Section_J_Attachment_7_Incentive_Fee_Plan_2JUN15.docx

PROJECTILE, 120 MILLEMETER: PRECISION EXTENDED RANGE MUNITION (PERM), XM1109

INCENTIVE FEE PLAN

23 April 2015

PREPARED BY:

Product Manager, Fire Support Systems (PdM, FSS) Program Manager, Armor and Fire Support Systems (PM, AFSS) Quantico, VA.

FOR OFFICIAL USE ONLY – CONTAINS SOURCE SELECTION INFORMATION – SEE FAR 3.104

Table of Contents

Table of Tables

M67854-15-R-6007 Attachment 7

FOR OFFICIAL USE ONLY – CONTAINS SOURCE SELECTION INFORMATION – SEE FAR 3.104

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1.0 Introduction

This document serves to describe and explain the incentive value, measurements, and calculation for each of the quality, cost and schedule performance incentive elements incorporated into the Production orders(s), if they are ordered, under Precision Extended Range Munition (PERM) contract as agreed to by Marine Corps Systems Command (MCSC) and the Contractor. The cost incentive is separate and distinct from the Reliability and Schedule incentives discussed in this incentive plan and is governed by Federal Acquisition Regulation (FAR) Part 16.403-1 Fixed-Price Incentive Firm (Target) Contracts.

1.1 Performance Incentive Period

Performance incentive periods for this plan cover the five ordering periods. Cost incentives will be developed and awarded based upon the individual CLIN or delivery order when multiple incentives are on a Delivery Order.

The performance incentives for CLINs 2000, 3000, 4000, and 5000 are contingent upon the order(s) being placed. Any performance incentive fee in one period will not be rolled over to any subsequent period.

1.2 Reserved

1.3 Terminology

1.3.1 Factor

A Factor is the non-cost incentive element under which the Contractor may earn performance incentive fee. Factors include quality and schedule.

1.3.2 Incentive Factor Rating

The Factor Ratings are based on the objective measurement of the evaluation criteria associated with incentive events within a period, and they establish the percentage of the incentive fee to which the Contractor may potentially earn.

1.3.3 Incentive Period/Event

The performance incentive period is the phase in time associated with contract milestone or event. There are a total of five (5) ordering periods defined in this incentive structure, presuming all orders are placed.

1.3.4 Incentive Award

The Incentive Award converts Incentive Factor Rating into the corresponding monetary incentive.

2.0 Scope

This document is applicable to the products and services provided under the Fixed Price Incentive Firm (FPIF) Contract Line Item Numbers (CLINs) of this contract contained in Section B of the PERM contract. CLIN 1000, and, if orders are placed, 2000, 3000, 4000, and 5000, are established for payment for earned performance incentive fee that relates to the actual performance under the applicable performance CLINs. In addition to the cost incentive (CLIN 1000), the first Ordering Period is subject to schedule incentives and Production Order(s), if placed, are subject to Reliability incentives as shown above in Section 1.1 of this incentive fee plan. Total incentives available between first ordering period and the following Production Ordering periods, if all are placed, is 6%, exclusive of the cost incentive.

2.1 Performance Incentives

2.2.1 Cost Performance Incentives

Cost Performance Incentives are detailed in Section B of the contract under Notes A, B and E. Notwithstanding anything else in this incentive fee plan or this contract, performance incentives are not earned or lost until the effective date of the written contract modification that specifically identifies the amounts earned or lost under a particular incentive. The Cost Performance Factor will focus on a Target Cost and a Target Profit, both to be determined during contract negotiations. The costs will be shared on a 50/50 ratio with a 120% cost ceiling. This performance incentive is to encourage the contractor to deliver quality rounds within the schedule constraints, as outlined in the Integrated Master Schedule (IMS) contained in the contractor proposal, in a cost efficient manner. All cost overruns above the 120% ceiling will be the sole responsibility of the contractor.

2.2.2 Reliability Performance Incentives

Reliability Performance Incentives are detailed in Section 4.0 and its sub-sections. Notwithstanding anything else in this incentive fee plan or this contract, performance incentives are not earned or lost until the effective date of the written contract modification that specifically identifies the amounts earned or lost under a particular incentive. The fee for payment for earned reliability performance incentives shall be reserved in CLINs 2000, 3000, 4000 and 5000, if orders are placed. The Reliability Performance Incentive is only applicable to each Production Order, if placed, for the production quality of rounds as determined by the Lot Acceptance Test (LAT).

The measurement for determining the amount of incentive earned is described in Section 4.0 including its sub-sections.

2.2.3 Schedule Performance Incentives

Schedule Performance Incentives are detailed in Section 4.0 and its sub-sections. Notwithstanding anything else in this incentive fee plan or this contract, performance incentives are not earned or lost until the effective date of the written contract modification that specifically identifies the amounts earned or lost under a particular incentive. The fee for payment for earned schedule performance incentives shall be reserved in CLIN 1000. The PERM Schedule Performance Incentive is for successful completion of delivery of PERM rounds ( and ancillary items defined in the CLIN) for Qualification and Production Verification Testing, by the dates set at contract award in the IMS, with the rounds subsequently passing testing. The PERM contract events are the first ordering period PERM PVT rounds.

