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

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.

Instructor:  JEFF CUSKEY, GOVCON Consulting & Expert Witness Services

Jeff Cuskey is a nationally known government procurement consultant, speaker, Small Business Innovation Research (SBIR) Program and Defense Contracting expert witness, and two-time Association of Procurement Technical Assistance Centers (APTAC) Economic Impact Award recipient.  In addition to providing consulting services to government and industry, he works part time as a Senior Procurement Advisor for the San Diego, Orange, & Imperial Procurement Technical Assistance Center (PTAC). While serving in the U.S. Navy Jeff held various leadership, acquisition and contracting positions, including assignments as the Navy’s multi billion dollar F/A-18 Strike Fighter Program Business Financial Manager (CFO) and F/A-18E/F Super Hornet Deputy Contracting Officer. After retiring from the Navy at the rank of Commander, he taught defense-focused MBA contracting, program management and business financial management courses at the Naval Postgraduate School (NPS), Monterey CA. Jeff has an MS degree in Acquisition and Contract Management from NPS and is a Certified Professional Contracts Manager (CPCM), Certified Federal Contracts Manager (CFCM), Certified Schedules Contracts Manager (CSCM), and Certified Procurement Professional (CPP). In 2020 APTAC recognized Jeff as its Betty McDonald Outstanding Member Achievement Awardee for his significant contributions and deep commitment not just to the procurement profession, but also to the APTAC organization and its members.