A proposal to change the Federal Acquisition Regulation : recognizing the award fee incentive in fixed-price contracts

Abstract

The award fee is a unique incentive structure that provides the Government with a method of subjective, after-the-fact, evaluation of contractor performance and affords the Government additional flexibility to reward a contractor for above average performance. Additionally, the award fee incentive is not subject to the Disputes clause of a contract. Use of the award fee has proven to enhance Government to contractor communication and improve contractor performance in areas of quality, production management, ingenuity, timeliness, and cost-effectiveness.. The award fee incentive is recognized in the Federal Acquisition Regulation only under cost-reimbursement contracts. Limiting the use of the award fee to cost-reimbursement contracts. Limiting the use of the award fee to cost-reimbursement contracts restricts the Government's ability to derive the full benefits of the award fee incentive. In order to obtain the full benefit of the award fee, its use in fixed-price contracts should be sanctioned by recognizing it as specific contract forms in both Fixed-price and Cost-reimbursement contracting.