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joel hoffman

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  1. page limitations on proposals

    I didn't need to use page limitations in my solicitations for construction, services or design build. In the interest of brevity, consistency between proposals and to focus on the specific information that we wanted to evaluate, I developed forms for relevant experience and related past performance owner rating and contact reference, if necessary to verify (not pp questionnaires for them to get owner's references to fill out and return) for prime, designer and specific key trade subs; for prime's and D-B designer's (only specifically identified positions ) key personnel; for identifying prime's work to be self performed. We included an outline price breakdown (not cost breakdown) and reserved the right to ask for it in the event that we needed it for price analysis or confirmation of their understanding of the work. For D-B, we focused on certain specific concept design information and on the level of quality of certain proposed equipment and materials. For D-B drawings, we limited the info to some specific preliminary information. I asked for certain organizational and management approach info but not detailed plans or detailed planned approaches. Did not have a problem with excessively long or wordy proposals, or typical lists of every project that they had ever completed. The competing firms liked seeing the same forms and similar format for every construction and D-B solicitation.
  2. J&A Requirement

    Ok, then 6.302-1 appears to discuss your situation. Is a J&A a big deal?
  3. J&A Requirement

    Does the solicitation limit the 20 items to the OEM?
  4. I need to find a fixed price incentive contract or similar cost incentive contract type that is allowable under the existing FAR for federal Design-Build contracting that provides for reimbursement of allowable costs, not to exceed a ceiling price or "Guaranteed Maximum Price" (GMP). The contract will provide for shared savings on the project if the actual costs are less than the ceiling price/GMP, through contract provisions for sharing of savings. In this scenario, the goal is to control costs within the target cost that is established at the price ceiling (GMP). The Question: Is there enough flexibility under the FAR in Parts 16.2 and 16.4, to use a fixed price incentive with Firm Target (FPIF) or similar contract type for a federal design-build construction project but with the "target price" plus the "target profit" in an FPI with "Firm Target" (FPIF) equal to the ceiling price? In other words, does the FAR specifically require separate "target" (cost plus profit) and "ceiling" (where ceiling price = cost plus profit)? Background : I'm presently working to develop guidance for federal agencies to use design-build with a “Guaranteed Maximum Price”, similar to the industry model described below. My goal is to be able to find a way to implement it consistent with the current federal statutes and the current FAR, without having to change either to implement it. D-B Industry Application: The Design-Build industry, e.g., Design-Build Institute of America (DBIA), Associated General Contractors (AGC), and the Engineers Joint Contracts Committee (EJCDC), have contract formats appropriate for design-build contracting. Their formats include, in addition to firm fixed price (the D-B industry term is "lump sum"), a form of "Cost-Plus with Guaranteed Maximum Price (Cost-Plus/GMP). This is a hybrid, combining the cost reimbursement features of a cost-plus contract with the cost certainty of a lump sum contract. The owner benefits by paying only the actual reimbursable costs of the work for the design-builder's performance and by knowing that its project will not exceed a pre-established price (adjusted, of course, for changes made by the owner or for other authorized adjustments under the contract). The GMP also offers both the owner and the design-builder the opportunity to realize savings on the project if the actual costs are less than the GMP, through contract provisions for sharing of savings. In commercial industry design-build practice, the use of a GMP contract structure is often used where the owner’s program is not defined well enough in scope and/or functional or technical requirements to be able to develop a budget or for the owner and industry to agree to a firm fixed price (FFP) for the project. Industry refers to FFP as “lump sum” pricing. The design-build contractor might be selected through some type of competitive best value process or through a qualifications-based selection (“QBS”) process. The owner and design-builder might work together to define the program more completely. The initial effort might be priced on a lump sum or cost-plus basis. The parties should establish a GMP for the project when the program is sufficiently established to make the GMP number realistic and meaningful. Federal Application: For federal design-build acquisition, design-build acquisition processes generally do not allow the use of QBS of the design-build contractor. The design-build contractor is normally selected using a competitively negotiated, best-value selection procedure, considering qualifications, usually design excellence, and price. Generally, federal government design-build build contracts are awarded as FFP contracts. In some instances, federal design-build with GMP contract approach may be more appropriate than the FFP pricing method, when there is already a defined programmatic scope and programmed amount of funding, but with only nominal design development and it is too early to be able to establish a firm fixed-price (FFP) without having to include considerable contingencies or risk in the FFP. It may be well suited for projects that are complex and difficult to adequately define a FFP at the outset and/or for projects that involve unusually high contingencies due to risks or unknown conditions, prior to considerable design development. Rather