mrsbadexample

Navy - I assume you are objecting to HHS's interpretation in the policy memo Q&A referenced above and not to my interpretation of their response to Question 11. I personally find the clause somewhat ambiguous; I was merely interpreting HHS's Q&A. Michael - Yes, applying the limitation on an annual basis requires more tracking of hours/costs charged to the contract by highly paid employees. I have also seen this clause interpreted differently by some contractors and COs. Many are not aware of this HHS policy memo.

The Q&A on the site you referenced is somewhat convoluted, but I think the response to Question 11 is pretty clear. It is an annual limit, so in your scenario charging direct labor costs of $144k to the HHS contract should be allowable (as long as it meets all the other criteria for an allowable cost). This clause should not be included in a FFP prime contract. Per HHSAR 331.101-70, this clause is required "when a cost-reimbursement, fixed-price level-of-effort, time-and-materials, or labor-hour contract is contemplated." In a fixed-price level-of-effort, time-and-materials, or labor-hour contract the employee would be required to record the number of hours spent working on the contract, so you could calculate the percentage of his salary that is allocable to the contract. However, since the clause does not restrict the salary that a company pays employees out of its own funds, I agree that it would be difficult to show whether the contract funds were actually used to pay for that portion of the employee's salary. If you have provided details on how the price for each hour of service was derived (direct labor plus fringe plus overhead, etc.), then I suppose one could use the direct labor amount per hour of service from that calculation and multiply by the number of hours incurred during the year to derive the total annual salary paid out of contract funds.

While you may not be able to hear our collective applause every day, I would wager that most of us feel this site is a far more valuable legacy than that of a saxophone player.

Thanks, Vern. I also found the new 2012 version here: http://www.loc.gov/r...Department.html

To answer Vern's original question (several years late): Since at least 1994 when Clinton signed an extremely similar EO, including the exemption of disputes from Contract Disputes Act coverage and a contract clause. It was more limited in scope, and it was later revoked by Bush. http://www.archives....s/pdf/12933.pdf

I have, but I did not find it particularly illuminating:

Does anyone have any experience with applying the following HHSAR clause to a firm fixed price commercial item subcontract? We are being told by an HHS agency CO that this salary rate limitation applies to subcontracts for fixed price commercial items as well as non-commercial item subcontracts. They are requesting documentation to prove that subcontractors who will be providing firm fixed price commercial items (services) are not using contract funds to pay the salary of anyone involved in the contract in excess of this rate limitation. As the commercial item services are based on market pricing, and as the individuals performing work will not be invoicing for their direct labor, I am having trouble understanding how this limitation could/should be applied and documented. Note that the clause does not prohibit a contractor from paying its employees a salary in excess of this rate; it only limits the portion of their salary that may be paid with Federal funds. On a fixed price subcontract, how can one determine what portion of an employee's salary is being paid with Federal funds? The CO is asking for the quoted prices for the subcontracted services to be broken out by labor, fringe, materials, overhead, etc. As commercial for-profit entities providing market priced services, subcontractors may not have a method for doing this, and it may be in conflict with their company policies. Per 331.101-70, the clause is only required to be included in prime contracts "when a cost-reimbursement, fixed-price level-of-effort, time-and-materials, or labor-hour contract is contemplated". The clause itself states that the salary rate limitation also applies to individuals under subcontracts, but it does not limit that flowdown to the same contract types. Can an argument be made that it should only apply to cost-reimbursement, fixed-price level-of-effort, time-and-materials, or labor-hour subcontracts as well, even though this isn't stated in the clause?

By the way, why can't one search for a three letter word on this forum? Off topic, I know, but I've been trying to search for FTE, FFP-LOE, etc. for the last two days. There should be a no-three-or-less-letter-acronym rule in the forum policies if they aren't searchable. (Nobody on here uses many acronyms, anyway, right? )

Here's another question: If the LOE is stipulated in terms of FTEs, is there a standard or generally accepted definition of an FTE? The number of hours each employee will actually perform direct work on the contract, even if they are full-time and only working on that contract, will vary based on how much sick/vacation time they take. If one of the employees is out on medical leave for a couple of weeks, and assuming the Government does not want the Contractor to replace him with another employee for that period, would that mean that the LOE had not been satisfied? Contractor100's example above used 2080 hours per year per employee, but I have to assume that those employees had some holiday/sick/vacation time. I have a feeling that I'm going to need a definition of an FTE in my contract as well...

Can you please clarify this sentence? Are you talking about how changes to the LOE would be handled?

I would think that they would have to issue a bilateral mod to the contract to change the LOE, or else terminate the contract for convenience. I'm not sure why your CO would be reluctant to do that. By the way, I edited my earlier post. I meant to say contract mod, not change order (per 52.243-1). We've asked the question about non-labor costs. I'll be curious to see the response.

Well, you can't invoice them for the full 20800 hours unless you deliver the full 20800 hours. My question is, without a change order, contract modification, can you just keep providing the hours even if they don't want them? I suppose if you are working at a government facility, or if you have no work that you could be doing, that might be difficult... That's a problem with using this contract type as a substitute for T&M rather than for it's real purpose as Vern has stated. Absolutely.

Well, so far. It was 16 hours yesterday...

Understood. Your and Don's way does make more sense. I was suggesting a different grouping if that was the intention, that's all. There's nothing to say that the Part (or the whole FAR) couldn't be revised to be more logical and eliminate ambiguity and conflicting passages. I wish that you and Don could rewrite it...

It sounds like the problem is that some agencies/COs seem to be executing FFP-LOE contracts as a substitute for the now-out-of-favor T&M contracts, and they seem to be trying to structure them so that they are more or less the same (billing by the hour). As you suggest, this is not a "true" level of effort contract. I'm not sure what would be the advantage to the government of this contract type vs. a T&M contract, other than that it doesn't seem to violate the agencies' ban on T&M contracts. Thanks for the link to the article, Vern. I look forward to reading it when I'm not working 13 hour days. Does anyone have any insight into how non-labor costs would properly be invoiced in a FP-LOE contract for commercial items, assuming that they cannot be accurately estimated at the time of contract award and built into the firm fixed price?