Defense Federal Acquisition Regulation Supplement; Award-Fee Contracts (DFARS Case 2006-D021), 8303-8305 [2011-3116]
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Dated: January 3, 2011.
Jared Blumenfeld,
Regional Administrator, Region IX.
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 216 and 252
RIN 0750–AF51
Defense Federal Acquisition
Regulation Supplement; Award-Fee
Contracts (DFARS Case 2006–D021)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Final rule.
AGENCY:
DoD is issuing a final rule
amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to address award-fee contracts,
including eliminating the use of
provisional award-fee payments.
DATES: Effective Date: February 14,
2011.
SUMMARY:
Mr.
Mark Gomersall, Defense Acquisition
Regulations System, OUSD (AT&L)
DPAP/DARS, 3060 Defense Pentagon,
Room 3B855, Washington, DC 20301–
3060. Telephone 703–602–0302;
facsimile 703–602–0350. Please cite
DFARS Case 2006–D021.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
I. Background
DoD published a proposed rule in the
Federal Register (75 FR 22728) on April
30, 2010, to revise guidance for awardfee evaluations and payments, eliminate
the use of provisional award-fee
payments, and incorporate DoD policy
guidance on the use of objective criteria.
A new clause entitled Award Fee sets
forth the use of award fees in DoD
contracts.
II. Discussion and Analysis
A. Analysis of Public Comments
In response to the proposed rule, DoD
received comments from three
respondents. A discussion of the
comments is provided below:
1. Making 40 Percent of the Award-Fee
Pool Available for the Final Evaluation
a. Comment: The respondents
considered the language aligning fee
distributions with contract performance
and cost schedules. One respondent
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8303
stated that holding 40 percent of the
award fee until the final evaluation does
not consider the completion of
individual contract line items or
undefinitized work.
DoD Response: The purpose of
making 40 percent of the award-fee pool
available under the final evaluation
period is to set aside a sufficient amount
to protect the taxpayer’s interest in the
event a contractor fails to meet
contractual obligations. Assuming the
contract is properly structured, there is
nothing in the rule that prohibits
contractors from being paid for
completed contract line items or work
performed under undefinitized
contracts.
b. Comment: The respondents
expressed concern that holding 40
percent award fee until the final
evaluation does not reward contract
performance, particularly if a contract is
terminated before the final evaluation.
One respondent was concerned that by
making a specified percentage of the
award fee available for the final
evaluation period, in the event of a
termination for convenience, the
contractor may not have the ability to
earn that final award–fee percentage.
DoD response: The rule does not
change the current procedures for
terminations for convenience. In the
event of a termination for convenience
prior to the final evaluation period,
contractors will be eligible to earn
award fee available up to the point of
the termination.
c. Comment: One respondent was
concerned that holding of 40 percent of
the award fee until final evaluation will
negatively affect cash flow. The
respondents were also concerned that
the proposed rule will increase financial
risk to Government contractors and
result in an imbalance in the risk/
reward relationship. One respondent
was concerned, therefore, that the rule
will unfavorably impact DoD’s supplier
base by adversely impacting suppliers’
ability to attract debt and equity
investment.
DoD Response: Contractors will
continue to be paid incurred costs on
cost-type contracts, completed work
under fixed-price contracts with
progress payments, or milestones
achieved under fixed-price contracts
with performance-based payments.
Accordingly, a contractor’s cash flow
should not be significantly impacted.
Since contractors who consistently meet
contractual performance requirements
will maximize the amount of award fee
earned, there is no imbalance in the
risk/reward relationship. There should
be little, if any, impact on a superior
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performer’s ability to attract debt and
equity investment.
d. Comment: One respondent
commented that the 40 percent fee
withhold until final evaluation is
arbitrary. The respondent requested
DoD to consider reducing the 40 percent
of the award-fee amount held until final
evaluation to a minimum of 20 percent.
DoD response: DoD agrees that under
certain circumstances it may be
appropriate to establish a lower
percentage of award fee to be available
for the final evaluation period.
Therefore, DFARS 216.405–2(1) has
been revised to state that the percentage
of award fee available for the final
evaluation may be set below 40 percent
if the contracting officer determines that
a lower percentage is appropriate, and
this determination is approved by the
head of the contracting activity.
