Download version 0.1 of EP 715-1-5 Architect-Engineer Contracting Guide - Hazardous Toxic Radioactive Waste HTRW Contracting.pdf

Download version 0.1 of EP 715-1-5 Architect-Engineer Contracting Guide - Hazardous Toxic Radioactive Waste HTRW Contracting.pdf
CEMP-ES/CEPR-P
EP 715-1-5
DEPARTMENT OF THE ARMY
U.S. Army Corps of Engineers
Washington, DC 20314-1000
Pamphlet
No. 715-1-5
10 August 1993
Procurement
ARCHITECT-ENGINEER CONTRACTING GUIDE
HAZARDOUS, TOXIC, RADIOACTIVE WASTE (HTRW) CONTRACTING
Table of Contents
Subject
Paragraph
Page
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1-2
1-3
1-4
1-5
1-6
1-7
1-8
1-9
1-10
1-11
1-12
1-13
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2-2
2-3
2-4
2-5
2-1
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2-7
2-13
2-19
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2-23
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract Selection Considerations . . . . . . . . . . . . . .
Risks Associated with Fixed-Price Contracts . . . . . .
Risks Associated with Cost-Reimbursement
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3-1
3-2
3-3
3-1
3-2
3-3
3-4
3-4
CHAPTER 1. INTRODUCTION
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suggested Improvements . . . . . . . . . . . . . . . . . . . . .
Perceptions and Attitudes . . . . . . . . . . . . . . . . . . . .
Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Architect-Engineer Contracts . . . . . . . . . . . . . . . . . .
Contract Basics. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor Motivations. . . . . . . . . . . . . . . . . . . . . . .
Basic Contract Forms . . . . . . . . . . . . . . . . . . . . . . . .
Prohibited Type of Government Contract. . . . . . . . .
Personal Services Contracts . . . . . . . . . . . . . . . . . . .
Statutes and Regulations . . . . . . . . . . . . . . . . . . . . .
CHAPTER 2. CONTRACT TYPES
General Overview . . . . . . . . . . . . . . . .
Fixed-Price Contracts . . . . . . . . . . . . .
Cost-Reimbursement Contracts . . . . .
Incentive Contracts . . . . . . . . . . . . . .
Indefinite-Delivery Contracts . . . . . . .
Time-and-Materials, Labor-Hour, and
Letter Contracts . . . . . . . . . . . . .
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CHAPTER 3. SELECTING CONTRACT TYPE
EP 715-1-5
10 Aug 93
Page
Subject
Appendix A.
Appendix B.
Appendix C.
Appendix D.
Solicitation Provisions and Contract Clauses
for Architect-Engineer Contracts . . . . . . . . . . . . . . . .
Sample Letter Contract . . . . . . . . . . . . . . . . . . . . . . .
Types of Contracts – A Comparison
and Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum Recommended HTRW Contracting
Capacity for Military HTRW Districts. . . . . . . . . . . .
ii
A-1
B-1
C-1
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CHAPTER 1
INTRODUCTION
1-1. Purpose. This pamphlet is to serve as a training guide for USACE personnel to
evaluate the most appropriate contract type for architectural and engineering services,
consistent with governing laws and regulations. Selection of the final contract type will
lie with the contracting officer. This guide is intended to assist noncontracting
personnel who must decide which contracting tool to use in order to accomplish the
USACE HTRW mission. This is not a policy regulation or directive.
1-2. Applicability. This pamphlet applies to HQUSACE/OCE elements, major
subordinate commands, districts, laboratories, and field operating activities (FOA).
1-3. References
a.
Public Law (PL) 96-83
b.
PL 92-582
c.
10 U.S.C. 2306(a)
d.
10 U.S.C. 2306(c)
e.
10 U.S.C. 2306(d)
f.
10 U.S.C. 2310(b)
g.
10 U.S.C. 2311
h.
10 U.S.C. 254(b)
i.
10 U.S.C. 4540
i
10 U.S.C. 7212
k.
10 U.S.C. 9540
l.
40 U.S.C. 541 et seq
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m . 41 U.S.C. 254(b)
n . 41 U.S.C. 501 et seq.
o.
5 U.S.C. 3109
p.
Armed Services Procurement Manual
q.
Army Federal Acquisition Regulation Supplement (AFARS)
r.
Engineer Federal Acquisition Regulation Supplement (EFARS)
s.
Federal Acquisition Regulation (FAR) [Note: FAR-related references are
grouped under “Solicitation Provisions” and “Contract Clauses” and listed in Appendix A]
The above citations are included in this guide for information only. Their inclusion in no
way supplements HQUSACE procurement policy. Please refer to the current appropriate
and applicable statute or regulation in use at the time of your query.
1-4. Suggested Improvements. Users are invited to send comments and suggested
improvements on ENG Form 3078.
1-5. Perceptions and Attitudes. As facility design and construction requirements grow
in complexity, contracting philosophy and procedures should be reevaluated to assure
that they continue to serve the best interests of the Government and still remain
attractive to the deisign and construction industry. Firm fixed-price contracting has
served for many years. The “mind set” that this is the only way to go must give way
to a more objective approach to contract type selection. Effective pricing and sound
business procurement practices require discrimination and judgement in selecting the
right contract type. Cost type contracting lends itself to fast-tracking or phased
construction, thus greatly reducing the project duration. The fixed-price contract
requires that work be specified and the final price and schedule agreed to before work is
started.
For environmental (HTRW) cleanup work that is part of a continuing program,
preplacing indefinite delivery cost-reimbursement contracts should be considered so this
type can be used when appropriate. See Appendix D.
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1-6. Background
a . The U.S. Army Corps of Engineers (USACE) accomplishes much of its
engineering and design work through professional A-E firms in the private sector.
Further, USACE policy prescribes that management of services obtained from private
A-E firms be accomplished by Corps personnel who are on a professional level
comparable with that of the technical counterparts in the A-E firm.
b . USACE personnel must therefore be proficient not only in the skills of their
profession but also in business matters relating to A-E firms, i.e., from negotiating the
contract terms to monitoring performance under the contract to ensuring that all
contractual requirements are complete. The participation of acquisition team members
in this process is obvious.
c . For over 50 years, USACE’s predominant approach to acquiring A-E services
has been by using firm-fixed-price (FFP) contracts (and additionally FFP delivery orders
under indefinite delivery contracts). While FFP contracting has served USACE well for
many years for our traditional engineering and design work, more objective approaches
to contract type selection are needed for USACE environmental work.
d . The Federal Acquisition Regulation (FAR) states that FFP contracting is
preferable if the circumstances are appropriate, because under it the contractor assumes
most of the risk and has the greatest motivation to control costs. However, FFP
contracting is not always the correct contract type. The Armed Services Procurement
Manual for contract pricing says the following:
Sound procurement requires use of the right contract type, The best, most realistic
and reasonable price in the world (for the particular requirement at hand) may turn
sour if the contract type is wrong.
e . USACE personnel need to be knowledgeable of all viable options available to
them prior to discussing selection of contract types for particular projects particularly in
the hazardous, toxic, and radioactive waste (HTRW) arena. This engineer pamphlet will
help them make that decision.
1-7. Architect-Engineer Contracts
a . The Federal Government has not always employed A-E firms. Before World
War II, the in-house capabilities of Government agencies generally satisfied their needs
for A-E services. In 1939, however, with the fear of war becoming stronger, Congress
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enacted legislation launching a vigorous military construction (MILCON) program to
improve existing facilities and construct new ones on military bases. That legislation,
known as the Public Works Act of 1939, is codified in Title 10, United States Code,
sections 7212, 4540, and 9540 (10 U.S.C. §§ 7212, 4540, and 9540).
b. That legislation authorized the Secretaries of the War and Navy Departments
to contract with practicing A-Es to produce and deliver “designs, plans, drawings, and
specifications” for public works and utilities projects, overriding statutes that required
advertising and competitive bidding. As a safeguard, the legislation limited fees for such
A-E services to 6 percent of the facility’s estimated construction cost.
c . The current procurement procedures for selecting A-E firms are governed by
Public Law (PL) 92-582, known as the Brooks Act (40 U.S. C. § 541 et seq.), which became
law in 1972. The Brooks Act applies to all A-E services: research, planning,
development, design, construction, alteration, and repair of real property. Professional
services covered under the Brooks Act include services of an architectural or engineering
nature or incidental services that members of the architectural and engineering
professions may logically or justifiably perform (see Table l-l).
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Table 1-1
Relationship of professional services to the Brooks Act
Services not covered under the Brooks Act
Services:covered under the Brooks Act
Conceptual designs
preparation of construction plans and
specifications
Preparation of plans and specifications for
facility support contracts
Engineering cost estimates
Value engineering analyses
Post design services
Preparation of record drawings (“as-built”
drawings)
Comprehensive master plans
Environmental engineering and
environmental impact assessments (when
they include technical engineering
considerations)
Land surveying and mapping
Professional engineering inspection services
Technical engineering studies
Studies having minimal need for engineering
interpretation and primarily requiring
counting, tabulating, inventorying,
cataloging, organizing, indexing, and
collating
Environmental impact assessments and
studies that are Iargely free of technical
engineering considerations
Studies regarding business or financial
considerations
Studies involving purely social, economic, or
psychological phenomena
Personnel analyses
Management consulting services
Auditing or accounting analyses/
investigations
Training instruction and training material
preparation not involving subject matter of a
technical engineering nature
Routine laboratory material testing services
Technical engineering consultations
Engineering field investigations
Material sample analysis and
recommendations
System safety or other safety analyses
Life-cycle cost studies
Soils
engineering
Preparation of construction guide
specifications
Preparation of technical engineering manuals
Expert architectural or engineering witness
service
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d . The Brooks Act requires–
(1) Public announcement of all requirements for A-E services.
(2) That A-E contracts be negotiated on the basis of demonstrated competence
and qualification for the type of professional services required.
(3) Discussions with no fewer than three firms regarding anticipated concepts.
(4)
Ranking of the three best qualified firms in order of preference.
(5) Negotiations with the best qualified firms in order of preference until a fair
and reasonable price agreement is reached.
Brooks Act selection criteria are implemented in FAR 36.602-1, which
requires that A-E firms be selected on the basis of the following considerations:
e.
(1) Professional qualifications necessary for satisfactory performance of
required services.
(2) Specialized experience and technical competence in the type of work
required.
(3) Capacity to accomplish the work in the required time.
(4) Past performance on contracts with Government agencies and private
industry in terms of cost control, quality of work, and compliance with performance
schedules.
(5) Location in the general geographical area of the project and knowledge of the
locality of the project – provided that application of this criterion produces at least
three qualified firms, given the nature and size of the project.
(6) Acceptability under other appropriate evaluation criteria.
f. The primary factor in A-E selection is the determination of the most highly
qualified firm. Secondly, factors such as geographic proximity and equitable distribution
of work must also be considered. However, those other factors should not take on
greater significance than qualifications and past performance. To that end, if several
firms are otherwise equally qualified, the equitable distribution factor can become a
significant element in the selection. When a firm has a past record of exceptional
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performance or has received a Department of Defense (DoD) or Service design award,
that fact must be fully recognized in judging that firm against other qualified firms. The
following A-E selection guidance is consistent with public law and existing DoD/FAR
policies and is intended to provide clarification and greater consistency in the process
without restricting the final selection.
(1) For purposes of considering the volume of DoD work previously awarded an
A-E firm, the A-E Contract Administration Support System (ACASS) will be the source
for data indicating A-E contract award volume during the previous 12 months. The
ACASS data base is kept current by monthly updates from Defense Contract Action Data
System (DCADS).
(2) Awards to overseas offices of A-E firms for projects outside the United
States and its territories and possessions will not be considered when computing volume
of DoD contract awards for purposes of equitable distribution.
(3) Awards to A-E subsidiaries not normally subject to management decisions,
bookkeeping, and policies of a holding company are to be treated as awards to individual
firms when considering equitable distribution, pursuant to Defense FAR Supplement
(DFARS) 236.602-1. Incorporated subsidiaries operating under a name different from
that of the parent company are in this category. Following this procedure allows greater
competition and avoids removing capable local subsidiaries from consideration because
of awards made to the holding company or to its other subordinate entities in different
locations.
(4) Past performance evaluations of recently completed DoD contracts should be
given appropriate consideration.
g . Price is not a factor in selecting A-E firms. Subsequent fee negotiations,
however, must result in fair and reasonable prices. Otherwise, the Government is
required to terminate negotiations with the most highly qualified firm and begin
negotiations with the second most highly qualified firm.
1-7. Contract Basics
a . A contract is a mutually binding legal relationship obligating the seller
(contractor) to furnish supplies or services (including design) and the buyer to pay for
them. It includes all types of written commitments that obligate the Government to an
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expenditure of appropriated funds (and occasionally non-appropriated funds as well). In
addition to bilateral instruments, contracts include (but are not limited to)–
(1) Awards and notices of award.
(2) Job orders or task letters issued under basic ordering agreements.
(3) Letter contracts.
(4)
Orders, such as purchase orders, which under the contract becomes effective
by written acceptance or performance.
(5) Bilateral contract modifications.
b . Contracts do not include grants and cooperative agreements covered by
41 U.S.C. § 501 et seq.
1-8. Contractor Motivations. Not every Government contract is sought by contractors
because it holds the promise of immediate profit. While profit is an undeniably strong
and enduring motivation of business enterprise, it is not the only one. Aside from an
expressed type of contract that provides dollars for work, the following factors may
influence a contractor’s judgment and willingness to accept a Government contract:
a . Company growth and development.
b . Expansion through sales growth.
c . Opportunities for follow-on business.
d . Developmentof existing capabilities and technology.
e . Opportunities for spinoffs.
f . Advancement in levels of technical knowledge.
g . Coverage of fixed costs (e.g., overhead and general and administrative).
h . Enhancement of image in private and public sectors.
i . Survival until better economic times.
