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Modification Authority
By Anonymous on Wednesday, November 08, 2000 - 06:20 pm:

What paragraphs of FAR 52.212-4 can be used for modification authority in block C of the SF 30 when modifying a delivery order written against a commercial contract? If the Government does not accept nonconforming services, why would it not be appropriate for the CO to use 52.212-4(a), Inspection/Acceptance, to deobligate what now are excess funds. Second part to this question. When can the modification authority for a delivery order ride on the modification authority used for the basic contract when the revisions to a contract have to be carried over to the delivery order.

By Vern Edwards on Sunday, November 26, 2000 - 10:18 pm:


Your questions are a little confusing, but I'll take a shot at answering them.

With regard to the first part, it appears that you have issued a delivery order against a commercial items IDIQ contract and that you have rejected the supplies tendered by the contractor. Is that right? Now you want to deobligate the funds obligated on the delivery order because the contractor has failed to perform. Is that right?

If so, I think that you have to terminate the delivery order, either for convenience or for cause, before you can deobligate the funds. The fact that you have rejected the supplies tendered does not necessarily mean that your obligations under the delivery order are no longer in force. You cannot deobligate the funds as long as your obligations remain in force. Once you have terminated the contract, cite the appropriate termination clause as the authority to deobligation the funds.

I'm not sure that I understand the second part of your question. However, the authority to modify a delivery order is derived from the authority in the basic contract.

By Anonymous on Monday, December 04, 2000 - 05:38 pm:

Vern, the answer to the second part of my question is what I was looking for there. Thanks

A little more clarification for you on the first part of the question. The requirement is for services and not supplies and the period of performance is for 1 year with monthly invoicing and payments.

My office addended 52.212-4 to provide for a reimbursement of funds if the contractor does not retain adequate numbers of qualified employees to perform 100% of the Government's mission. The Government is training the original contractor employees to perform at the three qualification levels required by the contract. There is cost associated to that training. If the contractor does not retain those employees for a year after the employee receives the training then the clause contains a formula that figures the required reimbursement for the training costs and training the replacement falls on the contractor. Rather than pay the contractor and wait for reimbursement we held the funds from the invoice in the month that a contractor employee quit. Then comes end of year when the only way to use those funds for other purposes is to get them deobligated and back in the end users hands. Do you want to still consider this a partial termination?

By Vern Edwards on Monday, December 04, 2000 - 05:57 pm:


As I understand it, you obligated the money for the training, but withheld payment in the amount of the reimbursement that you claim that the contractor owes you. So now you want to deobligate that amount.

Based on your new information I would say that the clause which entitles you to the reimbursement is the authority for the deobligation. I do not think that any termination is involved.

A word of caution--make sure that you proceed in a manner that is consistent with the terms of the clause that entitles you to reimbursement. Does the clause require you to modify the contract? If so, does it require a bilateral modification, or can you do it unilaterally? Do you need to get the contractor to agree to the reimbursement, or to the amount of the reimbursement?

By Anonymous on Thursday, December 07, 2000 - 05:26 pm:

We attempted to do a bilateral modification to the delivery order to remove excess funds and sent it off to the contractor with a definate suspense date with instructions that if we did not receive signature that we would deobligate unilaterally. The contractor has not challenged that decision. The IG challenged the authorities used. Why would we addend a clause, when allowed, and then not be able to use the authority the clause was meant to provide? Thanks for your help.

By Kennedy How on Friday, December 08, 2000 - 12:45 pm:

Is the IG saying that your use of the reimbursement clause was wrong? Or, are they saying that the situation doesn't warrant the application of the clause?

As I'm reading it, the clause is there, the contractor didn't keep the people around for the requisite time, the Government can get reimbursement for those people, which you tried to do. What is the IG objecting to here?

Some COs like to get Bilateral Mods on Unilateral actions; it's a warm-fuzzy thing. It keeps the contractor in the loop, and prevents them from being surprised.

I agree with Vern in that if you've withheld payment, then you need to deobligate. The alternative is to pay the contractor and have him cut a check back to you. The problem with this is that the check is made to the US Treasury, and you lose it. We hated to do that in our systems contract, because the program loses the money. So, we horse trade it for something else. But, both parties agree beforehand that this was a way to do it. Contractors like it because it doesn't show up as an "expenditure" of sorts; they hate having to give back money.