joel hoffman

Pup, the poster said that there is no relationship between the buildings to be demolished and the site work or new construction. I took that to mean that it is a separate site or that the demo is not necessary for the construction project.

I think seeker feels that she had answered the question (several times) already before your later follow up. Please read, for example, some discussion regarding the parol evidence rule at http://www.ehow.com/about_6660628_parol-evidence-rule.html My point was that the Government should resolve discrepancies between an offer and the Government's solicitation or the government's interpretation of the solicitation before ever awarding a contract to that firm. There are all sorts of board and court decisions stating to the effect that it is a fundamental rule of government contract law that the government must not award a contract based upon a non-conforming offer. Thus, if the government intends to accept the terms and conditions of a non-conforming offer, it is required to revise the solicitation to reflect those terms and to allow all firms to compete based upon the revised solicitation. If it is a sole source acquisition, the government should amend the solicitation or otherwise indicate adoption of the terms and conditions if it accepts them. I'm not a lawyer, but I would think that if there is no indication of acceptance of the terms and conditions by the government in the contract, then the parol evidence rule would apply. I'm also assuming that the contractor signerd the contract after the KO executed it. The contractor should not have executed the contract without the inclusion of its cover letter or at least the terms and conditions in the cover letter if it intended that such was to control the contract interpretation. Am I correct? If the Government signed the contract after the contractor signed it based upon its offer, then there might be a legal problem.

Good points. I do wonder if the DCAA would ever audit one of the original poster's contracts or perform a compliance audit of self-performance. If his/her share of the self-performed work constitutes a significant share of the contract effort, I think that the contract size would not be large enough for DCAA to audit.

My suggestion to the original poster is to keep track of all of your hours as a laborer on a project and to include them on the payrolls. If you personally perform some of the off-site share of the work that is not otherwise subject to the DBA if it would be performed by your employee(s), then also keep records of those hours. You are trying to prove that your company is self-performing its share of the work. It appears to me that this company must be performing small jobs anyway, if your personal efforts constitute a significant share of the labor on a project. For gosh sakes, most of the government offices that I am familiar with don't seem to even enforce the intent, let alone the letter of the self-performed work clauses in our construction contracts. I never saw DCAA get involved in trying to enforce such clauses. We can't even get them to perform audits when we need them. When they do, they generally use broad sampling techniques that I doubt if they would go to the time and trouble to go into that detail. I'm not an accountant so I can't advise you whether or not to assign yourself a salary or to pay yourself by the hour. Others here have already suggested that. EDIT: The poster asked: "Can anyone give me any insight into how the SBA (or any other auditing agency) would figure this (including any references)? " It has been stated above that the SBA doen't enforce the -14 clause. I have NEVER seen the Small Business Administration audit any of our construction contracts to verify compliance with the -14 clause. That is not to say that it couldn't happen but that is my experience. And, as of late 2012, I haven't been able to even get DCAA to perform construction contract audits on some large Civil Works projects that really needed audit support. Civil Works projects are funded outside of the DoD budget, so DCAA doesnt have to agree to audit them even though such audits are performed on a reimbursible basis. And DCAA has seldom performed audits in the depth that I would like to see for negotiating major changes and claims on DoD construction contracts. They are understaffed, underloved and apparently overworked.

