Attachment_11_-_PTES_Performance_Incentive_Plan.pdf

ATTACHMENT 11

PERFORMANCE INCENTIVE PLAN

FOR

Protected Tactical Enterprise Service (PTES)

20 February 2018

Revision History

Revision Modification # Approval Date Affected Pages Comments Original N/A TBD All Original Document

Table of Contents

1. INTRODUCTION

2. PERFORMANCE INCENTIVES

2.1 Payment of Incentives

2.2 CLIN 0001 Performance Incentives

2.3 CLIN 0002 Performance Incentives

2.4 CLIN 0003 Performance Incentives

3. PERFORMANCE INCENTIVE CRITERIA

3.1 CLIN 0001 Performance Incentive Criteria

3.1.1 CLIN 0001 Preliminary Design Review Performance Incentive

3.1.2 CLIN 0001 Software Build Risk Reduction Tests

3.1.3 CLIN 0001 Critical Design Review Performance Incentive………………………………...…11

3.2 CLIN 0002 Performance Incentive Criteria

3.2.1 CLIN 0002 Software Build Risk Reduction Tests

3.2.2 CLIN 0002 Completion of IOC Capability…………………………………………………….12

3.3 CLIN 0003 Performance Incentive Criteria

3.3.1 CLIN 0003 Software Build Operational Test Assessments

3.3.2 CLIN 0003 Completion of FOC Capability

4. ADDITIONAL PROVISIONS…………………………………………………………………13

4.1 Incentive Fee Plan Change Procedures…………………………………………………………13

4.2 Termination…………………………………………………………………………………..…13

5.0 APPENDIX 1 (EXAMPLE CACLULATION OF FEE) ......…………………………………..14

1. INTRODUCTION

The PTES contract includes a combination of incentives; a cost incentive (Pool 1), a performance incentive (Pool 2), and an award fee (Pool 3), discussed in greater detail below. The overall incentive fee structure is depicted in Figure 1-1. Pool 1 (Cost Incentive) will be implemented in accordance FAR 52.216-10.

Pool 2 (Performance Incentive) will be implemented via this Performance Incentive Plan (Attachment 11 to the contract). Pool 3 (Award Fee) will be implemented via Attachment 12 to the contract. The dollars for each incentive pool are established as a percentage (as noted below) applied to the target cost for each CLIN (0001, 0002, and 0003), excluding the Facilities Capital Cost of Money (FCCOM). This plan defines the dollar amounts, criteria, and administration process associated with performance incentives (Pool 2) under CLINs 0001, 0002, and 0003.

Figure 1-1 Available Incentive/Award Fee

Pool 1 - Cost Fee Structure (Target Fee 3%): Pool 1 is a cost incentive applicable to CLINs 0001, 0002, and 0003. Pool 1 is based on overall cost control at the individual CLIN-level. The overrun share ratio is 70/30 and the underrun share ratio is 100/0; an underrun is not incentivized. The maximum fee is 3% and the minimum fee is 0%. The cost incentive will be implemented in accordance with FAR 52.216-10. Pool 1 is completely depleted after a 10% cost overrun at the CLIN-level.

Pool 2 – Performance Incentive Fee Structure (7%): Pool 2 is a performance incentive applicable to CLINs 0001, 0002, and 0003. Pool 2 is based on the successful completion of major system-level events and successful demonstrations of software. At the point the cost overrun of a CLIN (based on the Government Estimate at Complete (GEAC)) exceeds 10% of Target Cost, the amount of the incentive fee pool is decreased by $0.70 for every $1.00 of overrun until Pool 2 is depleted. Pool 2 is completely depleted at a 20% cost overrun at the CLIN-level.

Pool 3 - Award Fee Structure (4%): Pool 3 is an award fee applicable to CLINs 0001, 0002 and 0003.

The Award Fee Pool is not affected by performance under Pool 1 or Pool 2. Additional details are available in Attachment 12 PTES Award Fee Plan.

Roles and Responsibilities

Incentive Approving Official (IAO): The Air Force Program Executive Officer for Space (SMC/PEO) will serve as the initial IAO for this plan. Following initial approval, SMC/PEO delegates authority for the Incentive Plan to the Director of the MILSATCOM Systems Directorate (SMC/MC). This delegation authorizes SMC/MC to approve any subsequent revisions to the plan. The IAO will consider the Contractor’s Certificate of Completion (COC) and other pertinent data, as well as input from the Incentive Reviewing Official, and make the final determination of incentive payment in a fee determination letter.

