Procurement Management

[Binoy]

Point of Total Assumption - In a FPIF contract this is the point when Seller starts bearing 100% of the risk. PTA is calculated as         (Ceiling Price - Total Cost)/Buyers risk % + Sellers target cost.

Let me explain with an example.

Suppose the total Cost of the service is 75000, with the ceiling price of 84000. The sellers target cost is 71000 and the risk is shared as 3:1.

The PTA for the seller is (84000-75000)/0.75+71000 = 83000. So at 83000, the seller starts to take 100% of the risk.