What is Cost Plus Award Fee Contract (CPAF)?

Consider a Cost Plus Award Fee (CPAF) contract to be a bonus-based transaction. It’s the same as hiring someone for a job, agreeing to cover all of their expenditures, and then adding a potential bonus if they do extraordinarily well. Assume you use a CPAF contract to hire a contractor to build a deck. You pay for all materials and labor expenses, and if the contractor surpasses the agreed-upon quality or finishes ahead of time, they may be eligible for an extra award or bonus in addition to their base payment. It serves as a motivator for extraordinary achievement.