A cost improvement curve is based loosely on the idea of a learning curve. In some contracts, generally large ones, the client may require the vendor to reduce the price of items supplied later in the project to less than the delivery price of earlier items of the project. The application of cost improvement curves borrows heavily from the learning curve theory but is based on somewhat different concepts. In the cost improvement curve it is reasonable to think that even though there is little chance for real learning, the cost of delivering items that are produced later in the project should be less than the cost of producing similar items early in the project.

The rationale for this is that the vendor will learn how to deal better with the customer, the specifications of the project deliverables, and the quality requirements. Although the deliverables of the project are not the same, a certain amount of improvement can be gained with the delivery of each deliverable.

The improvement curve rationale is then put into the contract. The improvement curve specification specifies that the price will be a certain amount for the first quantity of deliverables and will be somewhat lower for the next quantity delivered, and so on. Frequently the price of subsequent items will show a fixed percentage of reduction in price for each doubling of the number of units delivered, which is the relationship with classical learning curves.