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Don Mansfield

Multiple Incentives

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If you were going to include a performance incentive in a CPIF contract, would you--

(1) Include a contract clause that provided for a further adjustment of fee based on performance AFTER the target fee had been adjusted pursuant to FAR 52.216-10?

or

(2) do something different than (1)?

If (2), what would you do?

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Guest Vern Edwards

I would not award such a contract, but for the sake of discussion:

  • I would negotiate a total minimum and maximum fee for the contract and partition it into a portion for cost control and a portion for performance.  I would set a target, a minimum, and a maximum for each portion. The minimums would be $0.
  • The portion of fee for cost control would be adjusted based on the fee-sharing formula and the standard incentive fee clause.
  • The portion of fee for performance would be adjusted solely on the basis of the performance incentive arrangement.

Other readers should remember that the statutory fee limits do not apply to CPIF contracts.

i want to say that in my opinion such contracts are nuts. The reciprocal effect of the fee incentives would be impossible to determine in advance, which means that the combination would be irrational or difficult to justify on the basis of reason.

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1. Why would I want to do this? (conceptually)

2. Why would I want to do this? (practically)

Or; what would I accomplish that a single fee determination couldn't, and; considering all the work with fee determination is on the government's side, why would I put myself through that torture, considering once per year is painful enough as it is?

 

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Would it violate the rules of government contracting to create a hybrid contract, where certain CLINs are CPIF and other CLINs are CPAF? If not, that's what I would do. I would have the CPIF CLINs follow the usual sharing and standard incentive fee clause, and the CPAF CLINs have the award fee criteria based on the desired performance specs.

Hope this helps (somebody).

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