When is weighted guidelines required

F The contractor makes appropriate make-or-buy decisions; or. G The contractor has a proven record of cost tracking and control. A Requires large scale integration of the most complex nature;.

B Involves major international activities with significant management coordination e. C Has critically important milestones. A The program is mature and many end item deliveries have been made;. B The contractor adds minimal value to an item;. C The efforts are routine and require minimal supervision;. D The contractor provides poor quality, untimely proposals;.

E The contractor fails to provide an adequate analysis of subcontractor costs;. F The contractor does not cooperate in the evaluation and negotiation of the proposal;.

G The contractor's cost estimating system is marginal;. H The contractor has made minimal effort to initiate cost reduction programs;. I The contractor's cost proposal is inadequate;. J The contractor has a record of cost overruns or another indication of unreliable cost estimates and lack of cost control; or.

K The contractor has a poor record of past performance. A Reviews performed by the field contract administration offices disclose unsatisfactory management and internal control systems e. B The effort requires an unusually low degree of management involvement. The contract type risk factor focuses on the degree of cost risk accepted by the contractor under varying contract types.

The working capital adjustment is an adjustment added to the profit objective for contract type risk. It only applies to fixed-price contracts that provide for progress payments. Though it uses a formula approach, it is not intended to be an exact calculation of the cost of working capital. Its purpose is to give general recognition to the contractor's cost of working capital under varying contract circumstances, financing policies, and the economic environment. The following extract from the DD is annotated to explain the process.

Risk Factors. Contract Type Risk based on incurred costs at the time of qualifying proposal submission. Contract Type Risk based on Government estimated cost to complete. Working Capital 4. See paragraph d 2 of this section. Add Blocks 24a and 24b and insert the totals in Block 24c.

Do not use any other interest rate. This is the working capital adjustment. It shall not exceed 4 percent of the contract costs in Block Contract Type. Firm-fixed-price, no financing. Firm-fixed-price, with performance-based payments. Firm-fixed-price, with progress payments. Fixed-price incentive, no financing. Fixed-price incentive, with performance-based payments.

Fixed-price with redetermination provision. Fixed-price incentive, with progress payments. Time-and-materials including overhaul contracts priced on time-and-materials basis. Firm-fixed-price, level-of-effort.

Do not compute a working capital adjustment. They shall not receive the working capital adjustment in Block However, they may receive higher than normal values within the designated range to the extent that portions of cost are fixed.

The contracting officer should consider elements that affect contract type risk such as—. A The frequency of payments;. B The total amount of payments compared to the maximum allowable amount specified at FAR C The risk of the payment schedule to the contractor. When costs have been incurred prior to definitization, generally regard the contract type risk to be in the low end of the designated range.

If a substantial portion of the costs have been incurred prior to definitization, the contracting officer may assign a value as low as zero percent, regardless of contract type. However, if a contractor submits a qualifying proposal to definitize an undefinitized contract action and the contracting officer for such action definitizes the contract after the end of the day period beginning on the date on which the contractor submitted the qualifying proposal as defined in The contracting officer may assign a higher than normal value when there is substantial contract type risk.

Government inventories or stocks where the contractor can demonstrate that there are substantial risks above those normally present in DoD contracts for similar items; or. The contracting officer may assign a lower than normal value when the contract type risk is low.

For example, if a contractor receives progress payments at 80 percent, the portion that the contractor finances is 20 percent. On contracts that provide progress payments to small businesses, use the customary progress payment rate for large businesses.

Period to Perform Substantive. Contract Length. Portion in months. The average period is 37 months and the contract length factor is 1. This factor focuses on encouraging and rewarding capital investment in facilities that benefit DoD.

It recognizes both the facilities capital that the contractor will employ in contract performance and the contractor's commitment to improving productivity.

The contracting officer shall estimate the facilities capital cost of money and capital employed using—. The procedure is similar to applying overhead rates to appropriate overhead allocation bases to determine contract overhead costs. Complete a DD Form only after evaluating the contractor's cost proposal, establishing cost of money factors, and establishing a prenegotiation objective on cost.

