NATIONAL OCEANIC 

AND ATMOSPHERIC 

ADMINISTRATION 

NOAA’s Cost-Plus-AwardFee and Award-Term 

Processes Need to Support 

Fees and Extensions 

FINAL REPORT NO. OIG-12-027-A 

MAY 18, 2012 

U.S. Department of Commerce 

Office of Inspector General 

Office of Audit and Evaluation 

For Public Release 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington, D.C. 20230 

May 18, 2012 

MEMORANDUM FOR: 	 Mitchell J. Ross, Director 

Acquisition and Grants Office 

Ntt spheric Administration 

FROM: 	 Andrew Katsaros 

Assistant Inspector General for Audit 

SUBJECT: NOAA's Cost-Plus-Award-Fee and Award-Term Processes 

Need to Support fees and Extensions 

Final Report No. OIG-12-027-A 

We are providing our final audit report on the National Oceanic and Atmospheric 

Administration's (NOAA's) management of cost-plus-award-fee (CPAF) and cost-plus-awardterm (CPAT) contracts. Our audit objectives were to determine whether rating and payment 

decisions were supported and whether NOAA effectively monitored award-fee and awardterm plans and contractor performance. We assessed award-fee and award-term ratings and 

payments made by NOAA, based on documentation used to support them, and evaluated 

NOAA's guidance, payment structure, and evaluation criteria for the nine contracts we 

reviewed: four CPAF contracts, four CPAT contracts, and one contract with both award fees 

and terms. 

NOAA should use the two types of contracts more effectively to encourage excellence in 

contractor performance. Often, evaluation documents were not consistently maintained by 

NOAA performance monitors or did not contain enough specific examples of good or bad 

contractor performance to justify award fees and award-term extensions. Also, award-fee and 

award-term plans developed by NOAA did not consistently and clearly contain payment 

structures or identify criteria for evaluations that encouraged contractors to excel. In addition, 

descriptions defining scores to rate contractor performance were subjective and unclear. 

Further, NOAA did not maintain documentation in the contract file justifying the use of these 

contract types as required by the Federal Acquisition Regulation. In some cases, the selection of 

a CPAF or CPAT contract type may have been questionable. Together these issues raise 

questions on whether NOAA had assurances that the use of CPAF or CPAT contracts was 

appropriate. Finally, the complete picture of NOAA's use of CPAF and CPAT contracts is 

unclear. Data reported in the Federal Procurement Data System- Next Generation and records 

maintained by NOAA on the use of CPAF and CPAT contracts were inaccurate and 

incomplete. 
We have received your response to our draft report. Where appropriate, we have modified 

this final report based on this response. The formal NOAA response is included as appendix E. 

The final report will be posted on OIG's website pursuant to section 8L of the Inspector 

General Act of 1978, as amended. 

In accordance with Department Administrative Order 213-5, within 60 days of the date of this 

memorandum, please provide us with an action plan that responds to all of the report 

recommendations. We appreciate the cooperation and courtesies extended to us by your staff 

during our audit. Please direct any inquiries regarding this report to me at (202) 482-7859 or 

Mark Zabarsky at (202) 482-3884. 

Attachment 

cc: 	 Edward Horton, Chief Administrative Officer, NOAA 

Chad Wagner, Division Director, Policy and Oversight Division, NOAA AGO 

Dale Henderson, Chief Review and Analysis, Policy and Oversight Division, NOAA AGO 

Kelly Mabe, Deputy Director, National Capital Acquisition Division, NOAA AGO 

Thomas Fout, NESDIS Branch Chief, NCAD, NOAA AGO 

Mack Cato, Audit Liaison, NOAA 
Report In Brief 

MAY 18, 2012 

Background 

As of June 2011, NOAA had nine 

active cost-plus-award-fee (CPAF) 

and cost-plus-award-term (CPAT) 

contracts, which provide financial 

incentives based on contractor 

performance. These contracts had 

a potential maximum value of approximately $1.6 billion, including 

approximately $87 million in available award-fee pools and about $386 

million in available award-term periods. While incentive contracts can 

encourage excellence in contractor 

performance, they can be burdensome to administer and require 

effective monitoring to ensure that 

contract dollars are spent wisely 

and that award fees and terms are 

justified based on contractor performance. 

Why We Did This Review 

In December 2007, the Office of 

Management and Budget’s Office of 

Federal Procurement Policy issued 

guidance to chief acquisition officers and senior procurement executives to review and update their 

acquisition policies on the appropriate use of incentive contracts. In 

this audit, we assessed award-fee 

and award-term ratings and payments made by NOAA, based on 

documentation used to support 

them, and evaluated NOAA’s 

award-fee and award-term guidance, payment structure, and evaluation criteria for nine incentive 

contracts: four CPAF contracts, 

four CPAT contracts, and one contract with both award fees and 

terms. 

NATIONAL OCEANIC AND ATMOSPHERIC 

ADMINISTRATION 

NOAA’s Cost-Plus-Award-Fee and Award-Term Processes 

Need to Support Fees and Extensions 

OIG-12-027-A 

WHAT WE FOUND 

NOAA gave contractors high ratings, resulting in substantial award fees or 

extended contract periods of performance, for eight of nine contracts. However, 

the ratings associated with four of these contracts lacked sufficient support to 

demonstrate that the contractor met or exceeded the award-fee or award-term 

evaluation criteria. As a result, approximately $43.8 million was paid in award 

fees or contract extensions without proper justification. On some contracts, the 

performance monitors did not maintain documentation to support the ratings, 

and on other contracts, the examples and comments provided did not contain 

enough information to determine whether the ratings, award fees, and award 

terms were warranted. In addition, NOAA’s award-fee payment structures 

provided little incentive for contractors to excel in executing their contracts. 

Also, weaknesses existed in the management of NOAA’s CPAF and CPAT 

contracts. 

WHAT WE RECOMMEND 

We recommend that the Director of the NOAA Acquisition and Grants Office: 

1. Require performance monitors to provide narrative comments that 

identify specific strengths, weaknesses, and deficiencies to support 

assigned ratings. 

2. Develop award-fee and award-term incentive structures that encourage 

contractor excellence. 

3. Update the performance evaluation plans for contracts 

DG133E10CN0229 and DG133E09CN0094 to add more measurable 

award-fee criteria. 

4. Develop measurable and outcome-based criteria for assessing contractor 

performance for award fees and award-term extensions. 

5. Require a cost-benefit analysis in decisions on CPAF and CPAT 

contracts. 

6. Establish clear division of responsibility for the evaluation team and 

prohibit the same official from performing multiple roles. 

7. Develop controls over the maintenance of contract files and contract 

data to ensure more immediate availability and completeness of 

documentation for contract actions. 
 

