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                            16.402-1 Cost incentives.
        
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FAC Number: 2024-03 Effective Date: 02/23/2024
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Subpart16.016.116.216.316.416.516.616.7
Section16.40116.40216.40316.40416.40516.406
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16.402-1 Cost incentives.16.402-1 Cost incentives.       (a)                    						            Most incentive contracts include only cost incentives, which take the form of a profit or fee adjustment formula and are intended to motivate the contractor to effectively manage costs. No incentive contract may provide for other incentives without also providing a cost incentive (or constraint).                                          (b)                    						            Except for award-fee contracts (see  16.404 and  16.401(e)), incentive contracts include a target cost, a target profit or fee, and a profit or fee adjustment formula that (within the constraints of a price ceiling or minimum and maximum fee) provides that-                                                         (1)                          								                Actual cost that meets the target will result in the target profit or fee;                                                            (2)                          								                Actual cost that exceeds the target will result in downward adjustment of target profit or fee; and                                                            (3)                          								                Actual cost that is below the target will result in upward adjustment of target profit or fee.    **Parent topic:**  16.402 Application of predetermined, formula-type incentives.
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