Cost Plus Fixed Fee (CPFF) is NOT:

Cost Plus Fixed Fee (CPFF) is NOT:

• A. No Ceiling Price (Greater risk to buyer).
• B. All Costs are paid (subject to interpretation of 'Allowable Cost').
• C. Risks are more associated with the CM.
• D. All costs for performing the contract work and a fixed fee payment is paid by the buyer.

Answer: (C)

CPFF pays the contractor for all allowable costs incurred plus a fixed fee. The fixed fee is the contractor’s profit and does not depend on the final cost of the work. A key risk pattern here is that, without a ceiling price, the buyer (owner) bears the risk of cost overruns because costs can keep rising and still be reimbursed as long as they’re allowable. The contractor’s costs are reimbursed, and the fixed fee remains the same, so the contractor isn’t absorbing those overruns. Because of that, the idea that the risks are more associated with the Construction Manager isn’t accurate for CPFF. The ownership and cost-risk burden sits with the buyer, not with the CM. The other points describe CPFF correctly: no ceiling price increases buyer risk; costs are reimbursed subject to what’s allowable; and the buyer covers all contract costs plus the fixed fee.

CPFF pays the contractor for all allowable costs incurred plus a fixed fee. The fixed fee is the contractor’s profit and does not depend on the final cost of the work. A key risk pattern here is that, without a ceiling price, the buyer (owner) bears the risk of cost overruns because costs can keep rising and still be reimbursed as long as they’re allowable. The contractor’s costs are reimbursed, and the fixed fee remains the same, so the contractor isn’t absorbing those overruns.

Because of that, the idea that the risks are more associated with the Construction Manager isn’t accurate for CPFF. The ownership and cost-risk burden sits with the buyer, not with the CM. The other points describe CPFF correctly: no ceiling price increases buyer risk; costs are reimbursed subject to what’s allowable; and the buyer covers all contract costs plus the fixed fee.