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    What are the advantages of a FPIF contract if you own the TDP, have produced over 30K vehicles and the government has over 90 percent of the parts provision.


    Answer

    This is an interesting question.  Since you mention the use of an FPIF contract, I also assume that these parts are not commercial. 

    In a typical situation, spare parts are sole source.  Because of the lack of competition this makes the award of a FFP contract a questionable approach.  Numerous GAO reports have been written revealing that in a sole source environment FFP contracts results in the government overpaying, sometimes dramatically, for spare parts. 

    The use of an FPIF contract, as I’m sure you know, incents the contractor to use their ingenuity and initiative to control costs so that they can earn a share of any cost savings their efforts produce. 

    If you are in a sole source environment, with no expectation of competition, then an FPIF contract is likely the best course of action, especially since you are well in to production. 


    But, the situation that you describe is different because you own the Technical Data Package.  A properly written solicitation that includes access to the TDP could be a situation where an FFP contract could make sense if market research reveals that robust competition among a number of interested offerors would be present. Without a thorough market research study t is difficult to know what type of contrat would be in best interest of the government.

    One benefit to choosing a FFP contract would eliminate the need for an approved accounting system and might result in a greater pool of competitors, particularly small business manufacturers and machine shops.  Again this depends upon what you are buying and if your TDP is detailed enough to allow for a competitive approach.  On the other hand, industry may be able to in fact produce the spare parts, but they may not be willing to accept the risk of doing so under a FFP contract.

    In summary, given the situation that you describe, I’m not certain you can make a decision without market research and input from industry.  And I certainly can’t tell you what the advantages of either type of contract would be without that information. 


    I recommend that you issue an RFI that includes a draft SOW that includes the TDP in its current form.  This will allow your acquisition team to determine if the TDP is sufficient to entice multiple offerors into expressing their interest as well as to get the benefit of what options industry might offer to meet your remaining spare parts needs.  It will also reveal whether industry is willing to assume all the risk associated with a FFP contract on a first production run based solely on a tech data package.  If there is only one source, it would seem that a FFP contract could represent a good option.


    If you ultimately chose to proceed with a FFP contract, I would recommend including an evaluation factor that would assess price realism.  The FAR allows this in
    FAR 15.403-1(b) and performing this type of analysis would allow the government to reduce the risk that a contractor either “buys in” or simply under estimates their price.

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