Appendix G-Incentive and Award Fee Plan

FA4890-10-R-0009

APPENDIX G

REMOTELY PILOTED AIRCRAFT (RPA) INCENTIVE AND AWARD FEE PLAN

Appendix G – RPA Incentive Plan Page 1 of 13

1.0 INTRODUCTION.

1.1 This Plan describes the process that will be used to assess and determine the incentive and award fees earned by the Contractor. The objective is to motivate the Contractor to effectively manage costs and improve performance in the rated areas stated herein and in the contract that directly impact performance of requirements described in the PWS. This Plan describes the procedures and specific evaluation criteria used to assess the Contractor’s performance and to determine incentive/award fee earned. It consists of two elements, cost and performance. The incentive is evaluated and calculated using a combination of objective and subjective criterion designed to optimize contractor performance and incentivize continual process and program improvements throughout the life of the contract. Each element will be evaluated and calculated separately on a semi-annual basis. The results will be used in conjunction with the yearly

Contractor Performance Assessment Report System assessment to provide a complete program assessment of the Contractor’s performance on the RPA contract.

2.0 GENERAL PROCEDURES.

2.1 Evaluation Periods. Evaluations will occur on a semi-annual basis. The periods are as follows:

Evaluation

Period

Date

Period 1 TBD

Period 2 TBD

Period 3 TBD

Period 4 TBD

Period 5 TBD

Period 6 TBD

Period 7 TBD

Period 8 TBD

Period 9 TBD

Period 10 TBD

2.2 Assessment and Payment Overview. The objective and subjective evaluation criteria and calculations as described in paragraph 3.0 for Cost and paragraph 4.0 for Performance will be utilized to calculate the recommended fee for presentation to the Fee Determining Official (FDO).

Periodic feedback will be provided by the Program Manager (PM) to the Contractor. The PM will present all semi-annual evaluation findings and preliminary results, to include objective criteria calculations and subjective criteria recommendations, to an Award Fee Review Board

(AFRB) chaired by the Acquisition Management and Integration Center (AMIC) Director (DR) or

Deputy Director (DD) for validation. The AFRB Chair shall recommend a total fee amount to the

FDO who shall determine the final fee amount. The CO will modify the contract to incorporate the fee earned. Billing and payment of the fee will be made semi-annually at the IDIQ contract level.

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2.3 Procedures for Changing the Plan. Unilateral changes may be made to this plan, with the exception of Section 3.0, Cost Incentive Procedures, if the Contractor is provided a modification no later than 15 days before the start of the upcoming evaluation period. Changes affecting the current evaluation period will be by bilateral contract modification between Government and

Contractor. Any substantial changes to the plan must be approved by the FDO. Changes each period to the Special Interest Items (reference Paragraph 4.2.4) are not considered substantial.

2.4 Contract Termination. If the contract is terminated for the convenience of the

Government after the start of an evaluation period, the Government will prorate the target cost

(proposed by the Contractor) and the incentive/award fee pool to reflect months in which work was performed. After termination for convenience, the remaining fee cannot be earned by the

Contractor and, therefore, will not be paid.

2.5 Contractor Presentation. The Contractor will be provided the opportunity to make a presentation to the AFRB prior to the PM’s presentation to the board. The presentation shall be limited to thirty minutes and may complement but not duplicate inputs already submitted for consideration in a Contractor-determined format.

3.0 COST INCENTIVE PROCEDURES.

3.1 Determination of Cost Incentive Earned. Cost incentives provide a focus for ensuring costs stay within allotted program budgets. Cost incentive will only be earned as a result of actual savings against the total target costs. The cost incentive will be based on the contractual target cost (TC), as proposed by the Contractor, for cost reimbursable expenses. The target fee will be zero. The cost incentive share ratio is 40/60 (Government/Contractor). The cost incentive will be calculated using cost data from the Cost Performance Report (PWS Para. 2.23.2) and paid semi-annually and is considered preliminary. The cost incentive calculation will be adjusted when the Contractor determines actual fiscal year indirect rates; the incentive will be finalized when the incurred cost submission for each year has been certified by the contractor and submitted to DCAA/DCMA.

