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25 September 2012 Incentive contracts for development projects
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Abstract
Finding a contract vehicle that balances the concerns of the customer and the contractor in a development project can be difficult. The customer wants a low price and an early delivery, with as few surprises as possible as the project progresses. The contractor wants sufficient cost and schedule to cover risk. Both want to clearly define what each party will provide. Many program offices do not want to award cost plus contracts because their funding sources will not allow it, their boards do not want an open ended commitment, and they feel like they lose financial control of the project. A fixed price incentive contract, with a mutually agreed upon target cost, provides the owner with visibility into the project and input into the execution of the project, encourages both parties to save costs, and stimulates a collaborative atmosphere by aligning the respective interests of customers and contractors.
© (2012) COPYRIGHT Society of Photo-Optical Instrumentation Engineers (SPIE). Downloading of the abstract is permitted for personal use only.
David T. Finley, Byron Smith, and B. DeGroff "Incentive contracts for development projects", Proc. SPIE 8449, Modeling, Systems Engineering, and Project Management for Astronomy V, 84490S (25 September 2012); https://doi.org/10.1117/12.926803
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