Section_J_Atch_22 _US_Support_Incentive_Fee_Plan.pdf

SECTION J, ATTACHMENT 22, U.S. SUPPORT TO INCENTIVE FEE PLAN (IFP)

Attachment 22 US Support TO Incentive Fee Plan: FA8723-16-R-0005

SHARED EARLY WARNING SYSTEM (SEWS) PRIME CONTRACT RE-COMPETE

(SEWS II)

U.S. SUPPORT TASK ORDER 0002

INCENTIVE FEE PLAN (IFP)

SOLICITATION NO.: FA8723-16-R-0005

CONTRACT NO.: FA8723-16-X-XXXX

ATTACHMENT 22

23 SEPTEMBER 2016

Air Force Materiel Command

Air Force Life Cycle Management Center

Battle Management Directorate

Strategic Warning and Surveillance Systems Division

(AFLCMC/HBQ)

Revision Change Record

Revision Eff. Date Description Initials

001 26 February Modify the QPIs and better define the criteria EJF

002 6 April Revised calculation method of incentive fee EJF

003 16 September Revised calculation FS

004 23 September Final FS

1. INTRODUCTION

This Incentive Fee Plan (IFP) is applicable to all Cost Plus Incentive Fee (CPIF) Contract Line Item Numbers (CLINs) used in the execution of the SEWS II United States (U.S.)

Support Performance Work Statement (PWS). To ensure superior performance, the Government will use a combination of cost and performance incentives. The cost incentive pool is 25% and the performance incentive pool is 75%.

The CPIF CLINs will follow a straight CPIF structure. For application specifics, reference

FAR 52.216-10.

The SEWS Contractor’s incentive fee for the CPIF CLINs will be determined by adding the realized cost incentive to the earned performance incentive, and subtracting deductions from failure to meet “No Fail” items (NFIs). The performance incentive will be determined through the use of Quality Performance Indicators (QPIs) listed in Appendix A. NFIs are QPIs with a threshold or “Quality Acceptance Level” of zero (0) or 100% and require absolute compliance from the Contractor.

Sample calculations specific to QPI application are given in Appendix B for the Support Services CLINs.

2. SUPPORT SERVICES CLIN

The CPIF CLINs for Support Services will become effective upon award of TO-0002.

CPIF Support Services CLIN for TO 0002 is CLIN 0005. The Support Services Task Order will use the QPIs and NFIs located in Appendix A to measure the contractor’s performance. The Contractor shall provide a monthly, self-assessment report of their QPI ratings and NFIs, and provide supporting data. CDRL A00S – Technical Report – Study/Services

Along with the monthly self-assessment, the Contractor will also provide a quarterly report with supporting metrics at the quarterly QPI Review (QPIR). The QPIR will be held between the Program Manager (PM), Procurement Contracting Officer (PCO), Contracting Officer’s Representative (COR), Integrated Product Team Lead (IPT), and Contractor to adjudicate and finalize quarterly QPI ratings. The self-assessment will also review any NFIs incurred during the quarter. The deduction amount for the number NFIs that occurred, will reset at the beginning of each quarter. Therefore, there will be 4 sets of NFI deductions applied to the incentive fee.

At the conclusion of the period of performance (PoP), each QPI will be averaged to provide a final rating. The final QPI ratings will be multiplied against the performance incentive pool to determine the performance Incentive Fee share. Once the performance incentive pool is added to the cost incentive pool, NFI offenses will be deducted to determine the Contractor incentive fee. If the Contractor has a repeat offense of the same

NFI during the quarter, the deduction amount doubles. See Appendix B for sample calculations.

The cost incentive parameters for the Support Service CLINs are dictated by the Government and identified in Table 1 below.

Table 1: Support Services Incentive Fee and Share Ratio Structure

U.S. Support CLIN - CPIF Description FY17

Target Fee 6%

Share Ratio- Govt/Contractor 80/20

Minimum Fee 3%

Maximum Fee 9%

For criteria where the contractor’s performance exceeds the target performance, the fee will increase up to a maximum of 9% of the Target Cost of the applicable CPIF CLIN. For criteria where the contractor’s performance fails to meet the target performance, the fee will decrease down to a minimum of 3% of the Target Cost of the applicable CPIF CLIN.

