DoD Class Deviation Issued On Use of Fixed-Price Contracts

SUMMARY: Award of cost-reimbursement contracts exceeding $50M now requires the head of contracting activity approval. Further, this threshold decreases to $25M applicable to contracts awarded on or after October 1, 2019. We would expect further guidance on the implementation as related to options, mods, IDIQ TOs / DOs, etc.

SUBJECT: Class Deviation-Use of Fixed-Price Contracts Effective immediately. contracting officers shall first consider the use of fixed-price contracts. including fixed-price incentive contracts. in the determination of contract type and shall not award the following cost-type contracts unless the contract is approved by the head of the contracting activity:

• Cost-reimbursement contracts in excess of $50 million to be awarded after October I. 2018, and before October l, 2019. • Cost-reimbursement contracts in excess of $25 million to be awarded on or after
October l. 2019.

DETAILS: This class deviation implements section 829 of the National Defense Authorization Act for Fiscal Year 2017 (Pub. L. 114-328). which directs establishment of a preference for fixed­price contracts, including fixed-price incentive contracts. in the determination of contract type and establishes the requirement for higher-level approval for certain cost-type contracts. The Under Secretary of Defense for Acquisition and Sustainment has determined that the use of cost-type contracts is approved for research and development valued in excess of $25
million. if the contracting officer executes a written determination that the level of program risk does not permit realistic pricing and it is not possible to provide an equitable and sensible allocation of program risk between the Government and the contractor. 

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