gboyle

Here's the scenario: Contracting Officer issues a unilateral modification that (1) notifies contractor of partial termination for convenience of a commercial FFP contract with 52.212-4, (2) reduces value of FFP CLINs (no opportunity to reduce quantity), (3) reduces the funding for the CLINs to match the revised values, and (4) invites the contractor to follow the procedures in 49.104 (including submission of a settlement proposal 🤯). Aside from the obvious disregard for 49.109-7 in prematurely adjusting the contract value unilaterally, I wonder if this Contracting Officer has recklessly made an error of judgment in reducing the contract funding. While documenting a T4C notification in a unilateral modification seems fine, I can find no justification for unilaterally reducing the contract value and funding, especially when no attempt was made at following the procedure in 49.109-7. Thus, the although the contract funding was reduced, it does not seem that the Contracting Officer has actually (validly) reduced the Government's obligation. Is that right? And is there a resulting ADA violation here? I am trying to channel something I vaguely remember Vern saying at the FAR Bootcamp about a Contracting Officer being personally responsible for the difference when a deobligation was invalid or improper. TL;DR: The KO unilaterally notified the contractor of a partial T4C and simultaneously adjusted the contract value and funding without contractor input. Is the KO personally on the hook for the amount deobligated?

Sorry if my summary suggested that we have an interest in addressing or pursuing reimbursement. We are not pursuing reimbursement, do not intend to, and I mentioned that only as context. I know this is goofy. These are not GC people I am dealing with, and I am trying to nip this thing in the bud before they take this much further. It is a third-party to the contract alleging that money was received, when it was not. I should not have to prove a negative, but that is the position I am in. My hope was that I could respond that it is an impossibility to receive a payment (or even funding) on one contract for an issue that is entirely unrelated to that contract and instead relates only to another predecessor contract (this is why I mentioned that the two were sequential--contract 2 is the follow-on contract that began the day after contract 1's POP ended). It's like this: BTW, I haven't visited or posted here in a long time, and I just want to say how happy and thankful I am that you all are still here and actively posting!

I am trying to rebut an assertion that is so silly that I am struggling to respond without writing a treatise on how contracts work. I feel like I would have to start with the basics of letters, words, grammar. The assertion is that a contractor incurred some unanticipated costs on Contract 1 and that the USG reimbursed the contractor for that amount on Contract 2. The costs at issue only relate to Contract 1, so there is no overlap on the contract. Contracts 1 and 2 are sequential. Also, the costs were actually incurred, but no reimbursement from the USG occurred on either contract. I need to prove the negative, and my objective is to explain that this is procedurally impossible citing the FAR or other sources. I know that a contract scope includes a defined POP and that the funding is tied to that POP, but I need an objective source to make this point. I cannot find anything that succinctly explains this, and I am hoping you great minds can point me in the right direction.

Yes, my last post was unfocused. I know that is irritating, so I'm sorry. I am struggling to understand whether a modification with a net zero pricing change is a pricing adjustment. FAR 15.403-4(a)(1) and (a)(1)(iii) discuss contract modifications requiring certified cost or pricing data. The example used is a reduction of $500k and an increase of $300k resulting in a $200k modification. Even though the net change is $200k, the change is $800k for the purposes of evaluating whether the threshold was exceeded. If the reduction is $400k and and increase is $400k, that would also be an $800k change as far as the threshold is concerned, but, as there is no net change, the price is not modified. An administrative modification approving the subcontractor will be issued. It will not address price. Must the modification alter the price to trigger the requirement to submit certified cost or pricing data, or is the administrative modification sufficient to trigger that requirement?

This is a CPFF Task Order. I agree that 15.4 is applicable and that the CO is permitted to request detailed rate information as part of the determination of fairness and reasonableness. Our disagreement is over the requirements of 15.4. The CO says that "all cost elements are required for review for fair and reasonableness to the Government," and "a review for fair and reasonableness to complete this effort cannot be performed" without full disclosure of the subcontractor's costs (emphasis mine). Yes, cost data MAY be demanded by a CO doing a pricing review, FAR 15.402(a)(ii)( B ), but I cannot find the source that says it is REQUIRED for the review or that a review CANNOT otherwise be performed. I have asked the CO to cite the requirement and they have repeated the above assertion. Assuming that only data other than certified cost or pricing data is required, I believe I have my answer--the CO is not in the wrong by asking for the information but also not in the right for believing it is a requirement. However, I'm still not sure that I understand whether this is a scenario that is covered by 52.215-21. If, for example, our original estimate was for $1M and we will rejigger our spend plan to accommodate the new sub to stay within our $1M ceiling. Is that a pricing adjustment? According to way the FAR defines the calculation of a price adjustment to include the new work and work it replaced, the answer would seem to be yes. But if we allow a sub to work slightly more hours than we proposed or shift hours originally intended for a sub back to the prime, we would not be treating this as a price adjustment, but it seems no different in substance. Any thoughts on this?

