Acquisition policy update
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Air Armament Center. Acquisition Policy Update. Emily Jay AAC/PK [email protected] 882-4398. DISTRIBUTION STATEMENT A : Approved for public release; distribution is unlimited. Agenda. Update on Anticipated Changes from Last Year Contract Incentives

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Acquisition policy update

Air Armament Center

Acquisition Policy Update

Emily Jay


[email protected]


DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited.



Update on Anticipated Changes from Last Year

Contract Incentives

Changes to Source Selection Process

Firm Fixed Price Development Contracts

Other Hot Topics

Update from last year

Update From Last Year

  • Congress and DAPA “Conspiracy of Hope”

    Advocated Change in our Processes

    • Source Selection Improvement Team

      • Requirements Traceability Matrix

      • More Education of Teams “Do’s and Don’ts”

      • DFARS Guidance Regarding Downselects

      • Increased Use of Oral Proposals

      • Increased Emphasis on Cost Realism/Risk

      • Increased Emphasis on Structuring Contracts to Limit Overruns

      • Move to Risk Based Source Selection

    • Award Fee Policy Revisions

Contract incentives

Contract Incentives

April/May 2006 – OSD/AF letters

June 2007 – OSD/AF letters

More OSD and AFFARS change pending

AAC Local Procedures

CPFF (PI) Contract Type allows Min Base Fee with Performance Incentives

Cost, Schedule, and Performance are tied

Incentives Need to Consider Length of Effort, Scope of Work and determine if:

Graduated Plans Should Be Used

Interim Evaluations Should Be used

Incentive fee example 1 non graduated complete in 1 year

Incentive Fee Example #1Non-Graduated, Complete in 1 Year

  • Small % Fixed Fee

  • The Cost, Schedule, and Technical criteria are "final performance criteria" for a Performance Incentive Fee of X%

    • Only be earned if the combined criteria are all accomplished.

    • The criteria are interdependent, all criteria must be met to earn the performance incentive fee.

  • Sample Criteria

    • Cost: CPI of 1.0 or higher at contract completion

    • Schedule: All SDD major events complete IAW kt

    • Performance: Successful completion of DT

Incentive fee example 2

Incentive Fee Example #2

Cost Plus 3% Fixed Fee with 12% Incentive Fee for meeting Cost AND Schedule AND Performance

Changes to source selection

Changes to Source Selection

AF Standardized Source Selection Process

All source selection plans approved on or after 31 Mar 08 must comply with the revised procedures

Individual Deviations approved at AFMC

Program Tailoring Comes In Developing Evaluation Criteria

Changes will be implemented in AFFARS

Integrated risk based source selection criteria

Integrated Risk BasedSource Selection Criteria

Air Armament Center

Source selection evaluation matrix

Source Selection Evaluation Matrix



Cost/Price Risk *

Mission Capability

Mission Capability

Subfactor 1

Subfactor 2

Subfactor 3

Subfactor 1

Subfactor 2

Subfactor 3

Proposal Risk

Risk Rating

Risk Rating

Risk Rating







Past Performance

Past Performance

Cost/Price *

* This factor may require a risk assessment

as described in Paragraph 5.5.4.


* For use on cost reimbursement or fixed-price incentive contracts where Cost/Price Risk is an Evaluation Factor; Most Probable Cost is utilized

Cost price risk ratings

Cost / Price Risk Ratings



Cost risk ratings

Cost Risk Ratings

  • Cost

    • The Offeror’s proposal will be assigned a cost proposal risk rating to characterize the extent to which the proposed costs indicate a clear understanding of solicitation requirements and reflect a sound approach to satisfying those requirements, including the planning for sufficient Management Reserve to accommodate risk. This will be accomplished by assessing the difference between the Offeror’s Cost Proposal and the Government’s Most Probable Cost estimate (MPC) of the Offeror’s approach, including the Government’s estimate of risk associated with the Offeror’s approach.

      • High Risk ( Estimate is > 20% above or below MPC)

      • Moderate Risk ( Estimate is 11%-20% above or below MPC)

      • Low Risk (Estimate is <10% above or below MPC)

    • Individual programs may tailor % and upper boundary for high risk

Factors cost price risk

Factors – Cost/Price Risk

  • Elevated Cost/Price Risk as a separate evaluation factor

    • Moves Cost/Price risk from within the Cost/Price evaluation factor.

    • Only applies to ACAT programs in a System Development and Demonstration (SDD) phase utilizing Most Probable Cost (Cost Reimbursement or Fixed-Price Incentive contract)

    • Mandatory discussions of cost model prior to RFP release

    • Requires robust discussions with each offeror on how the government’s best estimate of Probable Costs is calculated

      • Each offeror will have its own MPC based on their unique approach

  • When used, Cost/Price Risk shall be a significant factor

Mission capability technical ratings

Mission Capability Technical Ratings



Mission capability risk ratings

Mission Capability RiskRatings



+ Used when risk is in the upper boundaries of a Mission Capabilities Risk Rating but not enough to merit the next inferior rating

Proposal risk pre sdd

Proposal Risk – Pre SDD

Past performance ratings

Past Performance Ratings



Fixed price development contracts

Fixed Price Development Contracts

FY07 Authorization Act – PL 109-364, sec 818

DFARS Case 2006-D053

MS B – MDA, with advice of the Contracting Officer, selects contract type for development program

Basis for Contract Type Documented in Acq Strategy

Include explanation of level of risk

If high risk, steps taken to taken to reduce program risk and reasons for proceeding despite the high level of program risk

Cost Type Contract Requires a Written Determination

Program is so complex and technically challenging…not practicable to reduce program risk to a level permitting FP contract”

Complexity and technical challenge is not a result of failure to meet 10USC2366a

DFARS Case – Out for Public Comment - Closes 24 March 08

Mda certification

MDA Certification

National Defense Authorization Act for 2006

Implemented in USD/ATL letter dated 2 May 06

Prior to MSB approval, MDA must certify

Technology has been demonstrated in a relevant environment

Program demonstrates high likelihood of accomplishing its mission

Program is affordable when considering the per unit cost and total acquisition cost

AoA has been conducted

Program is affordable when considering alternative systems

JROC has completed review, including analysis of reqts

Program complies with all policies, regs, directives

Other hot topics

Other Hot Topics

  • Sole Source Negotiations

    • Receive same level of Risk Assessment/Review Prior to Handshake

    • Congressional requirement for Service Contract Reviews

      • OSD looking at broader applications

  • UCA Definitizations

    • Increased Emphasis on 180 Day Definitization



Congress, OSD, and AF continue to advocate realism and accountability in estimates and contracts

Risk is now assessed in POM Submissions, MDA Certifications, Source Selections and Sole Source Awards

OSD and AF increasing use of Standardized Procedures to ensure min level of quality/realism

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