Atch 6 - Halvorsen Metrics Determination and Incentive Fee Arrangement.docx

Attachment 4 27 March 2024 Halvorsen Performance Metrics Determination and Incentive Fee Arrangement

Overview: This attachment contains the following sections:

I. INCENTIVE ARRANGEMENT FOR OVERHAUL FPI(F) CLINs: Detailed information on cost, performance, and schedule incentive fees for Overhaul FPI(F) CLINs.

II. INCENTIVE FEE EXAMPLE

I. INCENTIVE ARRANGEMENT FOR OVERHAUL FPI(F) CLIN

1. General: This is a Fixed Price Incentive Firm target (FPI(F)) contract with cost, performance, and schedule incentives. The maximum total price paid on each task order, including incentives earned, shall not exceed the established ceiling price (120% of target cost). Total Price Paid = Cost (adjusted for over/underrun share) + Normal Profit + Performance Incentive Profit earned + Schedule Incentive Profit earned. 50% of the task order profit will be payable to the Contractor as normal profit subject to adjustment IAW FAR Clause 52.216-16, Incentive Price Revision – Firm Target. 35% of the task order profit will be placed in the schedule incentive pool, and the remaining 15% will be placed in the performance incentive pool.

2. Cost: The cost incentive will be subject to a share ratio of 50%/50% (Government/Contractor).

3. Performance: The Contractor will earn performance incentive for achieving the required performance defined in the Halvorsen OH PWS.

4. Delivery: The delivery incentive to be earned will be based on “on-time” delivery of each of the overhauled loaders. The Contractor will earn the delivery incentive fee for each "on-time" delivery as set forth in the Schedule, based on the due dates established therein. Loader delivery milestone dates will be defined at time of task order award. The incentive may or may not be obligated at the time of task order award. Once the delivery incentive is obligated, the Contractor is not authorized to invoice for the delivery incentive fee earned for the "on-time" delivery until all of the following conditions are met:

a. The Contractor has completed the loader overhaul in accordance with the terms of this delivery order on or before the delivery date set forth in the Schedule, with acceptance as documented on a DD Form 250,

b. The Contractor submits a request for payment of the "on-time" schedule incentive along with the signed DD Form 250 as documentation that delivery of the overhauled loader occurred on or before the delivery date set forth in the Schedule of each task order,

c. The Government reviews the submitted documentation and the Contractor provides any additional information necessary to support the Contractor's request for schedule incentive payment, and

d. The Contractor's request for payment of the schedule incentive is approved by the cognizant Contracting Officer as evidenced by the signed request for payment on the "on-time" schedule incentive

5. Schedule Incentive adjustment: The Government will assess the Contractor’s past Halvorsen overhaul delivery performance. If the Government determines the Contractor is capable of continuing on-time overhaul deliveries, the Government may, at its sole discretion, remove the schedule incentive and add all schedule incentive fee dollars to the Cost Incentive profit pool distribution in table 2 below. The Government will unilaterally reinstate the schedule incentive on any future task order if the Contractor fails to meet contractual overhaul delivery dates.

Table 1

Incentive Profit Pool Distribution

II. INCENTIVE FEE EXAMPLE

1. The following is an example of how performance and cost incentives will be applied. All dollars in this example are for illustrative purposes only and do not reflect actual contractual amounts. Ceilings prices are set at 120% of Target Cost. This example assumes a task order period of one year with two 6-month performance evaluation periods and a cost share ratio of 50/50 (Government/Contractor). It also assumes the Contractor earns 100% of the performance incentive but overruns by $1,000K.

2. Target Profit will be divided at time of task order award as follows: 50% allocated for performance incentive and 50% for cost incentive. The first 6 month performance assessment period will be performance only.

· 12 month profit is $360K ($30K X 12 mo.)

· 12 month profit payable as normal profit is $180K (50% of the 12 mo. profit)

· 12 month performance incentive is $180K (50% of the 12 mo. profit)

· 12 month target cost is $3,600K ($300K X 12 mo.)

· 12 month ceiling price is $4,320 ($360K X 12 mo.)

3. First 6 months evaluation period represents ½ of the total effort and includes performance incentive only

· Available performance incentive is $90K ($180K/2)

· Earned performance incentive is $90K ($90K X 100%)

4. Last 6 mo performance evaluation: first for cost and then performance

· $3,600K tgt cost + ½ of the $1,000K overrun for Govt’s share (i.e. $500K @ 50/50 share ratio) = $4,100K. Cost incentives will be reconciled at task order closeout.

· $90K for this performance incentive plus 90K for last period for a total of $180K

· Final total task order calculation: $4,100K + $180K (cost incentive) +$180K (normal profit) = $4,460K

5. Final total task order billable obligations (combined cost, profit, and incentives) are $4,320K (the lesser of final task order calculation or ceiling price). See table below:

If the final cost exceeds the ceiling, the contractor absorbs the difference as a loss. In this example the Government would pay the ceiling and the contractor would absorb the $140,000 as a loss.