Incentive Contracts

The Defense Department and other government agencies this week announced a request "to review and approve an extension of a previously approved information collection requirement concerning incentive contracts."

According to an Oct. 15 Federal Register notice:

In accordance with FAR 16.4, incentive contracts are normally used when a firm fixed-price contract is not appropriate and the required supplies or services can be acquired at lower costs, and sometimes with improved delivery or technical performance, by relating the amount of profit or fee payable under the contract to the contractor's performance.

The information required periodically from the contractor, such as cost of work already performed, estimated costs of further performance necessary to complete all work, total contract price for supplies or services accepted by the Government for which final prices have been established, and estimated costs allocable to supplies or services accepted by the Government and for which final prices have not been established, is needed to negotiate the final prices of incentive-related items and services. Contractors are required to submit the information in accordance with several incentive fee FAR clauses: FAR 52.216-16, Incentive Price Revision -- Firm Target; FAR 52.216-17, Incentive Price Revision -- Successive Targets; and FAR 52.216-10, Incentive Fee.

The contracting officer evaluates the information received to determine the contractor's performance in meeting the incentive target and the appropriate price revision, if any, for the items or services.

View the full notice.