Warrant Prep 05 - Contract Type

Front 1

What are some of the factors to consider in determining the appropriate contract type?

Back 1

1. Price competition
   
2. Price analysis
   
3. Cost analysis
   
4. Type/complexity/maturity of requirement
   
5. Combining contract types
   
6. Urgency of the requirement
   
7. Period of performance
   
8. Contractors technical capability and financial responsibility
   
9. Adequacy of the contractors accounting system
   
10. Concurrent contracts
    
11. Extent and nature of proposed subcontracting
    
12. Acquisition history
    

Front 2

When is a contract type D&F required?

Back 2

For all contract types other than FFP

Front 3

What are the additional requirements (besides a D&F) when determining to use a cost-type contract?

Back 3

Document their use in the Acquisition Plan and approve one level above the CO

Front 4

Are you able to experiment and try new contract types?

Back 4

"Contract types not described in the FAR shall not be used, except as a deviation under Subpart 1.4"

Front 5

What contract type is required for production in Major Defense Acquisition Program systems?

Back 5

Fixed-price (no CR allowed)

Front 6

What contract type is required for commercial items and sealed bidding?

Back 6

FFP, FP w/ EPA, or T&M/Labor hour in certain circumstances

Front 7

What are the types of fixed price contracts described in the FAR?

Back 7

• FFP
• FP w/ EPA
• FPIF
• FPAF
• FP with Prospective Price Redetermination
• FP with Retroactive Price Redetermination
• FFP Level of Effort

Front 8

When using a FP with EPA contract, what 3 things can the adjustment be based on?

Back 8

1. Established prices
2. Actual costs of labor or material
3. Cost indexes of labor or material

Front 9

When may a FP with EPA contract be used?

Back 9

When there is market instability, it is necessary to protect the contract and the Government against fluctuations, and you can identify and cover contingencies beyond the contractor's control separately in the EPA clause

Front 10

When would a FP with Prospective Price Redetermination be appropriate?

Back 10

When it's possible to negotiate FFP for a certain period, but not for subsequent periods.

Only if FFP/FPIF are not appropriate & contractor has adequate accounting system

Front 11

When is Fixed-Ceiling-Price w/ Retroactive Price Redetermination appropriate?

Back 11

For R&D over $150K & requires HCA approval

Has a ceiling price, with total price (within the ceiling) re-determined after completion

Front 12

When would an FFP Level of Effort be used?

Back 12

R&D over $150K (unless approved by COCO)

Work which can only be stated in general terms. A certain level of effort is required over a stated period of time. Usually results in a report.

Front 13

What are the types of cost contracts described in the FAR?

Back 13

• Cost
  
• Cost-sharing
  
• CPIF
  
• CPAF
  
• CPFF (term, completion, and level of effort)
  

Front 14

What is reimbursed in a "cost contract"?

Back 14

In a cost contract, only reasonable, allocable, and allowable costs are reimbursed. No fee is permitted on a strict cost contract

Front 15

When would a cost-sharing contract be appropriate, and what is reimbursed?

Back 15

Contractor agrees to absorb a portion of the costs, in expectation of substantial compensating benefits

Contractor receives no fee, only an agreed-upon portion to cover of its allowable costs

Front 16

What is the base fee limited to on a CPAF contract?

Back 16

3%

Front 17

What is the difference between a CPFF completion and term contract?

Back 17

Completion: to receive entire fee, the contractor must complete/deliver work

Term: scope is defined in more general terms and contractor devotes a specified level of effort for a period of time

Front 18

What is a CPFF Level of Effort contract?

Back 18

This is a variation on the CPFF Term which includes procedures for adjusting the fee based on hours worked (fee reduction formula)

The contractor can create savings by using lower skill levels where appropriate and the Government reserves the right to convert to additional hours

Front 19

What are some of the areas than can be incentivized on a contract?

