Jacques

When NIH was planning this acquisition, I doubt anyone in the meetings advocating for it pointed out that attorneys' costs are recoverable on a successful protest.

When you say FPLH, do you mean, "firm-fixed-price, level-of-effort" as described at FAR 16.207?

10 hours ago, Don Mansfield said:

It doesn't have to be pre-priced to be a contract.

I agree.  FAR 16.505(b)(3) states, "If the contract did not establish the price for the supply or service, the contracting officer must establish prices for each order using the policies and methods in subpart 15.4."  If a basic IDIQ contract has to be pre-priced to qualify as a contract, the language at FAR 16.505(b)(3) does not make a lot of sense.

14 hours ago, C Culham said:

...[M]y sincere hope is that a prime/sub relationship is based on mutual understanding and awareness and as such the type of contract would be a mutual decision would it not?

You don't have to be absolutist about it.  Certainly, there are times when the Government can insert itself into this process, FAR Subpart 44.2 being the most obvious example.  However, there is no reason to believe on the facts in the OP that the contract includes a requirement the Government consent to any of the subcontracts, given that the prime contract is for a commercial product.  See FAR 12.301(d).  Maybe others would disagree, but when consent is required, it does not seem like Government overreaching when, e.g., FAR 44.203(b)(2) calls for the PCO to withhold consent to CPPC subcontracts (even though it may be a little paternalistic when the only one directly harmed on a FFP prime is the prime).  The additional requirement for consent doesn't change the fact the subcontract is grounded on an understanding between prime and sub.

@C Culham has it exactly right.  I assume we're talking about the "Payrolls and Basic Records" clause at FAR 52.222-8.  If so, the definition of "laborer or mechanic" at 29 CFR 5.2(m) (and repeated at FAR 22.401) is the place to look.

Just now, joel hoffman said:

Yep T&M is okay.

Why was it OK before FAC 2005-15?

Perhaps another data point would be helpful.

In 70 Fed. Reg. 56318 (Sept. 26, 2005), when the Councils posted the proposed rule implementing the statutory change to expressly recognize the ability of the Government to use T&M and LH contract types for commercial items, they included the following:

Quote

w. One commenter at the public meeting said the rule should apply only at the prime contract level since the commercial sector does not compete awards at the subcontract level.

Response : The rule does not change how commercial contractors price subcontracts. As always, commercial contractors can use T&M contracts. However, the Councils believe commercial contractors often award subcontracts on a competitive basis.

(emphasis added).  If FAR 12.207 constrains the behavior of contractors, why, prior to the change in the rules, could a contractor use a T&M contract?  The answer is easy:  FAR 12.207 does not constrain the behavior of contractors because it only applies to the Government.

14 hours ago, joel hoffman said:

It’s not a “commercial service” under the FAR unless it’s compliant with all the applicable Part 12 procedures and requirements, including pricing in 12.207. 

One looks solely to the definition of “commercial service” incorporated into the prime contract to decide how to interpret the requirements in the contract where the phrase “commercial service” is used.

My earlier comment about CICA was merely another example in an entirely different context where the FAR restricts what the Government can do but doesn’t apply to a prime.

Why do you think FAR 12.207 applies outside the Government?  Is there some clause upon which you’re relying?

13 minutes ago, joel hoffman said:

One can’t simply pick and choose what paragraphs of Part 12 it wants to use to classify a subcontract as a commercial service, then ignore 12.207, which doesn’t provide for commercial service contracts priced other than FFP or other FP types or T&M or labor-hour.

Joel, no one is ignoring 12.207.  It simply doesn’t apply outside the Government.  Using your logic, a prime would have to compete its subcontracts or prepare justifications for other than full and open competition.  No one would claim that pointing out that CICA only applies to the Government amounts to “ignoring” FAR Part 6.

Nick Sanders is the editor now.  Judging from his LinkedIn biography, he was or is a FAR Bootcamp instructor, so that certainly puts him in good company.  (Sorry if I'm ruining an inside joke.)

The following is another data point.  The more I try to understand this stuff, the more confused I get.

Quote

Comment: Four commenters recommended that the Board revise the rule to include counting only "net awards" in determining whether certain CAS thresholds are met.

