C) Indirect costs due to conversion. This sub-factor measures the extent to which indirect costs contribute to the performance of the contract. The work items of the attributable indirect costs should be matched for the benefits they would receive if they were treated as direct work. The other elements of indirect costs should be assessed in order to determine whether, due to their routine nature, they deserve only limited consideration in terms of profits or whether they are elements that contribute significantly to the proposed contract. A cost reimbursement contract is appropriate if it is desirable to transfer some risk of successful performance of the contract from the contractor to the buyer. It is most often used when the purchased item cannot be explicitly defined, such as in research and development, or in cases where there is not enough data to accurately estimate the final cost. — investments. This factor takes into account the contribution of the contractors` investments to the efficient and economical execution of the contract. (A) For experimental, development or research work carried out under a fixed-cost plus fee contract, the cost shall not exceed 15% of the estimated cost of the contract, free of charge.
(2) If price negotiation is based on a cost analysis, the contracting entities of agencies following a structured approach shall use it for profit analysis. Where contracting entities do not apply a structured approach, they shall comply with point (d) of this Subsection when developing profit or royalty targets prior to negotiation. (c) restrictions. No fixed-price contract will be awarded unless customer complies with all the restrictions set forth in sections 15.404-4(c)(4)(i) and 16.301-3. (vi) Independent development. By virtue of this factor, the contractor may be granted additional profit opportunities in recognition of independent development efforts relevant to the term of the contract without state support. The customer must verify whether the development costs have been recovered directly or indirectly from government sources. (1) A fixed-cost contract is eligible if the conditions of 16.301-2 are met and e.B. (i) the contractor`s expenses. This factor measures the complexity of the work and the resources that the potential contractor needs to perform the contract. Greater opportunities for profit should be offered in contracts requiring a high level of professional and managerial skills and potential contractors whose skills, facilities and technical assets are likely to lead to efficient and economical performance of contracts.
The sub-factors referred to in paragraphs (d)(1)(i) (A) to (D) of this subsection are taken into account when determining the Contractor`s effort, but may be modified in certain situations to account for differences in the categories used by potential contractors to list costs – Each reimbursement contract includes a clause on “cost limitation” or “fund limitation”, this limits the government`s liability if the contractor exceeds the estimated total cost. (i) the contract applies to the performance of research or exploration or preliminary studies and the effort required is unknown; or (C) When assessing the assumption of cost risk, contract agents shall, except in unusual circumstances, treat time and material, hourly and fixed-price contracts with the amount of effort as contracts with costs plus fixed costs. There are four general types of reimbursement contracts, which pay all of the contractor`s eligible, transferable and reasonable costs, plus fees or benefits that vary depending on the type of contract. (ii) May impose specific exceptions for situations where the mandatory application of a structured approach would be manifestly inappropriate. (i) use a structured approach to determine the profit or commission target for acquisitions that require a cost analysis; and (ii) Customer`s signature on the price negotiation memorandum or any other document demonstrating the determination of a fair and reasonable price will document Customer`s determination that legal price or fee restrictions have not been exceeded. (2) It is in the interest of the Government to provide entrepreneurs with sufficient financial reward opportunities to promote efficient contract enforcement, attract the best skills of large and small enterprises qualified for public procurement and maintain a viable industrial base. (1) If price negotiation is not based on a cost analysis, contracting entities are not required to analyse profit. (B) In the case of architectural engineering services for public works or utilities, the contract price or the estimated costs and charges for the manufacture and supply of drawings, plans, drawings and specifications shall not exceed 6 per cent of the estimated cost of constructing the public works or utilities free of charge. The types of reimbursement of contracts (subpart 16.3 of the FAR) provide for the payment of reimbursable costs incurred to the extent prescribed in the contract. Such contracts shall specify an estimate of the total cost for the purposes of the commitment and the setting of a ceiling which the contractor may not exceed (except at its own risk) without the consent of the procuring entity.
(3) Both the government and contractors should consider profit as a motivator for the efficient and effective performance of the contract. Negotiations aimed solely at lowering prices by reducing profits without adequately recognizing the profit function are not in the interest of the government […].