An amount in addition to actual, allowable costs incurred that is normally paid to a for-profit organization under a contractual arrangement. This increment above cost also is referred to as "profit." (Also see " Grants to For-Profit Organizations—Small Business Innovation Research and Small Business Technology Transfer Programs—Allowability of Costs and Fee—Profit or Fee.")
In specified cost-reimbursement pricing arrangements, fee represents an agreed-to amount beyond the initial estimate of costs. In most instances, fee reflects a variety of factors, including risk, and is subject to statutory limitations. Fee may be fixed at the outset of performance, as in a cost-plus-fixed-fee arrangement, or may vary (within a contractually specified minimum-maximum range), as in a cost-plus-incentive-fee arrangement.