Cost Plus Fixed Fee

[Mayonayze]

If I want to propose a 7% fixed fee for a CPFF contract where travel and material are 'non-fee bearing' and the ratio of fee bearing and non-fee bearing costs is weighted such that I would need to put 18% fee on the fee bearing cost items to achieve an overall program fee of 7%, is that acceptable given that the FAR limits fee on non R&D CPFF contracts to 10%? Asked another way, does the 10% limit apply only to fee bearing costs, or at the total cost line?

[Jacques]

It applies to the CLIN, which is where you list the estimated cost, fixed fee, and total.

[ji20874]

The thought that materials are 'non-fee bearing' is a bastardization of a T&M principle, and is not a CPFF principle.

FAR 15.404-4(c)(4)(i)(C) says "the fee shall not exceed 10 percent of the contract’s estimated cost."  Travel and material are included within the contract's estimated cost.

[here_2_help]

1 hour ago, Mayonayze said:

Asked another way, does the 10% limit apply only to fee bearing costs, or at the total cost line?

As ji20874 noted, the 10% limit applies to the total cost line. If your estimated costs are weighted the way your post implies, with burdened travel and material outweighing burdened labor by more than 2:1, then something isn't smelling right to me. Why is your burdened labor number so low in comparison to total estimated cost? Is there perhaps a subcontractor or two in the mix? If so, are you putting proposed fee on your subcontractors?

[Mayonayze]

thanks, all! H2H, the numbers were pre-coffee hypotheticals. I forgot to put my attention to detail on before posting

[Mayonayze]

52 minutes ago, ji20874 said:

The thought that materials are 'non-fee bearing' is a bastardization of a T&M principle, and is not a CPFF principle.

FAR 15.404-4(c)(4)(i)(C) says "the fee shall not exceed 10 percent of the contract’s estimated cost."  Travel and material are included within the contract's estimated cost.

Thanks for this, too. Our Navy folk are constantly complaining the SEAPORT-E CPFF contracts stipulate no fee on materials. Have not laid eyes on one of their TO's but will keep an eye out the next time I get a chance.

[Don Mansfield]

2 hours ago, Mayonayze said:

If I want to propose a 7% fixed fee for a CPFF contract where travel and material are 'non-fee bearing' and the ratio of fee bearing and non-fee bearing costs is weighted such that I would need to put 18% fee on the fee bearing cost items to achieve an overall program fee of 7%, is that acceptable given that the FAR limits fee on non R&D CPFF contracts to 10%? Asked another way, does the 10% limit apply only to fee bearing costs, or at the total cost line?

Are the nonfee bearing costs on a separate line item than the fee-bearing costs? The SEAPORT-E orders that I have seen contain both CPFF line items and Cost (no fee) line items.

[Mayonayze]

2 minutes ago, Don Mansfield said:

Are the nonfee bearing costs on a separate line item than the fee-bearing costs? The SEAPORT-E orders that I have seen contain both CPFF line items and Cost (no fee) line items.

This is probably what they mean, then

[Don Mansfield]

Then I agree with Jacques.

[Neil Roberts]

16 hours ago, Mayonayze said:

...I would need to put 18% fee on the fee bearing cost items to achieve an overall program fee of 7%,...

If this were DoD or DOE and maybe some other agencies, I believe you should be guided by using weighted guidelines instructions/structure for those elements. If I were negotiated with you, I would ask for some rationale as to why the bottom line fee should be 7%. As posted I could conclude that there is an arbitrary bottom line effective fee being arbitrarily allocated to elements of estimated cost. Just saying...