As a follow up to my post above, the DBA payriolls don't necessarily capture all of the contractor's labor costs or the contractor's share of the work. Please also note that the DBA only applies to work that is performed "at the site of the work" In additon, the Contractor is only required by contract clause 52.222-8 -- Payrolls and Basic Records to submit payrolls for work performed at the site of the work. There are other locations that work on the contract may be performed which are are exempt from the DBA and from payroll reporting requirements. Some examples are permanently established fabrication shops, home office fab shops, etc. Well, this would be work actually performed by the prime contractor but not included in the payrolls. SO - one cannot rely solely on the payrolls to prove the share of the work performed by the prime. You might say, "Well, the contractor should have other records to show what the off-site workers actually cost the company, so the owner should also prove what his time cost the contract." True enough. However, it shows that one cannot simply state the the D-B payrolls must be used to prove the self-performed percentage of cost . I think that one must look beyond the mechanics of DBA payrolls and other records to determine the true intent of the "Limitations on Subcontracting" Clause at 52.219-14. Congress intended to control such practices as brokering contracts by those various classifications of Small Business firms that Congress established set-asides for. It also intended to discourage or prevent "front" operations by large business contractors or other small business contractors, using SB's to obtain contracts for the other business to perform as "subcontractors" to the privileged set-aside firm.. This clause was intentionally different from the normal clause used in full and open competition for construction contracts at FAR 52.236-1 "Performance or Work by the Conteractor". That clause itself is not up to date, because it limits the measured share of work to work performed "at the site of the work". That is another topic for another debate. This topic is too deep to fully cover here but I read a lot about it and also discussed it with the SBA Regional Office back in the days that my office negotiated sole source contracts and issued RFP's for competitively negotiated, set-asides. I'm sure the reason that the -14 clause focused on labor was that many firms were counting, for example, the purchase of materials that would then be installed by the subs. That obviously was simply a money shuffling procedure. Another example was "renting equipment" from a sub and then "hiring" the sub's normal employees to operate the equipment. It was obvious that the sub was running its own equipment with its own employees. I negotiated and/oir supervised the negotiation of many sole source SB, SDB and 8(a) construction contracts for about 7 1/2 years. We saw all sorts of attempted machinations to attempt to convince us that the prime was "performing" its required minimum share of the work. I won't go into detail here but we could usually see through the smokescreens. We would reject such proposed manipulative approaches. If it could not be resolved to our satisfaction, we asked the SBA to find another firm. They always cooperated with our office. At any rate, somebody apparently suggested the method that is used in the -14 clause and Congress adopted it. I'm sure that Congress' intent is that the prime contractor actually perform a certain minimum amount of work itself - not sub or broker it out. Here, the contractor is actually self-performing work (literally!). His/her problem is in calculating the "cost" of his contribution because he apparently pays himself out of what is left over rather than pay himself a salary. Somehow there needs to be a way to cut this guy some slack and figure out a way to credit the company for the work that is actually being self-performed. As mentioned above, the DBA payrolls themselves don't even necessarily capture all labor costs.

Somewhere above, Vern mentioned that he wasn't sure whether or not the DBA applies to an owner performing labor on a construction project that is otherwise subject to the DBA (or if the owner had to report himself/herself on the payrolls?). I believe the answer is that the owner under the conditions presented in this thread is not subject to the DBA. As to reporting requirements, I found different requirements during a Google search. One site said that the owner must include himself on the payroll but did not have to include any rates or wages. I found the following US Department of Energy webpage: "ANSWERS TO QUESTIONS SUBMITTED DURING THE JUNE10, 2010 DAVIS-BACON ACT WEBINAR" at: http://www.energy.ca.gov/contracts/IFB_200-10-203/Reference_Documents/US%20DOE%20Webinar%20June%202010%20dba_faq_list.pdf "Contractors Who Own the Business but also Perform Labor• Does a self-employed contractor need to completeand submit DB payroll forms weekly, indicating onthem that he has paid himself at least the prevailing wage? If so, what happens when the contractor ispart way through the project and realizes that he under-bid, and his policyis to not change the contractedamount. In other words, he guarantees that he will only charge $xx for the job, no matter how long it takes him. Now he is not compliant with DB for the remainder of the project. Please see answer below. • If the owner of a private company is self-performing labor, on an EECBG project & public building, arethey required to pay themselves prevailing wage? Please see answer below. • What about a small business owner who owns the business and also does the work.....Do they pay themselves based on the Davis Bacon rates? Answer: A business ownerwho is the contractor and works with his/her employees, is not required topay him/herself DBA wages. Bona fide owners who are exempt pursuant to Department of Labor regulations, found at 29 CFR Part 541,are not laborers and mechanics and are not subject to the DBA. DOE recommends that owners of a business who also perform construction work list themselves on the certified payroll and under the column for "Work Classification" insert theword "owner." The owner does not have to put in his/her hours or wage rate.If the business owner is a sole proprietor, the contracting entity must determine that the person they are contracting with is truly a bona fide sole proprietor of a company. The contracting entity must maintain a record of the company Federal Tax ID number and a copy of the business license in the contracting file. Additionally, prior to awarding the contract, ask whether the sole proprietorplans to hire anyone to assist with the work – as those hired workers will be subject to the DBA. If the sole proprietor is not going to hire anyone, the owner is exempt from DBA and there is no requirement for certified payrolls.Workers classified as independent contractors or “1099 workers” are covered by the DBA and must be paid the DBA wages and listed on the contractor’s certified payroll record.NOTE: If the grantee/subgrantee hires an individual who is “self-employed”, but not a “sole proprietor”, the grantee/subgrantee must pay the independent contractor the DBA wages and complete thecertified payroll." Okay - I am not a lawyer. This is free advice and I am not getting paid to do research on this. So take it for what it is worth. I have amplified my response in additional posts, below.