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2. Elimination of Provisional Award-Fee
Payments
a. Comment: One respondent was
concerned that the elimination of
provisional award-fee payments will
negatively affect cash flow. One
respondent suggested that DoD should
provide a definition of ‘‘provisional
award-fee payments’’ and consider
continuation of provisional award-fee
payments, but with more restrictions.
DoD response: DoD understands the
respondents’ concerns. However, the
payment of award fee prior to the end
of an award-fee period is not
appropriate since the contractor’s
performance has not been evaluated and
the contractor may not earn that paid
award fee during that period. Because
DoD has made the policy decision that
provisional award-fee payments are not
appropriate, no definition of the term is
required.
b. Comment: One respondent stated
that payment for successful completion
of elements of multiple-incentive
contracts should not be affected by the
proposed rule’s elimination of
provisional award fees.
DoD Response: DoD agrees. There is
nothing in the rule that prohibits
payment when a contractor has
successfully completed elements of a
multiple-incentive contract.
3. Selection of Contract Type
a. Comment: According to one
respondent, limitations on cost-plusaward-fee (CPAF) contracts have the
unintended consequence of encouraging
the use of the less desirable cost-plusfixed-fee (CPFF) contract type.
DoD Response: The purpose of the
proposed rule is to ensure the amount
of award fees paid on CPAF contracts is
commensurate with the contractor’s
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performance. DoD expects contracting
officers to utilize appropriate contract
types.
b. Comment: One respondent
suggested DoD delete the language at
DFARS 216.45–2(3)(A)(1).
DoD Response: DoD believes the
respondent meant proposed DFARS
216.405–2(3)(i)(A)(2) (renumbered from
current DFARS 216.405–2(c)(3)(i)(A)(2)),
which states that the CPAF contract
should not be used to avoid developing
objective targets so a cost-plusincentive-fee (CPIF) contract can be
used. This language has not been
revised by this rule. CPAF contract
types should not be used instead of a
CPIF contract type where a CPFF
contract type is appropriate.
e. Comment: Respondents suggested
that DoD should reconsider the policy
that prohibits roll-over of unearned
award fee.
DoD Response: Contractors should not
be given a second opportunity to obtain
unearned award fees when they fail to
meet cost, schedule, and technical
performance criteria specified in the
contract. The roll-over of unearned
award fee would provide a disincentive
to contractors to meet cost, schedule,
and technical performance criteria
specified in the contract in a given
evaluation period if the contractor
believes they will be given additional
opportunities to obtain that unearned
award fee in subsequent evaluation
periods.
4. Other Issues
a. Comment: One respondent
recommended the reference to the
‘‘Government’’ be revised to reference
the ‘‘Contracting Officer’’ in the
proposed clause at DFARS 252.216–
70XX.
DoD Response: DoD agrees. DFARS
252.216–7005 has been changed
accordingly. Furthermore, the reference
to ‘‘the Contracting Officer’s final
evaluation’’ in DFARS 216.405–2(2) has
been revised for clarity to reference ‘‘the
fee-determining official’s final
evaluation.’’
b. Comment: One respondent
suggested that DoD clarify the definition
of CPAF such that it includes only
contracts that provide for fee only on an
award-fee basis, and does not include
any hybrid award-fee/incentive-fee
contracts.
DoD Response: No change to the
definition has been made. Award-fee
portions of hybrid contracts shall be
subject to the award-fee requirements of
this rule.
c. Comment: Respondents suggested
that the proposed rule should not be
applied retroactively.
DoD Response: The incorporation into
an existing contract of the new clause at
DFARS 252.216–7005 would require a
bilateral modification to that contract.
The rule does not require contracting
officers to insert DFARS 252.216–7005
into existing contracts. However, in
cases where its use may be justified, the
contracting officer may insert the clause
via a bilateral modification in
accordance with FAR 1.108(d).
d. Comment: Respondents suggested
that award-fee contract funding
modifications should be provided
concurrent with the fee-determining
official’s rating.
DoD Response: This rule has no effect
on the timeliness of funding
modifications.
