§3374 Undefinitized Contractual Actions: Allowable Profit

Summary

The head of an agency must make sure the profit allowed on a contract without a final price — when the final price is set after most work is done — reflects the contractor’s cost risks. It must take into account four things: the lower risk for costs already paid before the final price; the lower risk for costs still to be paid for the remaining work; the higher risk for costs spent before the award if those costs would have been charged to the contract had they been spent after award and were spent to meet expected delivery dates or price targets under the acquisition strategy required under section 4211; and the higher risk when negotiations go on more than 180 days after the contractor sent a qualifying proposal to set the final price. If the contractor sends a qualifying proposal and the contract is finalized after that 180-day period, the agency head must base the allowed profit on the contractor’s cost risk as it existed on the date the proposal was submitted.