Calculating the Industrial Funding Fee Adjustment

In order to assure that customer agencies receive the benefit of the
lower IFF rate, the MAS pricing must be adjusted to reflect the new
rate, regardless of the negotiations that resulted in the current
Schedule contract pricing.

On the electronic versions, an Excel spreadsheet is attached with these
formulae built in. Click on the word "Attachment" at the end of this
document for access. Once in Excel, select "net price" or "discount"
sheet (on the bottom of the Excel page) as appropriate. Enter the
current GSA Schedule contract price or discount in Column B on the
proper sheet and the base, and the revised price/discount will be
generated in Columns C and D, respectively.

**UNIT PRICE ADJUSTMENTS**: Schedule contract unit prices, including
fully loaded labor rates, can be adjusted downward by 0.2519% to reflect
the change. The use of the shorthand and method is accomplished by
multiplying the current price by 0.997481. This can be achieved through
a two step procedure by deducting 1% from the unit price, then dividing
the remainder by 0.9925.

Unit prices can be rounded up or down to the nearest penny or dollar
based on the contractor's commercial practice, and consistently with the
current contract pricelist. For most Schedule contract unit prices,
reducing the unit price by 0.25% (multiplying by 0.9975) will be
adequate. However, when the unit price is over \$375 and priced to the
penny, or over \$30,000 priced to the dollar, the more accurate figure
should be used.

Using the two step procedure has the benefit of giving you the current
base price: i.e., the Schedule contract price without the IFF.

**DISCOUNT AJUSTMENTS**: A 0.25% reduction in unit price DOES NOT equal
a 0.25% increase in discount. A discount is a percentage of the *list*
price. The IFF is a percentage of the *Schedule* contract price. The
list price minus the Schedule contract discount equals the Schedule
contract price.

Unfortunately, there is no simple rule that can be applied, because the
percentage point adjustment varies with the size of the current Schedule
contract discount. The one step procedure is to increase the current
Schedule contract discount, by the current discount times the change in
discount (0.25%). For greater accuracy, take the difference to four
decimal places as shown above.

*Remember, in math, you always do what is in the parentheses \[(...)\]
first, then multiplications and divisions before you do additions and
subtractions, and that percentages are equal to two decimal places. *

For example, if the current discount is 30% off of the contractor\'s
list price, the new discount would be 30.175% in accordance with the
following calculation:

**30% + \[(1 - 30%) X 0.25%\] =\
0.30 + (0.70 X 0.0025) =\
0.30175 =\
30.175%**

The two step approach for discounts is more complicated, but you gain
the defining of the base discount.

-   The current discount plus one (1) minus the current discount
    multiplied by 1% equals the base discount.

-   To add the revised IFF to the base discount, divide one (1) minus
    the base discount by .9925, and subtract that from one (1).

For example, if the current discount is 30% off of the contractor\'s
list price, the new discount would be 30.18% in accordance with the
calculation shown below.

**30% + (1- 0.30) X 1%=\
0.30 +0.0070 =\
0.3070 =\
30.70% Base Discount**

**1- (1 - 30.70%) / (1-0.0075) =\
1 - 0.693 / 0.9925 =\
1 - 0.6982 =\
0.3018 =\
30.18%\* Adjusted discount**

Where there are step or string discounts (e.g., 50% + 10% + 5%), the
adjustment should be made to first discount level only. No adjustment is
necessary for prompt payment discounts.

\*Any difference in the two results comes from the rounding down of
0.2519% to 0.25% in the first example.

ATTACHMENT