Retreadfed

See my post of yesterday at 1:23. You only have to do an adjustment if the employee works on more than one contract. No adjustment is necessary if the employee works on only one contract and works the minimum number of hours for a full pay period.

Why are you concerned with an hourly rate when we are talking about salaried employees who are working on only one contract? Is this a contract requirement? Normally, hourly rates are the basis upon which effort by wage employees is billed.

I'm not sure what you mean by this. On cost reimbursement contracts, contractors don't invoice for hours worked but for costs incurred. You've got to come off the notion of invoicing for hours. Let's go back to what is actually happening. Let us assume the contractor has calculated that the employee's hourly rate is $40 an hour by dividing the employee's annual salary by 2000 hours. Are you saying that the contractor is billing the government $40 for every hour worked by the employee even if the resulting amount would exceed what the contractor actually paid the employee?

If you are thinking of FAR 52.222-2, that clause would not apply to UCOT worked by salaried employees. That clause puts a limit on overtime premium costs that may be allowable. When a salaried employee works UCOT, no overtime premium is involved.

Not if the contractor only worked on one contract. In this case, the entire cost of the employee's salary is allocated to only that one contract. Remember as ji noted, you are invoicing for costs, not hours. The cost the contractor has incurred is the amount of the employee's salary. On the other hand, if the employee worked on more than one contract, the contractor would have to allocate the employee's salary cost to both contracts.

No. Assuming the employee works a minimum of the contractor's standard work week, if the employee works on only one contract you do not have to do any adjustment to the hourly rate. That is because the cost of the employee's salary will be charged (allocated) to only that one contract. Thus, what the employee is paid is what would be billed to the government. You don't have to worry about an hourly rate.

I agree that UCOT is not an incurred cost. I thought I had made that clear earlier. However, while it is not an incurred cost, it is relevant in determining costs that are allocated to contracts when a salaried employee works UCOT and charges time to more than one cost objective. Therefore, UCOT does have a relationship to the costs that are billed to the government on a cost reimbursement contract in that a contractor cannot bill the government for more costs than are allocated to a contract. This is another example of misleading language used in government contracting. When we talk about UCOT we are really saying that the employee does not receive compensation in addition to a salary when the employee works overtime. On the other hand, a salary compensates the employee for all hours worked by the employee. Thus, an employee is compensated for hours worked in excess of the employer's normal work hours. If an employee works on more than one cost objective during a pay period, we need to allocate the cost of those hours to each cost objective in an equitable way so that each cost objective bears its fair share of the employee's salary.

Fara, if the employee only charges time to one cost objective (contract) it doesn't matter how many hours are charged to the contract. What you are really concerned about is how much cost do you allocate to each contract to which the employee charges effort. When the employee charges time to only one contract, the amount you pay the employee during that period is all going to be charged to that one contract. Thus, if you use a total time accounting system, and the employee is paid $2,000 during a billing period, that is what you bill the government regardless of whether the employee worked 40 hours, 80 hours or 100 hours. If the employee charges time to more than one cost objective during a period, things can get complicated. If the total number of hours an employee works in an accounting period doesn't exceed 40, figuring out what to charge to each contract is fairly simple. For example, if the employee is paid $2,000 and charges 20 hours to contract A and 20 hours to contract B, you would simply divide the $2,000 by 40 to determine the hourly rate ($50) and then multiply that rate by the number of hours worked on each contract to determine how much of the employee's salary is allocated to each contract, $1,000 to each in this case. However, if the employee charges 40 hours to Contract A and 10 hours to Contract B you have to divide the $2,000 salary by 50 instead of 40. This gives you an hourly rate of $40 instead of an hourly rate of $50 as used in the previous example. This is an example of an abated hourly rate. Here, Contract A would have $1,600 allocated to it and Contract B would have $400 allocated to it.

The situation KB describes is very similar to one I had to deal with a few years back. In that case, the agency deobligated funds from several contracts before final rates were established. For some of the contracts, the agency did require the contractor to give a release for future claims. As you can guess, the final rates were higher than anticipated, but total costs were less than the estimated cost of the contracts at the time of the deobligations. The agency resisted paying the contractor its actual costs on all contracts, those were releases were given and those with no releases. However, the agency did ultimately relent and agreed to pay the contractor.

Fara, this is a fairly complicated question that has not been fully answered by the appeals boards or courts. The question you have raised is how to account and bill for uncompensated overtime (UCOT). In my view, the first question to be answered is whether the employee is working on more than one project during the accounting period. If the employee works on only one project that is a cost reimbursement contract, there should be no problem with charging the employee's hours at the hourly rate computed by dividing the annual salary by the contractor's normal work week. However, if in addition to the cost reimbursement contract, the employee works on some other project such as a proposal or another contract, you need to have a mechanism for equitably allocating costs to those projects (cost objectives). This is usually done by calculating an abated hourly rate. This requires the contractor to use a total time accounting system (which it should do in any event if for no other reason so management can get a complete picture of how the company if performing). When total time accounting is used, UCOT is captured in the timekeeping system. The abated hourly rate is computed by dividing what the employee is paid during an accounting period by the total hours shown in the timekeeping system for that period. You would then allocate costs to the various cost objectives using the resulting abated hourly rate. In this way, each cost objective gets allocated its fair share of costs for that period.

formerfed, what is the basis for this statement? What would be your position if the agency included a release in the deob mod?

