CPAF

CPAF contracts are authorized under FAR 16.305 and give the government significant flexibility to reward excellent performance in areas that are difficult to measure objectively: such as management effectiveness, responsiveness, innovation, and quality of deliverables.

How the award fee works:

• Base fee: a small guaranteed fee (often 0-3%) paid regardless of award fee determination
• Award fee pool: the maximum additional fee available, typically 5-10% of estimated cost
• Award Fee Board: a government panel that evaluates contractor performance against criteria defined in the Award Fee Plan
• Evaluation periods: typically semi-annual or annual reviews where the contractor submits a self-assessment and the Board renders a determination

Award fee criteria typically include: technical performance, schedule adherence, management effectiveness, cost control, responsiveness to government direction, and small business utilization.

Rollover: Unearned award fee from one period may or may not roll over to the next, depending on contract terms. Some contracts allow rollover; others do not.

CPAF is common in large defense service contracts: logistics, base operations, systems engineering support: where the government wants ongoing leverage over contractor performance quality. The key for contractors: understand the Award Fee Plan thoroughly and maintain continuous communication with the government's Fee Determining Official.