Chip13

In the event that an RFP for a competitive cost-reimbursement type contract includes 52.222-46, isn’t the the evaluation of professional compensation somewhat duplicative to the cost realism analysis specified in 15.404-1(d) that is already looking at the realism of the specific elements of cost like direct labor and fringe.

In 52.228-9 Cargo Insurance, the phrase "at the Contractor's expense" is used in the first sentence of the clause. I believe that phrase to mean, as did the DCAA auditor I spoke with, that the cost of the cargo insurance is an unallowable expense in a contract that includes the clause. I have never dealt with this clause in the past and am wondering if anyone else has any experience with it and if they agree with my interpretation?

InNeedof Wisdom, Hah, the reference to "chips" is pure coincidence. As far as pursuading others, guess I'll have to keep Phillipians 4:13 more pre-eminent in my thoughts!

Thank you all for your responses.

I agree with you assessment of the current state of contracting. In today's environment, argue, argue, argue and then argue some more gets you branded as an impediment and not a team player. In many cases, people can't even comprehend what you are talking about when you are trying to explain your opinion or the results of your reseach. Unfortunately, I have reached the conclusion that it is best just to share arguements with decision makers once and then let the chips fall where they may. Any additional arguing is like spitting into the wind...all it does is get your face wet.

I agree that reading books and articles, reading deeply, studying, and thinking the problem through for yourself are all wise to do, but unless there is some consistent guidance put forth in training, then you have 1000s of professionals interprettting regulations and procedures according to what each thinks is right in their his/her own eyes and significant inconsistencies from CO to CO, even within the same office. Also, unless you are the one with the authority to make the ultimate decision, you can research and advise till the cows come home, but that doesn't prevent dumb decisions from being made because the right thing to do is "too hard" or the poor business decision is easier.

Thanks all. I do not think it is a violation of the CPPC prohibition because the costs will be negotiated and the fixed fee dollars will be established prior to any costs being incurred under a completion or LOE task order. I agree that it is not wise to do so but many decisions are impacted more lately by schedule concerns vs. making the best business decisions. Decisions on acquisiton and contract strategy are made at much higher levels than are easily influenced so I am researching in order to brief all of the pros and cons of such an arrangement. Other than changes to the treasury rate which can impact the fee objective when FCCM is proposed, anticipated vendors changing, market conditions changing, material costs fluctuating, etc, which can all be addressed when negotiating the Task Order cost, but obviously have an impact on performance risk as well, any other "obvious" reasons that I haven't addressed would be much appreciated.

BZMANINTEXAS, thanks for the response. I understand the distinction between profit and fixed fee in that the fee is fixed no matter what the costs turn out to be while the amount of profit actually earned is fully dependent upon the costs incurred....cost more than estimated, less profit is realized and vice versa. I don't necessarily disgree with any of your statements. Our CO is proposing setting the contract up as I described and I am not aware of anything that specifically prohibits it. The government won't be unilaterally establishing a fixed fee percentage. The contractor will have opportunity to make their case that the risk may vary significantly from task order to task order and not agree to a fixed fee percentage at the IDIQ level. Let's say, hypothetically, that both parties agree that the nature of the work is such that they don't expect much to change from Task Order to Task order. Is there anything that precludes the establishment of a fixed fee percentage at the IDIQ level?

Previous training has always emphasized that when negotiating CPFF contracts, we are negotiating fixed fee dollars vs. fixed fee percentage. That makes complete sense since we are agreeing to fixed fee dollars that are not subject to change based on the cost of performance. However, when establishing the terms and conditions for an IDIQ under which CPFF Task Orders will be issued, can the IDIQ establish a fixed fee percentage (based upon the Weighted Guidelines) that will be used to establish the fixed fee dollars that will be placed on the Task Orders once agreement on cost is reached? That would seem to fall under DFAR 215.404-4(D) although it refers to establishing a basic "profit" rate vs "fee". The conditions affecting fee for the work to be performed under the CPFF Task Orders is not expected to change.

