To fill out DD Form 1547, the Record of Weighted Guidelines Application, the DoD contracting officer works through the numbered blocks in order: administrative identifiers first, then the contract’s cost breakdown, then the four weighted profit factors, and finally the totals, signature, and date. The current edition is dated April 2020 and is available as a fillable PDF from the Executive Services Directorate at esd.whs.mil. Contractors do not complete the form themselves, but the cost data they submit feeds nearly every dollar figure on it.
Who Prepares the Form and When
The contracting officer prepares DD Form 1547 as part of developing a prenegotiation profit or fee objective. The weighted guidelines method is the default structured approach under DFARS 215.404-4, and it applies to negotiated contract actions where certified cost or pricing data is required. That threshold sits at $2.5 million for prime contracts awarded on or after July 1, 2018, and covers new contracts, modifications, and change orders.1Acquisition.GOV. FAR 15.403-4 Requiring Certified Cost or Pricing Data Below that threshold, a contracting officer may still use the form when the acquisition is complex enough to warrant a formal profit analysis.
Certain actions use a different approach. Cost-plus-award-fee contracts follow DFARS 215.404-74, FFRDC work follows DFARS 215.404-75, and other nonprofit work uses a modified weighted guidelines method. An alternate structured approach is permitted for architect-engineer or construction work, material-heavy contracts, termination settlements, and actions at or below the cost or pricing data threshold.2Acquisition.GOV. DFARS 215.404-4 Profit
Blocks 1 Through 12: Administrative Data
The first twelve blocks tie the profit analysis to a specific contract action in DoD records. Entries include the report number, procurement instrument identification number, contracting office code, contractor name, unique entity identifier, and contract type code. None of these blocks affect the profit math; they exist so the completed form can be located, audited, and matched to a contract file later.
Blocks 13 Through 20: The Cost Breakdown
Blocks 13 through 20 capture the dollar figures that most of the profit percentages will later be multiplied against. Enter:
- Block 13 — material
- Block 14 — subcontracts
- Block 15 — direct labor
- Block 16 — indirect expenses
- Block 17 — other direct charges
- Block 18 — subtotal of Blocks 13 through 17
- Block 19 — general and administrative costs
- Block 20 — total objective cost
Block 20 is the anchor number for the rest of the form. Several of the profit factor calculations, including the cost efficiency factor, reference it directly.
Blocks 21 Through 23: Performance Risk
Performance risk measures how difficult the work is and how much management effort the contractor must invest. It has two subfactors, and the contracting officer assigns each a percentage within its designated range.3Acquisition.GOV. DFARS 215.404-71-2 Performance Risk
- Block 21 — technical subfactor. Normal value 5 percent; designated range 3 to 7 percent. For efforts involving development, production, or application of innovative new technologies, a technology incentive range of 7 to 11 percent (normal 9 percent) may apply. The incentive is not available for studies, analyses, or demonstrations whose main deliverable is a report.
- Block 22 — management/cost control subfactor. Normal value 5 percent; designated range 3 to 7 percent.
- Block 23 — composite performance risk result.
Weights assigned at the normal value do not require written justification. Any value above or below normal must be explained in the Price Negotiation Memorandum.
Blocks 24 and 25: Contract Type Risk and Working Capital Adjustment
Block 24 records the contract type risk percentage, drawn from the designated range for the contract structure being used. Blocks 24a through 24c break the calculation between incurred costs at proposal submission and estimated cost to complete. The normal values and ranges for common fixed-price arrangements are:4eCFR. 48 CFR 215.404-71-3 Contract Type Risk and Working Capital Adjustment
- Firm-fixed-price, no financing — 5 percent normal (4 to 6 percent)
- Firm-fixed-price with performance-based payments — 4 percent normal (2.5 to 5.5 percent)
- Firm-fixed-price with progress payments — 3 percent normal (2 to 4 percent)
- Fixed-price incentive, no financing — 3 percent normal (2 to 4 percent)
- Fixed-price incentive with performance-based payments — 2 percent normal (0.5 to 3.5 percent)
- Fixed-price incentive with progress payments — 1 percent normal (0 to 2 percent)
A fixed-price contract with redetermination provisions is treated as a fixed-price incentive contract with below-normal conditions.
Block 25 holds the working capital adjustment. It applies only to fixed-price contracts that provide for progress payments; contracts with performance-based payments and cost-plus contracts get nothing in this block. The calculation multiplies costs financed by a contract length factor and then by the Treasury interest rate published on the Bureau of the Fiscal Service’s Prompt Payment page. The result cannot exceed 4 percent of the total contract costs shown in Block 20.5Acquisition.GOV. DFARS 215.404-71-3 Contract Type Risk and Working Capital Adjustment
Blocks 26 Through 28: Facilities Capital Employed
These blocks credit contractors for their own investment in assets dedicated to the contract. Net book value from the corporate balance sheet, allocated to the contract’s performance period, feeds each block.6Acquisition.GOV. DFARS 215.404-71-4 Facilities Capital Employed
- Block 26 — land. Normal value 0 percent, no designated range.
- Block 27 — buildings. Normal value 0 percent, no designated range.
- Block 28 — equipment. Normal value 17.5 percent; designated range 10 to 25 percent.
Land and buildings generate no profit credit under the weighted guidelines. Equipment is where the facilities capital factor actually moves the profit objective.
Block 29: Cost Efficiency Factor
Block 29 is discretionary. The contracting officer may assign a value from 0 to 4 percent of the total objective cost in Block 20 when the contractor demonstrates concrete cost reduction efforts that benefit the pending contract. There is no normal value, and the contractor carries the burden of showing that the claimed savings actually reach the work at hand.7Acquisition.GOV. DFARS 215.404-71-5 Cost Efficiency Factor
Blocks 30 Through 35: Totaling the Profit Objective and Price
The lower portion of the form ties everything together:
- Block 30 — total profit objective
- Block 31 — total costs (restated from Block 20)
- Block 32 — facility capital cost of money, carried in from DD Form 1861
- Block 33 — final profit figure
- Block 34 — total price
- Block 35 — markup rate as a percentage
Blocks 36 Through 39: Signature and Date
Block 36 holds the contracting officer’s typed name, Block 37 the signature, and Block 39 the submission date. These blocks close out the form and establish who is accountable for the profit objective it records.
Statutory Fee Caps That Override the Calculation
Whatever number Block 33 produces, a cost-plus-fixed-fee contract cannot exceed the ceilings in 10 U.S.C. § 3322:8Office of the Law Revision Counsel. 10 USC 3322 Cost Contracts
- Research, experimental, or developmental work — 15 percent of estimated cost, excluding the fee.
- Architectural or engineering services for a public work or utility — 6 percent of estimated cost, excluding fees.
- All other cost-plus-fixed-fee contracts — 10 percent of estimated cost, excluding the fee.
Estimated costs for these caps are determined by the agency head when the contract is executed. The cost-plus-a-percentage-of-cost system is prohibited entirely.
Attaching the Form to the Price Negotiation Memorandum
The completed DD Form 1547 becomes an attachment to the Price Negotiation Memorandum. The PNM narrates the government’s prenegotiation position, and it must explain any weights assigned above or below their normal values. Weights at the normal value need no written justification. The Block 30 profit objective becomes the government’s starting position at the table, and the designated ranges on each factor give the contracting officer room to move during negotiations without stepping outside the regulation.9eCFR. 48 CFR 215.404-4 Profit