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  • Question

    Am I entitled to the entire negotiated fixed fee, or is that fee reduced during the descope process.


    Answer

    16.306 -- Cost-Plus-Fixed-Fee Contracts.
    Your answer is in FAR Subsections 16.306(a), (d)(1) and (d)(2).  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.” [Emphasis added.]
     
    Nonetheless, the type of CPFF contract  – completion or term – might affect the fee negotiation.  
     
    The completion CPFF describes the scope of work by stating a definite goal and specifying an end product. This type of contract requires the contractor to complete and deliver the specified end product (e.g., a final report of research) within or below the estimated cost as a condition for payment of the entire fixed fee.  Therefore, payment of the full fee would be proper if your company delivered the end product as specified in the original contract (i.e., an underrun occurred; your company completed performance at less than the estimated cost).  For a non- or partial delivery, the fee should be reduced correspondingly. That the contract was never fully funded is not relevant to the fee determination because in a Completion CPFF contract, payment of fee (full or partial) is based on delivery (all or some) of the end product.  
     
    In contrast is the Term CPFF. This type of contract describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period. Under this form, if the Government deems the performance satisfactory, the full fixed fee is payable at the expiration of the agreed-upon period.  In your case, since sufficient funding is not available for performance to continue to complete the term of the contract, the fixed fee must be reduced commensurately.
     
    Lastly, the fee amount might also vary if the “descope process”  is concluded as a termination for convenience.
     

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