on Wednesday, January 10, 2001 - 05:23 pm:
Can some one tell me the distinction in the term “equitable
adjustment” and “increase the contract’s funding”.
The issue is - I have a T&M contract with 100k funds awarded
with a 12 months period of performance. We are now 10 months
into the contract and have invoiced 60% of funds. With 2 months
remaining, the Govt requests that the contractor send a request
to “extend the contract at no cost to the Govt” for an
additional 7 months.
After talking with PM, was informed that the remaining funds
only covers through May, 3 months extending from the current POP
date. Would it be a good assumption to send letter to Govt
(a) Request for a modification extending the POP 7 additional
months at no cost and reserve the right to request an equitable
adjustment to continue service.
(b) Request for a modification extending the POP to May at no
additional cost. Then later request for additional funds and
extend the POP.
joel hoffman on Thursday, January 11, 2001 - 01:29 am:
Anon, How does the Government arrange for your services? Are
you performing a continuous service at a fixed level of effort
each month? The type of T&M efforts I'm familiar with are
usually structured for the Government and contractor to
negotiate individual orders with a ceiling amount, generally to
complete some task which may vary in level of definition.
I would need to know more about what you do - I can't provide a
coherent answer. If you receive individual orders, they should
include a funding limitation. The funds limitation protects you
from having to perform unfunded work and it protects the
Government, if you perform unfunded work, then ask for payment.
If you receive individual orders, it would appear that the
Government simply wants to continue the present arrangement, and
they want to lock in the existing unit prices for an additional
Then, your option (a) would not be necessary, because the
Government shouldn't ask you to perform a service without
funding. When the money runs out, they quit assigning work or
they must award additional funds for further services.
I can't address your option (b) without knowing more about the
nature of the T&M tasks and the ordering procedures. Happy
Sails! Joel Hoffman
John Ford on
Thursday, January 11, 2001 - 12:19 pm:
Anon, I see several problems with this from the government's
perspective. First, is the potential anti-deficiency issue. The
government is asking for seven months of service but only has
funds to cover three months. I hope the government is not
expecting you to work four months for free. If so, there is the
problem of illegally accepting voluntary services. On the other
hand, if the government is making a promise to pay you for the
other four months, but does not have the funds, this is a clear
violation of the Anti-Deficiency Act.
Another problem is the color of money. It may well be (but we
don't know from what you have described) that the extended
services will be to satisfy a need that cannot be funded with
the money currently on your contract. This again would be a
potential violation of the ADA and the purpose statute.
A third issue is competition. The extended services seem to be a
new procurement, not completion of a task you are already
obligated to perform. If this is the case, it seems the
government would have to obtain some form of competition, even
under the SAT.
Finally, from the contractor's viewpoint, under the T&M Payments
clause, you are permitted to stop work once you have expended
the money on your contract. As Joel indicated, if the government
asks you to perform seven months of work at the cost of three,
you can simply walk away after the third month. The increased
funding you would be seeking under the Payments clause is merely
a funding increase to complete current contract obligations. It
would not be an equitable adjustment because of changed
Kennedy How on
Thursday, January 11, 2001 - 12:47 pm:
I'm going to go out on a limb here and grasp another
opportunity to be wrong, but I think we've sort of done this in
the past (in a sense). In our case, it depends on the scope of
work in effect. If we had money left over on the contract, we'd
issue another task order to spend the rest. That period of
performance might well extend past the contract expiration date.
There are times, though, where we've run out of money, and the
contractor has told us that, and we've acknowledged that they've
had to stop work (this affected one of my big projects).
It seems to me that you can extend the period of performance to
spend the remaining money, as long as the extra effort is within
the existing scope of work. This way, it wouldn't be a new
procurement, but an extension of an existing task. If you know
the funding runs out at a certain date, then I don't think a
contractor is under obligation to perform further.
Charlie Dan on
Thursday, January 11, 2001 - 12:53 pm:
Your message indicates that you talked "with PM." Was this the
Govt Project or Program Manager, or your own? If you haven't
asked the Contracting Officer why they want a 7-month extension
on what appears to be 3 months of funding, you should. There may
be good reasons. Perhaps the Govt expects to use your company's
services at a lower rate than it has to date?
I disagree with jumping to the conclusion that this situation
may represent an Antideficiency Act violation - there just isn't
enough information to justify that line of thought. Frequently,
the Govt has money authorized and budgeted, but isn't prepared
to obligate it to the contract just yet -- for a variety of
reasons. Sometimes it is months into a fiscal year before an
individual contracting activity receives its full FY funding
allocation, so it must "limp along" and incrementally, rather
than fully fund its contracts.
Which brings me to a question for those who like to discuss
whether T&M contracts are cost-reimbursement or firm fixed-price
contracts. FAR 32.7 provides the Limitation of Funds clause for
use when a cost-reimbursement contract is incrementally funded.
Can a contracting officer incrementally fund a T&M contract?
joel hoffman on Thursday, January 11, 2001 - 01:00 pm:
I guess what I didn't say last night was that an arrangement
to perform a continuing known task for a definite period is more
generally structured as a variation of "level of effort".
"Time and Materials" arrangements are generally used to complete
specific tasks with identified end products or objectives at
specified estimated not to exceed costs and not to exceed
timeframes. That's why I'm confused how you would be asked to
perform any tasks beyond the funding available, under a T&M
At least that is my understanding of LOE's and T&M
contract types. I have some experience with variations of each.
Happy Sails! Joel
on Thursday, January 11, 2001 - 01:04 pm:
“At no additional cost to the Government” is a clumsy way of
saying that the agency wants to extend the contract period of
performance without otherwise changing the contract.
FAR 16.601 “Time-and-materials contracts” requires a
not-to-exceed ceiling for every T&M contract. If there is a
ceiling (and the ceiling lines up with the funding, as it
should) you shouldn’t have any problems as long as you stay
within the ceiling.
If there is no ceiling, you should insist on a ceiling, to keep
both parties out of trouble.
“(c) Limitations. A time-and-materials contract may be used (1)
only after the contracting officer executes a determination and
findings that no other contract type is suitable; and (2) only
if the contract includes a ceiling price that the contractor
exceeds at its own risk. The contracting officer shall document
the contract file to justify the reasons for and amount of any
subsequent change in the ceiling price.”
Getting back to your original question—
Equitable adjustment implies a change to the scope of the
contract. Normally, this is something the contractor would
request after the scope has been changed in some fashion.
Funding is the total under accounting and appropriation data.
Even if there is no ceiling or “Limitation of Funds,” you should
be careful not to spend more than the funding, because the
Anti-Deficiency rules may make it difficult or impossible for
the agency to reimburse you.
I don't think there is anything out of the ordinary in the
agency's request to extend the period of performance when a
substantial portion of the hours haven't been used. Nor do I
think it surprising that the PCO want to extend the date as far
as he can within reason.