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PROMISE
RISK TO CONTRACTORS
RISK TO GOVERNMENT
CASH FLOW
PROGRESS PAYMENTS
ADMINISTRATION
FEE/PROFIT
COST-REIMBURSEMENT
Best Effort
Low
High
As Incurred
None
Max Government
Max: 6/10/15 %CPFF Contracts
FIXED-PRICEShall Deliver
High
Low
On Delivery
% of Actual
Min Government
NO Limit
Contract Category Characteristics
Mission Support PlanningContract Types - Major Systems Continuum
FPI FFP
Pre-Systems Systems Acquisition SustainmentAcquisitions
TYPICAL CONTRACT TYPE CHANNEL
WORK STATEMENT TYPE CHANNEL
ConceptRefinement
Technology Development
Production and Deployment
FPI FFP
ILL DEFINED RQMT ... WELL ... DEFINED RQMT
CE PDRR EMD PRODUCTION orDEPLOYMENT
CPFFFFP (LOE)
IOC FOCOperations &
Support
A
System Development& Demonstration
B C
ConceptDecision
Design ReadinessReview LRIP/IOT&E
FRP DecisionReview
User Needs &Technology Opportunities
CPFF CPAF CPIF
Reliability of Cost Estimate and Confidence of Outcome
CPFF
30 % +
CPIF
20 - 30 %
FPIF
10 - 20 %
FFP or FFP/EPA
0 - 10 %
Rules of Thumb
Distribution of Cost OutcomesDoes Not Follow a Bell Shaped Curve
Distribution of Cost Outcomes Does Not Follow a Bell Shaped Curve
There is limited potential for under run, but infinite potential for
overrun.