{"data":{"id":"us/48-cfr-16.402-1","jurisdiction":"us","citation":"48 CFR 16.402-1","heading":"16.402-1 Cost incentives.","body":"(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).\n(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—\n(1) Actual cost that meets the target will result in the target profit or fee;\n(2) Actual cost that exceeds the target will result in downward adjustment of target profit or fee; and\n(3) Actual cost that is below the target will result in upward adjustment of target profit or fee.","path":["Title 48—Federal Acquisition Regulations System","CHAPTER 1—FEDERAL ACQUISITION REGULATION","SUBCHAPTER C—CONTRACTING METHODS AND CONTRACT TYPES","PART 16—TYPES OF CONTRACTS","Subpart 16.4—Incentive Contracts"],"source_url":"https://www.ecfr.gov/api/versioner/v1/full/2026-08-25/title-48.xml","current_through":"2026-08-25","vintage":"","retrieved_at":"2026-08-27T02:26:29Z","sha256":"7bc8d45baa1ba6840100cad701c47920ed8873ab8c69900788325ab5974a7d05","source_id":"us-cfr","stale":true,"prev":"us/48-cfr-16.402","next":"us/48-cfr-16.402-2"},"notice":"GroundRules: Original legal text. Not legal advice."}