PGI Part 216 - TYPES OF CONTRACTS

PGI 216.1 -SELECTING CONTRACT TYPES

PGI 216.104 Factors in selecting contract type.

PGI 216.104-70 Research and development.

PGI 216.2 -FIXED-PRICE CONTRACTS

PGI 216.203 Fixed-price contracts with economic price adjustment.

PGI 216.203-4 Contract clauses.

PGI 216.4 -INCENTIVE CONTRACTS

PGI 216.401 General.

PGI 216.402 Application of predetermined, formula-type incentives.

PGI 216.402-2 Technical performance incentives.

PGI 216.403 Fixed-price incentive contracts.

PGI 216.403-1 Fixed-price incentive (firm target) contracts.

PGI 216.403-2 Fixed-price incentive (successive targets) contracts.

PGI 216.405 Cost-reimbursement incentive contracts.

PGI 216.405-1 Cost-plus-incentive-fee contracts.

PGI 216.405-2 Cost-plus-award-fee contracts.

PGI 216.470 Other applications of award fees.

PGI 216.5 -INDEFINITE-DELIVERY CONTRACTS

PGI 216.505 Ordering.

PGI 216.505-70 Orders under multiple-award contracts.

PGI 216.7 -AGREEMENTS

PGI 216.703 Basic ordering agreements.

Parent topic: PGI Defense Federal Acquisition Regulation

PGI 216.1 -SELECTING CONTRACT TYPES
PGI 216.104 Factors in selecting contract type.

See the policy tab for Principal Director, Defense Pricing and Contracting memorandum dated April

1, 2016, entitled “Guidance on Using Incentive and Other Contract Types,” when selecting and

negotiating the most appropriate contract type for a given procurement.

PGI 216.104-70 Research and development.

(1) General. There are several categories of research and development (R&D) contracts: research,

exploratory development, advanced development, engineering development, and operational

systems development (see DFARS 235.001 for definitions). Each category has a primary technical or

functional objective. Different parts of a project may fit several categories. The contract type must fit

the work required, not just the classification of the overall program.

(2) Research and exploratory development.

(i) Price is not necessarily the primary factor in determining the contract type.

(ii) The nature of the work to be performed will usually result in a cost-plus award fee, cost-plus

fixed fee term, cost-no-fee, or cost-sharing contract.

(iii) If the Government and the contractor can identify and agree upon the level of contractor effort

required, the contracting officer may select a firm fixed-price level-of-effort contract, except see

DFARS 235.006.

(iv) If the Government and the contractor agree that an incentive arrangement is desirable and

capable of being evaluated after completion of the work, the contracting officer may use an incentive

type contract.

(3) Advanced development.

(i) The nature of the work to be performed often results in a cost-plus fixed fee completion type

contract.

(ii) Contracting officers may select incentive contracts if—

(A) Realistic and measurable targets are identified; and

(B) Achievement of those targets is predictable with a reasonable degree of accuracy.

(iii) Contracting officers should not use contracts with only cost incentives where—

(A) There will be a large number of major technical changes; or

(B) Actions beyond the control of the contractor may influence the contractor's achievement of cost

targets.

(4) Engineering development and operational systems development.

(i) When selecting contract types, also consider—
(A) The degree to which the project is clearly defined, which in turn affects the contractor's ability to

provide accurate cost estimates;

(B) The need for effort that will overlap that of earlier stages;

(C) The need for firm technical direction by the Government; and

(D) The degree of configuration control the Government will exercise.

(ii) For development efforts, particularly for major defense systems, the preferred contract type is

cost reimbursement.

(iii) Contracting officers should use fixed-price type contracts when risk has been reduced to the

extent that realistic pricing can occur; e.g., when a program has reached the final stages of

development and technical risks are minimal, except see DFARS 235.006.

PGI 216.2 -FIXED-PRICE CONTRACTS

PGI 216.203 Fixed-price contracts with economic price adjustment.

PGI 216.203-4 Contract clauses.

Contracting officers should use caution when incorporating Economic Price Adjustment (EPA)

provisions in contracts. EPA provisions can result in significant and unanticipated price increases

which can have major adverse impacts to a program. EPA provisions should be used only when

general economic factors make the estimating of future costs too unpredictable within a fixed-price

contract. The primary factors that should be considered before using an EPA provision include

volatility of labor and/or material costs and contract length. In cases where cost volatility and/or

contract length warrant using an EPA provision, the provision must be carefully crafted to ensure an

equitable adjustment to the contract. Accordingly, contracting officers should always request

assistance from their local pricing office, the Defense Contract Management Agency, or the Defense

Contract Audit Agency when contemplating the use of an EPA provision.

