joel hoffman

It is a "fixed price, non-incentive,firm-target with a fictional cost ceiling". Whoever developed the formulas didn't work it through or didn't understand it and whatever contractor rep who agreed to it appears to not understand what they were agreeing to. The fact that the government is asking questions in this forum indicates confusion. I wonder what the actual intent of the parties was. Making a contractor assume all risk for cost overruns with no corresponding incentive to reduce costs seems onerous to me. But both parties agreed to it. Maybe not knowing what they were seemingly agreeing to.

If the clause requires the government to review the voucher within seven days, you need to cite that in your notices to the KO. Your attorney can explain the consequences of failure to timely review invoices.

This topic concerns FFP changes. That's what I was responding to earlier.

FAR Part 43 provides for the KO to issue such directives as modifications or to follow up with a confirming mod ASAP.

Where the heck is contract price analyst?

Ji, I agree with Vern. You can't jjust deal with the situation "later".

"And just to review the math operation, in post #35 Joel laid out the calculation for an overrun scenario with an incurred cost of $78M as: TP = 78 + (7 - (78 - 60)). = 85 - 18 = 67. In fact, the calculation is TP=78+(7-(78-60))=78+(7-18)=78+(-11)=78-11=67. " Craig: I won't argue that. In hating this iPad I took a shortcut in my typing. Vern, Craig was responding to my test last night of Don's statement that the result is $ 67 million, regardless of the amount of overrun. Your calculation, based upon a TC of $68, is correct, of course. As to whether a contractor should not accept any loss below a cost ceiling, did you mean net loss or any loss of profit? On the outside, guaranteed maximum price contracts are quite common in the construction and desigN-build industry. They normally include a shared savings formula and may or may not include a separate, non-variable fixed fee.

I agree.

But if there is an underrun, the govt keeps it all and I believe that the contractor is paid the total cost plus target profit or fee. 52.216-16 -- Incentive Price Revision -- Firm Target. " ...(d) (2) (iii) If the final negotiated cost is less than the total target cost, the adjustment is the total target profit plus [___0__] percent of the amount by which the total final negotiated cost is less than the total target cost." So, with a total cost of $ 59 million plus $ 7 million target profit, the TP = $66 million.

Let's test Don's original assertion that this specific arrangement will yield a final price of $67 million, regardless of actual total cost. If the final cost is $ 78 million, then we are looking at: TP = 78 + (7 - (78 - 60)). = 85 - 18 = 67 But if there is an under run, the govt keeps it all and i think the contractor is paid the total cost plus target profit or fee. So, with a total cost of 59 million plus 7 million fee, the TP = $66 million. I have a low battery, so will verify that later.

Vern, the 70 million ceiling price is unachievable, with the share ratios given here. The most that the final contract price can be is $ 67 million with no overrun or under run. The government keeps all underruns and the contractor must absorb all overruns. This is a bum deal for the contractor. I'm guessing that the government specified at least the ceiling price, then the winning proposer probably proposed the target price and the share ratios. Either the firm desperately needed the work or is not too smart? As for what to tell the contractor, I'd probably say, "Please read the clause, which is used to establish the final contract price." Some incentive contract this turned out to be!

Judge, the final price is derived from 52.216-16(d)(2) -- "...(2) The total final price shall be established by applying to the total final negotiated cost an adjustment for profit or loss, as follows: (i) if the total final negotiated cost is equal to the total target cost, the adjustment is the total target profit." Thus, Total Price = Total Cost + Target Profit However, in this case, the final negotiated cost exceeded the target cost by $ 8 million dollars.. "(ii) If the total final negotiated cost is greater than the total target cost, the adjustment is the total target profit, less [100] percent of the amount by which the total final negotiated cost exceeds the total target cost." Thus, Total Price = Total Cost + (Target Profit - (100% x (Total Cost - Target Cost))). TP = 68 + ( 7 - (68 - 60)) = 75 - 8 = 67 ($ million)

i agree in this case. The ceiling must have been established before the fee and share ratios were established. The overrun share ratios make the ceiling cost irrelevant here.

