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Posts posted by kevlar51

  1. 4 minutes ago, here_2_help said:

    The purpose of performance-based payments is to tie contract financing payments to measurable technical performance. Period. There should be zero tie to incurred costs, at least with respect to payment request approval. (You can always have DCAA review costs after the fact.) If you are going to insist that contract financing payments must have a relation to incurred costs, then please use cost-based progress payments. Then you can reimburse the contractor for spending money instead of making technical progress. (Hello, any A-12 folks in the room?)

    In this case, for some reason, the government contracting officer accepted event values that were not commensurate with actual value. Okay, that was wrong, but the damage is done and the values are in the contract. Either you continue to pay the contractor for accomplishment of contractually agreed-upon milestones or you suspend PBPs and try to reform the contract.

    The other option, in my view, is to get ready for a contractor claim that you breached the contract by failing to make payments when agreed-upon events were completed.

    That was my gut reaction when I started reading the OP's post. But how do you reconcile that with the DFARS clause 252.232-7012 that Joel quoted? Payments cannot exceed cost incurred (in this DOD contract, at least).

  2. Michele G: Is the following along the lines of what you're explaining:

    Payment milestones for a Four-Legged Dinner Table (total price $1000):

    1. $600 upon ordering screws

    2. $200 upon ordering wood

    3. $100 upon assembly

    4. $100--final delivery

    And the contractor can't invoice for the first payment event because they've only incurred $5 in costs. So instead, they're basically submitting monthly cost reimbursable invoices on whatever other work they do up until they hit $600?


  3. As others have said, nothing is contractually/legally stopping vendors from proposing wages higher than what might be in a wage determination. But competition (especially in a LPTA procurement) will generally keep them from doing so. You can put language in there about allowing for escalation, but it's not necessary for the reason I just stated (i.e. it's already allowed).

    A awardee later coming to you to explain why the rates they proposed under a FFP solicitation aren't sufficient is a different issue. They can certainly still pay their staff more, and they have to run their own cost/benefit analysis before deciding to submit proposed pricing. And "bid low to win and get the Gov't to increase the price later" isn't a sound plan.

    All that considered, if staff turnover is enough concern, then perhaps LPTA isn't the best approach for you.

  4. On 3/9/2018 at 8:03 PM, here_2_help said:

    It really doesn't matter to you, the subK, whether you get the work through the large, long running contract with your prime or directly from the government customer. It's the same work and it should cost you exactly the same to perform, regardless. If that's the case, why do you care? Why are you trying to help out the government customer and the CO?

    I agree with the bulk of your post except, generally, with this part. I can think of plenty of reasons why a vendor might rather be a prime, than a sub. Large primes especially tend to have rather inflexible one-size-fits-all purchasing systems that place a great deal of administrative burden on their subs--without regard to whether the government places similar demands on the prime. 

  5. It's certainly possible, and I'd like to think the CO should know how to accomplish this. We don't have anywhere near enough information on your client's contract to know the correct path.

    Some words of caution:  Be careful about going around your client's back to talk to the end customer, especially to cut out a chunk of your client's business. Also be prepared to potentially not get award of the new, separate contract (assuming it gets competed).

  6. FAR 36.606(b) places the proposal request (i.e. price proposal) in the "negotiation" phase (i.e. after determination of the  most qualified firm). Though FAR 36.606(b) uses the term "ordinarily," so it appears to be far from mandatory.

    That being said, I'm not sure how many A-E firms have bench contracts, but you'll be pissing off the bulk of them by having to expend unnecessary efforts and cost to prepare pricing proposals that will never see the light of day. Expect those costs to creep into indirect rates and your agency will start seeing higher prices.

  7. I don't have background to point you to. But at a basic level, the Government assumes the cost risk in a cost-reimbursable contract. So if an issue arises that would have given rise to a warranty claim under a FFP contract, the Government would be paying for the work under a CPFF contract.

  8. If it's sole source, then their justification for adjusting your hours to put you on equal footing with other bidders makes little sense.

    Agreed with Joel--you're in a much better position in a sole source environment to negotiate and reach a clear meeting of the minds. Discuss your concerns with the Government, and figure out their concerns. Then resolve them in the contract document.

