Retreadfed

I'm still having trouble figuring out where the competitive advantage comes in in those situations where certified cost or pricing data are required. In those situations there are no viable competitors over whom to gain an advantage.

Lotus, in regard to scenario 2 is the contract a definitized contract or a letter contract?

Also, it is not clear to me as to over whom the contractor is gaining a competitive advantage. A competitive advantage can arise in regard to a party with whom negotiations are being conducted. The purpose of requiring contractors to submit certified cost or pricing data is to eliminate a supposed competitive advantage contractors have over the government in regard to the ability to make judgments concerning what would be a fair and reasonable price. In the pre-award context, if cost or pricing data is not submitted until after agreement on price, the contractor may have a competitive advantage over the government in regard to whether the price agreed to should stand. If the contracting officer believes negotiations should be reopened to allow the government to seek a lower price, there is little incentive, in the present case, for the contractor to agree. Thus, the government can be faced with either accepting a price it believes is too high, or foregoing acquiring the supplies or services it needs.

FAR-flung, H2H mentioned two types of competitive advantage: (1) "the ability to conduct effective, timely, TINA sweeps" and (2) "Litigation avoidance as a competitive advantage in the marketplace." If you have any idea what he was talking about in either case, maybe you can explain it to us mere mortals.

Prime contractors continue to face some risk of defective pricing even after contract award. See FAR 15.407-1(f)(2).

There is no apparent relationship between the quote and your statement.

Pepe, while it is a small sample size, I have an 8(a) client who is a white male from Appalachia. I guess a (very) few poor white males do qualify. As for Hispanics, right after graduating from college, I taught high school in Texas. One of the Spanish teachers was a blond blue eyed Spanish man. There are many people like him from Latin America who would be eligible for 8(a) status.

Vern, is there a possible correlation between this issue and the points you are making in another discussion here concerning small business programs? I am thinking specifically about small business subcontracting programs.

H2H, you are going to have to explain this. The requirement to submit certified cost or pricing data only applies when there is not adequate price competition. That exception is getting narrower because of DoD unilateral action in the DFARS and the 2017 NDAA. So I'm not sure what you mean when you refer to a competitive advantage? Are you talking about competitive advantage in regard to other contractors or do you view conducting timely, effective sweeps as a competitive advantage in regard to the government?

Pepe, I'm glad you brought this up. Much of the earlier discussion here has focused on the contractor. However, the individual signing the certificate has personal exposure for false statements, and other potential criminal activity. DoJ loves procurement certificates because it gives them a person to put the squeeze on in regard to potential corporate liability. (Years ago, congress passed a law requiring agencies to eliminate unnecessary procurement certifications. I had to review certifications that were of interest to my agency. The DoJ attorney working the issue for DoJ specifically mentioned that DoJ wanted to minimize the number of certifications that were eliminated because it reduced its opportunity to have a person to go after.) You can't put a corporation in jail, but you can put a person in jail. As for Vern's point about aggressive auditors or prosecutors, I once had an assistant U.S. attorney working a procurement fraud case tell me that he did not care if he was right or if he was wrong in regard to the case, the only thing he cared about was if he won.

H2H, I don't know what you mean by this. The certificate requires two dates, the "as of" date, i.e., the date by which the cost or pricing data must be current complete and accurate, and the date the certificate is executed, i.e., signed by the contractor. See the form of the certificate at FAR 15.406-2.

H2H, how is the contractor to know when price agreement will be reached? Just because negotiations are to take place on a certain date, does not mean that agreement on price will be reached on that date.

This raises some interesting issues. Let's take limitation on subcontracting as an example. In the 2013 NDAA, Congress amended the Small Business Act by changing the limitation on subcontracting applicable to set aside contracts. However, the SBA did not implement these changes until May of 2016 with an effective date of June 2016. Although there is a FAR case to update the FAR to be consistent with the revised SBA rules, the FAR has not been changed to reflect the statutory changes that have been in effect since 2013 or the SBA rules that have been in effect since 2016. Taking the limitation on subcontracting when a service contract is involved, 13 CFR 125.6 states in part that the contractor "will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. " In contrast, FAR 52.219-14 states that the contractor will pay at least "50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern." Clearly there is an inconsistency between the SBA rules and the FAR. Further, the FAR is inconsistent with the 2013 NDAA amendments. Applying FAR 1.602-1(b), no contract awarded after June 2016 should contain FAR 52.219-14, but should contain language that is consistent with the NDAA and implementing SBA rules. This raises the question of whether contracts awarded with 52.219-14, as contained in the FAR, were properly awarded? In order to achieve consistency with the NDAA and SBA rules, the contracting officer would have to obtain a deviation to 52.219-14. If such deviation is not granted, can the contracting officer award the contract using 52.219-14 as currently written?

Joel, are you saying proposals need to be based upon the cost or pricing data submitted to the government?

DW, what gives a contracting officer the authority to ignore the FAR and apply the regulations of an agency like the SBA or DoL instead of what the FAR provides?

