I must be thickheaded because this has become confusing to me. Is the description below saying essentially the same thing as the responses above for A &E contracts?
FAR 15.404-4 requires the use of a structured approached. The structured
approach is defined by EFARS 15.404-73-101 Alternate Structured Approach for
Architect-Engineer contracts as follows
" (a) The pre-negotiation profit objective for a
firm-fixed-price architect-engineer (including surveying and mapping)
contract, contract modification, or task order will be determined as
described below. The profit objective for all other types of A-E contracts
will be determined in accordance with DFARS 215.404-71.
Profit Objective = Cost x (Technical Complexity Factor +
Length Factor + Support of Socioeconomic Program Factor)
Where:
(1) Cost is the total estimated costs, including general and
administrative costs, of the prime contractor and any subcontractors,
exclusive of any profit. However, normal profit need not be deducted from
the prices for commercial supplies and services (such as airfares,
reproduction, lab tests, express mail and materials) in developing the cost
base.
(2) Technical complexity factor will vary from 0.05 for low
complexity (design of simple road repaving or routine boundary survey
verification) to 0.10 for high complexity (design of nuclear chemistry
laboratory or the design of the remediation of a very unusual and complex
hazardous waste site). Consider the nature of the work, degree of management
involvement required, schedule constraints, amount of Government assistance,
and availability of design criteria.
(3) Length factor is .02 for a contract action of 1 month or
less, and increases proportionately to 0.04 for a contract action of 21
months or longer. Consider the time necessary to complete the substantive
portion of work, including option periods.
(4) Support of socioeconomic programs factor will vary from
0.0 for a prime contractor (including a small business prime contractor) who
plans no subcontracting, to 0.02 for a contractor who demonstrates
exceptional program support. Consider the contractor's past record as well
as the instant contract with regard to mentoring and subcontracting with
small businesses, small disadvantaged businesses, and historically black
colleges and universities and minority institutions. "
A relevant question regarding subcontractor profit can be found on the DAU
ask a professor website. The entire question and answer can be found at
https://akss.dau.mil/askaprof-akss/qdetail2...13&cgiQuest
ionID=12857 The relevant part of the answer follows.
"...I spoke with the author and proponent of the A-E method, which was
developed circa 1995. The construction contract approach has been basically
unchanged since the 1970's or earlier, as was the previous A-E method. You
will note that one of the criteria for calculating the construction profit
objective is the "amount of subcontracting." Thus, the construction prime's
profit objective percentage should decrease as the amount of subcontracting
increases. By not including sub's profits in the multiplier, the A-E profit
objective method is different, but achieves similar results for evaluating
overall profit. The A-E method provides an overall profit objective for the
contract to be distributed any way the A-E team prefers. The author says that
it doesn't matter how the A-E proposal calculates or distributes profit
between the prime and its subconsultants; what is important for analysis and
negotiations objectives is the overall amount of proposed profit. .."
So, to reiterate, if the subcontractor's proposed cost do NOT include profit
they would go above the profit line, however; if the proposed subcontractor's
cost do include profit they would go below the profit line.