Section_J _Attachment_6_-_Incentive_Fee_Plan_V1.4_27_Mar_13.docx

FA4600-12-R-0013

Section J, Attachment 6

Incentive Fee Plan for

Systems Engineering, Management and Sustainment III

(SEMS III)

13 Mar 13

REVISION/CHANGE RECORD

INCENTIVE FEE PLAN FOR SEMS III

1.0 INTRODUCTION

This Incentive Fee Plan (IFP) documents the structure and implementation of fee provisions. The overall intent is to incentivize the Contractor to deliver quality products and services within program performance, cost and schedule constraints. The Contractor’s performance in achieving these results will be measured in accordance with the methods detailed in this plan.

2.0 COST PLUS INCENTIVE FEE (CPIF) STRUCTURE – Project Task Order (Type A) The incentive provisions consist of performance and schedule incentives applied in a Quality Performance Index (QPI) for the program. This allows a balance between cost and quality while meeting Government needs. The concept consists of points assigned to various Services Summary items; this number is converted to a percentage to complete the fee calculation. Project type task orders are for services to deliver a product such as hardware, software or both, or a report of the results of systems/software engineering analysis. Applicable CLINs are X008 (Additional System Engineering Tasks), X009 (System Modernization) and X010 (Systems Development).

2.1 Quality Incentives

Quality incentives apply to the services being delivered in the Task Orders (TOs) issued under this contract. The quality incentive will measure Contractor performance against the relevant performance requirements for the type of work performed.

2.1.1 Government Requirements Met

Performance Objective #1 (PO-1): The Government project manager with inputs from other Government personnel will verify in Contractor provided deliverables (design, baseline change, or implementation task order) that Government requirements are met. The Government project manager will perform this verification by comparing the Government’s requirements in the attachment to the Project task order performance work statement (PWS) with the Government requirements identified in the Contractor requirements traceability deliverables. These deliverables shall show the traceability of Government requirements into the product baseline and into the test plan. The Government will perform this verification for each Project task order. If deliverables do not show the traceability of all (100%) Project task order Government requirements identified in the attachment to the Project task order PWS into the product baseline and test plan, then no points will be granted for this area.

2.1.2 Lower Annual Life-Cycle Sustainment Cost

Performance Objective #2 (PO-2): Prior to the start of full performance, the Contractor and the Government will agree to a life-cycle sustainment cost for each system of the AFWA Enterprise. In the contract Transition Plan, the Contractor has provided the life-cycle sustainment cost in a sustainment model for each system of the AFWA Enterprise which serves as the initial life-cycle sustainment cost baseline for this objective. For each design, baseline change, or implementation task order that lowers the life-cycle sustainment cost, the Contractor will submit as part of the design phase, the recommended change to the life-cycle sustainment cost. The Government project manager with inputs from other Government personnel will verify in Contractor provided deliverables that a minimum of 2% annual reduction in life-cycle sustainment cost will be achieved for the system addressed by the Project task order. The Government will perform this verification for each Project task order which has an objective to lower AFWA Enterprise life-cycle sustainment costs. If the design, baseline change or implementation does not lower life-cycle sustainment costs by a minimum of 2% annually by system, then no points will be granted for this area.

2.1.3 Test Deficiencies

Performance Objective #3 (PO-3): The Government project manager with inputs from other Government personnel will verify in Contractor provided test results deliverables and by Remedy tickets that 100% of CAT I deficiencies, emergency or urgent, and 95% of CAT II deficiencies identified during Contractor tests are corrected prior to Government operational test and do not reoccur during implementation or within 30 days after implementation. A deficiency is as defined by TO 00-35D-54. The Government will perform this verification for each Project task order. If 100% of CAT I deficiencies, emergency or urgent, and 95% of CAT II deficiencies identified during tests are not corrected prior to Government operational test or reoccur during implementation or within 30 days after implementation, then no points will be granted for this area.

2.1.4 Test Procedure Errors

Performance Objective #4 (PO-4): When the SEMS III Contractor is required to create Government test procedures, the Government project manager with inputs from other Government personnel will verify in Government test results documents that no errors due to incorrect test steps occur during execution of 95% of test procedure steps. Any redlines to the procedures whether because of a missing step or an erroneous step not due to a malfunction is an error. The Government will perform this verification for each Project task order. If errors occur during execution of more than 5% of test procedure steps, then no points will be granted for this area.

