52.216-17
Incentive Price Revision-Successive Targets
FAR 52.216-17 requires contractors to submit detailed cost data and participate in price revisions, ensuring final contract prices reflect actual performance and incentivize cost control.
Overview
FAR 52.216-17, Incentive Price Revision—Successive Targets, is a contract clause used for contracts where the final price cannot be determined at the outset but is subject to revision as performance progresses. This clause establishes a process for adjusting contract prices based on actual costs and negotiated profit, with the goal of incentivizing cost control and performance. It sets out detailed procedures for submitting cost data, negotiating target and final prices, adjusting billing, and resolving disagreements. The clause also addresses subcontracting, termination, equitable adjustments, and the treatment of taxes and separately reimbursable costs.
Key Rules
- Price Revision Process
- The contract starts with initial target prices and profits, subject to revision based on actual costs and negotiated adjustments, but cannot exceed a set ceiling price.
- Submission of Cost Data
- Contractors must submit detailed cost statements and estimates at specified milestones and upon completion, using formats like Table 15-1, FAR 15.408.
- Negotiation of Final Price or Profit Formula
- After data submission, the parties negotiate a firm fixed price or a profit adjustment formula; if agreement is not reached, a formula is established per the clause.
- Billing and Payment Adjustments
- Billing prices are adjusted as target prices are revised, and overpayments must be refunded with interest if not promptly repaid.
- Quarterly Reporting
- Contractors must submit quarterly limitation on payments statements, reconciling payments and costs, and refunding any excess.
- Subcontracting Restrictions
- Subcontracts cannot be cost-plus-a-percentage-of-cost.
- Dispute Resolution
- Unresolved pricing disagreements are decided under the Disputes clause.
- Special Provisions
- Addresses contract termination, equitable adjustments, exclusions, separate reimbursements, and tax treatment.
Responsibilities
- Contracting Officers: Must insert and tailor the clause, review and negotiate cost/pricing data, issue modifications, and resolve disputes.
- Contractors: Must submit timely, accurate cost data and quarterly statements, negotiate in good faith, adjust billing, and refund overpayments.
- Agencies: Oversee compliance, audit submissions, and ensure proper contract administration.
Practical Implications
- This clause incentivizes contractors to control costs by tying profit to actual performance and cost outcomes.
- It requires rigorous cost tracking, timely reporting, and proactive communication between contractors and the government.
- Common pitfalls include late or incomplete data submissions, disputes over allowable costs, and failure to promptly adjust billing or refund overpayments.