3.1.1 Calculations. TC and actual cost (AC) data will be provided for each OCONUS location.

TC and AC from each location will be summed to determine the overall TC and AC. The cost incentive will be calculated on a cumulative basis.

3.2 Example Calculation.

3.2.1 Cost Incentive Formula.

Final Cost Incentive = (TC – AC) x Contractor Share Percent

3.2.1.1 Sample Calculation (Underrun).

Location 1 Location 2 Location 3 Total

TC $10M $10M $20M $40M

AC $12M $9M $14M $35M

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TC = $40M = $10M + $10M + $20M

AC = $35M = $12M + $9M + $14M

Underrun = $5M

Contractor Share = 60%

Cost Saved = ($40M - $35M) = $5M

Cost incentive earned = Cost saved x Contractor Share = $5M x 60% = $3M

3.2.1.2 Sample Calculation (Overrun).

TO 1 TO 2 TO 3 Total of all TO

TC $10M $10M $20M $40M

AC $12M $10M $19M $41M

TC = $40M = $10M + $10M + $20M

AC = $41M = $12M + $10M + $19M

Overrun = $1M = Zero incentive earned

4.0 INCENTIVE AND AWARD FEE PROCEDURES.

4.1 Available Pool: The available pool for each period is established by totaling the amount of incentive/award fee established for each task order associated with that period. The available fee will be a unilateral decision of the Government.

4.2 Determination of Fee Earned: The Incentive/Award Fee will be based, as outlined below, on four (4) criteria: Quality (35%), Warfighter Servicing/Process Improvements (35%), Small

Business (10%), and a Special Interest Item (SII) (20%), along with any considerations resulting from Positive Significant Incidents (PSI) and Negative Significant Incidents (NSI). The SII will be determined by the PM, and the Contractor will be notified IAW paragraph 2.3. If there is no

SII assigned, the uncommitted percentage will be divided equally between Quality and Warfighter

Servicing/Process Improvement. The overall fee determination will be calculated at the total contract level, considering performance on all awarded task orders.

4.2.1 Quality Criteria (includes Service Summary (SS) items & Quality Management

System (QMS)) – 35%. The Quality portion of the Incentive/Award Fee will use a Quality

Performance Index (QPI) where the Contractor can earn points for exceeding critical SS standards and for successfully executing the Contractor’s QMS to the benefit of the Government. The

Contractor can earn up to twenty-four (24) points per period under the Quality Criteria: four (4) points per month as defined below with two (2) points available for SS and two (2) points for QMS sections of the QPI. The SS and QMS sections will be evaluated IAW the PWS SS and Appendix

H.

4.2.1.1 A major nonconformance is defined as: A nonconformance that adversely impacts (or has the potential to) mission, safety of personnel and/or equipment, environment, performance

(quality), schedule (delivery), and/or cost.

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4.2.1.2 SS Point Assignment Explanation (12 possible points).

Zero (0) points will be awarded for a calendar month when the Government issues a major non-conformance for any of the following SS standards:

Aircraft Availability Rate

Total Abort Rate

Repeat/Recur Rate

12-Hour Fix Rate

Ground Control Station Operational Readiness Rate

Tactical Field Terminal Operational Readiness Rate

FSST Operational Readiness Rate

Reachback Circuits Operational Readiness Rates; OR

One (1) point will be awarded for each calendar month when the Government does not issue a major non-conformance for failure to meet any of the SS standards identified above; OR

Two (2) points will be awarded for each calendar month when the Government does not issue a major non-conformance for failure to meet any of the SS standards identified above and all of the following more stringent critical standards are met or exceeded at each deployed site:

Standard MQ-1 MQ-9

Aircraft Availability Rate 82% 85%

Total Abort Rate 7% 4%

Repeat/Recur Rate (see exception below) 4% 5%

12-Hour Fix Rate 82% 74%

Exception: Multispectral Targeting System (MTS) Ball repeats and recurs directly attributable to repair actions by another organization shall not be counted against the higher critical Repeat/Recur rate.