B. Other Change
In addition to changes made in
response to the public comments, the
phrase ‘‘held for’’ has been replaced by
the phrase ‘‘available for’’ in DFARS
216.405–2(1) to better reflect DoD
policy.
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III. Executive Order 12866
This is not a significant regulatory
action and, therefore, was not subject to
review under Section 6(b) of Executive
Order 12866, Regulatory Planning and
Review, dated September 30, 1993. This
rule is not a major rule under 5 U.S.C.
804.
IV. Regulatory Flexibility Act
DoD certifies that this final rule will
not have a significant economic impact
on a substantial number of small entities
within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.,
because most contracts awarded to
small entities use simplified acquisition
procedures or are awarded on a
competitive fixed-price basis and do not
utilize award-fee type incentives. Of the
1.16 million contracts awarded to small
businesses in Fiscal Year 2010, less than
0.1 percent were award-fee contracts.
The rule prohibits roll-over of
unearned award fee, and requires that at
least 40 percent of the award-fee pool be
available for the final performance
evaluation with the intent of
incentivizing the contractor throughout
performance of the contract. Any impact
of these requirements on small
businesses that do have award-fee
contracts is mitigated by the fact that
contractors will continue to be paid
costs on cost-type contracts, and
progress or performance-based
payments on fixed-price contracts.
Therefore, contractors’ cash flow will
not be impacted significantly unless
there is a failure to meet the
performance criteria in the contract.
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Furthermore, the final rule provides
more flexibility regarding the
requirement that 40 percent of the
award-fee pool must be available for the
final evaluation period. With the
approval of the head of the contracting
activity, the contracting officer can
determine that, in some cases, a
percentage of less than 40 percent of the
award-fee pool is appropriate to be
made available for the final evaluation
period.
Additionally, no comments were
received in response to publication of
the proposed rule with respect to the
impact of the proposed rule on small
entities.
V. Paperwork Reduction Act
The final rule does not impose any
information collection requirements that
require the approval of the Office of
Management and Budget under the
Paperwork Reduction Act (44 U.S.C.
3501, et seq.).
List of Subjects in 48 CFR Parts 216 and
252
Government procurement.
Ynette R. Shelkin,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR parts 216 and 252
are amended as follows:
■ 1. The authority citation for 48 CFR
parts 216 and 252 continues to read as
follows:
Authority: 41 U.S.C. 421 and 48 CFR
chapter 1.
PART 216—TYPES OF CONTRACTS
2. Revise section 216.401, paragraph
(e), to read as follows:
■
216.401
General.
*
*
*
*
*
(e) Award-fee plans required in FAR
16.401(e) shall be incorporated into all
award-fee type contracts. Follow the
procedures at PGI 216.401(e) when
planning to award an award-fee
contract.
■ 3. Add section 216.401–71 to read as
follows:
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216.401–71
Objective criteria.
(1) Contracting officers shall use
objective criteria to the maximum extent
possible to measure contract
performance. Objective criteria are
associated with cost-plus-incentive-fee
and fixed-price–incentive contracts.
(2) When objective criteria exist but
the contracting officer determines that it
is in the best interest of the Government
also to incentivize subjective elements
of performance, the most appropriate
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contract type is a multiple-incentive
contract containing both objective
incentives and subjective award-fee
criteria (i.e., cost-plus-incentive-fee/
award-fee or fixed-price-incentive/
award-fee).
(3) See PGI 216.401(e) for guidance on
the use of award-fee contracts.
■ 4. Revise section 216.405–2 to read as
follows:
216.405–2
Cost-plus-award-fee contracts.
(1) Award-fee pool. The award-fee
pool is the total available award fee for
each evaluation period for the life of the
contract. The contracting officer shall
perform an analysis of appropriate fee
distribution to ensure at least 40 percent
of the award fee is available for the final
evaluation so that the award fee is
appropriately distributed over all
evaluation periods to incentivize the
contractor throughout performance of
the contract. The percentage of award
fee available for the final evaluation
may be set below 40 percent if the
contracting officer determines that a
lower percentage is appropriate, and
this determination is approved by the
head of the contracting activity (HCA).
