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Vern Edwards

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Everything posted by Vern Edwards

  1. Justice1: Nothing you related in your last post changed my mind. You are entitled to nothing for G&A during the period of voluntary performance unless the government decides to compensate you for the voluntary performance or a board or court forces it to do so. We don't have all the facts tbat we should have, but if you had an LOE contract and you delivered the stipulated LOE, albeit sooner than expected, then your obligation to perform was over, even though the period of performance had not expired. I am basing my conclusion on your description of the contract as obligating your company to deliver up to a stipulated level of effort. If your description is wrong or incomplete, then I might change my position based on the true facts. It may be that an attorney can persuade the government to agree, or can persuade a board or in court, that the government's acceptance of your work obligates it to pay you, in which case you should be able to get your G&A. You must consult an attorney to see what the chances are. Frankly, I think you are wasting your time here. You could get all sorts of opinions, none of which you would be in a position to evaluate. In any case, our opinions don't count. The only opinion that should count is that of a good government contracts attorney that you're paying for an opinion.
  2. government recovery

    Fara, isn't that essentially what I described? Do you have the answer to your question?
  3. I do not think Justice1's company experienced a cost overrun. What happened was that the contractor completed the LOE two months before the period of performance expired. The company continued to work during the remaining two months, delivering additional level of effort without contractual coverage. The government had planned to buy additional LOE during the remainder of the period of performance, but balked for some reason, exercising an option early, instead. The contractor has not been paid for the extra work performed during the final two months. The result is that the contractor has not recovered some G&A costs incurred during the last two months of the period of performance. In my opinion, unless the government agrees or is forced to pay for the unfunded, voluntarily performed additional LOE, the company has no chance of recovering the last two month's G&A. The job was over after 10 months. This is what happens when people dealing with the government don't think and act contractually. You cannot deal with the government the way you deal with private sector firms, where much is done by handshake.
  4. The following is from training materials published online (https://www.google.com/search?q=G%26A+allocation+base&rlz=1C5CHFA_enUS628US655&oq=G%26A+allocation+base&aqs=chrome..69i57.5439j0j7&sourceid=chrome&ie=UTF-8): Selecting a G&A Base Background In general, Government contractors are constrained to use of three specific bases for allocation of the General and Administrative (G&A) costs of the organization. The bases are defined in Cost Accounting Standard 410 (48 FCR 9904.410), but are incorporated into the FAR in 31.203. First and by far the most common of the three is the cost input base, often referred to as Total Cost Input or TCI. With the TCI base, all costs that are not G&A and not statutory unallowables (such as interest or Federal income tax) are part of the G&A base. It is also the simplest of the G&A bases and usually (but not always) accepted by Government auditors without any real question. Second most common and growing in popularity is the Value Added G&A base. With this allocation base, material costs and certain subcontracts are excluded from allocation of G&A. Such costs may or may not be subject to allocation of other kinds of costs. Many firms using a value added G&A base collect the cost of purchasing, processing, and administering (but not managing) materials and subcontract purchases in a so-called Material Handling or Material & Subcontracts pool. These are often referred to as MH or M&S pools and the costs collected in such pools are applied to materials and subcontracts in lieu of G&A. The third and somewhat rare G&A base is called Single Element. It is sometimes also referred to as a single pool allocation because the methodology involves collection of all indirect costs in a single pool and allocation of those costs over a single cost element (such as labor). Such a pool would include everything from fringe benefits to facilities costs to bid and proposal costs. It is intended for use by very small services companies – usually on a manual or semi-manual system – as an administrative convenience. It is rarely approved by auditors and is therefore only seen primarily in firms prior to their first audited contract. The Government’s Position on G&A Allocation Bases In the regulation (FAR and CAS) and in the audit guidance (such as the Defense Contract Audit Manual or DCAM), the official position is that each company should use the allocation base for G&A that best reflects total business activity and, therefore, results in the most equitable allocation of G&A expense across all contract (both Government and commercial). In theory, the Government has no preference for one base over another so long as the resulting allocation is equitable. In reality, the Government has traditionally been heavily biased toward the TCI base and resisted efforts of contractors to change to the VA base. Recent Government regulation, however, has been aimed at making “excessive pass-through costs” unallowable on Government contracts. Translation – the Government really doesn’t want to pay for G&A on large subcontracts. (Please see separate whitepaper on Excessive Pass-Through Costs) This has resulted in a slowly shifting attitude towards use of the VA base for allocation of G&A expense. The new regulation on excessive pass-through costs has an exception in it specifically to allow the costs of Material Handling or Material & Subcontract rates. For this reason, many Government contractors currently using a TCI base are considering a switch to the VA base.
  5. government recovery

