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DoD Finalizes Rule on Award-Fee Contracts

The Department of Defense has finalized, with changes, a proposed rule (70,020.265, DFARS Case 2006-D021) amending the Defense Federal Acquisition Regulation Supplement to address award-fee contracts. The rule revises DFARS 216.401 to require the use of award-fee plans in all award-fee type contracts, and adds a new provision at DFARS 216.401-71 requiring contracting officers to use objective criteria to the maximum extent possible to measure contract performance. DFARS 216.405-2 has been revised to require the CO to perform an analysis of appropriate fee distribution to ensure at least 40 percent of the award fee is available for the final evaluation so that the award fee is appropriately distributed over all evaluation periods to incentivize the contractor throughout contract performance. In response to comments, DoD has revised the final version of the rule to state the final percentage of award fee may be set below 40 percent if the CO determines a lower percentage is appropriate and the determination is approved by the head of the contracting activity. Revised DFARS 216.405-2 also prohibits award-fee payments other than payments resulting from the evaluation at the end of an award-fee period. Further, the rule adds a new contract clause at DFARS 252.216-7005 and a related prescription provision at DFARS 216.406(e)(2). The rule eliminates the use of provisional award-fee payments. For the text of the final rule, which carries an effective date of February 14, 2011, see 70,016.621.




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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