The HCA may not delegate this approval
authority.
(2) Award-fee evaluation and
payments. Award-fee payments other
than payments resulting from the
evaluation at the end of an award-fee
period are prohibited. (This prohibition
does not apply to base-fee payments.)
The fee-determining official’s rating for
award-fee evaluations will be provided
to the contractor within 45 calendar
days of the end of the period being
evaluated. The final award-fee payment
will be consistent with the feedetermining official’s final evaluation of
the contractor’s overall performance
against the cost, schedule, and
performance outcomes specified in the
award-fee plan.
(3) Limitations.
(i) The cost-plus-award-fee contract
shall not be used—
(A) To avoid—
(1) Establishing cost-plus-fixed-fee
contracts when the criteria for cost-plusfixed-fee contracts apply; or
(2) Developing objective targets so a
cost-plus-incentive-fee contract can be
used; or
(B) For either engineering
development or operational system
development acquisitions that have
specifications suitable for simultaneous
research and development and
production, except a cost-plus-awardfee contract may be used for individual
engineering development or operational
system development acquisitions
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8305
ancillary to the development of a major
weapon system or equipment, where—
(1) It is more advantageous; and
(2) The purpose of the acquisition is
clearly to determine or solve specific
problems associated with the major
weapon system or equipment.
(ii) Do not apply the weighted
guidelines method to cost-plus-awardfee contracts for either the base (fixed)
fee or the award fee.
(iii) The base fee shall not exceed
three percent of the estimated cost of the
contract exclusive of the fee.
(4) See PGI 216.405–2 for guidance on
the use of cost-plus-award-fee contracts.
5. Revise section 216.406 to read as
follows:
■
216.406
Contract clauses.
(e)(1) Use the clause at 252.216–7004,
Award Fee Reduction or Denial for
Jeopardizing the Health or Safety of
Government Personnel, in all
solicitations and contracts containing
award-fee provisions.
(2) Use the clause at 252.216–7005,
Award Fee, in solicitations and
contracts when an award-fee contract is
contemplated.
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
6. Add section 252.216–7005 to read
as follows:
■
252.216–7005
Award Fee.
As prescribed in 216.406(e)(2), insert
the following clause:
AWARD FEE (FEB 2011)
The Contractor may earn award fee from a
minimum of zero dollars to the maximum
amount stated in the award-fee plan in this
contract. In no event will award fee be paid
to the Contractor for any evaluation period in
which the Government rates the Contractor’s
overall cost, schedule, and technical
performance below satisfactory. The
Contracting Officer may unilaterally revise
the award-fee plan prior to the beginning of
any rating period in order to redirect
contractor emphasis.
(End of clause)
[FR Doc. 2011–3116 Filed 2–11–11; 8:45 am]
BILLING CODE 5001–08–P
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]]>Agencies
[Federal Register Volume 76, Number 30 (Monday, February 14, 2011)]
[Rules and Regulations]
[Pages 8303-8305]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3116]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 216 and 252
RIN 0750-AF51
Defense Federal Acquisition Regulation Supplement; Award-Fee
Contracts (DFARS Case 2006-D021)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to address award-fee
contracts, including eliminating the use of provisional award-fee
payments.
DATES: Effective Date: February 14, 2011.
FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, Defense
Acquisition Regulations System, OUSD (AT&L) DPAP/DARS, 3060 Defense
Pentagon, Room 3B855, Washington, DC 20301-3060. Telephone 703-602-
0302; facsimile 703-602-0350. Please cite DFARS Case 2006-D021.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register (75 FR 22728)
on April 30, 2010, to revise guidance for award-fee evaluations and
payments, eliminate the use of provisional award-fee payments, and
incorporate DoD policy guidance on the use of objective criteria. A new
clause entitled Award Fee sets forth the use of award fees in DoD
contracts.
II. Discussion and Analysis
A. Analysis of Public Comments
In response to the proposed rule, DoD received comments from three
respondents. A discussion of the comments is provided below:
1. Making 40 Percent of the Award-Fee Pool Available for the Final
Evaluation
a. Comment: The respondents considered the language aligning fee
distributions with contract performance and cost schedules. One
respondent stated that holding 40 percent of the award fee until the
final evaluation does not consider the completion of individual
contract line items or undefinitized work.