For adjustments based on cost indexes of labor or material, use the following guidelines:

(1) Do not make the clause unnecessarily complex.

(2) Normally, the clause should not provide either a ceiling or a floor for adjustment unless

adjustment is based on indices below the six-digit level of the Bureau of Labor Statistics (BLS)—

(i) Producer Price Index;

(ii) Employment Cost Index for wages and salaries, benefits, and compensation costs for aerospace

industries (but see paragraphs (3) and (6) of this subsection); or

(iii) North American Industry Classification System (NAICS) Product Code.

(3) DoD contracting officers may no longer use the BLS employment cost index for total

compensation, aircraft manufacturing (NAICS Product Code 336411, formerly Standard Industrial

Classification Code 3721, Aircraft) in any EPA clause in DoD contracts. This index is ineffective for
use as the basis for labor cost adjustments in EPA clauses in DoD contracts.

The BLS employment cost index for wages and salaries, aircraft manufacturing may still be used in

EPA clauses for labor costs. If a BLS index for benefits is desired, contracting officers should use a

broader based index that will smooth the effects of any large pension contributions, such as the

employment cost index for benefits, total private industry. If a total compensation index is desired,

contracting officers should consider the creation of a hybrid index by combining the above

referenced indices at a predetermined percentage. For example, a hybrid total compensation index

could consist of 68 percent employment cost index for wages and salaries, aircraft manufacturing,

and 32 percent of the employment cost index for benefits, private industry.

(4) Normally, the clause should cover potential economic fluctuations within the original contract

period of performance using a trigger band. Unless the economic fluctuation exceeds the trigger

value, no EPA clause adjustments are made.

(5) The clause must accurately identify the index(es) upon which adjustments will be based.

(i) It must provide for a means to adjust for appropriate economic fluctuation in the event

publication of the movement of the designated index is discontinued. This might include the

substitution of another index if the time remaining would justify doing so and an appropriate index is

reasonably available, or some other method for repricing the remaining portion of work to be

performed.

(ii) Normally, there should be no need to make an adjustment if computation of the identified index

is altered. However, it may be appropriate to provide for adjustment of the economic fluctuation

computations in the event there is such a substantial alteration in the method of computing the

index that the original intent of the parties is negated.

(iii) When an index to be used is subject to revision (e.g., the BLS Producer Price Indexes), the EPA

clause must specify that any economic price adjustment will be based on a revised index and must

identify which revision to the index will be used.

(6) The basis of the index should not be so large and diverse that it is significantly affected by

fluctuations not relevant to contract performance, but it must be broad enough to minimize the

effect of any single company, including the anticipated contractor(s).

(7) Construction of an index is largely dependent upon three general series published by the U.S.

Department of Labor, BLS. These are the—

(i) Industrial Commodities portion of the Producer Price Index;

(ii) Employment Cost Index for wages and salaries, benefits, and compensation costs for aerospace

industries (but see paragraphs (3) and (6) of this subsection); and

(iii) NAICS Product Code.

(8) Normally, do not use more than two indices, i.e., one for labor and one for material.

(9) The clause must establish and properly identify a base period comparable to the contract periods

for which adjustments are to be made as a reference point for application of an index.

(10) The clause should not provide for an adjustment beyond the original contract performance

period, including options. The start date for the adjustment may be the beginning of the contract or
a later time, as appropriate, based on the projected rate of expenditures.

(11) The expenditure profile for both labor and material should be based on a predetermined rate of

expenditure (expressed as the percentage of material or labor usage as it relates to the total

contract price) in lieu of actual cost incurred.

(i) If the clause is to be used in a competitive acquisition, determine the labor and material

allocations, with regard to both mix of labor and material and rate of expenditure by percentage, in a

manner which will, as nearly as possible, approximate the average expenditure profile of all

companies to be solicited so that all companies may compete on an equal basis.

(ii) If the clause is to be used in a noncompetitive acquisition, the labor and material allocations may

be subject to negotiation and agreement.

(iii) For multiyear contracts, establish predetermined expenditure profile tables for each of the

annual increments in the multiyear buy. Each of the second and subsequent year tables must be

cumulative to reflect the total expenditures for all increments funded through the latest multiyear

funding.

(12) The clause should state the percentage of the contract price subject to price adjustment.