2.1.5 Implementations Installed

Performance Objective #5 (PO-5): The Government project manager with inputs from other Government personnel will verify in Government implementation results documents that no more than 3% of implementations performed during the Project task order period of performance had errors. In addition, there were no failures. If more than 3% of implementations performed during the Project task order period of performance had errors or if there were any implementation failures, then no points will be granted for this area.

2.1.5.1 An implementation error is any discrepancy which prevents satisfying one or more mission requirements but does not affect achieving operational readiness standards and workarounds exist. Unexpected result(s) may occur. An error may cause user/operator inconvenience or annoyance. Implementation may take longer than briefed.

2.1.5.2 An implementation failure is any discrepancy which affects achievement of operational readiness standards or requires reinstatement of previous operational baseline. No workarounds exist.

2.1.6 Deliverables Submitted

Performance Objective #6 (PO-6): The Government project manager with inputs from other Government personnel will verify in the Contractor deliverables that 98% of deliverables were without errors. An error is defined as an omission of required content or content that is incorrect, excluding administrative and format errors. The Government must identify errors within 30 calendar days of the Contractor’s release of the deliverable. The Government project manager will verify that the Contractor submitted 100% of deliverables to the Government on or before the stated due dates. The Government will perform this verification for each Project task order. If more than 2% of Project task order deliverables have any errors or if any deliverables are submitted after the stated due date, then no points will be granted for this area.

2.1.7 Cost and Schedule Variances

Performance Objective #7 (PO-7): The Government project manager will verify in the Contractor’s contract performance report that the cost efficiency (Cost Performance Index (CPI)) for cumulative to date is no less than 1.00 and no greater than 1.10. Government project manager will verify in Contractor contract performance report that the schedule efficiency (Schedule Performance Index (SPI)) for cumulative to date is no less than 0.90 and no greater than 1.10 for Project task order calculating schedule variance. The Government project manager will perform this verification once per month during the Project task order period of performance. The Contractor’s cost and schedule efficiencies may be outside of threshold for no more than 25% of the period of performance. If cost efficiency for cumulative to date is less than 1.00 or greater than 1.10 for more than 25% of the period of performance, then no points will be granted for this area. If schedule efficiency for cumulative to date is less than 0.90 or greater than 1.10 for more than 25% of the period of performance, then no points will be granted for this area.

2.1.8 Risk Mitigation Plans

Performance Objective #8 (PO-8): The Government project manager with inputs from other Government personnel will verify that all (100%) moderate and high risks (risk exposure greater than 7.5) have risk mitigation plans that are actively used. “Actively used” means that the Contractor reviews risk mitigation steps as required but at least monthly and reschedules dates that are past due after government approval or completes each step before its due date. The Government project manager will perform this verification once per month using the risk management deliverable during the Project task order period of performance by reviewing risk mitigation status in the Contractor’s risk management tool, and will perform this verification for each Project task order. If any risk mitigation plans for moderate and high risks are found during the Project task order period of performance to have past due steps in the risk mitigation plans, then no points will be granted for this area. This performance objective is not applicable for risks with exposures of 7.5 or less.

2.1.9 Key Milestones

Performance Objective #9 (PO-9): The Government project manager with inputs from other Government personnel will verify that the Contractor met all key milestone requirements identified in the Project task order PWS and that the Contractor completed 100% of the milestones by the due date identified in the Project task order PWS. The Government project manager will perform this verification at the due date for each key milestone or when completed by inspecting key milestone deliverables. The Government project manager will perform this verification for each Project task order. Resuspense is allowable with Government approval and accomplished NLT 1 month in advance of due date. If any requirements for any milestones are not met or if any milestones are completed after the due date, then no points will be granted for this area.

2.2 Scored Services Summary

Based on the quality incentives in Section 2.1, Table 1 assigns values for earning the quality incentive points. Calculation of the quality points and fee earned will occur at the end of the task order.

