Point of total assumption

In addition, once the costs on an FPI contract reach PTA, the maximum amount the buyer will pay is the ceiling price.

The profit decrease rate become higher, and once actual cost exceeds ceiling price the seller will start losing money (and then might stop working for the contract).

When "EAC exceeds PTA" is found in control cost process, it should be treated as a risk trigger.

In the government's efforts to cut cost overruns, the PTA is being introduced to FPIF contracts on an increasingly wide basis.

The contract type is implemented by calling out FAR Clause 52.216-16 Incentive Price Revision - Firm Target.

Calculation of Point of Total assumption (the case when EAC exceeds PTA that should be treated as a risk trigger, is shown)