Response: The Board does not agree with the commenters. As the Board understands the commenters' position, "net awards" refers to the total obligated value of the contract at the time of award, excluding as-yet-to-be-obligated incremental funding, and the potential value of contract options. The Board believes that CAS applicability thresholds are met when the total dollar value of the contract (including as-yet-to-be-provided incremental funding and the potential value of contract options) exceeds the appropriate thresholds. Because this appeared to be a recurring issue among some contractors, the Board is amending the definition of "net awards" in order to make it clear that incrementally-funded contracts and the potential value of contract options are to be included in determining a contractor's or subcontractor's CAS eligibility status. The Board believes that it is the value of the pricing proposal or action that gives rise to CAS applicability.

58 Fed. Reg. 58798, 58800 (Nov. 4, 1993).  The "certain CAS thresholds" discussed here may be for purposes of a disclosure statement rather than generic CAS coverage, so this quote may be completely irrelevant.  I share it anyway.

EDIT:  I think I'm tracking a little better now.  48 CFR 9903.301 defines "net awards" but then Chapter 99 uses the phrase "net CAS-covered awards" at 48 CFR 9903.201-2(a)(2) (full coverage), 48 CFR 9903.201-2(b)(1) (modified coverage), & 48 CFR 9903.201-2(d) (subcontracts).  Net awards are relevant to full or modified coverage, step 2 in DAU's decision tree linked earlier.

@C Culham Your post doesn't rebut that the pricing arrangement is incongruous.  If there are established rates, then the subcontractor is in the best position to control costs.  In which case, it is in a better position than the prime to bear the cost risks embedded within the established rates.  Now, there are all sorts of circumstances that may have led to the subcontractor having a negotiation advantage over the prime here that might explain the result, but @joel hoffman's comment seems self-evident.

1 minute ago, joel hoffman said:

I’m not disagreeing that the type of services are commercially sold and provided and Fara said they are sold at established “rates”. If there are established rates for the service, then pricing them at actual cost is incongruous. There are appropriate alternatives to adjust quantities if that is the only unknown. 

Got it.  I agree.  Valid point.  That said, I don't think the OP would recommend doing what the prime and sub did here.  I think the OP inherited it and is trying to make the best out of a bad situation.

32 minutes ago, joel hoffman said:

However, “standard rates” for tests  are incongruous for cost reimbursement services. Either there is an established rate or the subcontractor would charge actual costs. 

First, we don't know that paragraph (1) of the definition of "commercial service" in FAR Part 2 is off the table.  Under paragraph (1), "other services" can be a commercial service is they are "procured for support of a commercial product."  I don't know what the prime contract is for, but if it is a commercial product, you might not have to go to paragraph (2).  In any case, as Don already pointed out, paragraph (2) begins "services of a type," so just because this subcontractor wanted a CPFF pricing arrangement doesn't mean the service being furnished by the subcontractor doesn't qualify under paragraph (2).

Maybe this is just a long-winded way of saying I agree with the statement in the OP, "Using a CPFF contract does not change the services to non-commercial."  If they were commercial already, then the subcontract is "of a type."

Consider the DAU's CAS decision tree.

11 hours ago, Jamaal Valentine said:

@here_2_help

Your comment made me think of the DOD Source Selection Procedures. Outside of the FAR 1.108(c) reference it's not relevant here, but it says “In determining applicability of these source selection procedures, calculate the value of the contract action in accordance with FAR 1.108(c), except that the value of an indefinite delivery indefinite quantity (IDIQ) contract includes only the value of orders for which pricing terms are established in the basic contract.” I find the instruction interesting given FAR convention and the things you've mentioned (e.g., minimums, IGEs, etc.).

Strictly speaking, FAR 1.108(c) isn't relevant.  With only one exception, the prescriptions at FAR 30.201-3 & -4 point the reader to 48 CFR 9903.  The CAS regulations don't have a convention like FAR 1.108(c).  In my opinion, this isn't terribly surprising, since CAS is about consistency in the treatment of costs.  Once a business unit has a CAS-covered contract (what is sometimes called the "trigger contract"), more and more of its subsequent contracts are CAS-covered.  

EDIT:  While it isn't obvious to me that "net awards" as defined at 48 CFR 9903.301 is used in determining CAS applicability, if it is, then mMy comment above, "The CAS regulations don't have a convention like FAR 1.108(c)," may not be entirely on is entirely off the mark.

