16.305
Cost-plus-award-fee contracts
Cost-plus-award-fee contracts motivate contractor excellence by tying a portion of the fee to the Government's subjective evaluation of performance.
Overview
- FAR 16.305 defines cost-plus-award-fee (CPAF) contracts, a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and can earn an additional award fee based on the Government's evaluation of performance. The award fee is intended to motivate contractors to achieve excellence in contract performance, with the fee structure including a base amount (which may be zero) and an award amount determined subjectively by the Government. This section references other FAR sections for detailed application and limitations of CPAF contracts.
Key Rules
- Fee Structure
- The contract includes a base fee (possibly zero) and an award fee determined by Government evaluation.
- Award Fee Determination
- The award fee is based on a judgmental assessment of contractor performance, not a formula.
- Reference to Other FAR Sections
- For detailed procedures and limitations, refer to FAR 16.401(e) and 16.301-3.
Responsibilities
- Contracting Officers: Must structure the contract to include clear award fee criteria and ensure compliance with referenced FAR sections.
- Contractors: Must understand that award fees are not guaranteed and depend on Government evaluation of performance.
- Agencies: Must establish and document the award fee determination process and ensure it motivates desired performance.
Practical Implications
- CPAF contracts are used when it is difficult to objectively measure performance, but the Government wants to incentivize excellence. Contractors should be aware that a portion of their fee is at risk and subject to subjective evaluation, making clear communication and documentation of performance critical. Misunderstanding the award fee process or failing to meet performance expectations can result in reduced or no award fee.