Federal glossary · Metric
Profit Analysis (FAR 15.404-4) is the structured approach to determining fair and reasonable profit or fee. Considers contractor risk, capital investment, performance, and socioeconomic programs. Weighted guidelines method (DD Form 1547) used by DoD. Typical profit ranges: 5-15% for services, 8-15% for R&D, 10-20% for high-risk work.
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
Also known as
Profit Analysis (FAR 15.404-4) is the structured approach to determining fair and reasonable profit or fee. Considers contractor risk, capital investment, performance, and socioeconomic programs. Weighted guidelines method (DD Form 1547) used by DoD. Typical profit ranges: 5-15% for services, 8-15% for R&D, 10-20% for high-risk work.
is a metric concept federal contractors and grant writers run into across solicitations, regulations, and award filings
Profit Analysis 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 Profit Analysis 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 Profit Analysis 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. Profit Analysis also has implications for contract administration: getting the calculation methodology wrong post-award is a common source of disputes and contracting-officer modifications. Pair Profit Analysis 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
Profit Analysis 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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