"Amounts are significant enough to question whether this approach is wasteful." I agree with that assessment. I like Don's suggested approach. However, who determines the number of employees that are actually provided for a task? Is it the government or the contractor?

Which leads to the root problem. That is awarding a contract to a firm that plainly explained in a cover letter whatever it's understandings and conditions for its proposal were based upon where such information conflicts with the solicitation. This should not happen. The awarding office should know what is in the solicitation . It should also know not to award a contract based upon a non conforming proposal and what to do to resolve known inconsistencies before awarding a contract.

Which phases of contracting (acq planning, pre award, post award, close out) would this desk guide encompass and for what type contracts (service, supply, construction, D-B, R&D, etc.) what size contracts (e.g., purchase orders, other simplified methods or over the various thresholds, etc.), what type of pricing arrangement (FFP, CP, FPI, etc.)? It would seem that anything other than a very basic handbook would be as thick as the FAR and supplements. I wrote and supervised a couple of rewrites and expansions of contract administration manuals over the years for ACO's and COR's on FFP construction contracts. These manuals also include mods under the few various clauses that ACO's in our organization were authorized to execute but including all the steps for mods and other actions typically required for a field office. The manuals were hundreds of pages thick and had to be updated every few years. The handbook that Don suggests appears to be a massive undertaking and for what ultimate purpose , breadth of coverage, application to what organization, etc. ?

It is aggravating when someone asks a question that needs clarification then doesn't reply after having been asked by at least three respondents what they meant.

MBrown, although it might be possible, DFARS 1.603 requires a military or civilian candidate for a KO warrant meet certain statutory and regulatory training and experience requirements before they can be warranted. There are exceptions, such as havng been warranted prior to 2000 or in a contingency operation. However, I find it hard to believe that a field grade officer these days without such qualificatifications would possess an unlimited warrant for other than extraordinary contracting operations .

After corresponding with JL Chief, I learned that the contractor is from New Mexico, where the state charges a gross receipts tax on the bottom line contract amount, not a direct sales tax on materials. For contracts in New Mexico, one apparently adds the tax to the bottom line during the negotiations. This is similar to Mississippi, where there was a gross receipts tax on the bottom line contract amount and no sales tax was charged on construction materials for contracts performed in Mississippi. When JL Chief referred to a "use tax" in the original post JL may have applied this term to all taxes on materials for the Oklahoma contract, whether purchased in Oklahoma or outside OK. At any rate, for a construction contract in Oklahoma, one would include both "use taxes" (if any) and "sales taxes" in the direct cost of materials during negotiations. The taxes are then included in the subtotal before adding G&A/profit/bond determine the total price of the mod/contract. If a questioner doesnt use the correct term for a "tax" in defining the problem, it can cause confusion, as here. JL Chief, I'm no expert on the New Mexico gross receipts tax, although I did some quick Internet research on how it works. It does not appear to apply to construction services performed outside of New Mexico. If part of your question is whether or not the contractor is subject to the New Mexico gross receipts tax in addition to or in lieu of Oklahoma sales/use tax, then your consultant or you should consult with those familiar with the law.

