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I administer a CPIF contract that is currently underrunning.  The price summary of the order allows a billing fee rate of 13%.  At what point does the supplier earn their incentive fee (the portion of the underrun above 13% target fee that they are entitled to)?  Do I withhold until contract closeout? 

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I did read FAR 52.216-10(c), but the supplier is still only billing at the 13% billing fee rate.  FAR 52.216-10(c) states that the Government can pay above this fee rate at the discretion of the contracting officer.  I suppose my more specific question is, should I (as the contracting officer) pay above the amount being requested in the invoice or should I inform the supplier that the Government considers it appropriate for them to begin billing at a higher fee rate?  Thanks!

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The KO can certainly inform the supplier what to invoice, after determining to increase the billing level per (c)(1).  What do your agency procedures say about making payments that exceed the amounts invoiced?  Seems that you will have to communicate with the firm anyway to adjust the next billing.  I assume that you are withholding some of the fee per (c)(2)  to protect the government's interests.

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I cannot find any specific guidance regarding payment in excess of invoices.  Also, I am withholding a reasonable amount (and plan to continue doing so even after adjusting the fee).  I'm really just not sure of the proper mechanics of how to pay above the billing amount.  Is there a general rule of thumb used (for CPIF contracts) for the scenario where the Contractor is demonstrating that their cost performance will earn a fee significantly above the target fee and the KO considers it appropriate to pay a higher fee?  Should the KO change the billing fee rate of the order?  Request the supplier to bill at a higher rate?  Unilaterally begin paying above the invoiced amount?

Thanks!

 

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On 6/21/2017 at 2:17 PM, jparmbruster said:

I administer a CPIF contract that is currently underrunning.  The price summary of the order allows a billing fee rate of 13%.  At what point does the supplier earn their incentive fee (the portion of the underrun above 13% target fee that they are entitled to)?

Under a CPIF contract the contractor earns the incentive fee when it completes the work and the contracting officer determines the total allowable cost. The current underrun could disappear in a heartbeat. The parties might not realize there was actually an overrun until after the contract is physically complete and the participants have gone on to other jobs. Don't assume that the current underrun is the final result.

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On 6/24/2017 at 8:16 AM, Vern Edwards said:

Under a CPIF contract the contractor earns the incentive fee when it completes the work and the contracting officer determines the total allowable cost. The current underrun could disappear in a heartbeat. The parties might not realize there was actually an overrun until after the contract is physically complete and the participants have gone on to other jobs. Don't assume that the current underrun is the final result.

Everything Vern says is true.  However, if "the Contractor demonstrates that performance or cost clearly indicates that the Contractor will earn a fee significantly above the target fee, [emphasis added]," and after considering Vern's advice about the sometimes fleeting nature of underruns, you still think payment at a higher rate is appropriate, then I would suggest that the contractor request that the order be modified to so provide.  The contractor isn't allowed to invoice at a rate other than that provided in the order, so the order must be modified.

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