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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- PRICE Shall Deliver High Low On Delivery % of Actual Min Government NO Limit Contract Category Characteristics

PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred

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Page 1: PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred

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

Page 2: PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred

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

Page 3: PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred

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

Page 4: PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred

Distribution of Cost OutcomesDoes Not Follow a Bell Shaped Curve

Page 5: PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred

Distribution of Cost Outcomes Does Not Follow a Bell Shaped Curve

There is limited potential for under run, but infinite potential for

overrun.