Jump to content
The Wifcon Forums and Blogs

Recommended Posts

Here is a scenario. A contracting activity releases a competitive solicitation for a requirements / firm-fixed price, materials reimbursement type contract. The solicitation also includes a performance incentive in which the winning contractor has the ability to receive a quarterly fixed amount if the contractor meets specific performance goals in that quarter. The contractors proceed to bid on the effort with either no or negative profit/fee. This is based on the intent that they will pass the performance goals and receive the performance incentive. In the follow-on competitive solicitation, the contracting activity decides to remove the performance incentive. Is there a process in place, either policy or regulation, or some instance in which a minimum profit/fee was included in the solicitation to prevent a contractor from bidding either no or negative profit/fee? Is it possible to establish a minimum or is it the contractor's business decision to bid that particular way?

Share this post


Link to post
Share on other sites
Guest Vern Edwards

I assume that the "follow-on" contract will be firm-fixed-price.

I know of no policy or regulation providing for a contractually guaranteed minimum profit under a firm-fixed-price contract, and I know of no instance in which the government has awarded a firm-fixed-price contract with a contractually guaranteed minimum profit.

Share this post


Link to post
Share on other sites

To slightly rephrase the question, is there any instance in which the Government has required in a solicitation for a contractor to bid at least a minimum profit/fee in their proposal?

Share this post


Link to post
Share on other sites

(a) Buying-in may decrease competition or result in poor contract performance. The contracting officer must take appropriate action to ensure buying-in losses are not recovered by the contractor through the pricing of

(1) Change orders or

(2) Follow-on contracts subject to cost analysis.

(B ) The Government should minimize the opportunity for buying-in by seeking a price commitment covering as much of the entire program concerned as is practical by using --

(1) Multiyear contracting, with a requirement in the solicitation that a price be submitted only for the total multiyear quantity; or

(2) Priced options for additional quantities that, together with the firm contract quantity, equal the program requirements (see Subpart 17.2).

(c ) Other safeguards are available to the contracting officer to preclude recovery of buying-in losses (e.g., amortization of nonrecurring costs (see 15.408, Table 15-2, paragraph A., column (2) under “Formats for Submission of Line Item Summaries”) and treatment of unreasonable price quotations (see 15.405).

Share this post


Link to post
Share on other sites
Guest Vern Edwards

I'm not sure how you'd guarantee a profit under a firm-fixed-price contract without guaranteeing to cover all of the contractor's costs and to pay some amount in excess of those costs.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.

×
×
  • Create New...