If the contractor fails to meet minimum levels of acceptable performance for any QPI, as defined in Appendix A, a negative rating for that QPI may result.

The share ratio is 80% to Government and 20% to the Contractor. Therefore, for underruns against the Target Cost, the fee shall increase 20 cents for every dollar the allowable cost is lower than the Target Cost, not to exceed the Maximum Fee. For overruns against the Target Cost, the fee shall decrease 20 cents for every dollar the allowable cost is higher than the Target Cost, not to exceed the Minimum Fee.

Appendix B will provide a sample QPI calculation.

3. QUALITY PERFORMANCE INDEX (QPI)

The QPIs for the IFP have been developed as objective-oriented measures of contractor performance. The QPIs directly tie to elements contained in the SEWS II U.S. Support PWS. Evaluation will be based upon the observed performance, as compared to the standards listed in Appendix A.

The QPI table in Appendix A identifies the specific QPIs, specific evaluation criteria, and scoring scale. The QPI also identifies NFIs. The Contractor’s performance will be monitored and assessed by the Government Surveillance Team and reported on as part of the Quality Assurance Program.

4. DETERMINATION OF SHARE RATIO PAYMENT

Cost sharing will apply to the Support Services Task Order. The cost sharing payment, in either an underrun or overrun scenario, will be determined at the end of the performance period. The cost incentive pool is 25% and the performance incentive pool is 75%. The Government’s intent is for the Contractor to focus on the quality and effectiveness of the services and products it provides in areas addressed below. Once the incentive fee amount has been determined, the Government will make a determination on the payment to the Contractor based on the stated share ratios in Table 1 and the calculations demonstrated in Appendix B.

5. CHANGES TO THE INCENTIVE FEE PLAN

The IFP will be reviewed annually. The IFP may be changed unilaterally by the Government PCO to adjust the QPIs to accurately reflect mission needs. Any and all unilateral changes will take effect at the beginning of the next period of performance. The contractor will be notified of unilateral changes by the PCO prior to the beginning of the PoP with a formal unilateral contract modification to follow. All other modifications to the IFP during the performance period will be made by bilateral contract modification.

All significant changes to this plan must be coordinated with the SEWS Program Manager, with approval of the PCO. Changes to the QPIs will be considered a significant change. Updating the Historical Record of QPI determinations in Appendix C and minor edits to update references will not be considered significant changes.

6. CONTRACT TERMINATION

In the event of the termination of this contract for convenience pursuant to FAR 52.249-2 or default, FAR 52.249-8, the performance period during which such termination occurs will end and the cost and performance incentive pools will be pro-rated to match the period of performance end date. The government will evaluate the contractor’s performance for the period of performance completed.

APPENDIX A: QUALITY PERFORMANCE INDEXES FOR SUPPORT SERVICES AND

“NO FAIL” ITEMS

QPI 1: Cybersecurity Assessment (PWS 2.2.1.5.2.4)

Intent: The metric evaluates the Contractor’s ability to assess expected cybersecurity assessment results.

Criteria: The Contractor shall provide security assessment scans that accurately provide security assessment scan results that accurately portray expected results from independent/external testing or in conjunction with A&A tasks.

Data Source: Data source for this metric is obtained through cybersecurity documentation and independent/external testing entities.

QPI 2: Degraded System Resolution (PWS 2.3.1.3)

Intent: This metric evaluates the Contractor’s ability to facilitate resolution during degraded system performance.

Criteria: The Contractor shall coordinate, and facilitate resolution by working with any Contractors, vendors, suppliers, and other agencies to keep the SEWS fully functional to meet the SRD, ORD and FMS Case requirements. The Contractor shall resolve system issues without Government intervention.

Data Source: Data source for this metric is obtained by periodic inspections, contractor metrics, and customer complaints.

QPI 3: System Outage Restoral (PWS 2.3.1.2)

Intent: This metric evaluates the Contractor’s ability to restore and recover from system outages.

