RIR

Thank you Carl. I believe that, since the repair of the turbines was authorized work, the damage and resulting repair to the bearings is "re-performance", as Vern has stated. That effort is an allowable cost under the contract and the contractor can repair the damage without any specific approval from the government. The contractor is not "held liable" for that cost, it is a CPIF contract - they will be paid for it. To not count the cost of re-performance when calculating the incentive fee would be to ignore the repairs as part of the work - an overrun insurance policy if you will. I also believe that the intent of including the ship and its equipment under para (h) is to cover the contractor for damage to property that they weren't already authorized to repair, i.e. not part of the effort that is being measured in the shareline. I very much appreciate all of your time and effort.

There is a specific list of special tooling and equipment that is provided for use by the contractor and the turbines are not included. The vessel and its equipment are not described anywhere "Government- Furnished Property", but they are included in the definition of "government property" for the purposes of (h) (1) of the government property clause.

No, the turbines are not described as Government Furnished Property.

Don, The clause doesn't apply to this contract. Thank you to everyone for your interest and research!

This is the only language I can find referring to control of the vessel - C-2-7 ADDITIONAL INSURANCE PROVISIONS Notwithstanding any other provision of this contract, for the purpose of the contract clause entitled "Insurance-Liability to Third Persons (FAR 52.228-7)", the vessel, its outfit, supplies, equipment, and the property or equipment of Government personnel or Government contractors other than the Prime Contractor, shall not be considered to be in the care, custody or control of the Contractor nor used by the Contractor.

The turbine generators are on board a ship that is being overhauled at the contractor's facility.

Thank you very much for your time and advice!

Thank you very much. It is a tangled web. Our legal and technical people are all involved. I'm not making the decision; I'm just trying to understand it.

One last question - Because the original repair of the generator didn't include work on the bearing the contractor has argued that this isn't "re-work" but new work resulting from their damage of government property. Would you agree, if the repair of the bearing wasn't included in the original work package for the turbine generators, that the cost of repairing the bearing should be excluded for the purpose of fee calculation?

Joel, I am at home and can't access a copy of the contract at the moment. I'm trying to get someone to email one to me but it may be next week before I can look at all of the language. Thank you for your response.

Vern, Thank you for your response. Yes, the situation is as you described it. I believe the contractor is correct because paragraph (h) of the property clause says that we will not hold the contractor liable for damage to government property unless an exception applies. 1. The Turbine Generator fits in the definition of government property stated in the clauses. 2. The contractor damaged the Turbine Generator by failing to remove debris resulting from their repair. 2. No exception applies. V/R, Ruth

Yes, I apologize. 52.245-1 Government Property (June 2007) (Deviation) is the contract clause I am referring to.

FAR 45.104 ?Responsibility and Liability for Government Property states that generally contractors are not held liable for loss, theft, damage or destruction of Government property under Cost-reimbursement contracts. The contract in question (CPIF for ship repair/overhaul) includes: FAR 45.107 Government Property (June 2009) (Deviation). Paragraph (h) of this clause states that unless otherwise provided for in the contract, the Contractor shall not be liable for loss, damage, destruction or theft to the Government property furnished or acquired under this contract, with exceptions (gross negligence, willful misconduct, etc). The clause defines Government Property as all property owned or leased by the Government. Government property includes both Government-furnished and Contractor-acquired. Additional Provisions Relating To Government Property (NAVSEA) (April 2008) which states that for the purpose of FAR 45.107 (h) the following shall be included in the definition of Government Property: (1) the vessel; (2) the equipment on the vessel; (3) movable stores; (4) cargo; and (5) other material on the vessel FAR 52.216-10 Incentive Fee (March 1997) which states, for the purpose of fee adjustment, ?total allowable cost? shall not include allowable costs arising out of any claim, loss, or damage resulting from a risk for which the Contractor has been relieved of liability by the Government Property clause. The work package for this contract includes the repair of Turbine Generators. The contractor discovered, after reassembly, that ?construction debris? (metal shavings) were left in one of the generators due to trade error. The debris was removed and the generator was reassembled with no resulting damage. The contractor proceeded in this effort without any additional authorization from the government. As a result, the contractor re-opened another Turbine Generator to check cleanliness and discovered debris and extensive damage to a bearing from the debris (also present due to trade error). The contractor requested authorization to make repairs and has asserted that they should not be held liable for the damage to the bearing under 45.107 (h), with the associated cost handled in accordance with the Incentive Fee Clause, i.e. excluded from the fee calculation. The behavior that caused the damage is not considered by the government to fall under one of the exceptions to paragraph (h) of the government property clause (gross negligence, willful misconduct, etc.). I believe (I hope I?m wrong), based on the contract language, the contractor is correct in their assertion that the cost of the bearing repair should be excluded from the fee calculation, but it does not make sense to me. The damage occurred to a piece of government property they were tasked to repair, in the performance of that effort. Why are they excused from assuming their share of the risk for additional repair necessitated by their own poor workmanship?

Don, Thanks very much for the information.

Don, Yes, it is ship repair. The changes are issued under an Emergent & Supplemental Growth Pool.

Vern, SPS is what creates the change order (SF 30). The mod is electronically signed with the KO's signature. We typically have verbal authorizations (effective date will be prior to date signed) of our change orders, so they are authorized to do the work before the mod is issued in SPS.

Thank you everyone. I agree the idea is silly, but so is SPS. We sometimes issue 100 mods a week and it can take up to an hour to get just one processed. These change orders are issued as part of a "growth pool" which is already funded in the contract. We'll still do a definitization mod in SPS, but we definitize many changes on one mod. We use another tool to track our UCA's so associating the change order to the definitization mod in SPS won't be an issue. Again, I appreciate everyone's comments.

In an effort to minimize use of the Standard Procurement System it has been suggested that we issue Change Orders as Letters of Direction, instead of issuing them on the Standard Form 30. These letters would be issued against contracts awarded using FAR 15 Negotiated Procurement. Proponents of this idea point to 43.301 which states that actions processed under part 15 are excluded from the mandatory use of the SF 30. The letters will refer to the changes clause, and basically read like out current change order modifications do. Getting the contractor on board with this idea aside, does anyone see any problems with issuing change orders in this way? Thanks very much.

The base contract, for planning only, was signed prior to the establishment of the executive compensation cap. The bilateral modification was signed after 31.2 established the cap. The government is disallowing costs associated with executive compensation that were incurred during accomplishment of the effort added by the modification. Thanks to all for your responses. Ruth

Thank you for clarifying my question and for your response. V/R, Ruth

A CPIF contract was awarded (sole source) for the advance planning of ship repair. Two years later the parties agreed to incorporate the accomplishment of the repairs into the same contract. The bilateral modification that adds the accomplishment CLIN states that the parties have agreed "to price the accomplishment effort in accordance with all clauses, terms and conditions comprising this supplemental agreement". Incorporated by reference in this same modification is 52.216-7 Allowable Cost and Payment (Feb 1998). This clause states that the contracing officer shall determine allowable amounts in accodance with FAR 31.2 in effect on the date of this contract and the terms of this contract. Problem: FAR 31.2 established executive compensation caps in Feb 98. The government has deemed some executive compensation costs, incurred during the accomplishment phase of the contract, as unallowable in accordance with the change to 31.2. The contractor argues that because the base contract (planning) was signed prior to the change to 31.2 the salary caps don't apply to the entire contract. Do any of you agree with the contractor?