1-9. Basic Contract Forms
a . Completion form.
The contract form usually used by USACE is the
completion form. Completion-form contracts, either cost-reimbursement or fixed-price,
require the contractor to furnish a specified end product. The end product could be a set
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of construction drawings and specifications, a complete and functional facility,
equipment, a specified service, a study, or a report. Upon delivery and formal
acceptance by the Government of the specified end product, the contract is considered
“complete” and the contractor receives the final payment.
b. Term form. This contract form is used most often for early research and
development efforts where it is difficult to predict the technical outcome and there is n o
certainty of success. The contractor is contractually obligated to apply an agreed-upon
level of effort over a stated period of the time. When that time expires, the contractor is
paid its costs and fee and the contract illegally “complete.” In this contract, there is no
required end product. (However, to comply with the statutory prohibition against
personal services, some physical end product must be identified and submitted for the
level of effort expended.)
1-10. Prohibited Type of Government Contract. Cost-plus-a-percentage-of-cost
contracts are prohibited by 10 U.S. C. § 2306(a) and 41 U.S.C. § 254(b). Aside from being
prohibited, this type of contract is among the most reckless and improvident of
contracting methods; it encourages contractors to expend funds and incur costs without
discipline. Under it, the more the contractor spends, the greater the profit it receives.
The incentive is to spend dollars, not manage costs, since profit is tied to increased
expenditures and not to their control or reduction.
1-11. Personal Services Contracts
a . A personal services contract is characterized by the employer-employee
relationship it creates between the Government and the contractor’s personnel. The
Government is normally required to obtain its employees by direct hire under
competitive appointment or other procedures mandated by the civil service laws.
Obtaining personal services by contract, rather than by direct hire, circumvents those
laws unless Congress has specifically authorized acquisition of the services by contract.
b . USACE contracting officers shall not award personal services contracts
unless specifically authorized by statute (e.g., 5 U.S.C. § 3109) to do
SO .
c . To determine whether or not a contract is personal in nature, the contract
arrangement must be judged in the light of its own facts and circumstances, the key
question being Will the Government exercise relatively continuous supervision and
control over the contractor personnel performing the contract? Occasional supervision
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of a few contractor personnel does not necessarily create a personal services situation,
but a pattern of issuance of instructions directly to a relatively large number of
contractor personnel very well might.
d. If the following criteria are met, consideration should be given to determining
that a proposed contract is personal in nature.
(1) Performance on site.
(2) Principal tools and equipment are furnished by the Government.
(3)
Services are applied directly to the integral effort of the agency or an
organizational subpart in furtherance of assigned function or mission.
(4) Comparable services, meeting comparable needs, are performed in the same
or similar agencies using civil service personnel.
(5) The need for the type of service provided can reasonably be expected to last
beyond 1 year.
(6) The inherent nature of the service, or the manner in which it is provided,
reasonably requires, directly or indirectly, Government direction or supervision of
contractor employees.
e . Personal services contracts for the services of individual experts or
consultants are limited by the Classification Act. In addition, the Office of Personnel
Management has established requirements that apply in acquiring the personal services
of experts or consultants in this manner (e.g., benefits, taxes, conflicts of interest).
Therefore, the contracting officer shall effect necessary coordination with the cognizant
civilian personnel office.
1-12. Statutes and Regulations. Government acquisition of supplies and services is
controlled by many rules contained in statutes and regulations. The regulations
governing USACE acquisition of A-E services are discussed below in descending order of
importance. Much but not all of the material in these regulations is derived from
statute.
a. Federal Acquisition Regulation (FAR). The FAR is a single Government-wide
procurement regulation mandated by the Office of Federal Procurement Policy Act of
1974, as amended by PL 96-83. Ten years later and after more than 5 years of effort to
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consolidate the Defense and Federal acquisition regulations, the FAR went into effect on
1 April 1984. Although a great improvement on the procurement regulations that
preceded it, the FAR is not an easy guide to A-E contracting, per se. The FAR part
(Part 36) dealing
with construction and A-E contracts is relatively brief and does not
.
cover everything about them, only those matters peculiar to construction and A-E
contracting. Also, because A-E services are a comparatively small part of Federal
contracting, the FAR lends itself more to contracting for equipment, supplies, and other
services than it does to contracting for A-E services.
b . Defense FAR Supplement (DFARS). The DFARS is issued by the Assistant
Secretary of Defense (Production and Logistics) by direction of the Secretary of Defense
and in coordination with the Secretaries of the Army, Navy, and Air Force and the
Director of the Defense Logistics Agency. The DFARS establishes uniform policies and
procedures for DoD that implement and supplement the FAR. It is codified in the Code
of Federal Regulations as Chapter 2 of Title 48. Its Subpart 236.6 expands on the FAR
A-E coverage.
c . Army Federal Acquisition Regulation Supplement (AFARS). The AFARS is
issued by the Assistant Secretary of the Army (Research, Development and Acquisition)
pursuant to Subpart 1.3 of the FAR. The AFARS implements and supplements the FAR
and DFARS and establishes Department of the Army uniform policies and procedures for
acquiring supplies and services. The AFARS is applicable to military and civil works
design and construction.
d . Engineer Federal Acquisition Regulation Supplement (EFARS). The EFARS is
a regulation published by USACE; the Principal Assistant Responsible for Contracting
(PARC) is its proponent. The EFARS implements and supplements the FAR, DFARS, and
AFARS and establishes uniform policies and procedures for the Corps of Engineers
relative to the administration and legal aspects of its contracts.
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CHAPTER 2
CONTRACT TYPES
2-1. General Overview
a . A wide selection of contract types is available to provide needed flexibility in
acquiring the large variety and volume of supplies and services required by the
Government. Contract types vary according to–
(1) The degree and timing of the risk assumed by the contractor for the costs of
performance.
(2) The amount and nature of the profit incentive offered to the contractor for
achieving or exceeding specified standards or goals.
(3) The definability of the end product.
b.
The contract types are grouped into two broad categories: fixed-price
contracts and cost-reimbursement contracts. The specific contract types range from
firm-fixed-price (FFP), in which the contractor assumes full risk for the performance
costs and resulting profit (or loss), to cost-plus-fixed-fee (CPFF), in which the contractor
assumes minimal risk for the performance costs and the negotiated fee (profit) is fixed.
In between are the various incentive contracts, in which the contractor’s risk for the
performance costs and the profit or fee incentives are tailored to the uncertainties
involved in contract performance.
c . Despite the ease with which contract types can be divided into major
categories, the categories often coalesce. Cost-reimbursement contracts may contain
fixed-price types of arrangements [e.g., caps (or not-to-exceed dollar levels) may be
negotiated on cost elements such as overhead, general and administrative expense, or
travel]. Or a contract for the design, construction, and operation and maintenance of a
facility may contain firm-fixed-price provisions for the facility’s design and construction
and cost-plus-award-fee provisions for its operation and maintenance.
d . While this pamphlet presents all contract types currently available, some of
the contract types set forth here may not be appropriate for A-E services except in rare
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instances. However, the uncertainty of scope associated with HTRW work makes cost
reimbursement contracts an increasingly important contract type to consider for such
work.
2-2. Fixed-Price Contracts
a.
Firm-fixed-price contracts.
(1) A firm-fixed-price (FFP) contract provides for a price that is not subject to
any adjustment on the basis of the contractor’s cost experience in performing the
contract. This contract type places maximum risk and full responsibility for all costs
and resulting profit (or loss) upon the contractor. It provides maximum incentive for the
contractor to control costs and perform effectively and imposes a minimum
administrative burden upon the contracting parties.
(2) Under an FFP contract, the contractor is obligated to complete the contract
at a firm price. [Other types of “fixed-price” contracts, despite their names, may
provide for an adjustable price. Such contracts may include a ceiling price, a target
price (including target costs), or both, within which portions of the price may be subject
to adjustment under economic price adjustment, redetermination, or incentive
provisions.]
(3) An FFP contract is suitable for acquiring commercial products or for
acquiring other supplies or services on the basis of reasonably detailed specifications
when the Government can establish fair and reasonable prices at the outset, such as
when —
(a) There is adequate price competition.
(b) There are reasonable price comparisons with prior purchases of the same or
similar supplies or services made on a competitive basis or supported by valid cost or
pricing data.
( c ) Available cost or pricing information permits reasonable estimates of the
probable costs of performance.
(d) Performance uncertainties can be identified and reasonable estimates of
their impact can be made, and the contractor is willing to accept a firm fixed price
representing assumption of the risks involved.
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b . Fixed-price contracts with economic price adjustment.
(1) A fixed-price contract with economic price adjustment provides for upward
and downward revision of the stated contract price upon the occurrence of specified
contingencies. Economic price adjustments are of three general types, as follows:
(a) Adjustments based on established prices. These price adjustments are based
on increases or decreases from an agreed-upon level in published or otherwise established
prices of specific items or the contract end items.
(b) Adjustments based on actual costs of labor or material. These price
adjustments are based on increases or decreases in specified costs of labor or material
that the contractor actually experiences during contract performance.
( c ) Adjustments based on cost indexes of labor or material. These price
adjustments are based on increases or decreases in labor or material cost standards or
indexes that are specifically identified in the contract.
(2) A fixed-price contract with economic price adjustment maybe used when–
(a) There is serious doubt concerning the stability of market or labor conditions
that will exist during an extended period of contract performance.
(b) Contingencies that would otherwise be included in the contract price can be
identified and covered separately in the contract.
(3) A contract providing for adjustment based on cost indexes of labor or
material may be appropriate when—
(a) The contract involves unextended period of performance, with significant
costs to be incurred beyond 1 year after performance begins.
(b) The contract amount subject to adjustment is substantial.
(c) The economic variables for labor and materials are too unstable to permit a
reasonable division of risk between the Goverment and contractor without such an
arrangement.
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(4) Price adjustments based unestablished prices should normally be restricted
to industry-wide contingencies. Price adjustments based on labor and material costs
should be limited to contingencies beyond the contractor’s control.
(5) A fixed-price contract with economic price adjustment shall not be used
unless the Government determines that it is necessary either to protect the contractor
and the Government against significant fluctuations in labor or material costs or to
provide for contract price adjustment in the event of changes in the contractor’s
established prices. For example, a contract for highway or bridge construction may
contain economic price adjustment provisions during a period of war when oil availability
is unstable and market conditions are doubtful.
(6) When a fixed-price contract with economic price adjustment is used, in
addition to the other standard clauses listed in Appendix A, either the clause Economic
Price Adjustment – Labor and Material, or an approved USACE clause providing for
adjustment based on cost indexes of labor or material must be inserted in the contract.
c . Fixed-price incentive contracts. A fixed-price incentive (FPI) contract is a
fixed-price contract that 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. Fixed-price incentive contracts are covered in more detail under
the incentive contracts section.
d . Fixed-price contracts with prospective price redetermination.
(1) A fixed-price contract with prospective price redetermination provides for a
firm fixed price for an initial period of contract performance and prospective
redetermination, at a stated time or times during performance, of the price for
subsequent periods of performance.
(2) A fixed-price contract with prospective price redetermination may be used
when it is possible to negotiate a fair and reasonable firm fixed price for an initial
period, but not for subsequent periods of contract performance.
(3) The contract may provide for a ceiling price based on evaluation of the
uncertainties involved in performance and their possible cost impact. This ceiling price
should provide for assumption of a reasonable proportion of the risk by the contractor
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and, once established, may be adjusted only by execution of contract clauses providing
for equitable adjustment (e.g., by means of change orders).
(4) This contract type shall not be used unless–
(a) The Government has established that the conditions for use of a firm-fixedprice contract are not present and a fixed-price incentive contract would not be more
appropriate.
(b) The contractor’s accounting system is adequate for price redetermination.
(c) The prospective pricing periods can be made to conform with operation of the
contractor’s accounting system.
(d) There is reasonable assurance that price redetermination actions will take
place promptly at the specified times.
For example, a long-term contract (e.g., 10 years) for the design of similar process
plants in phases at multiple locations may contain provisions for prospective price
redetermination.
(5) When a fixed-price contract with prospective price redetermination is used,
the cause Price Redetermination—Prospective, must be inserted in the contract.
e.
Fixed-ceiling-price contracts with retroactive price redetermination.
(1) A fixed-ceiling-price contract with retroactive price redetermination
provides for a fixed ceiling price and retroactive price redetermination within the ceiling
after completion of the contract.
(2) A fixed-ceiling-price contract with retroactive price redetermination is
appropriate for research and development contracts estimated at $100,000 or less when
it is established that a fair and reasonable firm fixed price cannot be negotiated.
(3) A ceiling price shall be negotiated for the contract at a level that reflects a
reasonable sharing of risk by the contractor. The established ceiling price may be
adjusted only by execution of contract clauses providing for equitable adjustment (e.g.,
by means of change orders). The contract should be awarded only after negotiation of a
billing price that is as fair and reasonable as the circumstances permit.
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(4) Since this contract type provides the contractor no cost control incentive
except the ceiling price, the Government should make clear to the contractor during
negotiations before award that the contractor’s management effectiveness and ingenuity
will be considered in retroactively redetermining the price.
(5) This contract type shall not be used unless–
(a) The contract is for research and development and the estimated cost is
$100,000 or less.
(b) The contractor’s accounting system is adequate for price redetermination.
