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Award Fee Plans


Crazy KO

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Looking for anyone who can offer suggestions regarding my topic. I have a CPAF (IDIQ) bridge contract that was written for a a base of 6 months with a 6 month option (exercised), both of which have already expired. There were 4 task orders. The first 3 have expired and the 4th is still alive.

The AFP was never incorporated, not were funds obligated to cover the award fee pool. The contractor continues to perform on the 4th task order which ends in March 2010. The CORs have never submitted a performance evaluation.

My legal man says to bilaterally change the type of contract from CPAF to a CPFF and convert the base fee to a fixed fee to absorb it and negotiate a fixed fee which would make it "fair." I'm inclined to go with that.

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Why would one obligate funds to "cover the award fee pool"? Did you mean the award fee that was earned?

No because the award fee earned was never known because the COR (evaluator/monitor) never evaluated the contractor's performance, ever. So, when the CS incrementally funded the labor CLINs, that was as far as it went. The draft AFP submitted by the contractor with its proposal (suggesting 6% of the estimated labor), having never been validated/approved by the KO, is where the whole dilema lies. I believe govt, remaining silent on the acceptance of the draft AFP, had a responsibility to make 6% of the labor funding available in a CLIN (award fee pool).

Am I wrong to believe that award fee money must be made available at the time of award? Is it a myth? We just had an IG draft report come in for my activity and this very problem occured with another contract that was audited. The IG inspector made a finding that criticized us for this very thing. Is the IG wrong as well? There is a reference in the report to this requirement (I don't have the report with me at the present moment). I can post it on Monday.

But the point is this: If we never incorporated the plan from the beginning and we're nearing the end of the last task order, isn't it a moot point to do anything with an award fee plan now? Isn't the purpose of an award fee used to incentivize? What's left now for the contractor to be incentivized? The follow on will go on an omnibus vehicle...unless they view that as a subcontracting opp.

I think the only thing I can do at this point is negotiate a bilateral mod to change the contract type to a CPFF, remove the "base" fee and allow it to be absorbed somehow into a negotiated fixed fee. Does anyone disagree?

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If the percentage for the award fee pool was agreed upon during negotiations, but the pool was never funded, won't the IG say you were Anti-Deficient? As the KO, did you ever appoint award fee board members? I'm assuming what the contractor proposed was the Service Level Agreements that go into the award fee plan.

I'd agreed at this point that best bet is to do the bilateral mod and go to CPFF. CPAF is a culture change for many organizations and the Government needs to be ready to exercise its obligations to make it work. Maybe the group will be ready when you put the next one in place

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At the time of award, unearned award fee is a contingent liability and, therefore, funds may not be obligated. In order to avoid problems with the Anti-Deficiency Act, the GAO Red Book recommends that agencies commit funds to cover the amount of the contingent liability (See pp. 7-55 and 7-56).

If the IG criticized your agency for not recording an obligation for unearned award fee, I would love to see the report.

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Guys, I think you need to read Krazy KO's posts again. This is not a matter of earned or unearned award fee. As I read it, the problem is that the Government never evaluated the contractor's performance, and never determined how much award fee had been "earned"--though apparently there is some base fee that has been paid out.

Now, nearing the end of performance, Krazy KO wants to know what to do. The contractor's has suggested that it is entitled to an award fee equal to 6% of labor costs. Legal has opined that the contract should be modified from CPAF to CPFF, and Krazy KO tend to agree, since there is very little effort left to incentivize through use of an award fee.

Yet another approach would be to convert the entire mess into a FFP based on actuals incurred by the contractor to date plus an estimate to complete, with profit applied to cover the contractor's performance to date plus risk on the go-forward costs.

Anyway, this is not about recording an oblidation or ADA compliance, in my view. It's more about how Krazy KO should clean up the mess.

Hope this helps.

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Guys, I think you need to read Krazy KO's posts again. This is not a matter of earned or unearned award fee. As I read it, the problem is that the Government never evaluated the contractor's performance, and never determined how much award fee had been "earned"--though apparently there is some base fee that has been paid out.

