1. CMC200 FEES, FINANCING, AND PAYMENTS
CMQ101 - Course Introduction
9/15/2018
CMC200 FEES, FINANCING, AND PAYMENTS
Module 1: Fixed-Price Payment and Financing Lesson 2: Fixed-Price-Incentive Contract Payment and Financing Requirements

2. Lesson 2 Introduction: TLO
Given a Government Fixed-Price-Incentive contract and/or modification(s) to a Government contract, apply price revision requirements as needed.
Graphic: circle stamp with text, ‘ESSENTIAL’.

3. What’s In It For Me (WIIFM)
This lesson will provide you with basic information to perform contract administration on Fixed-Price-Incentive (FPI) contracts.

4. Lesson 2: ELO
Given a Government Fixed-Price-Incentive contract and/or modification(s), correctly implement all DCMA required payment actions.

5. Lesson 2: Topics CLIN Price and Profit Verification Payment Submittal
QLOPS
Final Price Process
Payment Submittal Verification

6. Topic 1: CLIN Price and Fee Verification
CLIN Price and Profit Verification
Payment Submittal
QLOPS
Final Price Process
Payment Submittal Verification

7. CLIN Price and Profit Verification
Every FPI contract includes a CLIN that contains an adjustment formula representing the allocation of cost risk between the Government and contractor.
The adjustment formula is normally stated as a share ratio
Government share + contractor share = 100% of cost risk
The percentage will be used to calculate the incentive profit that will be paid to the contractor based on the actual cost of the contract
Graphic: scale with text, ’50/50 share ratio’.
50/50 Share Ratio

8. CLIN Price and Profit Verification, Cont.
CMQ101 - Course Introduction
9/15/2018
CLIN Price and Profit Verification, Cont.
Graphic: excerpt from a contract.
maximum price + incentive profit
target cost + incentive profit
(target) incentive profit
percentage of cost overrun to be subtracted from the contractor’s target profit
percentage of cost underrun to be added to the contractor’s target profit
Type of Contract
60/40
60/40

9. Knowledge Review
If the contractor underruns an FPI contract, which share ratios would provide the most profit?
30/70
70/30
60/40
40/60

10. Topic 2: Payment Submittal
CLIN Price and Profit Verification
Payment Submittal
QLOPS
Final Price Process
Payment Submittal Verification

11. CMQ101 - Course Introduction
9/15/2018
Payment Submittal
Contractor submits interim billings as authorized by the contract
Submitted on combo or 2-in-1 invoices
Contractor is paid costs that have been incurred to date and should not exceed the target cost
Contractor also bills a portion of the fee as a percent of the cost incurred as per the contract and should not exceed the target fee.
Quarterly Limitation of Payments Statement (QLOPS) are submitted quarterly

12. Topic 3: QLOPS CLIN Price and Profit Verification Payment Submittal
Final Price Process
Payment Submittal Verification

13. CMQ101 - Course Introduction
9/15/2018
QLOPS: Overview
Per FAR 52, (g) The Contractor submits QLOPS to ACO and a copy to PCO/DCAA within 45 days of quarter’s end
CA/ACO analyzes QLOPS
ACO takes action to recover overpayments made to the contractor
Graphic: hands exchanging documents.

14. QLOPS
QLOPS shall be cumulative from the beginning of the contract and include the:
Total contract price of all supplies delivered (or services performed) and accepted by the Government
Total costs reasonably incurred (estimated to the extent necessary)
Graphic: calculator with receipt tape.

15. QLOPS, Cont.
QLOPS shall be cumulative from the beginning of the contract and include the:
Portion of the total target profit that is in direct proportion to the supplies delivered (or services performed) and accepted by the Government
Total amount of all invoices or vouchers for supplies delivered (or services performed) and accepted by the Government
Graphic: stack of invoices.

16. QLOPS, Cont.
During QLOPS review, note initial estimate of contract cost at completion:
Reasons for variances from the initial estimate
Potential underrun or overrun conditions
Reasons for variances between the QLOPS and cost of items delivered and accepted in progress payments
Major subcontracting effort
Graphic: man sitting at desk looking at computer monitor.

