Excerpts from Existing Contracts - SE-related Award Fee/Incentive Fee Plan Provisions

Following are excerpts from several Award Fee / Incentive Fee Plans that have been put in place on various contracts in the past several years. This list was originally included in Attachment 1 to SAF/AQ Policy Memo 03A-001, 6 Jan 2003; this letter stressed the importance of smart application of disciplined SE principles and practices as a integral part of Air Force acquisition transformation.

SAF/AQ Policy Memo 03A-005, 09 Apr 2003, superseded 03A-001 and removed the attachment. While the memo still provides numerous references for program management, technical, and contracting personnel, it is still vitally important that current "success story" information related to this desired re-focusing of Air Force acquisition remain readily available.

This list provides examples of provisions that are specifically focused on technical and Systems Engineering (SE) performance, rather than on the more traditional programmatic measures such as cost and schedule.

There is no substitute for close collaboration among the Program Manager, Contracting Officer, and technical experts during acquisition strategy development, source selection planning, and acquisition document preparation. MAJCOMs and Headquarters have an abundance of technical and contracting expertise, as well as dedicated Acquisition Center of Excellence (ACE) organizations, which can be brought to bear as advisors/consultants in support of these efforts.

Policy Memo 03A-005 is available on the SAF/AQX website at http://www.safaq.hq.af.mil/acq_pol/afpolicies.shtml.

(Not all-inclusive -- PMs, COs, and cognizant technical personnel must apply sound judgment in crafting actual language)
  • Government may recoup some fee / profit if the system does not meet performance goals. (National Polar Orbiting Environmental Sensing Satellite [NPOESS])
  • Shared System Performance Responsibility (SSPR): Contractor's responsibility to install and integrate subsystems and components, whether GFP or commercially-acquired, without resultant degradation of performance of any such item is in addition to and not in substitution of its responsibility to insure that the total system will meet all requirements of the system specification. (NPOESS)
  • Contractor evidences a disciplined engineering process using integrated product development to smoothly tie together manufacturing and quality assurance, system engineering ... Contractor keeps the USAF advised of configuration changes and provides USAF insight into changes in product baseline that effect performance or supportability. Acceptance of broad OSS&E responsibility ... evidenced by near term planning activities, implementation of appropriate actions, and long range planning activities to ensure ... suitability and effectiveness. (Halvorsen)
  • (P)rovide clear, concise, efficient, supportable and fully integrated engineering solutions with focus on weapon system priorities and comprehensive risk assessments as related to total Systems Engineering responsibilities and tasks (B-2 Flexible Acquisition & Sustainment Team [FAST])
  • Effectiveness of contractor's system engineering effort and interface control and management; conduct and thoroughness of ... reviews and configuration audits; ability to meet the technical requirements as specified in the system requirements document; ability to deliver a suitable (product) for DT&E ... (F-15 Advanced Display Core Processor [ADCP])
  • Life cycle management perspective including production and retrofit strategic planning ... The evaluation will include the quality, completeness and timeliness of ... sustainment products ... (C-17)
    Criterion also assesses the integration of the various systems/subsystems into a weapon system, which meets its functional requirements. This includes the identification of all interfaces, development of and adherence to all interface control procedures, and identification and integration of any Government Furnished Equipment ... (F-22)
  • 40/20/40 split between three Performance Evaluation Areas (PEA):
    • Technical Performance
    • Management
    • Cost Control and Reduction
Any PEA sub-element rated as unsatisfactory will result in an unsatisfactory rating for that PEA. However, if the technical performance area is rated as unsatisfactory, then the contractor will be awarded an unsatisfactory for all areas and will earn zero award fee for that period. (ICBM Prime Integration Contract, Annex 3B, Propulsion System Rocket Engine Life Extension Program)