Even in fixed price contract, you still have flexibility to finish the project at lower cost. But in Cost plus fixed fee, your profit is limited to "fixed fee"
Say if you have a firm fixed bid of Rs 100 Million for a project. You may have estimated 10% profit margin during estimation. However if while executing you find a way to cut cost you can still earn more profit , hence your profit is not limited. Now for this same project say your profit was fixed at 10 million due to CPFF contract type, then there is no way you could have made more profit.
admin
Fri, 04/26/2013 - 04:37
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Even in fixed price
Even in fixed price contract, you still have flexibility to finish the project at lower cost. But in Cost plus fixed fee, your profit is limited to "fixed fee"
Say if you have a firm fixed bid of Rs 100 Million for a project. You may have estimated 10% profit margin during estimation. However if while executing you find a way to cut cost you can still earn more profit , hence your profit is not limited. Now for this same project say your profit was fixed at 10 million due to CPFF contract type, then there is no way you could have made more profit.
Palmtree
Fri, 04/26/2013 - 07:17
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Very good answer!
Thank you!
sspawar
Fri, 04/26/2013 - 05:21
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endorse
endorse
y0zh
Fri, 04/26/2013 - 15:08
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+1
+1
crushPMP
Mon, 04/29/2013 - 03:13
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Because CPFF places an upper
Because CPFF places an upper limit (cap) on the profit margins, while a fixed bid contract can make huge profits for the reasons explained by admin