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Tuesday, May 29, 2018

Creating Value in CPFF contracts

The topic is CPFF contracts: incorrect use of incentives and death by a thousand papercuts….

If you went through the early days of USAID Iraq programming, you would remember that after a decade of T&M contracting, USAID discovered CPFF. The premise was innocent enough: they wanted a flexible instrument to allow for ramp up and ramp down at will, with scopes of work you could drive a proverbial truck through, minimal profits (CPFF is the lowest risk contract type for contractor) and the promise of some monster incurred costs audits to keep the contractor from spending too much money on things it did not really need.

After deciding that they wanted to have the same thing as T&M, but with the ability to see and audit all the costs, as opposed to some highly suspect fixed daily rates, USAID settled on CPFF “term” type contracts (FAR 16.306 (d)(2)).  The Contracting Officers, who were handed these CPFF term contacts, received very little training on what a CPFF was, and, received no training on what a CPFF “term” form meant.