If you have a passion for acquisition, you probably have a favorite contract type. Or if you have managed a challenging contract, you may have a least-favorite contract type. My favorite contract type is cost-plus-award-fee (CPAF).
Why is CPAF my favorite type? For several reasons.
- CPAF provides incentives that correspond to measurable performance standards for performance-based acquisition, while also incorporating professional judgment re award fee amounts
- CPAF requires the Government and Contractor to communicate continuously on expectations, progress, and any impediments
- CPAF easily allows some flexibility if mission objectives are altered and revised needs emerge, or technology capabilities evolve
- You can attract top talent to your contract because you pay for top talent (rather than forcing everyone into the same hourly rate for the same year of experience regardless of the individual’s talent and productivity)
- You can attract top talent to your contract because companies want to put their best employees on profitable contracts (rather than lose money on the hourly rate)
- CPAF with regular award fee assessments communicates the Government’s satisfaction or dissatisfaction with the contractor performance. CPARS reviews are too often done too late to change the course of the project. Let’s face award fee and profitability gets the attention of any contractor, no matter how large so the award fee assessment provides near-term feedback up the chain
- CPAF is a win-win for the Government and the Contractor when projects are successful (see reasons 1-6 that contribute to successful projects)
Love to hear your favorite contract type. Or even why you don’t like CPAF.
For more information on our enlightened solutions suite of apps to help PMs from requirements to project closeout, check out our videos on this website or request a demo at demo@seventhsenseconsulting.com.