  9. 20 hours ago, Vern Edwards said:

    You should charge the government for all of the work that you must do to fulfill its request, not just the cost of the laptop.

    This bears repeating. More often than you think, Government program management won't be expecting an invoice for higher than the laptop's sticker price. Be prepared to fight them on this, because procuring material has additional costs associated with it, and if you only bill the laptop sticker price, then you're losing money. And I don't know if your contract type allows profit on materials.

    This whole deal can be a slippery slope. You might buy the laptop now, and then the program team decides it's a lot easier and quicker to have you buy their equipment rather than their contracts office. That's not a good position to find yourself in, and it's made significantly worse if you're losing money on every purchase. I suppose an extra benefit to billing actual costs is the Gov't might be less inclined to come back for more due to sticker shock (not always the case).

  10. 47 minutes ago, Vern Edwards said:

    I'm not sure it makes a difference. Remember, the contract is cost-reimbursement. The contractor invoices on the basis of allowable cost incurred to deliver the level of effort. not by the hour at a fixed rate. There could be more to the cost of the level of effort than direct labor hours. If the subcontract cost is allowable, then the contractor invoices for it and the government reimburses up to the estimated cost or the total funds allotted.

    All fair points. And with that, I'm now more confused at what the OP is concerned with "losing."  Though the chances of an overzealous COR are high, at which point it's hard to apply the rules when the "rules" are all in one person's head.

  11. 5 minutes ago, Vern Edwards said:

    Extra funding? I don't understand what you're talking about. I presume that the contractor included the cost of the subcontract in its estimated cost for the LOE.

    I suppose that's a question for the OP. Was the subcontract price included included in the overall estimated cost? Was the estimated cost tied exclusively to an LOE?


  12. On 12/8/2017 at 8:48 PM, Vern Edwards said:

    Suppose you have a CPFF LOE Term contract with a 6,000 hour LOE, a $10,000,000 estimated cost, and a $600,000 fixed-fee. You are obligated to deliver the LOE in order to get the $600,000. You are not obligated to work beyond the LOE.

    You expect to have to burn the 6,000 hours with your own employees. You hire an FFP consulting sub to advise you, but you still expect to have to use your own people to deliver the 6,000 hours.

    Along comes the COR and tells you, to your surprise, that you must count the sub's hours against your LOE obligation. You realize that if you do that you can get to the 6,000 hours and collect your $600,000 with fewer hours from your own people.

    Why would that be a bad thing for you?

    It depends on whether you're a shareholder or an employee. Shareholders (and mid/upper management) will want to see maximum profit and will be quite pleased with your example. Employees (and lower management assigning them to tasks) will want to maintain as many hours as possible for their own staff to keep them working on Government funds. 


    In OP's case, I'm not sure where the extra funding is coming from for the FFP subcontract if he doesn't want to tie it to the LOE (assuming the estimated cost is tied to the LOE).

  13. 16 hours ago, Vern Edwards said:

    See Darst, Sales Commissions & Contingent Fees In Government Contracts, 05-10 Briefing Papers 1 (September 2005).

    The author provides a complete history and legal analysis of the covenant against contingent fees.

    You can read the rest yourself.

    Thanks very much for the cite, Vern. This has been informative--I've printed out the full article for some light reading later on. 

  14. On 10/12/2017 at 3:02 PM, REA'n Maker said:

    You might try "the FFP contract is based on an 1,880 hour standard" shtick.  Despite the glaring logical fallacy, it has always worked for me (I don't know whether to be pleased or horrified).

    Ha, I don't think that argument applies to my current scenario. But I'm absolutely guilty of making it when the need arises (and with equal success on my end).

  15. Purely anecdotal, but it's been years since I saw a true UCA. Large contractors I've worked with tend to shy away from them and have established rather strict internal approval requirements. I imagine it's tough for a CO to put one in place for similar reasons. Both sides of the table seem to think that a UCA is a huge advantage for the other party--Gov't sees it as a license for the contractor to run costs up and contractors see it as a license for the Gov't to kill their profit on the backend.

    Since these stricter internal requirements have been put in place, I don't see UCAs. I instead see lots of ATPs, NTPs, Letter Contracts, At-risk-orders, etc.  Basically come up with anything you want. Just don't call it a "UCA" because that has to get signed off up top.