What type of contract provides for payment to the contractor of a negotiated fee that is fixed at inception?

• A. Cost-Plus-Incentive-Fee Contract (CPIF)
• B. Cost-Plus-Fixed-Fee Contract (CPFF)
• C. Firm-Fixed-Price Contract (FFP)
• D. Time-and-Materials Contract (T&M)

Answer: (B)

In a contract where the buyer reimburses the contractor’s allowable costs and pays a fixed amount of profit negotiated at the start, you’re looking at a cost-plus-fixed-fee arrangement. The key idea is that the contractor’s payment includes two parts: reimbursement of allowable costs and a fixed fee that is agreed upon when the contract begins. That fixed fee does not change with how much work is actually performed or how costs differ later, providing the contractor with a predictable profit while transferring most cost risk to the buyer.

This differs from a cost-plus-incentive-fee contract, where part of the fee depends on performance or other metrics and can vary with outcomes. It also differs from a firm-fixed-price contract, which sets a single price for the entire deliverable and does not revolve around reimbursing costs plus a separate fixed fee. Time-and-materials pays based on labor hours at set rates plus materials, not a fixed upfront fee.