ContractPriceAnalyst

100% successful performance of what? Sucessful performance of the contractual requirements or sucessful performance of the contractual requirements and the performance incentive? Shoudn't Section M of the RFP describe what would constitute a merit-worthy performance incentive?

From the Contract Pricing Reference Guide: "Responsibility for Updating Subcontract Cost or Pricing Data (FAR 15.404-3©(4)). The offeror is responsible for assuring that subcontractor cost or pricing data are accurate, complete, and current as of the date of price agreement or, if applicable, another date agreed upon between the parties, given on the contractor's Certificate of Current Cost or Pricing Data. Accordingly, the offeror is also responsible for updating a prospective subcontractor's cost or pricing data. Remember that subcontract proposals are an integral part of prime contract proposals. As a result, when a prospective subcontractor's cost or pricing data are not accurate, complete, and current, the prospective prime contractor's proposal cannot be accurate, complete, and current."

I would guess that the only reason that the spreadsheet was marked FOUO is because the spreadsheet most likely contained some of the contractor's proprietary data. As long as the spreadsheet does not identify any subcontractor proprietary data that the subcontractor does not agree to release to the prime nor does the spreadsheet identify any kind of privacy act data, I don't see an issue with sending the contractor a spreadsheet containing that contractor's own proprietary data back to them. I am not recommending sending the objective to the contractor or any type of IGE. I am only referring to spreadsheets used to develop the Government's most recent pricing position during a sole source negotiation in which the Government developed their position based on a cost analysis of Cost or Pricing Data provided by the contractor. Any spreadsheet that I have provided to the PCO to provide to the contractor clearly delineates the Government's position regarding labor hours, material costs, other direct costs, rates applied, and profit. This allows both parties the opportuntity to review areas of agreement and disagreements. I believe that sending the contractor a copy of my spreadsheet helps to foster a climate of mutual cooperation. Personally, I find the USD(AT&L)/DPAP Contract Pricing Reference Guide that is currently located on the DAU ACC Community of Practice website to be a great reference for negotiation techniques and strategies that help create a win/win environment. Good luck!

FAR 31.201-2 © When contractor accounting practices are inconsistent with this Subpart 31.2, costs resulting from such inconsistent practices in excess of the amount that would have resulted from using practices consistent with this subpart are unallowable. I would argue that the company policy would result in unallowable costs under FAR 31.205-46(. However, I would be happy to consider the contractor's response to that argument.

Thanks for directing me to the DSSR as the allowances will provide a good base for analyzing overseas costs but it does not appear to govern contractor overseas travel anymore than the FTR and JTR. The Department of State Standardized Regulations (DSSR) governs allowances and benefits available to U.S. Government civilians assigned to foreign areas. The per diem rates in the DSSR appear to be the same as those at http://www.defensetravel.dod.mil/site/perdiemCalc.cfm. Contractors should know that the additional allowances identified in the DSSR can help to determine reasonableness but that they do not govern cost allowability. By the way, I found that DCAA issued a MFRD on April 12, 2004 on compensation costs for contractor employees located in foreign countries (see DCAA Memo 04-PPD-023® which can be found by clicking on "Open Audit Guidance" from the DCAA home page.

Vern, I have found your posts and advice provided on this forum to be extremely valuable. In this case, I would like to add a little more to your comment. At times, the difference at the cost line is too significant to bury elsewhere (i.e. profit). Also, some agency guidelines require the negotiation results to be documented by cost element with at least a "considered negotiated amount" with a detailed explanation of the reasons for any differences from the objective. Also, a well documented negotiated memorandum can be very useful to DCAA in a post award audit. Therefore, I would advise contractors to at least make sure that the CO fully understands their position. Personally, I would rather deal with a contractor that can provide reasonable support/rationale for each of their positions so that I could then sell that to my upper management. For example, a reasonable argument for business class travel for a trip from California to the Middle East might be that travel by coach only during normal business hours should entitle the contractor to two rest periods which would add x amount of additional costs and potential schedule delays which is more than offset by the difference in cost for the business class airfare. Thanks again to everyone for their input!

Thank you for your input!!!

This is a FFP that is currently being negotiated in which DCAA questioned the difference in cost between a business class fare and a coach class fare. The comment from the DCAA Branch Manager was in reply to my comments back to them regarding the contractor's assertion that the cost for the business class fare was reasonable due to the duration of the flight. I was only looking to see if others agree with the DCAA interpretation as I want to ensure that we treat the contractor fairly. Thanks again for your input!

Excessively long travel is at issue here; travel time including stops is a minimum of 20 hours. The DCAA comment is in reply to my comment back to them in that the contractor is arguing that the flight time is excessively prolong travel. I should have asked the forum if you concur or disagree with the DCAA interpretation of what is meant by the phrase, "excessively prolong travel" in FAR 31.205-46(?

Please share your thoughts on the interpretation of the allowability of Business Class Travel for an excessively long flight (i.e. from California to the Middle East) FAR 31.205-46( "Airfare costs in excess of the lowest priced airfare available to the contractor during normal business hours are unallowable except when such accommodations require circuitous routing, require travel during unreasonable hours, excessively prolong travel, result in increased cost that would offset transportation savings, are not reasonably adequate for the physical or medical needs of the traveler, or are not reasonably available to meet mission requirements. However, in order for airfare costs in excess of the above standard airfare to be allowable, the applicable condition(s) set forth above must be documented and justified." A Branch Manager at DCAA informed me that the reason that they questioned the travel eventhough the flight period is over 20 hours is as follows: "What the FAR cite is saying is that airfare costs in excess of the lowest priced fares would be allowable IF the cheaper fare caused the flight to be excessively longer than the business class fare. However, the contractor provided no evidence that the business class fare got them there significantly faster than the coach fare. I.e., the coach fare got them to the site as fast as business class, thus the coach fare did not excessively prolong the flight, and thus is not allowable on that basis." Do you concur or disagree with the DCAA interpretation of FAR 31.205-46( and why?