than paying a FFP for the full estimated contingencies, the GMP method can result in the government paying only for those actually encountered. Plus it incentivizes the design-builder to minimize, manage or avoid costs for such contingencies. Compressed time schedules available for RFP development, awarding and executing design-build contracts for large, complex projects are also a consideration for using design-build with GMP in lieu of FFP award. To be able to negotiate and establish a realistic GMP at the outset, the government must define its performance requirements for scope and quality up front, using a parametric/conceptual cost estimate. The design-build teams would also have to be able to conceptually estimate costs within that performance based requirements RFP format to develop their proposals. Is There an Applicable FAR Contract Type(s)? I have found that the federal “Fixed Price Incentive” contract types under FAR 16.403 (FPIF and FPIS) most closely resemble the industry Cost-Plus/GMP approach. The industry model is described in the DBIA Manual of Practice, in Document Number 510, Design- Build Contracting Guide, Chapter 5, “Lump Sum versus Cost-Plus/Guaranteed Maximum Price”. Both the industry Cost-Plus/GMP and the Federal design-build with GMP using the FPI approach require the design-builder to perform and complete the contracted scope within the contractually agreed maximum price, within the agreed time. Both provide for reimbursement of certain, allowable costs. The Challenge: The current challenge in adapting the FPI for federal design-build with GMP is to be able to use a single target cost/profit and ceiling price – not a lower target within a HIGHER ceiling. I think so, but need some advice or definitive support for my position. The classic FPIF with a lower target doesn't align with the industry model. It encourages a lower quality target design and construction level and may penalize the contractor for encountering unknowns or other non-controllable contingencies, rather than providing positive incentives to the contractor for mitigating, managing or avoiding risks and NOT consuming the contingency allowance. It is also much more cumbersome to manage and administer than a simple GMP ceiling. The industry has already demonstrated a willingness to accept the risk for exceeding the GMP/ceiling, using its existing GMP contract type. The design-builder is the single point of responsibility for design and construction. When D-B is properly used with government furnished performance criteria for means, methods, functional and technical design requirements, the D-B contractor has more ability to control the cost of work in design-build to meet the owner's quality, scope and functional requirements. The classic FPI model with separate target and ceiling price may be appropriate for complex, dynamic government developmental manufacturing programs (like developing and initial production or prototype production of airplanes, ships, missiles, etc.). It may also be appropriate for hiring a construction contractor during development of government furnished design for a complex facility, such as a hospital, etc. It isn't necessarily appropriate for Design-Build construction with a single source for both design and construction. Applicable FAR coverage: I found several pertinent FAR references for FPI contracts under: 16.201(a ); 16.204 (Fixed-price incentive contracts); 16.401 (General), 16.402, 16.403, 16.403-1, "Fixed-price contracts providing for an adjustable price may include a ceiling price, a target price (including target cost), or both.": A fixed price incentive with a single target/price ceiling (GMP) is consistent with the following: With a target equaling the ceiling price (the GMP), the profit is automatically affected when the contractor's actual cost exceeds the target: When the target and ceiling are the same (the GMP), they are within the constraints of the ceiling price. The government doesn't pay any more than what it bargained for and the contractor absorbs any cost overrun, affecting its profit: The GMP method meets this: The GMP method meets this : Paragraph d. (2) (ii) is the only paragraph in contract clause 52.216-16 Incentive Price Revision—Firm Target that would require some tailoring for the GMP with the target cost plus target profit equal to the ceiling GMP. Inasmuch as the paragraph provides for KO fill in anyway, it would be relatively simple to say something like "No adjustment - the target cost plus target profit equals the price ceiling." ______________________________________________________________________________________________ Note: [FAR Cost Reimbursement Incentive Type is not the Same as Industry Cost-Plus/GMP As a matter of semantics, the cost reimbursement incentive contract types under the Federal Acquisition Regulations have a different meaning than an industry “Cost-Plus/GMP” contract. The federal cost-plus (referred to as “cost reimbursement”) FAR contract types also provide for reimbursement of contractually allowable costs. However, the cost ceiling limitation is initially established as an estimate to complete the contract scope of work effort. The contractor is expected to make its best effort to complete the work within the cost ceiling. The government will not reimburse allowable costs that exceed the cost ceiling limitation. If the contractor cannot or does not complete the work within the cost ceiling limitation, the government would have to decide whether to provide additional funding to proceed beyond the cost limitation There are also legal and regulatory restrictions or prohibitions against the use of a federal Cost-Plus contract type for DoD Military construction and for some other Federal construction contracts.]
  5. ji, sorry- that wasn't necessarily directed at you. What is your opinion about whether or not an FPI contract necessarily must have separate target and ceiling for the application addressed above? If yes, why? What costs must be absorbed by the D-B contractor within the ceiling price?
