HKSM

The profit portion included in the seller's payment, separate from reimbursed costs.

Key Points

• Represents the seller's profit in the overall compensation.
• Distinct from reimbursed direct, indirect, and allowable costs.
• Can be structured as fixed fee, incentive fee, or award fee based on the contract type.
• Negotiated during procurement and may depend on risk, performance, or cost targets.

Example

In a CPFF contract, the buyer reimburses actual allowable costs of USD 500,000 and pays a fixed fee of USD 50,000. The USD 50,000 is the fee, meaning the seller's profit.

PMP Example Question

In a cost-reimbursable contract, what does the term "fee" most accurately describe?

1. Reimbursement of direct labor and materials
2. The seller's profit added to reimbursed costs
3. A contingency reserve for unknown risks
4. A penalty for failing to meet schedule targets

Correct Answer: B — The seller's profit

Explanation: The fee is the profit component paid to the seller and is separate from reimbursed costs.