Wouldn't the final price be the actual cost of 68 million with an absorption of 100 percent of the fee ($7 million) for the overrun plus absorption of the additional loss of ($7 million - $8 million)? This is because the contractor agrees to absorb 100% of costs in excess of the target price and the government agreed to absorb none of the excess costs. The excess is covered by the fee plus $1 million in cost overrun in excess of the fee. Thus the final price will be $68 million, minus $1 million, equals $ 67 million. Contractor is paid all costs less $1 million plus no fee. The contractor will absorb a $1 million loss and earn no fee.

You are welcome, TC. Im so used to using Master Format that i havent thought mucH about it. Those were good questions you brought up. Part of my job over the past 32 years with the Corps has been resolution of contract interpretation issues and claims I was very lucky to obtain a copy of the "Administration of Federal Contracts" book back in 1981 or so. Somebody stole ithat one in Saudi Arabia in 1983 so it must have been popular with contractors, too, . I had to replace it ASAP and locked it up! Good luck!

Thanks for the article, Vern. That may partly explain my observation of what happened in our case. Gosh, it is pervasive. While perusing the "Cosco Connection" magazine at my daughter's house in Gig Harbor, today, I read a review of a n article advising about The "The New Rules of Social Business" , stressing the importance of putting down the phone, turning off electronic devices, closing Twitter and Facebook during meetings - - and limiting any meeting to 20 minutes or less if you intend to hold your team members's attention. Sheesh.

This is another reason not to use the FAR clause "Order of Precedence" in USACE construction contracts. Those contracts are required to use the CSI Master Format. The various construction contract clauses distinguish between "specifications" and "drawings", as do the various claims decisions that deal with them.

TC, If you are arguing anything in a KO's Decision, I certainly hope that you would: 1) seek the advice of your USACE District counsel on this and other legal questions and, 2) Purchase, READ and use the George Washington University, Government Contracts Program Textbooks that Professors Ralph Nash and the late John Cibinic wrote with others. I especially recommend "Administration of Government Contracts" and "Formation of Government Contracts". Good Luck

I don't know why the MATRIX was included in EFARS 14, other than to illustrate to those who are used to the Uniform Contract Format what the corresponding layout is under the CSI Master Format. That format was from long ago in the early 1990's (I think that the last edition was "Master Format 1995") . Master Format was totally updated and revised by the Construction Specifications Institute in 2004 and adopted by the Tri-Services Specifications Committee several years ago for the Unified Facility Guide Specifications (UFGS). Vern, "Division 01" refers to the Specification sections for various general conditions in construction contracts. Division 00 contains the various pre-award provisions, the RFP or IFB, (RFP) eval criteria and basis of award, wage rates, contract clauses and special provisions, etc. I think that there are now somewhere around 41 to 43 Divisions, in place of the old Division 0 through 16 breakdown of the CSI Master Format 1995 contract format.

