§ 970.1509-8 - Special considerations—award fee.

(a) When a management and operating contract is to be awarded on an award-fee basis, several special considerations are appropriate.

(b) In management and operating contracts, the basic fee portion of the fee negotiation objective shall be established equal to what would otherwise have been the applicable fixed fee established in accordance with 970.1509-4. This basic fee includes a 50% base fee and a 50% “at risk fee.” No variations from this objective are authorized without the prior approval of the Procurement Executive. The basic fee shall be paid in equal monthly installments, in accordance with the clause at 970.5204-16, Payments and Advances. However, in the event the contractor's performance is judged by the Fee Determination Official to fall into the performance categories of Marginal or Unsatisfactory, as those terms are defined in subparagraph (d) of this section, the contractor shall be required to refund to the Government up to 50% of the basic fee paid for that evaluation period at a rate of 5% for each performance point below 76, as shown in the table in subparagraph (d) of this section.

(c) The award fee portion of the fee objective for a management and operating contract shall be established for each contract using the following formula:

(1) Placement of the facility on the EPA's National Priority List (NPL). Facilities which are listed on the NPL shall be considered to involve higher risks.

(2) Nature of the contractor's work at the facility. Contracts involving the management of facilities listed on the NPL or requiring the environmental restoration of NPL sites, shall be considered to involve higher risks, whereas contracts involving unrelated work may be considered of lesser risk, regardless of NPL designations.

(3) Size of the facility in relationship to the areas of risk. Management of a large facility with a minor site designated on the NPL would be considered a lesser risk than management of a small facility which includes several major sites listed on the NPL.

(4) Quantity, complexity and type of Government property for which the contractor is responsible. Contracts requiring control over large quantities of sensitive Government property shall be considered of higher risk than those involving relatively small quantities.

(5) Exposure to Third-Party Liability. Contract activities which expose the contractor to the risk of third-party liability will be considered, and such risk assessed accordingly.

(6) The extent to which the work at the facility presents health and safety risks to the workers at the facility and the public.

In considering the above factors, any risks which are indemnified by the Government (for example, by the Price-Anderson Act) will not be considered as risk to the contractor. Where a single contract involves multiple facilities falling into different categories, the basic fee amount shall be divided into amounts applicable to the operation of each facility before applying the award fee pool factor. The following potential award fees shall apply in each category (percent is stated as a percentage of the otherwise applicable maximum fixed fee amount) which is now the basic fee: CategoryBasic fee (percent)Potential award fee (percent)Potential maximum total (percent)Defense Facility—A100200300Defense Facility—B100150250Enrichment Plant100150250Miscellaneous100100200

(d) All management and operating contracts awarded on an award fee basis shall incorporate the following performance grading and fee conversion system into the contract, by including the system in the Performance Evaluation Plan required by the contract clause at 970.5204-54. The performance grading and fee conversion system consists of a set of adjectival grades defined in a narrative form, in terms of performance points, and the percentage of available award fee earned as follows:

Fee Conversion Table[The contractor's performance shall be evaluated by the Fee Determination Official at the end of each evaluation period, and graded in accordance with the scale below]Performance scorePercent of award fee earnedOutstanding Any score in the Outstanding category will earn 100% of the available award fee 96 and above100.0Good9594.09488.09382.09275.09168.09060.08951.08843.08736.08630.0Satisfactory8525.08420.08315.08210.0815.0800.0790.0780.0770.0760.0Performance scorePercent of basic fee refundedMarginal755.07410.07315.07220.07125.07030.06935.06840.06745.06650.0UnsatisfactoryBelow 6550.0

Performance scores should be rounded to the nearest tenth of a point and the percent of award fee determined accordingly (e.g., a score of 88.4 equals 46.2% of award fee earned).

Narrative Description of Performance Adjectives AdjectiveDefinition (performance description)OutstandingPerformance substantially exceeds expected levels of performance. Several significant or notable achievements exist. No notable deficiencies in performance.GoodPerformance exceeds expected levels and some notable achievements exist. Although some notable deficiencies may exist, no significant deficiencies exist.SatisfactoryPerformance meets expected levels. Minimum standards are exceeded and “good practices” are evident in contract operations. Notable achievements or notable deficiencies may or may not exist.MarginalPerformance is less than expected. No notable achievements exist; however, some notable deficiencies exist, or any notable achievements which exist are more than offset by significant or notable deficiencies.UnsatisfactoryPerformance is below minimum acceptable levels. Significant deficiencies causing severe impacts on mission capabilities exist. Performance at this level in any area mentioned in the Performance Evaluation Plan may result in a decision by the Fee Determination Official to withhold all award fees for the period. Definitions

Significant: This term indicates a major event or sustained level of performance which, due to its importance, has a substantial positive or negative impact on the contractor's ability to carry out its mission.

Notable: This term indicates an event or sustained level of performance which is of lesser importance than a “significant” event, but nonetheless deserves positive or negative recognition.

(e) Prior approval of the Procurement Executive, is required for total fee (basic plus award fee pool) exceeding the guidelines in paragraph (c), of this section. Additionally, in the event use of the award fee guidelines in paragraph (c), of this section, result in total fees which exceed or are expected to exceed the statutory limitations imposed by 10 U.S.C. 2306(d) and 41 U.S.C. 254(b), prior approval of the Procurement Executive shall be obtained.

(f) When a management and operating contract is to be awarded on an award-fee basis, the contract shall include the clause at 970.5204-54.

(g) Fee Determination Officials must be careful to ensure that all important areas of contract performance are mentioned in the Performance Evaluation Plan, even if such areas are not assigned specific weights or percentages of award fee.