A vendor offers a fixed-price incentive fee contract with a target cost of $200,000, target fee of $30,000, a sharing ratio of 80/20 (buyer/seller), and a ceiling price of $250,000. If actual costs come in at $180,000, what is the total price paid to the seller?

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Accepted Answer

$214,000. Cost underrun = 200,000 - 180,000 = $20,000; the seller keeps 20% of savings = $4,000. Final fee = 30,000 + 4,000 = $34,000. Total price = actual cost + fee = 180,000 + 34,000 = $214,000, which is below the ceiling. The $210,000 distractor omits the incentive share.

A vendor offers a fixed-price incentive fee contract with a target cost of $200,000, target fee of $30,000, a sharing ratio of 80/20 (buyer/seller), and a ceiling price of $250,000. If actual costs come in at $180,000, what is the total price paid to the seller?

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