Table 1 (Type A) Project Task Order Scored Services Summary

2.3 Cost Incentives

Cost incentives provide a focus for ensuring costs stay less than or within the negotiated target cost. The goal in “Project Task Orders” is to meet the Target Cost (TC). Understanding that meeting the TC exactly is highly unlikely, there is a range of incentive effectiveness in which the fee will change in accordance with the final cost bounded by the maximum/minimum fee (See Table 2). The Government will adjust the fee by the QPI.

Table 2 (Type A) CPIF Incentive – Project Task Orders

Share ratio is expressed as Government percentage share of cost risk (i.e., 60%) divided by the Contractor percentage share of cost risk (i.e., 40%). This example appears as 60/40 on graph above.

The Government will use the following formulas for fee calculation. (See Section 5.0 for sample calculations.)

Maximum Fee = 12% Minimum Fee = 5%

TC = Target Cost = Negotiated Cost TAC = Total Allowable Cost = Actual Cost of Work CS = Cost Share % Contractor = (As applicable to the adjusted total allowable cost) TF = Target Fee (10% of TC) ATF = Adjusted Target Fee = ((TC – TAC) x CS) + TF QPI = The result of the number of quality points earned divided by the total quality points possible. Expressed as a %.

AFF = Adjusted Final Fee = ATF x QPI

Also expressed as:

AFF = (((TC-TAC) x CS) + TF) x QPI

3.0 COST PLUS INCENTIVE FEE (CPIF) STRUCTURE – Sustainment/Maintenance/Incremental Improvement (S/M/II) (Type B) The incentive provisions consist of performance and schedule incentives applied in a QPI for the program. This allows a balance between cost and quality while meeting Government needs. The concept consists of points assigned to various Services Summary items; this number is converted to a percentage to complete the fee calculation. S/M/II task orders involve the delivery of services to maintain or improve a capability to meet mission requirements. Applicable CLINs are X002 (Systems Engineering, Program Management/Systems Management and System Sustainment), X003 (Space Weather Analysis and Forecast System Sustainment), and X008 (Additional System Engineering Tasks).

3.1 Quality Incentives

Quality incentives apply to the services being delivered in the Task Orders (TOs) issued under this contract. The quality incentive will measure Contractor performance against the relevant performance requirements for the type of work performed.

3.1.1 Government Requirements Met

Performance Objective #1 (PO-1): The Government project manager with inputs from other Government personnel will verify in Contractor provided deliverables (design, baseline change, or implementation task order) that Government requirements are met. The Government project manager will perform this verification by comparing the Government’s requirements in the attachment to the Project task order PWS with the Government requirements identified in the Contractor requirements traceability deliverables. These deliverables shall show the traceability of Government requirements into the product baseline and into the test plan. The Government will perform this verification for each S/M/II task order. If deliverables do not show the traceability of all (100%) S/M/II Government requirements identified in the attachment to the S/M/II task order PWS into the product baseline and test plan, then no points will be granted for this area.

3.1.2 Lower Annual Life-Cycle Sustainment Cost

Performance Objective #2 (PO-2): Prior to the start of full performance, the Contractor and the Government will agree to a life-cycle sustainment cost for each system of the AFWA Enterprise. In the contract Transition Plan, the Contractor has provided the life-cycle sustainment cost in a sustainment model for each system of the AFWA Enterprise which serves as the initial life-cycle sustainment cost baseline for this objective. For each design, baseline change, or implementation task order that lowers the life-cycle sustainment cost, the Contractor will submit as part of the design phase, the recommended change to the life-cycle sustainment cost. The Government project manager with inputs from other Government personnel will verify in Contractor provided deliverables that a minimum of 2% annual reduction in life-cycle sustainment cost will be achieved for the system addressed by the Project task order. The Government will perform this verification for each S/M/II task order which has an objective to lower AFWA Enterprise life-cycle sustainment costs. If the design, baseline change or implementation does not lower life-cycle sustainment costs by a minimum of 2% annually by system, then no points will be granted for this area.

3.1.3 Test Deficiencies

Performance Objective #3 (PO-3): The Government project manager with inputs from other Government personnel will verify in Contractor provided test results deliverables and by Remedy tickets that 100% of CAT I deficiencies, emergency or urgent, and 95% of CAT II deficiencies identified during Contractor tests are corrected prior to Government operational test and do not reoccur during implementation or within 30 days after implementation. A deficiency is as defined by TO 00-35D-54. The Government will perform this verification for each S/M/II task order. If 100% of CAT I deficiencies, emergency or urgent, and 95% of CAT II deficiencies identified during tests are not corrected prior to Government operational test or reoccur during implementation or within 30 days after implementation, then no points will be granted for this area.