The only estimate would be the contractor's burden on the travel amount based on their applicable indirect rates. We always stipulate that the amount provided by the government in the RFP is a base direct cost amount and that it should be burdened with each contractor's applicable indirects. $1M of direct travel dollars may cost the government significantly more from one contractor to the next depending upon their burdens. Likewise, if you state the $1M provided is inclusive of all applicable burdens then a $1M Travel NTE line may buy you fewer trips (direct travel dollars) from one contractor to the next depending upon their burdens.

I believe Vern meant FAR 16.102 ( b ). Wouldn't the decision on whether to include cost realism as an evaluation factor or subfactor be predicated on a commom sense (not that there is much of that used in government contracting) litmus test associated with risk. If you have 10 FFP CLINS worth a total of $100M and one cost-reimbursement CLIN for a NTE for travel of $50k, wouldn't adminstrative effort to perform the analysis outway any potential beneft that could be derived from performing a cost realsim analysis on the cost-reimbursement CLIN? I am specifically talking about a circumstance where the exact travel requirements cannot be predicted and the government is establishing the Travel NTE base value to which the offerors are only applying their appicable indirect rates.

Vern, I posted all the information I had at the time. I never mentioned FFP/LOE term. That was introduced by you later in the thread for some reason. Thanks for all the responses everyone.

It is unilateral. Apparenly, the contract has language stating that all options can be exercised in whole or in part, from time to time, and at any time. The contract is CPFF/LOE, so no worries about paying fixed rates associated with future periods (at least for hours performed by the prime as some of the subcontractors have T&M contracts with the prime), as the contractor will be reimbursed for actual costs incurred, but certainly the estimated costs and fixed fee were predicated upon escalated labor, future projected indirect rates and a mix of prime and subcontractor efforrt. Also since the labor was based on a mix of prime and subs and the contractor will have to increase hours in the base period, the mix of prime and subs may change or even necessitate bringing on additional subcontractors that weren't even priced in the base or any of the option periods.

Scenario: Our command has a CPFF/LOE contract with a base and four option periods. The LOE for the base period has been reached and the command has a need for additional LOE in the base period. Rather that soliciting the contractor for the additional effort in the base period, the CO wants to partially exercise Option 1 and Option 2 and move the associated LOE to the base period. It seems to me that the LOE and related costs and fixed fee are associated with a future PoP that may be based on escalated labor rates and different indirect rates. Is this a feasible approach to add more LOE to the base period?

Retreaded, thanks for your response. In answer to your first question regarding why the government is requiring certified cost or pricing data for this TO: 1. None of the exceptions in 15.403-1( apply. 2. The TO is over the $700k threshold. 3. FAR 15.403-4(a)(1)(i) requires such for the award of any negotiated contract, which this TO meets the definition of per FAR 2-101 4. Since all TOs were anticipated to be Cost-type orders, no pricing exists at the IDIQ level. In answer to your second question, the prime did not need to get consent to subcontract.

Scenario: Government has a prime IDIQ contract with a $800M ceiling under which CPFF/LOE Task Orders are issued. The Task Orders are primarily for labor hours (non-commercial services). Prime contractor is stating that they estabished T&M contracts (reasonableness based on price analysis) with their subcontractor suppliers for the length of the prime IDIQ contract at the time of the initial IDIQ award (10 months ago). A new Task Order is being solicited by the Government valued at $100M. Cost or Pricing data submitted by the prime indicates they are proposing subcontract cost from one subcontractor @ $20M. Prime is stating that because they have an established subcontract already in place, they can certify to their proposed costs and do not have to cause the subcontractor to submit certified cost or pricing data to the government, even though they are proposing subcontract costs (and intend to issue a Task Order under their T&M agreement) that exceeds the $12.5M threshold referenced in FAR 15-404-3©(1)(i). Does the prime contractor have to cause the subcontractor to submit certified cost or pricing data or can the prime simply submit the subcontract agreement and the initial prime analysis used to determine the reasonableness of the T&M rates?