DoD Response: The purpose of making 40 percent of the award-fee
pool available under the final evaluation period is to set aside a
sufficient amount to protect the taxpayer's interest in the event a
contractor fails to meet contractual obligations. Assuming the contract
is properly structured, there is nothing in the rule that prohibits
contractors from being paid for completed contract line items or work
performed under undefinitized contracts.
b. Comment: The respondents expressed concern that holding 40
percent award fee until the final evaluation does not reward contract
performance, particularly if a contract is terminated before the final
evaluation. One respondent was concerned that by making a specified
percentage of the award fee available for the final evaluation period,
in the event of a termination for convenience, the contractor may not
have the ability to earn that final award-fee percentage.
DoD response: The rule does not change the current procedures for
terminations for convenience. In the event of a termination for
convenience prior to the final evaluation period, contractors will be
eligible to earn award fee available up to the point of the
termination.
c. Comment: One respondent was concerned that holding of 40 percent
of the award fee until final evaluation will negatively affect cash
flow. The respondents were also concerned that the proposed rule will
increase financial risk to Government contractors and result in an
imbalance in the risk/reward relationship. One respondent was
concerned, therefore, that the rule will unfavorably impact DoD's
supplier base by adversely impacting suppliers' ability to attract debt
and equity investment.
DoD Response: Contractors will continue to be paid incurred costs
on cost-type contracts, completed work under fixed-price contracts with
progress payments, or milestones achieved under fixed-price contracts
with performance-based payments. Accordingly, a contractor's cash flow
should not be significantly impacted. Since contractors who
consistently meet contractual performance requirements will maximize
the amount of award fee earned, there is no imbalance in the risk/
reward relationship. There should be little, if any, impact on a
superior
[[Page 8304]]
performer's ability to attract debt and equity investment.
d. Comment: One respondent commented that the 40 percent fee
withhold until final evaluation is arbitrary. The respondent requested
DoD to consider reducing the 40 percent of the award-fee amount held
until final evaluation to a minimum of 20 percent.
DoD response: DoD agrees that under certain circumstances it may be
appropriate to establish a lower percentage of award fee to be
available for the final evaluation period. Therefore, DFARS 216.405-
2(1) has been revised to state that the percentage of award fee
available for the final evaluation may be set below 40 percent if the
contracting officer determines that a lower percentage is appropriate,
and this determination is approved by the head of the contracting
activity.
2. Elimination of Provisional Award-Fee Payments
a. Comment: One respondent was concerned that the elimination of
provisional award-fee payments will negatively affect cash flow. One
respondent suggested that DoD should provide a definition of
``provisional award-fee payments'' and consider continuation of
provisional award-fee payments, but with more restrictions.
DoD response: DoD understands the respondents' concerns. However,
the payment of award fee prior to the end of an award-fee period is not
appropriate since the contractor's performance has not been evaluated
and the contractor may not earn that paid award fee during that period.
Because DoD has made the policy decision that provisional award-fee
payments are not appropriate, no definition of the term is required.
b. Comment: One respondent stated that payment for successful
completion of elements of multiple-incentive contracts should not be
affected by the proposed rule's elimination of provisional award fees.
DoD Response: DoD agrees. There is nothing in the rule that
prohibits payment when a contractor has successfully completed elements
of a multiple-incentive contract.
3. Selection of Contract Type
a. Comment: According to one respondent, limitations on cost-plus-
award-fee (CPAF) contracts have the unintended consequence of
encouraging the use of the less desirable cost-plus-fixed-fee (CPFF)
contract type.
DoD Response: The purpose of the proposed rule is to ensure the
amount of award fees paid on CPAF contracts is commensurate with the
contractor's performance. DoD expects contracting officers to utilize
appropriate contract types.
b. Comment: One respondent suggested DoD delete the language at
DFARS 216.45-2(3)(A)(1).
