here_2_help Posted October 9, 2023 Report Share Posted October 9, 2023 Normally, when I think FPIF, I think "contractor overrun" -- but here's a new one (for me): the contractor is actually significantly underrunning because of unexpected production efficiencies realized during the multi-year procurement (for production, not services). The contractor is worried because it believes that the CLINs are now over-priced. As it delivers, it's billing more than will be the case when the Incentive Fee formula is used to determine the final price. That's a great situation from a cash flow perspective, but not so much from a revenue recognition perspective. The contractor is convinced that, at the final Incentive Fee reckoning, it will have to send its government customer a Very Large check, which it would very much rather not do, even though it means that the government is basically giving it a nice, interest-free, loan at the moment. Instead, the contractor would like to reprice CLINs to recognize the underrun. However, the contracting officer is reluctant. Is there something I should know to understand why repricing CLINs on an FPIF contract -- to recognize an underrun and to prevent what could be perceived as an over-billing -- is not favored? Thank you. Link to comment Share on other sites More sharing options...
Don Mansfield Posted October 9, 2023 Report Share Posted October 9, 2023 How is the contractor getting paid--contract financing or just delivery payments? Link to comment Share on other sites More sharing options...
Retreadfed Posted October 9, 2023 Report Share Posted October 9, 2023 and if it is government provided contract financing, what kind of financing? Link to comment Share on other sites More sharing options...
here_2_help Posted October 9, 2023 Author Report Share Posted October 9, 2023 Assume progress payments based on costs incurred to be liquidated as units of production are delivered and accepted. Link to comment Share on other sites More sharing options...
formerfed Posted October 9, 2023 Report Share Posted October 9, 2023 FAR 16.403(c) seems to provide for this situation Quote (c) Billing prices. In fixed-price incentive contracts, billing prices are established as an interim basis for payment. These billing prices may be adjusted, within the ceiling limits, upon request of either party to the contract, when it becomes apparent that final negotiated cost will be substantially different from the target cost. Link to comment Share on other sites More sharing options...
here_2_help Posted October 9, 2023 Author Report Share Posted October 9, 2023 Thank you! Link to comment Share on other sites More sharing options...
Retreadfed Posted October 11, 2023 Report Share Posted October 11, 2023 If FAR 52.216-16 is in the contract, see paragraph (f). Link to comment Share on other sites More sharing options...
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