Fixed Price plus Award Fee Contract (FPAF)

Fixed Price plus Award Fee Contract (FPAF)

A Fixed Price plus Award Fee (FPAF) contract is a type of contract used in procurements where the contractor is paid a fixed price for the work performed, but also has the potential to earn an additional award fee based on their performance.

Here's an example of how an FPAF contract might work:

Let's say the U.S. government needs to develop a new software application to help manage a complex system of data for a government agency. The government would issue a request for proposal (RFP) to solicit bids from private companies to perform the work.

After evaluating the proposals, the government selects a contractor and negotiates a Fixed Price with Award Fee contract. The contract specifies that the contractor will be paid a fixed price of $10 million to complete the work, but also has the potential to earn an additional award fee of up to $1 million based on their performance.

The award fee is based on a set of criteria specified in the contract, such as meeting key milestones, delivering the software on time, and achieving high levels of quality. If the contractor meets or exceeds the performance criteria, they can earn a portion of the award fee. If they fall short, they may not receive any award fee at all.

In this way, the FPAF contract motivates the contractor to perform at a high level and meet the government's expectations. If the contractor delivers high-quality work on time and within budget, they have the potential to earn a significant bonus on top of the fixed price of the contract.