[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR16.405-2]

[Page 307]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 16--TYPES OF CONTRACTS--Table of Contents
 
                    Subpart 16.4--Incentive Contracts
 
Sec. 16.405-2  Cost-plus-award-fee contracts.

    (a) Description. A cost-plus-award-fee contract is a cost-
reimbursement contract that provides for a fee consisting of (1) a base 
amount fixed at inception of the contract and (2) an award amount that 
the contractor may earn in whole or in part during performance and that 
is sufficient to provide motivation for excellence in such areas as 
quality, timeliness, technical ingenuity, and cost-effective management. 
The amount of the award fee to be paid is determined by the Government's 
judgmental evaluation of the contractor's performance in terms of the 
criteria stated in the contract. This determination and the methodology 
for determining the award fee are unilateral decisions made solely at 
the discretion of the Government.
    (b) Application. (1) The cost-plus-award-fee contract is suitable 
for use when--
    (i) The work to be performed is such that it is neither feasible nor 
effective to devise predetermined objective incentive targets applicable 
to cost, technical performance, or schedule;
    (ii) The likelihood of meeting acquisition objectives will be 
enhanced by using a contract that effectively motivates the contractor 
toward exceptional performance and provides the Government with the 
flexibility to evaluate both actual performance and the conditions under 
which it was achieved; and
    (iii) Any additional administrative effort and cost required to 
monitor and evaluate performance are justified by the expected benefits.
    (2) The number of evaluation criteria and the requirements they 
represent will differ widely among contracts. The criteria and rating 
plan should motivate the contractor to improve performance in the areas 
rated, but not at the expense of at least minimum acceptable performance 
in all other areas.
    (3) Cost-plus-award-fee contracts shall provide for evaluation at 
stated intervals during performance, so that the contractor will 
periodically be informed of the quality of its performance and the areas 
in which improvement is expected. Partial payment of fee shall generally 
correspond to the evaluation periods. This makes effective the incentive 
which the award fee can create by inducing the contractor to improve 
poor performance or to continue good performance.
    (c) Limitations. No cost-plus-award-fee contract shall be awarded 
unless--
    (1) All of the limitations in 16.301-3 are complied with; and
    (2) The contract amount, performance period, and expected benefits 
are sufficient to warrant the additional administrative effort and cost 
involved.

[48 FR 42219, Sept. 19, 1983. Redesignated at 62 FR 12696, Mar. 17, 
1997; 63 FR 34073, June 22, 1998; 64 FR 72449, Dec. 27, 1999]

[[Page 308]]