TC, according to Nash and Cibinic's "Administration of Government Contracts, 4th Edition", the common law order of precedence rule is used in Government contracts when a specific order of precedence clause is not applicable. The general rule of common law is that specific provisions will rule over general provisions and that written or typed provisions will prevail over general provisions, Restatement, Second, Contracts § 203 ( c) and ( d). See page 179 of the reference. On page 180 it states that the "general rule of common law does not apply where a specific provision conflicts with a standard government contract clause that is required by statute or regulation." Reading further on page 180, in discussing an ENGBCA decision in Hydracon Corp., ENGBCA 3462, 75-2 BCA ,¶ 11,489, The Board said "It is an established canon that standard clauses for Government contracts, which are required by law and by regulations having the effect of law, cannot be contradicted by other specially drafted provisions so that they are, in effect, written out of the contract or subordinated to such special provisions." You also said: TC, I disagree with your position that deviations in a proposal should take precedence over the original performance or prescriptive specifications. In USACE Design-Build contracts, the "new" O.O.P. clause I mentioned above will state, in the event of a conflict between the accepted proposal and the solicitation requirements: "... ( b ) In the event of conflict or inconsistency between any of the provisions of this contract, precedence shall be given in the following order: (1) Betterments: Any portions of the accepted proposal which both conform to and exceed the provisions of the solicitation. (2) The provisions of the solicitation. (See also Contract Clause: SPECIFICATIONS AND DRAWINGS FOR CONSTRUCTION.) (3) All other provisions of the accepted proposal. (4) Any design products including, but not limited to, plans, specifications, engineering studies and analyses, shop drawings, equipment installation drawings, etc. These are "deliverables" under the contract and are not part of the contract itself. Design products must conform with all provisions of the contract, in the order of precedence herein." There is a well established principle of Federal procurement, stated in many protest decisions, that a proposal, in order to be awardable, must comply with all and not deviate from any material requirements of the solicitation. There is discussion of this in Nash and Cibinic's "Formation of Government Contracts" (I only have the Third Edition). See Chapter 6, Basic Negotiation Procedures, under "Non-Conforming Offers" , starting on page 781 in my Third Edition. On page 781 Nash and Cibinic say If a proposal contains a deviation that the government would like to accept, "[t]he government may not award to that offeror but must amend the [solicitation] to permit other offerors to propose to the deviation." See Labat-Anderson, Inc., 71 Comp Gen. Dec. B-244559.3 93-1 CPD ¶ 193. I will reiterate that you should not use the FAR Order of Precedence Clause in the USACE, CSI Master Format, construction contract format. It is written for and specifically prescribed only for us with the Uniform Contract Format, not for Master Format. By the way that MATRIX in EFARS 14 is obsolete anyway. It refers to an old edition of the CSI Master Format. In addition, EFARS never said to include the clause or the clause with the Matrix.

you also posted this under another thread at http://www.wifcon.co...ry16699. There, I replied: "Because different rules apply to different types of set-asides, please explain what type of set-aside this is and what provision or clause is used to limit subcontracting. Thanks."

Because different rules apply to different types of set-asides, please explain what type of set-aside this is and what provision or clause is used to limit subcontracting. Thanks.

It is common. I never found it to be an issue. Participants are there to provide their input and expertise. If someone susupects a problem, they should discuss it privately with the prospective subordinate and find out if it might pose a problem. If so, they shouldn't be required to serve.

Brian, my post above wasn't concerned with TINA or "data other than cost or pricing data". The premise was that it can be determined that there is "adequate price competition" even when only one quote or proposal is received. Among other things, the government must consider the quote reasonable in that event. Here, the agency didnt think so. Another good point made here is that it seems that the requirement wasn't clear enough for a meeting of the minds on the level of effort required to meet them. Perhaps negotiations could have resolved scope and price issues - perhaps not. In this case, nobody else even quoted. I don't know if it was evident that the prices were not expected or intended to exceed $150k. Unfortunately, from my experience with gov't acquisition personnel in general, many are often reluctant to directly discuss price in negotiated acquisitions, let alone scope. This is not specifically directed at the 1102 community, it includes other disciplines associated with acquisitions as well. My latest experience was an urgent need last summer to hire construction scheduling expertise for the government on a high visibility project that was going South, so that the government could work with the contractor to get the schedule back on track. The project HAS to finish within a mandated limit. It took over 3 weeks to contract with one firm from the GSA schedule - after receiving the requested quote or proposal. Nobody would CALL the firm and negotiate an acceptable and affordable scope of services within the simplified acquisition price limit. Despite the firm's willingness and attempts to talk directly, it was handled by email at a snail's pace. I was finally able to get the folks responsible to CALL and work out the details. Meanwhile, the impact on the job was tens of thousands of dollars per day for lack of a working schedule. The scheduler contract was within the simplied acquisition limit.

Perhaps, as ji alludes to, the official meant that there was not adequate price competition, as described in 15.403-1©(1) and in 15.404 because they didn't consider the price to be reasonable.