JI, that clause is not pertinent to the question at hand. The question concerned whether the "use tax" is considered a direct cost or if it is paid separately, below the (overhead and profit) line when negotiating change orders. It wasn't a question of allowability as a cost. The use tax is also not an after imposed tax. It has been in effect prior to negotiating change orders. Edit: I don't quite understand JL's stAtement that the contractor has not been charging use tax to the contract and how that affects the situation. JL, are you saying that the contractor has avoided paying the tax to date, so did not include it in the original contract price for those materials purchased out of state? Further edit: See my post below. JL may have been trying to say that because the contract is in Oklahoma, the contractor, who is from New Mexico, has not been charging a New Mexico gross receipts tax. See discussion below.

Ok, I checked with the Tulsa a District of the Corps of Engineers. Contractors working in Oklahoma are subject to pay a use tax on any materials purchased outside of the state. The rate is the same as the sales tax would be for in-state purchases. Thus, the Corps would treat a use tax the same as if it were paid as sales tax. And it would be part of the material cost as a direct cost. Sorry for the late response.

Regor, to clarify - the question doesn't pertain to how to reimburse the contractor for the bond in a progress payment. That is pretty straight forward . I believe that the question concerned how to negotiate the contract or modification price when including the cost of the bonds. The debate here concerned whether or not the contractor can charge overhead and profit on the cost of the bond in calculating the total price. In my experience since 1971 with contract and mod negotiating I only remember encountering one construction contractor that charged anything on the cost of the bond. In that case, they charged bond on the bond to account for what the bonding company would actually charge at the end of the contract. My last experience was with a $25 million equitable adjustment in 2012 and they did not charge any G&A or profit on the bond cost. Others here said they have seen such charges. The bonding company calculates the final bond cost as a percentage of the final contract price, in my experience.

Salty, this is a situation where it is possible for problems between the parties if the government agrees to pay the claim. As I mentioned in the other thread there is no clear trail of responsibility from the prime contract through the first tier sub to the second tier sub. What is the responsibility and liability of the first tier sub to the prime and to the second tier sub? Who gets the money from whom? Also - just because something isn't in a lower tier subcontract doesn't mean that it isn't required by the prime contract or subcontract. Also, who directed the work? There must be a clear trail.

I noticed, in reading this thread on the Internet, that bimaho, the original poster, seems to have checked out long ago without clearly describing what the equitable adjustment is for and for how much. It would help to fully understand the scenario. Don't fret too much over "Infoseeker's" venemous barbs.

Carl, I will agree with you that one needs to read the contract, first. However, it is apparent that the contract doesn't offer much help or 'not' probably wouldn't be asking for some advice. However: 1) A task order selection is NOT a source selection; 2) The Basic policy for ordering under a MATOC would be contained in FAR 16.505 and supplements thereto as a starting point, if not already stated in the contract; 3) 'not' must determine what the objectives of the task order selection are (consistent with anything in the contract).

Motorcity, I have experience from the Integrated Project Delivery Team and Program Management Office approach on an extremely large Cat 1 Defense Program for the elimination of the nation's Chemical Weapons Stockpile. We had our own dedicated, contracting officers and specialists, attorneys, project/program managers, engineering and construction managers. They were all co-located within our Program Office, although that office is at a Division level location. Is that what you are inquiring about or are you referring to remotely located PCO's and/or ACO's?