(c) There is reasonable assurance that the price redetermination will take place
promptly at the specified time.
(d) The PARC approves its use in writing.
(6) This type of contract may be appropriate for use by USACE laboratories.
The inability to place an incentive to control cost is the primary reason why it is used
infreqently in today's market. It is still used for some research and development work,
but only to a limited degree and onIy under strict regulatory guidance.
(7) When a fixed-ceiling-price contract with retroactive price redetermination is
used, in addition to the standard clauses listed in Appendix A, the clause Price
Redetermination—Retroactive, is inserted in the contract.
f.
Firm-fixed-price, level-of-effort term contracts.
(1) A firm-fixed-price, level-of-effort term contract requires the contractor to
provide, for a fixed dollar amount, a specified level of effort, over a stated period of
time, on work that can be stated only in general terms.
(2) A firm-fixed-price, level-of-effort term contract is suitable for investigation
or study in a specific research and development area. The product of the contract is
usually a report showing the results achieved through application of the required level of
effort. However, payment is based on the effort expended rather than on the results
achieved.
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(3) This contract type may be used only when–
(a) The work required cannot otherwise be clearly defined.
(b) The required level of effort is identified and agreed upon in advance.
(c) There is reasonable insurance that the intended result cannot be achieved by
expending less than the stipulated effort.
(d) The contract price is $l00,000 or less, unless approved by the PARC.
2-3 Cost-Reimbursement Contracts
a.
General.
( 1 ) Cost-reimbursement contracts provide for payment of allowable incurred
costs, to the extent prescribed in the contract. These contracts establish an estimate of
total cost for the purpose of obligating funds and establishing a ceiling that the
contractor may not exceed (except at its own risk) without Government approval.
(2) These types of contracts are suitable for use when the uncertainties involved
in contract performance do not permit costs to be estimated with sufficient accuracy to
use any fixed-price type of contract. Admixtures of varying services over extended
performance time frames, during which outcomes may range from educated guesses to
unexpected results, are candidates for the application of cost-reimbursement contracts.
(3) A cost-reimbursement contract may be used only when–
(a) The contractor’s accounting system is adequate for determining costs
applicable to the contract.
(b) Appropriate Government surveillance during performance will provide
reasonable assurance that efficient methods and effective cost controls are used.
(c) A determination and findings has been executed, in accordance with USACE
procedures, showing that this type of contract is likely to be less costly than any other
type or that it is impractical to obtain A-E services of the kind or quality required
without using this contract type (see 10 U.S.C. §§ 2306(c), 2310(b), and 2311).
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b.
Government risk under cost-reimtursement contracts.
(1) The risks associated with acquiring A-E services under cost-reimbursement
contracts are assumed by the Government, because there is no guarantee that the
product or service will be delivered for the amount estimated. Also, there is no
requirement that the contractor deliver the product/service if its cost exceeds the
estimate. The Government accepts the element of uncertainty and promises to
reimburse those contractor-incurred costs that are determined, under audit, to be
allowable (e.g., reasonable and allocable).
(2) Cost-reimbursement contracts may not be preferred over fixed price
contracts for several reasons. They may not provide contractors strong incentives to
operate efficiently and effectively to control costs, since the contractor is reimbursed
for its costs and the profit (fee) may not be adequately affected by any increase or
decrease in costs. (The term “profit” applies to fixed-price contracts; “fee” is the
appropriate term for cost-reimbursement contracts.) This type of contract may be more
time consuming and costly to award and administer. Further, contract administration
and oversight activities are greater than for fixed-price contracts, in order to ensure
that the contractor’s operations are conducted in an efficient and effective manner and
that costs are controlled. This contract type is often appropriate for HTRW work and
should be used where personnel have been adequately trained to administer such
contracts.
c.
Profit (fee) under cost-reimbursement contracts.
(1) There are statutory limitations on profit (fee) that can be agreed to as a
function of initially estimated costs under cost-reimbursement contracts. For
experimental, developmental, or research work performed under a cost-plus-fixed-fee
contract, the fee cannot exceed 15 percent of the contract’s estimated cost, excluding
fee. For other cost-plus-fixed-fee contracts, the fee cannot exceed 10 percent of the
contract’s estimated cost, excluding fee. [See 10 U.S.C. § 2306(d) and 41 U.S.C.
§ 254(b).]
(2) Virtually all A-E cost-reimbursement contracts other than Research and
Development contracts fall within the 10 percent fee limitation. This fee limitation is
not to be confused with the statutory 6 percent limitation on total A-E contract price as
a percent of estimated construction cost. The 6 percent A-E contract price limitation
relates to the production and delivery of designs, plans, drawings, and specifications,
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whereas the 10 percent fee limitation under cost-reimbursement contracts applies only
to the A-E firm’s profit.
d . Mutually agreed-upon estimate of cost.
(1) Since negotiations for cost-reimbursement contracts do not result in a price,
but in an overall estimate of total cost, identifiable cost factors must be examined and
assessed carefully. An overall estimate that reflects excessive caution can result in the
rapid expenditure of money over a short period of time, leaving work to be done that will
require the obligation of additional dollars and the modification of a contract to permit
their use. On the other hand, an overall estimate that reflects undisciplined enthusiasm
can result in excessive fees and motivate a contractor to spend its way toward realizing
the ceiling of such an estimate.
(2) The key to effective cost estimating for these types of contracts is to
isolate, as best as one can, the major elements of the job to be done and to associate
with each of those elements costs that, when examined and assessed in light of the job to
be done, are determined to be realistic (or as realistic as possible).
e . Audit of contractor costs.
(1) Under a cost-reimbursement contract, the contractor shall maintain–and the
Government shall have the right to examine and audit–books, records, documents, and
other evidence and accounting procedures and practices, sufficient to reflect properly all
costs to have been incurred or anticipated to be incurred in performing contract work.
Additionally, the Government’s right to audit extends to auditing a contractor’s
submitted cost or pricing data in connection with the pricing of a contract or pricing
associated with its modification.
(2) The Government’s right to audit under cost-reimbursement contracts is not
only comprehensive but specific, including requirements that auditable records be
retained for specific periods under the FAR. The Defense Contract Audit Agency is the
cognizant contract audit activity for contracts awarded under the military program, and
USACE is the cognizant contract audit activity for contracts awarded under the civil
works program. Other cognizant contract audit agencies associated with environmental
work include the Environmental Protection Agency (EPA) and the Department of Energy
(DoE).
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f. Cost Accounting Standards.
(1) Under cost-reimbursement contracts, the function of cost allowability is a
critical element in contract administration. For instance, the total cost of any costreimbursement contract is the sum of allowable direct and indirect costs allocable to the
contract incurred or to be incurred. In ascertaining what constitutes a cost, any
generally accepted method of determining or estimating costs that is equitable and is
consistently applied [unless a required accounting standard is invoked under Cost
Accounting Standards (CAS)] may be used.
(2) The factors considered by the Goverment in determining whether a cost is
allowable under a contract include—
(a) The terms of the contract.
(b) Any prescriptive limits set forth in FAR Part 31, Contract Cost Principles
and Procedures.
(c) Standards promulgated by the CAS Board, if applicable; otherwise, generally
accepted accounting principals and practices appropriate to the particular
circumstances.
(d) Its reasonableness and allocability.
(3) A cost is reasonable if, in its nature and amount, it does not exceed that
which would be incurred by a prudent person in the conduct of competitive business. A
cost is allocable if it is assignable or chargeable to one or more cost objectives on the
basis of relative benefits received or other equitable relationship. Subject to this, a cost
is allocable to a contract if it—
(a) Is incurred specifically for the contract.
(b) Benefits both the contract and other work and can be distributed to them in
reasonable proportion to the benefits received.
(c) Is necessary to the overall operation of the business, although a direct
relationship to any particular cost objective cannot be shown.
g. Payments under cost-reimbursement contracts. Under cost-reimbursement
contracts, the Government commits itself to making payments for costs incurred as work
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progresses. Unlike payments under fixed-price contracts, such payments are not based
on progress. These payments are not made more often than once every 2 weeks (except
for small businesses) in amounts determined to be allowable. To receive payment, the
contractor submits, in such form and detail as is required by the contract, an invoice or
voucher supported by a statement that all claimed costs are allowable costs of
performance. To receive final payment, the contractor submits a completion invoice or
voucher promptly upon completion of work, but not later than 1 year from the
completion date (unless the Government approves a longer period in writing).
h. Cost contracts. A cost contract is a cost-reimbursement contract under
which the contractor receives no fee. Because of the no-fee feature, cost contracts
have only limited appeal. A cost contract may be appropriate for research and
development work, particularly with nonprofit educational institutions or other nonprofit
organizations, and for facilities contracts.
i. Cost-sharing contracts. A cost-sharing contract is a cost-reimbursement
contract under which the contractor receives no fee and is reimbursed only for an
agreed-upon portion of its allowable costs (i.e., an agreed-upon percentage or amount of
each allowable dollar). The contractor agrees to absorb its respective percentage or
amount of each allowable dollar in the expectation of substantial compensating benefits.
Such benefits might include an enhancement of the contractor’s capability or expertise,
or perhaps improvement of its competitive position in the commercial marketplace.
j. Cost-plus-incentive-fee contracts. A cost-plus-incentive-fee (CPIF) contract
is a cost-reimbursement contract that provides for an initially negotiated fee to be
adjusted later by formula based on the relationship of total allowable costs to total
target costs. CPIF contracts are covered in more detail under the incentive contracts
section.
k. Cost-plus-award-fee contracts. A cost-plus-award-fee (CPAF) contract is a
cost-reimbursement contract that provides for a fee consisting of a base amount (which
may be zero) fixed at inception of the contract and an award amount, based upon a
judgmental evaluation by the Government, sufficient to provide motivation for
excellence in contract performance. CPAF contracts are covered in more detail under
the incentive contracts section.
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l.
Cost-plus-fixed-fee contract.
(1) A cost-plus-fixed-fee (CPFF) contract is a cost-reimbursement contract that
provides for payment to the contractor of a negotiated fee fixed at contract award. The
fixed fee does not vary with actual cost but may readjusted as a result of changes in the
work to be performed under the contract. This contract type permits contracting for
efforts that might otherwise present too great a risk to contractors, but it provides the
contractor only a minimum incentive to control costs.
(2) CPFF contracts are designed primarily for use when the level of contract
effort cannot be defined accurately. Generally, the dollars involved are significant,
work specifications cannot be defined precisely, and the uncertainty of performance is so
great that a firm price or an incentive arrangement cannot be anticipated at any time
during the life of the contract. The Government agrees to pay the performing
contractor a fixed number of dollars above the estimated cost as a fee for doing the
work. The fee dollars, established as an absolute dollar amount at the outset, usually
change only when the scope of the work changes.
(3) Under a CPFF contract, there is no potential to increase profits (and there is
a corresponding disincentive to exert cost controls), because the fee is fixed at the
outset as a function of an agreed-upon estimated cost. Underrunning the contract will
improve the percentage of return in that the fee will be higher (as a percentage) than
was negotiated at the outset. The fact is, however, that the amount of fee dollars,
having been fixed as an absolute amount, remains the same. Similarly, while an overrun
will lessen the percentage of return in that the fee will be lower (as a percentage) than
was negotiated at the outset, the difference is meaningless because the dollars remain
unchanged.
(4) USACE use of CPFF contracts in recent years has generally been limited to
facilities criteria development and design of high-tech, first-of-a-kind facilities projects.
CPFF contracts have also been used for unique construction projects of long duration.
(5) When a CPFF contract is used, the clauses Allowable Cost and Payment, must
be inserted in the contract.
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2-4. Incentive Contracts
a.
General.
(1) Incentive contracts are appropriate when a firm-fixed-price contract is
unsuitable and the required A-E services can be acquired at lower cost (and, in certain
instances, with improved delivery or technical performance) by relating the amount of
profit or fee payable under the contract to the contractor’s performance. Incentive
contracts are designed to obtain specific acquisition objectives by—
(a) Establishing reasonable and attainable targets that are clearly communicated
to the contractor.
(b) Including appropriate incentive arrangements designed to motivate
contractor efforts that might not otherwise be emphasized and to discourage contractor
inefficiency and waste.
( 2 ) When predetermined, formula-type incentives related to technical
performance or delivery are included, increases in profit are provided only for
achievement that surpasses the targets, and decreases are provided to the extent that
the targets are not met. The incentive increases or decreases are applied to
performance targets rather than to minimum performance requirements. Cost
incentives, technical performance incentives, and delivery incentives are discussed in
detail in FAR 16.402, Application of predetermined, formula-type incentives.
(3) The two basic categories of incentive contracts are fixed-price incentive
contracts and cost-reimbursement incentive contracts. Since it is usually to the
Government’s advantage for the contractor to assume substantial risk, fixed-price
incentive contracts are preferred when contract costs and performance requirements are
reasonably certain.
b . Fixed-price incentive contracts.
(1) General.
(a) A fixed-price incentive contract is a fixed-price contract that 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. The final
price is subject to a price ceiling, negotiated at the outset. The two forms of fixed-price
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incentive contracts, firm target and successive targets, are described later in this
pamphlet.
(b) A fixed-price incentive contract is appropriate when—
A firm-fixed-price contract is not suitable.
— The nature of the services being acquired and other circumstances of the
acquisition are such that the contractor’s assumption of risk will provide a positive profit
incentive for effective cost control and performance.
— (If the contract includes incentives relating to technical performance and/or
delivery) the performance requirements provide a reasonable opportunity for the
incentives to have a meaningful impact on the contractor’s management of the work.
