Dictionary of Procurement Terms

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  • Cost Estimate

    A forecast amount as distinguished from an actual outlay, based upon related cost information available at the time and anticipated future conditions. The process of calculating the probable cost of a job.

  • Cost Objective

    A function, organizational unit, or contract for which costs are to be determined and cost data accumulated.

  • Cost of Goods Sold

    The dollar amount equal to beginning inventory plus net purchases less ending inventory. (Schiller, 2000)

  • Cost Ordering

    CANADIAN In calculating economic order quantity, the costs which increase with the number of orders placed; includes costs related to the clerical work of preparing, issuing, following and receiving orders, physical handling of goods, inspection, and machine set-up costs, if the order is being manufactured.

  • Cost Plus Award Fee Contract (CPAF)

    A cost reimbursement contract that provides for a base fee amount fixed at inception of a contract, and an additional fee to be determined at time of fee award that is based on an evaluation by the purchaser as to the quality of the contract performance, and the evaluator’s assessment as to the fee amount necessary to motivate the contractor toward excellence.

  • Cost Plus Fixed Fee Contract (CPFF)

    A contract whereby the contractor is reimbursed for its actual incurred cost for material, labor, and other agreed to incidentals, plus a fixed sum established in the contract. (Harney, 1992)

  • Cost Plus Incentive Fee Contract (CPIF)

    A contract whereby the contractor receives additional compensation for keeping the total amount expended below the agreed-upon maximum contract amount or for achieving certain pre-specified goals during the performance of the contract. Often used in construction contracts to assure completion of the building project prior to the targeted completion date.

  • Cost Plus Percentage of Cost Contracts

    An agreement on a construction project in which the contractor is provided a specified percentage profit over and above the actual costs of construction. These contracts are considered poor business practice because the contractor has little incentive to hold down costs. This type of costing method is prohibited in federal purchasing. A Cost Plus Fixed Fee Contract is a better approach.

  • Cost Principles

    The regulatory principles used to determine the allowability of incurred costs for the purposes of reimbursement under the provisions of the contract.

  • Cost Realism

    A factor considered during cost analysis of a proposal to determine if the costs proposed are realistic in light of historical experience, costs on similar projects, market conditions over the life of the proposal, or other factors.