Successful completion of the contract events is defined in the PERM Statement of Work (SOW) Attachment 1-Section J of the contract. The measurement for determining the amount of incentive earned is described in Section 4.0 including its sub-sections.

3.0 Evaluation of Performance Incentives

Final judgment and award of performance incentives is a unilateral decision determined by the PM, AFSS Procuring Contracting Officer (PCO). There will be no provisional, interim or advance billing of incentive fee prior to determination by the Incentive Fee Board (IFB) and execution by the PCO of a modification authorizing payment. The IFB membership will be determined after contract award by the PdM, FSS.

The achievement of performance incentives addressed below shall not be modified, relaxed, or otherwise adjusted except for changes directly resulting from Government-caused interruption which must be acknowledged in writing by the PCO referencing this plan. Any Contractor request for adjustment to the schedule dates specified in this plan shall be submitted in writing to the PCO. The Government may elect to extend or modify the schedules specified in this plan should events dictate. Such elections are unilateral decisions and made solely at the Government’s discretion. Any changes to the schedules or other incentive fee terms specified in this plan shall be incorporated via modification prior to the next performance incentive fee period.

3.1 Contractor Self-Assessment

At the end of each of the performance incentive fee periods under this contract, the Contractor shall provide a self- assessment report within 10 days to the PCO. This report shall clearly identify specific evaluation categories, factors or elements, and the rating that the Contractor believes it earned.

3.2 Performance Incentive Fee Determination

Upon receipt of the Contractor Self-Assessment Report, the IFB will deliver the IFB’s Fee Recommendation Report to the PCO within 30 days. The PCO will be responsible for the final fee determination and inform the Contractor of the performance incentive fee rating. The Contractor is responsible for informing the PCO if there is a disagreement within 10 days of notification of the rating, prior to a unilateral modification. Fees will be provided via a PCO unilateral modification not later than 30 days after receipt of the final fee determination. If the Contractor disputes the performance incentive fee rating, the Contractor shall provide written notification to the PCO with rationale supporting why the Contractor believes the performance incentive fee determination is not in accordance with the contract within 10 days after receipt of final unilateral modification.

4.0 Performance Incentive Fee Structure

4.1 Ordering Period One - PERM Performance Incentives

The PERM Performance Incentives for CLIN 1000 are intended to encourage the Contractor to deliver quality PVT ammunition rounds on schedule that have a high confidence of meeting PERM requirements as outlined in the PERM Performance Specification, Attachment 2 – Section J of the PERM contract and to deliver rounds prior to the dates set at contract award in the IMS. Base Year Performance Incentives are outlined in Table 1 below.

Table 1 – Base Year Performance Incentives Structure

4.1.1 Ordering Period One - PERM Performance Factor – Schedule The Schedule Performance Factor will focus on delivery dates for PERM ordering period one production lot. The contractor will be awarded the incentive fee if PERM rounds, IAW the PERM SOW, Attachment 1 – Section J, are delivered by the dates set at contract award in the IMS and they also complete successful testing and qualification. Table 1 provides overall performance incentive structure for the PERM contract Ordering Period One CLIN 1000. It provides allocated incentive percentage of available performance fee to be earned per evaluation factor for each performance incentive period. Each CLIN will be separately evaluated.

4.2 Production Order(s), if placed, Performance Incentives

The Production Order(s), if placed, include the Cost Performance Incentives described in Section 2.2.1 and Reliability Performance Incentives. Schedule Performance Incentives do not apply to the Production Orders(s), if placed. Table 2 below provides the overall performance incentive structure for the Production Delivery Order periods, if ordered under CLINs 2000, 3000, 4000, and 5000 respectively.

Table 2 – Production Orders in ordering Periods 2 – 5 - Performance Incentive Structure RELIABILITY / PERFROMANCE INCENTIVE (CLIN 2000, 3000, 4000, and 5000)

*Lot size shall not exceed 544 rounds

4.2.1 Production Order(s) PERM Performance Factor – Reliability The PERM Ammunition Acceptance Procedures, Section E of the contract provides measurement for the PERM Reliability Performance Factor. This performance factor will focus on PERM exceeding reliability as stated in the PERM Performance Specification, Attachment 2 – Section J, during LAT conducted in accordance with the PERM SOW Attachment 1 – Section J. The quality will be determined by the number of failures during a LAT. The number of failures will determine the incentive fee awarded, if any. Number of failures in Table 2 is based on the expectation that each LAT will fire 11 PERM rounds. However, failure rates will be adjusted based on changes to lot sample sizing at the governments sole discretion. Any or all of the issues listed in the Ammunition Acceptance Procedures, Section E, can lead to a determination of round failure. The earned performance incentives shall be reserved in CLINs 2000, 3000, 4000 and 5000, if orders are placed.

FOR OFFICIAL USE ONLY – CONTAINS SOURCE SELECTION INFORMATION – SEE FAR 3.104

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