Perhaps it is useful to make explicit what has been implicit in this thread.  It may be entirely obvious to all involved, but might not be obvious to a "newbie."  First, generally, the Federal Acquisition Regulation doesn't govern the conduct of the contractor, the contract does.  See, e.g., Nash & Cibinic, Legal Status of Government Manuals and Instructions:  Putting the Fox in Charge of the Chickens, 1 Nash & Cibinic Report ¶ 77 (Oct. 1987); Nash & Cibinic, Formation of Government Contracts (4th Ed. 2011), at 59 (contrasting housekeeping rules from substantive ones).  Thus, when portions of the FAR like FAR 16.201(a) make statements like, "The contracting officer shall use firm-fixed-price or fixed-price with economic price adjustment contracts when acquiring commercial products and commercial services, except as provided in 12.207(b)," hopefully it is obvious that this has no impact on how a prime contracts with its subcontractor.

That said, the contract between the Government and the prime does say a lot.  For instance, it tells the prime what clauses must be flowed down to a subcontractor.  Those contractual requirements for flow down may differ depending on whether the subcontract is for commercial products or services or not.  Therefore, the "Definitions" clause at FAR 52.202-1 matters.  If, embedded in the definition of a commercial item was how it was priced, then that would have an impact on the analysis.

I hope that provides some context for some "newbies" that might happen upon this thread.

Break..Break

For what it is worth, I don't think the definition of a commercial product or service includes anything about how it is priced that would prevent the arrangement described in the OP.  I also think Congress knew that the FAR was a housekeeping rule when it wrote Pub. L. 103-355, FASA, § 8002(d).  I also think the Councils' implementation of the statute in the FAR (phrased as it is in terms of what the Government can and cannot do) is reasonable.

On 6/1/2023 at 11:10 AM, OuterSpace said:

My question is, does my company need an NDA in place with the Air Force before we share this proprietary information? Or is an NDA not needed (or even possible), because they are a government agency?

Whether your company "needs" an NDA (or something similar) depends on whether you want to protect the information you share with the Air Force.  While generally a matter of state law, most laws providing a remedy for misappropriation of trade secrets require that the company claiming it is a trade secret take extensive measures to protect from disclosure what the company claims is a trade secret.  

Quote

Generally, trade secret protection is given to concrete information, that is maintained in secrecy by the owner, which has economic value from not being generally known or readily discernible by others who can profit from its disclosure.

NASH & RAWICZ, INTELLECTUAL PROPERTY IN GOVERNMENT CONTRACTS (6TH ED. 2008), at 157.  The requirement that the owner maintain the secrecy of the putative trade secret also appears in the second half of the definition of a trade secret in the Uniform Trade Secrets Act at § 1(4):

Quote

“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process that: (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Nash & Rawicz note further:

Quote

The trade secret owner must assert reasonable efforts under the circumstances to maintain the secrecy of the trade secret.  These efforts need not be extreme or unduly costly measures but should include reasonable measures that prevent access to the trade secret without authorization, such as, controlling access to the plant, limiting access to the trade secret on a need to know basis, monitoring of publications, advising employees of the existence of the trade secrets, use of confidentiality and non-disclosure agreements, restrictive legends on drawings, employee exit interviews, noncompete agreements with employees, etc.

Nash & Rawicz, at 163. Outside the context of the Federal government, absent an express promise of confidentiality, under the Restatement (Third) Unfair Competition § 41(b), a duty of confidence can arise if at the time of the disclosure,

Quote

(1) the person knew or had reason to know that the disclosure was intended to be in confidence, and (2) the other party to the disclosure was reasonable in inferring that the person consented to an obligation of confidentiality.

Because of the Freedom of Information Act, and limitations on the ability of most Government employees to bind the Government, an inferred promise of confidentiality that binds the Government is unlikely to arise on your facts.

If you believe that what you are sharing with the Air Force qualifies as a trade secret, and you want it to remain a trade secret (for instance, vis-a-vis third parties) after sharing it with the Air Force, it seems to me you would want some assurances from the Air Force that it will treat the putative trade secret consistently with it being a trade secret.  (Sorry if all of this is obvious.)