(i) Normally, do not apply adjustments to the profit portion of the contract.

(ii) Examine the labor and material portions of the contract to exclude any areas that do not require

adjustment. For example, it may be possible to exclude—

(A) Subcontracting for short periods of time during the early life of the contract which could be

covered by firm-fixed-priced subcontracting;

(B) Certain areas of overhead, e.g., depreciation charges, prepaid insurance costs, rental costs,

leases, certain taxes, and utility charges;

(C) Labor costs for which a definitive union agreement exists; and

(D) Those costs not likely to be affected by fluctuation in the economy.

(iii) Allocate that part of the contract price subject to adjustment to specific periods of time (e.g.,

quarterly, semiannually, etc.) based on the most probable expenditure or commitment basis

(expenditure profile).

(13) The clause should provide for definite times or events that trigger price adjustments.

Adjustments should be frequent enough to afford the contractor appropriate economic protection

without creating a burdensome administrative effort. The adjustment period should normally range

from quarterly to annually.

(14) When the contract contains cost incentives, any sums paid to the contractor on account of EPA

provisions must be subtracted from the total of the contractor's allowable costs for the purpose of

establishing the total costs to which the cost incentive provisions apply. If the incentive arrangement

is cited in percentage ranges, rather than dollar ranges, above and below target costs, structure the

EPA clause to maintain the original contract incentive range in dollars.

(15) The EPA clause should provide that once the labor and material allocations and the portion of

the contract price subject to price adjustment have been established, they remain fixed through the
life of the contract and shall not be modified except in the event of significant changes in the scope

of the contract. The clause should state that pricing actions pursuant to the Changes clause or other

provisions of the contract will be priced as though there were no provisions for economic price

adjustment. However, subsequent modifications may include a change to the delivery schedule or

significantly change the amount of, or mix of, labor or material for the contract. In such cases, it may

be appropriate to prospectively apply EPA coverage. This may be accomplished by—

(i) Using an EPA clause that applies only to the effort covered by the modification;

(ii) Revising the baseline data or period in the EPA clause for the basic contract to include the new

work; or

(iii) Using an entirely new EPA clause for the entire contract, including the new work.

(16) Consistent with the factors in paragraphs (1) through (15) of this subsection, it may also be

appropriate to provide in the prime contract for similar EPA arrangements between the prime

contractor and affected subcontractors to allocate risks properly and ensure that those

subcontractors are provided similar economic protection.

(17) When EPA clauses are included in contracts that do not require submission of

certified cost or pricing data as provided for in FAR 15.403-1, the contracting officer must obtain

adequate data to establish the baseline from which adjustments will be made. The contracting

officer may require verification of the data submitted to the extent necessary to permit reliance upon

the data as a reasonable baseline.

PGI 216.4 -INCENTIVE CONTRACTS

PGI 216.401 General.

(c) Incentive contracts. DoD has established the Award and Incentive Fees Community of Practice

(CoP) under the leadership of the Defense Acquisition University (DAU). The CoP serves as the

repository for all related materials including policy information, related training courses, examples

of good award fee arrangements, and other supporting resources. The CoP is available on the DAU

Acquisition Community Connection at https://acc.dau.mil/awardandincentivefees. Additional

information can be found on the MAX website maintained by the Office of Management and Budget

at: https://max.omb.gov.

(e) Award-fee contracts.

(i) It is DoD policy to utilize objective criteria, whenever possible, to measure contract performance.

In cases where an award-fee contract must be used due to lack of objective criteria, the contracting

officer shall consult with the program manager and the fee determining official when developing the

award-fee plan. Award-fee criteria shall be linked directly to contract cost, schedule, and

performance outcomes objectives.

(ii) Award fees must be tied to identifiable interim outcomes, discrete events or milestones, as much

as possible. Examples of such interim milestones include timely completion of preliminary design

review, critical design review, and successful system demonstration. In situations where there may

be no identifiable milestone for a year or more, consideration should be given to apportioning some
of the award fee pool for a predetermined interim period of time based on assessing progress toward

milestones. In any case, award fee provisions must clearly explain how a contractor’s performance

will be evaluated.

(iii) The head of the contracting activity for each defense agency shall retain the D&F for (a) all

acquisition category (ACAT) I or II) programs, and (b) all non-ACAT I or II contracts with an

estimated value of $50 million or more. The head of the contracting activity shall forward the D&Fs

for ACAT I programs to Defense Pricing and Contracting/Contract Policy directorate DPC/CP) within

1 month of the end of the quarter. Copies of D&Fs on all contracts shall also be included in the

contract file.