         

       

           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Contents 

Introduction ....................................................................................................................................................... 1
 

Findings and Recommendations .................................................................................................................... 4
 

I.	 Management of CPAF and CPAT Contracts Needs Improvement ......................................4
 

A. Contractor Ratings Were Not Adequately Supported to Justify Award-Fee 

 Payments and Award-Term Extensions .................................................................................4
 

B. Payment Structures Do Not Provide Adequate Distinctions Between Satisfactory 

 and Excellent Contractor Performance ..................................................................................6

 C. Evaluation Criteria Do Not Adequately Support Contractor Performance 

 Assessments.................................................................................................................................. 6

 D. NOAA Entered into CPAF and CPAT Contracts Without Sufficient Knowledge 

 of Their Appropriateness ......................................................................................................... 7
 

E. Overlapping Award-Fee and Award-Term Responsibilities Create 

Additional Risks............................................................................................................................ 9
 

II.	 Inaccurate and Incomplete Reporting of NOAA’s Open and Active CPAF and CPAT

 Contracts............................................................................................................................................ 9
 

Recommendations................................................................................................................................. 11
 

Summary of Agency and OIG Comments................................................................................................ 12
 

Appendix A: Objectives, Scope, and Methodology ................................................................................ 13
 

Appendix B: Potential Monetary Benefits ................................................................................................ 16
 

Appendix C: NOAA Award-Fee and Award-Term Processes ........................................................... 17
 

Appendix D: Award-Fee and Award-Term Definitions ........................................................................ 18
 

Appendix E: Agency Response.................................................................................................................... 19
 

COVER: Detail of fisheries pediment,

U.S. Department of Commerce headquarters,
 

by sculptor James Earle Fraser, 1934
 

FINAL REPORT 
‐     ‐  

       

‐      

       

       

                                                           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Introduction 

As of June 2011, the National Oceanic and Atmospheric Administration (NOAA) had nine 

active cost-plus-award-fee (CPAF) and cost-plus-award-term (CPAT) contracts, which provide 

financial incentives based on contractor performance. These contracts have a potential 

maximum value of approximately $1.6 billion, including approximately $87 million in available 

award-fee pools and about $386 million in available award-term periods. While incentive 

contracts can encourage excellence in contractor performance, they can be burdensome to 

administer and require effective monitoring to ensure contract dollars are spent wisely and that 

award fees and terms are justified based on contractor performance. 

In December 2007, the Office of Management and Budget’s (OMB’s) Office of Federal 

Procurement Policy issued guidance1

 to chief acquisition officers and senior procurement 

executives to review and update their acquisition policies on the appropriate use of incentive 

contracts. In this audit, we reviewed award-fee and award-term ratings and payments made by 

NOAA, based on documentation used to support them, and evaluated NOAA’s award-fee and 

award-term guidance, payment structure, and evaluation criteria for nine incentive contracts: 

four CPAF contracts, four CPAT contracts, and one contract with both award fees and terms. 

We found that NOAA gave contractors high ratings, 

resulting in substantial award fees or extended 

contract periods of performance, for eight of the nine 

contracts.2 However, we found that the ratings 

associated with award fees and award-term extensions 

on four of these contracts lacked sufficient support to demonstrate that the contractor met or 

exceeded the award-fee or award-term evaluation criteria. As a result, approximately $43.8 

million was paid in award fees or contract extensions without proper justification, which we 

have identified as unsupported costs.3 On some of the contracts, the performance monitors4 

did not maintain documentation to support the ratings, and on other contracts, where 

documented support was available, the examples and comments provided did not contain 

enough information to determine whether the ratings, award fees, and award terms were 

warranted. 

Further, NOAA’s award-fee payment structures provided 

little incentive for contractors to excel in executing their 

contracts. For example, all five CPAF contracts we 

reviewed allowed awards ranging from 50 percent to 70 

percent of the award-fee pool to be paid for satisfactory performance. Additionally, NOAA’s 

performance evaluation plans used broad, highly subjective criteria—such as “satisfactory 

1

 OMB Memorandum, Appropriate Use of Incentive Contracts, December 4, 2007. 2

 For one contract, award fees were not paid to the contractor because an evaluation period was not completed. 3

 An unsupported cost is a cost that is questioned by OIG because OIG found that at the time of the audit such
 

cost was not supported by adequate documentation. 5 U.S.C. App. 3 § 5(f)(2).
 4

 Performance monitors provide the continuous evaluation of the contractor’s performance in specific assigned 

areas of responsibility. This often-daily oversight is the foundation of the award-fee and award-term evaluation 

processes. Performance monitors are specialists intimately familiar with their assigned areas of cognizance. 

Award fee and award term

justifications were not supported.

Award fee payment structures

did not provide incentives

for contractors to excel.

FINAL REPORT 1 
Issues with 

Contract 

No. 

Estimated 

Contract 

Amount 

Contractor 

Ratings 

Not 

Adequately 

Supported 

Payment 

Structure 

Not 

Adequately 

Discriminated 

Issues 

with 

Evaluation 

Criterion 

Issues 

with 

Adjectival 

Ratings 

Contract 

Type 

Not 

Justified 

Separation of 

Duties in 

Evaluating 

Contractor 

Performance 

DG133E09 – 

1 CN0101 $ 20,598,869    

DG133E10 – 

2 CN0229 130,703,026   

DG133E09 – 

3 CN0094 735,794,197    

DG133E03 – 

4 CN0012 10,032,561     

EA133E08 – 

5 CQ0020 200,000,000   

DG133E06 – 

6 CQ0030 69,999,000    

DG133W05 – 

7 CQ1067 330,000,000  

DG133E07 – 

8 CQ0030 45,000,000   

DG133W03 – 

9 CQ0021 80,000,000    

TOTAL $1,622,127,653 

Source: OIG 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

quality,” “marginal quality,” and “unsatisfactory quality”—making it difficult for performance 

monitors to understand and consistently apply the ratings. Revising performance evaluation 

plans for two specific satellite contracts alone to include measurable award-fee criteria would 

put approximately $61 million in expected award fees for these contracts to better use. 

Appendix B summarizes the monetary benefits identified from this audit. 

Additionally, we found weaknesses in the management of NOAA’s CPAF and CPAT contracts. 

First, NOAA did not ensure adequate separation of duties in evaluating contractor performance 

and awarding fees. The award-fee and award-term plans provided for separation of such duties 

by requiring evaluation teams to consist of an award determining official, a performance 

evaluation board (PEB), and performance monitors. The PEB is responsible for reviewing the 

performance monitors' evaluations, the contractor's self-evaluation, and any other information 

available to arrive at an overall objective and impartial position on the contractor's 

performance. At NOAA, however, this process was not consistently followed. In some 

instances, NOAA officials not only assessed contractor performance but also recommended 

award-fee amounts. Second, NOAA did not maintain documentation in the contract file 

justifying the use of these contract types as required. In some cases, the later conversion of the 

contract suggested that the initial selection of a CPAF and CPAT contract type may have been 

questionable. Together, these issues raise questions on whether NOAA had assurances that the 

use of these contract types was appropriate. Table 1 contains a summary of findings associated 

with the nine contracts. 

