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EM Contractor Fee Payments

In the interest of furthering transparency in its government operations, the Department of Energy’s Office of Environmental Management (EM) herein is releasing information relating to fee payments under its major cost-reimbursable contracts. Charts delineating fees that are paid under cost-plus-award-fee (CPAF), cost-plus-incentive-fee (CPIF), and cost-plus-fixed-fee (CPFF) contracts are listed by site location in the following hyperlinks.

With CPFF contracts, the fee is negotiated and fixed at the inception of the contract. The fixed fee will not vary with the actual costs that the contractor incurs. In general, the contractor earns fee either by completing the work called for in the contract or devoting a specified level of effort for a stated time period (FAR 16.306).

Unlike CPFF contracts, the fees in CPAF and CPIF contracts are not fixed at the outset of the contract, but instead depend on the performance of the contractor. CPIF contracts may provide for performance and delivery incentives as well as a formula that provides the fee that is initially negotiated and adjusted based on the relationship of total allowable cost to the total target cost. CPIF contracts specify a target cost, a target fee, minimum and maximum fees and a fee adjustment formula. The formula provides, within limits, for an increase in the fee paid to the contractor above the target fee when total allowable costs are less than the target cost. The formula also provides for a decrease in fee below the target fee when the total allowable costs exceed the target cost. This variation in fee provides an incentive for the contractor to manage the contract effectively. If the total allowable costs are greater to or less than the range of costs within which the fee adjustment formula operates, the Contractor will earn the minimum or maximum fee, respectively (FAR 16.405-1). In addition, CPIF contracts may allow for delivery or performance incentive fees, where incentive fees are paid for meeting a contract performance requirement or a contract milestone.

CPAF contracts are a special type of incentive contract where the fee may include a base amount that is fixed at the inception of the contract and an award amount that the contractor may earn in whole or in part during performance to provide motivation for excellence in such as areas as quality, timeliness, technical ingenuity, and cost-effective management. The amount of award fee to be paid in any given performance period is determined by the Government’s judgmental evaluation of the contractor’s performance in terms of the criteria stated in the contract. This determination and the methodology for determining the award fee are unilateral decisions that are made solely at the discretion of the Government (FAR 16.405-2).

The charts in the accompanying hyperlinks provide the total fee that is available under the contract, the fee that is available by Fiscal Year, and the fee paid to the contractor by Fiscal Year. The Department of Energy, Office of Environmental Management, Office of Contract Assistance will review the fee charts quarterly and revisions will be made as required.