( c ) A fixed-price incentive contract may be used only when a determination and
findings has been executed showing that this contract type is likely to be less costly than
any other type or that it is impractical to obtain A-E services of the kind or quality
required without the use of this contract type (see 10 U.S.C. §§ 2306(c), 2310(b), and
2311).
(d) In fixed-price incentive contracts, billing prices are established as an interim
basis for payment. These billing prices may be adjusted, within the ceiling limits, upon
request of either party to the contract, when it becomes apparent that final negotiated
cost will be substantially different from the target cost.
(2) Fixed-price incentive (firm target) contracts.
(a) A fixed-price incentive (firm target) contract specifies the following
elements, all of which are negotiated at the outset:
—
A target cost.
—
A target profit.
—
A price ceiling (but not a profit ceiling or floor).
—
A profit adjustment formula.
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(b) The price ceiling is the maximum that maybe paid to the contractor, except
for any adjustment under various contract clauses. When the contractor completes
performance, the parties negotiate the final cost, and the final price is established by
applying the formula. When the final cost is less than the target cost, application of the
formula results in a final profit greater than the target profit; conversely, when final
cost is more than target cost, application of the formula results in a final profit less than
the target profit, or even a net loss. Because the profit varies inversely with the cost,
this contract type provides a positive, calculable profit incentive for the contractor to
control costs.
( c ) A fixed-price incentive (firm target) contract is appropriate when the parties
can negotiate at the outset a firm target cost, target profit, and profit adjustment
formula that will provide a fair and reasonable incentive and a ceiling that provides for
the contractor to assume an appropriate share of the risk. When the contractor assumes
a considerable or major share of the risk, the target profit should reflect this
responsibility.
(d) This contract type maybe used only when–
— The contractor’s accounting system is adequate for providing data to support
negotiation of final cost and incentive price revision.
— Adequate cost or pricing information for establishing reasonable firm targets
is available at the time of initial contract negotiation.
—
A determination and findings has been executed pursuant to FAR 16.403(c).
(e) The Government shall specify in the contract Schedule the target cost, target
profit, and target price for each item subject to incentive price revision.
(3)
Fixed-price incentive (accesive targets) contracts.
(a)
A fixed-price incentive (successive targets) contract specifies the following
elements, all of which are negotiated at the outset:
—
An initial target cost.
—
An initial target profit.
—
An initial profit adjustment formula to be used for establishing the firm
target profit, including a ceiling and floor for the firm target profit. (Note: This
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formula normally provides for a lesser degree of contractor risk than would a formula for
establishing final profit and price.)
– The point at which the firm target cost and the firm target profit will be
negotiated (usually before receipt of the first deliverable).
–
A ceiling price that is the maximum that may be paid to the contractor,
except for any adjustment under clauses providing for equitable adjustment or other
revision of the contract price under stated circumstances.
(b) When the point specified in the contract is reached, the parties negotiate the
firm target cost, giving consideration to cost experience under the contract and other
pertinent factors. The firm target profit is established by the formula. At this point,
the parties have two alternatives, as follows:
— They may negotiate a firm fixed price, using the firm target cost plus firm
target profit as a guide.
— If negotiation of a firm fixed price is inappropriate, they may negotiate a
formula for establishing the final price using the firm target cost and firm target profit.
The final cost is then negotiated at completion, and the final profit is established by
formula, as under the fixed-price incentive (firm target) contract.
(c) A fixed-price incentive (successive targets) contract is appropriate when–
— Available cost or pricing information is not sufficient to permit the
negotiation of a realistic firm target cost and profit before award.
— Sufficient information is available to permit negotiation of initial targets.
— There is reasonable assurance that additional reliable information will be
available at an early point in the contract performance to permit negotiation of either a
firm fixed price or firm targets and a formula for establishing final profit and price that
will provide a fair and reasonable incentive. (Note: This additional information is not
limited to experience under the contract itself but may be drawn from other contracts
for the same or similar items.)
(d) This contract type may be used only when–
— The contractor’s accounting system is adequate for providing data for
negotiating firm targets and a realistic profit adjustment formula, as well as later
negotiation of final costs.
— Cost or pricing information adequate for establishing a reasonable firm
target cost is reasonably expected to be available at an early point in contract
performance.
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—
A determination and findings has been executed pursuant to FAR 16.403(c).
(e) The Government shall specify in the contract Schedule the initial target cost,
initial target profit, and initial target price for each item subject to incentive price
revision.
c.
Cost-plus-incentive-fee contracts.
(1) The cost-plus-incentive-fee (CPIF) contract is a cost-reimbursement contract
providing for the initially negotiated fee to be adjusted later by a formula based on the
relationship of total allowable costs to total target costs. This contract type specifies a
target cost, a target fee, minimum and maximum fees, and a fee adjustment formula.
The formula provides, within limits, for increases in fee above target fee when total
allowable costs are less than target costs, and decreases in fee below target fee when
total allowable costs exceed target costs. This increase or decrease is intended to
provide an incentive for the contractor to manage the contract effectively. When total
allowable cost is greater than or less than the range of costs within which the
fee-adjustment formula operates, the contractor is paid total allowable costs, plus the
minimum or maximum fee.
(2) A CPIF contract, having some resemblance to a fixed-price incentive
contract, is appropriate for use when it is highly probable that the required development
of a large (or major) system is feasible and that its performance objectives have been
established and a target cost and a fee adjustment formula can be negotiated that are
likely to motivate the contractor to manage effectively. In other words, the
requirement is not definitive enough for a fixed-price incentive contract, but it is clearly
susceptible to a definition that permits the use of other than a CPFF contract.
(3) The fee adjustment formula should provide an incentive that will be effective
over the full range of reasonably foreseeable variations from target cost. If a high
maximum fee is negotiated, the contract should also provide for a low minimum fee,
which may be a zero fee or– in rare cases–a negative fee. Once costs (in either
direction from the target cost) fall outside the range of incentive effectiveness, the
CPIF contract in effect becomes a CPFF contract; and regardless of how much is
underrun (or overrun), the dollar amount of the maximum (or minimum) fee is all that
will be paid.
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(4) When a CPIF contract is used, the clauses Allowable Cost and Payment, and
Incentive Fee, must be inserted in the contract.
d.
Cost-plus-award-fee contracts.
(1) A cost-plus-award-fee (CPAF) contract is a cost-reimbursement contract
that provides for a fee consisting of a base amount at inception of the contract and an
award amount that the contractor may earn in whole or in part during performance and
that is sufficient to provide motivation for excellence in such areas as quality,
timeliness, technical ingenuity, and cost-effective management. Base fees generally a r e
negotiated to reflect minimum acceptable performance in order to provide a greater
award fee pool, thus providing a maximum incentive to improve performance. The
amount of the award fee to be paid is determined by the Government’s judgmental
evaluation of the contractor’s performance in terms of the criteria stated in the
contract. This determination is made unilaterally by the Government and is not subject
to the Disputes clause.
(2) The CPAF contract is designed to encourage effective work, to control cost,
and to improve the timeliness and quality of performance. It is a means of applying
incentives in contracts that involve varying efforts and activities, not all of which are
susceptible of finite measurement. The CPAF contract is suitable for use when–
(a) The work to be performed is such that it is neither feasible nor effective to
devise predetermined objective incentive targets applicable to cost, technical
performance, or schedule.
(b) The likelihood of meeting acquisition objectives will be enhanced by using a
contract that effectively motivates the contractor toward exceptional performance and
provides the Government with the flexibility to evaluate both actual performance and
the conditions under which it was achieved.
( c ) Any additional administrative effort and cost required to monitor and
evaluate performance are justified by the expected benefits.
(3) The number of evaluation criteria and the requirements they represent will
differ widely among contracts. The criteria and rating plan should motivate the
contractor to improve performance in the areas rated, but not at the expense of at least
minimum acceptable performance in all other areas.
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(4) Under CPAF contracts, the contractor should be evaluated at stated intervals
during performance, so that the contractor will be periodically informed of the quality of
its performance and the areas in which improvement is expected. Award fees are paid
periodically after any award fee earned has been established and determined for each
performance evaluation period under the contract’s performance plan. The contractor,
in virtually all cases, is provided with an opportunity to comment on any periodic
evaluation of its performance. Award fees may be paid in whole, in part, or not at all,
depending on the assessment of contractor performance.
(5) CPAF contracts have been widely used to procure technical; administrative;
Government-owned, Contractor-operated (GOCO); and housekeeping services for major
installations. CPAF contracts are also being used for research and development efforts
where technical uncertainties or anticipated changes do not permit the structuring of a
CPIF contract.
(6) When a CPAF contract is used, in addition to the standard clauses listed in
Appendix A, the clause Allowable Cost and Payment, must be inserted in the contract.
2-5. Indefinite-Delivery Contracts
a. General.
(1) There are three types of indefinite-delivery contracts: definite-quantity
contracts, requirements contracts, and indefinite-quantity contracts. The appropriate
type of indefinite-delivery contract may be used when the exact times and/or quantities
of future deliveries or performance are not known at the time of contract award.
(2) The various types of indefinite-delivery contracts offer the following
advantages:
(a) Indefinite-quantity contracts and requirements contracts permit flexibility in
both quantities and delivery scheduling and ordering of services after requirements
materialize.
(b) Indefinite-quantity contracts limit the Government’s obligation to the
minimum quantity specified in the contract.
(c) Indefinite-delivery contracts permit faster delivery of services because
procurement lead time is virtually eliminated.
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(3) Indefinite-delivery contracts may provide for firm fixed prices, fixed prices
with economic price adjustment, fixed prices with prospective redetermination, cost
reimbursement, or prices based on catalog or market prices.
(4) The AFARS limits the use of indefinite-delivery contracts for A-E services as
follows:
(a) Indefinite-delivery contracts may be used only where multiple small A-E
efforts are anticipated at a particular activity or installation. Normally, these contracts
will be awarded for a period of 1 year and a new selection will be made for any
requirement beyond that term. However, they may be extended if the contracting
officer determines that there is an anticipated need for similar services beyond the first
contract period.
(b) No individual delivery order may exceed $150,000, except that this threshold
may be waived by the PARC.
(c) The
An additional
period where
be waived by
total of all orders under an individual contract may not exceed $750,000.
ordering ceiling, not to exceed $750,000, may be applied to a second annual
appropriate and authorized by the approving official. (This threshold may
the PARC.)
(d) The scope of such contracts should be made as specific and non-duplicative as
possible to reflect the approved requirements of specified installations or USACE
activities rather than a broad category of A-E efforts.
(e) The local contracting office (ordering officer) supporting the installation
shall only be authorized under the indefinite-delivery contract to write orders under the
scope and terms of the contract and shall not be made responsible for actions required
under FAR 36.608 and 36.609, which shall remain the responsibility of the cognizant
USACE contracting officer.
(5) When an indefinite-delivery contract is used, in addition to the standard
clauses listed in Appendix A, the appropriate clause presented in Table 2-1 shall be
inserted in the contract.
b.
Definite-qantity
contracts.
(1) A definite-quantity contract provides for delivery of a definite quantity of
specific supplies or services for a fixed period, with deliveries or performance to be
scheduled at designated locations upon order.
(2) A definite-quantity contract may be used when it can be determined in
advance that a definite quantity of supplies or services will be required during the
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Table 2-1
Contract clauses for indefinite-delivery contracts
Contract type
Contract clause
Definitequality
Requirements
Indefinitequality
FAR 52.216-18, Ordering
FAR 52.216-19, Delivery-Order Limitations
FAR 52.216-20, Definite Quantity
FAR 52.216-21, Requirements
FAR 52.216-22, Indefinite-Quality
contract period and the supplies or services are regularly available or will be available
after a short lead time.
c.
Requirements contracts.
(1) A requirements contract provides for filling all actual purchase requirements
of designated Government activities for specific supplies or services during a specified
contract period, with performance to be scheduled by placing orders with the contractor.
(2) When using a requirements contract, the Government should state a realistic
estimated total quantity in the solicitation and resulting contract. This estimate is not a
representation that the estimated quantity will be required or ordered, or that conditions
affecting requirements will be stable or normal. The Government should base the
estimate on the most current information available.
(3) Under a requirements contract, the Government should state, if feasible, the
maximum limit of the contractor’s obligation to perform and the Government’s obligation
to order. The contract may also specify maximum or minimum quantities that the
Government may order under each individual order and the maximum that it may order
during a specified period of time.
(4) A requirements contract may be used when the Government anticipates
recurring requirements but cannot predetermine the precise quantities of supplies or
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services that designated Government activities will need during a definite period. This
type of contract would be appropriate for professional engineering inspection services
where the contract would have established unit prices for soil compaction tests, concrete
strength tests, etc. Funds are obligated by each delivery order, not by the contract
itself.
d.
Indefinite-quantity contracts.
(1) An indefinite-quantity contract provides for an indefinite quantity, within
stated limits, of specific supplies or services to be furnished during a fixed period, with
performance to be scheduled by placing orders with the contractor.
(2) The contract shall require the Government to order and the contractor to
furnish at least a stated minimum quantity of supplies or services and, if and as ordered,
the contractor to furnish any additional quantities, not to exceed a stated maximum.
The maximum quantity should be established by the Government from records of
previous requirements or by other means; the maximum quantity should be realistic and
based on the most current information available.
(3) To ensure that the contract is binding, the minimum quantity must be more
than a nominal quantity but should not exceed the amount that the Government is fairly
certain to order. The contract may also specify maximum or minimum quantities that
the Government may order under each delivery order and the maximum that it may order
during a specific period of time.