3.1.4 Implementations Installed

Performance Objective #5 (PO-5): The Government project manager with inputs from other Government personnel will verify in Government implementation results documents that no more than 3% of S/M/II implementations performed during the S/M/II task order period of performance had errors. In addition, there were no failures. If more than 3% of implementations performed during the S/M/II task order period of performance had errors or if there are implementation failures, then no points will be granted for this area.

3.1.4.1 An implementation error is any discrepancy which prevents satisfying one or more mission requirements but does not affect achieving operational readiness standards and workarounds exist. Unexpected result(s) may occur. An error may cause user/operator inconvenience or annoyance. Implementation may take longer than briefed.

3.1.4.2 An implementation failure is any discrepancy which affects achievement of operational readiness standards or requires reinstatement of previous operational baseline. No workarounds exist.

3.1.5 Deliverable Submitted

Performance Objective #6 (PO-6): The Government project manager with inputs from other Government personnel will verify in the Contractor deliverables that 98% of deliverables were without errors. An error is defined as an omission of required content or content that is incorrect, excluding administrative and format errors. The Government must identify errors within 30 calendar days of the Contractor’s release of the deliverable. The Government project manager will verify that the Contractor submitted 100% of deliverables to the Government on or before the stated due dates. The Government will perform this verification for each S/M/II task order. If more than 2% of S/M/II task order deliverables have errors or if any deliverables are submitted after the stated due date, then no points will be granted for this area.

3.1.6 Risk Mitigation Plans

Performance Objective #8 (PO-8): The Government project manager with inputs from other Government personnel will verify that all (100%) moderate and high risks (risk exposure greater than 7.5) have risk mitigation plans that are actively used. “Actively used” means that the Contractor reviews risk mitigation steps as required but at least monthly and reschedules dates that are past due after government approval or completes each step before its due date. The Government project manager will perform this verification once per month using the risk management deliverable during the S/M/II task order period of performance by reviewing risk mitigation status in the Contractor’s risk management tool, and will perform this verification for each S/M/II task order. If any risk mitigation plans for moderate and high risks are found during the S/M/II task order period of performance to have past due steps in the risk mitigation plans, then no points will be granted for this area. This performance objective is not applicable for risks with exposures of 7.5 or less.

3.1.7 Time Compliance Network Orders (TCNO) Tasks

Performance Objective #10 (PO-10): The Government project manager with inputs from other Government personnel will verify in Government TCNO results documents that all are installed by due date. The score for all S/M/II TCNOs applicable to the task order will be applied to the S/M/II task order when it is completed. If any TCNO is not installed by the due date and a Plan of Action and Milestones is not submitted by the TCNO installation due date, then no points will be granted for this area.

3.2 Scored Services Summary

Based on the quality incentives in Section 3.1, Table 3 assigns values for earning the quality incentive points. Calculation of the quality points and fee earned will occur at the end of the task order or at the end of each option period for maintenance/sustainment task orders.

Table 3 (Type B) S/M/II Task Order Scored Services Summary

3.3 Cost Incentives

Cost incentives provide a focus for ensuring costs stay less than or within negotiated target cost. The goal in “S/M/II” is to meet the Target Cost (TC). Understanding that meeting the TC exactly is highly unlikely, there is a range of incentive effectiveness in which the fee will change in accordance with the final cost bounded by the maximum/minimum fee (See Table 4). The Government will adjust the fee by the QPI.

Table 4 (Type B) CPIF Incentive – S/M/II Task Order

Share ratio is expressed as Government percentage share of cost risk (i.e., 33.3%) divided by the Contractor percentage share of cost risk (i.e., 66.7%). This example appears as 33.3/66.7 on graph above.

The Government will use the following formulas for fee calculation. (See Section 5.0 for sample calculations.)

