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What is the Point of Total Assumption (PTA)?

PTA is the cost point on a Fixed Price Incentive Fee (FPIF) contract where the seller assumes 100% of additional cost overruns. Above PTA, the seller's profit decreases dollar-for-dollar with cost increases.

What is the PTA formula?

PTA = (Ceiling Price − Target Price) / Buyer's Share Ratio + Target Cost. Where Target Price = Target Cost + Target Fee. The buyer's share ratio is the negotiated percentage of cost overruns the buyer pays before PTA.

Why is PTA important in contract management?

PTA tells the seller the maximum cost they can incur before absorbing all overruns. It helps both parties understand risk allocation and incentivizes the seller to control costs. PMP exams frequently test this formula.

Point of Total Assumption (PTA) Calculator for FPIF Contracts

Target Cost

Target Fee

Buyer's Share Ratio (decimal)

Ceiling Price

How FPIF Contracts Work

In a Fixed Price Incentive Fee contract, the buyer and seller share cost overruns up to the PTA. Below PTA, the buyer pays their share ratio of overruns. Above PTA, the seller absorbs 100% of additional costs. The ceiling price caps the buyer's total payment. This formula is a PMP exam staple — memorize it.