FAR_from_perfect

Vern, excellent quality advice!!!! Please know that you made a big difference today!

The task orders issued off this IDIQ contract are basically change orders for the overall project of building a new and improved replacement vehicle (many times over) for the Military. Good point about the diversion from the main cost points by bidding a higher profit. I use this tactic myself in snowball fights...lob the one snowball high and pelt them directly in the face when they are looking up.

Yes. FFP

Thanks for the tough love Vern. I think I shot my last salvo across the bow yesterday at trying to get them to settle for 12% profit on all new work. Again, this would be splitting the difference between my position of 10% and their's of 14%. We'll see. I am somewhat confident that I can get them to 13.5% but I'd be really surprised to see them come all the way down to 12%.

When I say PLEASE....I am saying that in the context of "Give me a Break". I am offended that they actually offered to drop their profit margin by a paltry .25%. I am willing to split the difference with them which is much more reasonable than I should be and they offer ridiculous counter. I just did another WGL on a different task and the profit objective came out to 8%. Claiming that they provide a great service and that they are wonderful does not justify charging a 14% profit margin. I can back up the profit objective with WGL...they just puff out their chests and say, stick it government, pay the 14% or go somewhere else. I am looking for advice because I'm not ready to terminate this contract over their stubborness to come down a couple percent on their profit. 12% is still a very respectable profit margin for anybody....especially in this economy. If I were buying R&D to develop a missile that can shoot down another missile in outer space, then maybe 14% is warranted. Not for buying the product that I'm buying (a automotive vehicle).

The contract was competed and is valued at over $1B and is an IDIQ contract, not a requirements contract. The in-scope tasks that I need them to accomplish are in the $100K ball park and are mostly derived from Govt directed design changes or other issues that come up during product development. The bulk of the contract (competed aspect) actually has a really low profit margin. But for all new work, they want 14% profit when the reasonable amount should be around 10% (or less). I know they basically cut their original profit to ensure they won the contract but now I have a feeling they are just trying to get right by charging a much higher profit margin on change orders (not really a new concept). As a big picture perspective on this, they will never be able to re-coup the profit they left on the table at contract award, but I need to evaluate each new task on a case by case basis. Each time we argue about profit. I say 10%, they say 14%. After a month of being stubborn, we usually end up settling on 12% (split the difference). I waste too much time and energy on this recurring issue. I tried to get them to agree to an across the board settlement of 12% for profit on all new work. They said they can go from 14% to 13.75%. Please!!!!

I have a major contractor that insists on charging 14% profit on new tasks on an IDIQ contract. He claims that all of the Govt contracts they have with different agencies pay them between 13.5% and 14.5 %. When I do weighted guidelines on his proposals, I keep coming up with a recommended profit margin around 10%. I am having a difficult time (morally) paying this contractor the 14% they are proposing. I know they are trying to get as much as possible and they know that I need them to do the work so they have all the leverage in this. Can anyone provide advice on what I should or can do? I don't want to roll over and pay them what they want but I'm afraid I have no other choice. I do plan to annotate this somehow in their CPARs report. They are a good contractor but they are very stubborn on this issue...understandably so. Please help!!