Oops, I somehow replied without replying. I wanted to let Whynot know that his most recent post captures some of our struggle. The PCO recently received advice from his legal counterpart that we have to allow him the CEO salary in G&A eventhough he can't possibly devote his full-time effort toward that end because executive compensation is not based on hours worked. We also can't disallow him the hours that he works in support of a direct charge positon in support of a contract requirement. Therefore, we end up with two full-time salaries for one individual. I don't see how this is reasonable, but I just calculate the numbers. Thank you everyone for your input and advice!

I am confused by the comment from X DCAA; is there ever a time when more than 2080 hours per year for one individual is appropriate?

The business started 10 years ago (S-Corporation) and is a FMS directed source. The contract is a FFP-LOE undefinitized contract for a base year for 25 full-time support services positions. The number of hours in the contract are based on 25 positions at 2050 hours each per year. The equivalent of 33 holidays and vacation days are included in the overhead rate for all positons. The CEO is fulfilling the role of a direct charge Program Manager while also claiming a full-time salary as CEO in the G&A pool. The owner believes that the IRS tax code substantiates his position that the dual salary is reasonable because he is a S-Corporation. The owner believes that the direct portion of the salary can in no way be considered compensation for performing the functions within the scope of duties as a corporate officer. Therefore, his opinion is that a salary as CEO in the G&A rate and a salary as direct charge Program Manager is reasonable. The hours that are direct charged are accounted for on a time-sheet and accepted by the customer. The owner doe not track any additional hours worked in support of his CEO functions as he claims that he does not need to track his time since he is a salaried employee as CEO. Personally, I don't see how one individual receiving dual full-time compensation is reasonable, but the owner has almost convinced the PCO that it is reasonable. Thank you Vern and Retreadfed for your input.

Hi, I am working with a PCO regarding a situation in which a CEO of a small business (one Government contract and no other business) has a salary of more than $175K included in the G&A pool. We later discover that he is also fulfilling a full-time direct charge position within that contract. The contractor is currently working under a UCA to which we are now trying to definitize. This CEO direct charged the contract 228 hours during the month of December alone against a billing rate that also includes his salary as CEO in the G&A. In summary, one individual receiving compensation for two full-time positions (direct charge and CEO). For a small business not subject to CAS, is it allowable or even is it potentially fraudulent? I can give more details about my inquiry, but I am curious to here the initial responses to my question. Thanks in advance to all who are able to reply! -ContractPriceAnalyst

Hi Lacylu, Hopefully, the real world exposure into FAR 15 will make the concepts from CON 217 seem more relevant. The advise from Formerfed and Govtacct02 will also help you in your educational journey. I highly recommend that you follow Formerfed's advice to familiarize yourself with the material in the DPAP Contract Pricing Reference Guides as it is a great tool. Good luck! -ContractPriceAnalyst

Can you please clarify your question? Has your experience been limited to FAR Part 12 Commercial acquisitions? Where do you work? What is your current position?

Thank you WENO2 for sharing your story! I guess the lesson learned from that story is that ACOs and PCOs need to communicate with one another. There is a big difference between a PCO inadvertently forgetting to include the progress payments clause in the contract and one that purposely left it out because the contractor asserted that they were going to self-finance. Since your story suggests that the objective profit was purposely higher due to no progress payments then it sounds like the contractor had asserted that they were going to self finance. If the ACO knew the backstory, he/she may not have automatically modified the contract to offer progress payments. It is so sad that so many in our profession do not understand the effect of the time value of money and financing.

To DOECPA, The FAR clearly states that Performance Based Payments are the preferred form of financing (FAR 32.10), however, it is important that the PCO use good business judgement before agreeing to the payment events (see FAR 32.1004(a)). A payment event should equate to a significant performance milestone and the amount for the payment should be approriate to the event. A PCO should ideally get assistance from both the PM and ACO in negotiating a fair performance based payment plan with the contractor. The reason that WGL allows for a higher profit is due to the idea that the contractor will have to self finance until they reach their milestone event. Therefore, it is important for the PCO to consider the impact of financing during profit negotiations. A fair performance based payment plan should ideally result in a higher profit for the contractor. However, if the PCO does not carefully negotiate the performance based payment events and the amounts then there is a chance that the events might result in essentially the Government giving advance payments to the contractor. That type of a perfomance based payment schedule does not deserve a higher profit. Be careful but be fair to the contractor!

Yes, the six month time lines for audits which become nearly obsolete by the time they are issued is a huge problem! DCAA management overreacted to the GAO audits. The question is where do we go from here?

Loul, I imagine that many negotiated FPRAs do represent fair and reaonable rates so I should have made myself clearer; my point is that IF an FPRA does not represent fair and reasonable rates then a FPRR based on DCAA recommended rates is better than agreement with a contractor's proposed rates just for the sake of agreement which I believe is the message from the memo. A negotiation in which one party concedes for the sake of agreement due to incompetence does not make the negotiation fair and reasonable. Based on my experience, there are a lot more incompetent ACOs then incompetent auditors.

Requiring DCMA to issue FPRRs using DCAA recommended rates makes more sense than establishing FPRAs just for the sake of agreement when as the memo points out, the FPRA rates are NOT fair and reasonable.