  6. ji, If that's all you think the discussion is about, then you have confirmed my conclusions. The FAR says very plainly that fixed price contracts that provide for an adjustable price may include a ceiling price, a target price (including target cost), or both. For application of a pre-determined formula-type cost incentive, the contract includes a target cost, target profit or fee and a profit or fee adjustment that is within the constraints of a price ceiling. The basic question is why and when you would set the target price equal to the ceiling price for a construction or design-build contract, rather than setting it lower than the ceiling price. Other than telling me "that's the way we've always done it", I want to know why the ceiling price must be higher than the target price for a construction or design-build contract that is awarded, due to time constraints, before various questions or concerns or before a reasonable FFP can be determined. I explained why the type of costs that you'd be asking the contractor to eat a share of in a design-build contract would be payable in either a cost or FFP contract type. The object is to incentivize the contractor to manage the unknowns after award and control and reduce the overall cost to the government. A GMP icost incentive does that and allows the parties time to collaberate together to address and mitigate contingencies. And it "hasn't always been done that way". I'm busy preparing for a hurricane but will try to find a POC in DAU or GSA to answer Vern's question of which projects have used a GMP using FPI.
  7. I've been a bit remiss by not emphasizing that the federal design-build with GMP project delivery method - just like the industry model - provides the flexibility for the parties to definitize Firm Fixed-prices for all or part of the project after award, during project execution. This greatly simplifies contract administration, especially for the owner but also the design-builder, who can then focus on internal design and construction management. The design-builder will track their actual costs, anyway as part of their own traditional project controls, construction and earned value management. The cost savings Incentive would still apply if the FFP comes in under the GMP. It is apparent to me that the lack of input here by other forum members indicates that they don't really care about the topic and/or likely don't have much, if any, clue about design-build, the business side of construction or when such a pricing method would be useful for the government. The industry is pushing for a way to do this but isn't going to go to the effort and expense to sponsor FAR revisions if nobody in the government would understand when or how to use it. The D-B Industry's current primary interest focus is on promoting the use of "Quality Based Selection" of design-build teams in government and commercial D-B , then using what they term "Progressive Design-Build", in lieu of selecting the design-builder using Best Value (FFP). In Progressive Design-Build, the owner may select a D-B team to define or help define its "program" (scope, budget and program schedule), then develop the performance criteria for functional and technical design, then design and build the project. The method would use an evolutionary contracting process, through a series of options that would be negotiated as the project progresses. The industry also advocates using sole source negotiated GMP for Progressive design-build pricing purposes. All that is beyond the scope of the GMP method being discussed here.
  8. We can continue later, Vern. But while I am thinking about it and before I lose my train of thought (one of my problems these days) , the types of contingency costs that you would suggest the government make the design-build contractor share between a target and separate ceiling would be otherwise reimbursable in a cost reimbursement construction contract and would probably be included in a FFP contract price, if you could even get a design-builder to agree to one. The GMP method would only be appropriate for the limited instances where it is too early or otherwise too risky to be able to achieve a reasonable FFP when the owner needs to award a contract to meet its schedule for occupancy. The cost plus methods would result in the government paying for all risks and inefficiencies that are allowable. The FFP, if even possible, would have the government pay for the risks included plus a markup on those costs, regardless of whether they are actually encountered. Some otherwise unallowable costs might be included in a competitively negotiated price, too. The GMP includes contingencies - but only costs that are otherwise allowable would be reimbursed. The cost savings share incentive encourages the contractor to manage and avoid or mitigate expending those costs. It allows both parties more time to address and mitigate risks. The government benefits from the time gai8ned to award and start project execution. The government also gains extra time after award to collaborate with the design-builder in addressing , avoiding and mitigating risks. It saves paying some costs it otherwise would have paid in a firm fixed price at the outset. I think that someone would have to justify to me why the construction contractor must be required to share those costs between separate target and ceiling that iotherwise would have been allowable under a different pricing method . I think that H2H also mentioned the difference between paying for risk in an FPP contract whether or not the costs are avoided later. Yes, something like the Monte Carlo simulation should be used in pricing risk. I am making some contacts to find out where GSA has used their GMP method.
  9. No justification to anybody is not true for DoD. . Use of FPI for any application requires approval. Use of any ceiling price that "departs" from 20% delta will require appropriate justification, whether 3-5% or 0%. Of course, expecting a target price for a construction project to be established at least 20% below the programmed amount for 100% scope would be asinine. Whether it is 3-5% or 20% , requiring a construction contractor to pay 30-50% of the risk of contingencies/uncertainties by putting it on the right side of the target is unrealistic expectation. This isn't the same application of FPI, as "you know" it has been used for. Since at least 95% of design and construction in the US market is performed by other than the US Government, it generally doesn't involve something as complicated as inventing or developing new classes of ships, airplanes, complex weapons systems, etc. Construction contractors base the estimates for their FFP prices on historical construction costs that include normal events and less than perfect execution, then add for some escalation. They also consider risks for contingencies that might or might not occur. The owner's estimate of "fair and reasonable costs" also consider historical costs and some allowance for level of escalation plus risk. There are risks that the contractor can't always control, such as skilled labor availability, material cost escalation, subcontractor availability and market conditions that would affect buyout prices, etc. What would you expect the contractor to eat 30-50% of the cost of? Reimbursement is already limited to those costs which are reasonable and allocable, etc.