Table 1. Summary of Findings Associated with the Nine CPAF and CPAT Contracts 

FINAL REPORT 2 
       

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

NOAA contract data reported

in FPDS NG were inaccurate.

Finally, the complete picture of NOAA’s use of CPAF 

and CPAT contracts is unclear. Data reported in the 

Federal Procurement Data System-Next Generation 

(FPDS-NG) and records maintained by NOAA on the 

use of CPAF and CPAT contracts were inaccurate and incomplete. This occurred, in part, 

because NOAA contracting officials did not consistently ensure the accuracy of individual 

contracts reported in FPDS-NG or track combination contracts containing award-fee and 

award-term provisions. 

Appendix A further details the objectives, scope, and methodology of our audit. Appendix B 

charts the potential monetary benefits we found from our review. Appendix C outlines 

NOAA’s award-fee/award-term processes, while appendix D defines the terms used in this 

report. 

FINAL REPORT 3 
 

                                                           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Findings and Recommendations 

I. Management of CPAF and CPAT Contracts Needs Improvement 

NOAA needs to use award-fee and award-term contracts more effectively to encourage 

excellence in contractor performance. We reviewed nine CPAF and CPAT contracts and 

identified weaknesses in how NOAA evaluated contractor performance and developed 

award-fee and award-term plans. Often, contractor performance evaluation documents 

were not consistently maintained by NOAA performance monitors or did not contain 

enough specific examples of good or bad contractor performance to justify award fees and 

contract extensions. Also, award-fee and award-term plans developed by NOAA did not 

consistently and clearly identify criteria for evaluations or contain payment structures that 

encouraged contractors to excel. In addition, descriptions defining scores to rate 

contractor performance were subjective and unclear. Further, contracting officials did not 

justify the cost-effectiveness of selecting a CPAF or CPAT contract by evaluating 

administrative costs against expected benefits to the government. Without this evaluation, 

NOAA had no assurance that use of CPAF or CPAT contracts was appropriate. 

A.	 Contractor Ratings Were Not Adequately Supported to Justify Award-Fee Payments and AwardTerm Extensions 

Contracting officials did not consistently demonstrate that contractor performance ratings 

supported award payments and term extensions. As a result, approximately $43.8 million of 

award fees and award terms may not have been justified. 

Of the nine contracts we reviewed, rating periods had been completed for eight. For the 

remaining contract, a rating period had not been completed because the contract was 

converted to another contract type, so no award fees had been paid. Four contracts had 

sufficient documentation supporting performance monitors’ evaluations and ratings. The 

other four contracts—one award-fee and three award-term—lacked adequate supporting 

documentation to determine whether the assigned ratings and the resulting award fees and 

term extensions were justified. This occurred because NOAA officials responsible for 

documenting contractor performance did not adhere to the processes outlined in the awardfee and award-term plans. For some contracts, performance monitors did not provide 

comments or examples to support their adjectival5

 or numerical ratings or to indicate that 

key evaluation criteria were satisfied. For those contracts where performance monitors did 

provide narratives to support ratings, the comments or examples were general and lacked 

the detail needed to demonstrate that the ratings were warranted. For example, on one 

award-fee contract—totaling approximately $10 million—to upgrade personnel and 

equipment for the Command and Data Acquisition Stations and Satellite Operations 

Control Center, contracting officials could not provide written evidence of government 

5

 Adjectival ratings describe what constitutes each level of performance within each performance category, such as 

“excellent” or “satisfactory,” and provide assistance in establishing evaluation criteria as shown in FAR section 

16.401(e)(3)(iv) and FAR table 16-1. 

FINAL REPORT 4 
     

           

       

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

surveillance of the contractor’s performance to support the award fee paid to the 

contractor in the amount of $302,964. 

For one $80 million CPAT contract for the National Weather Service’s river, flood, and 

drought forecasting capabilities, the award consisted of a base period of 5 years and 

included five 1-year award-term periods. The contract called for annual evaluations of the 

contractor’s performance against the criteria stated in the award-term plan. According to 

the award-term plan, the documentation needed to support award-term determinations 

included performance monitors’ evaluations, PEB rating recommendations, and award 

determining official’s decisions. However, a PEB 

chairperson had not been appointed, the PEB had 

Approximately $43.8 million never met, and performance monitors’ documentation of award fees and award terms

was available only for the first award-term period. We may not have been justified.

found that the supporting documentation was either 

incomplete or unavailable. For example, performance 

monitors generally provided numerical ratings and less than one-sentence explanations to 

support rating recommendations. In some instances, no narrative descriptions were 

included with the ratings. Support for superior ratings included general comments such as 

“there were no quality problems,” “excellent task quality,” “on budget,” and “exceeds 

government’s needs.” Despite the lack of specific comments and examples, the award 

determining official approved all five of the 1-year award-term extensions, totaling $40 

million. We also found other problems with this contract such as the contracting officer 

awarding the term extension 9 months after the 5-year base period of performance had 

ended. 

For another CPAT contract—valued at about $70 million—for National Environmental 

Satellite, Data, and Information Service scientific and technical support services, the PEB and 

contracting officer’s technical representative (COTR) prepared evaluation reports for the 

award determining official without detailed narratives supporting the numerical ratings that 

the contractor received. The reports contained short descriptions or no comments on how 

and why the specific numerical ratings were provided for the contractor. For example, the 

PEB and COTR used descriptions such as “frequent information discussions held with task 

monitors to ensure constant awareness of task status” and “accurate and timely monthly 

technical progress reports; and experimental results from scientific deployments presented 

to the task monitor in a timely fashion” as a basis for supporting additional award terms. 

Despite the lack of clear and specific comments and examples, the contractor earned two 

award terms totaling 7 months at a cost of $3.5 million. 

Best practices from other federal agencies such as NASA, the Air Force, the Army, and the 

Navy generally state that performance monitors should observe contractor performance 

based on the criteria specified in the performance evaluation plan and document results by 

giving specific examples to support their conclusions. Performance monitors’ evaluations 

form the foundation of the award-fee and award-term evaluation process. Without detailed 

performance monitors' reports and examples, NOAA is forced to rely on contractor selfassessments and high-level PEB assessments to recommend award-fee and award-term 

extensions, which could result in overstated award fees and unjustified extended contract 

FINAL REPORT 5 
                                                           

 

 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

performance. Without sufficient documentation from the performance monitors, we could 

not determine whether the high fees or term extensions awarded were justified. 

B.	 Payment Structures Do Not Provide Adequate Distinctions Between Satisfactory and Excellent 

Contractor Performance 

To encourage contractor excellence, OMB guidance6 on incentive contracts such as CPAF 

and CPAT requires clear distinctions between satisfactory and excellent performance to 

support award-fee and award-term approvals. For the five CPAF contracts that we 

reviewed, award-fee payment structures were not designed to prompt contractors to excel. 

