ABSTRACT
Interest rates are perceived as the purview of accountants and their minions rather than something over which the project manager has some measure of control. And contracts math goes directly to project profitability, an area in which project managers are often judged. Critical element of mathematics in project management is the notion of present value. The confusion arises when some individuals try to add, multiply, subtract, or otherwise play mathematical games with the subscript identifier. The simple math is associated with fixed-fee contracting. A cost-plus-fixed-fee contract is a simple, classic example. The most complex contracts formulas are related to incentive-fee contracts. Incentive-fee contracts apply a sharing ratio to project costs based on target costs and actuals. For both fixed-price-incentive contracts and cost-plus-incentive-fee contracts, the math is largely the same. The math for both cost-plus-incentive-fee and fixed-price-incentive contracts is identical.
