"Award term" is a contract performance incentive feature that ties the length of a contract's term to the performance of the contractor. The contract can be extended for "good" performance or reduced for "poor" performance.

Award term is a contracting tool used to promote efficient and quality contractor performance. In itself, it is not an acquisition strategy, nor is it a performance solution. As with any tool, its use requires careful planning, implementation, and management/measurement to ensure its success in incentivizing contractors and improving performance.

The award term feature is similar to award fee (FAR 16.405-2) contracting where contract performance goals, plans, assessments, and awards are made regularly during the life of a contract. Award term solicitations and contracts should include a base period (e.g., 3 years) and a maximum term (e.g., 10 years), similar to quantity estimates used in indefinite quantity/indefinite delivery contracts for supplies (FAR 16.504).

When applying the award term feature, agencies need to identify and understand the project or task:

• Conditions, constraints, assumptions, and complexities
• Schedule, performance, and cost critical success factors
• Schedule, performance, and cost risks

They also need to understand marketplace conditions and pricing realities. Only then can agencies establish meaningful and appropriate schedule, performance, and cost measures/parameters for a specific contract. These measures must be meaningful, accurate, and quantifiable to provide the right incentives and contract performance results. Specifics need to be incorporated and integrated in an award term plan.

Award term is best applied when utilizing performance or solution-based requirements where a SOW or SOO describes the agency's required outcomes or results (the "what" and "when" of the agency's requirement) and where the contractor has the freedom to apply its own management and best performance practices (the "how" of the requirement) towards performing the contract. The award term plan must specify success measurement criteria, regarding how performance will be measured (i.e., defines what is "good" or "poor" performance) and the award term decision made.

There should also be a clear indication of the consequences of various levels of performance in terms of the contract's minimum, estimated, and maximum terms -- and the agency needs to be prepared to follow up with those consequences. If contractor performance is below the standard set, the contract ends at the completion of the base period. The agency must be prepared to re-procure in a timely fashion.

The effort applied in managing an award term contract after award is critical. Too often, agencies and contractors don't invest the right people (numbers and skills) and management attention during the contract performance phase. Managing contracts with features like award term is not a "last minute," incidental, or a fill-out-a-survey job. As in the case of its "sister" award fee approach, communication needs to be constant and clear with contractors, and not include so many evaluation elements that it dilutes the critical success factors.