In the case of a cost overrun in a CPFF program, what is the first step a Contracting Officer should take?

The first step a Contracting Officer should take in the event of a cost overrun in a Cost-Plus-Fixed-Fee (CPFF) program is to assess if the costs were necessary for existing requirements. This assessment is critical because it allows the Contracting Officer to understand the context of the overrun. Evaluating the necessity of the incurred costs helps in determining whether the costs were justifiable and whether they were incurred as part of fulfilling the contract's requirements.

Understanding the nature of the cost overrun is essential before proceeding to any remedial measures or negotiations with the contractor. It enables the Contracting Officer to gather all pertinent information regarding the cost implications and the operational needs of the program. This step is foundational because it informs all subsequent actions, including discussions with the contractor or potential adjustments to the contract’s funding or scope.

In contrast, immediately requesting a refund or terminating the contract can lead to unnecessary conflict or disruption if it is found that the costs were indeed required to meet the contract objectives. Notifying the government about budget limits without assessing the situation may overlook the underlying reasons for the overrun, and while it is prudent to manage budget constraints, doing so prematurely can impede effective resolution.