Maximum Fee = 10% Minimum Fee = 5%

TC = Target Cost = Negotiated Cost TAC = Total Allowable Cost = Actual Cost of Work CS = Cost Share % Contractor = (As applicable to the adjusted total allowable cost) TF = Target Fee (8% of TC) ATF = Adjusted Target Fee = ((TC – TAC) x CS) + TF QPI = The result of the number of quality points earned divided by the total quality points possible. Expressed as a %.

AFF = Adjusted Final Fee = ATF x QPI

Also expressed as:

AFF = (((TC-TAC) x CS) + TF) x QPI

4.0 COST PLUS INCENTIVE FEE (CPIF) STRUCTURE – Services (Type C) The incentive provisions consist of performance and schedule incentives applied in a QPI for the program. This allows a balance between cost and quality while meeting Government needs. The concept consists of points assigned to various Services Summary items; this number is converted to a percentage to complete the fee calculation. Services task orders involve the delivery of analysis or the performance of specific tasks in which the product is the result of labor applied. Applicable CLIN is X008 (Additional System Engineering Tasks).

4.1 Quality Incentives

Quality incentives apply to the services being delivered in the Task Orders (TOs) issued under this contract. The quality incentive will measure Contractor performance against the relevant performance requirements for the type of work performed.

4.1.1 Government Requirements Met

Performance Objective #1 (PO-1): The Government project manager with inputs from other Government personnel will verify in Contractor provided deliverables (specific Services task order deliverable) that Government requirements are met. The Government project manager will perform this verification by comparing the Government’s requirements in the Services task order PWS with the Government’s requirements identified in the Contractor requirements traceability deliverables. These deliverables shall show the traceability of Government requirements into the Services task order deliverables. The Government will perform this verification for each Services task order. If deliverable does not show the traceability of all (100%) Services task order Government requirements identified in the Services task order PWS into the Services task order deliverable, then no points will be granted for this area.

4.1.2 Deliverable Submitted

Performance Objective #6 (PO-6): The Government project manager with inputs from other Government personnel will verify in the Contractor deliverables that 98% of deliverables were without errors. An error is defined as an omission of required content or content that is incorrect, excluding administrative and format errors. The Government must identify errors within 30 calendar days of the Contractor’s release of the deliverable. The Government project manager will verify that the Contractor submitted 100% of deliverables to the Government on or before the stated due dates. The Government will perform this verification for each Services task order. If more than 2% of deliverables have errors or if any deliverables are submitted after the stated due date, then no points will be granted for this area.

4.2 Scored Services Summary

Based on the quality incentives in Section 4.1, Table 5 assigns values for earning the quality incentive points. Calculation of the quality points and fee earned will occur at the end of the task order.

Table 5 (Type C) Services Task Order Scored Services Summary

4.3 Cost Incentives

Cost incentives provide a focus for ensuring costs are less than or within negotiated target cost. The goal in “Services” is to meet the Target Cost (TC). Understanding that meeting the TC exactly is highly unlikely, there is a range of incentive effectiveness in which the fee will change in accordance with the final cost bounded by the maximum/minimum fee (See Table 6). The Government will adjust the fee by the QPI.

Table 6 (Type C) CPIF Incentive – Services Task Order

Share ratio is expressed as Government percentage share of cost risk (i.e., 33.3%) divided by the Contractor percentage share of cost risk (i.e., 66.7%). This example appears as 33.3/66.7 on graph above.

The Government will use the following formulas for fee calculation. (See Section 5.0 for sample calculations.)

Maximum Fee = 10% Minimum Fee = 5%

TC = Target Cost = Negotiated Cost TAC = Total Allowable Cost = Actual Cost of Work CS = Cost Share % Contractor = (As applicable to the adjusted total allowable cost) TF = Target Fee (8% of TC) ATF = Adjusted Target Fee = ((TC – TAC) x CS) + TF QPI = The result of the number of quality points earned divided by the total quality points possible. Expressed as a %.

AFF = Adjusted Final Fee = ATF x QPI

Also expressed as:

AFF = (((TC-TAC) x CS) + TF) x QPI

5.0 INCENTIVE FEE CALCULATIONS AND QPI

5.1 The Government shall calculate an Adjusted Target Fee (ATF) in accordance with this section.

5.2 This contract has a target fee, minimum fee, maximum fee, and multiple share ratios set by the Government.

5.3 Incentive Fee will be calculated as follows:

5.3.1 Step One ATF: The result of TAC subtracted from TC is multiplied by the appropriate CS Ratio. The result is then added to the TF.

