The cost efficiency factor gives a lot of flexibility to a negotiator. Let’s be honest: the profit percentage that Weighted Guidelines DD 1547 gives you are very low. In fact, I can’t think of many commercial businesses that would accept a profit of 3% on a contract, especially after all the effort a contractor puts into preparing and negotiating it. However, the suggested profit is something to stand on. After all, deciding on profit is not a science.
One of my favorite parts of the DFARS is the cost efficiency for profit/fee. Basically, the contractor can get a much higher profit if the contractor gives adequate evidence it reduced costs. However, the amount earned cannot be more than 4% of the contract value and cost efficiency factor use is solely at the discretion of the contracting officer, and the cost efficiencies must affect the pending contract.
This is an incentive for contractors to earn money for their past deeds that save money for the government. However, some say its just the government giving away money. I think its simply another tool to be used on a case by case basis. Don’t just give money away; make sure the money saved actually benefits the government. Do that, and you should motivate a contractor.
Sound off — do you think the cost effiency factor wastes money, is always useful, or is a tool to be used in given situations?