We performed a price analysis of the rates by comparing them to rates from other subs already performing on the contract and to some rates from other contracts. I think the CO files our price analyses in the round filing cabinet. I posted about this issue before. In that case the proposed sub was a self-employed consultant charging a rate 40% less than other similarly qualified people in his labor category. The CO still demanded more. She insisted that she had to be told what his fee and G&A. What is the fee % that an IC makes on a fixed rate after expenses? 0%? 100%? In my opinion, that line of inquiry is not useful for the purpose of determining if a prime should be able to add a sub. I understand that the CO can request uncertified cost or pricing data, but that is discretionary. I suspect that our CO is mistaking something that is optional for something that is an absolute requirement. There is not, as I understand, a requirement to obtain cost data if a determination of fairness/reasonableness can be made using a price analysis. Is that an accurate statement?

I support a prime contract that requires consent for all new subs, and the CO is hell-bent on performing a cost analysis of each addition before granting approval. This presents a problem because the CO demands to know indirect rates and "fee" even when the sub is a self-employed independent consultant charging a fixed labor rate. I have appealed to reason and explained that indirects and fee do not exist in these circumstances because the subs use market-based rates. These explanations have been ignored (or were not understood). What I am wondering now is if the desire to perform a cost analysis is wholly misplaced, and I am looking for feedback on whether I am drawing the right conclusions on these facts: 1. The base contract is a MATOC, and we are seeking to add a sub to a Task. 2. The base contract solicitation was competitive and explicitly stated that "Submission of certified cost or pricing data is not required." The resulting contract does not contain clause 52.215-20. 3. The contract does, however, contain the cost or pricing data clause for modifications, 52.215-21. 4. We do not expect that the addition of the subcontractor will increase the total estimated amount of the Task. The rule requiring certified cost or pricing data says regarding the award of subcontracts that certified cost or pricing data is required of the subcontractor if it was required of the prime. 15.403-4(a)(1)(ii). In this case, certified cost or pricing data was not required of the prime, therefore, it is not required of the subcontractor, unless there is some reason to require it in 52.215-21. Requests for consent to subcontract, especially when the approval of the subcontract would not require the modification of other terms, do not seem to be modifications for the purposes of 52.215-21, Table 15-2 of 15.408, and 15.408(m). I can only figure that the CO's belief that a cost analysis is necessary comes from (1) the language in 52.244-2 which discusses the potential requirement for certified cost or pricing data; and (2) Table 15-2, which directs one to "conduct cost analyses for all subcontracts when certified cost or pricing data are submitted by the subcontractor," see Section IIA. I have asked and a rationale was not provided, merely a restatement of the assertion that cost details are absolute requirements for consent. However, if a cost analysis is not required and the mere addition of a subcontractor is not a modification, then cost details are not required. They may be requested per 15.402, but they are not absolute requirements without which consent may not be granted. Have I gone wrong anywhere or left out any relevant facts?

I suggested to our sub that he estimate his total costs to determine his "overhead" and the rest would be his "technical labor." This would paint a reasonably accurate picture of his costs and yearly income. Do you see any pitfalls to this approach?

It is not uncommon for my firm to seek Government concurrence on the strong candidates we identify for positions on engineering services contracts. We are not contractually required to do this, but it serves the interests of providing the customer with the solution that best suits their needs. Even if this is done at the insistence of the Government, I doubt it would have offended the contractors I have worked for.

Several times I have emphasized the fact the sub uses a market based approach to determining his rate. The CO refuses to listen to me. When I made this point last, the response from the CO was that he "had to use some basis of chargeable costs associated with his services (Overhead/GA/FEE at least) that he provides. Without it a review for fair and reasonableness to complete this effort cannot be performed. As such, that information shall be disclosed for further review by the Government." At this point I feel like I'm talking to a wall. I think any further attempts will become adversarial.

We have provided a more than satisfactory justification of the proposed price. Our price analysis demonstrated that the rate this individual is charging is nearly half of what is being charged by similar consultants. At issue is an inquiry into the cost elements that comprise the rate of a self-employed individual. These costs are honestly not known, so I see no utility in estimating (guessing) what they are when a price analysis seems to support the fairness reasonableness of the rate.

Thanks H2H. Unfortunately, this is the first time this individual has stepped out on his own to work as an independent consultant, so he cannot produce any invoices or other documentation showing that his rate was paid on other contracts. The rate he is asking is more than $120/hr lower than other individuals that are approved in his labor category. These consultants just pick big round numbers as their hourly rates, and they are quite high, but when the customer is looking for one of the world's leading experts in photovoltaic-hydro-dynamic-mathy-something-bee-boop-bopology there are only a handful of people with the skills and they command hefty compensation. So when a guy comes along that meets the qualifications, is desired by the customer for his specific expertise, and is significantly cheaper than other similar consultants on the program, I am at a loss as to why we need to go through this drill when it was not required for those other more highly compensated consultants.

