ABSTRACT
A fundamental aspect of any agreement between a Supplier Organization (SO) and an Owner Organization (OO) is how to calculate the amount of consideration the SO is to receive. The selection has a gross influence on the behaviour of both parties and, to ensure that the SO is incentivized to meet the real objectives of the OO, it is vital that the correct choice is made. If the SO is engaged on a Firm Price contract then there is little to be concerned about because any time wasted is its own time, and the cost is to its account. There is also an aspect of confidentiality here since most commercial organizations prefer not to share with others what they have paid to their suppliers. In a Cost Plus Percentage Fee contract the fee to which the SO is entitled is calculated as a percentage of the cost incurred.