(4) An indefinite-quantity contract may be used when–
(a) The Government cannot predetermine, above a specified minimum, the
precise quantities of supplies or services that will be required during the contract period.
(b) It is advisable for the Government to commit itself for more than a minimum
quantity.
(5) An indefinite-quantity contract should only be used when a recurring need is
anticipated. Funds for other than the stated minimum quantity are obligated by each
delivery order, not by the contract itself.
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2-6. Time-and-Materials, Labor-Hour, and Letter Contracts
a.
Time-and-materials contracts.
(1) A time-and-materials contract provides for acquiring services on the basis of
direct labor hours at specified fixed hourly rates that include wages; overhead; general
and administrative expenses; and profit and materials at cost, including, if appropriate,
material handling costs as part of material costs.
(2) A time-and-materials contract may be used only when it is not possible at the
time of placing the contract to estimate accurately the extent or duration of the work or
to anticipate costs with any reasonable degree of confidence.
(3) A time-and-materials contract may be used only after the contracting officer
executes a determination and findings that no other contract type is suitable and only if
the contract includes a ceiling price that the contractor exceeds at its own risk. The
contracting officer shall document the contract file to justify the reasons for and
amount of any subsequent change in the ceiling price.
b.
Labor-hour contracts. A labor-hour contract is a variation of the time-and-
materials contract, differing only in that materials are not supplied by the contractor.
c.
Letter contracts.
(1) A letter contract is a written preliminary contractual instrument that
authorizes the contractor to begin performing services immediately.
(2) A letter contract may be used when the Government’s interests demand that
the contractor be given a binding commitment so that work can start immediately and
negotiating a definitive contract is not possible in sufficient time to meet the
requirement. However, a letter contract should be as complete and definite as feasible
under the circumstances.
(3) Each letter contract must, as required by the clause at FAR clause, Contract
Definitization, contain a negotiated definitization schedule including–
(a) Dates for submission of the contractor’s price proposal, required cost or
pricing data, and, if required, make-or-buy and subcontracting plans.
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(b) A date for the start of negotiations.
(c) A target date for definitization, which shall be the earliest practicable date
for definitization.
(4) The Schedule will provide for definitization of the contract within 180 days
after the date of the letter contract or before completion of 40 percent of the work to
be performed, whichever occurs first. However, the contracting officer may, in extreme
cases and in accordance with USACE procedures, authorize an additional
period. If,
after exhausting all reasonable efforts, the contracting officer and the contractor cannot
negotiate a definitive contract because of failure to reach agreement as to price or fee,
the FAR requires the contractor to proceed with the work and provides that the
contracting officer may, with approval of the PARC, determine a reasonable price in
accordance with FAR Subpart 15.8 and Part 31, subject to appeal as provided in the
Disputes clause.
( 5 ) Except in an emergency, a letter contract may be used only after the PARC
or a designee executes a determination and findings that no other contract is suitable.
Letter contracts shall not–
(a) Commit the Government to a definitive contract in excess of the funds
available at the time the letter contract is executed.
(b) Be amended to satisfy a new requirement, unless that requirement is
inseparable from the existing letter contract. Any such amendment is subject to the
same requirements and limitations as a new letter contract.
(6) The contracting officer must include in each letter contract the FAR clauses
required for the type of definitive contract contemplated and any additional clauses
known to be appropriate for it. In addition, the following FAR clauses be inserted in
letter contracts:
(a) Execution and Commencement of Work.
(b) Limitation of Government Liability.
(c) Contract Definitization.
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(7) The contracting officer must also insert the clause Payments of Allowable
Costs Before Definitization, in letter contracts if a cost-reimbursement definitive
contract is contemplated.
( 8 ) Appendix B contains sample formats for letter contracts.
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CHAPTER 3
SELECTING CONTRACT TYPE
3-1. General
Many factors should be considered when selecting and/or negotiating the A-E contract
type. They include the following:
a . Price analysis. Price analysis, with or without competition, may provide a
basis for selecting the contract type. The degree to which price analysis can provide a
realistic pricing standard should be carefully considered, even when there may not be full
and open competition.
b. Cost analysis. In the absence of effective price competition and if price
analysis is not sufficient, the contractor’s proposal (cost estimate) and the Government
estimate provide the bases for negotiating contract pricing arrangements.
c. Type and complexity of the requirement. Complex requirements, particularly
those unique to the Government, usually result in greater risk assumption by the
Government. This is especially true for complex research and development contracts,
when performance uncertainties or the likelihood of changes make it difficult to
estimate performance costs in advance.
d. Urgency of the requirement. If urgency is a primary factor, the Government
may choose to assume a greater proportion of the risk or it may offer incentives to
ensure timely contract performance. When the customer’s or USACE’s needs dictate an
immediate contractor response to environmental or other problems requiring professional
or technical work, contracts must contain advance agreements to meet those needs.
e. P e r i o d o f p e r f o r m a n c e .
In times of economic uncertainty, contracts
extending over a relatively long period may require economic price adjustment terms.
f. Adequacy of the contractors accounting system. Before agreeing on a
contract type other than firm fixed price, it should be determined that the contractor’s
accounting system will permit timely development of all necessary cost data in the form
required by the proposed contract type. This factor may be critical when the contract
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type requires price revision while performance is in progress, or when a cost-reimbursement contract is being considered and all current or past experience with the contractor
has been on a fixed-price basis.
g. Concurrent contracts. If performance under the proposed contract involves
concurrent operations under other contracts, the impact of those contracts, including
their pricing arrangements, should be considered.
h. Extent and nature of proposed subcontracting. If the contractor proposes
extensive subcontracting, a contract type reflecting the actual risks to the prime
contractor should be selected.
3-2. Contract Selection Considerations
a. The primary considerations in contract selection is uncertainty, since risk
(the other major factor cited above) is itself driven, in large part, by uncertainty. Risk
can be associated with many aspects of a project such as time, personnel, cost, and work
definition. Figure 3-1 shows the relationship of uncertainty and risk to various contract
types. Notice that, as a rule, FFP contracts incur the least financial risk to the
Government, while cost-reimbursement contracts incur the most. This is because in a
fixed-price contract, financial risks with respect to the cost of the work are precisely
defined. In a cost-reimbursement contract, this precise defining of the costs does not
occur.
b. The selection of a contract type for a particular project is typically the
result of an integrated effort involving two groups of people: those having technical
expertise regarding the scope of the work and those familiar with the various types of
contracts available to do the work. Expertise and knowledge from both those groups is
essential in order to successfully address two major drivers of contract
selection–uncertainty and risk.
Issues pertaining to uncertainty are considered primarily
by technical people who have the knowledge required to address specific project
questions. Risk issues deal with controlling the costs associated with work to be done
and are addressed by contracts people who have expertise in selecting contracts.
c. Environmental contracts now involve a third major consideration: the
possible need for rapid response. This requirement dictates that advance agreements be
in contracts in order to remove the necessity for time-consuming negotiations during
critical phases of contract execution.
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Figure 3-1. Factors Influencing Contract Choice
3-3. Risks Associated with Fixed-Price Contracts
With a fixed-price contract, the only risk to the Government is the work definition.
The limitation of Government risk in fixed-price contracts is the reason for their being
the preferred contract type. Unfortunately, the scope-of-work definition is sometimes
poorly developed, resulting in numerous changes, increases in cost (including personnel
costs), and delays. This highlights the fact that if the work definition, scope, design,
and/or specifications are not sufficiently detailed, or are not presented clearly, a fixedprice contract is not the appropriate type. The work definition is a time-consuming task
and requires the ability to define in writing the contract deliverables to be accomplished.
3-4. Risks Associated with Cost-Reimbursement Contracts
a. General. When considering a cost-reimbursement contract type, there are
four major areas of risk to be considered: time, Government personnel, cost, and work
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definition. The reasons for taking risks in these areas must be evaluated and prioritized
so that the tradeoffs that are necessary can be used in selecting the contract type.
b. Time. In evaluating the time risk, the project manager must consider the
time required to obtain approval to use a cost-reimbursement contract. Most offices
where initial selection of contract type is performed do not have the authority to
approve the use of a cost-reimbursement contract. The request to use this type of
contract will generally require a written detailed justification and a determination and
findings. Depending upon where the authority is maintained, it could take 30 to 90 days
to obtain approval. This approval is a critical-path activity. On the other hand, costreimbursement contracting lends itself to fast-tracking or phased construction, thus
greatly reducing the project duration, once approval has been gained.
c. Government personnel. The Government personnel risk factor is difficult to
quantify during the contract-type decision process. Administration of a costreimbursement contract can have a significant adverse impact on the administering
office. Since the Government is assuming the cost risks associated with the contract, it
must be prepared to assume an increased burden in administering the contract to
minimize those risks. The activity could result in a substantial personnel drain on the
administering office, depending upon the size and duration of the contract.
d. Cost. The cost risk factor in a cost-reimbursement contract is also difficult
to quantify during the contract-type decision process. In actuality, the total cost of a
cost-reimbursement contract is not known until the final audit of the contractor’s
records. The cost of awarding and administering the contract must also be considered,
as noted above. The identification of the personnel requirements to administer a costreimbursement contract is a major element in determining the Government’s cost. Also,
there are cost risks related to the work definition. When the work definition is poor, the
change orders will be many and large, with a corresponding increase in the cost risk
factor.
e. Work definition. Work definition is a major factor affecting other risks. With
good work definition, the time factor can be estimated, because it will be possible to
identify which factors will require strenuous management to stay within the estimated
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cost. Poor work definition could result in a contract that will require a full-time project
manager or contract administrator. Poor work definition generally leads to contract
changes and thus greater cost.