  10. GSA is using FPI with GMP similar to this proposed use. They are using FPIS and developing a single target-ceiling GMP. So, it is being done already, whether or not you knew about it. There is less uncertainty for design-build application than for CM@risk project delivery system. The CM is hired early in the design stage and the government has hired a separate designer. I see a high probability that the target/ceiling may change during the owner's design development. The construction manager has no control over the design development. But they are able to refine the GMP. In design-build, the same firm is responsible for providing the integrated design and construction services. Much more collaboration with much less uncertainty. Thus FPIF should be possible and appropriate for most projects - again with a single target/ceiling.
  11. Gosh, I think we adequately discussed this. The short of it is - 1) There is no government sponsor, 2) the FPIF method with target= ceiling (then defining that in the solicitation as the GMP) is similar to the industry's "Cost-Plus/GMP", with the understanding that their vernacular simply means that the owner will reimburse certain defined allowable costs for completing the project - not to exceed the ceiling/GMP. That's the same as the federal "FPI" version. The "I" incentive operates essentially the same in both forms. My question is WHY does it seem to you that the FPI approach is a halfway measure? Why isn't the existing FPIF contract type and incentive revisions clause 52.216-16 suitable for the specific application of D-B described herein , when the clause is slightly edited (as I showed in a previous post is specifically allowed)? It appears to me to operate essentially the same as the commercial GMP contract, subject to standard FAR operatives for such as determining allowable costs. Unfortunately, you apparently don't have access to the DBIA Standard Agreement and DBIA specifically prohibits me from sharing it "for educational purposes" or any other purpose other than to a D-B client that I may be working for. The FPI should exclude the indirect/overheads that DBIA includes in the fee ( fee = profit only). In my opinion, the DBIA treatment of those costs is too ambiguous to put into the "fixed fee". They are included in the fee in the DBIA contract for commercial privacy reasons. Construction companies vary widely in how they are organized and how they treat costs as direct or indirect costs. The FAR is very strict on mixing fixed costs and reimbursable costs for construction contracts (e.g., 36.208 Concurrent performance of firm-fixed-price and other types of construction contracts). To me, it would be very challenging for the government to determine if direct and indirect costs have been totally separated or classified within the fixed fee or within the reimbursable costs. The possibility of paying twice or of inconsistent treatment of direct and indirect costs is difficult to avoid where there is no visibility of what costs are included in the fixed fee. The only FAR change that might be recommended is to clarify that the target price can be set to equal the ceiling price and when that could be appropriate. I think that the DFARS at 216.403-1 and the PGI at 216.403-1 already cover how an organization can vary from the 'one size fits all' " 120 % ceiling and 50/50 share ratio "point of departure". Its ridiculous to assume that a Design-Build contract - when used under the circumstances in the "Guidance" - would have to have a ceiling price that is 20% more than the target - as though it were an ACAT 1 Acquisition Program for a nuclear submarine or aircraft carrier or the dad-gummed Air Force Tanker. The PGI describes the requirements for D&F approval for any Incentive type contract and how to analyze risk, etc.in establishing a ceiling price. The Budgets for federal construction projects don't include other than a low percentage for contingencies. The various FAR References that provide flexibility (including the instructions for the FPIF Incentive Clause) have already been quoted herein. At least two people from DAU, Vern Edwards and an attorney from my client organization have indicated that it doesn't appear that the target and ceiling can't be the same in an FPIF. For the most complex straight construction projects, using various forms of Construction Manager at Risk project delivery method, the successive targets form has been used with success. By the way, I must read the info at the above site that I just noticed...
  12. Contractor’s Email Leads to Lost Contract, Denied Protest

    "Throwing its weight around"? Come on! The company made up its own terms, disguising them as a capability boast.
  13. D&F Signature Authority over $1Billion

    I think perhaps the President...