To Vern's point about considering other alternatives, we do not know if there is data showing that sweeps play a significant role in any delays in awarding contracts. Is this policy really about speeding up the process or a way of advancing a hidden agenda of which we are not aware? In any event, I think it is inevitable that this will be challenged.

In regard to Vern's last post, 5 CFR 2625.106(c) might be of interest. It says: A violation of this part or of supplemental agency regulations, as such, does not create any right or benefit, substantive or procedural, enforceable at law by any person against the United States, its agencies, its officers or employees, or any other person. Thus, for example, an individual who alleges that an employee has failed to adhere to laws and regulations that provide equal opportunity regardless of race, color, religion, sex, national origin, age, or handicap is required to follow applicable statutory and regulatory procedures, including those of the Equal Employment Opportunity Commission.

FARmer, is DFARS 216.405-2(2) incorporated in your contract? If not, what does the contract say about when the award fee determination will be made?

I do not know what the Manos positon is or the rationale for it. Therefore, I cannot respond to this question. However, in response to the first part of your last post, let me try to be clearer in what I am saying. A G&A rate is established as a way of allocating costs incurred for the overall management and operation of the contractor to contracts. Such costs frequently include compensation of management, state taxes, rental of facilities and general insurance costs. None of these costs is expressly unallowable, although there may be limits on the amount that is considered allowable. When the G&A rate is established, these costs will be allocated to contracts in proportion to base costs that are allocated to those contracts. Thus, if the contractor uses a total cost input (TCI) base, all costs except G&A will be in that base. Therefore, G&A will be allocated to a contract as a stated percentage of base costs allocated to that contract, which would be all costs other than G&A for a contractor using a TCI base. If a contract contains a clause saying that a contractor using a TCI base will not be reimbursed for G&A on travel, G&A will still be allocated to that contract and the contractor reimbursed for it because of other allowable base costs, such as direct labor being incurred on that contract. Thus, the contractor is recovering part of the allowable costs included in the G&A pool because it is being allocated to the contract because of the allowable direct labor incurred on the contract. The fact that G&A allocable to the contract because of the allowable travel does not make exec comp or facilities rental expressly unallowable under that contract although a portion of those costs that are properly allocable to the contract will not be reimbursed. When the contractor submits its certified proposal to establish final indirect cost rates, the contractor will not have to eliminate the unreimbursed portion from its proposal as an expressly unallowable cost.

Vern, I have to disagree with this statement. Indirect cost rates, such as G&A, are not costs, but a vicarious way of allocating various costs to cost objectives that benefit from those costs. The costs that are included in the G&A pool for calculation of the G&A rate for reimbursement on government contracts are allowable costs. Thus, if a contractor cannot bill for the G&A that is allocated to contracts because of incurrence of allowable base costs, the contractor is not being permitted to recover allowable indirect costs that it has incurred. An agreement not to seek reimbursement for some G&A allocated to a contract does not make the costs that are included in the G&A rate expressly unallowable. If this were the case, the contractor would have to figure out some way to exclude those costs from its proposal to establish final indirect cost rates. I do not think the FAR requires such a result

Joel, note that the us of 52.216-15 is limited to R&D contracts with educational institutions. As I recall, congress has permitted the use of predetermined indirect cost rates by educational institutions. This is an exception to the prohibition against the use of CPPC contracts.

Joel, G&A is to be computed using a base that best represents total activity of the contractor. Under the CAS, there are three acceptable bases. Total cost input is one of those bases and is the base most commonly used by contractors. That base consists of all costs except G&A cost. Obviously, travel would be a part of that base. Another base is the value added base that excludes subcontracts and material from the base. Travel could be included in that base. The FAR does not address these bases but merely defines G&A and states in part that "G&A expense does not include those management expenses whose beneficial or causal relationship to cost objectives can be more directly measured by a base other than a cost input base representing the total activity of a business unit during a cost accounting period." For many contractors, travel is a part of the G&A base. Thus, for those contractors, if they incur travel costs, those travel costs will attract G&A to the contracts under which the travel was performed. If the contract prohibits the contractor from claiming G&A costs on travel, the contractor will have incurred allowable costs that it cannot recover.

A more likely hypothesis is that many government contracting officers merely do not understand G&A. For example, I once had to deal with a contracting officer who did not understand why he should pay G&A for every year that a contract was in existence. He thought that once he paid for G&A in the first year of the contract, that was all the government should pay. In addition, some contracting officers do not believe that G&A is a real cost, but a hidden form of profit.

H2H, thanks for the reply. However, you did not address the application of FAR 31.201-3 and 31.205-46 to the transaction if the contractor claimed the full $500 when it could have bought the ticket for $250 using accumulated points. The dollar values here are merely for discussion purposes, not necessarily to reflect reality.

Joel, I dealt with procurement fraud while working for DoD. I once had a conversation about this with an attorney from DoJ who prosecuted fraud cases. It was his view that he would prosecute any government employee who applied FF miles, or other points earned as a result of government activity, for personal use. OGE has now changed the Governmentwide Ethics Regulation to permit such use.