Types of Contracts: Firm Fixed-Price and Cost Plus-Fee

1. EMIS 7307 Chapter 5 • Much of Chap 5 and 6 varies depending on the contract type. • Two major types are important so we’ll digress to Contracting 101 for a few charts. • If interested in more details see Chapter 6 of text.

2. EMIS 7307 Chapter 5

3. EMIS 7307 Chapter 5 • The two types of contracts are Firm Fixed Price (FFP) and Cost Plus Fee (CPF). • FFP contracts are used when: • Producing product is low risk. • Making off the shelf purchases. • Potential willing bidders exist. • There is little, perhaps no, customer involvement during the execution of FFP contracts.

4. EMIS 7307 Chapter 5 • CPF contracts are used when: • Producing system is perceived as high risk. • Potential bidders won’t bid on a FFP. • There is much customer involvement in the execution of CPF contracts. • Design reviews • Production reviews • Testing • ETC.

5. EMIS 7307 Chapter 5 • Why is there so much customer involvement in the execution of CPF contracts? • Only have a target cost. If the costs exceed target customer still pays. • The system is so new and challenging it’s hard to know the requirements well, at the beginning. • This partially explains requirements creep.

6. EMIS 7307 Range of Contract Types/Risk/Program Control (TYPES OF CONTRACTS) FFP CPFF FFP/EPA FPIF FPR T&MOR L/H CS CR CPIF CPAF (RISK) LOWHIGH BUYER HIGHLOW SELLER (PROJECT CONTROL) BUYER LESSMORE MORELESS SELLER Chapter 5 FFP = Firm Fixed Price CS = Cost Sharing FFP/EPA = Firm Fixed Price CR = Cost Reimbursement w/Economic Price Adjustments CPIF = Cost Plus Incentive Fee FPIF = Fixed Price Incentive Firm CPAF = Cost Plus Award Fee FPR = Fixed Price Redeterminable CPFF = Cost Plus Fixed Fee T&M = Time and Materials L/H = Labor Hour

7. EMIS 7307 Chapter 5 • Design review general considerations: • Customer involvement not required in an FFP contract. • From a SE perspective no less important! • Event driven. • All the lead-up work complete else postpone! • Should be a phase culminating event. • Actual event should be anticlimactic.

8. EMIS 7307 Chapter 5

9. EMIS 7307 Chapter 5 • Figure 5.1 shows the author’s view of how design reviews, both formal and informal, fit into the process. • Next slide shows a government view. • Design reviews are gating functions. • Next phase doesn’t officially start until successful. • Design reviews fit into a bigger review picture as depicted in the second slide from here.

10. EMIS 7307 Chapter 5

11. EMIS 7307 Chapter 5

12. EMIS 7307 Chapter 5 • Informal reviews are the many “mini” reviews (discussions) without the senior management or customer. • This is where the work is done to make sure the various design teams are ready for the formal reviews.

13. EMIS 7307 Chapter 5 • Formal reviews at the system level cover items like those listed in Figure 5.4. • Typically every program has at least 3: • SRR • PDR • CDR • Look at Figure 5.6 for an example of tracking TPMs through the review process.

14. EMIS 7307 Operational requirements Draft A spec Functional Analysis (block diagrams) Feasibility analysis (trade study results) Maintenance concept SEMP TEMP Draft TPMs Conceptual; design drawings Output is baseline functional design May consume as much as a week. Chapter 5 Conceptual Design Review also called SDR or SRR includes:

15. EMIS 7307 Subsystems specs Draft Assembly specs “ilities reports” TPM analyses Engineering models/ prototypes Lab test results presented Supplier data Allocated baseline Test plans reviewed May consume the equivalent of a weeks time for each subsystem ~15% of the production drawings available Chapter 5 Preliminary Design Review (PDR) includes:

16. EMIS 7307 Evaluates all Cis Evaluates product baseline Prelude to actual building and coding of system Product baseline Test plans reviewed May consume the equivalent of a weeks time for each assembly ~ 85% of the production drawings available Chapter 5 Critical Design Review (CDR) includes:

17. EMIS 7307 Chapter 5 • For PDRs and CDRs the formal events will necessarily be capstone or summary events. • Action items are brought forward and results adjudicated. • From previous reviews. • From TIMs. • Sometimes reviews are given a pass to continue design, with a  review scheduled to finish the review some time in the future. •  reviews are for a few specific action items.

18. EMIS 7307 Chapter 5 • Whenever we have a baseline what happens? • For some good (?) reason someone wants to change it! • Change control is a big issue from the beginning and gets bigger as time goes on. • More drawings that may need to change. • More drawings or products impacted if there is a change. • Remember, change control is required because of changes!

19. EMIS 7307 Chapter 5 • Configuration management comprises: • Identification • Control • Status accounting • Audits

20. EMIS 7307 Chapter 5 • Identification • Selection of CIs. • Determine types of documentation. • Documenting the functional and physical characteristics. • Establish interface management procedures. • Issuing numbers and identifiers.

21. EMIS 7307 Chapter 5 • Control • Engineering change proposals. • Class 1- Form, fit, function changes. • Requires customer approval. • Class 2 - All other changes. • Configuration Control Board. • Request for deviation.

22. EMIS 7307 Chapter 5

23. EMIS 7307 Chapter 5

24. EMIS 7307 Chapter 5 • Status accounting: • Lists of approved documents. • Status of proposed changes. • Implementation status. • Configuration of all units.

25. EMIS 7307 Chapter 5 • Audits • Functional Configuration Audit (FCA) • Verifies actual performance of each CI meets specification. • Physical Configuration Audit (PCA) • Verifies as-built matches technical data package.

26. EMIS 7307 Chapter 5 • Look at the 2 paragraphs near the bottom of page 245. • Another illustration that later is more costly.