How to Justify Increased Profit/Fee Under DoD Contracts Requiring Certified Cost or Pricing Data

This presentation provides insight into DoD’s profit policies and how businesses can justify and negotiate a higher profit or fee on DoD contracts and contract modifications that require the submission of certified cost or pricing data under Federal Acquisition Regulation (FAR) 15.403.

Defense Federal Acquisition Regulation Supplement (DFARS) 215.404-4(b)(1) requires DoD contracting officers to use a structured approach for developing a prenegotiation profit or fee objective on any negotiated contract action when certified cost or pricing data is obtained, except for cost-plus-award-fee (CPAF) contracts and contracts with Federally Funded Research and Development Centers (FFRDCs).

The structured approach most commonly used by DoD contracting officers is called the “Weighted Guidelines” method. Under the weighted guidelines method, contracting officers are required to factor in performance risk, contract type risk, working capital, facilities capital employed (if proposed), and cost efficiency when developing their prenegotiation profit/fee objectives.

Some businesses are unaware that the Government’s prenegotiation profit objectives, developed via the formulaic weighted guidelines method, can vary widely based upon the underlying assumptions and values used. Furthermore, some businesses do not realize they can negotiate a higher profit or fee. As a result, these businesses unknowingly accept the Government’s proposed profit rate on contracts that might have higher than normal performance risk and warrant a higher profit.

In this presentation, you will learn how to develop effective strategies that can be used to negotiate higher profit or fee positions that are fully justified under DoD’s weighted guidelines (profit) method application.

Target Audience: Novice and experienced small business government contractors