SMORS_Pre-Proposal_Conference_-_Sample_Fee_Calculation_v002.pdf

SUSTAINMENT & MODIFICATION OF RADAR SENSORS (SMORS)

PRE-PROPOSAL CONFERENCE HANDOUT

SAMPLE FEE CALCULATION

The following scenario provides an example of the how the Government will apply criteria to calculate the cost, performance and schedule incentive fees earned by the contractor. This example is based on the Ballistic Missile Early Warning System (BMEWS) and PAVE Phased Array Warning System (PAWS) (BPP) Radio Frequency Monitor Technology Refresh (RFM TR) Delivery Order (DO) [FA8723-17-F-0009 (F0009)]. This example will show the calculations of the various elements to show the overall resulting incentive fee for the Base Period of RFM TR (CLINs 1001, 9001 and 9002). The incentive fees are based on the contractor’s Target Cost. The values used throughout the scenario are for illustration purposes only and do not reflect any estimates, budgets or other data associated with this DO.

Sample Data

CLIN 1001

Target Cost (TC): $5,000,000 (proposed amount)

Target Fee (cost) (1.40%): $70,000 $5,000,000 x 1.40%

Maximum Fee (cost) (2.00%): $100,000 $5,000,000 x 2.00%

Minimum Fee (cost) (0.60%): $30,000 $5,000,000 x 0.60%

Underrun share ratio: 75/25

Overrun share ratio: 80/20

CLIN 9001

Performance Incentive Fee Pool (6.00%): $300,000 $5,000,000 x 6.00%

CLIN 9002

Schedule Incentive Fee Pool (2.00%): $100,000 $5,000,000 x 2.00%

F0009 Performance Incentive Fee Criteria

Product Quality – 67% of the Performance Incentive Fee Pool

The contractor will earn the allocated portion of the Product Quality performance incentive based on the number of Category II – Urgent DRs identified during each DT or OT event that are within the contractor’s control. The average number of Category II – Urgent DRs will be calculated by dividing the total number of Category II – Urgent DRs within the contractor’s control assigned during DT and OT for each site divided by the total number of DTs and OTs during the evaluation period. Performance incentive will be based on the average number of DRs according to:

67% of Available PIF (Max) = average of less than 1 Category II – Urgent DRs in DT & OT

57% of Available PIF = average of less than 2 Category II – Urgent DRs in DT & OT

47% of Available PIF = average of less than 3 Category II – Urgent DRs in DT & OT

37% of Available PIF = average of less than 4 Category II – Urgent DRs in DT & OT

28% of Available PIF = average of less than 5 Category II – Urgent DRs in DT & OT

20% of Available PIF (Min) = average of 5 or more Category II – Urgent DRs in DT & OT

Quality Engineering Reviews – 33% of the Performance Incentive Fee Pool

The contractor will earn the allocated portion of the Quality Engineering Review performance incentive based on the contractor’s average number of open action items and document comments at the completion of all SETR milestone meetings associated with CLIN 1001. The average number of action items and document comments will be calculated by dividing the total number of action items and document comments within the contractor’s control assigned at each SETR milestone meeting that are open at the completion of the meeting by the total number of SETR milestone meetings during the evaluation period. Performance incentive will be based on the average number of action items or document comments according to:

33% of Available PIF (Max) = average of less than 1 Critical action items or Critical document comments, or an average of less than 1 Major action items or Major document comments

28% of Available PIF = average of less than 1 Critical action items or Critical document comments, or an average of less than 2 Major action items or Major document comments

23% of Available PIF = average of less than 1 Critical action items or Critical document comments, or an average of less than 3 Major action items or Major document comments

17% of Available PIF = average of less than 1 Critical action items or Critical document comments, or an average of less than 6 Major action items or Major document comments

10% of Available PIF (Min) = average of 1 or more Critical action items or Critical document comments, or an average of 6 or more Major action items or Major document comments

F0009 Schedule Incentive Fee Criteria

Schedule is measured at the successful completion of DT, within the contractor’s control. The contractor will earn the allocated portion of the schedule incentive according to the measures below:

100% of Available SIF (Max) = Completes DT ≥ 15 business days ahead of schedule

70% of Available SIF = Zero (0) days behind ≥ completes DT < 15 business days ahead of schedule

30% of Available SIF (Min) = Completes DT > zero (0) business day behind schedule

Sample #1 - Contract Results and Incentive Fee Calculations

At the end of the evaluation period, the Government determined the average number of Category II – Urgent DRs to be less than 1 for the Product Quality PIF. In addition, the Government determined that for the Quality Engineering Review PIF the average number of Major action items was 1.8. Also, DT was completed seven (7) business days ahead of the contractually agreed to schedule. The Total Allowable Cost was $4,801,502.

Sample Cost Incentive Fee Calculation for CLIN 0001

Cost Incentive Fee Earned: $119,625 $70,000 + [25% x ($5,000,000 – $4,801,502)]

Sample Performance Incentive Fee Calculation for CLIN 9001

Performance Incentive Fee Earned: $285,000 ($201,000 + $84,000)

Product Quality $300,000 x 67% = $201,000

Quality Engr. Review $300,000 x 28% = $84,000

Sample Schedule Incentive Fee Calculation for CLIN 9002

Schedule Incentive Fee Earned: $70,000 $100,000 x 70%

Sample #1 Total Incentive Fee Calculation (Cost, Performance & Schedule))

Total Incentive Fee Earned: $474,625 $119,625 + $285,000 + $70,000

Total Fee Percentage of Cost: 9.88% $474,625 / $4,801,502

Sample #2 - Contract Results and Incentive Fee Calculations – Impact of Cost Control Overrun

At the end of the evaluation period, the Government determined the average number of Category II – Urgent DRs to be less than 1 for the Product Quality PIF. In addition, the Government determined that for the Quality Engineering Review PIF the average number of Major action items was 1.8. Also, DT was completed seven (7) business days ahead of the contractually agreed to schedule. The Total Allowable Cost was $5,647,963, which is greater than the threshold 8% overrun, and therefore, the Performance Incentive Fee Pool would be reduced by 10%. The Performance Incentive Fee percent earned for Product Quality and Quality Engineering Review remains the same.

Cost Incentive Fee Earned: $30,000 (Min Fee)

$70,000 + [20% x ($5,000,000 – $5,647,963)] = -$59,593

Sample Performance Incentive Fee Calculation for CLIN 9001

Performance Incentive Fee Earned: $256,500 ($180,900 + $75,600)

Product Quality ($300,000 x 90%) x 67% = $180,900

Quality Engr. Review ($300,000 x 90%) x 28% = $75,600

Sample Schedule Incentive Fee Calculation for CLIN 9002

Schedule Incentive Fee Earned: $70,000 $100,000 x 70%

Sample #2 Total Incentive Fee Calculation (Cost, Performance & Schedule))

Total Incentive Fee Earned: $356,500 $30,000 + $256,500 + $70,000

Total Fee Percentage of Cost: 6.31% $356,500 / $5,647,963