1. PROMISE RISK TO CONTRACTORS RISK TO GOVERNMENT CASH FLOW PROGRESS PAYMENTS ADMINISTRATION FEE/PROFIT COST- REIMBURSEMENT Best Effort Low High As Incurred None Max Government Max: 6/10/15 % CPFF Contracts FIXED-PRICE Shall Deliver High Low On Delivery % of Actual Min Government NO Limit Contract Category Characteristics

2. Mission Support Planning Contract Types - Major Systems Continuum FPI FFP Pre-Systems Systems Acquisition Sustainment Acquisitions TYPICAL CONTRACT TYPE CHANNEL WORK STATEMENT TYPE CHANNEL Concept Refinement Technology Development Production and Deployment FPIFFP ILL DEFINED RQMT... WELL... DEFINED RQMT CE PDRREMDPRODUCTION or DEPLOYMENT CPFF FFP (LOE) IOC FOC Operations & Support A System Development & Demonstration B C Concept Decision Design Readiness Review LRIP/IOT&E FRP Decision Review User Needs & Technology Opportunities CPFF CPAF CPIF

3. Reliability of Cost Estimate and Confidence of Outcome CPFF 30 % + CPIF 20 - 30 % FPIF 10 - 20 % FFP or FFP/EPA 0 - 10 % Rules of Thumb

4. Distribution of Cost Outcomes Does Not Follow a Bell Shaped Curve

5. There is limited potential for under run, but infinite potential for overrun.