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    When using the alternate structured approach to determine profit on a contract modification, are the weights assigned to the profit factors of Degree of risk, Relative difficulty of work, Size of job, Period of performance, and Subcontracting a function of the size of the entire project, or just that modification?


    Answer

    Use the DAU Profit Guidelines Tool. 
     
    This change order proposal was submitted in response to one of the standard remedy granting clauses.  You should limit the repricing of the contract to the effect of the change alone without altering the basic profit or loss position of the contractor.  Said another way, the change order is not an opportunity to change a loss to a profit,  or vice-versa.  Likewise the change order is not an excuse to reform the contract or to shift his [contractor's]  his own risks or losses  to the government.  We are only interested in increasing the costs and maintaining the same fee rate (within the limitations of alternate methodology). -Basic Principals of Pricing Adjustments, Ch8 Administration of Government Contracts, Cibinic & Nash
     
    RESEARCH:  See DFAR 215.404-4  Profit.  “… (c)  Contracting officer responsibilities…(C)  May use an alternate structured approach (see 215.404-73) when  (1)  The contract action is—(i)  At or below the certified cost or pricing data threshold (see FAR 15.403-4(a)(1)); (ii)  For architect-engineer or construction work;… (a)  The contracting officer may use an alternate structured approach under 215.404-4(c).” 
     
    See ttps://www.acq.osd.mil/dpap/cpf/docs/contract_pricing_finance_guide/vol3_ch11.pdf
    Consider Basic Contract Profit/Fee for Contract Modifications. FAR requires that you consider profit/fee objectives based exclusively on the contract action being negotiated. The only exception is the negotiation of contract change or modification. When you negotiate contract modifications, you may use the basic-contract profit/fee rate as your negotiation objective rate if both of the following conditions are met: The contract modification is for the same type and mix of work as the basic contract. The modification is of relatively small dollar value compared to the total contract. If the contract modification does not meet both of the above conditions, perform a profit/fee analysis to establish the appropriate profit/fee objective.
     
    DIRECTION ANSWER:  Use DAU tool https://www.dau.mil/tools/t/Profit-Guidelines-for-Construction
    Profit Guidelines for Construction - Alternate Structured Approach. This tool can be utilized for determining profit on basic construction contracts as well as modifications to construction contracts.  This interactive spreadsheet allows the user to enter the different weights for the 7 risk factors and it will calculate the profit percentage based on the weights entered.  This tool also provides the guidance for scoring the 7 factors of this alternate structured approach.  This is the same tool that is used on CON 244.

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