Incentive Reviewing Official (IRO): The Government Program Manager (PM) (or designee) will serve as the IRO. The IRO reviews the Incentive Fee Plan and recommends approval of the performance incentive to the IAO based on a compilation of pertinent data regarding the Contractor’s performance in meeting incentive criteria. Upon consideration of all information obtained from pertinent sources, the IRO shall arrive at a fee recommendation to be presented to the IAO.

Procurement Contracting Officer: The Procurement Contracting Officer (PCO) is the formal liaison between the Contractor and Government personnel, and executes the Incentive Fee Plan. The PCO transmits the IAO’s fee determination letter to the Contractor, prepares and distributes funding modifications obligating the appropriate amount of fee earned by the Contractor and maintains appropriate incentive documentation as part of the official Government contract file.

Performance Monitors: Performance Monitors shall continually monitor and maintain written records of the Contractor’s performance throughout the evaluation period applicable for the incentive fee.

Performance Monitors consist of the Program Office personnel (e.g. Government Project Managers, Integrated Product Team (IPT) Leads, and Federally Funded Research and Development Corporations (FFRDC)) who will evaluate acceptance criteria. Performance Monitors shall prepare end of milestone evaluation reports as directed by the IRO.

2. PERFORMANCE INCENTIVES

The maximum amount available for Pool 2 is calculated at the CLIN level (CLIN 0001, 0002, and 0003) as 7% of the Target Cost, excluding the Facilities Capital Cost of Money (FCCOM), for each CLIN (adjusted for changes in target cost and target fee through contract modification). The total performance incentive available for each CLIN will decrease from 7% to 0% as shown in Figure 2-1 based on the estimated cost overrun. Cost overruns are estimated each quarter and at the time of each Milestone Completion, based on the Target Cost subtracted from the GEAC (reference paragraph 2.1, Payment of Incentives). The Government will release to the Contractor the latest GEAC upon written request to the PCO. The Government will assess each performance milestone as pass/fail. Any unearned fee will not be returned or “rolled over” to the performance incentive pool.

Figure 2-1 Performance Incentive Fee Pool vs Overrun

2.1 Payment of Incentives

Following completion of each successful performance milestone, the Contractor shall deliver a COC, defined in Section 3 of this document, for each milestone to the Contracting Officer. Upon Government acceptance that the criteria have been met, the Contracting Officer will issue a unilateral modification to recognize the applicable incentive payment, subject to the following guidelines for payment of incentives:

1. The incentive fee pool available for a specific Milestone being evaluated will be adjusted based on the cost performance at the CLIN-level, as determined by the CLIN GEAC at the time of Milestone completion. If the GEAC indicates a cost overrun greater than 10%, then the incentive fee pool available for the Milestone will be adjusted. See Appendix 1 for formulas and example calculations.

2. For the purpose of calculating the GEAC, Target Cost is established at contract award. Target Cost will only be modified via contract modification.

3. Upon contract award, the GEAC will be based on the estimated Target Cost at the CLIN-level. The GEAC will be calculated based on an analysis of the following: a) the Cost Performance Index (CPI), b) the Schedule Performance Index (SPI), c) the Schedule Risk Assessment (SRA), and d) a Government review of the opportunities and technical risk going forward.

4. Upon receipt of the COC from the Contractor, the PCO and PM will determine if all of the criteria were successfully met for the Milestone. Upon Government confirmation of successful completion of a performance milestone (“pass”), the Contractor will be eligible for payment for that performance milestone, adjusted for cost overruns, in excess of 10% (see Appendix 1). If any of the criteria are not met then the performance milestone is considered “fail” and the Contractor receives zero (0%) incentive fee available and eligible for payment for that performance milestone.

5. The Government will adjust the Performance Incentive total payment at CLIN closeout. The final overrun is calculated based on the final audited total cost of the CLIN.

-5 0 5 10 15 20 25

Pe ro fo rm an ce

In ce nt iv e F ee

CLIN Cost Overrun (%)

Performance Incentive Fee Pool vs Cost Overrun

• If the overrun exceeds 10%, but is less than 20%, the fee percentage is calculated in accordance with paragraph 1, Pool 2 above. If the overrun exceeds 20%, then the adjustment will require repayment of all previously earned performance incentive fee (see Appendix 1 - Example 2).

