For an A-76 study, only 65% of the potential incentive fee may be included in the cost comparison's "cost of contracting".  On the surface, it would appear this is an addition to the contractor's bid, and anything that increases the A-76 cost of contracting obviously favors retention of the A-76 study in-house.  However, this ignores the potential strategy a bidding contractor could easily employ to win the contract award and dislodge the Government work force in an A-76 study situation.

For illustrative purposes, assume a contractor offers a bid of $10 million in an A-76 solicitation.  Additionally assume the Government has advertised a potential $1.0 million incentive fee in this solicitation, the maximum amount.  While the potential annual contract cost would be $11.0 million ($10.0 mil plus the $1.0 mil award fee), for the purpose of the CA study, the resulting cost of contracting on the cost comparison form would be $10.65 million (the $10.0 million bid plus 65% of the $1.0 million incentive fee).

However, it is very usual in any negotiated contract solicitation involving an incentive fee, and would certainly be the case in an A-76 study, for the contractor to reduce the price offer by the incentive fee amount when submitting the "final offer".  The justification for this reduction of the previously offered price is the bidder's assurance his/her excellent performance and superior business skills will result in receiving the full value of the incentive fee.  The 10% incentive fee now replaces the typical 10% contract profit percentage, which would have been included in the bid price, had the incentive not been offered.  

So what if he/she dismisses the incentive fee; what's the harm in an A-76 study?  Assume this situation occurs in our A-76 example.  In lieu of the original $10.0 million offer, the final offer is now $9.0 million (the original $10.0 million offer minus the $1.0 million incentive fee).  While the potential annual contract cost is now $10.0 million ($9.0 million plus the $1.0 million incentive fee, which just happens to equate to the contractor's original bid price), the A-76 cost comparison "cost of contracting" is now shown as $9.65 million (the "new" $9.0 million bid plus 65% of the $1.0 million award fee).

Annually the A-76 cost comparison "cost of contracting" is $350,000 less than the potential "real" contract value.  Then, applying this "undervalued" contract cost over the A-76 cost study five year period, the A-76 cost comparison "cost of contracting" would be understated by $ 1.75 million.

Anyone who believes a bidding contractor would not reduce the contract price offer by the incentive fee offered amount, particularly in A-76 study, is professionally naive.