FOR THE COMMANDER:
4 APPENDICES
APP A - Solicitation Provisions
and Architect-Engineer Contracts
Contract Clauses for Contracts
APP B – Sample Letter Contract
APP C - Types of Contracts A Comparison and Summary
APP D - Minimum Recommended
HTRW Contracting Capacity
for Military HTRW Districts
WILLIAM D. BROWN
Colonel, Corps of Engineers
Chief of Staff
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APPENDIX A
SOLICITATION PROVISIONS AND CONTRACT CLAUSES
FOR ARCHITECT-ENGINEER CONTRACTS
Solicitation Provisions
Required When Applicable
FAR provision or
clause number
52.203-2
FAR text
reference
Title
3.103-1
Certificate of Independent Price Determination
53.203-4
3.404(b)
Contingent Fee Representation and Agreement
52.203-8
3.104-10(a)
Requirement for Certificate of Procurement Integrity
52.203-8
3.104-10(a)
Requirement for Certificate of Procurement Integrity–Alternate I
52.203-11
3.808(a)
Certification and Disclosure Regarding Payments to Influence Certain
Federal Transactions
52.204-3
4.904
Taxpayer
52.204-4
4.603
Contractor Establishment Code
52.207-2
7.305(b)
Notice of Cost Comparison (Negotiated)
52.209-5
9.409(a)
Certification Regarding Debarment, Suspension, Proposed Debarment, and
Other Responsibility Matters
52.209-7
9.507-l(b)
Organizational Conflicts of Interest Certificate–Marketing Consultants
52.212-7
12.304(a)
Notice of Priority Rating for National Defense Use
52.215-3
15.405-2
Solicitation for Information or Planning Purposes
52.215-5
15.407(c)(1)
Solicitation Definitions
52.215-6
15.407(c)(2)
Type of Business Organization
52.215-7
15.407(c)(3)
Unnecessarily Elaborate Proposals or Quotations
52.215-8
15.407(c)(4)
Amendments to Solicitations
52.215-9
15.407(c)(5)
Submission of Offers
52.215-10
15.407(c)(6)
Late Submissions, Modifications, and Withdrawals of Proposals
52.215-11
15.407(c)(7)
Authorized Negotiators
52.215-12
15.407(c)(8)
Restriction on Disclosure and Use of Data
52.215-13
15.407(d)(1)
Preparation of Offers
52.215-14
15.407(d)(2)
Explanation to Prospective Offerors
52.215-15
15.407(d)(3)
Failure to Submit Offer
Identification
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Solicitation Provisions (Continued)
Required When Applicable
FAR provision or
clause number
FAR text
reference
Title
52.215-16
15.407(d)(4)
Contract Award
52.215-17
15.407(e)
Telegraphic Proposals
52.215-18
15.407(j)
Facsimile Proposals
52.215-19
15.407(g)
Period for Acceptance of Offer
52.215-20
15.407(h)
Place of Performance
52.215-34
15.407(h)
Evaluation of Offers for Multiple Awards
52.215-35
15.407(i)
Annual Representations and Certifications-Negotiation
52.215-36
15.407(c)(9)
Late Submissions, Modifications, and Withdrawals of Proposals (Overseas)
52.216-1
16.105
Type of Contract
52.219-1
19.304(a)
Small Business Concern Representation
52.219-2
19.304(b)
Small Disadvantaged Business Concern Representation
52.219-3
19.304(c)
Women-Owned Small Business Representation
52.219-19
19.1007(a)
Small Business Concern Representation for the Small Business
Competitiveness Demonstration Program
52.219-21
19.1OO7(c)
Small Business Size Representation for Targeted Industry Categories Under
the Small Business Competitiveness Demonstration Program
52.219-22
19.304(d)
SIC Code and Small Business Size Standard
52.222-19
22.610(a)
Walsh-Healey Public Contracts Act Representation
52.222-21
22.810(a)(1)
Certification of Nonsegregated Facilities
52.222-22
22.810(a)(2)
Previous Contracts and Compliance Reports
52.222-24
22.810(c)
Preaward On-Site Equal Opponunity Compliance Review
52.222-25
22.810(d)
Affirmative Action Compliance
52.223-1
23.105(a)
Clean Air and Water Certification
52.223-5
23.505(a)
Certification Regarding A Drug-Free Workplace
52.225-12
25.1005(a)
Notice of Restrictions on Contracting With Sanctioned Persons
52.227-15
27.409(g)
Representation of Limited Rights Data and Restricted Computer Software
52.230-1
30.201-3(a)
Cost Accounting Standards Notices and Certification (National Defense)
52.232-13
32.302-3(a)
Notice of Progress Payments
52.233-2
33.106(a)
Service of Protest
52.237-1
37.110(a)
Site Visit
52.252-1
52.107(a)
Solicitation Provisions Incorporated by Reference
52.252-3
52.107(c)
Alterations in Solicitation
52.252-5
52.107(e)
Authorized Deviations in Provisions
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Contract Clauses
Required
FAR provision or
clause number
FAR text
reference
Title
52.202-1
2.201
Definitions–Alternate I
52.203-5
3.404(c)
Covenant Against Contingent Fees
52.203-7
3.502-3
Anti-Kickback Procedures
52.225-13
25.1005(b)
Restrictions on Contracting With Sanctioned Persons
52.236-23
36.609-2(b)
Responsibility of the Architect-Engineer Contractor
52.236-24
36.609-3
Work Oversight in Architect-Engineer Contracts
Required When Applicable
52.203-1
3.102-2
Officials Not to Benefit
52.203-3
3.202
Gratuities
52.203-9
3.104-10(b)
Requirement for Certification of Procurement Integrity–Modification
52.203-10
3.104-10(c)
Price or Fee Adjustment for illegal or Improper Activity
52.203-12
3.808(b)
Limitation on Payments to Influence Certain Federal Transactions
52.203-13
3.104-10(d)
Procurement
52.204-1
4.103
Approval of Contract
52.204-2
4.404(a)
Security Requirements
52.204-2
4.404(c)
Security Requirements–Alternate II
Integrity–Service
Contracting
52.207-3
7.305(c)
Right of First Refusal of Employment
52.209-6
9.409(b)
Protecting the Government’s Interest When Subcontracting With
Contractors Debarred, Suspended, or Proposed for Debarment
52.212-8
12.304(b)
Defense Priority and Allocation Requirements
52.212-12
12.505(a)
Suspension of Work
52.215-1
15.106-1(b)
Examination of Records by Comptroller General
52.215-2
15.106-2(b)
Audit–Negotiation
52.215-22
15.804-8(a)
Price Reduction for Defective Cost or Pricing Data
52.215-23
15.804-8(b)
Price Reduction for Defective Cost or Pricing Data–Modifications
52.215-24
15.804-8(c)
Subcontractor Cost or Pricing Data
52.215-25
15.804-8(d)
Subcontractor Cost or Pricing Data–Modifications
52.215-30
15.904
Facilities Capital Cost of Money
52.215-31
15.904(b)
Waiver of Facilities Capital Cost of Money
52.216-5
16.205-4
Price Redetermination–Prospective
52.216-7
16.307(a)
Allowable Cost and Payment
52.216-8
16.307(b)
Fixed Fee
52.216-12
16.307(f)(1)
Cost-Sharing Contract–No Fee
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Contract Clauses (Continued)
Required When Applicable
FAR provision or
clause number
FAR text
reference
Title
52.216-16
16.405(a)
Incentive Price Revision – Firm Target
52.216-17
16.405(b)
Incentive Price Revision – Successive Targets
52.216-23
16.603-4(b)(1)
Execution and Commencement of Work
52.216-24
16.603-4(b)(2)
Limitation of Government Liability
52.216-25
16.603-4(b)(3)
Contract Definitization
52.216-25
16.603-4(b)(3)
Contract Definitization – Alternate I
52.216-26
16.603-4(c)
Payments of Allowable Costs Before Deflnitization
52.219-5
19.508(b)
Notice of Total Small Business-Labor Surplus Area Set-Aside
52.219-6
19.508(c)
Notice of Total Small Business Set-Aside
52.219-7
19.508(d)
Notice of Partial Small Business Set-Aside
52.219-8
19.708(a)
Utilization of Small Business Concerns and Small Disadvantaged Business
Concerns
52.219-9
19.708(b)
Small Business and Small Disadvantaged Business Subcontracting Plan
52.219-13
19.902
Utilization of Women-Owned Small Businesses
52.219-14
19.508(e) and
19.811-3(e)
Limitations on Subcontracting
52.219-15
19.508(f)
Notice of Participation by Organizations for the Handicapped
52.219-16
19.708(b)(2)
Liquidated Damages – Small Business Subcontracting Plan
52.220-1
20.103(b)
Preference for Labor Surplus Area Concerns
52.220-2
20.202
Notice of Total Labor Surplus Area Set-Aside
52.220-3
20.302(a)
Utilization of Labor Surplus Area Concerns
52.220-4
20.302(b)
Labor Surplus Area Subcontracting Program
52.222-1
22.103-5(a)
Notice to the Government of Labor Disputes
52.222-2
22.103-5(b)
Payment for Overtime Premiums
52.222-3
22.202
Convict Labor
52.222-20
22.610(b)
Walsh-Healey Public Contracts Act
52.222-26
22.810(e)
Equal Opportunity
52.222-26
22.810(e)
Equal Oppotunity – Alternate I
52.222-29
22.810(h)
Notification of Visa Denial
52.222-35
22.1308(a)
Affirmative Action for Special Disabled and Vietnam Era Veterans
52.222-35
22.1308(c)
Affirmative Action for Special Disabled and Vietnam Era Veterans –
Alternate I
52.222-36
22.1408
Affirmative Action for Handicapped Workers
52.222-36
22.1408(b)
Affirmative Action for Handicapped Workers – Alternate I
52.222-37
22.1308(b)
Employment Reports on Special Disabled Veterans and Veterans of the
Vietnam Era
52.222-40
22.1005
Service Contract Act of 1965, as Amended–Contracts of $2,500 or Less
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Contract Clauses (Continued)
Required When Applicable
FAR provision or
clause number
FAR text
reference
Title
52.222-41
22.1006(a)
Service Contract Act of 1965, as Amended
52.222-42
22.1006(b)
Statement of Equivalent Rates for Federal Hires
52.222-43
22.1006(c)(1)
Fair Labor Standards Act and Service Contract Act – Price Adjustment
(Multiple Year and Option Contracts)
52.222-44
22.1006(c)(2)
Fair Labor Standards Act and Service Contract Act – Price Adjustment
52.223-2
23.105(b)
Clean Air and Water
52.223-3
23.303
Hazardous Material Identification and Material Safety Data
52.223-6
23.505(c)
Drug-Free Workplace
52.224-1
24.104
Privacy Act Notification
52.224-2
24.104
Privacy Act
52.225-14
25.902
Inconsistency Between English Version and Translation of Contract
52.227-1
27.201-2(a)
Authorization and Consent
52.227-1
27.201-2(b)
Authorization and Consent – Alternate I
52.227-2
27.202-2
Notice and Assistance Regarding Patent and Copyright Infringement
52.227-11
27.303(a)
Patent Rights – Retention by the Contractor (Short Form)
52.227-11
27.303(a)(3)
Patent Rights – Retention by the Contractor (Short Form) – Alternate I
52.227-11
27.303(a)(3)
Patent Rights – Retention by the Contractor (Short Form) – Alternate II
52.227-12
27.303(b)
Patent Rights – Retention by the Contractor (Long Form)
52.227-12
27.303(b)(2)
Patent Rights – Retention by the Contractor (Long Form) – Alternate I
52.227-12
27.303(b)(2)
Patent Rights – Retention by the Contractor (Long Form) – Alternate II
52.227-13
27.303(c)
Patent Rights – Acquisition by the Government
52.227-13
27.303(c)(3)
Patent Rights – Acquisition by the Government – Alternate I
52.227-13
27.303(c)(3)
Patent Rights – Acquisition by the Government – Alternate II
52.227-18
27.409(j)
Rights in Data – Existing Works
52.227-21
27.409(q)
Technical Data Certification, Revision, and Withholding of Payment –
Major Systems
52.227-22
27.409(r)
Major System – Minimum Rights
52.227-23
27.409(s)
Rights to Proposal Data (Technical)
52.228-1
28.101-3(b)
Bid Guarantee
52.228-2
28.106-4
Additional Bond Security
52.228-3
28.309(a)
Workers’ Compensation Insurance (Defense Base Act)
52.228-4
28.309(b)
Workers’ Compensation and War-Hazard Insurance Overseas
52.228-5
28.310
Insurance – Work on a Government Installation
52.228-11
28.203-6
Pledges of Assets
52.229-3
29.401-3
Federal, State, and Local Taxes
52.229-4
29.401-4
Federal, State, and Local Taxes (Noncompetitive Contract)
52.229-5
29.401-5
Taxes – Contracts Performed in U.S. Possessions or Puerto Rico
A-5
EP 715-1-5
10 Aug 93
Contract Clauses (Continued)
Required When Applicable
FAR provision or
clause number
FAR text
reference
Title
Taxes – Foreign Fixed-Price Contracts
52.229-6
29.402-1(a)
52.229-7
29.402-1(b)
Taxes – Fixed-Price Contracts with Foreign Governments
52.229-8
29.402-2(a)
Taxes – Foreign Cost-Reimbursement Contracts
52.229-9
29.402-2(b)
Taxes – Cost-Reimbursement Contracts with Foreign Governments
52.229-10
29.401-6(b)
State of New Mexico Gross Receipts and Compensating Tax
52.230-3
30.201-4(a)
Cost Accounting Standards
52.230-4
30.201-4(b)(1)
Administration of Cost Accounting Standards
52.230-5
30.201-4(c)(1)
Disclosure and Consistency of Cost Accounting Practices
52.230-6
30.201-4(d)
Consistency in Cost Accounting Practices
52.232-10
32.111(d)(1)
Payments Under Fixed-Price Architect-Engineer Contracts
52.232-12
32.412(a)
Advance Payments
52.232-12
32.412(b)
Advance Payments – Alternate I
52.232-12
32.412(c)
Advance Payments – Alternate II
52.232-12
32.412(d)
Advance Payments – Alternate Ill
52.232-12
32.412(e)
Advance Payments – Alternate IV
52.232-12
32.412(f)
Advance Payments – Alternate V
52.232-16
32.502-4(a)
Progress Payments
52.232-16
32.502-4(b)
Progress Payments – Alternate I
52.232-17
32.617
Interest
52.232-18
32.705-1(a)
Availability of Funds
52.232-23
32.806(a)(1)
Assignment of Claims
52.232-23
32.806(a)(2)
Assignment of Claims – Alternate I
52.232-24
32.806(b)
Prohibition of Assignment of Claims
52.232-25
32.908(c)
Prompt Payment
52.232-26
32.908(a)
Prompt Payment for Fixed-Price Architect-Engineer Contracts
52.232-28
32.908(d)
Electronic Funds Transfer Payment Methods
52.233-1
33.014
Disputes
52.233-1
33.014
Disputes – Alternate I
52.233-3
33.106(b)
Protest After Award
52.233-3
33.106(b)
Protest After Award – Alternate I
52.236-22
36.609-1(c)
Design Within Funding Limitations
52.236-25
36.609-4
Requirements for Registration of Designers
52.237-2
37.110(b)
Protection of Government Buildingsr Equipment, and Vegetation
52.242-1
42.802
Notice of Intent to Disallow Costs
52.242-2
42.1107
Production Progress Reports.
52.242-10
42.1404-2(a)
F.o.b. Origin – Government Bills of Lading or Prepaid Postage
A-6
EP 715-1-5
10 Aug 93
Contract Clauses (Continued)
Required When Applicable
FAR provision or
clause number
FAR text
reference
Title
52.242-11
42.1404-2(b)
F.o.b. Origin–Government Bills of Lading or Indicia Mail
52.242-12
42.1406-2
Report of Shipment (REPSHIP)
52.243-1
43.205(a)(4)
Changes — Fixed-Price —Alternate Ill
52.243-7
43.106
Notification of Changes
52.244-4
44.204(d)
Subcontractors and Outside Associates and Consultants
52.245-1
45.106(a)
Property Records
52.246-11
46.311
Higher-Level Contract Quality Requirement (Government Specification)
52.247-1
47.104-4(a)
Commercial Bill of Lading Notations
52.247-63
47.405
Preference for U.S.-Flag Air Carriers
52.248-1
48.201
Value Engineering
52.248-1
48.201(e)(1)
Value Engineering—Alternate lll
52.248-2
48.201(f)
Value Engineering Program–Architect-Engineer
52.249-7
49.503(b)
Termination (Fixed-Price Architect-Engineer)
52.250-1
50.403-3
Indemnification Under Public Law 85-804
52.250-1
50.403-3
Indemnification Under Public Law 85-804—Alternate l
52.251-1
51.107
Government Supply Sources—Alternate l
52.252-2
52.107(b)
Clauses Incorporated by Reference
52.252-4
52.107(d)
Alterations in Contract
52.252-6
52.107(f)
Authorized Deviations in Clauses
52.253-1
53.111
Computer Generation of Forms by the Public
Optional
52.216-4
16.203-4(c)
Economic Price Adjustment—Labor and Material
52.219-10
19.708(c)(1)
Incentive Subcontracting Program for Small and Small Disadvantaged
Business Concerns
52.227-17
27.409(i)
Rights in Data—Special Works
52.232-17
32.617(b)
Interest—Alternate
A-7
l
EP 715-1-5
10 Aug 93
A-8
EP 715-1-5
10 Aug 93
APPENDIX B
SAMPLE LETTER CONTRACT (COST-REIMBURSEMENT TYPE)
(date)
Subject: Contract No.