'Not', please note that a task order competition under an existing MATOC is conducted pursuant to FAR 16.505. It is not a "source selection" under Part 15. Please be careful not to use the latter term anywhere in your request for task order proposals. Also, those competing for the task order are already contract holders and would be potential "proposers", not "offerors". In developing a model RFP that has been used agency-wide for design-build task order competition, I used the term "proposers" in lieu of offerors. I agree with jlew's post, too. You stated that The customer wants to ensure that the best of the best contractor is receiving the award. You need then to decide what evaluation factors and evaluation criteria to apply for the competition and you need to determine the relative importance of price to qualifications and any service performance considerations. Similar to a source selection, you should advise the proposers what you need to see, how it will will evaluated and the relative importance of each "factor", "subfactor within a factor, etc. You may be able to simplify "past performance" evaluations for task orders, if there have been several task orders awarded to the various firms. You can use the original source selection evaluations and supplement them by using information to assess the recent track records of the various firms. You can also reserve the right to search for recent, government wide past performance ratings. By past performance, I am referring to recent, relevant performance - the quality of performance, not amount of recent, relevant experience, which could be a separate consideration. But you should not have to have the firms submit much, if any past performance information - especially for task orders under the instant MATOC.

jlew, I guess that's how one gets promoted, eh? jlew, thanks and I also wish you a merry Christmas.

I don't have access to official Army Contracting Agency policy on contract files but it would seem that any competent KO or Specialist would document the contract file for every determination or official action. I administered contracts for over 30 years. I was called upon numerous to review, advise on, or evaluate and resolve changes, REA's, claims and other issues on contracts both within and outside my District or Division. I can tell you that the absence of a thoroughly organized and documented contract file is a recipe for disaster if there are claims, REA's, performance problems, etc., It is even worse, if the CAB team or PCO changes - and we all know that this is the norm, not the exception. There ought to be some agency policy on maintaining documentation for decisions and actions taken, if it isn't clear in the FAR. The FAR is very skimpy on details concerning contract files.

Having run across this thread this morning, I would have to respond by asking what is the purpose of the question? Is it to determine the number of productive hours in a labor year (output) or is it to determine the total cost for a labor year? (Sorry - I think that the term "person year" is clumsy - like saying a "personnel access hole").

While waiting for your response Chief, I will offer that if a contract states that "the contractor may charge up to 10% for Overhead and Profit", note the distinctive difference between that phrase and the phrase "the contractor may charge up to 10% for Overhead and for Profit". I'm sure that there are decisions in cases of contract interpretation that cover similar situations; your lawyer should be able to assist you in that regard. Unfortunately, I'm not a student of grammar - you can probably tell. I tried looking up on-line style manuals for a distinction between the two phrases but was unsuccessful. My "gut feel" is that the former is all inclusive: "(up to 10%) for overhead and profit" would be all-inclusive "for both" or "in total". The latter phrase should mean "for each" - that is, "(up to 10%) for profit and (up to 10%) for overhead".

???????? The Decision stated that AQUA Terra's bid price was 25.77% higher than the IGE. The Decision stated that this was not contested. And, when applying the price preference, you don't lower the SB's bid price. Don't you apply the prescribed percentage to increase the non-SB's price? The protestor's bid would only have been less than 25% over the IGE if profit were subsequently added to the original IGE. Is that the basis of their argument that the bid was less than 25% over the IGE? I explained above that the 25% factor for Civil Works already includes a consideration for not including profit in the IGE. That is why the COFC would not require profit to be added to the IGE. (EDIT: For example, see footnote 4 at page 12 of the Decision.) The similar measuring stick for awarding Military Construction contracts above the IGE is a 15% difference between a bid and the IGE. Government estimates for MC do include profit. Thus, the 10% difference between the yardsticks of 15% (MC) and 25% (CW) considers that profit would be included in a bid and in an IGE for MC but not in the IGE for Civil Works. Again, the historic basis for that was that CW estimates have been based upon in-house cost and compared with industry prices to do the work. Even though the USACE has few remaining in-house resources these days, the law has remained the same.