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Cost-Reimbursable Contract

A contract in which the buyer repays the seller for allowable, documented costs and also pays an extra fee that generally represents the seller's profit.

Key Points

  • Buyer covers actual, allowable costs and pays a separate fee for the seller's profit.
  • Greater cost risk is carried by the buyer; the seller's financial risk is lower.
  • Requires strong cost tracking, reporting, and audit rights; may include a cost ceiling or not-to-exceed amount.
  • Common subtypes include CPFF, CPIF, and CPAF, which differ in how the fee is calculated.

Example

A government agency funds an R&D effort with uncertain scope. The contractor bills for labor, materials, and other allowable expenses, and also receives a negotiated fee for profit. If the contract is CPIF, the fee can increase slightly if costs are controlled below target.

PMP Example Question

A project involves exploratory work with unclear scope. The buyer wants to reimburse the contractor's allowable costs and pay a profit fee, possibly with incentives tied to cost performance. Which contract type best fits this need?

  1. Firm-fixed-price (FFP)
  2. Cost-plus-incentive-fee (CPIF)
  3. Time and materials (T&M)
  4. Unit price

Correct Answer: B — Cost-reimbursable contract (e.g., CPIF)

Explanation: Cost-reimbursable contracts pay actual costs plus a fee for profit, and CPIF adds incentives tied to performance, which suits uncertain R&D work.

Advanced Project Management — Measuring Project Performance

Move beyond guesswork and status reporting. This course helps you measure real progress, spot problems early, and make confident decisions using proven project performance techniques. If you manage complex projects and want clearer visibility and control, this course is built for you.

This is not abstract theory. You’ll work step by step through Earned Value Management (EVM), learning how cost, schedule, and scope come together to show true performance. You’ll build a solid foundation in EVM concepts, understand why formulas work, and learn how performance data actually supports leadership decisions.

You’ll master Work Breakdown Structures (WBS), control accounts, and budget baselines, then apply core EVM metrics like EAC, TCPI, and variance analysis. Through a detailed real-world example, you’ll forecast outcomes, analyze trends, and understand contingencies and management reserves with confidence.

Learn how experienced project managers monitor performance, communicate results clearly, and take corrective action before projects slip. With practical exercises and hands-on analysis, you’ll be ready to apply EVM immediately. Enroll now and start managing performance with clarity and control.



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