The payment structures that we reviewed associated specific numerical performance scores 

(between 0 and 100) with adjectival ratings—“excellent,” “very good,” “good,” 

“satisfactory,” and “poor/unsatisfactory”—and specified the percentage of the available 

award fee or award terms that contractors could earn for each rating. However, we found 

that contractors did not have to excel to receive a large portion of available award fees. For 

example, NOAA’s payment structure for the Geostationary Operational Environmental 

Satellite-R Series (GOES-R) ground segment services and supplies contract allowed the 

contractor to earn an award fee for “satisfactory” performance—which the contract defines 

as meeting contract requirements with some weaknesses. The payment structure would 

allow up to 70 percent, about $75.6 million, of the award-fee pool for average performance, 

leaving only about $22.7 million to motivate performance that exceeds expectations. This 

type of payment structure not only allows contractors to receive substantial payments for 

average performance but also leaves little in the award-fee pool to encourage contractors 

to exceed expectations and achieve desired contract outcomes. Moreover, FAR section 

16.401 states that the contractor should not earn more than 50 percent of the available 

award-fee pool for satisfactory performance. 

C.	 Evaluation Criteria Do Not Adequately Support Contractor Performance Assessments 

Clear evaluation criteria are critical to ensuring that award fees are commensurate with 

contractor performance. Without clearly defined metrics and outcomes, performance 

ratings are subject to interpretation and can result in unsupported contractor performance 

evaluations and awards. Accordingly, OMB guidance7

 calls for incentive contracts such as 

CPAF and CPAT contracts to establish specific performance objectives before contract 

award, such as delivering products and services on time, within cost goals, and of a stated 

level of quality. OMB guidance also states that awards must be tied to demonstrated results, 

as opposed to effort, in meeting or exceeding specified performance standards. Best 

practices from NASA and the Departments of the Air Force, Army, and Navy similarly 

recommend the use of measurable criteria to evaluate contractor performance and warn 

that using broad evaluation criteria can result in monitors being unable to provide 

meaningful comments to support ratings. 

6

 OMB Memorandum, Appropriate Use of Incentive Contracts, December 4, 2007. 7

 OMB Memorandum, Appropriate Use of Incentive Contracts, December 4, 2007. 

FINAL REPORT 6 
           

     

  

                                                           

 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Of the nine contracts reviewed, four had clear and measurable criteria to evaluate 

contractor’s performance. For example, the award-term plan for Software Development 

and Systems Security for the Comprehensive Large Array-data Stewardship System includes 

“98 percent of system components scanned quarterly,” 100 percent of the documentation 

provided meets the stated standards within 30 days,” and “90 percent of system operators 

and administrators are trained prior to introduction of new capabilities.” 

The remaining five contracts—three CPAF and two Criteria and ratings used to evaluate CPAT—had no clear and measurable criteria to contractor performance were subjective

evaluate performance. For example, on two GOES- and applied inconsistently.

R contracts, one which provides for antenna 

system development and the other for ground segment services and supplies, contracting 

officials used identical evaluation criteria factors and descriptions for evaluating the 

contractor’s performance rather than tailoring the particular requirements and outcomes of 

each contract. The evaluation plans for these contracts included identical phrases such as 

“the contractor will be evaluated on its ability to maintain an integrated program that links, 

among others: risk management to schedule and cost management, requirements 

management to schedule and cost management,” “support informed, timely, and effective 

decisions to control risks and mitigation plans,” “the contractor will be evaluated based on 

its ability to interface with the Government Furnished Property vendors and the GOES-R 

space segment vendors,” and “this includes, but is not limited to, the following: compliance 

with contract provisions; performance against the Small Business Subcontracting plan 

goals...and timely subcontract adjustments.” 

NOAA should tailor evaluation criteria and factors to fit the circumstances of each 

procurement award to ensure that NOAA’s contract objectives are being met and to 

motivate the contractor to perform the best job in critical areas as determined by NOAA. 

For the two GOES-R contracts, revising the performance evaluation plans to include 

meaningful and measurable award-fee criteria will put approximately $61 million in expected 

award fees to better use. For the other three contracts, no available award fees or terms 

remain because the contracts were converted to another contract type, the period of 

performance ended on the contract, or contracting officials awarded all available award 

terms. 

D.	 NOAA Entered into CPAF and CPAT Contracts Without Sufficient Knowledge of Their 

Appropriateness
 

While CPAF and CPAT contracts can provide incentives toward innovation and cost 

reductions, they require more post-award monitoring and resources than fixed-priced 

contract types. Before a cost-reimbursable contract, such as CPAF or CPAT, is selected, 

the FAR8

 requires that each contract file contain documentation showing why the particular 

contract type was selected and the government’s additional risks and burden required in 

managing the selected contract type. OMB guidance9

 reinforced this requirement by 

directing contracting officers to conduct and document risk and cost-benefit analyses when 

8

 FAR section 16.103(d).
 9

 OMB Memorandum, Appropriate Use of Incentive Contracts, December 4, 2007. 

FINAL REPORT 7 
                                                           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

determining whether to use incentive contracts. In addition, according to the FAR,10 an 

incentive contract may only be used when appropriate government surveillance during 

performance will provide reasonable assurance that efficient methods and effective cost 

controls are used. 

Of the nine contracts reviewed, eight contracts lacked documentation justifying the costeffectiveness of selecting an incentive contract as required by the FAR, section 16.103(d)(1). 

In some contracts, the selection of an award-fee or award-term contract type may have 

been questionable. For example, in July 2009, NOAA awarded an approximately $21 million 

CPAF contract for engineering and ground system engineering support services for two 

operational environmental satellite constellations. Subsequently, in June 2011, NOAA 

officials converted this contract to cost-plus-fixed-fee (CPFF) because they realized the 

significant time involved in adequately evaluating contractor performance to determine 

whether an award fee was warranted, thus raising questions about whether the selection of 

a CPAF contract was initially appropriate. 

Of the nine contracts, contracting officials already have converted two that were originally 

executed with award-fee provisions and one with award-term provisions to CPFF contracts. 

NOAA did not document the reasons for changing the initial contract types to CPFF 

contracts. Table 2 contains the contract type before and after conversion of these 

contracts. 

Table 2. Contracts Converted to Cost-Plus-Fixed-Fee (CPFF) 

Contract 

Contract 

Type 

Before 

Conversion 

Contract 

Type 

After 

Conversion 

DG133E03CN0012 CPAF CPFF 

DG133E09CN0101 CPAF CPFF 

DG133E07CQ0030 CPFF/AT CPFF

 Source: OIG 

Contracting officials stated to us that they converted these three contracts for the following 

reasons: 

	 The scope of work never justified incentives for contract performance. 

	 The Line Offices did not have the resources or experience to administer award-fee 

contracts. 

	 Acquisition and Grants Office resources were strained because Line Offices would 

not comply with award-fee processes. 

	 Conversions were completed only after research was done to ensure contract 

outcomes and deliverables were not jeopardized. 

10 FAR section 16.301-3 (a)(4)(ii). 

FINAL REPORT 8 
                                                           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Without proper justifications and approvals, NOAA had no assurance that CPAF and CPAT 

contracts were the most appropriate types for these contract actions and could not justify 

the increased risk and administrative burden. 