Now, nearing the end of performance, Krazy KO wants to know what to do. The contractor's has suggested that it is entitled to an award fee equal to 6% of labor costs. Legal has opined that the contract should be modified from CPAF to CPFF, and Krazy KO tend to agree, since there is very little effort left to incentivize through use of an award fee.

Yet another approach would be to convert the entire mess into a FFP based on actuals incurred by the contractor to date plus an estimate to complete, with profit applied to cover the contractor's performance to date plus risk on the go-forward costs.

Anyway, this is not about recording an oblidation or ADA compliance, in my view. It's more about how Krazy KO should clean up the mess.

Hope this helps.

OK, to woops85: No AFEB or FDO were ever appointed. AFAR 5116.405-2(B)(2)© Violation right there (this is an army activity BTW).

To DonAcquisition: If I could share the report with you I would but here's exactly what the IG Says "There is no evidence that funds obligated at award accounted for the base fee portion of the award fee as required by DoD Financial Regulations (DoDFMR), VOL 3, Chpt 8, 080503". My take on that is an implication that award fee pool money must be made available at the time of award, or at least the amount of award that is to be available for evaluation period being funded. I hope I'm making sense. The report doesn't say that we're AD.

My point of the post was to solicit feedback from folks who'd been a similar situations. I appreciate the replys and I do believe that the way forward is to negotiate a different outcome for the parties that is fair and reasonable and hopefully within legal bounds.

Anyway, still open to suggestions here.

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OK, to woops85: No AFEB or FDO were ever appointed. AFAR 5116.405-2(B)(2)? Violation right there (this is an army activity BTW).

To DonAcquisition: If I could share the report with you I would but here's exactly what the IG Says "There is no evidence that funds obligated at award accounted for the base fee portion of the award fee as required by DoD Financial Regulations (DoDFMR), VOL 3, Chpt 8, 080503". My take on that is an implication that award fee pool money must be made available at the time of award, or at least the amount of award that is to be available for evaluation period being funded. I hope I'm making sense. The report doesn't say that we're AD.

My point of the post was to solicit feedback from folks who'd been a similar situations. I appreciate the replys and I do believe that the way forward is to negotiate a different outcome for the parties that is fair and reasonable and hopefully within legal bounds.

Anyway, still open to suggestions here.

One more thing: I was not the KO at the time of award. I'm just the latest KO in a string of them who caught this hot potato!

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To DonAcquisition: If I could share the report with you I would but here's exactly what the IG Says "There is no evidence that funds obligated at award accounted for the base fee portion of the award fee as required by DoD Financial Regulations (DoDFMR), VOL 3, Chpt 8, 080503". My take on that is an implication that award fee pool money must be made available at the time of award, or at least the amount of award that is to be available for evaluation period being funded. I hope I'm making sense. The report doesn't say that we're AD.

The IG is correct in that base fee should be obligated at award. Note that the IG only took exception to "the base fee portion." Base fee and award fee are two different things. Base fee is more like fixed-fee in this context--a definite liability.

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Krazy KO,

My sympathies on your situation! As the recipient of similar hot potatoes in the past, coincidentally in an Army office as well, I have but one piece of advice: put the legal first before the fair and reasonable. It does no good to have a happy program office and happy contractor if the contracting officer goes to jail, gets fired or loses his or her warrant.

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Krazy KO,

My sympathies on your situation! As the recipient of similar hot potatoes in the past, coincidentally in an Army office as well, I have but one piece of advice: put the legal first before the fair and reasonable. It does no good to have a happy program office and happy contractor if the contracting officer goes to jail, gets fired or loses his or her warrant.

To DonAcquisition: I know there is a difference between these two fees. The IG specifically states "...base fee portion OF THE award fee..." Perhaps this is a typo, but I am reading it and thinking, auh-oh, I have the same problem on this other contract too. But again, this is a moot part of my problem (only added it for background information)...

I do like Dwgerard's response...go with legal over F&R.

Thanks to all who wrote...

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