4.2.1.3 QMS Point Assignment Explanation (12 possible points).

Zero (0) points will be awarded for a calendar month during a calendar month when the

Government issues a major nonconformance for a technical data violation, OR

One (1) point will be awarded for a calendar month when the Government does not issue more than three (3) total major non-conformances, and none are a repeat from the previous 90 calendar days, OR

Two (2) points will be awarded for a calendar month when the Government does not issue any major non-conformances.

4.2.1.4 Quality Criteria Calculation. The overall QPI shall be calculated by dividing the

Quality points earned by the Quality points available (24) during the period and multiplying the result by the available fee for this factor:

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4.2.1.4.1 Formula.

(Points Awarded / Total Points Available) x Available Pool = Fee Amount Earned

4.2.1.4.1.1 Sample Calculation. Assumption: Available Fee pool = $3M

Contractor earns 18 of 24 available points:

Available Pool: $3M x 35% = $1.05M

(18/24) x $1.05M = $787.5K

4.2.2 Warfighter Servicing/Process Improvement Criteria – 35%. The following evaluations will be performed during each period:

4.2.2.1 Warfighter Servicing. The Warfighter Servicing calculation is based on the average score of surveys submitted rather than total points. The PM will complete a Warfighter Servicing

(WS) Survey using the format at Attachment 1 and obtain completed surveys from supported

Maintenance Group Commanders, and other warfighter customers as deemed appropriate by the

PM. The PM survey shall count as two separate surveys when calculating the Warfighter

Servicing/Process Improvement score in order to provide a program-wide assessment vs.

unit-level only perspective. The overall score of each survey will be equal to the average value of the point value assigned to each question.

4.2.2.2 Process Improvements. The Process Improvements calculation is based on the average score of process improvements submitted rather than total points.

4.2.2.2.1 Contractor Process Improvement Inputs (CPII). The Contractor shall provide process improvement inputs using the format at Attachment 3 as they occur within 20 calendar days of the event occurrence but not later than five (5) days after the end of the Incentive/Award

Fee period (via email distribution) to the PM. Process improvement inputs must provide a tangible benefit to the government and be consistent with the performance requirements of the

RPA contract.

4.2.2.2.2 Government Process Improvement Inputs (GPII). The Government will provide inputs using the format at Attachment 3 as they occur (via email distribution) to the PM. Process improvement inputs must provide a tangible benefit to the government and be consistent with the performance requirements of the RPA contract.

4.2.2.2.3 Process Improvement Input Evaluations. The PM will assign an office of primary responsibility (OPR) for evaluation of the inputs as required, and set a suspense for completion of the evaluation. The OPR is responsible for providing a coordinated validation of the input to include a validation of the claims made by the Contractor or any Government representative (e.g., monetary savings, man-hours avoided etc.). OPRs will evaluate individual CPIIs and GPIIs, and assign a numerical value using the rating scale in Attachment 2. The PM shall calculate an

Overall Process Improvement Score (OPIS) as an average of the individual CPII and GPII ratings.

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4.2.2.3 Warfighter Servicing/Process Improvement Calculation. The overall score for this criteria will be computed by adding all Warfighter Survey Scores (WSS) and the OPIS and dividing the result by the total number of inputs with the OPIS considered as a single input. The resulting percentage will be multiplied by the available pool for this factor.

4.2.2.3.1. Formula.

Available Pool*[(Sum of WSS + OPIS) / (Count of WSS + 1)]/Highest Scale Rating = Fee

Amount Earned

4.2.2.3.2 Sample Calculation. Assumption: Available pool = $3M

Question 1 Question 2 Question 3 Question 4 WSS Count

Survey 1 Scores 1 2 1 1 1.25 1

Survey 2 Scores -1 0 1 0 0.00 1

Survey 3 Scores 2 2 1 2 1.75 1

Survey 4 Scores 2 2 1 2 1.75 1

OPIS 2.00 1

(Sum of WSS + OPIS) / (Count of WSS +1)

Overall Average Rating

6.75 / 5 = 1.35

Available Pool: $3M x 35% = $1.05M

Highest Possible Rating: 2

$1.05M x 1.35 /2 = $ 708,750

4.2.3 Small Business Criteria -10%. The Contractor can earn one (1) point for every full 1% it exceeds the contractor proposed small business participation percentage (minimum is 15%). No fractional points will be awarded. The ceiling is five (5) points.

