Is it discretionary for a PCO to add additional fee on a CPFF completion effort contract due to certain circumstances that were unknown after negotiations? Is additional fee allowable?
The first question I would ask myself is how would the government’s Pre-Negotiation Memorandum been different knowing from the onset that GFM would not be provided. My guess is the fee would have be higher based on how you stated the contract was initially negotiated as well as the extra risk the contractor would assume had they known that they would be required to procure all of the necessary material.
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As stated in FAR 16.306(a), “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.” Based on that statement and your scenario, you would be allowed to execute a bilateral contract modification to change the fixed fee as per FAR 43.103(a)(3). And as you pointed out, there is no black or white answer that you must or must not modify the contract to change the fee. That decision should be based on a well written justification that supports the changed fee (or not changing the fee) is fair and reasonable, makes sound business sense and that any modification is within the scope of the contract.
As always, we encourage you to work with your contracting and legal office as well as referencing your agency specific regulations for any acquisition as we don't have all the facts or access to the contract files.