    The CO would make a government claim against the contractor. If the parties couldn't settle the CO would issue a final decision demanding payment, which would create a contract debt, and the CO would commence collection procedures. See FAR Subpart 32.6. The contractor would then have to decide whether to pay or appeal to a board or to the Court of Federal Claims.
  6. help: It was a level of effort task order. What if the contractor delivered the full level of effort, but delivered it sooner than planned, which seems to have been the case? There was no shortfall in direct labor, but it was expended in less than a year. How if at all would that affect the contractor's argument?
  7. I'm not sure. You should consult an attorney.
  8. Because of the funding and contract structure they would look down to the CLIN level. It doesn't matter that the government requested the extra work. You knew that you didn't have to do it under contract and that it wasn't funded. You took your chances. I don't know what your chances are with DCMA, but I suspect they're not good. Be careful about invoicing for payment to which you know you are not entitled under the terms of the contract. "Under bill" might be a false claim. Sympathy with small businesses goes only so far. Most people in the contracting business will not feel sorry for a company that performed at risk and can't get paid for it. Consult an attorney before you do anything.
  9. Seven questions: 1. Option 1 ran from 1 Jan 2017 to 31 Dec 2017 and was funded with Fiscal Year 2017 money. Is that right? 2. The final option ran from 1 Jan 2018 to 31 Dec 2018 and is funded with FY 2018 money. Is that right? 3. During Option 1 you ran out of LOE and funding after 30 Sep 2017, during FY 2018, and you then worked at risk. Is that right? 4. The work performed at risk was done after 30 Sep 2017. Is that right? 5. The government had planned to increase the Option 1 LOE and funding using FY 2018 funds, but then decided that they could not do that. Is that right? 6. You have not been paid for the work done at risk during Option 1. Is that right? 7. You want to know if there is any way to get paid for the work done at risk during Option 1 with the unused FY 2018 funds obligated for the final option. Is that right? If the answer to each of those questions is yes, then I think that the government erred in thinking that they couldn't use FY 2018 funds to pay for the additional work done under Option 1 after 30 Sep. I don't know why they thought they couldn't apply FY 2018 funds to Option 1. The addition of LOE to Option 1 would have been an out-of-scope mod. Since the out-of-scope addition of LOE would have been for work to be done after 30 Sep 2017, during FY 2018, it would have been a bona fide need of FY 2018 and would have had to be funded with FY 2018 money. See Principles of Federal Appropriations Law 3d, Vol. I, Ch. 5. The government should be able to mod Option 1 to add LOE to cover the work done at risk, fund it with FY 2018 money, and then pay you for the work done at risk. They would have needed to justify and get approval for a sole source procurement. Depending on how the contract is written, it may have been improper for them to exercise the final option "early". What you have ahead of you is a challenge in the art of persuasion. The biggest problem you would have in trying to get this fixed is that someone in the government is going to say that they cannot mod Option 1 after the fact, because it's "expired", "dead", and you cannot modify an expired/dead option. That would be wrong, but good luck convincing them. On the other hand, shame might prompt them to act on your behalf. Do you have a valid claim for payment for the work done at risk? I don't want to speculate. You might if you retain a good lawyer. Otherwise... BTW, it appears that the task order was cost-reimbursement. If so, you may not have had a "cost overrun" in Option 1. If you delivered the original LOE at or within the estimated cost, then the extra LOE you provided at risk was not an overrun. It was additional work.
  10. Why is the Govt so cliquish?

