Use of Cost plus Award Fee Contracts for Software Development Efforts
Daniel V. Ferens, Mark Hunter · The Journal of Cost Analysis · 1996
The focus of this paper is the use of cost plus award fee contracts for software development efforts. A thesis study conducted at the Air Force Institute of Technology sought to determine what type of contract was best for software development, and how it could be best applied. They study consisted of an extensive literature review, interviews with 23 government and four contractor management personnel, and historical information from past projects. The study concluded that cost plus award fee contracts were the most flexible for software development efforts, and give both contractor and government personnel an effective means to administer a software development contract. The study also concluded that there are common milestones that could be used for award fee assessment. Further research was performed to discover ways of determining award fee at each milestone or, alternately, at the end of a calendar period. A set of management indicators can be used to determine milestone completion or periodic progress and, consequently, to determine award fees. This paper concludes with guidance for incorporating these metrics and for implementing award fees in general.