I don't know what you mean by "projects" in this context, but the FAR, DFARS and CAS do not apply to grants. Instead, grants are covered by 2 CFR 200 as implemented by the agencies through the promulgation of regulations that apply to grants. As for the applicability of the CAS to contracts awarded to IHE's, remember not all the CAS apply to IHEs. Instead, only 4 CAS specifically written for IHEs apply to IHEs. CAS 415 is not one of them. Further, the CAS only deal with the measurement, assignment and allocation of costs to contracts. The allowability of costs allocated to contracts by the CAS is determined by the cost principles applicable to the contract. In this case, that would be the cost principles in 2 CFR 200, as amended by the agency awarding the contract. Carl has pointed you in the right direction by referencing 2 CFR 200.430(h). However, if you have any cost reimbursement contracts subject to the FAR, look at FAR 52.216-7(b)(ii)(C). That might help you. Also, you did not say how you are calculating the faculty labor costs you include in your budgets, submitted in regard to grant applications or contract proposals.

KB, I am not clear on what your contract calls for. You use the term "ceiling" several times. What that means is not clear. What do you mean by "ceiling"? Also, what do you mean by "funded value"? Is the contract incrementally funded? If so, is FAR 52.232-22 in the contract?

This indicates to me that whoever wrote the contract had no idea what they were doing. FFP and T&M are distinct types of contracts. If the contract has FFP CLINS and T&M CLINS, the contract is not a single contract type, but a mixed contract that should have clauses applicable to FFP contracts and clauses applicable to T&M contracts. Further the contract should say which clauses apply to which CLINS. Finally, note that FAR 16.102(b) reads in part "Contract types not described in this regulation shall not be used, except as a deviation under subpart 1.4." I can find no reference to a "Fixed Price Labor Hours" contract in the FAR, thus the use of this contract type is questionable.

More info is needed. Was there a timeframe within which the results of the FAT test were to be communicated to the contractor? If so, was this done? Was there sufficient time for the contractor to wait for the results of the FAT before the production lot was due? Was the production lot delivered early? If the answer to Don's question is "yes" was the notice delivered prior to delivery of the production lot?

The base fee is set at the time of contract award. Thus, if the contract is awarded with an estimated cost of $100K and a base fee of $2K, the contractor is entitled to the $2K of base fee regardless of what its actual costs are. If the fee changed based on costs incurred, you probably would have an illegal cost plus percentage of cost contract.

Can you clarify your question? Are you asking if you can award a contract where the amount obligated, including an amount for base fee, exceeds funding available for that contract? If so, are you using appropriated funds for the contract?

There is no universal definition of subcontract in the FAR. There are at least six or seven definitions of subcontract found in different parts of the FAR. Those definitions, including the definition found in 52.244-2, apply only to the (sub)part in which they are found. The primary purpose of 52.244-2 is to identify which subcontracts require consent from the government. That clause dos not address what clauses are to be inserted in subcontracts. In this regard, there are two types of flow down clauses, those that are required to be included in subcontracts by their own terms, and clauses that are necessary for the prime contractor to comply with its obligations under the prime contract. In regard to the former, you would first have to look at the FAR (sub)part that prescribes that clause to see if it contains a definition of subcontract. If so, you would follow that definition in determining whether that clause needs to be included in a particular instrument. If no definition is provided, you would apply the definition of subcontract from a reputable dictionary. In regard, to the latter category of flow down clauses, the prime contractor should use its judgment as to whether a clause needs to be included in a particular instrument. For example, if the prime has a fixed price arrangement with a "subcontractor" but the prime contract is a cost reimbursement contract, there would be no need to flow down the Allowable Cost and Payment clause from the prime contract. Instead, another payments clause would have to be used and this clause need not be a FAR clause.

Yes, this is a statutory requirement (see 41 U.S.C. 104. However, the statute does not define what is meant by "commercial marketplace." I guess congress wanted the FAR Councils to figure it out just as they did for what is a "claim."

I have also tried to find it again, but have been unable to do so. It was issued well before 2018, probably some time between 2012 and 2015. It could have been rescinded.

Fara, has the subcontract already been awarded?

Is there a statute, regulation or contract clause that says this or is this based on DCAA's view of things?

Are you equating the contract maximum with "the final anticipated dollar value of the action" as stated in FAR 1.108(c)?

I'm not sure what this means, but since an order is a contract, wouldn't CAS applicability to an order depend on whether the order falls within one of the CAS exemptions? For example, if the contract includes commercial products and non-commercial products and the order is for commercial products would you say the CAS apply to that order?

What is the basis for your statement concerning "the total estimated value of all orders"?