Criteria: The Contractor shall present a restoral plan within two (2) hours for critical outages and within two (2) business days for non-critical outages. Refer to SDS Matrix.

Data Source: Data source for this metric is obtained by periodic inspections, Contractor metrics, and Customer complaints.

NFI 1: Security Violations (PWS 2.1.1)

Intent: This metric evaluates the Contractor’s ability to comply and meet applicable security requirements.

Criteria: The Contractor shall comply with applicable security requirements DD Form 254, DoD Contract Security Classification Specification. The Contractor shall ensure security directives are complied with 100% of the time. A security violation will result in a $500 deduction from the available quarterly fee. All subsequent security incidents will double in the amount penalized (e.g. 3 security incidents will result in a $3,500 deduction. $500 + $1,000 + $2,000 = $3,500).

Data Source: Data source from this metric is obtained from periodic inspections, trend analysis, and Contractor metrics.

NFI 2: Log of Trouble Tickets (PWS 2.3.4.2.1.1)

Intent: This metric evaluates the Contractor’s ability to log trouble tickets when a system issue occurs.

Criteria: The Contractor shall log 100% of the trouble tickets when an issue occurs that impact system performance, including communications outages. Trouble tickets will identify a problem exists and log the outages to include planned outages IAW CDF procedures. Failure to log a trouble ticket will result in a $500 deduction from the available quarterly fee. All subsequent failures will double in the amount penalized (e.g.

3 failures to log trouble tickets will result in a $3,500 deduction. $500 + $1,000 + $2,000 = $3,500).

Data Source: Data source from this metric is obtained from periodic inspections, Contractor metrics, and Customer complaints.

NFI 3: Reporting time of System Outages (PWS 2.3.4.2.1)

Intent: This metric evaluates the Contractor’s ability to report system outages in a timely manner to Customer and the SEWS SPO.

Criteria: The Contractor shall report 100% of the critical outages within one (1) hour.

The Contractor shall report 100% of non-critical outages within one (1) business day.

Failure to report in the above time will result in a $500 deduction from the available quarterly fee. All subsequent failures will double in the amount penalized (e.g. 3 non-reports of critical outages within 1 hour will result in a $3,500 deduction. $500 + $1000 + $2,000 = $3,500).

Data Source: Data source from this metric is obtained from Contractor’s metrics reports of system functionality.

Table 2: Quality Performance Indicator Chart QPIs for Support CLINs

# Fee % Min Fee -3% -2% -1% Target Fee –

6% +1%

+2% Max Fee +3%

Cybersecurity Assessment

Contractor assessment is more than 6% different than independent verification assessment is more than 5% different than independent verification

Contractor assessment is more than 4% different than independent verification

Contractor assessment is more than 3% different than independent verification

Contractor assessment is more than 2% different than independent verification

Contractor assessment is more than 1% different than independent verification

Contractor assessment is a 0% different than the independent verification

Degraded System Resolution resolves less than 90% of issues without Government intervention than 91% of issues without than 92% of issues without than 94% of issues without than 96% of issues without than 98% of issues without resolves 100% of issues without

Government intervention

System Outage Restoral

Restoral Result

(RR) is less than 83%

(RR) is more than 85% than 87% than 89% than 91% than 93% than 95%

QPI Process and Procedures for Support Services:

The following are the processes and procedures that will be applied between the Government and contractor with regards to QPI reporting and adjudication.

The Government PM, PCO, and COR, along with the Contractor’s Program Manager, Contracting Representative, and Contractor Technical Lead will comprise the QPI Assessment Group (QAG).

On a quarterly basis, the QAG will meet and hold a QPI Review (QPIR). At the QPIR, the contractor will present a QPI assessment for each QPI identified as relevant to the effort.

Thus any effort may have less than all QPIs that apply. The QPI assessment will also include supporting technical data. Note: If any QPI assessment is not fully supported by accurate, relevant technical data, or is otherwise challenged by the QAG, the Contractor will have 3 business days to provide the required data or a default rating of zero (0) will be assessed against the specific QPI.

