This text is not in eCFR or DITA. It is extracted from the .docx attachment for Class Deviation 2026-O0045, which directs contracting officers to use it in place of the codified PGI. The parsed text is a convenience layer; the .docx attachment is authoritative.
The formula specified in FAR 16.404-2(a)(3) does not apply for the life of the contract. It is used to fix the firm target profit for the contract. To provide an incentive consistent with the circumstances, the formula should reflect the relative risk involved in establishing an incentive arrangement where cost and pricing information were not sufficient to permit the negotiation of firm targets at the outset.
Authoritative source
Issued as an attachment to the Office of the Secretary of Defense memorandum for Class Deviation 2026-O0045, signed July 15, 2026. Verify against the attachment before relying on this text.
- .docx attachment for Class Deviation 2026-O0045
- Class Deviation 2026-O0045 memorandum (PDF)
- Class Deviation 2026-O0045 on part52.dev
Codified PGI
No codified counterpart is tracked for PGI 216.404-2. This section exists only in the Class Deviation.