To determine the amount that the government might owe to the contractor for final rates in order to close, would the award fees paid over the course of the contract be added into the CACWS? For example, they are showing $44,284,136.84 CACWS, which would result in the government owing approximately $170K. Now a revised CACWS has been submitted based on adding in $2,123,779.58 of Award Fees paid increasing the CACWS to $46,407,916.42 which would now result in the government owing approximately $405K. Would paid award fees be taken into consideration in negotiating final rates for quick-close out?
Award-fees are not costs, so they are not necessary for a completed CACWS. Further, as award-fees are not cost, they also need not be considered in determination of final contract costs or final indirect cost rates.
Open full Question Details
The Federal Acquisition Regulation (FAR) describes a Cost-plus-award-fee contract this way:
16.405-2 Cost-plus-award-fee contracts.
A cost-plus-award-fee 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.
Cost-plus-award-fee contracts are required to contain the clause at FAR § 52.216-7 (Allowable Cost and Payment). Of particular note to this question and response, §52.216-7(d)(2)(i) requires the contractor to submit “an adequate final indirect cost rate proposal to the Contracting Officer.” Also highly relevant to this question and response is §52.216-7(d)(2)(iii) (H) and (I) which identify elements of an adequate indirect cost rate proposal to include:
“(H) Schedule of direct costs by contract and subcontract and indirect expense applied at claimed rates, . . . .”
“(I) Schedule of cumulative direct and indirect costs claimed and billed by contract and subcontract.”
The CACWS, so prominently mentioned in the question, is not specifically identified or defined in the Federal Acquisition Regulation (FAR), but rather appears in the DCAA policy, procedure and guidance. The CACWS is, according to the Defense Contract Audit Agency (DCAA) (see DCAAM 7641.90, Enclosure 6, paragraph b), “a summary schedule of cumulative allowable contractor costs for each open flexibly priced contract through the last contractor fiscal year for which indirect cost rates have been settled” (Italics and bolding added for emphasis). The concentration of the CACWS as well as that of the DCAA audit is on the cost incurred.
The award fee is not a cost, so inclusion on the CACWS would not be necessary for the CACWS to be complete. In fact, the award fee amount is to be determined, consistent with the award fee plan, in accordance with the contract’s award-fee clause. FAR §16.406(e ) requires such award-fee clauses to provide that “the award fee amount and the award-fee determination methodology are unilateral decisions made solely at the discretion of the Government.”