PGI 216.402 Application of predetermined, formula-type incentives.

PGI 216.402-2 Technical performance incentives.

Contractor performance incentives should relate to specific performance areas of milestones, such

as delivery or test schedules, quality controls, maintenance requirements, and reliability standards.

PGI 216.403 Fixed-price incentive contracts.

PGI 216.403-1 Fixed-price incentive (firm target) contracts.

(1) Use of FPIF contract.

(i) Not mandatory. DFARS 216.403-1(b)(1) directs the contracting officer to give particular

consideration to the use of fixed-price incentive (firm target) (FPIF) contracts, especially for

acquisitions moving from development to production. DFARS does not mandate the use of FPIF for

initial production and each acquisition situation must be evaluated in terms of the degree and nature

of the risk presented in order to select the proper contract type.

(ii) Considerations. Volume 4, chapter 1, of the Contract Pricing Reference Guide provides a detailed

discussion of the considerations involved in selecting the proper contract type. For example:

(A) It is not in the Government’s best interest to use FPIF when the cost risk is so great that

establishing a ceiling price is unrealistic.

(B) It is also not in the Government’s best interest to use firm-fixed-price (FFP) contracts on

production programs until costs have become stable. Therefore, FPIF contracts should be

considered in production and sole source follow-on programs where actual costs on prior FFP

contracts have varied by more than 3-4 percent from the costs considered negotiated. Contracting

officers are reminded that actual costs on prior contracts for the same item or essentially the same

item, regardless of contract type or data reporting requirements of the prior contract, are cost and

pricing data on the pending contract, and must be obtained from the contractor on production

programs when certified cost or pricing data are required.

(C) For sole source major systems procurements, contracting officers should utilize FPIF contracts

instead of FFP contracts unless the reasons for significant variation are well understood and actions

have been taken to ensure that significant variation will not recur. In addition, when options are
included as described in PGI 217.202 (2), the use of FPIF contracts is both highly recommended and

encouraged, because both parties will be assuming more risk in pricing multiple years of

requirements.

(2) Incentive arrangement. DFARS 216.403-1(b)(2) directs the contracting officer to pay particular

attention to share lines and ceiling prices for fixed-price incentive (firm target) contracts, with 120

percent ceiling and a 50/50 share ratio as the point of departure for establishing the incentive

arrangement. While DFARS does not mandate the use of these share ratios or ceiling percentage, it

is not unreasonable to expect that upon entering into production, risks have been mitigated to the

point that the DFARS recommended point of departure for an FPIF incentive arrangement would be

normal.

(3) Analyzing risk.

(i) Quantification of risk.

(A) The first step is establishing a target cost for which the probability of an underrun and overrun

are considered equal and therefore, the risks and rewards are shared equally, hence the 50/50 share

is the point of departure. Equally important is determining that the contractor has a high probability

of being able to accomplish the effort within a ceiling percentage of 120 percent. In accomplishing

both these steps, the analysis of risk is essential.

(B) Too often, risk is evaluated only in general terms without attempting to quantify the risk posed

by the various elements of cost. Also, a contracting officer may incorrectly fall back on the share

ratios and ceiling percentages negotiated on prior contracts or other programs, without examining

the specific risks.

(C) Whether being used to select the proper contract type or establishing share lines and ceiling

price on an FPIF contract, the analysis of risk as it pertains to the prime contractor is key. From a

contractor’s perspective, all risks, including technical and schedule risk, have financial

ramifications. Technical and schedule risks, if realized, generally translate into increased effort,

which means increased cost. Therefore, all risk can be translated into cost risk and quantified. Risk

always has two components that must be considered in the quantification: the magnitude of the

impact and the probability that it will occur.

(D) When cost risk is quantified, it is much easier to establish a reasonable ceiling percentage. The

ceiling percentage is applicable to the target cost on the prime contract. It is important to

understand the degree of risk that various cost elements pose in relation to that target cost. A

discussion of the major cost elements and the risk implications follows in paragraphs (3)(ii) through

(iv) of this section.

(ii) Subcontracts and material cost and risk.

