JB-3a CPIF examples.pdf

JB-3a CPIF examples

COST PLUS INCENTIVE FEE

EXAMPLES OF FEE COMPUTATION

For illustrative purposes, the following are examples of incentive fee computations for underrun and overrun scenarios using the following assumptions:

Mob Target Cost 100,000$

Target Fee Cost Incentive 4% 4,000$ Performance Incentive 4% 4,000$ Total Target Fee 8% 8,000$

Maximum Fee (Cost Incentive % + 2%)

6% $ 6,000

Minimum Fee (on Cost) 1% 1,000$

Fee Adjustment FormulaGovt 50% Contractor 50%

UNDERRUN TARGET COST:

This an UNDERRUN example of a contract where the actual cost is $85,000 vice the target cost of $100,000. The target fee is 8% (4% cost; 4% performance). The maximum fee on cost is 6% (4% Cost Incentive + 2%); minimum fee on cost is1%; and fee adjustment formula 50/50 (these % apply only to cost incentive). Another assumption is that 87% of the performance incentive fee pool was earned.

In this example the fee computed was as follows:

Cost Incentive Pool $4,000 + (50% x $15,000 underrun) = $11,500; but limited to $6,000 maximum fee.

Performance Incentive Pool 87% of $4,000 = $3,480 o Total Cost + Performance Incentive Fee= $9,480

Underrun Scenario Mobilization Actuals Computed Fee Total Paid

Target Cost 100,000$ 85,000$ 85,000$ 85,000$ Target Fee Cost Incentive 4% 4,000$ Performance Incentive 4% 4,000$ -$ Total Target Fee 8% 8,000$

Underrun (Overrun) 15,000$ Subtotal

Maximum Fee (on Cost) 6% 6,000$ Minimum Fee (on Cost) 1% 1,000$

Fee Adjustment FormulaGovt 50% Kr 50%

COST 4% 4,000$ 4,000$

COST UNDERRUN ADJ. 7,500$

TOTAL 11,500$ 6,000$

PERFORMANCE 4% 4,000$ 3,480$ 3,480$ 3,480$

87% 14,980$ 9,480$ 108,000$ 94,480$

OVERRUN TARGET COST:

This an OVERRUN example of a contract where the actual cost is $108,000 vice the target cost of $100,000. The target fee is 8% (4% cost; 4% performance). The maximum fee on cost is 6% (4% Cost Incentive + 2%); minimum fee on cost is1%; and fee adjustment formula 50/50 (these % apply only to cost incentive). Another assumption is that 87% of the performance incentive fee pool was earned.

In this example the fee earned was as follows:

Cost Incentive Pool $4,000 - (50% x $8,000 overrun*) = $0, but subject to minimum fee of 1% =$1,000

Performance Incentive Pool 87% of $4,000 = $3,480 o Total Cost + Performance Incentive Fee Earned = $4,480

*Note that allowability of the $8,000 target cost overrun is subject to FAR 52.232-2 Limitation of Cost requirements

Overrun Scenario Mobilization Actuals Computed Fee Total Paid

Target Cost 100,000$ 108,000$ 108,000$ 108,000$ Target Fee Cost Incentive 4% 4,000$ Performance Incentive 4% 4,000$ Total Target Fee 8% 8,000$

Underrun (Overrun) (8,000)$ Subtotal

Maximum Fee (on cost) 6% 6,000$ Minimum Fee (on cost) 1% 1,000$

Fee Adjustment FormulaGovt 50% Kr 50%

COST 4% 4,000$ 4,000$

COST OVERRUN ADJ (4,000)$

TOTAL -$ 1,000$

PERFORMANCE 4% 4,000$ 3,480$ 3,480$ 3,480$

87% 3,480$ 4,480$ 108,000$ 112,480$