At the conclusion of the QPIR, a QPI assessment document formalizing the quarterly QPI ratings will be signed by all members of the QAG. If additional data is required, as noted above, then the QPI assessment document will be signed at the first opportunity. Failure to sign will be documented and the PCO’s signature will finalize the quarterly rating. A signed copy of the QPI assessment will be provided to the contractor within 48 hours.

At the conclusion of the performance period, the quarterly QPI ratings are rolled up and averaged in order to determine the overall annual QPI rating. The final rating will be rounded to the nearest whole percentage. For percentages of 0.49 and below, the percentage will be rounded down. For percentages of 0.5 and above, the percentage will be rounded up. This rating will be multiplied against the performance incentive pool, resulting in the performance incentive.

In the event a QPI rating cannot achieve consensus among the members of the QAG, the Government PM will make a final rating determination and provide documented rationale supporting the decision. The rationale will be attached to the quarterly QPI assessment.

The intent of this process is to achieve consensus, accountability and efficiency.

APPENDIX B: SAMPLE CALCULATIONS, SUPPORT SERVICES– QPI IMPACT

NOTE: VALUES IN THE FOLLOWING EXAMPLE ARE ONLY APPLICABLE TO THE

EXAMPLE AND ARE FOR DEMONSTRATION PURPOSES ONLY

QPI Calculations

This Appendix provides an example of how the QPIs will be used to generate a QPI rating which will be applied against a performance incentive Pool. The following example will use data supporting QPI #1 to demonstrate how a quarterly rating would be derived and how the quarterly rating would flow up into the annual QPI determination. This example uses only QPI #1, but the concept applies to all QPIs. A unique specific log sheet for each QPI will be used to track and monitor performance in support of quarterly and ultimately annual QPI assessments. The impact of the QPI assessment on the Contractor incentive fee will be shown later in this section. Again, the values used are purely hypothetical in an effort to demonstrate how the calculations are conducted. In no way do they reflect past Contractor performance.

Using QPI #1 for sample purposes

The following table is hypothetical Contract Data:

Table 3: Contract Cost Data

Target Cost (CPIF) $10,000,000

Target Fee (6%) $600,000

Minimum Fee (3%) $300,000

Maximum Fee (9%) $900,000

UNDERRUN EXAMPLE

For the first quarter, The Contractor’s cybersecurity assessment was within 3% of the independent verification conducted. Therefore, the Contractor received a 6% Fee.

The actual costs were $9,200,000.

During the first quarter, The Contractor had 2 security violations and was late in reporting a critical outage. During the second quarter the Contractor had 3 security violations. During the third quarter, the Contractor did not log a trouble ticket. Lastly, during the fourth quarter, the Contractor did not have any NFI deductions.

Table 4: Sample - QPI #1

QPI

Fee % Quality Performance Index – Quarter 1

Min Fee -3%

-2%

-1% Target

Fee 6%

+1% +2% +3% assessment is more than

6% of is more than

5% of independent verification

Contractor assessment is more than

4% of independent verification

Contractor assessment is more than 3% of is more than

2% of independent verification

Contractor assessment is more than

1% of independent verification

Contractor assessment is a 100% match to the

At the end of the year, the quarterly QPI ratings are rolled up and averaged in order to determine the overall annual QPI rating. The below table demonstrates how the annual QPI ratings are calculated.

Table 5: Sample - Annual QPI Ratings Roll-Up

SAMPLE: Annual QPI Ratings Roll-Up – FY 201X

QPI Quarter

Quarter

Quarter

Quarter

Final Rating

Cybersecurity Assessment 6% 4% 3% 7% 5%

Degraded System Resolution 5% 6% 7% 7% 6.25% -> 6%

System Outage Restoral 8% 7% 7% 8% 7.5% -> 8%

Performance Incentive Fee Pool (75%): $225,000 (min); $450,000 (target); $675,000 (max)

$300,000 X 75% = $225,000 (min); $600,000 X 75% = $450,000 (target); $800,000 X 75% = $675,000 (max)