  14. Vern - The publication 510 has been restructured into numerous other documents. Only members can download the documents. The Standard Form of Agreement for the Cost-Plus/GMP method, Document 530 , is still there. I am searching for the discussion on how and when to use it in the current publication list. Have asked the staff to assist. EDIT: AHA! The Pub 510 chapter 5.0 on Lump Sum vs. Cost-Plus/GMP has been absorbed into the general instructions for the Standard Form of Agreement. It is available only for members as a download. Unfortunately, I cannot transfer, copy or reprint it under the license agreement. It is only available for members as a download. The new citation for that which I cited earlier as Publication 510, "Lump Sum vs. Cost-Plus/Guaranteed Price" is "(Specific Instructions For) Document No. 530, Standard Form of Agreement Between Owner and Design-Builder - Cost Plus Fee With An Option For A Guaranteed Maximum Price (2010 Edition)" Darned. Sorry.
  15. Vern, it is part of the "DBIA Manual of Practice". My Manual is a Binder with each Document separately bound with covers. I'm referencing Manual of Practice Document Number 510: "Design-Build Contracting Guide." I will call DBIA and ask and check the website. I also remembered this morning, when I was responding to H2H about negotiating risk on the construction task orders for two Systems Contracts under a DoD Level I Major Acquisition Program, that a Cost Reimbursement construction contract doesn't contain the same clauses as a FP construction contract. The FPI contract type for construction contains most of the FFP clauses, including differing site conditions and other clauses that provide for equitable adjustments. The Cost Plus Systems contractor had argued to include many of those possible risks during the Alpha Contracting definition phase. The overall risk contingency allowance affects the amount of the fixed fee or base fee. I just don't remember how we finally addressed it in pricing the task order.
  16. Yes - I agree with you, H2H. In the negotiations of the Cost plus Award Fee construction task orders on two single award task order, systems contracts for the last two Chemical Weapons Demilitarization Projects, the government and the systems contractor used Alpha Contracting methods to identify and quantify various risk contingencies. In those cases, the amount of the contingency affected the cost ceiling and the fixed portion of the fee. The funding was available for those or any other cost of the work. The systems contractor is also the designer and the design development was in the early stages at that point. I don't know how the DoD got authorization to perform the construction task order under cost plus award fee, considering the statutory and regulatory restrictions on that method. I'm guessing that they ignored it - but it was a DoD Level I, Major Acquisition Program. The award fee did provide an incentive for cost underruns - cost incentives are mandatory, if performance incentives are also to be included.. EDIT: I forgot to say that we also used the Monte Carlo simulations...
  17. Vern, thanks. Regarding contingencies: Vern, I did not go into detail regarding a separate line item for the risk/contingencies. That is discussed as optional approach in both the DBIA Publication 510 and in my proposed Guidance for Federal D-B with GMP. It is an amount that is included in the target cost, thus is within the GMP and included within the incentive . I mistakenly said in an earlier post that the contractor would have to justify using it. In my post yesterday, I explained why a separate line item might be useful during the source selection evaluation: Vern, I tend to agree with you that separate line item isn't necessary. Actually, the DBIA model states "Subject to the issue of which costs are reasonable, the design-builder has the entire GMP available to perform the work, and in the event a line item within the GMP is exceeded, the design-builder has the right to use underruns in other items to offset the overages, as long as the overall GMP remains intact." The separate line item is only useful to identify what the proposers are considering to be such contingencies. A separate line item that can be used on other line items would add unnecessary complexity. The basic rationale for the identical target price/ceiling price is that, as a result of recommendations from an industry sponsored Forum for Federal Owners, I was asked to research and develop guidance for federal agencies to utilize GMP (and recommend required revisions to laws or FAR that restrict or prohibit its use). I was told later that the scope of the recommendations isn't restricted to D-B but also includes the Construction Management at Risk project delivery method. Mike Loulakis referred me to GSA's policy for their version of CM@Risk, using FPIS with GMP (also uses target = Ceiling) . I considered their method during my development of design-build guidance. However, In design-build, the contractor has more control over the design than a construction manager at risk does. Thus the FPIF, which is simpler than the FPIS would generally be the contract type used for design-build with GMP. I informed my client that there is already a policy for CM@Risk that could be used and adapted for other agencies. I believe that I discussed the rationale in my introductory posts. However, 1. It is consistent with an established industry method - which GSA also adopted and which the Federal Owners Forum discussed. The industry and commercial owners are comfortable with it and it is understandable. 2. It is MUCH less complex than the separate target and ceiling and the PTA - if you recall a recent thread, the concept of PTA wasn't clear and in the example used, ALL of the profit was eliminated at a point below the actual ceiling cost. 3. It is simpler and provides a POSITIVE incentive. The separate target versus ceiling with cost overrun sharing formula can be essentially a punishment for the contractor encountering a situation during or after design, which the contractor might have little no control over - e.g., delays in obtaining third party permits, the risk of trade buyout differentials, which aren't known until after the associated tradework is designed and bid, etc., 4. The government's version of FPI is more suited for complex developmental programs with first articles or prototypes, systems designs, complex software development, etc. It is vastly more complex than the type of work involved with the GMP method. Look at the Boeing Tanker program as but one example. The government leads the public (as reported by the press, who knows nothing about FPI) to believe that the second competition was a fixed price LPTA. Shortly after contract award for the FIRST FOUR PLANES, the contractor announces a multi-hundred million dollar cost overrun, which the government (taxpayers) will have to share in. Was it a buy in? 5. In design-build, the scope is generally boxed within the defined program for one project. Back to discussion of contingency: The GSA policy definition of the contingency allowance, which is set at 3% of the estimated cost of the work, is: The contingency allowance is included within the GMP, thus provides the construction manager at risk a positive incentive not to have use all of it. I did not go into that kind of detail about contingency in this thread but did say that it is within the GMP.