E. Overlapping Award-Fee and Award-Term Responsibilities Create Additional Risks 

To improve accountability over federal programs and operations, OMB Circular A-12311 

requires that key responsibilities in authorizing, processing, recording, and reviewing official 

agency transactions be separated among individuals performing these duties. Best practices 

from the Departments of the Air Force and Army underscore OMB Circular A-123. 

Specifically, their guidance states that it is especially important for all personnel to 

understand the overall evaluation process and their specific roles and responsibilities within 

their agency to evaluate the contractor's performance. The Federal Aviation 

Administration’s award-fee guide similarly indicates that a three-level organizational 

structure should generally be established using separate individuals for performance 

monitor, PEB, and fee-determining official (FDO) duties. 

However, on two of the contracts we reviewed, NOAA personnel simultaneously fulfilled 

multiple key roles in the award-fee process, such as performance monitor and voting 

member on the PEB. For example, on a contract—totaling approximately $45 million—for 

theoretical analysis, exploratory studies and experiments for satellites, the performance 

evaluation plan designated employees to act as performance monitors as well as members 

on the PEB. In other words, performance monitors are reviewing their own ratings. 

Allowing personnel to simultaneously carry out both performance monitor and PEB 

responsibilities increases the risks inherent to CPAF and CPAT contracts because the PEB, 

when recommending the earned award-fee amount or term extension, is expected to 

provide an objective assessment of the contractor’s overall performance based on 

performance monitors’ evaluations, contractors' self-evaluations, and any other information 

available. 

II.	 Inaccurate and Incomplete Reporting of NOAA’s Open and Active CPAF 

and CPAT Contracts 

In October 2003, the General Services Administration (GSA) introduced FPDS-NG12 as the 

backbone system for government agencies to provide contract award data to OMB. This 

system contains public information on contract spending across the federal government. 

FPDS-NG was designed to enhance the quality and reliability of procurement data by 

allowing agencies to directly upload data from their separate contract writing systems. To 

improve the completeness and accuracy of data in FPDS-NG, OMB directed agency and 

11 OMB Circular A-123, Management’s Responsibility for Internal Control, December 21, 2004, and updated as of April
 

14, 2011. 

12 The system contains summary-level information about contracts valued at $3,000 or more and paid for with 

appropriated funds.
 

FINAL REPORT 9 
 

                                                           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

department heads to ensure they implemented contract writing systems that were capable 

of electronically transferring data directly to FPDS-NG no later than the end of FY 2005.13 

GSA requires each department to complete an annual certification that states the 

completeness and accuracy percentages of their data contained in FPDS-NG. The 

Department of Commerce reported in its FY 2010 annual certification that NOAA had a 

100 percent accuracy rate on information recorded in the contract type field and NOAA's 

overall accuracy rate was 98 percent. 

The Department’s Office of Acquisition Management (OAM) provided us an active list of 

CPAF contracts from FPDS-NG during fiscal years 2008 to 2010. We also requested a list 

of active CPAF and CPAT contracts from NOAA’s Acquisitions and Grants Office, covering 

the same period, to verify the universe of these contracts. We determined that there were 

discrepancies between the two lists. 

To illustrate, OAM identified seven CPAF contracts as active during fiscal years 2008 to 

2010. However, NOAA’s list showed five active contracts—two with award fees and three 

with award terms. Ultimately, we determined that NOAA had nine active CPAF and CPAT 

contracts for that time period: four CPAF contracts, four CPAT contracts, and one 

contract with both award fees and terms. Two of the four CPAF contracts had an 

inaccurate contract type listed in FPDS-NG. NOAA was also unable to locate the contract 

file for one contract identified by OAM as a CPAF contract and in FPDS-NG as a cost-plusincentive-fee (CPIF) contract. Section 4.801 of the FAR requires the head of each office 

performing contracting, contract administration, or paying functions to establish files 

containing the records of all contract actions. Missing files could be an indication of 

questionable contract management and oversight practices. Table 3 contains information on 

the contracts reported by OAM, NOAA, and FPDS-NG. 

Table 3. Contract Designations According to OAM, NOAA, and FPDS-NG 

Contract No. 

Estimated 

Contract 

Amount 

Per 

OAM 

Per 

NOAA 

Per 

FPDS-NG 

Determination 

After Contract 

File Review 

1 DG133E09CN0101 $ 20,598,869 CPAF — CPAF CPAF 

2 EA133E08CQ0020 200,000,000 CPAF — CPAF CPAF/CPAT 

3 DG133E09CN0094 735,794,197 CPAF CPAF CPAF CPAF 

4 DG133E10CN0229 130,703,026 — CPAF FPa FP/CPAF 

5 DG133E06CQ0030 69,999,000 CPAF CPAT CPFF CPFF/CPAT 

6 DG133E03CN0012 10,032,561 CPAF — CPFF CPAF 

7 DG133E07CQ0030 45,000,000 CPAF — CPAF CPFF/CPAT 

8 DG133W05CQ1067 330,000,000 — CPAT FP FP/CPAT 

9 DG133W03CQ0021 80,000,000 — CPAT ODb CPFF/CPAT 

10 DG133W03CT0030 0 CPAF — CPIF Missing file 

Total $1,622,127,653 7 5 10 9 

Source: OIG
 

Dashes indicate that the contract was not identified in the list to OIG. aFP—fixed price; b

The contract type recorded in FPDS-NG states order dependent (OD), which allows 

pricing arrangement to be determined separately for each order. 

13 OMB Memorandum, Timely and Accurate Procurement Data, August 25, 2004. 

FINAL REPORT 10 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Inaccuracies and deficiencies in maintaining a complete list of active CPAF contracts 

occurred, in part, because NOAA contracting officials did not consistently ensure the 

accuracy of individual contracts reported in FPDS-NG or track combination contracts 

containing award-fee and award-term provisions. Also, since FPDS-NG does not allow 

agencies to code contracts with more than one contract type as combination contracts, 

agencies must use the code for the contract type representing the larger portion of the 

expected contract value. For example, if a contract has both cost-reimbursement and fixedprice portions but the fixed-price portion of the contract makes up 60 percent of the 

expected contract value, the contract would be coded as fixed-price. This practice results in 

potentially underreporting award-fee and award-term contracts in FPDS-NG and increases 

the risk of erroneous reporting to internal and external stakeholders such as Congress, 

OMB, and taxpayers. Therefore, having complete and accurate information would allow 

NOAA to monitor the use and execution of these types of contracts more effectively. 

Recommendations 

We recommend that the Director of the NOAA Acquisition and Grants Office: 

1.	 Require performance monitors to provide narrative comments that identify specific 

strengths, weaknesses, and deficiencies to support assigned ratings. 

2.	 Develop award-fee and award-term incentive structures that encourage contractor 

excellence. 