• If additional incentive is earned beyond the payment of previous milestones, the payment of the remaining incentive fee will be made.

• If the Contractor received excess incentive fee paid out at previous milestones, then the Contractor shall be required to adjust the final incentive fee recognized resulting in either an offset to billings or an incentive fee payback. The PCO has the discretion to demand a direct payback of money to the U.S. Treasury, or other payments determined by the PCO. All late payments due to the Government are subject to interest. Interest shall be computed at the Treasury Bill rate in effect at that time, as prescribed in FAR 52.232-17, Interest.

2.2 CLIN 0001 Performance Incentives

Table 2-1 provides the breakout of performance incentives under CLIN 0001.

CLIN 0001

Performance

Milestone Number

CLIN 0001

Performance

Milestone

% of Total Available

CLIN 0001

Incentive Pool

Maximum Performance

Incentive Pool Earned

Fee Mod

Number

Mod Effective

Date

Criteria

Milestone 1 Preliminary Design

Review 10% * Section

3.1.1

Milestone 2

Software Build 1 Risk Reduction Test

(RRT1) 20% *

Section

3.1.2

Milestone 3 Critical

Design Review 30% * Section

3.1.3

Milestone 4

Software Build 2 Risk Reduction Test

(RRT2) 40% *

Section

3.1.2 *Note: To be inserted upon contract award; Maximum Performance Incentive Pool will remain constant aside from changes in target cost and target fee via contract modification

Table 2-1 Performance Incentives for CLIN 0001

2.3 CLIN 0002 Performance Incentives

Table 2-2 provides the breakout of performance incentives under CLIN 0002.

CLIN 0002

Performance Milestone

Number

CLIN 0002

Milestones

% of Total Available

CLIN 0002

Incentive Pool

Maximum Performance

Incentive Pool Earned

Fee Mod

Number Mod

Effective Date

Software Build 3 Risk Reduction Test

(RRT3)

20%

Section 3.2.1

Table 2-2 Performance Incentives for CLIN 0002

2.4 CLIN 0003 Performance Incentives

Table 2-3 provide the breakout of performance incentives under CLIN 0003.

CLIN 0003

Milestone Number

CLIN 0003

Performance

Milestones

% of Total Available

CLIN 0003

Incentive Pool

Maximum Performance

Incentive Pool Earned Fee Mod

Number Mod

Effective Date

Software Build 5 Operational Test

Assessment

10%

3.3.1

Milestone 2

Software Build 6 Operational Test

Assessment 15%

Milestone 3

Software Build 7 Operational Test

Assessment 20%

Milestone 4

Software Build 8 Operational Test

Assessment 25%

Milestone 5

Completion of

FOC

Capability

30%

3.3.2

*To be inserted upon contract award; Note: Maximum Performance Incentive Pool will remain constant aside from changes in target cost and target fee through contract modification

Table 2-3 Performance Incentives for CLIN 0003

3. PERFORMANCE INCENTIVE CRITERIA

3.1 CLIN 0001 Performance Incentive Criteria

3.1.1 Milestone 1: CLIN 0001 Preliminary Design Review Performance Incentive

Incentive Acceptance Criteria: Completion of the PDR is defined as meeting all PDR criteria per the Statement of Work, paragraph 1.1.1.2.l. and closing all PDR liens.

Milestone 2

Software Build 4 Risk Reduction Test

(RRT4) 30%

3.2.1

Milestone 3 Completion of IOC

Capability

50%

3.2.2

*Note: To be inserted upon contract award; Maximum Performance Incentive Pool will remain constant aside from changes in target cost and target fee via contract modification

Contractor Assessment: Following the PDR, the Contractor will submit a COC to the Contracting Officer, with the following content:

1. Date of the PDR

2. Summary of PDR liens

3. Dates when each of the PDR liens were closed

Government Assessment: Following the PDR, the Government PM (or designee) will review the PDR COC with respect to the Incentive Criteria in this section along with any other relevant data sources available. At that time, the Government PM (or designee) will determine whether the Contractor met the acceptance criteria for the milestone. The Government will assess the performance milestone as pass/fail.

The IAO will notify the PCO of the results of the Government Assessment.

