Sec. 21.06.03.04. Types of Cost Incentive Contracts

A. Definitions.

(1) "Cost-plus incentive fee" means a contract which provides for the reimbursement to the contractor of allowable costs incurred up to a ceiling amount and establishes a formula by which the contractor is rewarded for performing at less than target cost or is penalized if it exceeds target cost.

(2) "Fixed-price incentive contract" means a fixed-price contract in which the parties establish at the outset a target for performance and a formula by which the contractor is rewarded for exceeding performance and penalized if performance is not met.

(3) "Target" means the parties agreed best estimate.

B. Determinations.

(1) Before entering into any incentive contract, the procurement officer shall make a determination that the proposed contractor's accounting system shall permit timely development of all necessary cost data in the form required by the specific type of contract contemplated and that the contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles.

(2) Before entering any cost-plus incentive fee contract, the procurement officer shall make the additional determinations required under Regulation .03B(2)(a).