Prime contractor is attempting to get consent (required by the contract) to add a new subcontractor with a T&M subk to perform engineering support services. Prime contract is CPFF. The KO has requested detailed cost information demonstrating how the subcontractor's hourly rate was built (direct labor, overhead, G&A, profit), which seems to me like an unnecessary exercise that is not a useful way to determine fairness/reasonableness for the following reasons: - subk will be less than $1M total and less than 7% of the total cost of the contract - subcontractor is a self-employed independent consultant who sets his rate according to the market for similarly qualified independent consultants - as a self-employed individual there is no distinction between direct labor and profit, and the rate, as a market rate, was not burdened with indirect rates and profit amounts - subcontractor's rate is demonstrably lower (by almost 50%) than other similar independent consultants that are approved on this contract and for other contracts with similar labor quals I believe a price analysis should be sufficient, whereas the KO seems to be requesting details to perform a cost analysis. My understanding of Part 15 is that in this case cost or pricing data is not required, thus, a cost analysis is not required. I would like to convince the KO that this is not a useful way to spend our time. I will be making many more similar requests and would like to avoid repeating this process. I will appreciate any corrections of my tenuous grasp of Part 15 and any advice on how to address this issue with the KO in a respectful and non-obnoxious way.

Bob, I have the same background, and ended up taking a job with a contractor. I did a few internships with Government Contracts attorneys during school so I had an advantage when applying for CA jobs. Don't bother with certificate programs, unless you want to go for an LLM at GW's Government Contracts program. I recommend that you educate yourself on the subject matter if you have not already been exposed to it. The books by Ralph Nash and John Cibinic--Formation/Administration of Government Contracts--are good primers. Also, I learned a lot by helping people respond to RFPs, so you might look at solicitations on fedbizopps.gov just to see how they are constructed. Try issue spotting the solicitation, outlining the compliance requirements in sections K and L, and looking up any section I FAR clause that jumps out at you. Definitely apply to Government Contracts Specialist intern programs. The intern programs last 2 to 3 years and provide excellent training and education, both in breadth and depth. Contracts Administration for a contractor will pay more, especially if you can demonstrate a fair amount of knowledge during your interview, but there is almost no training, you deal with a more narrow slice of the contracting, and it's not particularly challenging. Go to any recruiting events you can find. NCMA and its local chapters frequently have job fairs attended by both Government and contractor recruiters. I also attended tech-oriented job fairs just to talk to recruiters. Good luck!

Vern, can you suggest some good books?

I think responsible contractors have already begun to factor the economic climate into their pricing by lowering escalation significantly. If a contractor is sensitive to the Government pay freeze, they will not escalate at 3 percent. 2% currently seems reasonable to me. Agreeing to revert to older/lower LH or T&M rates and holding steady for an additional year out will mean that the contractor is agreeing to out years of declining profit. It is unlikely that a contractor would willingly agree given the funding squeeze and potential for declining revenue. I have heard from DOD Contracting Officers that say they are instituting a contractor salary freeze for the next option period on cost reimbursable type contracts. Specifically, they have directed contractor to invoice at the same rates next period as they have in the current period. To me that seems misguided, unworkable, and contrary to the FAR. Contractors are bound by CAS to invoice for actual costs, and if a company gave an employee a raise in January, they can't agree to invoice for that employees services at a lower rate now. Are these KOs misunderstanding this directive? Are they merely attempting to control funding in response to the potential sequestration?

Vern, that makes sense. It seems that shifting sub costs to indirects would inappropriately shift direct costs to other contracts. I considered that this term could be a way of requiring prior consent for subs, but it's a very awkward way of doing so. Why not just use fill-in-the-blank part of 244-2? The reason this came up is that our prime contractor was directed by the Government to use the same pay rates for the upcoming period as in the current period. When this was conveyed to me I objected on the grounds that doing so would violate our cost accounting system, as this is a cost type contract where our personnel already received raises a few months ago. I thought I should check the contract for the clause cost allowability clause and I found that special term in Section B of the prime contract which was included as an attachment to our subk. They do not seem to understand my position, so I am beginning to get concerned about them. The Government has been paying for our costs so far, so I guess this special term shouldn't be a concern. Thank you all for the input.

I'm looking at a federal contract that contains a special term taking exceptions to 52.216-7. "Notwithstanding FAR 52.216-7, incorporated in this contract, unless authorized in writing . . . the following shall be unallowable as direct costs:" "Subcontracts" is among the items listed. Is it permissible to take exceptions to this clause? If so, does that mean subcontractor costs should be rolled into indirect costs, and are there any other ramifications with respect to subcontracting?

A presolicitation document issued by a federal agency contains the below question and answer, which appears to me as Government-directed exclusivity. This creates the concern among companies interested in participating as subcontractors that they must choose the single best team to join, as opposed to participating on multiple teams. Is Government-directed exclusivity allowable? Does anyone have an alternative read on this? If my interpretation is accurate, such a requirement would be anticompetitive and a serious interference in commercial relationships. I've never heard of anything like this.