452. Missile Growth and Its Impact on Profits

Paper

Abstract

Two extremes exist in contracting philosophy, namely, the very loose Cost Plus Fixed Fee (CPFF) , and the ever stringent Firm Fixed Price (FFP). All of the incentive concepts fall some place between; the Fixed Price Incentive Fee (FPIF) and the similar Cost Plus Incentive Fee (CPIF) contracts are the most important of these concepts to the weight engineer. If statistical estimates are used for negotiating program costs, the FPIF contract will place a greater responsibility on the weight engineer than will the CPIF contract. The weight engineer, through the detailed weight estimate he prepares for his company proposal, is partially responsible for the accuracy of 30 to 110 per cent of the cost estimate used in contract negotiations. Target fees performance incentives such as weight and range are greatly affected by the proposal weight estimates. The weight engineer is also very influential in achieving and exceeding performance incentive targets. The weight engineer’s confidence in his weight estimates may even influence management’s decision on the type of contract to propose. Although the examples of the incentive schemes i n t h i s paper are simplified, they present a reasonable idea of the actual schemes. The main purpose of this paper is to impress the average weight engineer with his growing importance in establishing the position of his employer through increased use of incentives in government procurement. The contract information in this paper is not meant to encompass all aspects of contracting, Only a few general concepts are discussed with the intention of arousing the engineer’s curiosity to investigate further those areas of particular interest to him.