Section 12: Cost Plus Award Fee Contracts

Section 12: Cost Plus Award Fee Contracts
Cost Plus Award Fee Contracts
Presenter:
Bill Smallwood
Operations Project Manager
ACF River Projects
US Army Corps of Engineers

BUILDING STRONG®
Presenter:
Scott Hyatt
Operations Project Manager
J. Strom Thurmond Project
US Army Corps of Engineers

BUILDING STRONG®
O&M Contracts 12-1

Advanced

Objectives
 Define the basic Cost-Plus-Award-Fee Contracting

Option as used to accomplish O&M services.
 Identify the major advantages and disadvantages of
Cost-Plus-Award-Fee Contracts.
 Identifyy the basic field input
p required
q in the development
p
of the RFP Solicitation.
 Identify basic administrative and inspection requirements
of a CPAF contract.
BUILDING STRONG®
Types of Cost Plus Contracts
 Cost sharing
 Cost Plus Incentive
Fees
 Cost Plus Fixed Fee
 Cost Plus Award Term
 Cost Plus Award Fee
BUILDING STRONG®
O&M Contracts 12-2

Advanced

 16.301-1 Cost Reimbursement - Description.
 Cost-reimbursement types of contracts provide for payment
of allowable incurred costs,, to the extent prescribed
p 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 the approval of the contracting officer.
 16.301-2 Application.
 Cost
Cost-reimbursement
reimbursement contracts are suitable for use only
when uncertainties involved in contract performance do not
permit costs to be estimated with sufficient accuracy to use
any type of fixed-price contract
BUILDING STRONG®
O&M Services Brian G. Phelps
BUILDING STRONG®
O&M Contracts 12-3

Advanced
 16.405-2 Cost-plus-award-fee contracts.

 A cost-plus-award-fee
p contract is a cost-reimbursement
contract that provides for a fee consisting of (1) a base
amount fixed at inception of the contract, if applicable
and at the discretion of the contracting officer, and (2)
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 the areas of cost,
schedule, and technical performance. See 16.401(e)
for the requirements relative to utilizing this contract
type.
BUILDING STRONG®

 16.401 e(2) Award-fee amount. The amount of award fee earned
shall be commensurate with the contractor's overall cost, schedule,
and technical performance as measured against contract
requirements
i t in
i accordance
d with
ith th
the criteria
it i stated
t t d iin th
the award-fee
df
plan. Award fee shall not be earned if the contractor's overall cost,
schedule, and technical performance in the aggregate is below
satisfactory. The basis for all award-fee determinations shall be
documented in the contract file to include, at a minimum, a
determination that overall cost, schedule and technical
performance in the aggregate is or is not at a satisfactory level.
This determination and the methodology for determining the award
fee are unilateral decisions made solely at the discretion of the
Government.
BUILDING STRONG®
O&M Contracts 12-4

Advanced
Firm Fixed Price vs Cost Plus Award Fee

Grass Mowing
(Simplified)
FFP CPAF
Labor $ 30.00 Labor $ 30.00

Fuel $ 3.00 Fuel $ 3.00
Oil $ 2.00 Oil $ 2.00
TOTAL REIMBURSABLE
EXPENSES $35.00 EXPENSES $35.00
Profit/10% $ 3.50 Base Fee/3% $ 1.05

Award Fee/7% $ 2.45
Bid Price $ 38.50 Bid Price $ 38.50
Contract Cost Contract Cost

Minimum - $36.05
$38.50
Maximum - $38.50
BUILDING STRONG®
Disadvantages
1 N
1. Not the
h PPreferred
f dC Contracting
i MMethod
h dbby
Regulation.
2. Perceived Higher Cost.
3. Increased Potential for Security Problems.
4. Increased Liability for the COR When Compared to
Traditional Fixed-Price Contracts.
5. Increased Administration
BUILDING STRONG®
O&M Contracts 12-5