Performance Incentive Fee Earned: $475,000

Cybersecurity Assessment: Target Fee – 1% ($125,000) Degraded System Resolution: Target Fee ($150,000) System Outage Restoral: Target Fee + 2% ($200,000)

Cost Fee Pool (25%): $75,000 (min); $150,000 (target); $225,000 (max)

$300,000 X 25% = $75,000 (min); $600,000 X 25% = $150,000 (target); $800,000 X 25% = $225,000 (max)

Underrun - Cost Incentive Fee Earned (25%): $310,000, defaults to max $225,000

$150,000 + [(10,000,0000 - 9,200,000) x 20%]

Underrun – Total Incentive Fee Earned (before NFI Deductions): $700,000

NFI Deduction Calculation: $ - 6,000

Quarter 1: 2 security violations and late in reporting a critical outage = $500 + $1,000 + $500 = $2,000

Quarter 2: 3 security violations = $500 + $1,000 + $2,000 = $3,500

Quarter 3: did not log a trouble ticket = $500

Quarter 4: No NFI deductions = $0

Underrun – Total Incentive Fee Earned: $694,000

Total Government Payment = $9,200,000 + $694,000 = $9,894,000

OVERRUN EXAMPLE

For the first quarter, The Contractor’s cybersecurity assessment was within 3% of the independent verification conducted. Therefore, the Contractor received a 6% Fee.

The actual costs were 10,800,000.

During the first quarter, The Contractor had 2 security violations and was late in reporting a critical outage. During the second quarter the Contractor had 3 security violations. During the third quarter, the Contractor did not log a trouble ticket. Lastly, during the fourth quarter, the Contractor did not have any NFI deductions.

Table 4: Sample - QPI #1

QPI

QPI Title Quality Performance Index – Quarter 1

3% 4% 5% 6% 7% 8% 9% is more than

6% of is more than

5% of independent verification

Contractor assessment is more than

4% of independent verification

Contractor assessment is more than

3% of is more than

2% of independent verification

Contractor assessment is more than

1% of independent verification

Contractor assessment is a 100% match to the

At the end of the year, the quarterly QPI ratings are rolled up and averaged in order to determine the overall annual QPI rating. The below table demonstrates how the annual QPI ratings are calculated.

Table 5: Sample - Annual QPI Ratings Roll-Up

SAMPLE: Annual QPI Ratings Roll-Up – FY 201X

QPI Quarter

Quarter

Quarter

Quarter

Final Rating

Cybersecurity Assessment 6% 4% 3% 7% 5%

Degraded System Resolution 5% 6% 7% 7% 6.25% -> 6%

System Outage Restoral 8% 7% 7% 8% 7.5% -> 8%

Performance Incentive Fee Pool (75%): $225,000 (min); $450,000 (target); $675,000 (max)

$300,000 X 75% = $225,000 (min); $600,000 X 75% = $450,000 (target); $800,000 X 75% = $675,000 (max)

Performance Incentive Fee Earned: $475,000

Cybersecurity Assessment: Target Fee – 1% ($125,000) Degraded System Resolution: Target Fee ($150,000) System Outage Restoral: Target Fee + 2% ($220,000)

Cost Fee Pool (25%): $75,000 (min); $150,000 (target); $225,000 (max)

$300,000 X 25% = $75,000 (min); $600,000 X 25% = $150,000 (target); $800,000 X 25% = $225,000 (max)

Overrun - Cost Incentive Fee Earned: -$10,000, defaults to $75,000

$150,000+ [($10,000,0000 - $10,800,000) x 20%]

Overrun – Total Incentive Fee Earned (before NFI Deductions): $550,000

NFI Deduction Calculation: $ - 6,000

Quarter 1: 2 security violations and late in reporting a critical outage = $500 + $1,000 + $500 = $2000

Quarter 2: 3 security violations = $500 + $1,000 + $2,000 = $3,500

Quarter 3: did not log a trouble ticket = $500

Quarter 4: No NFI deductions = $0

Overrun – Total Incentive Fee Earned: $544,000

Total Government Payment = $10,800,000 + $544,000 = $11,344,000