Conduct Procurement

CONDUCT PROCUREMENT
Conduct Procurement is the process of 

• obtaining seller responses, 
• selecting a seller 
• awarding a contract
• implementation of the Contract/Agreement for delivery

The key benefit of this process is that it selects a qualified seller and implements the legal agreement for delivery. The end results of the process are the established agreements including formal contracts. This process is performed periodically throughout the project as needed. 

A contract is a mutually binding agreement that 

obligates the seller to provide the specified products, services, or results; 

obligates the buyer to compensate the seller; 

and represents a legal relationship that is subject to remedy in the courts. 

The major components in an agreement document will vary, and may include but are not limited to:

- Procurement statement of work or major deliverables;

- Schedule, milestones, or date by which a schedule is required;

- Performance reporting;

- Pricing and payment terms;

- Inspection, quality, and acceptance criteria;

- Warranty and future product support;

- Incentives and penalties;

- Insurance and performance bonds;

- Subordinate subcontractor approvals;

- General terms and conditions;

- Change request handling; and

- Termination clause and alternative dispute resolution mechanisms.

Difference between CPAF and CPIF contracts

Diff between Cost Plus Award Fee and Cost Plus Incentive Fee Contracts

Both contract types are cost reimbursable. One has an Award Fee and the other an Incentive Fee. They are very similar on the surface. Both have their own applications, so its not easy to tell which is most commonly used. The answer to that is "it depends".

CPAF
The award fee is usually based on a subjective evaluation of some component of the work. It is also not usually subject to dispute. There is a performance portion of the contract which describes the area of work to be evaluated, the weighting of importance (if any), and the amount of the fee that can be earned each contract period. This contract works best for R&D work where quality is the primary objective. Also for any contract type where the results cannot be objectively measured.

CPIF
The incentive fee is usually based on objective criteria (often cost-based) that are included in the contract. When cost based, every $ over budget means a greater loss of incentive fee and every $ under budget means a greater portion of the incentive fee is earned. The incentive fee can be based on any criteria such as cost schedule, technical goals (e.g. ship speed), or delivery/schedule.