Cost-Plus-Award-Fee (CPAF)
What It Is
A cost-plus-award-fee (CPAF) contract reimburses allowable costs and pays two fee components: a (sometimes zero) base fee fixed at award, and an award fee the contractor earns based on the government's periodic, judgmental evaluation of performance against an award-fee plan (quality, timeliness, cost management, responsiveness). The award-fee determination is unilateral and generally not subject to the disputes process. It is used where the work permits the government to motivate excellent performance through subjective evaluation rather than an objective cost or delivery formula.
Who Carries the Risk
Cost risk on the government like any cost-type contract; the award fee shifts performance risk by tying part of profit to the government's subjective assessment.
When the Government Uses It
- Services and support efforts where performance quality is important but hard to capture in an objective incentive formula.
- Efforts where the government wants to motivate responsiveness and management excellence through periodic evaluations.
- Larger, longer-term contracts — uncommon on small commercial set-asides.
Key Features
| Feature | What It Means |
|---|---|
| Base fee | A fixed (often small or zero) fee paid regardless of the award-fee score. |
| Award fee | Earned through periodic government evaluations against an award-fee plan; the amount earned is the government's judgment call. |
| Award-fee plan | The criteria and evaluation periods that govern how award fee is scored — read it closely, it defines how you get paid. |
| Limited dispute rights | The award-fee determination is generally unilateral and not subject to the Disputes clause, unlike most contract decisions. |
What It Means for an SDVOSB
Like other cost-type contracts, CPAF requires an adequate accounting system and brings DCAA exposure, so it is a step up from fixed-price set-asides. The distinctive risk is that a meaningful slice of your profit rides on subjective evaluations you cannot formally dispute — so understanding and managing to the award-fee plan is essential. Limitations on subcontracting apply as on any cost-type contract under 13 CFR 125.6.
Common Pitfalls
- Not managing to the award-fee plan — the criteria define your profit, and the determination is largely outside the disputes process.
- Treating the base fee as your real profit when it may be small or zero; most of the margin is the at-risk award fee.
- Carrying cost-type accounting and audit overhead without the systems to support it.
Run the Numbers
Frequently Asked
Can I dispute an award-fee determination?
Generally no. Award-fee determinations are unilateral judgments by the government's fee-determining official and are typically excluded from the Disputes clause. That is what makes the award-fee plan so important — the criteria in it, and how you perform against them each evaluation period, decide how much fee you earn.
What is the difference between award fee and incentive fee?
Incentive fee (CPIF) moves by an objective formula tied to how final cost compares to target cost. Award fee (CPAF) is earned through the government's subjective evaluation of performance against an award-fee plan. Incentive fee is formula-driven and measurable; award fee is judgment-driven and generally not disputable.
Primary Sources
Plain-English reference, not legal advice. Contract-type selection is a contracting-officer judgment and the FAR is periodically amended — always confirm the contract type, clauses, and how the limitations on subcontracting are measured against the solicitation and your contracting officer before relying on this.
Change log (1)
- LaunchedPublished the federal contract types reference covering the pricing and delivery arrangements an SDVOSB encounters on set-asides — firm-fixed-price (FFP), fixed-price with economic price adjustment (FP-EPA), fixed-price incentive (FPIF), the cost-reimbursement family (CPFF, CPIF, CPAF), time-and-materials and labor-hour, the indefinite-delivery vehicles (IDIQ, requirements, definite-quantity), and letter contracts — each with a who-carries-the-risk callout, a key-features table, an SDVOSB-specific angle tying the type to the limitations on subcontracting, common pitfalls, FAQPage, Article, Dataset, and BreadcrumbList structured data, primary-source FAR Part 16 citations, and cross-links into the glossary, regulation explainers, how-to guides, FAQ, and the limitations-on-subcontracting and price-to-win calculators.