5.3.2 Step Two AFF: The fee calculated in step one shall be adjusted through application of the QPI, as described in paragraph 5.4 of this section (Administering the Two-Step Incentive Fee Plan). The QPI adjustment shall be the final determination of the fee amount authorized for the payment. At no time shall the AFF be below the minimum fee or above the maximum fee.

5.3.3 TAC for the purpose of this section is “interim” until contract completion and is subject to final adjustment after DCAA final rate revisions and determination of allowable costs. However, after the end of each contract performance period, the “interim” TAC will only be modified if finalized costs incurred for non-severable projects are different than what was estimated, correction of invoicing errors (found prior to the start of the next fiscal year) is required to revise the AFF.

5.4 Administering the Two-Step Incentive Fee Plan

5.4.1 The adjusted final fee calculation for each task order shall be accomplished upon completion of the task order.

5.4.2 Within 75 days following the end of each task order, the Contractor will provide the Contracting Officer (CO) with the TAC incurred for that performance period. Actuals should be used for cost incurred.

5.4.3 Within 135 days following the end of each task order, the AFF will be determined and a contract modification issued. Once the Step One adjustment is calculated as set forth below in paragraph 5.7. Step Two, the QPI, must be calculated. The QPI is designed to ensure that performance expectations are not sacrificed to achieve cost objectives. The QPI reflects the Contractor’s success in achieving acceptable levels of performance.

5.4.4 In addition to adjusting the incentive fee due to quality indicators, failure to meet the Services Summary may also result in the Government taking corrective action under the Inspection of Services clause or Contractor Performance Assessment Reporting System.

5.4.5 Each of the Performance Objectives within the Scored Services Summary (See Tables 1, 3 and 5) will be reviewed to determine if the acceptable standard has been achieved. The Government will give the Contractor monthly feedback on performance at the Monthly Status Reviews. The Scored Services Summary quality points earned will be determined for each task order by the CO. Final Scored Services Summary quality points earned will be determined and approved by the CO within 45 days following the end of the task order. NOTE: The Government will identify whether a future task order is considered a Project, a S/M/II or Services in the request for proposal for each future task order to determine the applicable performance objectives used.

5.4.5.1 The total possible points that the Contractor can earn is 9 points for Projects, 7 points for S/M/II, and 2 points for Services. Quality points are then converted to a percentage that is applied to the ATF. For example, if the Contractor earned 7 points during the period of performance of a “Project” task order, the Contractor would be entitled to receive 78% (7 points divided by 9 possible quality points) of the ATF. A complete example of the incentive calculations are provided below in paragraph 5.7. The quality points are listed on the Scored Services Summary above in Tables 1, 3 and 5.

5.4.5.2 The Contractor may earn up to 100% of the quality points if performance is achieved as described in the Scored Services Summary for that particular task order. If the Contractor meets the performance threshold for each Performance Objective, the Contractor is awarded the full quality point(s) indicated for that objective. If they do not meet the performance threshold for each Performance Objective, the Contractor is awarded zero points for that particular objective. The quality points for each Performance Objective are added together; these total quality points earned are divided by the total quality points possible. The result is expressed as a percentage which is the QPI. The percentage will be rounded up or down to the nearest whole percentage number. For example, if 6 out of 7 quality points were earned, the QPI would be 86%. (6/7 = .8571 which is rounded up to 86%). This percentage would then be used to determine the AFF.

5.5 Incentive Fee Plan Change Procedures

5.5.1 All significant changes to the Incentive Fee Plan are approved by the CO. Significant changes are those relating to performance objective criteria, and adjusting quality points. The Contractor may recommend changes to the CO no later than ten (10) working days prior to the beginning of the task order. After approval, the CO shall notify the Contractor in writing of any change(s). Unilateral changes may be made to the Incentive Fee Plan if the CO gives the Contractor written notification 30 days prior to the start of the task order. Changes affecting the task order period must be by bilateral concurrence.

