Start Date

4-1987 8:00 AM

Description

Fixed price contracts have been proclaimed as the most appropriate type of contracts for the Government to negotiate to the detriment of any consideration of the incentive type contracts. This tendency is especially true for the production contracts where clear, firm specifications are available to enable the contractor to perform the required work. In many cases, however, the use of incentive contracts might prove a valuable tool for contracting officers.

This paper will explore the use of fixed price incentive and cost plus incentive fee contracts where negotiations have become deadlocked due to substantial differences in negotiation positions between the parties involved. In these situations, there is a natural tendency to split the difference which can result in a final settlement in which the contracting officer is left feeling uncomfortable.

Several options open to both parties accompanied with graphical representations will also be presented. These options afford incentives in the form of rewards and penalties that both the Government and the contractor can accept. Also provided are practical solutions and methods for resolving the negotiation impasse, thereby enhancing a settlement to a fixed price incentive contract or an alternative-incentive contract.

A case study of an actual program will be used to demonstrate the methods proposed to achieve acceptable compromises during negotiations. The case study covers an Engineering Development Program in a mature phase of development. This study includes the use of variable share lines in the same contract and offers an innovative method whereby agreements can be reached in even the most difficult negotiations during any phase of the product life cycle.

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Apr 1st, 8:00 AM

Innovative Use ot Incentive Contracts

Fixed price contracts have been proclaimed as the most appropriate type of contracts for the Government to negotiate to the detriment of any consideration of the incentive type contracts. This tendency is especially true for the production contracts where clear, firm specifications are available to enable the contractor to perform the required work. In many cases, however, the use of incentive contracts might prove a valuable tool for contracting officers.

This paper will explore the use of fixed price incentive and cost plus incentive fee contracts where negotiations have become deadlocked due to substantial differences in negotiation positions between the parties involved. In these situations, there is a natural tendency to split the difference which can result in a final settlement in which the contracting officer is left feeling uncomfortable.

Several options open to both parties accompanied with graphical representations will also be presented. These options afford incentives in the form of rewards and penalties that both the Government and the contractor can accept. Also provided are practical solutions and methods for resolving the negotiation impasse, thereby enhancing a settlement to a fixed price incentive contract or an alternative-incentive contract.

A case study of an actual program will be used to demonstrate the methods proposed to achieve acceptable compromises during negotiations. The case study covers an Engineering Development Program in a mature phase of development. This study includes the use of variable share lines in the same contract and offers an innovative method whereby agreements can be reached in even the most difficult negotiations during any phase of the product life cycle.

 

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