What is the appropriate net profit for a cost plus work of $200,000?
A. The FTA Best Practices Procurement Manual (BPPM) discusses the negotiation of profit on Cost Plus contracts in section 5.2 Cost and Price Analysis. With respect to profit, the BPPM guidance reads: • Profit/Fee – To negotiate a fair and reasonable profit, consideration should be given to: • The complexity of the work to be performed, • The risk borne by the contractor, • The contractor’s investment, • The amount of subcontracting, • The quality of its record of past performance, and • Industry profit rates in the surrounding geographical area for similar work.The BPPM is available online. We would suggest you review the fees negotiated with this particular contractor by other agencies, as well as the fees these agencies are paying other A&E firms on cost-type contracts with a similar mix of direct labor vs. subcontracted effort, and the complexity of the work being done. Q. We are a light rail transit agency. We had issued an IFB for crossing panels. There were 15 record holders. We