Gentlemen:
This letter constitutes a contract on the terms set forth herein and signifies the
intention of the U.S. Army Corps of Engineers to execute a formal cost-reimbursement
contract with you for the performance of the services as set forth in the enclosure
marked “Attachment A,” upon the terms and conditions therein stated, which is
incorporated in and made a part hereof.
You are directed, in accordance with the contract clause entitled “Execution and
Commencement of Work,” to proceed immediately to commence performance of the
work with all diligence to the end that services may be performed within the time
specified in Attachment A, or if no time is so specified, at the earliest practicable date.
You shall, in addition, obtain such approvals in respect of commitments hereunder as
may be specified in Attachment A.
In accordance with the clause entitled “Contract Definitization,” you shall submit a
proposal on the estimated cost to the Government, including fee (profit), for the services
covered by this letter. Your proposal shall be supported by a cost breakdown reflecting
the factors outlined in the suggested format enclosed and by any other information
specified herein. A Certificate of Current Cost or Pricing Data (FAR 15.804-4) shall be
submitted upon agreement on contract price.
Please indicate your acceptance of the foregoing by signing this letter and
returning it with all supporting documentation to this office.
This contract is entered into pursuant to 10 U.S.C. § 2304(c)( ), and any required
justification and approval has been executed.
Sincerely,
Executed as of the date shown below:
By
Date
B-1
EP 715-1-5
10 Aug 93
SAMPLE LETTER CONTRACT (FIXED-PRICE TYPE)
(date)
Subject: Contract No.
Gentlemen:
This letter constitutes a contract on the terms set forth herein and signifies the
intention of the U.S. Army Corps of Engineers to execute a formal fixed-price contract
with you for the performance of the services as set forth in the enclosure marked
“Attachment A,” upon the terms and conditions therein stated, which is incorporated in
and made a part hereof.
You are directed, in accordance with the contract clause entitled “Execution and
Commencement of Work,” to proceed immediately to commence performance of the
work with all diligence to the end that services may be performed within the time
specified in Attachment A, or if no time is so specified, at the earliest practicable date.
In accordance with the clause entitled “Contract Definitization,” you shall submit a
firm proposal for the services covered by this letter. Your proposal shall be supported by
a cost breakdown reflecting the factors outlined in the suggested format enclosed and by
any other information specified herein. A Certificate of Current Cost or Pricing Data
(FAR 15.804-4) shall be submitted upon agreement on contract price.
Please indicate your acceptance of the foregoing by signing this letter and
returning it with all supporting documentation to this office.
This contract is entered into pursuant to 10 U.S. C. § 2304(c)( ), and any required
justification and approval has been executed.
Sincerely,
Executed as of the date shown below:
By
Date
B-2
EP 715-1-5
10 Aug 93
APPENDIX C
TYPES OF CONTRACTS - A COMPARISON AND SUMMARY
Fixed-price (greatest risk on contractor)
Firm-fixed-price
Application
and
essential
Fixed-price Incentive
Fixed-price with economic price
adjustment
(FFP)
elements
Reasonably definite design or
performance specification available.
Fair and reasonable price can be
established at outset.
Conditions for use:
Prior purchase experience of the
same or similar supplies or services
under competitive conditions.
Valid cost or pricing data.
Realistic estimates of proposed
cost.
Any other reasonable basis for
pricing that can be used to establish
fair and reasonable price.
Contract or willing to accept
contract at a level that causes it to
take all financial risks.
Application
Unstable market or Iabor conditions
during the production period and
contingencies that would otherwise
be included In the contract price can
be identified and made the subject
of a separate price adjustment
clause.
Cost uncertainties exist, but there is
potential for cost reduction and/or
performance improvement by giving
contractor a degree of cost
responsibility and a positive profit
incentive.
Provides for upward adjustment
(with ceiling) in contract price.
There are two forms of this contract:
firm target (FPlF) and successive
targets (FPIS).
Firm target: Firm target cost, target
profit, and profit-sharing formula
are negotiated into basic contract,
profit is adjusted upon contract
completion FAR 16.403-1.
Adjustments based on
established prices.
Adjustments based on actual
costs of labor or material.
Index
FAR clauses:
52.216-2
52.216-3
52.216-4.
elements
Contract must contain target cost,
target profit, ceilng price, and
profit-sharing
formula.
May provide for downward
adjustment if price of escalated
segment has potential of falling
below the limits established in the
contract.
cost
essential
Profit is earned, or lost, on the basis
of relationship that contract's final
negotiated cost bears to total target
cost.
Contingencies must be specifically
defined in contract.
Adjustments based on
of labor or material.
and
(FPR)
Application and essential elements
Three general types of adjustments:
Possible uncertainties in
performance can be identified and
costed.
Fixed-price with redetermination
(FPI)
Successive targets: initial cost and
profit targets are negotiated into
contract, but final cost target (firm)
cannot be negotiated until
sometime during performance.
Contains production point(s) at
which either a firm target, and final
profit formula, or a fixed-price
contract, can be negotiated FAR
16.403-2.
Application
and
essential
elements
There are two forms of this contract:
Prospective: Used when It is possible
to negotiate a fair and reasonable
price or an initial period of
performance but not for entire
contract period.
Contract is FFP at the start At a
specific time(s) during performance,
the contract price is redetermined
either upward or downward.
A price ceiling, if appropriate, should
be negotiated into the original
contract.
Retroactive: Used when realistic
fixed price cannot be negotiated
initially, or when contract amount is
so small, or time so short tnat any
other contract type would be
Impractical.
Realistic ceiling price is negotiated
into original contract, and final price
is negotiated after contract is
completed
FAR
clauses
52.216-5,
52.216-6.
Incentives may be for cost, technical
performance, and/or delivery.
Limitations/Advantages
Price not subject to adjustment
regardless of contractor
performance costs.
Places 100 percent of financial risk
on contractor.
Places Ieast amount of
administrative burden on
contracting officer.
Preferred
types.
over
all
other
contract
Limitations/Advantages
Reduces
contractor’s
fixed-price
Limitations/Advantages
Limitations/Advantages
Price can be adjusted upward or
downward upon action of an
Industry wide contingency beyond
contractor’s control.
risk.
Fixed-price with EPA is preferred
over a cost-reimbursement contract
If contingency materializes, the
contract administration burden wiII
increase.
Used with negotiated procurements
and in limited applications with
sealed bidding when determined to
be feasible.
Requires adequate
accounting system.
contractor
Contracting officer must determine
that contract type is least costly and
that award of any other type would
be impractical.
Government and contractor
administrative effort is more
extensive than under other fixedprice contract types.
Used only with negotiated
procurements.
Billing price must be established for
Interim payment.
For both: Contracting officer must
determine that an FFP contract WiII
not satisfy requirement.
Contractor’s accounting system must
be adequate for price
redetermination.
Prospective pricing period must
able to be made to conform to
contractor’s accounting period.
be
Price must be redetermined
promptly at time(s) specified.
Redetermination must be done
promptly upon contract completion
Must establish ceiling price in the
original contract that represents the
contractor’s
assumption
of
reasonable degree of risk
Requires approval, in writing, from
the head of the contracting activity
Used only with negotiated
procurements.
Suitability
Commercial products and
commercial-type products, military
Items for which reasonable prices
can be established, and services.
Federal Acquisition Regulation
FAR 16.202.
Suitability
Federal
FAR 16.203.
Acquisition
Suitability
Suitability
Commercial products and
commercial-type products, military
items for which reasonable prices
can be established at time of award,
and services.
Development
and
production.
Prospective: Quality production or
services.
Retroactive: Research and
development of $l00,000 or less
only.
Federal
Regulation
FAR 16.403.
C-1
Acquisition
Regulation
Federal
FAR
FAR
Acquisition
16.205 (prospective)
16.206 (retroactive).
Regulation
EP 715-1-5
10 Aug 93
TYPES OF CONTRACTS - A COMPARISON AND SUMMARY (Continued)
Cost-reimbursement (greatest risk on Government)
(CPFF)
(CPIF)
(CPAF)
Cost and cost-sharing
Cost-plus-fixed-fee
Cost-plus-incentive-fee
Cost-plus-award-fee
Application and essential elements
Application and essential elements
Application
Contract completion is feasible.
Incentives are desired but
performance not susceptible to finite
measurement. Not feasible to devise
predetermined objective or target
applicable to cost or schedule.
Provides for subjective evaluation of
contractor
performance
Contractor
is evaluated at stated time(s) during
performance period. Contract must
contain clear and unambiguous
evaluation criteria to determine
award fee.
Development of a majors system has a
high probability that it is feasible,
and positive profit incentives for
contractor management can be
negotiated.
Level of effort is unknown, and
contractor's performance cannot be
subjectively evaluated.
Award fee is earned for excellence in
performance, quality, timeliness,
ingenuity, and cost effectiveness and
can be earned in whole or in part.
Fee is adjusted by a formula
negotiated into the contract in
accordance with the relationship
that total allowable cost bears to
target cost.
Two separate fee pools can be
established in contract: a base fee
not to exceed 3 percent of the
contract’s estimated cost, and an
award fee.
The total award fee plus base fee
limits
cannot exceed the statutory
shown in FAR 15.903: prouction
and services (Includes A-E services)–
10 percent, and R&D–15 percent of
estimated cost.
Award fee earned
determined by the
officer and is often
recommendation of
evaluation board.
by contractor
contracting
based upon
an award fee
Performance incentives must be
clearly spelled out and objectively
measurable.
and
essential
elements
Provides for payment of a fixed fee
Contractor receives fixed fee
regardless of the actual costs he
incurs during performance.
Can take two basic forms:
Fee range should be negotiated to
give the contractor an incentive over
various ranges of cost performance.
Completion form: Clearly defined
task with a definite goal and specific
end product.
Term form: Scope of work described
In general terms. Contractor
oligated only for a specific level of
effort for stated period of time
Total fee cannot exceed the
statutory Iimits shown in FAR 15.903:
production and services – 10 percent,
and R&D– 15 percent of estimated
cost.
Contract must contain target cost,
target fee, minimum and maximum
fees, and fee adjustment formula.
Fee adjustment is made upon
completion of contract
Completion form is preferred over
the term form whenever milestones
can be defined well enough to
develop estimates.
Application and essential elements
Cost: Typically, for R&D with
nonprofit
organizations
or
educational Institutions, and
facilities contracts.
Cost-sharing: R&D projects jointly
sponsored by Government and
contractor, where contractor
contemplates a commercial benefit
that it accepts in lieu of fee.
Government pays costs in accordance
with Cost Accounting Standards and
FAR 31.201. No fee is paid.
Must oresent evidence that there is a
high
probability
that
the
contractor
will receive substantial present or
future commercial benefits.
Term form requires the contractor
to perform at specific level for a
definite period.
Government can order more work
without an Increase in fee, providing
the contract estimated cost is
Increased Fee reexpressed as
percentage of estimated cost at time
contract is awarded
Maximum fee Iimits are provided in
FAR 15.903 They are production
and
services–l0percent,
and
R&D–15 percent. These fee
Iimitations are the same for all costreimbursement contracts.
FAR clause 52216-7
10 U.S.C. 2306(c), 2310(b)
41 U.S.C. 254(b).
10 U.S.C 2306(d)
41 U.S.C 254(b)
FAR clause 52.216-7.
Limitations/Advantages
Limitations/Advantages
Limitations/Advantages
Limitations/Advantages
Weighted guidelines will n o t be used
to determine either base or award
fee.
Difficult to negotiate range between
the maximum and minimum fees to
provide an incentive over entire
range.
Contractor has minimum incentive to
control costs.
Used only when uncertainties
involved make it impossible to use a
fixed-price
contract.
Government’s
determination
of
amount of award fee earned by the
contractor is not subject to D i s p u t e s
clause.
CPAF contract cannot be used to
avoid CPIF or CPFF types If either is
feasible.
Should not be used if the amount of
money, period of performance, or
expected benefits are insufficient to
warrant
additional
administrative
effort.
Very costly to administer Contractor
must have an adequate accounting
system for determining costs.
Used only with negotiated
procurements.
Determination
required.
and
Performance must be objectively
measurable.
Costly
to
Normally not used for development
of major weapons systems once
initial exploration contract has
determined project feasibility
administer.
Costly
Used only with negotiated
procurements.
(See FAR 16.301-3.)
Appropriate Government
surveillance during performance
ensure effective methods and
efficient cost controls are used.
to
administer.
•
to
Determination and findings
required.
Least preferred type because
contractor assumes no financial
•
risk
Used only with negotiated
procurement
Used only with negotiated
procurements.
FAR 15 903(d)
Statutory fee limitations:
10 U.S.C. 2306(d) and 41 U.S.C.
254(b). Production and services–
10 percent, R&D–15 percent.
Contractor’s accounting system must
be adequate to determine costs.
(These Iimitations are the same for
all cost-reimbursement contracts.)
findings
Suitability
Suitability
Sortability
Suitability
Major systems development and
other development programs where
It has been determined that this
contract type is desirable and
administratively prafctical.
Completion form: Research or other
development effort when the task
can be clearly defined, a definite
goal or target is expressed, and a
specific end product is required.
Development and test programs
when a target cost and a fee
adjustment formula can be
negotiated that are Iikely to
motivate the contractor to manage
effectively.
Term form: Research, preliminary
exploration, or a study when the
level of effort is Initially unknown
Can be used for development and
test when a CPIF ts determined to be
impractlcal.
Federal
Acquisition
16.404-2.