Potential Earnings: (Table assumes available pool of $3M with 10% being $300K)

Small Business

Participation*

Points Awarded Fee Earned

16% 1 20% of $300K ($60K)

17% 2 40% of $300K ($120K)

18% 3 60% of $300K ($180K)

19% 4 80% of $300K ($240K)

20% 5 100% of $300K

* based on contractor proposed small business participation of 15%

4.2.3.1 Sample Calculation. Assumption: Available pool = $3M

Contractor earns 3 out of 5 points by achieving 18%

($3M x 10%) x (3/5) = $180,000 Fee earned for Small Business Criteria

4.2.4 SII Criteria – 20%. The PM may assign a SII for up to 20% of the total available pool prior to the beginning of the period. When identified, the SII is an area of performance that the

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Government deems critical and requires special attention. The SII is defined in Attachment 4 to this appendix.

4.2.4.1 Sample Calculation. Assumption: Available pool = $3M

Contractor received an Outstanding SII rating:

($3M x 20%) = $600,000 Fee earned for SII

4.2.5 Significant Incidents. In the event of any significant positive or negative incident that, in the opinion of the Government, was within the contractor’s control, the FDO may unilaterally modify up or down the amount of the total fee earned for the period without regard to Contractor performance in the areas scored. The fee will not be modified as a result of events that are outside the control of the Contractor.

Positive Significant Incidents:

Examples include but are not limited to:

• Major innovations that significantly improved weapon system capabilities or provided vast savings to the government.

Negative Significant Incidents:

Examples include but are not limited to:

• Serious damage/destruction to Government property as a result of the contractor’s actions.

• Serious, significant, and/or chronic management problems or performance problems that can be reasonably attributed to a general lack of Contractor management oversight in areas not necessarily delineated in the Incentive/Award Fee evaluation criteria.

4.2.5.1 If the cause of a NSI (i.e., aircraft mishap, etc.) is determined to be a Contractor responsibility after the period in which the event occurred, then the Government can consider the finding in the period during which the responsibility determination was made or if no formal determination is or will be made, when the investigation is closed. The AFRB should consider if any action was already taken in regard to the NSI. The Government will ensure the contractor is aware of any NSI that will be reviewed by the AFRB.

4.2.5.2 PSIs shall not be issued for any CPII or GPII as defined in Paragraphs 4.2.2.2.1 and

4.2.2.2.2.

4.3 Incentive/Award Fee Results. The AFRB will consist of 3 to 5 voting members identified in

Attachment 5 to validate the proposed Incentive/Award Fee results. The PM will present the proposed results each period to the AFRB to ensure consistency and integrity in application of the this plan. The PM’s presentation shall be restricted to government personnel. The AFRB will validate the PM’s inputs, recommendations, and calculations, and consider any PSI/NSI inputs prior to reaching a final consensus on a recommended fee amount. The AFRB Chair will forward the recommended amount, rationale, and supporting documentation to the FDO for final approval.

The AFRB may consult with functional area advisors who provide technical expertise and advice

Appendix G – RPA Incentive Plan Page 8 of 13 to the AFRB.

4.3.1 The FDO considers the AFRB recommendation, but is solely responsible for the final fee determination. If the FDO decision differs from the recommendation of the AFRB, the FDO shall document their decision rationale for the contract file. The final results for each period will not be closed until the FDO approves the final fee amount. The final determination is the unilateral decision of the Government. The FDO will provide the CO a written incentive/award fee decision and, barring unforeseen circumstances, the CO shall notify the Contractor of the final decision within 60 calendar days after the end of the period.

4.3.1.1 AFPEO/CM shall normally serve as the FDO, unless delegated to HQ ACC 06 or higher (i.e. A4, A4-2, A7K, etc.).

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Attachment 1

Warfighter Servicing Survey

Please answer the following questions using the ratings provided:

1. How well has the Contractor’s management team openly communicated, participated in problem-solving, and worked to enhance positive working relationships with the Government’s management team, Group/Squadron CCs/leaders, other key personnel?

