Updated_Contractor_Briefing_of_BAT_Incentives.pdf

Contractor Briefing for BAT Incentives

BAT Program Office

AFLCMC/WNKABB

24 March 2016

BAT Incentives

• CPIF selected for EMD increments (B‐2, B‐1 & B‐52)

– Recognizes risk inherent in development efforts

– Includes performance/schedule and cost incentives

• FPIS selected for Production Increments (B‐2, B‐1 & B‐52)

– Recognizes risk reduction in EMD Increments

– Accommodates including development and production in a single contract

– Successive targets supports appropriate Production price reset at end of B‐2 EMD

Examples show EMD I and Production I details but also apply to Increments II & III

Costs are collected and cost‐incentives administered by increment and contract type

EMD/CPIF

Yes

BAT CPI Incentive Flow Target Fee

Performance 65%

Cost 35%

PRR

50%

SVR

30%

CDR

20%

Review On

Sched

Incentive Paid

No

Rsolvd < 30 days

Yes50% Incentive

Paid

Event

PRR?

50% PRR

Incentive

Paid

No Yes

Incentive Lost

No

Only the cost incentive is subject to the CPI geometry once the performance pool is created.

Re‐baseline PRR schedule

PRR on Sched to new baseline?

Yes

Incentive Lost

No

BAT CPIF Details

• Target Fee is set at 9%

– Weighted Guidelines Used

– Input from AFMC on other CPI contracts

• Maximum Fee = 11%

– Input from AFMC on DPAP guidance

• Minimum Fee = 0%

– Extends the effectiveness of the cost incentive

• Share Ratio is 80/20 over and under

– Ratio is where the overrun and underrun geometry converge

– Satisfactorily reflects the risk of development

Yes

BAT CPI Incentive Flow Target Fee

9%

Performance 65%

Cost 35%

• Share Ratio: 80/20 (over & under)

• Minimum Fee: 0%

• Maximum Fee: 11%

PRR

50%

SVR

30%

CDR

20%

Review On

Sched

Incentive Paid

No

Rsolvd < 30 days

Yes50% Incentive

Paid

Event

PRR?

No Yes

Incentive Lost

No

(5.85%, $1.755)

(3.15%, $.945M) (5.15%, $1.545)

TC = $30M*

TF = $2.7M

(1.17%, $351.0K) (2.925%, $877.5K)

(1.755%, $526.5K)

1.4625% $438.750K

CDR ‐ $175.500K

SVR ‐ $263.250K

PRR ‐ $438.750K

TC = $30M

TF = $0.945M

Tprice = $30.945M

50% PRR

Incentive

Paid

Re‐baseline PRR schedule

PRR on Sched to new baseline?

Yes

Incentive Lost

No

* Note: TC of $30M is used for demonstration purposes only.

BAT CPIF Cost Details Cost Fee Price

Target $30M* $.945M (35% of TF%) $30.945M

Underrun $27M $1.545M $28.545M

Overrun $34.725M $0 $34.725M

Fee Adjustment at Underrun Cost = (($30M ‐ $27M) * 20%) + $0.945M = ($3M * 20%) + $0.945 = $0.600M + $0.945M = $1.545M

Fee Adjustment at Overrun Cost = (($30M ‐ $34.725M) * 20%) + $0.945M = (‐$4.725M * 20%) + $0.945 = ‐$0.945M + $0.945M = $0

* Note: TC of $30M is used for demonstration purposes only.

20% is the contractor’s share of the 80/20 split

BAT CPIF Cost Geometry ($ = Millions)

$27.00 , $1.545

$30.00 , $0.95

$34.725 , $0.00

$0.500

$1.000

$1.500

$2.000

$25.00 $30.00 $35.00 $40.00

Target TP $30.945M

Overrun TP $34.725M

Underrun TP $28.55M

Share Ratio 80/20

Over & UnderFe e

Cost

Minimum Fee = 0

* Note: Underrun TP and Overrun TP are based on TC of $30M from previous slides

Production/FPIS

BAT FPIS Process Flow Process Established by FAR 52.216‐17

Final Price Revision

• InitTProfit – Initial Target Profit

• NegTC – Negotiated Target Cost

• InitTC – Initial Target Cost

PRR

Complete

NEG

Cost = Initial Tgt Cost

Reset Process Complete

NoIF

Contractor Proposal

45 Days Negotiations FFP?

Yes

NEG

Cost > Initial Tgt Cost

NEG

Cost < Initial Tgt Cost

Target Price Unchanged

Revised Target Price = InitTProfit – ((NegTC‐InitTC)*.4) + NegTC

Revised Target Price = InitTProfit – ((NegTC‐InitTC)*.4) + NegTC

FPIF

60/40 Share Applies

BAT FPIS Details

• Target Profit is set at 10%

– Weighted Guidelines Used (8.5%)

– Recognizes reduced risk from EMD and reset

• Ceiling Price = 105.45% of Target Price

– Equal to PTA based on suggestions in DAU & AF guides

• Share Ratio is 60/40 over and under

– Recognizes reduced risk from EMD

• Reset Conditions if converted to FPIF

– Share ratio will remain 60/40

– Initial Ceiling Price will become Final Ceiling Price if Negotiated

Target Cost exceeds Initial Target Cost

– Initial Ceiling Price will be adjusted downward if Negotiated

Target Price does not exceed Initial Target Price

$32.73 , $5.09

$36.36 , $3.64

$40.00 , $2.18

$42.18 , $‐

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$30.00 $35.00 $40.00 $45.00

Target TP $40M

Overrun TP/ PTA $42.18M

Underrun TP $37.82M

BAT FPI Geometry ($ = Millions)

Share Ratio 60/40

Over & Under

Pr of it

Cost