exact difference between these two?

Rita Mulcahy's book even provides an example on this. But example is just confusing to me. I will put it here-:

FPIF example-: Contract=$110. For every month early the project is finished an additional $10 is paid to seller.

FPAF example-: Contract=$110. For ever month performance exceeds the planned level by more than 15% an additional $5 is awarded to the seller with maximum award of $25.

2

The primary difference between an incentive fee and an award fee is one of the ability to measure objectively against criteria. An incentive fee is used where one can objectively measure; an award fee is when the application of an additional fee is based on a subjective assessment.

https://acqnotes.com/acqnote/careerfields/award-fee-contracts

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