A firm contracted an event management company to conduct the annual sales day event. The agreement states that the event management company will charge the firm for the actuals and receive 8% of the total cost. What type of contract is this?
In the scenario:
The event management company is reimbursed for actual costs (e.g., venue, catering, logistics).
In addition, the company receives 8% of the total cost — this percentage-based fee acts as an incentive or award for performance or cost control.
This setup aligns with a Cost Plus Award Fee (CPAF) contract, where:
The buyer reimburses the seller for allowable actual costs.
The seller earns an additional fee, which may be based on performance or a predetermined award (in this case, 8% of total cost).
Why the other options are incorrect:
A. Charges based on hours worked and materials used, not percentage of costs.
B. Price is fixed with incentives tied to cost savings or performance, not reimbursement of actual costs plus a percentage.
C. Reimburses actual costs plus a predefined fixed fee, not a percentage-based award.
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