(A) In many prime contractors’ contracts, a substantial amount of risk is borne by subcontractors,

not the prime contractor, via negotiated firm-fixed-price (FFP) subcontracts. In the case of FFP

subcontracts, the subcontractor is obligated to deliver at the negotiated price. The risk to the prime

contractor is the supplier’s failure to perform or perform on time. Generally, that risk is considered

to be low by both the prime and the subcontractor as evidenced by the FFP contract type. In

addition, the prime contractor will normally have priced effort for material management or

subcontract administration to ensure timely performance on the part of the suppliers. This effort

may be bid directly or indirectly (e.g., as part of an overhead expense) depending on the contractor’s

accounting practices.
(B) The impact of negotiated FFP subcontracts on the prime contractor’s risk can be significant. A

prime contract with a 120 percent ceiling price provides overrun protection to the prime contractor

equal to 20 percent of the target cost on the contract. However, if FFP subcontracts represent half

of the total contract cost, then half of the target cost is subject to little or no cost risk on the part of

the prime contractor. Therefore, the overrun protection provided by 20 percent of the target cost is

really closer to 40 percent protection of the prime’s cost that is truly at risk to the prime contractor,

which likely is significantly overstated. Thus, a ceiling price less than 120 percent in this risk

situation would be more appropriate.

(C) For subcontracts that have not yet been negotiated between the prime and subcontractor at the

time of negotiation of the prime contract, the degree of risk is essentially limited to the difference

between the price proposed by the subcontractor and the subcontract value included in the prime

contractor’s proposal.

(D) For subcontracts that are not FFP, the risk to the prime is based on the risk represented by the

subcontractors’ contractual relationship with the prime. If the subcontract is FPIF and has a 50/50

share ratio and 120 percent ceiling, the prime’s risk is 50 percent of each dollar of overrun up to the

ceiling amount. An analysis of the subcontractor’s risk would be necessary to determine the

probability of reaching the ceiling price.

(iii) Direct labor cost and risk.

(A) The risk in direct labor is in the hours needed to perform the effort and the risk in the labor rates

paid to employees. There is generally little risk in the direct labor rates. However, there are various

levels of risk in the direct labor hours needed by the prime contractor to accomplish the contract

requirements. This risk can be driven by a number of factors including technical complexity,

schedule constraints, or availability of personnel, parts, or tooling. Risks vary by task and the key is

to identify the major tasks and assess the “what if” impact at the total contract cost level.

(B) Schedule is often correctly cited as a risk factor, but it is important to understand and quantify

the probability and impact of a potential schedule slip. Generally, any schedule slip can only affect

the prime contractor’s in-house cost. Therefore, any schedule impact should be assessed on the

impact it would have on the prime contractor’s performance of its tasks.

(C) However, it is wrong to assume the worst-case scenario that a schedule delay results in an

extension of the entire prime contractor workforce for the period of the delay. A responsible

contractor will take steps to minimize both the delay and the impact of that delay. For instance, a

production schedule assumes an optimal sequencing of tasks which presumes the timely arrival and

availability of parts from suppliers or other in-house sources. A delay in receiving parts as planned

could require a resequencing of tasks and could adversely affect the efficiency of performing a

number of tasks, but it will not cause the entire workforce to be idle during the delay.

(iv) Indirect (e.g., overhead) cost and risk. Overhead and other indirect costs (e.g., general and

administrative expense) can represent a significant portion of the prime contractor’s in-house cost.

Indirect expense (hereafter referred to as overhead) poses potential cost growth risk or the

opportunity for cost reduction from the following two perspectives:

(A) Actual overhead rate. (1) First, the actual overhead rate could be different than that proposed.

Proposed overhead rates, even those covered by a forward pricing rate agreement, are based on

forecasts of overhead expenses and the bases to which they are applied. The final overhead rate that

is actually applied (charged) to a contract will be based on the actual overhead expenses and the

actual base, each of which could be considerably different than estimated. The net effect could be a
higher or lower overhead rate than estimated.

(2) In general, the risk in an overhead rate tends to be driven more by fluctuations in the base than

in the expenses. This is because overhead expenses are made up of expenses that consist of “fixed”

(e.g., depreciation) and variable (e.g., fringe benefits) in nature. When the actual base turns out to

be lower than the estimated base, the fixed costs are spread over a smaller base resulting in a

higher overhead rate. In general, if the actual base is greater than estimated, a lower overhead rate

will result.

(3) In assessing this risk, the contracting officer should consider the contractor’s ability to predict

overhead rates based on comparing proposed versus actual rates for prior years. In making this

comparison, it is important to do so in a manner consistent with the proposal being reviewed. For

instance, if the majority of overhead costs on the proposal being reviewed occur two years in the

future, the comparison should look at the contractor’s accuracy in predicting overhead rates two

years in advance. For example, in looking at the 2009 actual overhead rate, what did the contractor

propose for 2009 in its 2007 forward pricing rate proposal?