Regulation
Government
surveillance
during performance will
provide assurance that cost
controls are used.
A determination and findings
has been executed.
Contractor must have an adequate
accounting system.
Level-of-effort services that can only
be subjectively measured and
contracts for which work would have
been accomplished under another
contract type if performance
objectives could have been
expressed as definite mliestones,
targets, and goals susceptible of
being actually measured.
FAR
FAR 16.301-3
Use only when–
•
Contractors
accounting
sytem is adequate to
determine applicable costs.
Federal
Acquisition
FAR 16.404.1.
Federal
Regulation
FAR 16.306.
C-2
Acquisition
Regulation
R&D.
Facilities (cost contract only).
Federal
Acquisition
Regulation
FAR 16.302 (cost)
FAR 16.303 (cost sharing).
EP 715-1-5
10 Aug 93
TYPES OF CONTRACTS - A COMPARISON AND SUMMARY (Continued)
Other contractual devices (special uses)
Time-and-materials
Labor-hours
(T&M)
(L-H)
Letter contract
Application and essential elements
Application
A T&M contract maybe used only
when it is not possible at the time of
placing the contract to estimate
accurately the extent or duration of
the work or to anticipate costs with
any reasonable degree of
confidence.
A variant of T&M contract differing
only in that materials are not
furnished by contractor.
Calls for
hours at
materials
specified
and
essential
Application
elements
Often used in conjunction with other
contract types.
provision of direct Iabor
specified hourly rates and
at cost (or some other basis
in contract).
and
essential
Indefinite-delivery
elements
Gets contractor going quickly.
Interest of national defense
demands that contractor be given
binding commitment so that work
can commence immediately and not
possible to negotiate definitive
contract in sufficient time.
Letter contracts shall contain
expected dates for contractor’s
proposal and start of negotiations,
and also a contract definitization
tar et date (all within 180 days or
before 40 percent of the work is
complete, whichever comes frrst). In
extreme cases, additional time may
be authorized FAR clause 52.216-25.
Ceiling price established at time of
contract award.
Government’s maximum Iiability
shall not exceed 50 percent of total
estimated cost of procurement.
Contract
contains
ceiling
price.
Requires completion prior to award
when such competition is practical.
Clauses:
FAR 52.216-23.
Execution and Commence of Work.
FAR 52.216-24.
Limitation of Government Liability.
FAR 52.216-25.
Contract Definitization.
FAR 12.304 and FAR 52.212-7.
Notice of Priority Rating for National
Defense.
Limitations/Advantages
Limitations/Advantages
Used only after the contracting
officer executes determination and
findings that no other contract the
is suitable.
Does not
control.
encourage
effective
Same as those for T&M contracts.
cost
The exact time and/or quantities of
future deliveries are not known at
time of contract award.
There are three types of lndefinitedelivery contracts:
Definite-quantity: Definite quantity
of specified supplies or services for a
fixed period. Deliveries or
performance at designated
locations, upon order. Supplies
regularly available or after short lead
time.
Requirements: FiIIs all actual
Government requirements for
specified supplies or services of
designated activites during specified
contract period. Contract contains
estimated total quantity, maximum
limit of contractor’s Iiability, and a
limit to the Government’s ordering
obligation. Funds are obligated by
each order and not by the contract
Indefinite-quantity:
Contractor
provides, within stated limits,
specified supplies or services during
specified contract period. Contract
contains a minimum Government
obligation and a stated maximum
order quantity. Funds are obligated
for the minimum quantity only.
Used when Impossible to determine
precise need and Government does
not wish to commit to more than
minimum quantity.
Limitations/Advantages
Limitations/Advantages
Must have written determination
that no other contract type is
suitable.
Reqirements:
Flexibility
in
an 3 delivery schedule Orders
only after need materializes.
Must be superseded by definitized
contract at earnest possible date.
Indefinite-quantity: Flexible
quantity and delivery schedule.
orders placed only after need
materializes Limited Government
Minimum stock levels
obligation
maintained Direct shipment to
users.
Maximum Government
definitization.
Requires almost constant
surveillance by Government to
ensure effective contractor
management.
Application and essential elements
Iiability
until
Used only with negotiated
procurements.
quantity
placed
Catalog or market prices are used.
Used only with negotiated
procurements.
Letter contracts shall not –
Used
•
Ceiling price required in contract.
•
•
Suitability
Federal
Acquisition
Regulation
Federal
Acquisition
only
Federal
Regulation
FAR 16.603.
C-3
Acquisition
with
fixed-price
contracts.
16.202
16.203
16.205
15.804-3(c)
Suitability
Manufacture of supplies and
performance of services, including
production planning and
procurement of necessary materials.
Used only for services.
FAR 16.602.
FAR
FAR
FAR
FAR
Suitability
Suitability
Engineering and design services in
conjunction with the production of
supplies, engineering, design and
manufacture of dies, jigs r fixtures,
gauges, and special machine tools;
repair and maintenance and
overhaul work to be performed in
emergencies.
FAR 16.601.
Commit funds in excess of
those available at the time of
letter contract.
Be entered into without
competition.
Be amended to satisfy a new
requirement.
Regulation
Commercial or modified commercial
supplies or services when the need is
recurring.
Federal
FAR 16.501.
Acquisition
Regulation
EP 715-1-5
10 Aug 93
APPENDIX D
MINIMUM RECOMMENDED HTRW CONTRACTING CAPACITY
FOR MILITARY HTRW DISTRICTS
Type of work
Small 1/
Design
District
Contract type
Containerized HTRW,
Fence, Roads, etc.
RFP
Firm-fixed-price
Indefinite delivery
Study, Investigations,
Design, Installation
support
A-E
Indefinite delivery
Cost reimbursable
Firm-fixed-price
Environmental Services
RFP
Firm-fixed-price
Indefinite delivery
Remediation
RFP
Cost-reimbursable
Firm-fixed-price
RFP
Firm-fixed-price
Indefinite delivery
Containerized, HTRW
Fence, Roads, etc.
2/
Large Design
District
Study, Investigations,
Design, Installation
Support
A-E
Indefinite delivery
Cost-reimbursable
Firm-fixed-price
Minimum
#of
contracts
Dollar value/
duration
1-4
$5 M/3 yrs
$12 M/5yrs
1-2
1-2
1-2
$3 M/3 yrs
1-2
1-2
4
$50 M/5 yrs
$50 M/5 yrs
$5 M/3 yrs
1-2
1-2
$20 M/5 yrs
$20 M/5 yrs
$5 M/3 yrs
Environmental Services
RFP
Firm-fixed-price
Indefinite delivery
1-2
Remediation
RFP
Indefinite delivery
Firm-fixed-price
2
2
$50 M/5 yrs
$50 M/5 yrs
Study/Design/Remediate
Total Environmental
Restoration Contract
(TERC)
RFP
Indefinite delivery
Cost-reimbursable
1
$200 M/10 yrs
1
Annual HTRW investigation and design workload less than $15 million
2
Annual HTRW investigation and design workload of a robust district approaching $60 million
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EP 715-1-5
10 Aug 93
D-1. Recommendations
a. A group of contracts has been recommended for two categories of
districts – the small HTRW Design District which has an annual HTRW
study/design workload of up to $15 million and the large HTRW Design District
which has an annual HTRW study/design workload significantly more than $15
million. The recommendation represents the minimum capability and may need to
be increased depending upon district workload.
b.
The recommended group of contracts is intended to be used as a “kit-bag”
of contracting tools. The individual contract types supplement and complement each
other. No one contract type is the right choice for every situation. The maximum use
and effectiveness of each of the contract types is dependent on the HTRW design
district acquisition of the entire family of recommended pre-placed contracts. Use of
site specific contracts, both for design and remediation will always remain the
preferred option of contracting where possible, and this type of contract should
always be considered along with the pre-placed types when developing specific project
acquisition strategy.
D-2. Small HTRW Design Districts
a.
The small design district execute routine projects referred to as
“containerized” HTRW projects. Containerized projects include excavating and
arranging for disposal of underground storage tanks, drums, and PCB transformers,
capacitors, etc. This district may also be called upon to perform normal construction
activities to support an HTRW project such as the building of a road to the site or the
construction of a fence around the site. To accomplish containerized waste, fencing
and road type projects as well as small remediations, it is recommended that $5
million pre-placed remedial action contracts be procured. These contracts should be
firm-fixed-price indefinite delivery type (IDT) contracts. Their duration should be
one year with two one-year options. The minimum number of these contracts
required, one to four, is dependent on the workload at the HTRW design district. It is
recommended that these contracts be set aside for small businesses that are trying to
gain experience in the HTRW arena. These contracts can typically be procured as
service contracts through the request for proposal (RFP) selection process.
b . In order to accomplish studies, designs, and to provide installation
support, it is recommended that two to four Architect-Engineer (A-E) IDT contracts
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10 Aug 93
be procured. Half of these contracts should be firm-fixed-price and the other half costreimbursable. The contract ceilings should be about $12 million. Contract duration
should be one year with four additional one-year options and must be procured using
Brooks Act procedures. Again, the number of contracts required depends on assigned
workload.
c.
To complement in-house work and provide installation support, small
design districts should procure one to two Environmental Services contracts. One of
these contracts should be general in nature to allow preparation of non-HTRW
environmental reports. The second contract would be for a limited number of specific
services required at the District, e.g., geotechnical and/or chemical sampling and
analysis. These contracts should be firm-fixed-price, IDT professional services
contracts. For the general services contract, the total contract award should not
exceed $3 million with a duration of one year plus two one year options. The amount
and duration of contracts for specific services will need to be determined by clearly
identified local requirements. Districts may contract directly for chemical analyses
of primary samples only after the Division Chemistry Laboratory has determined
that it cannot meet the projected requirements in-house, by contract or through
another Division Chemistry Laboratory. This limitation does not preclude sampling
and analysis incidental to performance of a study or design under one of the above
referenced A-E IDT contracts.
d . Small design districts are also responsible for accomplishing
remediations. It is recommended that a minimum of two to four contracts be
procured strictly for remediation. The contract ceiling should be $50 million with a
duration of one year plus four one year options. One or two of the contracts should be
firm-fixed-price in order to handle those remediations in which there is substantial
information and design. The remaining one or two contracts should be costreimbursable which should be utilized whenever components of remediation are
unknown. Total number of contracts should be limited to those required to execute
the district’s potential workload.
e . It should be noted that for a small HTRW design district, procurement of a
“cradle-to-grave” Total Environmental Restoration Contract (TERC) type contract is
not recommended. Due to the limited workload of these districts, it is felt the work
can be accomplished through the contracts recommended above. For many
remediation projects, it is possible to concurrently execute a pre-placed A-E IDT
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10 Aug 93
contract and a pre-placed remediation contract. The A-E can be directed to prepare
interim packages for execution by the remediation contractor, in order to expedite
point source removals, interim removals, etc. A cradle-to-grave contract should be
reserved for special instances. It is recommended that in lieu of procuring their own
TERC contracts, a small HTRW design district contact a large HTRW design district
to utilize their TERC contracts on a case-by-case basis as the need arises.
D-3. Large HTRW Design Districts
a.
Large design districts must also have small remediation contracts to
handle containerized hazardous waste, fence building and road building, etc. It is
recommended that a large design district procure four $5 million firm-fixed price
remediation contracts. The duration should be one base year with two one year
options. Procurement of these contracts should be structured to encourage the
development of HTRW contractors.
b.
It is recommended that the district should procure a minimum of two $20
million A-E IDT contracts with a duration of one base year and four one year options.
One should be firm-fixed price and the other cost-reimbursable. Where more than
two contracts are necessary, half should be cost-reimbursable and half should be
firm-fixed price. The main intent of the contracts is to perform investigations,
studies, design and installation support. These contracts must be procured using
Brooks Act procedures.
c.
To complement in-house work and provide installation support, large
design districts should procure one to two Environmental Services Contracts. One of
these contracts should be general in nature to allow preparation of non-HTRW
environmental reports. The second contract would be for a limited number of specific
services required at the District, e.g., geotechnical and/or chemical sampling and
analysis. These contracts should be firm-fixed-price, IDT professional services
contracts. For the general services contract, the contract ceiling should not exceed $5
million with a duration of one year plus two one year options. The amount and
duration of contracts for specific services will need to be determined by clearly
identified local requirements. The limitations on sampling and analysis contracts
discussed in paragraph 2 above also apply to Large HTRW Design Districts.
d.
It is further recommended that the large design district procure a total of
four large pre-placed remediation contracts. Two contracts would be cost
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reimbursable and two firm-fixed price. The recommended contract ceiling is $50
million. The contract duration should be one year with four one year options. These
contracts would be used to perform remedial action work only. These contracts
should be procured through an RFP.
e.
The last contract recommendation is that the large HTRW design district,
when approved by the PARC, procure a minimum of one Total Environmental
Restoration Contract (TERC). A TERC is an environmental remediation contract
that permits a single contractor to provide full clean-up services (cradle-to-grave) at
certain large, high priority, time sensitive sites. Not every HTRW project is
appropriate for using a TERC and these contracts should not be considered a
replacement for all other contracting tools. The ceiling amount of this indefinite
delivery type, cost reimbursement contract should generally not exceed $200 million
unless a higher workload has been identified and justified. The contract length
should be four years with two three year options.
g . As discussed above for small HTRW design districts, the large HTRW
design districts should limit the actual total number of contracts to those needed to
execute the potential assigned program. The minimum number of contracts
recommended is based on an annual study/design program approaching $60M, and
the number of contracts should be adjusted according if the district workload varies
significantly from $60M.
D-5
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