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EXAM 2.
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Exam of 5 pages for the course ASE Section 5 Sample Preparation Exam 1 at ASE Section 5 Sample Preparation Exam 1 (EXAM 2.)
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EXAM 2Advance Payment - ANS-No more than 15%
LEAST perferred
Performance Based Payment - ANS-PREFERRED
Finance payment - ANS-Accepted payment
Delivery payment - ANS-INVOICED payment
Reimburement/Sealed Bidding - ANS-CANNOT do PBP
Cannot have PBP and progress payments on same contract at same time - ANS-PBP
and Progress Payments
Can convert from progress payments to PBP? - ANS-YES
Advance Payments - ANS-Requires approval by Deputy Undersecretary for Finance
WGL (weighted Guidelines) - ANS-can produce higher profit objective with PBPs
Profit reduction - ANS-almost always warranted with PBPs, resulting in reduction in total
contract price
Time Value of Money - ANS-A dollar today is worth more than a dollar a year from now
measured through - ANS-Discounted Cash Flow, Internal Rate of Return (IRR), Net
Present Value (NPV)
Performance Based Payments Basics - ANS-achievement of specific events or
accomplishments
customary form of contract financing
Fully recoverable in case of default
PBP Are NOT - ANS-Payment for accepted goods or services (delivery payments)
Payments for partial deliveries
, PBPs:Can be based on : - ANS-(1) performance measured by objective, quantifiable
methods;
(2) accomplishment of defined events; or
(3) other quantifiable measures of results.
Can be on whole contract or line item basis
Total payments cannot exceed 90% of contract or line item price
Basis of Win-Win Agreement - ANS-Contractor cost of raising funds (expressed as %) is
Weighted Average Cost of Capital (WACC)
Weighted Average Cost of Capital (WACC) - ANS-WACC usually > Treasury Rate
Sets stage for negotiation of lower profit (price) in exchange for accelerated funding
May use Customary Contract Financing when: - ANS-Contract ≥ $2.5M
Deliveries begin NET 6 months after award
Practical to use PBPs when - ANS-FFP Production contract > $50M
Stable, mature program
Period of Performance > 24 months
Consistent expenditure profile history on prior buys
PBP Key Steps - ANS-1.Establish Detailed Program Schedule
2. Identify Key Performance Milestones (PBP Events)
3.Establish Completion Criteria for PBP Events
4.Evaluate monthly expenditure profile
5.Establish Event values
6.Develop Special Contract Provision
Step 1(PBP Key Steps) - ANS-Establish detailed program schedule
Work with Program Management & technical personnel
What is program critical path?
What are key activities that must be completed to ensure contract delivery?
Are there significant subcontractor activities?
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