17. QLOPS, Cont.
ACO should maintain a control record for QLOPS (e.g., Microsoft Excel)
Record should be stored in IWMS contract file and contain the following data
Fixed-Price Incentive Contract - Quarterly Limitation and Payments Statement (QLOP) Record
Contractor:
Contract Number:
Date of Initial Acceptance:
CLIN(s):
Quarter Ending
Date Statement Due
Date Statement Received
Date Technical Review Requested
Contractor Overpaid (Y/N)
Amount of Overpayment
Refund or Credit Offset (R/C)
Date of Refund or Credit Offset
Other Comments
Example only

18. Knowledge Review What is not part of QLOPS? Contractor’s name
Date of initial Acceptance
Final costs
CLIN

19. Topic 4: Final Price Process
CLIN Price and Profit Verification
Payment Submittal
QLOPS
Final Price Process
Payment Submittal Verification

20. Establishing Final Price Process
CMQ101 - Course Introduction
9/15/2018
Establishing Final Price Process
The process for computing final FPI contract price is:
Contractor submits final statement of costs
Audit performed by DCAA or DCMA pricing
Government and contractor negotiate to determine final (actual) cost
Profit is calculated based on share ratio
Final contract price is calculated based on negotiated final costs and final profit
When the final profit and final contract price have been established, the ACO/PCO issues a bilateral contract modification

21. Calculating Final Profit
CMQ101 - Course Introduction
9/15/2018
Calculating Final Profit
Graphic: text in cursive font: target cost – final cost = cost change x contractor’s share ratio = change in profit + target profit =final profit.

22. Establishing Final Price Incentive Profit
CMQ101 - Course Introduction
9/15/2018
Establishing Final Price Incentive Profit
The incentive profit is determined after contract performance. This incentive encourages the contractor to effectively manage the contract costs.
Underrun: The contractor earns more profit when they have a cost underrun
Overrun: The contractor earns less profit when they have a cost overrun
When the final profit and final contract price have been established, the ACO/PCO issues a bilateral contract modification

23. Calculating Final FPI Contract Price
CMQ101 - Course Introduction
9/15/2018
Calculating Final FPI Contract Price
Graphic: text in cursive font: final profit + final cost = final price
If final price < ceiling price: pay final price
If final price > ceiling price: pay ceiling price

24. Topic 5: Payment Submittal Verification
CLIN Price and Profit Verification
Payment Submittal
QLOPS
Final Price Process
Payment Submittal Verification

25. Payment Submittal Verification
This example shows how an overrun incentive profit is calculated.
Target cost
$86,000
Target (incentive) profit
$2,900
Target price
$88,900
Ceiling price
$100,000
Share ratio
60/40
Final cost
$90,000
Target cost minus final cost = change in cost
$86,000 - $90,000 = -$4,000
Change in cost times contractor’s share ratio = change in profit
-$4,000 x 40% = -1,600
Change in profit plus target profit = final profit
-$1,600 + $2,900 = $1,300
Final profit plus final cost = final price
$1,300 + $90,000 = $91,300

26. Payment Submittal Verification, Cont.
This example shows how an underrun incentive profit is calculated.
Target cost
$86,000
Target (incentive) profit
$2,900
Target price
$88,900
Ceiling price
$100,000
Share ratio
60/40
1. Final cost $80,000
2. Target cost minus final cost = change in cost $86,000 - $80,000 = $ 6,000
3. Change in cost times contractor’s share ratio =
change in profit $6,000 x 40% = $ 2,400
4. Change in profit plus target profit = final profit $2,400 + $2,900 = $ 5,300
5. Final profit plus final cost = final price $5,300 + $80,000 = $85,300

27. Knowledge Review What are the two parts that make up the final price?
Target Cost – Actual Cost
Seller’s sharing ratio + Target fee
Actual Cost x Seller’s sharing ratio
Final Profit + Final Cost

28. Price Revision Open: ‘Price Revision Group – Student’ from Blackboard.
Complete the assignment in the time provided.
Discuss with the class.

29. Price Revision
Open: ‘Price Revision Individual – Student’ from Blackboard.
Complete the assignment in the time provided.
Discuss with the class.

30. CMQ101 - Course Introduction
Questions?
Graphic: two red dice, text, ‘Q & A’.

31. Lesson 2 Summary
Fixed-Price Incentive Contract - Quarterly Limitation and Payments Statement (QLOP) Record
Contractor:
Contract Number:
Date of Initial Acceptance:
CLIN(s):
Quarter Ending
Date Statement Due
Date Statement Received
Date Technical Review Requested
Contractor Overpaid (Y/N)
Amount of Overpayment
Refund or Credit Offset (R/C)
Date of Refund or Credit Offset
Other Comments
Graphic: Example QLOPS record, final price equation in cursive, stack of invoices.

32. CMQ101 - Course Introduction
9/15/2018
Up Next
Graphic: contract cartoon character with text, ‘NEXT’.
Cost-Reimbursement Contract Payments and Financing