3.1.2 Milestones 2 & 4: CLIN 0001 Software Build Risk Reduction Tests

Incentive Criteria: Completion of a Software Build Risk Reduction Test is defined as meeting all objectives of the test documented in the associated Test Plan and closing all Category 1 deficiencies resulting from the Software Build Risk Reduction Test.

NOTE: This is an Agile project management milestone; entrance and exit criteria will be jointly agreed upon prior to Build start

Contractor Assessment: Following each Software Build Risk Reduction Test in Table 2-1, the Contractor will submit a COC to the Contracting Officer, with the following information:

1. Name of Software Build Risk Reduction Test

2. Date of Completion

3. Name of associated Test Plan and Test Procedure

4. Summary of test objectives met versus test objectives planned

5. Summary of Category 1 deficiencies identified during the Software Build Risk Reduction Test

6. Dates when each of the Category 1 deficiencies were closed

Government Assessment: Following each Software Build Risk Reduction Test (RRT) in Table 2-1, the Government PM (or designee) will review the Software Build RRT COCs with respect to the Incentive Criteria in this section along with any relevant data sources available. At that time, the Government PM (or designee) will determine whether the Contractor met the acceptance criteria for the milestone. The Government will assess the performance milestone as pass/fail. The IAO will notify the PCO of the results of the Government Assessment.

3.1.3 Milestone 3: CLIN 0001 Critical Design Review Performance Incentive

Incentive Criteria: Completion of the CDR is defined as meeting all CDR criteria documented in Statement of Work, paragraph 1.1.1.2.l. and closing all CDR liens.

Contractor Assessment: Following the CDR, the Contractor will submit a COC to the Contracting Officer, with the following content:

1. Date of the CDR

2. Summary of CDR liens

3. Dates when each of the liens were closed

Government Assessment: Following the Critical Design Review, the Government PM (or designee) will review the CDR COC with respect to the Incentive Criteria in this section along with any other relevant data sources available. At that time, the Government PM (or designee) will make a final determination whether the Contractor met the criteria for the milestone. The Government will assess the performance milestone as pass/fail. The IAO will notify the PCO of the results of the Government Assessment.

3.2 CLIN 0002 Performance Incentive Criteria

3.2.1 Milestones 1 & 2: CLIN 0002 Software Build Risk Reduction Tests

Incentive Acceptance Criteria: Completion of a Software Build Risk Reduction Test is defined as meeting all objectives of the test documented in the associated Test Plan and closing all Category 1 deficiencies resulting from the Software Build Risk Reduction Test.

NOTE: This is an Agile project management milestone; entrance and exit criteria will be jointly agreed upon prior to Build start

Contractor Assessment: Following each Software Build Risk Reduction Test in Table 2-2, the Contractor will submit a COC to the Contracting Officer, with the following content:

1. Name of Software Build Risk Reduction Test

2. Date of Completion

3. Name of associated Test Plan and Test Procedure

4. Summary of test objectives met versus test objectives planned

5. Summary of Category 1 deficiencies identified during the Software Build Risk Reduction Test

Government Assessment: Following each Software Build Risk Reduction Test in Table 2-2, the Government PM (or designee) will review the associated COCs with respect to the Incentive Criteria in this section along with any relevant data sources available. At that time, the Government PM (or designee) will determine whether the Contractor met the acceptance criteria for the milestone. The

3.2.2 Milestone 3: CLIN 0002 Completion of IOC Capability

Incentive Acceptance Criteria: Completion of the IOC Capability is defined as meeting all criteria documented in Statement of Work, paragraph 2.1.2.2.5a for DD250 of the IOC Capability.

Contractor Assessment: Following the DD250 of the IOC Capability, the Contractor will submit a COC to the Contracting Officer, with the following content:

1. Date of the DD250

2. Summary of DD250 criteria and how each was met

Government Assessment: The Government PM (or designee) will review the IOC Capability COC with respect to the Incentive Criteria in this section along with any relevant data sources available. At that time, the Government PM (or designee) will determine whether the Contractor met the acceptance criteria for the milestone. The Government will assess the performance milestone as pass/fail. The IAO will notify the PCO of the results of the Government Assessment.

3.3 CLIN 0003 Performance Incentive Criteria

3.3.1 Milestones 1, 2, 3, and 4: CLIN 0003 Software Build Operational Test Assessments

Incentive Acceptance Criteria: Completion of a Software Build Operational Test is defined as meeting all objectives of the test documented in the associated Test Plan and closing all Category 1 deficiencies resulting from the Software Build Operational Test.