3.	 Update the performance evaluation plans for contracts DG133E10CN0229 and 

DG133E09CN0094 to add more measurable award-fee criteria. 

4.	 Develop measurable and outcome-based criteria for assessing contractor 

performance for award fees and award-term extensions. 

5.	 Require a cost-benefit analysis in decisions on CPAF and CPAT contracts, including 

documentation of how the benefits will offset the costs and justifications and 

approvals for all contract actions containing award-fee and award-term provisions. 

6.	 Establish clear division of responsibility for the evaluation team (award determining 

official, PEB, and performance monitors) and prohibit the same official from 

performing multiple roles. 

7.	 Develop controls over the maintenance of contract files and contract data to ensure 

more immediate availability and completeness of documentation for contract 

actions. 

FINAL REPORT 11 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Summary of Agency and OIG Comments 

In responding to our draft report, NOAA concurred with all of our recommendations except 

for a draft recommendation that asked NOAA to develop and maintain a database of contracts 

with award-fee, award-term, and incentive provisions. NOAA asserted that it would continue 

to rely on FPDS-NG and that developing and maintaining a separate database, which would 

essentially serve the same purpose as FPDS-NG, would not be an efficient use of its limited 

resources. 

We agree that NOAA should rely on FPDS-NG for tracking all contract actions. However, we 

disagree that FPDS-NG will provide a complete and accurate picture of NOAA’s use of CPAF 

and CPAT contracts. As noted in our report, data reported in FPDS-NG and records 

maintained by NOAA on the use of CPAF and CPAT contracts were inaccurate and 

incomplete. Further, FPDS-NG does not allow agencies to code contracts with more than one 

contract type as combination contracts, which forces NOAA to use the code for the contract 

type representing the larger portion of the expected contract value. For example, five of the 

nine contracts we reviewed had been coded as contract types other than CPAF or CPAT 

because the contracts were combination contracts and a larger portion of the expected value 

of these contracts was a contract type other than CPAF or CPAT. As a result, we had to rely 

on records separately maintained by NOAA and OAM, other than FPDS-NG, to determine the 

number of CPAF and CPAT contracts currently in effect. We also found inaccuracies in these 

records. 

Recognizing NOAA’s intention to address its data quality issues without maintaining a separate 

database, we removed the draft recommendation with which NOAA did not concur and are 

asking NOAA to develop controls for accumulating contract data in coordination with the 

development of its controls over the maintenance of its contract files, as described in 

recommendation 7 of this final report. 

We look forward to reviewing NOAA’s action plan to address our report recommendations in 

greater detail. We have included NOAA’s complete response as appendix E. 

FINAL REPORT 12 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix A: Objectives, Scope, and 

Methodology 

The objectives of our audit were to determine whether the National Oceanic and Atmospheric 

Administration (NOAA) properly supported decisions related to award-fee and award-term 

ratings and effectively monitored award-fee and award-term plans and contractor performance. 

We limited our scope to cost-plus-award-fee (CPAF) and award-term (CPAT) contracts and 

task orders. However, we do not have reasonable assurance that we have reviewed all of these 

contracts and task orders active during FYs 2008, 2009, and 2010 due to NOAA’s inability to 

provide a complete and reliable list when requested by the Office of Inspector General. 

To identify the population of NOAA’s CPAF and CPAT contracts, we obtained a list from the 

Department of Commerce Office of Acquisition Management (OAM). OAM’s list was 

generated from the Federal Procurement Data System-Next Generation (FPDS-NG), covered 

FYs 2008–2010, and contained task orders and modifications for CPAF and CPAT contracts. 

According to OAM’s list, NOAA’s Acquisitions and Grants Office had 7 active CPAF contracts. 

NOAA disagreed, stating it had 2 active CPAF contracts and 3 contracts with award terms. 

Three of the 5 contracts NOAA identified as containing award fees or award terms were not 

on OAM’s list. Through our review of the contract files, we verified that of the 10 contracts 

identified by OAM and NOAA, 4 had award-fee provisions, 1 had award-fee and term 

provisions, and 4 had award-term provisions. For one contract, NOAA could not locate and 

provide the contract file for our review. As a result, the contract type was not verified for one 

of the contracts we intended to include in our audit. A list of contract actions that OAM and 

NOAA identified as CPAF or CPAT is shown in tables 4 and 5. 

Because of the conflicting information we received related to these contracts, we reviewed the 

award documents for the seven contracts on OAM’s list plus the three contracts NOAA 

identified that were not contained on OAM’s list. Performing this procedure allowed us to 

independently verify which contracts and task orders were awarded with fee and term 

provisions, as shown in tables 4 and 5. 

FINAL REPORT 13 
 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Table 4. Award-Fee Contracts Included in the Audit 

NOAA 

Funding Office Contract No. Description 

Estimated 

Contract 

Amount 

Estimated 

Award-Fee 

Pool Amount 

National 

Environmental 

Satellite, Data, 

and Information 

Service 

1 DG133E09CN0101 

CPAF contract for engineering and 

ground system engineering support 

services for two operational 

environmental satellite 

constellations: GOES and POES

 $ 20,598,869 $ 958,872 

2 DG133E10CN0229 

Combination FP and CPAF 

contract for GOES-R series 

antenna system development 

130,703,026 5,001,414 

3 DG133E09CN0094 

CPAF contract for GOES-R 

ground segment services and 

supplies 

735,794,197 75,647,068 

4 DG133E03CN0012 

CPAF contract for personnel and 

equipment to upgrade the 

Command and Data Acquisition 

Stations and Satellite Operations 

Control Center 

10,032,561 655,096 

5 EA133E08CQ0020 

IDIQ contract with two CPAF task 

orders and award terms for 

Comprehensive Large Array-data 

Stewardship System information 

technology support 

200,000,000 4,341,310 

Total $1,097,128,653 $86,603,760 

Source: OIG review of contract files 

CPAF = cost-plus-award-fee; GOES = Geostationary Operational Environmental Satellite; POES = Polar 

Operational Environmental Satellite; FP = fixed-price; GOES-R = Geostationary Operational Environmental 

Satellite-R Series; CPFF = cost-plus-fixed-fee; IDIQ = indefinite-delivery, indefinite-quantity. 

Table 5. Award-Term Contracts Included in the Audit 

NOAA 

Funding Office Contract No. Description 

Estimated 

Contract 

Amount 

Estimated 

Award-Term 

Pool Amount 

National 

Environmental 

Satellite, Data, 

and Information 

Service 

1 DG133E06CQ0030 

CPFF contract with award terms 

for scientific and technical support 

services 

$ 69,999,000 $ 15,000,000 

2 DG133E07CQ0030 

IDIQ contract with award terms 

for theoretical analysis, 

exploratory studies and 

experiments for government 

satellites 

45,000,000 36,000,000 

National 

Weather 

Service 

3 DG133W05CQ1067 

IDIQ contract with FP or costreimbursable task orders and 

award terms for Advanced 

Weather Interactive Processing 

System services 

330,000,000 295,460,000 

4 DG133W03CQ0021 

IDIQ contract with CPFF and FP 

task orders and award terms for 

river, flood, and drought 

forecasting capabilities 

80,000,000 40,000,000 

Total $ 524,999,000 $ 386,460,000 

Source: OIG review of contract files
 

CPFF = cost-plus-fixed-fee; IDIQ = indefinite-delivery, indefinite-quantity; FP = fixed-price. 

