Assumptions and method
Assumes an agreed fixed-price incentive arrangement and buyer cost-share fraction. Real contractual terms control; this is not a contract interpretation.
Test a scenario
Use the result in a decision
Use the same scope and test commercial assumptions.
Assumes an agreed fixed-price incentive arrangement and buyer cost-share fraction. Real contractual terms control; this is not a contract interpretation.
Set a baseline and change one assumption to compare outcomes.
A worked example
Follow the fixed teaching example
- Target price = 100,000 + 15,000 = 115,000.
- Illustrative threshold = 100,000 + (130,000 − 115,000)/0.8 = 118,750. Actual contract terms determine applicability.
These illustrative inputs describe a project scenario, not a published benchmark. All monetary inputs use the same currency and price basis.
- Target cost
- 100000
- Target profit
- 15000
- Ceiling price
- 130000
- Buyer share of cost difference (%)
- 80
- Point of total assumption
- 118,750
- Target price
- 115,000
Interpret the output only within the assumptions above. Changing the inputs changes the result; it does not validate the inputs.
Source & credit
Standard incentive-contract arithmetic. The link gives one jurisdiction’s contractual context, not a universal rule.
Federal Acquisition Regulation: incentive contracts
This is independently written code and explanation of the underlying method. The linked publication, its diagrams and its trademarks remain its owner’s material; no permission to reuse them is implied.