E7-9754. Contract Profit/Fee Policies

AGENCY:

Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION:

Request for public input.

SUMMARY:

DoD is conducting a review of the Department's contract profit/fee policies. As part of this review, DoD would like to hear the views of interested parties regarding the effectiveness of the profit/fee policies presently used for DoD contracts.

DATES:

Submit written comments to the address shown below on or before July 23, 2007.

ADDRESSES:

Submit comments to: Office of the Director, Defense Procurement and Acquisition Policy, ATTN: OUSD (AT&L) DPAP (CPF), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Comments also may be submitted by facsimile at [phone], or by e-mail at [e-mail].

FOR FURTHER INFORMATION CONTACT:

Mr. Bill Sain, by telephone at [phone], or by e-mail at [e-mail].

SUPPLEMENTARY INFORMATION:

DoD contract profit/fee policies, to include policy for developing pre-negotiation profit or fee objectives, are described in the Defense Federal Acquisition Regulation Supplement (DFARS), in sections 215.404-4 and 215.404-70 through 215.404-76. One of the key aspects of DoD's profit policy is the Weighted Guidelines. While there have been some revisions to the Weighted Guidelines over the past few years, the basis for the existing policy was established in the mid-1980s. Since then, there have been a number of changes, including (1) the evolution of DoD's acquisition programs, (2) extensive industry consolidation, and (3) a significant increase in the number of DoD contracts for services. In light of these many changes, DoD is interested in receiving public input on the existing profit/fee policies, with regard to those that are working effectively and those that should be revised or eliminated, along with supporting rationale. Potential areas for consideration include, but are not limited to, the following:

• The contractor risk factors used in DoD's structured approach for developing profit/fee objectives, particularly with regard to—
• The pertinence of the existing factors;
• Whether the ranges and normal values used for the existing factors are still valid; and
• Whether there are other risk factors that are not reflected in the existing policies.
• Any changes needed to—
• The technology incentive at DFARS 215.404-71-2(c)(2) and (d)(4);
• The contract type risk factor at DFARS 215.404-71-3;
• The facilities capital employed factor at DFARS 215.404-71-4;
• The cost efficiency factor at DFARS 215.404-71-5;
• The modified weighted guidelines at DFARS 215.404-72;
• The policies as they provide for consideration of the amount of investment a contractor has in a contract;
• The policies as they provide for consideration of the extent of contract financing payments;
• The policies as they apply to contracts for services; and
• The policies as they apply to contracts for research, development, test, and evaluation.
• Whether any of the existing structured approaches for profit analysis should play a role in establishing the base fee or pool on award-fee contracts.

Michele P. Peterson,

Editor, Defense Acquisition Regulations System.