While the answer to the OP may depend on the context, if that context is the FAR, then consider the following.  According to the FAR Drafting Guide (Version 5, April 30, 2011), at 33:

Quote

Solicitation amendment/ contract modification.  Use--

(a) "Amendment" to refer to a change made to a solicitation before contract award (FAR 14.208 and 15.206).

(b) "Contract modification" to refer to a written change to the terms of a contract.

(emphasis in original).

EDIT:  In what seems to be a departure from this guidance, FAR 16.603-3(c) states, "Letter contracts shall not...[b]e amended to satisfy a new requirement unless the requirement is inseparable from the existing letter contract."  FAR 18.127 likewise does not seem to follow convention.

EDIT:  I wouldn't read too much into this drafting convention.  For instance, requirements can be "amended or revised" (FAR 9.204 & 11.201), and subcontracting plans (FAR 19.705-2) & shipping instructions can be "amended" post-award (FAR 42.302).

EDIT:  For non-FAR instruments, this might not be the rule.  For instance FAR 3.801(5) seems to suggest (to me) that a grant, loan, or cooperative agreement might be amended.

DELETED

40 minutes ago, C Culham said:

At one time I too was a procurement analyst.  Here you go....

CO Warrant to $10 million 

CO awards a purchase ordered valued at $150K to a current Federal employee unknowingly.   Discovered after almost all  work complete. Payment to be made in one payment.   Contractor/individual was performing the work.

The contract was deemed to be an unauthorized commitment (FAR 1.603-2(a)).

Agreement was ratified by the head of agency (FAR 3.6).

 

Interesting story, but just because someone thought the contract was an unauthorized commitment doesn't make it one.  I offer it is not an unauthorized commitment for a contracting officer to award a VOIDABLE (vs. void ab initio) contract if the contract value was within the warrant authority of that contracting officer.

EDIT:  To be more complete, I wouldn't even characterize the award of a void ab initio contract as an unauthorized commitment.  The void contract is void not because of anything having to do with the contracting officer's warrant.

1 minute ago, MileHighAcq said:

I guess in that case such issues would have to be resolved by GAO under quantum meruit.

Sorry for being petty, but before I forget, I'm pretty sure the GAO doesn't handle this workload anymore.  If I have my references right, 31 USC 3702 was the basis for the GAO's claims settlement authority discussed in Title 4, Chapter 2 of its "Policy and Procedures Manual for Guidance of Federal Agencies."  That statute has changed, but the FAR reference has not been updated.  For DoD, if I'm reading DoDI 1340.21 correctly, the Defense Office of Hearings and Appeals handles these types of claims.  If the vendor wants to file under FAR Subpart 50.1, as I understand it, for DoD, each of the three services has a "Contract Adjustment Board" that hears requests for extraordinary contractual relief.

1 hour ago, Vern Edwards said:

I think a ratifying official could invoke the Christian Doctrine to add a missing mandatory clause.

Brilliant!

EDIT:  I came back here to compose a post saying Vern had convinced me I was reading FAR 1.602-3(c)(3) incorrectly.  For what it's worth, I got there from the definition of unauthorized commitment.  As noted in FAR 1.602-3(a):

Quote

Unauthorized commitment, as used in this subsection, means an agreement that is not binding solely because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government.

Usually what that means to me is that all the "elements of a contract" are there except authority:  offer, acceptance, consideration, sufficiently definite terms, etc.  Another element of a contract is that the subject matter of the contract is legal.  If the contract is void at its inception rather than merely being voidable, then there's more afoot relevant to the existence of a binding contract than just lack of authority.

If the putative "unauthorized commitment" does not qualify as an "unauthorized commitment" because it is missing more than just a Government representative with authority to enter into the agreement on behalf of the Government, then the agreement does not even qualify as an "unauthorized commitment."

I think Vern's reference to the Christian Doctrine solves that hiccup for me.

11 minutes ago, Jamaal Valentine said:

I think you are getting overwhelmed and I’m not sure what you know about’ institutional ratifications.’

The OP is about the meaning of FAR 1.602-3(c)(3), so let's limit the discussion to ratifications under FAR 1.602-3, please.

1 minute ago, Jamaal Valentine said:

What do you mean isn’t subject to review? Review by whom? I’ve been a ratifying official and my decisions were surely subject to review.

I meant review outside the contracting functional chain of your organization.