52.216-10 Incentive Fee.

As prescribed in 16.307(d), insert the following clause:

Incentive Fee (Jun 2011)

(a) General. The Government shall pay the Contractor for performing this contract a fee determined

as provided in this contract.

(b) Target cost and target fee. The target cost and target fee specified in the Schedule are subject to

adjustment if the contract is modified in accordance with paragraph (d) of this clause.

(1) "Target cost," as used in this contract, means the estimated cost of this contract as initially

negotiated, adjusted in accordance with paragraph (d) of this clause.

(2) "Target fee," as used in this contract, means the fee initially negotiated on the assumption that

this contract would be performed for a cost equal to the estimated cost initially negotiated, adjusted

in accordance with paragraph (d) of this clause.

(c) Withholding of payment.

(1) Normally, the Government shall pay the fee to the Contractor as specified in the Schedule.

However, when the Contracting Officer considers that performance or cost indicates that the

Contractor will not achieve target, the Government shall pay on the basis of an appropriate lesser

fee. When the Contractor demonstrates that performance or cost clearly indicates that the

Contractor will earn a fee significantly above the target fee, the Government may, at the sole

discretion of the Contracting Officer, pay on the basis of an appropriate higher fee.

(2) Payment of the incentive fee shall be made as specified in the Schedule; provided that the

Contracting Officer withholds a reserve not to exceed 15 percent of the total incentive fee or

$100,000, whichever is less, to protect the Government’s interest. The Contracting Officer shall

release 75 percent of all fee withholds under this contract after receipt of an adequate certified final

indirect cost rate proposal covering the year of physical completion of this contract, provided the

Contractor has satisfied all other contract terms and conditions, including the submission of the final

patent and royalty reports, and is not delinquent in submitting final vouchers on prior years’

settlements. The Contracting Officer may release up to 90 percent of the fee withholds under this

contract based on the Contractor’s past performance related to the submission and settlement of

final indirect cost rate proposals.

(d) Equitable adjustments. When the work under this contract is increased or decreased by a

modification to this contract or when any equitable adjustment in the target cost is authorized under

any other clause, equitable adjustments in the target cost, target fee, minimum fee, and maximum

fee, as appropriate, shall be stated in a supplemental agreement to this contract.

(e) Fee payable.

(1) The fee payable under this contract shall be the target fee increased by _____ [Contracting Officer

insert Contractor’s participation] cents for every dollar that the total allowable cost is less than the

target cost or decreased by ______ [Contracting Officer insert Contractor’s participation] cents for
every dollar that the total allowable cost exceeds the target cost. In no event shall the fee be greater

than ____________ [Contracting Officer insert percentage] percent or less than _________________

[Contracting Officer insert percentage] percent of the target cost.

(2) The fee shall be subject to adjustment, to the extent provided in paragraph (d) of this clause, and

within the minimum and maximum fee limitations in paragraph (e)(1) of this clause, when the total

allowable cost is increased or decreased as a consequence of-

(i) Payments made under assignments; or

(ii) Claims excepted from the release as required by paragraph (h)(2) of the Allowable Cost and

Payment clause.

(3) If this contract is terminated in its entirety, the portion of the target fee payable shall not be

subject to an increase or decrease as provided in this paragraph. The termination shall be

accomplished in accordance with other applicable clauses of this contract.

(4) For the purpose of fee adjustment, "total allowable cost" shall not include allowable costs arising

out of-

(i) Any of the causes covered by the Excusable Delays clause to the extent that they are beyond the

control and without the fault or negligence of the Contractor or any subcontractor;

(ii) The taking effect, after negotiating the target cost, of a statute, court decision, written ruling, or

regulation that results in the Contractor’s being required to pay or bear the burden of any tax or

duty or rate increase in a tax or duty;

(iii) Any direct cost attributed to the Contractor’s involvement in litigation as required by the

Contracting Officer pursuant to a clause of this contract, including furnishing evidence and

information requested pursuant to the Notice and Assistance Regarding Patent and Copyright

Infringement clause;

(iv) The purchase and maintenance of additional insurance not in the target cost and required by the

Contracting Officer, or claims for reimbursement for liabilities to third persons pursuant to the

Insurance Liability to Third Persons clause;

(v) Any claim, loss, or damage resulting from a risk for which the Contractor has been relieved of

liability by the Government Property clause; or

(vi) Any claim, loss, or damage resulting from a risk defined in the contract as unusually hazardous

or as a nuclear risk and against which the Government has expressly agreed to indemnify the

Contractor.

(5) All other allowable costs are included in "total allowable cost" for fee adjustment in accordance

with this paragraph (e), unless otherwise specifically provided in this contract.

(f) Contract modification. The total allowable cost and the adjusted fee determined as provided in

this clause shall be evidenced by a modification to this contract signed by the Contractor and

Contracting Officer.

(g) Inconsistencies. In the event of any language inconsistencies between this clause and

provisioning documents or Government options under this contract, compensation for spare parts or

other supplies and services ordered under such documents shall be determined in accordance with
this clause.

(End of clause)

Parent topic: 52.216 [Reserved]