What is Cost Plus Incentive Fee in SAP PSM-GPR - Procurement for Public Sector?

SAP Term: Cost Plus Incentive Fee

• Component: PSM-GPR

• Component Name: Procurement for Public Sector

• Description: A pricing arrangement in which payment by an organization to a supplier consists of two components: Target supplier costs A target fee for providing the requested goods or services, which is adjusted within specified limits according to the real supplier costs. The fee is reduced if costs exceed the target and increased if costs are below target. This provides an incentive for the supplier to control costs.

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• Key Concepts: 
  Cost Plus Incentive Fee (CPIF) is a type of contract used in public sector procurement. It is a cost-reimbursement contract that pays the contractor a fee based on the actual costs incurred plus an incentive fee based on performance. The incentive fee is determined by the contractor's performance against predetermined criteria. 
  
  How to use it: 
  In the SAP PSM-GPR Procurement for Public Sector component, CPIF contracts are used to incentivize contractors to meet or exceed predetermined performance criteria. The contractor's performance is evaluated against the criteria and an incentive fee is paid out based on the results. The incentive fee can be either a fixed amount or a percentage of the total cost of the project. 
  
  Tips & Tricks: 
  When setting up a CPIF contract in SAP PSM-GPR Procurement for Public Sector, it is important to clearly define the performance criteria and the incentive fee structure. This will ensure that both parties understand what is expected and how the incentive fee will be calculated. 
  
  Related Information: 
  For more information on CPIF contracts, please refer to the SAP Help Portal or contact your local SAP representative.