5.5.2 Upon CO and Contractor agreement, for certain task orders, there may be an omission of certain performance objectives in the incentive calculation. Each task order’s PWS/Services Summary will identify the included performance objectives.

5.5.3 Task orders for a particular effort that include a variation of the fee structure outlined in this document, shall include an amendment to the Incentive Fee Plan as Attachment 5 to that order’s PWS.

5.6 Contract Termination

In the event this contract is terminated for the convenience of the Government after the start of a task order, the incentive fee deemed earned and to be paid for this period will be a matter of equitable adjustment in accordance with the termination clause of this contract. The remaining incentive fee dollars for all periods subsequent to this termination shall not be considered earned, and therefore shall not be paid.

5.7 Schedule for Provisional Billing on the Incentive Fee

The Government will withhold a reserve not to exceed 15% of the total incentive target fee or $100,000, whichever is less for the particular task order, to protect the Government’s interest per FAR 52.216-10 until the Adjusted Final Fee is determined. The contractor shall be allowed to divide the remaining 85% of the Target Fee amount for each task order by the number of months in each period of performance and invoice that amount monthly. Per 52.216-10(c)(1), if the contracting officer at any time considers that performance or cost indicates that the contractor will not achieve the target fee, the Government shall pay on the basis of an appropriate lesser fee.

5.8 Sample Incentive Calculations

Examples of how the Government will calculate AFF:

Assume the following

This task is for a Type A – Project Task Order (Table 2).

Target Cost (TC): $1,000,000

Target Fee (TF) (10% of TC): $100,000

Minimum Fee: 5% ($50,000)

Maximum Fee: 12% ($120,000)

Total possible quality points: 9

Total Earned quality points: 7

Example 1 (Underrun)

In Step One of this scenario, the Contractor’s TAC is $970,000 has earned an adjustment target fee of $112,000, before the QPI adjustment. Assuming the quality points earned in Step Two for the performance period is 7 out of 9 points, the Government would pay the Contractor a fee of 78% (rounding to the nearest whole number) of $112,000 or $87,360.

Below is an explanation of the calculations summarized above for this underrun example:

Total Allowable Cost (TAC): $970,000

Formula: (TC-TAC) x CS + TF = Adjusted Target Fee ($1,000,000 - $970,000) x 40% + $100,000 = $112,000 Note: Contractor Share (CS) is determined by the TAC. The TAC is $970,000, which correlates to a 3% underrun. A 3% underrun has a Government to Contractor cost share ratio of 60/40 (See CPIF (Projects) graph. The Contractor share of 40% is used in the incentive formula.

ATF x QPI = Adjusted Final Fee $112,000 x 78% = $87,360

Example 2 (Overrun)

In Step One of this scenario, the Contractor’s TAC is $1,020,000 has earned an adjustment target fee of $80,000, before the QPI adjustment. Assuming the quality points earned in Step Two for the performance period is 7 out of 9 points, the Government would pay the Contractor a fee of 78% of $80,000 or $62,400.

Below is an explanation of the calculations summarized above for this overrun example:

Total Allowable Cost (TAC): $1,020,000

Formula: (TC-TAC) x CS + TF = Adjusted Target Fee ($1,000,000 - $1,020,000) x 100% + $100,000 = $80,000 Note: Contractor Share (CS) is determined by the TAC. The TAC is $1,020,000, which correlates to a 2% overrun. A 2% overrun has a Government to Contractor cost share ratio of 0/100 (See CPIF (Projects) graph). The Contractor share of 100% is used in the incentive formula.

ATF x QPI = Adjusted Final Fee $80,000 X 78% = $62,400

Incentive Fee Plan v1.4 image2.emf

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Adjusted Fee Amount

Range Of Incentive Effectiveness

(Max Fee )

(Target Fee)

(Min Fee)

CPIF Incentive (S/M/II)

Adjusted Total Allowable Cost

>0% up to 3%

(33.3/66.7)

Target Cost

Overrun

5% Fee

8% Fee

10% Fee

Adjusted Fee % Value

Share-line

Underrun

(0/100)

UNCLASSIFIED

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CPIF Incentive (Services)

(33.3/66.7)

8% Fee image1.emf

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CPIF Incentive (Projects)

>0% up to 5%

(60/40)

12% Fee

>0% up to 5%