    I think your premise, that the government is "cliquish", is unproven. What you can do and how well you can do it is part of who you are, as is what you have done in the past. I'm in business, and I regularly do business with people based on who they are. And I always prefer doing business with people with whom I've done business in the past, who have done a good job, and whom I know that I can count on in the future. I know they are someone who can do the job. People with credentials (or a good sales pitch), but with whom I've had no experience, are just that, and a higher risk. Once I find a good vendor, I stick with them. Does it sometimes cost me more? You bet, and it's worth it, as you know if you've ever had a critical vendor fail you. Who they are is what they have done and can do.
  11. Invoicing for unworked hours under a FFP TO

    Look at your CLIN description(s) and at the associated SOW. Did you specify process, result, or manning (pardon the sexist term). Did you specify any combination of those? If you did not specify manning, then you probably got what you paid for.
  12. Invoicing for unworked hours under a FFP TO

    This was the original post: Emphasis added. The answer to the question depends on whether the contract stipulates that the contractor is obligated to place a specific worker or specific kind of workers at the "duty station" in question during specific time periods. If it does, then I think you might be able to recover some part of the payments made. If the contract does not so stipulate, then I do not think that you can recover the payments in court unless you can show that the service provided during the months in question did not conform to the SOW in some other way due to the absence of the personnel in question. Of course, you can always just ask the contractor to return what you consider to have been an overpayment. That's a half-baked answer, but the best that I can do based on the information that you have provided. @MAY-D-FAR-B-WIT-U You posted to the forum for beginners, so I assume that you are a beginner in contracting. Since you are a beginner, I hope that you have learned something from the responses that you have received here---not about the answer to your question, but about the nature of contracting. I will not recommend a contract type for your requirement, but I will say that it sounds like it should be some form of level-of-effort type.
  13. Missed Option but Have a J&A

    That's good news! Congratulations. Glad legal joined the team. Your legal counsel's position is the position that 99 out of 100 contracting practitioners would take. The contract "dies" after the period of performance expires and you cannot raise a contract from the dead. I don't mind them taking that position as long as they ground it in a sound argument supported by something other than a vague sense of unease. However, I think it's demonstrably untrue. Contracts do not necessarily die when the period of performance ends.
  14. Missed Option but Have a J&A

