HKSM
Fee
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?
- Reimbursement of direct labor and materials
- The seller's profit added to reimbursed costs
- A contingency reserve for unknown risks
- 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.