  18. Just noticed this. The Ceiling price or GMP is subject to adjustment under an applicable clause in the contract. See paragraph (k) of the clause --- I've been quoting the wrong clause. The FPIF Incentive price revision clause is 52.216-16, not -17. Its covered exactly the same way in the DBIA's cost-plus/GMP contract language. 8/31/2017 EDIT: Your question is also answered in FAR 16.201 (a): 8/31/2017 EDIT: Here is the paragraph (k) 8/31/2017 EDIT: I'm thinking that the author of the DBIA's: STANDARD FORM OF AGREENENT BETWEEN OWNER AND DESIGN-BUILDER -- COST PLUS FEE WITH AN OPTION FOR A GUARANTEED MAXIMUM PRICE adapted the FAR clause for non-government D-B industry use. He/she got rid of the legal gobblygook, FAR language using PlainSpeak but covered much of the meat of the clause - converting it to a GMP clause.. Michael C. Loulakis, ESQ., a well known attorney in design, construction and design-build law, who is also an engineer, is the probable author. I'll ask him the next time we talk.
  19. tguns, I would like to comment but I would like to see your answers to the others' questions first. Another question, does the company provide shirts and direct its employees to wear them on every job/contract?
  20. Ok, I read the 2000, Nash & Cibinic Reports article. I don't agree that there is not an existing, appropriate contract type under the FAR that operates essentially the same as the "Cost-Plus/GMP" type, as described and defined in the DBIA Design-Build Manual of Practice - when both are used under the scenario described herein. I will limit my scenario to the circumstances where the commercial owner or federal government has a defined "program" for a construction project. The owner/government has an authorized project, the scope is defined, the funding budget limit is defined and the owner/government has defined the functional and technical performance requirements. Both the design-build team and the government can develop a parametric cost estimate. However, the project is very complex and there may be numerous risks that might affect price but can't be totally mitigated or avoided with certainty at the point that it is necessary to award a contract. Prices for various construction materials are fluctuating due to market conditions, so it would be risky to lock in one design solution at this point and alternative material and systems can be used to meet the owners performance requirements. Thus, this is not an application of the "progressive design-build" approach, which is generally not allowed for FAR acquisitions. Lets assume that there is a commercial design-build project with similar characteristics and circumstances. Under this scenario, assume, it would be very risky and/or speculative for a design-builder to agree to a "lump sum" (translated for federal contracting: FFP). The contractor will only agree to an FFP if it can include a contingency for the POSSIBLE, quantifiable risks, that may or may not occur or may or may not be controllable, manageable or able to be mitigated, given time and possible alternatives. The owner and contractor agree that it isn't practical to use a FFP, with the owner absorbing all the cost risk for the contingency. The contractor will agree to a ceiling price but wants protection for the risks. The owner will agree but wants a way to positively motivate (incentivize) the contractor to try to avoid, find ways to mitigate and to manage the risks, in order to reduce costs and/or time to complete the project. The owner wants to avoid delays due to unmanaged risk that would prevent the project from being available for its business use (let's not discuss other time incentives for the sake of this discussion). The parties agree to a designbuild method, as described and defined DBIA's Manual of Practice in Document Numbers 510, "Cost-Plus/Guaranteed Maximum Price" and 530, "Standard Form of Agreement Between Owner and Design-Builder - Cost Plus Fee With an Option for a Guaranteed Maximum Price". Under this scenario, the parties are able to negotiate a GMP at the outset, so there is no option used (or the parties could include the option to incentivize the contractor's initial performance). The parties agree to an incentive shared cost savings formula of 50/50% for each dollar of contractor cost savings under the GMP and they agree to a fixed fee for profit. They agree that the contractor will open its books so that the owner can verify or audit actual costs expended. Note: in actuality, the DBIA model includes the contractor's Home and Branch Office overheads and other indirect costs in the "fee". The contractor usually doesn't want to completely share its indirect and other overhead details with another business organization for proprietary business purposes. The parties establish a distinct line item within the GMP for the contingency risks that have been quantified. They agree that the line item is exclusively for the contractor's use to draw on but that it must justify the need to draw on the line item. Note: As Vern and I previously stated, the commercial "Cost Plus" model does not equate to the FAR "cost plus" (cost reimbursement) types. Now, assume that the federal agency's project falls under a similar scenario. The federal agency has decided to use design-build for similar cost and urgency reasons. Assume that the