DoD Response: DoD believes the respondent meant proposed DFARS
216.405-2(3)(i)(A)(2) (renumbered from current DFARS 216.405-
2(c)(3)(i)(A)(2)), which states that the CPAF contract should not be
used to avoid developing objective targets so a cost-plus-incentive-fee
(CPIF) contract can be used. This language has not been revised by this
rule. CPAF contract types should not be used instead of a CPIF contract
type where a CPFF contract type is appropriate.
4. Other Issues
a. Comment: One respondent recommended the reference to the
``Government'' be revised to reference the ``Contracting Officer'' in
the proposed clause at DFARS 252.216-70XX.
DoD Response: DoD agrees. DFARS 252.216-7005 has been changed
accordingly. Furthermore, the reference to ``the Contracting Officer's
final evaluation'' in DFARS 216.405-2(2) has been revised for clarity
to reference ``the fee-determining official's final evaluation.''
b. Comment: One respondent suggested that DoD clarify the
definition of CPAF such that it includes only contracts that provide
for fee only on an award-fee basis, and does not include any hybrid
award-fee/incentive-fee contracts.
DoD Response: No change to the definition has been made. Award-fee
portions of hybrid contracts shall be subject to the award-fee
requirements of this rule.
c. Comment: Respondents suggested that the proposed rule should not
be applied retroactively.
DoD Response: The incorporation into an existing contract of the
new clause at DFARS 252.216-7005 would require a bilateral modification
to that contract. The rule does not require contracting officers to
insert DFARS 252.216-7005 into existing contracts. However, in cases
where its use may be justified, the contracting officer may insert the
clause via a bilateral modification in accordance with FAR 1.108(d).
d. Comment: Respondents suggested that award-fee contract funding
modifications should be provided concurrent with the fee-determining
official's rating.
DoD Response: This rule has no effect on the timeliness of funding
modifications.
e. Comment: Respondents suggested that DoD should reconsider the
policy that prohibits roll-over of unearned award fee.
DoD Response: Contractors should not be given a second opportunity
to obtain unearned award fees when they fail to meet cost, schedule,
and technical performance criteria specified in the contract. The roll-
over of unearned award fee would provide a disincentive to contractors
to meet cost, schedule, and technical performance criteria specified in
the contract in a given evaluation period if the contractor believes
they will be given additional opportunities to obtain that unearned
award fee in subsequent evaluation periods.
B. Other Change
In addition to changes made in response to the public comments, the
phrase ``held for'' has been replaced by the phrase ``available for''
in DFARS 216.405-2(1) to better reflect DoD policy.
III. Executive Order 12866
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD certifies that this final rule will not have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.,
because most contracts awarded to small entities use simplified
acquisition procedures or are awarded on a competitive fixed-price
basis and do not utilize award-fee type incentives. Of the 1.16 million
contracts awarded to small businesses in Fiscal Year 2010, less than
0.1 percent were award-fee contracts.
The rule prohibits roll-over of unearned award fee, and requires
that at least 40 percent of the award-fee pool be available for the
final performance evaluation with the intent of incentivizing the
contractor throughout performance of the contract. Any impact of these
requirements on small businesses that do have award-fee contracts is
mitigated by the fact that contractors will continue to be paid costs
on cost-type contracts, and progress or performance-based payments on
fixed-price contracts. Therefore, contractors' cash flow will not be
impacted significantly unless there is a failure to meet the
performance criteria in the contract.
[[Page 8305]]
Furthermore, the final rule provides more flexibility regarding the
requirement that 40 percent of the award-fee pool must be available for
the final evaluation period. With the approval of the head of the
contracting activity, the contracting officer can determine that, in
some cases, a percentage of less than 40 percent of the award-fee pool
is appropriate to be made available for the final evaluation period.
Additionally, no comments were received in response to publication
of the proposed rule with respect to the impact of the proposed rule on
small entities.
V. Paperwork Reduction Act
The final rule does not impose any information collection
requirements that require the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. 3501, et seq.).
List of Subjects in 48 CFR Parts 216 and 252
Government procurement.
Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 216 and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 216 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR chapter 1.
PART 216--TYPES OF CONTRACTS
0
2. Revise section 216.401, paragraph (e), to read as follows:
216.401 General.
* * * * *
(e) Award-fee plans required in FAR 16.401(e) shall be incorporated
into all award-fee type contracts. Follow the procedures at PGI
216.401(e) when planning to award an award-fee contract.
