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    Can we have two different fee% for labor loading and another for ODC costs


    Answer

    It appears you are a contractor so I will respond assuming that perspective. FAR 16.306(a) describes cost-plus-fixed-fee contracts: "A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract." There are two forms - completion and term - described in paragraphs (d)(1) and (d)(2). The completion form requires the contractor to deliver a specified end product as a condition for payment of the full fixed fee, whereas the term form requires delivery of a specified level of effort as a condition for payment of the full fixed fee. The solicitation should specify which form is intended for the anticipated contract.
     
    If the solicitation does not break out the work by contract line item (CLIN), the contractor will propose an estimated cost and fee to perform the entire contract work. The cost and fee amounts are then negotiated, with the fee amount often negotiated as a percentage of the estimated cost. However, once the estimated cost and fee percentage are agreed upon, the resultant fee is converted to a fixed amount which is set at contract award and does not vary thereafter - hence the term "fixed fee." If the solicitation breaks the work out by contract line item (CLIN) with, in your case, separate CLINs for labor and ODCs, the same process is typically followed for each CLIN, with a fixed fee set for each CLIN. In some cases, the solicitation may break out ODCs into a separate CLIN and not allow fee on that CLIN. The bottom line is you must refer to and follow the requirements of your specific solicitation.
     
    In general, though, a contractor's CPFF proposal will break out estimated costs by cost elements (see Table 15-2 "Instructions for Submitting Cost/Price Proposals When Certified Cost or Pricing Data Are Required" in FAR 15.408). The cost elements are then summed and the fee amount is calculated as a percentage of that total estimated cost. In other words, it is not necessary to apply different fee percentages to different cost elements nor would it make sense to do so because the awarded contract will only show the fixed fee amount for the whole contract (unless the cost elements are in different CLINs, as discussed above). Further, the contractor is not paid its fee based on the percentage of costs incurred; to do so would constitute a cost-plus-percentage-of-cost arrangement prohibited by FAR 16.102(c). The contractor is paid the full fixed fee amount stated in the contract if it delivers the required goods or services in accordance with the contract terms, independent of its actual incurred costs. It may help to think of the proposed estimated fee percentage as only a negotiation tool which is discarded after the fee amount is negotiated and fixed in the contract (or order, if an IDIQ contract under FAR Subpart 16.504).
     
    As we do not know the specifics of your solicitation or contract, you should consult with the contracting officer for specific guidance on your particular acquisition.

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