FINAL REPORT 14 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

To accomplish our objectives, we reviewed: 

	 relevant policies and guidance to include OMB directives, the Federal Acquisition 

Regulation, the Commerce Acquisition Manual, and NOAA acquisition guidance; 

	 a total of nine contracts identified as CPAF by the Office of Acquisition Management and 

NOAA Acquisitions and Grants Office; 

	 award-fee plans and award-term incentive provisions in the contracting officer's files and 

evaluated the payment structure and criteria used to evaluate contractor performance; 

	 documentation supporting contractor evaluations and scoring decisions to verify that (1) 

award fees were paid in accordance with the award-fee plan and (2) award terms, when 

earned, were adequately explained and supported in accordance with the award-term 

incentive provisions of the contract; and 

	 records supporting the payment of award fees to contractors, including assessments of 

contractor performance, and determined whether sufficient descriptive information was 

forwarded to award determining officials. 

We also obtained contract files and analyzed documentation on award-fee and award-term 

planning, evaluation, and payment processes and interviewed contracting and program officials 

responsible for monitoring contractor performance. Additionally, we obtained an understanding 

of the internal controls used to manage award-fee and term processes by interviewing the 

acquisition personnel at NOAA and assessing their adherence to the requirements in the 

Commerce Acquisition Manual. While we identified and reported on internal control deficiencies, 

no incidents of fraud, illegal acts, violations, or abuse were detected within our audit. We 

identified weaknesses in the controls related to the processes and procedures used to evaluate 

and monitor the award-fee and term processes. We did not rely on computer-processed data 

to draw our conclusions or to perform this audit. 

We conducted the audit fieldwork between May 2011 and February 2012. We performed our 

fieldwork at the NOAA Acquisitions and Grants Office - National Capital Acquisition Division 

in Silver Spring, Maryland. We conducted this audit in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit objectives. We performed 

our work under the authority of the Inspector General Act of 1978, as amended, and 

Department Organizational Order 10-13, August 31, 2006. 

FINAL REPORT 15 
 

 

 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix B: Potential Monetary Benefits 

Questioned Costs Funds Put to Better Use 

Unsupported Award-Fee 

Payments and Award-Term 

Extensions 

$ 43,802,965 $ 0 

Balance of Award-Fee Pool $ 0 $60,927,455 

FINAL REPORT 16 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix C: NOAA Award-Fee and AwardTerm Processes 

The award determining official determines the award-fee amount earned on a CPAF contract 

and the award-term points earned on a CPAT contract at the end of each evaluation period. 

Procedures for monitoring and evaluating contractor performance during each period are as 

follows. 

General Overview of Award-Fee Process 

1 The contractor may submit its technical proposal recommendation evaluation factors and weightings for the task order. 

Consideration will be given to the contractor’s recommendations; however, the government will determine the specific evaluation 

factors for each evaluation period. 

2 At the kick-off meeting, the contracting officer (CO) will provide to the contractor the government’s selected evaluation factors and 

weightings for the task order. 

3 The contractor will be apprised in writing by the contracting officer’s technical representative (COTR) of a general assessment of its 

performance at the mid-point of each evaluation period, and at such other times as deemed appropriate. 

4 No later than 5 business days after the conclusion of each evaluation period, the contractor may submit a self-evaluation report to 

the Award Fee Evaluation Board (AFEB). This self-evaluation report may not exceed 10 pages in length. 

5 The AFEB will meet within fifteen (15) business days after conclusion of each evaluation period to consider all performance 

information it has obtained, including the contractor self-evaluation report (if received within the allotted time in the previous 

paragraph). The AFEB will summarize its findings and recommendations in the Award-Fee Evaluation Report (AFER). 

6 The AFEB Chair will present the AFER findings and recommendations to the Fee Determining Official (FDO) within five (5) business 

days of the AFEB meeting. The report will include recommended adjectival rating and performance scores with supporting 

documentation. A copy of the AFER will also be provided to the contractor at the time of AFER submission to the FDO. 

7 The contractor may submit to the FDO a supplement to the self-evaluation report within 5 business days of receipt of the AFER to 

provide any additional information to the FDO and in response to AFER that the contractor believes is relevant to its performance 

and that may affect the FDO determination. This supplement shall not exceed 10 pages in length. 

8 The FDO will consider the AFEB recommendation, self evaluation report supplement (if submitted) and any other pertinent 

information in determining the performance scores. The FDO findings will be stated in the written award fee determination (AFD). 

9 The FDO will provide the AFD to the contractor. 

General Overview of Award-Term Process 

1 The Award Term Review Board (ATRB) Recorder notifies each ATRB member and performance monitor one week before the 

evaluation period is complete. 

2 For each evaluation period, the contractor is required to submit to the contracting officer (CO) a written (10-page maximum) selfassessment of their performance two weeks after the current evaluation period ends. 

3 Performance monitors review their written records of the contractor’s performance as well as the contractor’s self-assessment and 

submit their evaluation reports to the CO and ATRB no later than two weeks after receipt of contractor’s self-assessment. 

4 The CO forwards copies of the performance monitors’ evaluation reports to the contractor upon receipt. 

5 The contractor will then orally respond to the performance monitor evaluations via a formal one-hour presentation to all members 

of the Award Term Organization within two weeks after receipt of Monitors’ Evaluation Report. 

6 The ATRB will then prepare their evaluation report and recommendation for the award term determining official (ATDO). The 

ATRB chairperson briefs the evaluation results and recommendation of earned award-term points to the ATDO one week after the 

formal one-hour presentation. 

7 The ATDO determines the final earned award-term points for the evaluation period within one week after ATRB chairperson’s 

evaluation briefing. 

8 A letter from the CO informs the contractor of the earned award term points and the total cumulative points. 

9 Upon the accumulation of sufficient award term points, the CO issues a letter/modification within two weeks after the ATDO’s 

determination is made authorizing award extension and/or documenting earned term points. 

