NGCD_1_FPI(S)_Basics.pdf

NGCD 1 Fixed Price Incentive Basics

These materials are for informational purposes only. No portion of this content should be construed as part of solicitation number W911SR-17-R-0005. If offerors have questions about the solicitation, they should submit those questions to the contracting officer, in accordance with Section L’s proposal submission instructions prior to the cut off for questions.

Important FPI(S) NGCD 1 Notes

• Offerors propose initial target cost and profit for each CLIN IAW Section L instructions and the cost template. The resulting incentive structure will be as follows:

FPI(S) CLINs: Ceiling Price = 130% of Initial Target Cost;

Under Target Share Ratio = 85% Government : 15% Contractor;

Over Target Share Ratio = 85% Government : 15% Contractor;

A ceiling and floor for the firm target profit will not be incorporated into FPI(S) CLINs.

• The Government may unilaterally convert FPI(S) CLINs to FPIF as follows:

Successive Target Cost: Any value the Contracting Officer considers to be reasonably challenging, but achievable.

Successive Target Profit: Initial Target Profit + 15% * (Initial Target Cost – Successive Target Cost);

however, this may not exceed the ceiling price minus the successive target cost;

Under Target Share: ≤ 85% Government : ≥15% Contractor, determined by the Contracting Officer;

Over Target Share: 85% Government : 15% Contractor;

Ceiling Price: 130% of the initial target cost.

NGCD 1 FPI(S) Incentive Geometry

Example Proposed Initial

Target Profit (ITπ)

Example Proposed Initial Target Cost (ITC)

$0

$50

$100

$150

$200

$250

$300

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400

P ro fi t

(T h o u s a n d s

Cost (Thousands)

FPI(S) Line

Ceiling

130% * ITC

Unilateral Conversion to FPIF Example

Initial Target Cost & Profit

$0

$50

$100

$150

$200

$250

$300

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400

P ro fi t

(T h o u s a n d s

Cost (Thousands)

FPI(S) Line FPI(F) Line

RCA Target Cost

KO Discretion

≥15% Contractor Underrun Share @ KO Discretion

Bilateral Conversion to FPIF Example

$0

$50

$100

$150

$200

$250

$300

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400

P ro fi t

(T h o u s a n d s

Cost (Thousands)

FPI(S) Line FPI(F) Line

Negotiable Firm Target Cost Overrun Share Underrun Share Ceiling Price

Bilateral Conversion to FFP Example

$0

$50

$100

$150

$200

$250

$300

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400

P ro fi t

(T h o u s a n d s

Cost (Thousands)

FPI(S) Line

Firm Fixed

Price

FPI(S) Conversion Timeframe

• Converting FPI(S) CLINs to Firm Targets or FFP Negotiation Timeframe (Starting Point), Based on When Pricing Information is Due:

• LRIP: Within 30 days after the contractor is 40% complete

• FRP 1 & 2: Within 30 days after the contractor is 40% complete

• FRP 3 – 6: Within 30 days after the contractor is 20% complete

𝑃𝑒𝑟𝑐𝑒𝑛𝑡 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑒 = (𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑊𝑜𝑟𝑘 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑒𝑑)𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒

𝐵𝑢𝑑𝑔𝑒𝑡 𝐴𝑡 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑖𝑜𝑛

General FPI Information

• Acronyms:

Fixed Price Incentive – Firm Target (FPIF)

Fixed Price Incentive – Successive Target [FPI(S)]

• A FPIF contract provides for adjusting profit and establishing the final contract price by application of a formula based on the relationship of total final negotiated cost to total target cost. (See FAR 16.403-1)

• A FPI(S) contract includes an initial target cost, initial target profit, initial target profit adjustment formula to be used for establishing the firm target profit, the production point at which the firm target cost and firm target profit will be negotiated, and a ceiling price that is the maximum that may be paid to the contractor (with some exceptions). (See FAR 16.403-2)