Advanced

Advantages
1. Very Flexible
2. In General, Better Quality Services Are Received.
3. Management Services and Expertise Are Also Procured.
4. Contractor/Government Relationship Is More Positive in
Nature. You Reward for Good Performance Rather Than
Deduct for Poor Performance.
5. Reduced Administration
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Field COR Input
1. R
1 Requestt Wage
W Rates.
R t (May
(M BeB Automated)
A t t d)
2. Develop Appendices Which List Government-
Furnished Supplies, Materials, Equipment and
Primary Facilities to Be Maintained.
3 Develop Technical Provisions
3.
4. Develop Government Cost Estimate.
BUILDING STRONG®
O&M Contracts 12-6

Advanced
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Technical Provisions
TP-1. General TP-9. Natural Resource Management
TP-2. Buildings, Structures, Facilities TP-10. Maintenance and Repair of Paved
Mechanical Electrical,
Mechanical, Electrical Plumbing,
Plumbing Sewage and and Unpaved Roads
Roads, Road Shoulders
Shoulders,
Water Systems Parking Areas, Drainage Structures and
TP-3. Cleaning, Custodial Services, and Refuse Boat Ramps
Removal TP-11. Operation and Maintenance of
TP-4. Grass Mowing and Trail Maintenance Visitor Center
TP-5. Maintenance of Boundary Lines TP-12. Cleaning & Maintenance of
Government Vehicles, Equipment, Mowers,
TP-6. Maintenance of Signs, Barricades, Gates, Trailers and Attachments
Bumpers, Posts, Fencing, Traffic Counters and
Fire Extinguishers TP-13. Recreation Facilities Repairs
TP-7 Maintenance of Landscaped Areas (Trees, TP-14. Aids to Navigation, Floating Debris
Shrubs, and Grass) Removal and Courtesy Dock Maintenance
TP-8. Cleaning & Maintaining Riprap and TP-15. Labor for Powerhouse Maintenance
Beaches TP-16. Emergency Spill Response Support
BUILDING STRONG®
O&M Contracts 12-7

Advanced

Government Cost Estimate
O&M Contracts 12-8

Advanced

Additional Field COR Input,
5 Develop Appendices Which Include Sample
5.
Formats, E.G. Daily Inspection Reports, Work Order
Format, Etc.
6. Develop Crediting Plan or Evaluation Factors for
Award Fee.
7. Submit With Requisition or PR&C Through
Channels to Contracting Division.
BUILDING STRONG®
SOLICITATION
O&M Contracts 12-9

Advanced
General Instructions
To aid in the evaluation of proposals, contractors are
required to follow the same general format…
Volume 1 -
Technical Volume 2 -
Proposal Volume 3 -
M
Management t
Cost/Price
Proposal
Proposal
BUILDING STRONG®
Evaluation of Proposals
Responsibility
 It is the offeror's responsibility

p y to ensure the completeness
p of
the proposal; therefore, the evaluation panel for the
government has been instructed to evaluate on the basis of
the information provided in the proposal. The government
shall not assume that an offeror possesses any capability
unless specified in the proposal. Proposals that are
unrealistic in terms of technical or schedule commitments, or
unrealistically low in cost will be considered indicative of a
lack of understanding of the complexity and risk in the
contract requirements.
BUILDING STRONG®
O&M Contracts 12-10

Advanced
Source Selection Plan
 Defines
D fi E
Evaluation
l ti P Procedures
d
 Identifies Evaluation Team Members
 Establishes a Schedule for

Evaluation
BUILDING STRONG®

The Pre-
Pre-Proposal Conference …
-Occurs after solicitation is issued and

before proposals are due
- An Opportunity to meet prospective

bidders
- An Opportunity for bidders to see the

Project
- An Opportunity to answer basic

questions and amend the solicitation
O&M Contracts 12-11

Advanced
Evaluation Criteria
 Technical Area - (1) Understanding and
Compliance with Requirements and (2) Soundness
of Approach.
Approach
 Management Area - (1) Program Management

Controls, (2) Past Performance/Relevant
Experience and (3) Key Personnel.
 Cost Area - (1) Cost Analysis/Pricing Data and (2)