(B) Actual base cost. If the actual base cost on the contract (e.g., direct labor dollars) is different

than that proposed, the contract will be charged overhead costs according to the actual base costs

on that contract. If the contractor overruns direct labor, even if the actual labor overhead rate was

the same as proposed, that rate would be applied to a higher base resulting in increased overhead

dollars on that contract. The opposite would be true if the contractor underruns direct labor on the

contract. Since this aspect of risk is tied to the base cost on the contract, the risk is the same as it is

for those base costs (e.g., direct labor, material).

PGI 216.403-2 Fixed-price incentive (successive targets) contracts.

The formula specified in FAR 16.403-2(a)(1)(iii) does not apply for the life of the contract. It is used

to fix the firm target profit for the contract. To provide an incentive consistent with the

circumstances, the formula should reflect the relative risk involved in establishing an incentive

arrangement where cost and pricing information were not sufficient to permit the negotiation of firm

targets at the outset.

PGI 216.405 Cost-reimbursement incentive contracts.

PGI 216.405-1 Cost-plus-incentive-fee contracts.

Give appropriate weight to basic acquisition objectives in negotiating the range of fee and the fee

adjustment formula. For example—

(1) In an initial product development contract, it may be appropriate to provide for relatively small

adjustments in fee tied to the cost incentive feature, but provide for significant adjustments if the

contractor meets or surpasses performance targets; and

(2) In subsequent development and test contracts, it may be appropriate to negotiate an incentive

formula tied primarily to the contractor's success in controlling costs.
PGI 216.405-2 Cost-plus-award-fee contracts.

(1) Although weighted guidelines do not apply per DFARS 216.405-2(3)(ii) when definitizing a

contract action, the contracting officer shall, nevertheless, separately assess and document the

reduced cost risk on the contract for—

(i) The period up to the date of definitization; as well as

(ii) The remaining period of performance (see DFARS 217.7404-6).

(2) Normally, award fee is not earned when the fee-determining official has determined that

contractor performance has been submarginal or unsatisfactory.

(3) The basis for all award fee determinations shall be documented in the contract file.

(4) The cost-plus-award-fee contract is also suitable for level of effort contracts where mission

feasibility is established but measurement of achievement must be by subjective evaluation rather

than objective measurement. See Table 16-1, Performance Evaluation Criteria, for sample

performance evaluation criteria and Table 16-2, Contractor Performance Evaluation Report, for a

sample evaluation report.

(5) The contracting activity may—

(i) Establish a board to—

(A) Evaluate the contractor's performance; and

(B) Determine the amount of the award or recommend an amount to the contracting officer; and

(ii) Afford the contractor an opportunity to present information on its own behalf.

PGI 216.470 Other applications of award fees.

The “award amount” portion of the fee may be used in other types of contracts under the following

conditions:

(1) The Government wishes to motivate and reward a contractor for—

(i) Purchase of capital assets (including machine tools) manufactured in the United States, on major

defense acquisition programs; or

(ii) Management performance in areas which cannot be measured objectively and where normal

incentive provisions cannot be used. For example, logistics support, quality, timeliness, ingenuity,

and cost effectiveness are areas under the control of management which may be susceptible only to

subjective measurement and evaluation.

(2) The “base fee” (fixed amount portion) is not used.

(3) The chief of the contracting office approves the use of the “award amount.”

(4) An award review board and procedures are established for conduct of the evaluation.
(5) The administrative costs of evaluation do not exceed the expected benefits.

TABLE 16-1, PERFORMANCE EVALUATION CRITERIA

Submarginal Marginal Good Very Good Excellent

A

Time of

Delivery.

(A-1)

Adherence to

plan

schedule.

Consistently

late on 20%

plans

Late on 10%

plans w/o prior

agreement

Occasional

plan late

w/o

justification.

Meets plan

schedule.

Delivers all

plans on

schedule &

meets prod.

Change

requirements

on schedule

(A-2)

Action on

Anticipated

delays.

Does not

expose changes

or resolve them

as soon as

recognized.

Exposes changes

but is dilatory in

resolution on

plans.

Anticipates

changes,

advise

Shipyard

but misses

completion

of design

plans 10%.

Keeps Yard

posted on

delays, resolves

independently

on plans.

Anticipates in

good time,

advises Shipyard, resolves

independently

and meets

production

requirements.