Complete the form as follows:. The structure and allocation base units-of-measure must be compatible on all three displays. The sum of these products represents the estimated contract facilities capital cost of money for the year's effort. To establish cost and price objectives, apply the facilities capital cost of money and capital employed as follows:. Use the imputed facilities capital cost of money, with normal, booked costs, to establish a cost objective or the target cost when structuring an incentive type contract.

Do not adjust target costs established at the outset even though actual cost of money rates become available during the period of contract performance. When measuring the contractor's effort for the purpose of establishing a prenegotiation profit objective, restrict the cost base to normal, booked costs.

Do not include cost of money as part of the cost base. Assess and weight the profit objective for risk associated with facilities capital employed in accordance with the profit guidelines at The following extract from the DD Form has been annotated to explain the process. Contractor Facilities Capital Employed. Amount Employed. Profit Objective. A Achievable benefits to DoD will result from the investment; and. B The benefits of the investment are included in the forward pricing structure.

Do not make this addition if the value of intracompany transfers has been included in Block 20 at price i. Asset Type. A The economic value of the facilities capital, such as physical age, undepreciated value, idleness, and expected contribution to future defense needs; and. B The contractor's level of investment in defense related facilities as compared with the portion of the contractor's total business that is derived from DoD; and.

A New investments in state-of-the-art technology that reduce acquisition cost or yield other tangible benefits such as improved product quality or accelerated deliveries; or. B Investments in new equipment for research and development applications. Maximum values apply only to those cases where the benefits of the facilities capital investment are substantially above normal. A Allocations of capital apply predominantly to commercial item lines;.

B Investments are for such things as furniture and fixtures, home or group level administrative offices, corporate aircraft and hangars, gymnasiums; or. C Facilities are old or extensively idle. To the extent that the contractor can demonstrate cost reduction efforts that benefit the pending contract, the contracting officer may increase the prenegotiation profit objective by an amount not to exceed 4 percent of total objective cost Block 20 of the DD Form to recognize these efforts Block Metrics developed by the contractor such as fully loaded labor hours i.

However, the contracting officer shall consider the impact that quantity differences, learning, changes in scope, and economic factors such as inflation and deflation will have on cost reduction. As used in this subpart, a nonprofit organization is a business entity—.

Show the net reduced amount on the DD Form Use a designated range of —1 percent to 0 percent instead of the values in There is no normal value. However, the contracting officer is not required to complete Blocks 21 through 30 of the DD Form The profit amount in the negotiation summary of the DD Form must be net of the offset.

In order to ensure that this policy is applied to all DoD contracts that allow facilities capital cost of money, similar adjustments shall be made to contracts that use alternate structured approaches. In developing a fee objective for cost-plus-award-fee contracts, the contracting officer shall—.

This discussion will assist in the contracting officer determining the involvement of DCAA, which could be a limited-scope audit e. At a minimum, the contracting officer shall discuss with DCAA the following:. C Potential impact on existing contracts, task or deliver orders, or other proposals the contractor has submitted to the Government. See PGI for guidance on factors to consider when deciding whether to request a make-or-buy plan and for factors to consider when evaluating make-or-buy plan submissions.

Major weapon system should-cost program reviews shall be conducted in a manner that is transparent, objective, and provides for the efficiency of the DoD systems acquisition process section of the National Defense Authorization Act for Fiscal Year Pub. A A thorough review of each contributing element of the program cost and the justification for each cost.

B An analysis of non-value added overhead and unnecessary reporting requirements. Profit factors Weight ranges percent I. Contractor Effort Weights applied to cost : a. Material acquisitions: 1 Purchased parts 1 to 3.

Labor skills: 1 Technical and managerial: a Scientific 10 to Overhead: 1 Technical and managerial 5 to 8. Other direct costs 3 to 8. Government Contracting The Government Supports Profit The Federal government recognizes that profit is part of doing business. Are there circumstances where weighted guidelines are not appropriate? How does the WGM work? There are six main areas to enter the data used to calculate profit: Start by entering all of your existing costs before fee in lines Enter an assigned weighting for Technical vs.

When you assign weightings, consider the type of contract you are negotiating. The largest driver to your profit is how you position yourself in the Designated Range.

Examples from the FAR include: Actual cost reductions achieved on prior contracts. Reduction or elimination of excess or idle facilities. Metrics developed by the contractor, such as fully loaded labor hours i. You must adhere to statutory ceilings based on FAR