Financial Statements
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Cost Proposal – Bid Sheets
BUILDING STRONG®
O&M Contracts 12-12

Advanced
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BUILDING STRONG®
O&M Contracts 12-13

Advanced
AWARD
Contract Administration Key Items

(Pitfalls)
-Requiring contractor to stick with proposals
-Staying
y g on schedule
-Dealing with contractor’s internal controls
-Maintaining inventory of supplies & materials
-Making sure QC & Safety plans are followed
-Keeping
Keeping accurate cost records
-Maintaining vehicle/equipment files (GSA compliance)
-Assure all correspondence is timely
BUILDING STRONG®
O&M Contracts 12-14

Advanced
Schedule, Schedule, Schedule!

Weekly
Work
Schedule
Monthly
Summary
Long-Term
Long-
Work
Plan
Planning + Execution = Success

BUILDING STRONG®
COST PLUS AWARD FEE CONTRACTS

CONTRACT BUDGET
2000
1500
1000
500
0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
ESTMATED 100.14 218.42 365.2 511.16 653.65 800.9 999.2 1196.4 1315.4 1408.3 1503.4 1601.8
ACTUAL 84.65 191.3 338.9 489.5 640 789 940
EXAM1 90 210 225 275 355 455 500
EXAM2 95 206 380 560 770 970 1400
BUILDING STRONG®
O&M Contracts 12-15

Advanced
Property Control - In addition to GFE, Contractor must:
- Maintain a small tool inventory

(for non-bar coded items)
- Provide supply
e to es o
inventories on de
demand
a d
- Comply with GSA &

credit card regulations
BUILDING STRONG®

Contractor Quality Control
- The Contractor’s Quality Control Chief should be
independent and non-biased
- Overall Quality Control should be the responsibility of
everyone on the Contractor’s staff
BUILDING STRONG®
O&M Contracts 12-16

Advanced

Contractor Quality Control Submittals and Reports
- The Contractor
Contractor’s
s Quality Control Plan
must be submitted (in draft form) with the
management proposal
- Final Quality Control Plan must be

approved after Contract is awarded
- Daily and monthly reports are required
- Contractor may submit additional reports
BUILDING STRONG®
Quality Assurance
(Pitfalls)
- Review invoices to assure proper
record keeping and use on site
- Check
Ch k ti time sheets
h t tto verify
if proper
labor billings
- Review productivity and job controls
- Review vehicle and equipment utilization
- Verify competition on purchases when required
- Remind the Contractor that they will be audited and they
are subject to inspection by various District Office elements
- Develop QA Plan to consolidate your QA Program
BUILDING STRONG®
O&M Contracts 12-17

Advanced

Quality Assurance Plan
-Identify responsibilities and authority
of team ((KO, COR, QAR, QAI, SI, etc.))
-Identify inspection objectives &

methods
-Identify performance indicators &

evaluation criteria
-Identify Special Inspectors or COTR’s

and include letters of appointment
BUILDING STRONG®
Quality Assurance Plan - Establish daily reporting (form)
- Establish routine meeting

requirements with Contractor
for quality management &
mutual understanding
- Provide references (FAR, safety

manual, design standards, etc.)
BUILDING STRONG®
O&M Contracts 12-18

Advanced
Quarterly Award Fee

Primary Evaluation Factors
Typical Criteria with Sample Weightings
1. Funds Management and Cost Control (40%).
2. Performance (40%).
3. Coordination and Flexibilityy (15%).

