Award Fee Reduction or Elimination

Last September, we reported on an interim Department of Defense rule that requires contracting officers to include in the evaluation criteria of any award-fee plan, a review of contractor and/or subcontractor actions that jeopardized the health or safety military and civilian Government personnel through gross negligence or reckless disregard for the safety of such personnel.

That interim rule is now a final rule. It was adopted without change effective February 24, 2012. The purpose of this rule was to implement sections of the National Defense Authorization Acts for fiscal years 2010 and 2011 that provided increased authorities to reduce or deny award fees to companies found to jeopardize the health or safety of Government personnel.

It seems to us that this rule might have the most applicability in a "war zone" however there is nothing in the rule or the statutory basis that limits it thus. The rule applies even where it is not specifically identified as an award fee criteria. Contractors with award fee contracts (e.g. CPAF contracts) or contemplating award fee contracts should take note.