NOTE: This is an Agile project management milestone; entrance and exit criteria will be jointly agreed upon prior to Build start

Contractor Assessment: Following each Software Build Operational Test Assessment in Table 2-3, the Contractor will submit a COC to the Contracting Officer, with the following content:

1. Name of Software Build Operational Test Assessment

2. Date of Completion

3. Name of associated Test Plan and Test Procedure

4. Summary of test objectives met versus test objectives planned

5. Summary of Category 1 deficiencies identified during the Software Build Operational

Test Assessment

Government Assessment: Following each Software Build Operational Test Assessment in Table 2-3, the Government PM (or designee) will review the associated COCs with respect to the Incentive Criteria in this section along with any relevant data sources available. At that time, the Government PM (or designee) will determine whether the Contractor met the acceptance criteria for the milestone. The

3.3.2 Milestone 5: CLIN 0003 Completion of FOC Capability

Incentive Acceptance Criteria: Completion of the FOC Capability is defined as meeting all criteria documented in Statement of Work, paragraph 3.1.2.5a for DD250 of the FOC Capability.

Contractor Assessment: Following the DD250 of the FOC Capability, the Contractor will submit a COC to the Contracting Officer, with the following content:

1. Date of the DD250

2. Summary of DD250 criteria and how each was met

Government Assessment: The Government PM (or designee) will review the FOC Capability COC with respect to the Incentive Criteria in this section along with any relevant data sources available. At that time, the Government PM (or designee) will determine whether the Contractor met the acceptance criteria for the milestone. The Government will assess the performance milestone as pass/fail. The IAO will notify the PCO of the results of the Government Assessment.

4. ADDITIONAL PROVISIONS

4.1 Incentive Fee Plan Change Procedure

All substantive changes to this incentive fee plan shall be done by bilateral modification of the contract signed by both the Contractor and the Government.

4.2 Termination

In the event the contract is terminated by the Government, the Contractor shall submit a Termination Proposal subject to negotiation and agreement of the parties. Any incentive payment determinations made by the IAO prior to the termination shall not be affected by the termination decision.

APPENDIX 1

(EXAMPLE CALCULATION OF FEE)

The formulas which govern the incentive fee at each milestone are shown in (a) below. The formulas which govern the incentive fee at the end of the CLIN PoP are shown in (b) below.

Variables:

MSn: Milestone n PIn : % of Total Available CLIN Incentive Pool for Milestone (Table 2-1, Table 2-2, Table 2-3) CVG: Government Cost Variance GEAC: Government Estimate at Complete for each CLIN ($) TC: Total CLIN Target Cost PIEn: Performance Incentive earned for Milestone MSn ($) x: number of milestones in CLIN FA: Incentive Fee Adjustment CPIE: CLIN Performance Incentive earned (based on the final audited CLIN total and actual overrun)

(a) Formulas for Milestone Payments:

Step 1: Estimate the projected overrun at the end of the CLIN using the GEAC

CVG = ((GEAC-TC)/TC)

Step 2: Determine whether the CVG is less than or equal to10%, greater than10% and less than 20%, or greater than or equal to 20% and apply the appropriate formula/formulas below

Case 1 - cost overrun less than or equal to 10%: CVG ≤ 0.1 PIEn = ( PIn)*(0.07)* TC

Case 2 - cost overrun greater than 10 % but less than 20%: 0.1 < CVG < 0.2

PIEn = (0.07 – [(CVG – 0.1) *0.7])*(PIn)*TC

Case 3 - cost overrun is greater than or equal to 20%: CVG ≥ 0.2

PIEn = 0%

(b) Formulas at expiration of CLIN:

Step 1: Calculate the final audited CLIN total cost. For purposes of calculating CVG at CLIN expiration, GEAC is equal to the final audited CLIN total cost.