RATING:__________________________

2. How well has the Contractor’s management team aggressively pursued and provided timely response to Government issues to enhance organizational-level maintenance support and mission effectiveness?

3. How well has the Contractor met the needs of your organizational-level maintenance requirements, mission and flying program?

4. How well has the Contractor performed maintenance services?

Rating Description Point

Value*

Outstanding Contractor consistently exceeds mission requirements 2

Good Contractor occasionally exceeds mission requirements 1

Satisfactory Contractor meets mission requirements 0

Unsatisfactory Contractor fails to meet mission requirements -1

*Point Value will be removed prior to sending surveys to the Warfighting Customers

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Attachment 2

Process Improvement (CPII/GPII) Ratings

The following point definitions shall be applied to individual Process Improvement evaluations:

Outstanding: (2 Points). Process improvement provides exceptional benefit to the Government through: dollar savings or cost avoidance; program-wide effects; or very large impacts over an extended period of time.

Good: (1 Points). Process improvement provides appreciable benefit to the Government through dollar savings or cost avoidance, program wide effects, or large impacts over an extended period of time.

Satisfactory: (0 Points). Process improvement provides little or no benefit to the Government.

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Attachment 3

Contractor/Government Process Improvement Input Format

All process improvement inputs are due to the Program Manager as they occur within 20 days of the event occurrence but not later than five (5) days after the end of the Award Fee period (via email distribution) to the PM.

CPII/GPII FY-XX - Title

ACTION:

Fully identify and explain specific actions taken by Contractor personnel.

IMPACT:

Provide specific impact of actions. Examples include, but are not limited to actual dollar savings or cost avoidance to the Government or other efficiencies provided to the

Government’s advantage.

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Attachment 4

Special Interest Item

Description: This SII will evaluate the Contractor’s efforts in transitioning from the current

MQ-1 and MQ-9 organizational-level (O-level) maintenance operations to the RPA O-level maintenance requirements IAW the Contractor’s Transition Plan. Evaluation will include:

whether all major milestones were properly identified and met on schedule, the Contractor’s success in dealing with the outgoing incumbent Contractor and warfighter customers, and the

Contractor’s capability of meeting RPA O-level maintenance requirements at full performance start. This SII will evaluate the Contractor’s ability to successfully assume requirements at full performance start.

The SII will be rated as follows:

Outstanding. Exceeded all transition plan objectives and milestones. Fully capable to commence RPA O-level maintenance requirements at full performance start. The Contractor will earn 100% of the available SII Award Fee pool for achieving an Outstanding rating.

Good. Fully met 100% of all transition plan objectives and milestones, and exceeded some.

Fully capable to commence RPA O-level maintenance requirements at full performance start.

The Contractor will earn 85% of the available SII Award Fee pool for achieving an Good rating.

Satisfactory. Fully met all transition plan objectives and milestones. Fully capable to earn 50% of the available SII Award Fee pool for achieving a Satisfactory rating.

Unsatisfactory. Failed to meet transition plan objectives and milestones. Not fully capable to earn 0% of the available SII Award Fee pool for achieving an Unsatisfactory rating.

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Attachment 5

AFRB Members

Award Fee Review Board Voting Members

HQ ACC AMIC/DR or DD (Chairperson)

432 MXG/CC or CD or HQ ACC/A8Q

HQ ACC AMIC/PM

HQ ACC AMIC/PK

HQ ACC AMIC/PMA

HQ ACC AMIC/PKC

Note: AMIC/PM or AMIC PK will serve as chairperson in the absence of AMIC/DR or DD.

Non-Voting Members / Advisors

HQ ACC/JA

ACC AMIC/PMAU

ACC AMIC/PSU

ACC AMIC/DRQ

ACC AMIC/PSC

ACC AMIC/PLG

ACC AMIC/DRF

ACC AMIC/PCE

ACC AMIC/OL

ACC AMIC/PKCA

Fee Determining Official

AFPEO/CM or Deputy AFPEO/CM