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Offerors Need To Understand The Pricing Scheme And Any Caveats

bob7947

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On April 26, 2007, the Army awarded an indefinite delivery, indefinite quantity, fixed price, job-order contract to Lakeshore Engineering Services, Inc., for repair, maintenance, and construction services at Fort Rucker, Alabama. Lakeshore performed 79 construction delivery orders in the base year and 74 construction delivery orders in the first option year.

On March 10, 2009, Lakeshore filed a claim with the contracting officer seeking $1,996,152.40 for losses it incurred while performing during the base and first option year. Lakeshore claimed that it had lost money as a result of the Army's pricing scheme. The contracting officer issued a final decision denying the claim and Lakeshore took the matter to the Court of Federal Claims.

The pricing scheme was a bit complex. Offerors were told that offers were to be priced using three coefficients – one for work (1) during normal hours on pre-priced items, (2) during overtime work on pre-priced items, and (3) on non-pre-priced items. For the pre-priced items, the coefficient was to be "multiplied by the unit prices listed in a Universal Unit Price Book (UUPB) to price a job or project on individual job orders. According to the Solicitation, the coefficient was "a numerical factor that represents costs (generally indirect costs) not considered to be included in the [uUPB] prices, e.g., general and administrative and other overhead costs, insurance costs, bonding and alternative payment protection costs, protective clothing, equipment rental, and contractor’s profit." The Solicitation said the coefficient should account for a wide variety of risks of doing business, adding at a later point, the coefficient "shall contain all allowable contractor costs, including contingencies and profit." It further stated that the "offeror’s coefficient shall contain all costs other than the pre-priced unit prices, as no allowance will be made after award." The Solicitation, however, allowed for adjustments in the coefficient for the option years, to be based on the Engineering News Record building Cost Index (BCI), in accordance with the Economic Price Adjustment Clause, Army Federal Acquisition Regulation Supplement 5152.237-9000.

The Solicitation designated the Gordian Group Construction Task Catalog (the Gordian Catalog) and PROGEN Online as the UUPB and accompanying software, respectively, to be "used by the contractor in development of price proposals for individual Task Orders." According to the Solicitation’s technical specification, "[t]he UUPB, modified for Fort Rucker, contains pricing information (i.e., Government Estimate) for the description of work to be accomplished and for the units of measure specified." This segment further indicated that the "UUPB consists of Divisions 1 through 16 that are applicable to Divisions 1 through 16 of the Job Order Contract Technical Specifications." It additionally specified that the "UUPB modified for Fort Rucker contains unit pricing data to be used by the Contractor in development of price proposals for each work order," adding that "[t]he pricing data is presented as basic items and as price adjustment modifiers to the basic item."

The pricing information available to offerors also included the caveat that: "[w]hile diligent effort is made to provide accurate and reliable up-to-date pricing, it is the responsibility of the Contractor to verify the unit prices and to modify their Adjustment Factors accordingly."

What happened at the Court of Federal Claims? See Lakeshore Engineering Services, Inc. v. U. S., No. 09-865C, April 3, 2013.



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I wonder if the Army's pricing "scheme" (perhaps that word is especially apt in this case), is the norm for commercial construction contracting or found in any other Government contracting offices. I have worked on construction contracts for both Navy and Army organizations and I have never seen such a "scheme" in use in those offices. I cannot imagine that a commercial construction contract would base its pricing on such an arcane system when simply adding the allowable costs seems to be sufficient.

I also wonder why any commercial company, short of desperation, would agree to such terms.

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vecchia, the Army has been using this pricing scheme for at least 25 years for Job Order Contracting ("JOC" contracts). And JOC contractors have been complaining about it for almost that long. There are some provisions for pricing non-covered work, which contractors have also tried to maximize the use of. In addition, I'm not positive but the contractors often but not always propose the quantities of unit priced work to be performed. You can do a search under "army job order contracting guide". At one site you can view a video that a friend of mine at USACE made back in 1987. It is mostly still applicable today.

Someone told me last week that one of my old USACE organizations is using a similar method to contract for ID/IQ's for the Air Force, using the Means Estimating Guides instead of the Army's source estimating book. I think that the USAF also uses Means for their SABRE contracts. I didn't look it up this afternoon to verify. Busy...

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Joel,

What is the benefit of using such a scheme? It seems to me that it is difficult to manage from both sides, and can be interpreted differently by each side even when the inputs are agreed upon by both sides.

I can understand why I have never seen this pricing scheme, I have not worked for the USACE or the USAF, I have worked for NAVFAC and the Army Contracting Agency and they did not use such a complicated pricing system in those organizations.

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