Federal glossary · Metric
Fee (or profit) on government contracts is the contractor's compensation beyond cost recovery. Determined through weighted guidelines (FAR 15.404-4) considering risk, investment, performance, and socioeconomic factors. Typical ranges: 5-10% for low-risk services, 8-15% for R&D, 10-20% for high-risk manufacturing. Fee is not allowed on cost-reimbursement contracts without explicit authorization.
Example: The Simplified Acquisition Threshold or a fiscal-year budget measure.
Reference record · Sources: OMB budget guidance · Verified Jul 2, 2026 · Covers definition, governing source
or profit
Also known as
Fee (or profit) on government contracts is the contractor's compensation beyond cost recovery. Determined through weighted guidelines (FAR 15.404-4) considering risk, investment, performance, and socioeconomic factors. Typical ranges: 5-10% for low-risk services, 8-15% for R&D, 10-20% for high-risk manufacturing. Fee is not allowed on cost-reimbursement contracts without explicit authorization.
(or profit) is a metric concept federal contractors and grant writers run into across solicitations, regulations, and award filings
Fee is a measurement used in federal contract evaluation, source selection, oversight, or performance management. For example: Example: The Simplified Acquisition Threshold or a fiscal-year budget measure. Understanding Fee matters because evaluators use metrics like it to compare proposals quantitatively, score past performance, set award-fee outcomes, and decide who gets the next option year. Contractors who track how Fee is calculated — and what target values look like in their NAICS or service area — write proposals that are concrete and defensible instead of generic and easily dismissed. Fee also has implications for contract administration: getting the calculation methodology wrong post-award is a common source of disputes and contracting-officer modifications. Pair Fee with the related metrics above to see how the federal government composes evaluation criteria into source-selection narratives.
Example: The Simplified Acquisition Threshold or a fiscal-year budget measure.
Meaning in practice
Fee is a measure used to score, compare, or track government activity.
Where you’ll see it
You will see it in evaluation criteria, dashboards, scorecards, reports, and oversight reviews. Example: Example: The Simplified Acquisition Threshold or a fiscal-year budget measure..
Common confusion
People often confuse the metric with the threshold or decision rule attached to it.
What to do next
Check how the metric is calculated before you compare records or opportunities.
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Get notified when usage of Fee changes in contracts or guidance.
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