Defining Cost-Plus Contract Fees

Fee Types

Cost-plus contract line fees represent the profit received for work performed on a government contract. PeopleSoft Contracts supports the following four fee types:

• Fixed: Fixed award fee types are the most common fee types used by the government.

  Fixed fees are an agreed upon percentage between the government and the government contractor. These fees are applied on top of total costs and represent the profit for performing the service or creating the products for the government. As with all fee types, fixed fees are subject to a funded and revenue fee limit amount determined by the government.

• Award: Award fees are comprised of two elements: the base fee amount and an additional award fee amount that can be earned by meeting certain deliverables, by finishing the work by a certain date, or some combination of these two actions.

  The additional award fee cannot be billed to the government until approval has been received to do so. The government contractor may receive all, part or none of the additional award fee. Both the base fee amount and the additional award fee are subject to funded and revenue fee limit amounts determined by the government.

• Incentive: Incentive fees are directly tied to the performance of the government contractor on the contract.

  The government shares costs that may be over or under a target cost amount. When the contract is completed, the contractor can request a fee amount based on the total funded costs, maximum and minimum fee range, and overrrun or underrun cost percentages that are agreed upon when the contract is signed. The fee request is also subject to both funded and revenue fee limits.

• Other: Other fees represent all other fee types that are not designated with any special attributes.

  Other fees enable you to capture an amount that you specify which is subject to billing and revenue fee limits defined by the user.

Setting Up a Contract to Manage Cost-Plus Contract Fees

To manage your contract line fees you define a contract with a contract classification of Government. You must select rate-based products to add to the contract and assign a fee type to the product requiring cost-plus functionality. Each contract line can represents one fee type. Only one fee type can be assigned to a contract line at any point in time, but a contract can contain multiple contract lines assigned to different fee types. When you assign fee types to a product and add them to a contract, cost-plus functionality is enabled, you can create and manage the fees for the contract lines as needed, and bill and recognize revenue for your fee amounts.

Fees are calculated using billing and revenue fee worksheets. If you choose to use different rates to calculate your billing and revenue fee amounts for your contract lines, then you will have separate billing and revenue fee worksheets. If you use the same rates for billing and revenue recognition, then you will only have billing fee worksheets and that fee worksheet data is used to calculate both billing and revenue recognition fees. However, billing and revenue plans are still required to bill and recognize revenue for the contract lines outside of fee processing.

Billing and revenue fee worksheets are incorporated into the billing and revenue plans assigned to the contract lines. For cost-plus contract lines (rate-based contract lines associated with a fee type), you must define an individual billing and revenue recognition plan for each contract line, and you must use the billing and revenue recognition method of As-Incurred. Cost-plus contract lines require their own individual billing and revenue recognition plans because the billing and revenue fee worksheet created by the system for the billing and revenue plans assigned to the contract lines are unique to the fee type assigned.

Billing and revenue plans are required to generate invoices and accounting entries for the contract lines as work is completed. The billing and revenue fee worksheets are required to calculate the billing and revenue fee amounts that can be billed to your customer or recognized as revenue. To manage and process incentive and award fee amounts, Contacts delivers award schedules that enable you to define fee events that can be controlled using either dates or milestones.

In addition to calculating and managing your fee amounts, you must also define the limit amounts for your funded and revenue costs, as well as fee limits. When you prepare a fee worksheet for fee generation, the system calculates a proposed fee amount. You can accept the proposed fee amount or override that amount and enter a different amount. When you save the page or submit the fee for processing, the system automatically calls the fee limit processor. This process checks the fee amount requested against the billing or revenue fee limit defined as well as whether the transaction falls within any period of performance dates specified. If the requested fee amount is within the limit parameters, then the fee is passed and can be billed or recognized as revenue. If the fee amount exceeds the limit amount, then the fee request is rejected, and either reset to the system calculated proposed fee amount or reset to zero.

The fee amount is generated at a summary level and stamped with the project and activity designated as the target and assigned to the contract line on the Related Projects page.

Cost-Plus Contract Fee Statuses

When fees are calculated by the system, it uses the cost rows for the contract lines that are stored in the Project Costing Project Transaction tables. To ensure that costs are not used twice in fee calculations, the system assigns a fee status to each cost row. PeopleSoft Contracts uses the following fee statuses:

• Blank: A blank fee status indicates that no fees have been calculated using this cost row.

  Cost rows with a blank fee status can be used by the fee worksheet to generate fee rows.

• 1 (one): A fee status of 1 indicates that the cost row has already been used to calculate fees and cannot be used to generate additional fee rows.

• 2 (two): A fee status of 2 indicates that the cost row is an actual billing (BIL) fee row.

• 3 (three): A fee status of 3 indicates that the cost row is an actual billing (BIL) additional award fee row.

• 4 (four): A fee status of 4 indicates that the cost row is an actual revenue (REV) fee row.

• 5 (five): A fee status of 5 indicates that the cost row is an actual revenue (REV) additional award fee row.