(b) Application.
(2) (A) Award fee, when properly used, is a valuable tool for motivating contractors to improve performance while, at the same time, providing Government personnel an opportunity for close monitoring of the contractor’s performance (technical, management, schedule, and cost). The intended goal of award fee contracting is to motivate the contractor’s performance in those areas critical to program success that are susceptible to measurement and evaluation. By entering into an award fee arrangement, the contracting officer initiates a process that incentivizes a contractor to improve performance and records the Government’s assessment of the contractor’s performance. Once the decision has been made to use an award fee contract, the evaluation plan and organizational structure must be tailored to meet the needs of the particular acquisition. The award fee plan must clearly identify the specific award fee evaluation criteria for assessing contractor performance. The criteria should take into account program risk, as well as be appropriate for the designated award fee period.
(B) The award fee pool is the total of the available award fee dollars for each evaluation period for the life of the contract. Base fee is not earned and is, therefore, paid on a regular basis without the contractor’s performance being evaluated. Since the available award fee during the evaluation period must be earned, the contractor begins each evaluation period with 0% of the available award fee and works up to the evaluated fee for each evaluation period. Contractors do not begin with 100% of the available award fee and have deductions withdrawn to arrive at the evaluated fee for each evaluation period. In addition, contractors should not receive award fee (above the base fee) for simply meeting contract requirements. Earning of award fee should be in accordance with the award fee plan, and should be directly commensurate with the level of performance under the contract. A contractor should not receive the maximum amount of award fee under a contract without a demonstrated superior level of performance, as provided for in the award fee plan. Maximum contract fee is the sum of all fees (not just the award fee) and incentives payable under the contract, including performance and subcontracting incentives.
(C) When an Award Fee Evaluation Board (AFEB) will be used, the Principal Assistant Responsible for Contracting (PARC) or authorized contracting officer must appoint an Award Fee Determining Official (AFDO) in writing, unless the PARC will serve as the AFDO. The AFDO will appoint in writing the AFEB and its chairperson. Such appointment letters will clearly outline the responsibilities and limitations of the AFEB and its chairperson. AFEB membership should consist of those contracting and acquisition management personnel, including contract administration personnel, most knowledgeable of the requirements and contractor performance in the areas to be evaluated. Selection of board members must be coordinated with the Program Executive Officer or other management official responsible for technical requirements. The AFEB chairperson is responsible for ensuring that all AFEB evaluators are sufficiently trained in their responsibilities. AFEBs and AFDOs will document the rationale for their decision(s). The AFDO may alter the AFEB’s recommended award fee; however, it must be documented in sufficient detail to show that the integrity of the award fee determination process has been maintained.