Back 19

Costs, delivery, performance

Front 20

What approval is required when including incentives in a contract?

Back 20

D&F signed by SCCO, unless ACAT I, ACAT II, or if > $50M, then HCA

Front 21

To use an FPIF contract, what must the contractor have?

Back 21

An adequate accounting system and the ability to supply adequate cost or pricing information for establishing a reasonable target cost

Front 22

What are the components of an FPIF contract?

Back 22

• Target Cost
  
• Target Profit
  
• Price Ceiling (as % of total cost)
  
• Share Ratios (over & under run)
  
• Point of Total Assumption
  

Front 23

Explain what happens at the point of total assumption on an FPIF contract?

Back 23

The contract essentially becomes an FFP contract. Any additional costs will eat away at the contractor's profit, until the ceiling price is reached and the contractor receives no profit. Beyond ceiling, the contractor assumes all risk and costs, and receives no profit.

Front 24

What does DFARS state as the point of departure when establishing ceiling and share ratios for an FPIF contract?

Back 24

120% ceiling and 50/50 share ratios

Front 25

What is the Range of Incentive Effectiveness for an FPIF and CPIF contract?

Back 25

RIE is the area of the cost line over which incentives motivate the contractor.

For FPIF, it is the point of inception through PTA

For CPIF, it is the area between min and max fee

Front 26

What must you fund when awarding an FPIF contract?

Back 26

Must obligate to target price and commit to most likely price (judgment required - can be as high as ceiling price)

Front 27

How is Fixed-Price Incentive (Successive Targets) different from FPIF?

Back 27

For successive targets, you will negotiate a target cost, target profit, price ceiling, and share ratios the same as FPIF. However, the cost or pricing data is usually not sufficient to negotiate firm target cost info.

Typically after a certain production point when data is then available (i.e. before delivery of first item), parties will negotiate firm values and could even potentially negotiate an FFP.

Front 28

What are the components of a CPIF contract?

Back 28

• Target Cost
  
• Target Fee
  
• Share Ratios (over and under run)
  
• Minimum Fee
  
• Maximum Fee
  

Front 29

For a CPIF contract, who pays what at the max fee, min fee, and in the Range of Incentive Effectiveness?

Back 29

At max and min fee lines, the Government pays all costs (100/0 share ratio). The contractor is reimbursed for all costs and receives the amount of fee % based on target cost.

In the RIE, the share ratio dictates how much profit the contractor actually sees. If under target cost, the contractor's costs are still fully reimbursed, but the remaining difference between target and actual goes to fee. For overruns, the contractor's share gets taken out of fee and fee percentage decreases.

Front 30

When may T&M contracts be used?

Back 30

Only if no other contract type is suitable and it is not possible to estimate accurately the extent or duration of work. This is the least preferred business arrangement. Requires D&F with 6 specific elements.

Front 31

What must be included in a D&F for using T&M contracts?

Back 31

1. Ceiling Price
   
2. Why CPFF is not appropriate
   
3. Market research conducted
   
4. Establish that it is not possible to estimate the extent or duration of work
   
5. Establish the requirement has been structured to minimize T&M
   
6. Describe actions taken to minimize T&M on future requirements
   

Front 32

Can T&M contracts be incrementally funded?

Back 32

No

Front 33

What are the approval thresholds for T&M D&Fs?

Back 33

If base plus option years is less than 3 years and over $1M, it is the SCCO. If less than $1M, it is the COCO.

If base plus option years is greater than 3 years, approval authority is HCA.

Front 34

What is multiyear contracting?

Back 34

Multiyear Contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for greater than 1 year, and up to 5 years

Front 35

Why would you use a basic agreement or basic ordering agreement?

Back 35

A basic agreement should be used when a substantial number of separate contracts may be awarded to a contractor during a particular period and significant recurring negotiating problems have been experienced with the contractor.

Front 36

What is the maximum length of a BOA?

Back 36

5 years