(A-3)

Plan

Maintenance.

Does not

complete

interrelated

systems studies

concurrently.

System studies

completed but

constr. Plan

changes delayed.

Major work

plans

coordinated

in time to

meet

production

schedules.

Design changes

from studies

and interrelated

plant issued in

time to meet

product

schedules.

Design

changes,

studies

resolved and

test data

issued ahead

of production

requirements.

B

Quality of

Work.

(B-1)

Work

Appearance.

25% dwgs. Not

compatible with

Shipyard repro.

processes and

use.

20% not

compatible with

Shipyard repro.

processes and

use.

10% not

compatible

with

Shipyard

repro.

processes

and use.

0% dwgs

prepared by

Des. Agent not

compatible with

Shipyard repro.

processes and

use.

0% dwgs.

Presented

incl. Des.

Agent,

vendors,

subcontr. Not

compatible

with Shipyard

repro

processes and

use.

(B-2)

Thoroughness

and Accuracy

of Work.

Is brief on plans

tending to leave

questionable

situations for

Shipyard to

resolve.

Has followed

guidance, type

and standard

dwgs.

Has

followed

guidance,

type and

standard

dwgs.

Questioning

and

resolving

doubtful

areas.

Work complete

with notes and

thorough

explanations for

anticipated

questionable

areas.

Work of

highest

caliber

incorporating

all pertinent

data required

including

related

activities.

(B-3)

Engineering

Competence.

Tendency to

follow past

practice with no

variation to

meet reqmts.

job in hand.

Adequate engrg.

To use & adapt

existing designs

to suit job on

hand for routine

work.

Engineered

to satisfy

specs.,

guidance

plans and

material

provided.

Displays

excellent

knowledge of

constr. Reqmts.

considering

systems aspect,

cost, shop

capabilities and

procurement

problems.

Exceptional

knowledge of

Naval

shipwork &

adaptability

to work

process

incorporating

knowledge of

future

planning in

Design.
B

Quality of

Work

(Cont’d)

(B-4)

Liaison

Effectiveness

Indifferent to

requirements of

associated

activities,

related

systems, and

Shipyard

advice.

Satisfactory but

dependent on

Shipyard of force

resolution of

problems without

constructive

recommendations

to subcontr. or

vendors.

Maintains

normal

contract

with

associated

activities

depending

on Shipyard

for

problems

requiring

military

resolution.

Maintains

independent

contact with all

associated

activities,

keeping them

informed to

produce

compatible

design with

little assistance

for Yard.

Maintains

expert

contact,

keeping Yard

informed,

obtaining info

from equip,

supplies w/o

prompting of

Shipyard.

(B-5)

Constant

surveillance

required to

keep job from

slipping—assign

to low priority

to satisfy needs.

Requires

occasional

prodding to stay

on schedule &

expects Shipyard

resolution of

most problems.

Normal

interest and

desire to

provide

workable

plans with

average

assistance

& direction

by

Shipyard.

Complete &

accurate job.

Free of

incompatibilities

with little or no

direction by

Shipyard.

Develops

complete and

accurate

plans, seeks

out problem

areas and

resolves with

assoc. act.

ahead of

schedule.

C

Effectiveness

in Controlling and/or

Reducing

Costs

(C-1)

Utilization of

Personnel

Planning of

work left to

designers on

drafting boards.

Supervision sets

& reviews goals

for designers.

System

planning by

supervisory,

personnel,

studies

checked by

engineers.

Design

parameters

established by

system

engineers &

held in design

plans.

Mods. to

design plans

limited to less

than 5% as

result lack

engrg.

System

correlation.

(C-2)

Control

Direct

Charges

(Except

Labor)

Expenditures

not controlled

for services.

Expenditures

reviewed

occasionally by

supervision.

Direct

charges set

&

accounted

for on each

work

package.

Provides

services as part

of normal

design function

w/o extra

charges.

No cost

overruns on

original

estimates

absorbs

service

demands by

Shipyard.

(C-3)

Performance

to Cost

Estimate

Does not meet

cost estimate

for original

work or

changes 30%

time.

Does not meet

cost estimate for

original work or

changes 20%

time.

Exceeds

original est.

on change

orders 10%

time and

meets

original

design

costs.

Exceeds original

est. on changing

orders 5% time.

Never

exceeds

estimates of

original

package or

change

orders.

