Retreadfed

Is there a clause in the subcontract that authorized the sub to submit the initial modification request? Similarly, was there a clause in the subcontract requiring or authorizing the sub to submit the final list of incurred cost and for the prime to pay the sub in accordance with that list?

Have you considered how FAR 31.205-26(e) and(f) might apply to your situation?

REA'n Maker, the way I read the SBA regs, you do not look at the cumulative performance of the contract, but each individual performance period, i.e., you evaluate compliance with the LOS clause in each period of performance, not the total period of performance. From what you wrote, I understood you to be saying you look at the entire period of performance, e.g., base period and all option periods combined to determine compliance with the LOS clause.

Neil, what you are describing concerning flow down clauses are contractual requirements, not regulatory requirements. There are very few mandatory flow down clauses, i.e., clauses that by their terms are to be included in subcontracts. Other clauses that are required for the prime to carry out its obligations under the prime contract may be included in subcontracts as necessary flow down clauses. However, as discussed in this forum before, when a contractor is acquiring commercial items from a subcontractor, the only clauses that are required to be included in subcontracts are those listed in FAR 52.244-6, which include "a minimal number of additional clauses necessary to satisfy [the contractor's] contractual obligations." By implication, these additional clauses would be limited to those that are suitable for use when acquiring commercial items. I don't understand this statement that you made "the prime is still responsible for ensuring itself that the subcontractor is financially sound before making an interim payment not supported by what it contracted for, a deliverable product." I don't see any such requirement anywhere. At the prime level, the government is required to obtain "adequate security," which may be the contractor's financial conditions, as a condition for providing government financing. However, that is a contract formation issue.

Neil, note that SI's company is proposing to provide a commercial item. What the prime is asking for is inappropriate for such a subcontract. If the prime is serious about regulatory requirements, it should be reading FAR 32.2, particularly 32.001 and 32.202-2. However, as we have said before, the FAR does not apply to contractors and does not generally govern the relationship between primes and subs. This is generally a matter of negotiation. If the prime's policy is to include inappropriate clauses in subcontracts, the sub should either refuse to accept the clauses and walk away from the deal if the prime insists or roll over and accept the inappropriate clauses. As for costs, what the prime pays its subs is a cost to the prime. I see nothing in DFAR 252.232.7012 that requires the prime to include costs incurred by subcontractors.

Mandatory flow down clauses are those that by their terms are required to be inserted in subcontracts. See for example, FAR 52.215-2. Neither of the cited clauses has a requirement for the clause to be inserted in a subcontract.

Tomahawk, why do you say you think the RFP has a T&M portion for materials? Is the contractor required to manufacture the parts or just provide them? I'm having a hard time understanding how a T&M pricing arrangement would work if the RFP merely calls for the contractor to provide the parts. In other words, what would be the time portion of such an arrangement?

Joel, I don't quite understand what you are saying, so I will answer my own question. Under a cost reimbursement or T&M contract, the contractor does not have to provide a completed product or service in order for the contractor to be paid. Under a cost reimbursement contract, the contractor is entitled to be paid its allowable cost incurred in performing the contract whether it completes the contract or not. Thus, if the contract calls for a product or a completed task, the contractor does not have to deliver the product or complete the task in order to be paid its allowable costs subject to the Limitation of Cost or Limitation of Funds clause. Similarly, under a T&M contract, the contractor is paid for the hours expended and cost of material regardless of whether it completes the contract. Thus, the government may pay the contract price and not receive what it bargained for.

What do you mean by don't pay for something you did not receive? Would you apply that advice to cost reimbursement or T&M contracts?

Keep an open mind about the issues you face. Remember, not all contractors are crooks and not all government personnel are saints or always correct.

GAO's bid protest jurisdiction is not governed by the FAR just as jurisdiction of the Court of Federal Claims is not governed by the FAR. Each is independent of what is in the FAR.

I don't know the specific motivation for this statement, however, there have been court decisions and GAO bid protest decisions that hold that agencies cannot issue an order against a GSA schedule for items, with a value exceeding the micro purchase ceiling, that are not on the schedule unless the agency uses the appropriate procedures for an open market procurement. See, FAR 4.802(f). Therefore, if a teaming agreement is formed, each team member must provide an item that is on its schedule when responding to an order otherwise the agency will have to comply with 8.402(f).

Hopefully, the amendment includes the appropriate clauses for a set aside and deleted inappropriate clauses. Simply changing from unrestricted to a set aside without adjusting the clauses could create contract administration issues.

I agree with Joel. The adjustment you would be asking for would be pursuant to the Changes clause, not 52.222-43. The wages and fringe benefits in a wage determination are minimums that you must pay. They are not what you must base your price on. Further, the minimums in the WD would not act as a limitation on your right to an equitable adjustment pursuant to a change order under the Changes clause. FAR 52.222-43 and the Changes clauses provide independent bases for a price adjustment to a contract.

That is true for a proposal. The dollar amount contained in a proposal is a potential cost to the government. However, 31.201-1, which you referenced, refers to the allowability of contractor costs. FAR 31.201-1 does not apply to indirect cost rates, but to the individual costs that are used to compute the indirect cost rate.