What type of incentive is designed to encourage sellers to manage costs effectively?

The cost incentive is specifically designed to motivate sellers to control and manage their expenses effectively throughout the contract period. By providing financial benefits or rewards based on cost savings achieved, this type of incentive encourages contractors to minimize unnecessary expenditures and operate efficiently. The ultimate goal is to align the contractor’s interests with those of the customer, ensuring that both parties benefit from reduced costs while maintaining quality and performance.

In contrast, other types of incentives serve different purposes. Delivery incentives focus on timely completion and delivery of goods or services. Performance incentives are geared towards achieving specific performance metrics or outcomes, thus rewarding quality and effectiveness. Administrative incentives typically relate to procedural aspects and compliance, which do not directly influence cost management. Hence, the cost incentive stands out as the most pertinent option for encouraging effective cost management by sellers.