TABLE 16-2,

CONTRACTOR

PERFORMANCE

EVALAUTION

REPORT

Ratings Period of

____________________________________

Excellent Contract Number

______________________________

Very Good Contractor

____________________________________

Marginal Date of Report

_________________________________

Submarginal PNS Technical

Monitor/s________________________

____________________________________________
CATEGORY CRITERIA RATING ITEM

FACTOR

EVALUATION

RATING

CATEGORY

FACTOR

EFFICIENCY

RATING

A-1 Adherence to Plan Schedule ________ x .40 = __________

A-2 Action on

Anticipated Delays ________ x .30 = __________

A-3 Plan Maintenance ________ x .30 = __________

Total Item Weighed Rating __________ x .30 = __________

B QUALITY OF WORK

B-1 Work Appearance ________ x .15 = __________

B-2 Thoroughness and Accuracy of Work ________ x .30 = __________

B-3 Engineering Competence ________ x .20 = __________

B-4 Liaison Effectiveness ________ x .15 = __________

B-5 Independence and Initiative ________ x .15 = __________

Total Item Weighed Rating __________ x .40 = __________

C

EFFECTIVE-NESS IN CONTROL-LING AND/OR

REDUCING COSTS

C-1 Utilization of Personnel _______ x .30 = __________

C-2 Control of all Direct Charges Other than

Labor _______ x .30 = __________

C-3 Performance to Cost Estimate _______ x .40 = __________

Total Item Weighed Rating __________ x .30 = __________

TOTAL WEIGHT RATING

_________________________________

Rated by:

_________________________________________________

Signature(s)

_______________________________________________

NOTE: Provide supporting data and/or justification for below average or outstanding item ratings.

PGI 216.5 -INDEFINITE-DELIVERY CONTRACTS

PGI 216.505 Ordering.

(b)(2) Exceptions to the fair opportunity process. For an order exceeding the simplified acquisition

threshold, that is a follow-on to an order previously issued for the same supply or service based on a
justification for an exception to fair opportunity citing the authority at FAR 16.505(b)(2)(i)(B) or

(C)—

(A) The justification shall include a copy of the previous justification to assist the approval authority

in determining whether the actions to remove or overcome any barriers that led to the exception to

fair opportunity cited on the previous justification were completed; and

(B) The approval authority shall determine whether the planned actions were completed. If the

actions were not completed, the justification for the follow-on action must be approved by the

approval authority one-level above the approval authority for the previous justification (see FAR

16.505(b)(2)(ii)(C)). If the previous justification was approved by the Senior Procurement Executive

(SPE), the approval remains at the SPE level.

PGI 216.505-70 Orders under multiple-award contracts.

(b) For task orders issued under multiple-award indefinite-delivery indefinite-quantity services

contracts, contracting officers shall, when minimum labor category qualifications exist in the

underlying contract–

(1) Ensure solicitations contain minimum labor category qualifications deemed necessary for

successful task order performance, such as education and years of work experience, that are

consistent with the contract’s requirements;

(2) When allowed under the terms of the contract, identify any exceptions from labor category

qualifications, such as education and years of work experience, proposed by the contractor as an

alternative. When exceptions exist, contracting officers shall –

(i) Identify any proposed exception from the labor category qualifications in the contract file,

considering any potential performance and price impacts on the agency’s requirements, and

(ii) Document the reasons for accepting any proposed alternatives to the contract requirements; and

(3) Include verification procedures within the quality assurance surveillance plan to ensure

contractor personnel providing the service meet qualification requirements identified for the labor

categories specified in the task order and contract. Verification, such as validation of contractor

personnel education and years of relevant work experience, ensures the Government receives

adequate services, as identified in task order and contract performance requirements (see FAR

46.104 and 46.407).

PGI 216.7 -AGREEMENTS

PGI 216.703 Basic ordering agreements.

(d)(i) Individual orders under a basic ordering agreement shall be individually closed following

completion of the orders (see FAR 4.804).

(ii) The office issuing the agreement shall furnish all authorized ordering offices sufficient

information for the ordering office to complete its contract reporting responsibilities under DFARS
204.670-2 or, in the case of civilian agencies, the Federal Procurement Data System reporting

requirement. Data furnished to civilian agencies must contain uncoded information about the data

elements and the meanings of the codes to permit these users to translate the data into the federal

format. This data must be furnished to the ordering activity in sufficient time for the activity to

prepare its report for the action within 3 working days of the order.

(iii) Any activity listed in the agreement may issue orders on DD Form 1155, Order for Supplies or

Services, or Standard Form 26, Award/Contract.