Introductory to the “Basics”

of Contract Types and Their Impact in the Management

of Government Property

Presented by: Fay K. Schulte, CPPM

Government contracts can be complex and managing Government property against different types of contracts can be complicated.

This presentation covers different contract types and how property should be managed against these types.

Grouped into the following categories under FAR Part 16:

◦ Fixed-Price Contracts (Subpart 16.202)◦ Cost-Reimbursement Contracts (Subpart

16.301)◦ Time and Material Contracts (Subpart 16.601)◦ Incentive Contracts (Subpart 16.401)◦ Indefinite – Delivery Contracts (Subpart 16.501)◦ Labor Hour Contracts (Subpart 16.602)◦ Letter Contracts (Subpart 16.603)

What Are The Government Contract Types?

Firm Fixed-Price (FFP) Fixed-Price Level of Effort (FPLOE) Fixed-Price With Award Fees Fixed-Price with Economic Price

Adjustment Fixed-Price Incentive (FPI) Fixed-Price, Material Reimbursement Fixed-Price Redeterminable

Variations of Fixed-Price

Basic Definition: A contract that negotiates a fair and reasonable priced that can be established at the outset with a negotiated price that remains the same over the life of the contract and the Government pays the negotiated amount regardless of the contractor’s real costs.

Maximum risks and full responsibility for all costs and resulting profits or loss on the contractor with minimum administrative burden on both contracting parties.

Firm-Fixed Price (FFP)

Generally used for a specified level of effort over a stated period of time.

Contractor is obligated to devote a specified “level of effort” over a stated period of time for a “fixed” price. Price is based on effort expended, not results achieved.

Contract price not-to-exceed $100,000 except with the approval from the Chief of the Contracting Officer (CO).

Fixed Price Level of Effort (FPLOE)

An award fee earned in addition to the fixed price.

May be used to motivate contractors since other incentive cannot be used when contractor performance cannot be objectively measured.

Award fee amount is determined by contractor’s performance based on criteria established in the contract.

Fixed Price With Award Fees

Price adjustments provisions based on upward and downward revision of stated contract price with specific contingencies regarding stability of labor or material prices during the life of the contract.

Fixed Price with Economic Price Adjustment

Fixed-price incentive (FPI) contract with provisions for adjustment of profit. The final contract price is based on a comparison between the final negotiated total costs and the total target costs.

Fixed Price Incentive (FPI)

Used in the purchase of repair and overhaul services to provide a firm fixed-price for services with reimbursement for cost of materials used.

Fixed Price, Material Reimbursement

Fixed-Price Redetermination contracts are either prospective or retroactive. The prospective type is used when it is possible to negotiate a fair and reasonable price for an initial period but not for subsequent periods. The initial portion of the contract is firm fixed price and will be the longest period possible. The price for subsequent periods is determined through negotiation after completion of the contract and will be for at least 12 months. The retroactive type is used when it is not possible to negotiate a fair and reasonable price for the entire contract period. A ceiling price is established and final price is determined through negotiation after completion of the contract.

Fixed Price Redeterminable

Cost-Plus-Fixed Fee (CPFF)

Cost-Plus-Award-Fee (CPAF)

Cost-Plus-Incentive-Fee (CPIF)

Variations of Cost Reimbursement (Cost-Plus)

Basic Definition of Cost Plus: Type of contract where a contractor is paid for all of its allowed expense up to a set limit, plus additional payment to allow the company to make a profit.

Contractor's costs responsibility is minimized, Government's cost responsibility is maximized. The contractor is reimbursed for allowable, allocable costs. Contractor's profit is fixed. Price of the contract (total amount paid to the contractor) is not fixed.

Cost-Plus-Fixed Fee (CPFF)

A cost reimbursement type contract with special fee provisions. It provides a means of applying incentives in contracts which are not susceptible to finite measurements of performance necessary for structuring incentive contracts. The fee is in two parts: a fixed amount unrelated to performance, and an award amount related to a subjective judgment of the quality of the contractor's performance.

Cost-Plus-Award Fee (CPAF)

A cost-reimbursement type contract with provision for a fee that is adjusted by formula in accordance with the relationship which total allowable costs bear to target cost.

Cost-Plus-Incentive Fee (CPIF)

Definition: A contract under which a contractor is paid on the basis of the actual cost of direct labor, usually with specific hourly rates along with the actual costs of materials and equipment and agreed fixed add-on to cover the contractor’s overhead and profits.

Time and Materials (T&M)

Definition: Type of contract that provides for an indefinite quantity of services or supplies during a fixed period of time.

Delivery or Task Orders are placed against a Basic Ordering Agreement (BOA) for individual requirements. Generally IDIQs are used when it cannot predetermine the precise quantities of services or supplies that it will require during the contract period.

Indefinite Delivery/Indefinite Quantity (IDIQ)

Definition: A contractual written letter that authorizes the contractor to begin immediately performing services or manufacturing supplies.

May be used when the Government’s interest demands that the contractor be given a binding commitment so that work can start immediately in the event negotiating a definitive is not possible in sufficient time to meet the requirement.

Letter Contracts

Property professional should have a principle understanding of the complexity of the different types of contracts so they can within the contract -

◦ Understand the basic format and the contract type risk analysis;

◦ Understand specific property requirements;◦ Understand their property administration role

within the lifecyle of the contracting process;◦ Be able to identify contractual FARs and other

Agency’s supplement clauses (DFARs etc,);

Why Should We Know Types of Contracts?

The Contracts department and/or the cognizant contract representative within your company should be your contact for contractual information including the contract type.

Who to Contact?

Where would you find the contract type within the contract?

Generally on the 2nd page of the contract award:Sample 1

Sample 2

So, you have been made aware there is property on a Government contract. What should be your first initial step?

“Read the contract”, particularly the Statement of Work, CLINs, applicable FARs and any attachments pertaining to Government property.

Next step - how would the contract type affects the management of Government property?

3

Contractor retains title to all Contractor Acquired Property (CAP) on a basic FFP contract after final delivery unless:

The CAP is called out in a separate Contract Line Item Number (CLIN) which the Government will reimburse; then title shall be vested to the Government, and/or

If the contract is financed by Progress Payments under FAR 52.232-16.

Basic FFP Contract – Contractor Acquired Property

With the exception to the basic FFP, all “CAP & GFP” property shall be managed in accordance with FAR Clause 52.245-1, 52.245-2, and other Agency’s clauses (if applicable), along with the contractual Statement of Work (SOW) in conjunction with the contractor’s Government Property Policies and Procedures.

Questions?

Contact Info:

Fay K. Schulte, CPPM (310) 722-3430 – Mobile

fayk888@gmail.com