PMI Scheduling Professional Certification (PMI-SP) Practice Exam

Which of the following is true about a Cost Plus Award Fee contract?

1. Fees are paid only based on actual costs estimated

2. Additional payments depend on customer satisfaction

3. It is fixed and does not allow for any variability

4. It does not require documentation of costs incurred

The correct answer is: Additional payments depend on customer satisfaction

A Cost Plus Award Fee contract is structured to pay the contractor for their allowable costs and to also provide an additional fee that is contingent upon certain performance criteria, often including customer satisfaction. This additional payment serves as an incentive for the contractor to meet or exceed desired outcomes, ensuring that the client's expectations are closely aligned with the contractor's efforts. The true aspect of this contract type is that the additional payments, beyond the reimbursement of costs, depend significantly on how satisfied the customer is with the work performed. This means that the contractor must not only manage costs effectively but also deliver quality and value in alignment with the client's objectives. Thus, the performance evaluation can lead to increased earnings based on the level of satisfaction, which is a core characteristic of this contract type. Understanding this structure is essential for managing expectations and delivering projects under a Cost Plus Award Fee contract, as the incentives drive performance towards the client’s satisfaction benchmarks.