[Federal Register: April 30, 2010 (Volume 75, Number 83)]
[Proposed Rules]               
[Page 22728-22729]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Defense Acquisition Regulations System

48 CFR Parts 216 and 252

Defense Federal Acquisition Regulation Supplement Award-Fee 
Contracts (DFARS Case 2006-D021)

AGENCY: Defense Acquisition Regulations System, Department of Defense 

ACTION: Proposed rule with request for comments.


SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to address award-fee contracts, including 
eliminating the use of provisional award-fee payments.

DATES: Comments on the proposed rule should be submitted to the address 
shown below on or before June 29, 2010, to be considered in the 
formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2006-D021, 
using any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    [cir] E-mail: dfars@osd.mil. Include DFARS Case 2006-D021 in the 
subject line of the message.
    [cir] Fax: 703-602-0350.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Mr. Mark 
Gomersall, OUSD(AT&L)DPAP(DARS), 3060 Defense Pentagon, Room 3B855, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http:/
/www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, 703-602-0302.


A. Background

    This DFARS case proposes to revise guidance for award-fee 
evaluations and payments and to eliminate the use of provisional award-
fee payments. One new clause is provided as part of this rule to detail 
the use of award fees. In addition, this rule incorporates DoD policy 
guidance on the use of objective criteria.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD does not expect this rule to have a significant economic impact 
on a

[[Page 22729]]

substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. because most 
contracts awarded to small entities use simplified acquisition 
procedures or are awarded on a competitive fixed-price basis and do not 
utilize award-fee type incentives. Therefore, DoD has not performed an 
initial regulatory flexibility analysis. DoD invites comments from 
small business concerns and other interested parties on the expected 
impact of this rule on small entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2006-D021) in 

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

List of Subjects in 48 CFR Parts 216 and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

    Therefore, DoD proposes to amend 48 CFR parts 216 and 252 as 
    1. The authority citation for 48 CFR parts 216 and 252 continues to 
read as follows:

    Authority:  41 U.S.C. 421 and 48 CFR chapter 1.


    2. Add sections 216.401 and 216.401-70 to read as follows:

216.401  General.

    (e) Award-fee plans required in FAR 16.401(e) must be incorporated 
into all award-fee type contracts.

216.401-70  Objective criteria.

    (1) Contracting officers will use objective criteria to the maximum 
extent possible to measure contract performance. Objective criteria are 
associated with cost-plus-incentive-fee and fixed-price incentive 
    (2) When objective criteria exist but the contracting officer 
determines that it is in the best interest of the Government also to 
incentivize subjective elements of performance, the most appropriate 
contract type is a multiple-incentive contract containing both 
objective incentives and subjective award-fee criteria (i.e., cost-
plus-incentive-fee/award-fee or fixed-price-incentive/award-fee).
    (3) See PGI 216.401-70 for guidance on the use of award-fee 
    3. Revise section 216.405-2 to read as follows:

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

    (1) Award-fee pool. The award-fee pool is the total available award 
fee for each evaluation period for the life of the contract. The 
contracting officer must perform an analysis of appropriate fee 
distribution to ensure at least 40% of the award fee is held for the 
final evaluation so that the award fee is appropriately distributed 
over all evaluation periods to incentivize the contractor throughout 
performance of the contract.
    (2) Award-fee evaluation and payments. Award-fee payments other 
than payments resulting from the evaluation at the end of an award-fee 
period are prohibited. (This prohibition does not apply to base-fee 
payments.) The fee-determining official's rating for award-fee 
evaluations will be provided to the contractor within 45 calendar days 
of the end of the period being evaluated. The final award-fee payment 
will be consistent with the contracting officer's final evaluation of 
the contractor's overall performance against the cost, schedule, and 
performance outcomes specified in the award-fee plan.
    (3) Limitations.
    (i) The CPAF contract shall not be used--
    (A) To avoid--
    (1) Establishing cost-plus-fixed-fee contracts when the criteria 
for cost-plus-fixed-fee contracts apply; or
    (2) Developing objective targets so a cost-plus-incentive-fee 
contract can be used; or
    (B) For either engineering development or operational system 
development acquisitions that have specifications suitable for 
simultaneous research and development and production, except a CPAF 
contract may be used for individual engineering development or 
operational system development acquisitions ancillary to the 
development of a major weapon system or equipment, where--
    (1) It is more advantageous; and
    (2) The purpose of the acquisition is clearly to determine or solve 
specific problems associated with the major weapon system or equipment.
    (ii) Do not apply the weighted guidelines method to CPAF contracts 
for either the base (fixed) fee or the award fee.
    (iii) The base fee shall not exceed three percent of the estimated 
cost of the contract exclusive of the fee.
    (4) See PGI 216.405-2 for guidance on the use of cost-plus-award-
fee contracts.
    4. Add section 216.406 to read as follows:

216.406  Contract clauses.

    (e) Use the clause at 252.216-70XX, Award Fee, in solicitations and 
contracts when an award-fee contract is contemplated.


    5. Add section 252.216-70XX to read as follows:

252.216-70XX  Award fee.

    As prescribed in 216.406(e), insert the following clause:


    The Contractor may earn award fee from a minimum of zero dollars 
to the maximum amount stated in the award-fee plan in this contract. 
In no event will award fee be paid to the Contractor for any 
evaluation period in which the Government rates the Contractor's 
overall cost, schedule, and technical performance below 
satisfactory. The Government may unilaterally revise the award-fee 
plan prior to the beginning of any rating period in order to 
redirect Contractor emphasis.

(End of clause)

[FR Doc. 2010-9881 Filed 4-29-10; 8:45 am]