0
3. Add section 216.401-71 to read as follows:
216.401-71 Objective criteria.
(1) Contracting officers shall use objective criteria to the
maximum extent possible to measure contract performance. Objective
criteria are associated with cost-plus-incentive-fee and fixed-price-
incentive contracts.
(2) When objective criteria exist but the contracting officer
determines that it is in the best interest of the Government also to
incentivize subjective elements of performance, the most appropriate
contract type is a multiple-incentive contract containing both
objective incentives and subjective award-fee criteria (i.e., cost-
plus-incentive-fee/award-fee or fixed-price-incentive/award-fee).
(3) See PGI 216.401(e) for guidance on the use of award-fee
contracts.
0
4. Revise section 216.405-2 to read as follows:
216.405-2 Cost-plus-award-fee contracts.
(1) Award-fee pool. The award-fee pool is the total available award
fee for each evaluation period for the life of the contract. The
contracting officer shall perform an analysis of appropriate fee
distribution to ensure at least 40 percent of the award fee is
available for the final evaluation so that the award fee is
appropriately distributed over all evaluation periods to incentivize
the contractor throughout performance of the contract. The percentage
of award fee available for the final evaluation may be set below 40
percent if the contracting officer determines that a lower percentage
is appropriate, and this determination is approved by the head of the
contracting activity (HCA). The HCA may not delegate this approval
authority.
(2) Award-fee evaluation and payments. Award-fee payments other
than payments resulting from the evaluation at the end of an award-fee
period are prohibited. (This prohibition does not apply to base-fee
payments.) The fee-determining official's rating for award-fee
evaluations will be provided to the contractor within 45 calendar days
of the end of the period being evaluated. The final award-fee payment
will be consistent with the fee-determining official's final evaluation
of the contractor's overall performance against the cost, schedule, and
performance outcomes specified in the award-fee plan.
(3) Limitations.
(i) The cost-plus-award-fee contract shall not be used--
(A) To avoid--
(1) Establishing cost-plus-fixed-fee contracts when the criteria
for cost-plus-fixed-fee contracts apply; or
(2) Developing objective targets so a cost-plus-incentive-fee
contract can be used; or
(B) For either engineering development or operational system
development acquisitions that have specifications suitable for
simultaneous research and development and production, except a cost-
plus-award-fee contract may be used for individual engineering
development or operational system development acquisitions ancillary to
the development of a major weapon system or equipment, where--
(1) It is more advantageous; and
(2) The purpose of the acquisition is clearly to determine or solve
specific problems associated with the major weapon system or equipment.
(ii) Do not apply the weighted guidelines method to cost-plus-
award-fee contracts for either the base (fixed) fee or the award fee.
(iii) The base fee shall not exceed three percent of the estimated
cost of the contract exclusive of the fee.
(4) See PGI 216.405-2 for guidance on the use of cost-plus-award-
fee contracts.
0
5. Revise section 216.406 to read as follows:
216.406 Contract clauses.
(e)(1) Use the clause at 252.216-7004, Award Fee Reduction or
Denial for Jeopardizing the Health or Safety of Government Personnel,
in all solicitations and contracts containing award-fee provisions.
(2) Use the clause at 252.216-7005, Award Fee, in solicitations and
contracts when an award-fee contract is contemplated.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
6. Add section 252.216-7005 to read as follows:
252.216-7005 Award Fee.
As prescribed in 216.406(e)(2), insert the following clause:
AWARD FEE (FEB 2011)
The Contractor may earn award fee from a minimum of zero dollars
to the maximum amount stated in the award-fee plan in this contract.
In no event will award fee be paid to the Contractor for any
evaluation period in which the Government rates the Contractor's
overall cost, schedule, and technical performance below
satisfactory. The Contracting Officer may unilaterally revise the
award-fee plan prior to the beginning of any rating period in order
to redirect contractor emphasis.
(End of clause)
[FR Doc. 2011-3116 Filed 2-11-11; 8:45 am]
BILLING CODE 5001-08-P