Source: NOAA 

FINAL REPORT 17 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix D: Award-Fee and Award-Term 

Definitions 

award fee: An amount awarded for excellence in contractor performance as measured by the 

criteria defined and established in the contract within the award-fee pool amount available to 

the contractor. 

award determining official: The person responsible for reviewing the recommendations of 

the performance evaluation board in determining the amount of award fee or the length of 

award term extension to be earned by the contractor for each evaluation period. 

award-fee plan: The document that identifies the award-fee strategy, detailing procedures for 

implementing the award-fee structure and the method by which the contractor’s 

performance will be evaluated during each evaluation period. 

award-term plan: The document that describes the process by which contractor 

performance will be evaluated and defines a process, consistent and effective, resulting in 

equitable appraisals of contractor performance and award-term determinations. 

cost-plus-award-fee (CPAF) contract: A cost-reimbursement contract that provides for a 

fee consisting of a base amount fixed at inception of the contract and an award amount, 

based on a judgmental evaluation by the government, sufficient to provide motivation for 

excellence in contract performance. 

cost-plus-award-term (CPAT) contract: A contract that awards the contractor by 

extending the contract period of performance. Under an award-term incentive, the 

government monitors and evaluates the contractor’s performance, and if the award 

determining official decides that the contractor’s performance was excellent, then the 

contractor earns an extension. The extension is conditioned upon the government’s 

continuing need for the service and the availability of funds. 

cost-plus-fixed-fee (CPFF) contract: A contract that allows for payment of all incurred 

costs within a predetermined amount plus an agreed-upon fee, which will not change. 

performance evaluation board (PEB): The board responsible for review of the 

performance monitors’ evaluations, the contractor’s self-evaluation, and any other pertinent 

information for determining the overall position on the effectiveness of the contractor’s 

performance. The board also summarizes its findings and recommendations in an evaluation 

report for submission to the award determining official. 

performance monitors: Persons assigned by the program manager to provide input to the 

performance evaluation board on a contractor’s performance. 

task order contract: A contract for services that does not specify a firm quantity of services 

to be procured (other than a minimum or maximum quantity). 

FINAL REPORT 18 
Appendix E: Agency Response 

UNITilD STATilS Dllf'ARTMilN T OP' COMMIIRC e: 

N•tio nal Oc •anic. a n d At_mowphef'fc: Actm nt•tn~U n 

CHIEF ADMINISTRAT IVE OFFIC ER 

May4. 2012 

ORAN LM FOR. Andrew Kntsaros 

Assistanllnspeclor General for u: ~ 1-

FROM: Ed"ard I lorton £/2..;c;;;; ~~ NOAA Chief 1\dmini~t mhe O~ ~r 

SUOJEC"T Draft OJG Report - Nat/una/ Oct:rmlc and Atmn.<pltenc 

Adminl.vtratian: NOAA 's Cost-Pfus-Award-F<J<' ami Award-Term 

f'rnt·c.v1·cs Need 10 ."i11ppor1 Fuu,\ ond Extenwunv 

Thank you tor the opportunity to commcm on the Oflice of the lrupeclor Gcoernf"s drnfl audit 

n:port of thl' Nationlll Uce:mic and Atmo:>phenc Atlm inistrnl ion · s munugo:mcnl or", ·1-pln.>­

award- ~e a nd cost-plus-award-term contracts. Our specific comments on the report's limlings 

and recom m~n ut io s urc unachcd. 

Attachment 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

FINAL REPORT 19 
Department of Commerce 

National Oceanic and Atmospheric Administration 

Comments on the Draft OIG Report Entided 

"NOAA's Cost-Plus-Award-Fee and Award-Term Processes 

Need to Support Fees and Extension" 

(April6, 2012) 

General Comments 

The Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) 

appreciates the considerable time and effort of the Office of Inspector General (OIG) in 

conducting its review of NOAA's management of cost-plus-award-fee and cost-plus-award-term 

contracts. 

Recommended Changes for Factual/Technical Information 

Distinguishing appli cable law and regulation at the time of award may provide additional 

context. In addition, we would suggest distinguishing changes relevant to the subject of the audit 

changed before, during, and after contract award. 

NOAA Response to OIG Recommendations 

Recommendation 1: Require performance monitors to provide narrative comments that identify 

specific strengths, weaknesses and deficiencies to support assigned ratings. 

NOAA Response: Concur. Performance monitors will be required to provide narrative 

comments that identify strengths, weaknesses and deficiencies to support assigned ratings. 

Recommendation 2: Develop award-fee and award-term incentive structures that encourage 

contractor excellence. 

NOAA Response: Concur. NOAA will develop award-fee and award-term incentive structures 

that encourage contractor excell ence. 

Recommendation 3: Update the performance evaluation plans for contracts DG133EIOCN0229 

and DG133D09CN0094 to add more measurable award-fee criteria 

NOAA Response: Concur. The performance evaluation plan for contract DG 133D09CN0094 

will be updated. The performance eval uation plan for contract DG133EIOCN0229 will be 

eliminated as part of a conversion to a cost plus fixed fee contract 

Recommendation 4: Develop measurable and outcome-based criteria for assessing contractor 

performance for award fees and award-term extensions. 

NOAA Response: Concur. NOAA will develop award-fee and award-term incentive structures 

that encourage contractor excellence. 

Recommendation 5: Require a cost-benefit analysis in decisions on CP .AF and CPAT contracts, 

including documentation of how the benefits will offset the costs and justifi cations and approvals 

for all contract actions containing award fee and award term provisions. 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL
 

FINAL REPORT 20 
Department of Commerce 

National Oceanic and Atmospheric Administration 

Comments on the Draft OIG Report Entitled 

"NOAA's Cost-Plus-Award-Fee and Award-Term Processes 

Need to Support Fees and Extension" 

(April6, 2012) 

NOAA Response: Concur. NOAA will require a cost-benefit analysis in decisions on CPAF 

and CPAT contracts, including documentation of how the benefits will offset the costs and 

justifications and approvals for all contract actions containing award fee and award term 

provisions. 

R ecommendation 6: Establish clear division of responsibility for the evaluation team (award 

determining official, PEB, and performance monitors) and prohibit the same official from 

performing multiple roles. 

NOAA Response: Concur. NOAA will establish clear division of responsibility for the 

evaluation team (award determining official, PEB, and performance monitors) and prohibit the 

same offi cial from performing multiple roles. 

Recommendation 7: Develop and maintain a database of all contracts and orders containing 

award-fee, award-term, and incentive provisions. 

NOAA Response: Non-Concur. NOAA will rely on FPDS-NG. NOAA currently utilizes 

FPDS-NG, the government-wide database for tracking all contract actions. NOAA has not 

awarded a CP A1' or CP AT type contract in the past 12 months and it would not be an efficient 

use of our limited resources to develop and maintain a database which is separate from FPDSNG that would essentially serve the same purpose. NOAA will ensure data entered into FPDS is 

accurate by continuing to utilize our current two part method of review and by conducting 

quarterly Independent Verification and Validations (J.V&V) in accordance with CAM 1304.6. It 

should be noted that the IV & V requirement was established after the list of CP AF and CP AT 

contracts reviewed in this audit were awarded and since implementation of CAM 1304.6, NOAA 

has consistently received a 95% or high accuracy rating. 

R ecommendation 8: Develop controls over the maintenance of contract files to ensure more 

immediate availability and completeness of documentation for all contract actions. 

NOAA Response: Concur. NOAA will develop controls over the maintenance of contract files 

to ensure more immediate availability and completeness of documentation for all contract 

actions. 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL
 

FINAL REPORT 21