Overview
This section outlines the application and structure of award-fee provisions within fixed-price contracts, specifically for situations where subjective performance motivation is required.
Key Rules
- Purpose: Used to motivate contractors when performance cannot be measured by objective, quantifiable incentives.
- Base Structure: Contracts must establish a firm-fixed price that includes normal profit for the effort.
- Payment Condition: The fixed price is paid for satisfactory performance; any award fee earned is paid in addition to that base price.
- Regulatory Compliance: Utilization of this contract type must meet the specific requirements and documentation standards set forth in FAR 16.401(e).
Practical Implications
- This contract type allows the government to reward "excellence" or specific behaviors that are difficult to define in a Statement of Work, such as responsiveness or technical ingenuity.
- Contracting Officers must be prepared for a higher administrative burden, as award fees require a subjective evaluation process and an Award Fee Board.