( )
4. Safety and Accident Prevention (5%).
BUILDING STRONG®
Award-Fee Award-Fee Pool Description

Adjectival Rating Available To Be
Earned
Excellent 91%--100% Contractor has exceeded almost all of the significant award-fee
criteria and has met overall cost, schedule, and technical performance
requirements of the contract in the aggregate as defined and measured
against the criteria in the award-fee plan for the award-fee evaluation
period.
Very Good 76%--90% Contractor has exceeded many of the significant award-fee criteria
and has met overall cost, schedule, and technical performance
period.
Good 51%--75% Contractor has exceeded some of the significant award-fee criteria
and has met overall cost, schedule, and technical performance
period.
S ti f t
Satisfactory N G
No Greater
t Th
Than 50%
50%. Contractor
C t t has h mett overall ll cost,
t schedule,
h d l and d technical
t h i l performance
f
period.
Unsatisfactory 0% Contractor has failed to meet overall cost, schedule, and technical
performance requirements of the contract in the aggregate as defined
and measured against the criteria in the award-fee plan for the award-
fee evaluation period.
Source: 16-401 e-3-iv BUILDING STRONG®
O&M Contracts 12-19

Advanced
Quarterly Award Fee

Sample Rating Results
QTR 1st 2nd 3rd 4th
Available $10,000 $10,000 $20,000 $20,000
Earned $7,000 $ 6,000 $16,000 $18,000
Total awd fee - $60,000

Total earned - $47,000
BUILDING STRONG®

Objectives
 Define the basic Cost-Plus-Award-Fee

Cost Plus Award Fee Contracting
Option as used to accomplish O&M services.
 Identify the major advantages and disadvantages of
Cost-Plus-Award-Fee Contracts.
 Identify the basic field input required in the development
of the RFP Solicitation
Solicitation.
 Identify basic administrative and inspection requirements
of a CPAF contract.
BUILDING STRONG®
O&M Contracts 12-20

Advanced
“Suddenly a
heated
exchange took
place between
the King and
the moat
contractor”
BUILDING STRONG®
O&M Contracts 12-21

Advanced

Section 12: Cost Plus Award Fee Contracts

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Section 12: Cost Plus Award Fee Contracts

Cost Plus Award Fee Contracts

US Army Corps of Engineers

Cost Plus Award Fee Contracts

US Army Corps of Engineers

O&M Contracts 12-1

Cost Plus Award Fee Contracts

 Define the basic Cost-Plus-Award-Fee Contracting

Types of Cost Plus Contracts

O&M Contracts 12-2

Cost Plus Award Fee Contracts

Cost Plus Award Fee Contracts

O&M Services Brian G. Phelps

O&M Contracts 12-3

Cost Plus Award Fee Contracts

 16.405-2 Cost-plus-award-fee contracts.

Cost Plus Award Fee Contracts

O&M Contracts 12-4

Firm Fixed Price vs Cost Plus Award Fee

Labor $ 30.00 Labor $ 30.00

Profit/10% $ 3.50 Base Fee/3% $ 1.05

Contract Cost Contract Cost

Cost Plus Award Fee Contracts

O&M Contracts 12-5

Cost Plus Award Fee Contracts

Cost Plus Award Fee Contracts

O&M Contracts 12-6

Cost Plus Award Fee Contracts

Cost Plus Award Fee Contracts

O&M Contracts 12-7

Cost Plus Award Fee Contracts

Cost Plus Award Fee Contracts

O&M Contracts 12-8

Cost Plus Award Fee Contracts

Cost Plus Award Fee Contracts

O&M Contracts 12-9

 It is the offeror's responsibility

O&M Contracts 12-10

 Identifies Evaluation Team Members

 Establishes a Schedule for

Cost Plus Award Fee Contracts

-Occurs after solicitation is issued and

- An Opportunity to meet prospective

- An Opportunity for bidders to see the

- An Opportunity to answer basic

O&M Contracts 12-11

 Management Area - (1) Program Management

 Cost Area - (1) Cost Analysis/Pricing Data and (2)

Cost Proposal – Bid Sheets

O&M Contracts 12-12

Cost Plus Award Fee Contracts

O&M Contracts 12-13

Contract Administration Key Items

O&M Contracts 12-14

Cost Plus Award Fee Contracts

Schedule, Schedule, Schedule!

Planning + Execution = Success

COST PLUS AWARD FEE CONTRACTS

O&M Contracts 12-15

Cost Plus Award Fee Contracts

Property Control - In addition to GFE, Contractor must:

- Maintain a small tool inventory

- Comply with GSA &