PMBOK® 8th Edition is here. The PMP® exam has changed — make sure your prep matches.
PMBOK® 8th Edition is here. The PMP® exam has changed — make sure your prep matches.
Calculate the Point of Total Assumption for Fixed-Price-Incentive-Fee (FPIF) contracts. Essential for PMP® procurement questions.
Target Price (TP)
$110,000
TC + TF = $100,000 + $10,000
Point of Total Assumption
$112,500
TC + (CP - TP) / BSR = $100,000 + ($120,000 - $110,000) / 0.8
| Scenario | Actual Cost | Buyer Pays | Seller Pays | Seller Fee |
|---|---|---|---|---|
| 80% of Target Cost | $80,000 | $94,000 | $0 | $14,000 |
| Target Cost (100%) | $100,000 | $110,000 | $0 | $10,000 |
| 110% of Target Cost | $110,000 | $118,000 | $2,000 | $8,000 |
| Point of Total Assumption | $112,500 | $120,000 | $2,500 | $7,500 |
| At Ceiling Price | $120,000 | $120,000 | $0 | $0 |
TC + (CP - TP) / BSRWhere TC = Target Cost, CP = Ceiling Price, TP = Target Price, BSR = Buyer Share RatioTC + TFWhere TC = Target Cost, TF = Target FeeThe Point of Total Assumption is the cost point in an FPIF contract where the seller assumes responsibility for all additional cost overruns. Below PTA, cost overruns are shared between buyer and seller according to the share ratio. Above PTA, the buyer pays the ceiling price and the seller absorbs everything beyond that.
A Fixed-Price-Incentive-Fee contract is a hybrid contract type. It has a fixed ceiling price like a firm fixed-price contract, but shares cost risk between buyer and seller through a share ratio. The seller is incentivized to control costs because they keep a larger fee when costs come in under target. But if costs exceed the PTA, the contract effectively becomes a firm fixed-price contract at the ceiling price.
The PTA is the cost level above which the seller in a Fixed-Price-Incentive-Fee (FPIF) contract absorbs every additional dollar of cost. Below PTA the buyer shares overruns by the share ratio; above PTA the seller eats them entirely.
PTA = ((Ceiling Price − Target Price) / Buyer's Share Ratio) + Target Cost. The buyer's share ratio is the fraction of cost overrun the buyer agrees to absorb (e.g., 0.80 for an 80/20 split).
PTA only applies to FPIF (Fixed-Price-Incentive-Fee) contracts. It is not relevant for CPFF, CPIF, T&M, firm-fixed-price, or any cost-reimbursable contract type.
PTA is the seller's risk ceiling. Every cost dollar above PTA comes directly out of seller profit, so the seller has a strong incentive to keep actual cost below the PTA value.
Expect a small number of procurement-domain questions on FPIF math, PTA interpretation, and contract-type selection. The 2026 exam weights procurement under Business Environment (26%).