Retreadfed

Carl, no mod has been proposed yet. It seems like the contractor is simply being asked to reduce the price of the contract without a contract change. If I were the contractor, I would not do it until a mod is proposed so I can know the impact of the change on my pricing. As you indicated, there may be no impact or the price may go up.

I think a good starting point in looking for answers would be the contract level CO's PD and the contract. There does not seem to be any inherent obligations to manage the TO level COS by the contract level CO.

What kind of liability are you talking about? Are you asking if a contractor could sue the HQ CO for an action taken by a TO CO?

Are you planning to issue a modification to the contract, such as a partial termination, to correct the port count? If not, what is your basis for requesting a repricing of the contract? From what you have written, it seems you are asking the contractor to do something they don't have to do.

H2H, is this what you had in mind Absent an advance agreement, recovery of pre-contract costs requires proof of four elements: (1) the costs were incurred prior to the effective date of the contract; (2) the costs were incurred directly pursuant to negotiation of the contract and in anticipation of award; (3) the costs were necessarily incurred in order to comply with the proposed contract delivery schedule; and (4) the costs would have been allowable if incurred after the date of the contract. Radant Technologies, Inc., ASBCA No. 38324, 91-3 BCA ¶ 24,106 at 120,657; FAR 31.205-32. The four part test from Radant had been cited in a few later cases.

That is not necessarily a true statement. Unless there is something in the contract to the contrary, the contractor only has a legal obligation to pay when the supplies or services called for by the PO are delivered or performed. Until then, the obligation is contingent upon performance. I agree that accruals are an acceptable way of accounting for some costs such as sick or annual leave. However, for incurred cost purposes on government contracts, the accrual needs to be tied to some obligation to actually pay the cost. In the case of a PO for supplies or services, there is no obligation to pay until delivery or performance has occurred.

Doesn't this statement answer your own question? Generally, for government cost accounting purposes, a cost is incurred when the contractor has paid the cost or has a legal obligation to pay the cost. There are a few exceptions to this rule when imputed costs, such as cost of money, can be considered an incurred cost. These principles apply when determining what costs are included as incurred costs when establishing final indirect cost rates. See, FAR 52.216-7(d)(2)(ii) which states "The proposed rates shall be based on the Contractor’s actual cost experience for that period. "

Based on what has been provided to us, I agree with you. The problem is, we don't have the text of the entire clause, nor do we know what other clauses are in the contract. Thus, what we have here is a known unknown.

Joel, I have interpreted the issue as being one of profit at the prime contractor level. CM has not been clear on exactly what the issue is. Maybe we can get some clarification.

If this is a Navy contract, they usually contain a clause disclaiming any potential liability on the part of the government for costs caused by directions or contract changes issued by someone other than the contracting officer. Is there such a clause in your contract?

Is the "Proj Manager" a contracting officer? If not, what authority did (s)he have to issue such directions? If (s)he did not have the authority to issue such directions, maybe you do not have a claim at all.

Maybe you should look into that and see how that might impact what you have in mind concerning the IDIQ contract.

CF, look at 13 CFR 124.106(e)(3). It might provide you with a way out.

Why would you want to classify university research as a commercial item? Such contracts would normally have to be a type of fixed price contract. In my experience working at ONR, research contracts at universities are generally not susceptible of being priced on a fixed price basis unless the contract is a fixed price LOE contract as described in FAR 16.207.

Subcontractor profit is a cost to the prime. However, the OP did not mention subcontractor profit. On the other hand, prime profit is not a cost to the prime.

The simple answer to the question is profit is not a cost. When negotiating a contract, profit is the difference between the anticipated cost of performance and the price negotiated.

The term Vern used was dictum.

Funny that the clause does not apply to contracts for commercial items, but is to be included in subcontracts for commercial items.

Don, I do not see anything in the DFARS that says do not include the clause in contracts for commercial items. Confusingly, the introductory language to the clause says it generally does not apply to contracts that are not subject to the CAS, which would mean that (a)-(e) of the clause do not apply to contracts for commercial items. However, (e) requires the clause minus the introductory language to be included in subcontracts for commercial items. However, I am confused by the introductory language. It says that (e) does not apply unless the contract is subject to the CAS. If the contract is for commercial items, and not subject to the CAS, (e) would not apply to the contractor. In that case, it could be argued that the prime is not required to include the clause in subcontracts, unless the prime contract is subject to the CAS.

You did not quote all of Subsection (e). Note that it requires prime contractors to delete the introductory language when including the clause in subcontracts. Thus, the language limiting application to contracts subject to the CAS does not apply at the subcontract level. Therefore, it is required to be in your subcontract and you are bound to comply with it just as you would with any other term of your subcontract otherwise you will be in breach of your subcontract.

Is this clause in your subcontract?

Neil, here is the pertinent language from 10 U.S.C. 2324 which, with the companion statute in title 41, is the source of the relevant part of 31.205-47 "Except as provided in subparagraph (C), costs incurred by a contractor or subcontractor, or personal services contractor in connection with a criminal, civil, or administrative proceeding commenced by the United States or a State in connection with a covered contract, subcontract, or personal services contract may be allowed as reimbursable costs under the contract, subcontract, or personal services contract." It goes on to state that "The term “covered contract” means a contract for an amount in excess of $500,000 that is entered into by the head of an agency, except that such term does not include a fixed-price contract without cost incentives or any firm fixed-price contract for the purchase of commercial items."

It depends to a large degree on what clauses are in the contract and whether they survive contract closeout. A prime example is the ability to revoke acceptance due to a latent defect under the fixed price supply Inspection clause. This right is open ended.

Neil, I had similar thoughts. In addition, FAR 31.102 states the application of the cost principles when pricing a contract. It only applies to the government when evaluating proposals and does not prevent a contractor from proposing any cost it pleases. Further, it does not say anything about determining what costs a contractor can recover after a contract is awarded. Finally, there are several clauses that incorporate the cost principles from FAR 31.2. However, I am unaware of any clause that incorporates what is in 31.1.

Do you charge other agencies for doing work for them under the Economy Act?