In federal contracting, this is known as cost-plus-percentage-of-cost and is illegal. This is the first version where I have heard of it being used with a maximum or ceiling amount. It generally makes sense to incentivize a contractor to do the work for less cost (cost-plus-incentive-fee or fixed-price-incentive pricing arrangements), but why anyone would want to incentivize a contractor or subcontractor to spend all the money is a mystery. Dudley Dudley Sharp Contracts Manager Office for Research and Sponsored Project Administration Arizona State University 480-965-0273 -----Original Message----- From: Research Administration List [mailto:xxxxxx@HRINET.ORG] On Behalf Of Greg and Peg Schmidt Sent: Thursday, October 07, 2004 7:52 AM To: xxxxxx@HRINET.ORG Subject: Re: [RESADM-L] fixed price subawards under NIH grants? Price Plus Percentage Fee. Sorry about that. More often called Cost plus... It's a reimbursement contract with a percentage fee for profit. I might have a $100,000 contract which is comprised of $86,957 of costs and a 15% fee. If I spend the full 86,957, I'll get my full fee. If I spend only $80,000, I'll get 15% of that or $12,000. Greg ----- Original Message ----- From: "Jean M. Murphy" <xxxxxx@WELLESLEY.EDU> To: <xxxxxx@HRINET.ORG> Sent: Tuesday, October 05, 2004 11:24 AM Subject: Re: [RESADM-L] fixed price subawards under NIH grants? > Hello All! > I found this exchange on fixed price contracts helpful, but was > left with one question. Can someone explain or spell out what a PPPF > contract is? > Thanks much. > Jean > > Research Administration Discussion List <xxxxxx@HRINET.ORG> writes: >>Greg makes very strong points that should be valued. His view of how >>the for-profit looks at things is quite accurate. I do wish to point >>out that my statement in my final paragraph was directed explicitly >>towards grants, as opposed to contracts. Greg, on the other hand, >>describes considerations that are more likely to come about in a >>contract situation. There can be considerable differences between the >>two from a university's point of view when looking at the way to sub- >>out the work; a subaward under A-110 rules may be quite different from >>a subcontract under FAR because the purposes and risks of the >>projects, as proposed, are frequently -- but not always -- different. >>The views Greg and I presented should both be studied! >> >>Chuck >> >> >> >>At 10:27 AM 10/1/2004, you wrote: >> >> >>Oh, my gosh! I'm going to disagree somewhat with Dr. Chermside on his >>closing point. Could this be professional suicide? >> >>It is possible that there are several potential for-profits that are >>under consideration to team with you. You do not necessarily know >>what the final outcome of your proposal will be. You could not really >>forsee the scope that will be finally agreed upon between you and the >>Agency, and by fiat to the sub, so you couldn't really project the >>type of award to be negotiated. The Agency really doesn't care what >>type of arrangement you have with your subs except to the extent that >>the required flow-through provisions are in the subaward no matter >>what the form. >> >>Now it is true that some branches of agencies look sideways at FPC's >>for some reason. They're really no different than a Purchase Order. >>You provide a good/service, I give you a fixed amount of money for that. >>They don't have problems with those, so they really shouldn't have any >>problems with a FPC. >> >>When should a project be a CRC, CPFF, PPPF, FPC, or any of the other >>miriad of types of contracts? The FAR is a good place to look. It's >>all about sharing risks. >> >>If I have no idea whether the objectives can be met or how much it >>will really cost, I would issue a CRC (university) or a CPFF >>(company). Think basic research. The project could be over as soon >>as it begins with min imalcosts. decades costing many billions. Here >>the risks lean most heavily on the prime. The sub will be paid for their costs. >> >>If I'm reasonably sure that the outcomes can be achieved with specific >>effort, but there are some significant risks involved, I'd lean >>towards a PPPF where my costs will be coverd and I'll still make my >>profit on a percentage basis of my costs. Here the risks are shared >>equally between prime and sub. The prime pays for what the sub >>expends, and the sub gets some or all of their fees. >> >>Finally, if you know the outcomes and the efforts involved and can put >>a price to it with assurance, a FPC is the way to go. This is like >>buying a painter's services. You can shop the job out, get costs to >>perform and sign a contract. If the painter can knock off your job in >>a day and you can accept the quality of work performed, they'll come >>out ahead. If it takes them a week, they get the same amount and earn >>little or lose money. As the owner, I don't care so long as the >>quality is there and the other terms of the agreement are met. Here, >>the risks are all on the sub. >> >>Greg > > > Jean M. Murphy > Director of Pre-Award Services > Wellesley Centers for Women > http://www.wcwonline.org > E-mail: xxxxxx@wellesley.edu Phone: 781-283-2508 Fax: > 781-283-2504 > > Wellesley College, Cheever House, 106 Central Street, Wellesley, MA > 02481 > > > ====================================================================== > Instructions on how to use the RESADM-L Mailing List, including > subscription information and a web-searchable archive, are available > via our web site at http://www.hrinet.org (click on "Listserv Lists") > ====================================================================== > ====================================================================== Instructions on how to use the RESADM-L Mailing List, including subscription information and a web-searchable archive, are available via our web site at http://www.hrinet.org (click on "Listserv Lists") ====================================================================== ====================================================================== Instructions on how to use the RESADM-L Mailing List, including subscription information and a web-searchable archive, are available via our web site at http://www.hrinet.org (click on "Listserv Lists") ======================================================================