agency can't justify sole source or limited competition. It must use the two-phase design-build process in FAR 36.3. The government doesn't want to assume the entire cost risk for possible contingencies but due to urgencies or other reasons, doesn't have the time or solutions to all the concerns at hand. Through market research, the government discovers that industry is unwilling to agree to a firm fixed price contract without allowing for the risk contingencies. The government determines that a design-build contract with a cost ceiling (GMP) like the DBIA model, which will include a fixed profit and a POSITIVE incentive for the design-build contractor to manage, avoid or mitigate risks is appropriate and desirable, thus hopefully the contractor will not expend the entire ceiling cost. The government will reimburse the contractor for its allowable costs, including overhead and other indirects under the Part 31 cost principles, within the ceiling price (less the fixed profit). Voila - the Fixed Price Incentive Firm Target with the ceiling price = the target price plus profit = GMP is within the bounds of FAR Part 16. The contract clause 52.216-1 Type of Contract will state that the contract type is a Fixed Price Incentive - Firm Target and that the target cost plus target profit will equal the ceiling cost, which is a Guaranteed Maximum Price. The cost savings incentive sharing formula may be specified or it may be competitively negotiated. The GMP must be within the Contract Cost Limit (CCL), which the government will identify in a solicitation provision. The solicitation provision will also state that "Offerors are under no obligation to approach the CCL." In this example, the solicitation will state that full scope and design and material quality are the most important of the non-cost factors. It will state that all evaluation factors other than cost or price, when combined, are significantly more important than cost or price. Thus, competition will hopefully control the reasonableness of proposed cost and provide high quality. A distinct line item for contingency within the GMP could be used and could be evaluated during the source selection to determine what kind of risks the proposers are considering. This often reveals industry concerns, ambiguities or errors in the solicitation or industry misunderstandings of requirements. This facilitates the possibility for effective discussions that lead to solutions or otherwise alleviate some concerns, hopefully leading to better final pricing. I have successfully used similar approaches during discussions when initial proposed prices exceeded the CCL or were otherwise worthy of discussion. The final price is established by contract modification, based upon the final cost, fixed profit plus any share of cost savings realized below the target cost. Having studied both the DBIA's contract conditions and the FAR contract clause at 52.216-16, I believe that the FPIF with GMP, in operation, is essentially the same as the DBIA's Cost-Plus/GMP model used for the commercial D-B project above- of course, tailored for the federal government acquisition regulations, cost principles, etc. The FPIF contract is greatly simplified when there is not separate ceiling with its separate cost sharing disincentive of costs between the target and price ceiling.
  21. Haven't had a chance to read it yet - not at home. Id like to discuss some more off line. We are going GMP to allow the contractor to include quantifiable risk that is included as a contingency. We want to positively incentify the contractor through a share of the savings to manage, mitigate or avoid as much of those risks and associated contingency costs as possible. There is often other not fully fleshed out design definition at the point that the contract has to be awarded, so there is some risk there. The cost avoidance sharing can also positively motivate the contractor to finish early, avoid quality control related rework, etc. I don't understand how that fits the "FFP" concept that the contract price is not subject to revision based upon the actual costs incurred. In true FFP, the contractor assumes those risks but may well include them in the contract price. The contractor keeps all savings and the owner pays the costs included for the risks even if not actually encountered or that cost less than priced. Let me catch up with Ralph's article. I probably read it back then. We had a subscription at the Office.
  22. Thanks, Vern. I will study the article and discuss with my client to see if they want to pursue developing guidance under that approach. Trying to implement guidance for something out of the ordinary that could be used government wide is a challenge. Inventing a "new" contract type will be especially daunting, inasmuch as we are interacting with some organizations that are staffed by risk averse legal, contracting and program managers. They want to see a contract type that neatly fits into a FAR 16 box. One Agency's HQ Counsel are stating that FPI is a "cost reimbursement" contract therefore prohibited for any construction, even though the wording in the law and the regulations expressly/specifically name the prohibited FAR types of cost reimbursement construction contracts. Geewiz, Prof. Nash wrote that article 17 years ago and still no takers. thanks again.