Step 2: Determine whether the final CVG is less than or equal to10%, greater than 10% and less than 20%, or greater than or equal to 20% and apply the appropriate formula/formulas below:

Case 1 - cost overrun less than or equal to 10%: CVG ≤ 0.1

CPIE = (0.07)* TC

Case 2 - cost overrun greater than 10% but less than 20%: 0.1 < CVG < 0.2

CPIE = (0.07 – [(CVG – 0.1) *0.7])*TC

Case 3 - cost overrun is greater than or equal to 20%: CVG ≥ 0.2

CPIE = 0%

Step 3: Calculate the fee adjustment (FA) to date up or down to be consistent with the final fee calculation

Incentive Fee Adjustment at CLIN expiration:

FA = CPIE – (PIE1 + PIE2 + … PIEx)

For illustration purposes only, the following two examples are filled-in to show how the calculations are to be performed. In both cases CLIN 0001 was selected as the example.

Example 1: Illusrates how to calcualte incentive fee when the cost overrun is less than or equal to ten percent at the time of all four milestones included in CLIN 0001.

For this illustration, assume:

• The GEAC was calculated at each Milestone’s completion and used to calculate CVg.

• Target Cost of CLIN 0001 excluding FCCOM, TC = $10M

• Maximum Performance Incentive Fee Pool = $700K

• PI1= 0.10

• PI2= 0.20

• PI3= 0.30

• PI4= 0.40

• Upon CLIN completion, the actual overrun was 10%

• MS 1 (PDR) – 10% of Incentive Fee Pool, GEAC=$10M o CVG = ($10M-$10M)/$10M= 0% o PIE1 = PI1* 0.07*$10M = 0.10*0.07*$10M= $70K

• MS 2 (RRT1) – 20% of Incentive Fee Pool, GEAC=$10.5M o CVG = ($10.5M-$10M)/$10M= 5% o PIE2 = PI2* 0.07*$10M = 0.20*0.07*$10M=$140K

• MS 3 (CDR) – 30% of Incentive Fee Pool, GEAC= $10.6M o CVG = ($10.6M-$10M)/$10M= 6% o PIE3 = PI3* 0.07*$10M = 0.30*0.07*$10M= $210K

• MS 4 (RRT2) – 40% of Incentive Fee Pool, GEAC= $10.8M o CVG = ($10.8M-$10M)/$10M= 8% o PIE4 = PI4* 0.07*$10M = 0.40*0.07*$10M= $280K

• At CLIN closeout, final audited CLIN total cost = $11M o PIE1 + PIE2 + PIE3 + PIE4 = $700K o CPIE = (0.07)* TC o CPIE = (0.07)* $10M o CPIE = $700K o FA = CPIE – (PIE1 + PIE2 + PIE3 + PIE4) o FA = $700K - $700K o FA = $0 o No adjustment required

Example 2: Illustrates how to caculate incentive fee when the cost overrun is less than or equal to ten percent at Milestone one, is equal to ten percent at Milestone two, is greater than ten percent but less than twenty percent at Milestone three, and is greater than twenty percent at Milestone four.

For this illustration, assume:

• The GEAC was calculated at each Milestone’s completion and used to calculate CVg.

• Target Cost of CLIN 0001, excluding FCCOM (TC): $10M

• Maximum Performance Incentive Fee Pool ($700K)

• PI1=0.10

• PI2= 0.20

• PI3=0.30

• PI4=0.40

• Upon CLIN completion, the actual overrun was greater than 20%

• MS 1 (PDR) – 10% of Incentive Fee Pool, GEAC = $10.8M o CVG = ($10.8M-$10M)/$10M= 8% o PIE1 = PI1* 0.07*$10M = 0.10*0.07*$10M= $70K

• MS 2 (RRT1) – 20% of Incentive Fee Pool, GEAC=$11M o CVG = ($11M-$10M)/$10M=10% o PIE2 = PI2* 0.07*$10M = 0.20*0.07*$10M=$140K

• MS 3 (CDR) – 30% of Incentive Fee Pool, GEAC=$11.5M o CVG = ($11.5M-$10M)/$10M=15% o PIE3 = (0.07-[(0.15-0.10)*0.7])*0.30*$10M= $105K

• MS 4 (RRT2) – 40% of Incentive Fee Pool, GEAC=$12.2M o CVG = ($12.2M-$10M)/$10M=22% o PIE4 = $0

• At CLIN closeout, final audited CLIN total cost = $12.4M o PIE1 + PIE2 + PIE3 + PIE4 = $315K o CPIE = $0 o FA = CPIE – (PIE1 + PIE2 + PIE3 + PIE4) o FA = $0 – ($70K + $140 + $105K + $0) = -$315K o No fee earned, Contractor must pay the Government $315K