  23. Vern, I was thanking you for your explanation. The information would have been particularly useful earlier. I would be interested in reading Prof. Nash's full article. Thanks. If there is a simpler way - that is expressly allowed by FAR - without having to create a class deviation or seek FAR revisions, then I'm open to it under the circumstances of my current assignment. Sorry for the detail to follow: Having access to both an industry published Manual of Practice and the FAR clause, it appears to me that both the industry cost-plus GMP and federal FPIF operate essentially the same - for the D-B application that is possible for government to use, as explained below. The existing FAR clause 52.216-16 could be revised to add an Alternate 2, deleting paragraph (d) (2)(ii), which provides a fill-in for a price adjustment when the actual negotiated final cost exceeds the target. That situation isn't applicable to GMP. A simple statement that the target cost plus target price equals the ceiling cost equals the GMP could also be included in the new Alternate 2. I don't think that is really necessary though. The solicitation/contract language would define and explain it. Contractors read the solicitation narratives before reading the operative contract clauses anyway. For now, the fill-in paragraph can be simply filled in as N/A. The contract narrative language defines what constitutes the GMP (target cost plus target profit equals ceiling price equals GMP). In Industry, an owner can use a QBS selected D-B team to develop the owners program and develop the performance-based design criteria. Then at an early point in the design development, before the parties are able to negotiate a lump sum (FFP) contract, they negotiate a GMP for the construction or both design and construction. The parties might choose to convert to lump sum at a later point, when the cost certainty would allow. The owner has the option of continuing the relationship or ending it after each preliminary phase. That is called "progressive design-build". The federal government can't use "progressive design-build" under current law and regulations to select a D-B team using QBS (without meaningful consideration of price) to develop its program, develop the requirement and design criteria for the government, then use the same firm to design and construct it. However, both government and industry can use D-B with a GMP after having established the "program" (which means defining the scope, cost and budget) and after having established enough level of preliminary design development to be able to select a D-B team. The GMP pricing method is used in industry or government when it is too early in the acquisition cycle to be able to establish a lump sum price (FFP) - for reasons of urgency and/or the level of complexity of the project. This then is the application that the government could use for D-B with GMP - urgency and/or complexity of the project don't allow the additional time needed to develop the design criteria to be able to price and award a FFP design-build contract. It won't use QBS - it must use best value, considering quality and price. You probably don't believe it but the industry " Standard Form of Agreement for Cost Plus GMP" and the FPIF clause are actually very similar when used with the best value approach ( not the Progressive D-B approach). Both the industry approach, the government GMP approach can allow for the parties to be able to definitize prices for the project or portions of the project to FFP if the parties agree. This is done to simplify contract administration effort, cost, etc. under industry or government approaches. Contractors don't like private or government owners having full access to their books and other management and business information. The government D-B method with GMP is not intended for broad use. It would only be used under special circumstances. Therefore, there isn't currently much if any political support to allow QBS selection of a design-build firm without meaningful consideration of price) or to allow federal-wide use of "Progressive Design-Build". Based upon my personal experience and that of some other leading D-B practitioners, the government often can't afford many of the most highly qualified design-build teams - that would dominate a QBS selection process. After selection they would negotiate with the firm in the absence of competition to establish a fair and reasonable cost for the project. Been there - done that, in single award, design-build ID-IQ follow on task orders. There isn't a government agency that is currently interested in acting as the proponent to sponsor amended law or FAR revisions to allow QBS or progressive D-B. It would probably require a monumental effort and the sponsorship of several agencies to effect legislative and regulatory (major) revisions to use it. D-B with GMP would not be widely used in government anyway, Yes it is more complex and requires expertise that most government agencies don't have. I don't think that the agencies are interested in revising FAR to "expressly" define a special GMP contract type and write a clause that would likely largely mirror the current FPI clause, anyway. GSA has Developed policy and procedures to use GMP with FPI for their version of owner furnished design with construction manager hired early in the design development phase. It uses the existing FAR FPI Incentive clause(s). So it can be done within the context of the current FAR for the intended limited application. That's why I originally asked the question.
  24. Davis Bacon Wage Determination For Non Construction

    ji - not really. DOL has issued numerous decisions and memos that discuss coverage of the DB vs. services, etc. There are some tricky interpretations sometimes. However, installing a new fire alarm system in a building isn't a service or supply for the labor portion. https://www.wdol.gov/aam.aspx Chapter 5 of the USACE Engineer Regulation 1180-1-8 Labor Relations in Construction, dated 30 Dec 16 is :"APPLICABILITY OF CONTRACT LABOR PROVISIONS TO VARIOUS SITUATIONS, CONDITIONS, AND WORK ACTIVITIES" and is based largely upon numerous DOL decisions. http://www.publications.usace.army.mil/USACE-Publications/Engineer-Regulations/udt_43546_param_orderby/Proponent/udt_43546_param_direction/ascending/