    One problem I have is that I write so much stuff I can't remember when I wrote about something. I wrote about the problem of untimely exercise of options and CICA in The Nash & Cibinic Report in 2013. While the article does not address the problem of extension by supplemental agreement vs. new contract, it might be of interest, so I've copied it below. If I were writing it today I would say some things differently. I would say "period of performance has expired" instead of "contract has expired." But I stand by my main conclusions. Where I use the pronouns "we" and "ours" I am speaking from Prof. Nash and myself. I don't agree with all of the things the GAO said in the quote from their decision. The Nash & Cibinic Report, August 2013 ¶ 40. LATE EXERCISE OF OPTIONS: What Are The CICA Implications? Vernon J. Edwards What, if anything, do the Competition in Contracting Act and Federal Acquisition Regulation Part 6, “Competition Requirements,” require a Contracting Officer to do when he has inadvertently failed to exercise an option within the deadline for doing so? Let’s review the regulations and consider three scenarios. The Regulations Suppose that an agency competitively awarded a firm-fixed-price service contract with a period of performance of one year and a priced one-year extension option. The option clause in the contract, FAR 52.217-9, “Option To Extend the Term of the Contract (MAR 2000),” states, in pertinent part: (a) The Government may extend the term of this contract by written notice to the Contractor at least 30 working days before the contract expiration; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least 60 days before the contract expires. The preliminary notice does not commit the Government to an extension. FAR 6.001, “Applicability,” states: This part applies to all acquisitions except— *** (c) Contract modifications, including the exercise of priced options that were evaluated as part of the initial competition (see [FAR] 17.207(f)), that are within the scope and under the terms of an existing contract; FAR 17.207, “Exercise of options,” states, in pertinent part: (a) When exercising an option, the contracting officer shall provide written notice to the contractor within the time period specified in the contract. *** (c) The contracting officer may exercise options only after determining that— (1) Funds are available; (2) The requirement covered by the option fulfills an existing Government need; (3) The exercise of the option is the most advantageous method of fulfilling the Government’s need, price and other factors (see paragraphs (d) and (e) of this section) considered; (4) The option was synopsized in accordance with [FAR] Part 5 unless exempted by 5.202(a)(11) or other appropriate exemptions in 5.202; and (5) The contractor is not listed on the Excluded Parties List System (EPLS) (see FAR 9.405-1). *** (f) Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and [FAR] Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g.— (1) A specific dollar amount; (2) An amount to be determined by applying provisions (or a formula) provided in the basic contract, but not including renegotiation of the price for work in a fixed-price type contract; (3) In the case of a cost-type contract, if— (i) The option contains a fixed or maximum fee; or (ii) The fixed or maximum fee amount is determinable by applying a formula contained in the basic contract (but see [FAR] 16.102(c)); (4) A specific price that is subject to an economic price adjustment provision; or (5) A specific price that is subject to change as the result of changes to prevailing labor rates provided by the Secretary of Labor. Three Scenarios Assume that the CO properly made all of the determinations in paragraphs (c) and (f) prior to the issuance of the preliminary notice of intent to exercise the option. Now consider three scenarios: (1) The CO gave timely preliminary notice, but did not give the contractor timely written notice of the exercise of the option. The contract period of performance has not yet expired. (2) The CO gave timely preliminary notice, but did not give the contractor timely written notice of the exercise of the option. The contract period of performance expired two weeks ago, but the contractor continued working. (3) The CO gave timely preliminary notice, but did not give the contractor timely written notice of the exercise of the option. The contract period of performance expired two weeks ago, and the contractor stopped working at its end. In every case, the CO’s failure to exercise the option was due to administrative oversight, and the contractor is willing to waive the CO’s failure to meet the deadline. May the CO go ahead and extend the contract by exercising the “option,” or must he conduct a new procurement and either seek full and open competition or justify a sole-source acquisition? Apparently, failure to process option paperwork in a timely fashion is not unheard of, and we recently became aware of two such cases. In each case, agency counsel or contracting staff told the CO that he could not exercise the option. As far as we have been able to determine, this issue has not come before the Government Accountability Office very often, and apparently never before the U.S. Court of Federal Claims. The GAO has treated late option exercises as sole-source contracts. See Washington National Arena Limited Partnership, Comp. Gen. Dec. B-219136, 65 Comp. Gen. 25, 85-2 CPD ¶ 435, 1985 WL 50837, an early CICA decision. In that case, the agency extended a contract four months after its expiration. The GAO sustained the protest on this issue, stating: "We agree with [the protester] that this attempt [to extend the contract] was improper. Upon expiration of [the contractor’s] contract, neither the government nor [the contractor] was obligated by any of the contract terms; [the contractor] no longer was bound to provide visitor reservation services, and the government no longer was bound to pay [the contractor] commissions for such services. The unexercised option provisions were part of the contract and, thus, necessarily expired when the contractual relationship was terminated. Thus, the attempted retroactive extension of [the contractor’s] contract was not an extension at all—there was no contract to extend—but the noncompetitive creation of a new contractual relationship with [the contractor]. Under CICA, agencies are required to “obtain full and open competition through the use of competitive procedures” in procuring property or services. 41 U.S.C. § 253 [now 41 U.S.C. § 3301]. Certain exemptions from the competition requirement are listed, but it does not appear from the record, and [the agency] does not argue, that any of these exemptions would apply to justify a noncompetitive award to [the contractor] under the circumstances here. Consequently, we sustain the protest on the ground that [the agency] should have conducted a competitive procurement for these visitor reservation services." See also Acumenics Research & Technology, Inc.—Contract Extension, Comp. Gen. Dec. B-224702, 87-2 CPD ¶ 128, 1987 WL 102680, and WSI Corp., Comp. Gen. Dec. B-220025, 85-2 CPD ¶ 626, 1985 WL 53711." In none of our scenarios can the option be exercised in accordance with its terms, as appears to be required by FAR 6.001(c) and FAR 17.207(a) and (f) for exercise to be exempt from CICA, since the CO missed the deadline. The deadline is one of the terms of the option. In Washington National, the agency appears to have consciously decided not to extend the contract and then changed its mind, whereas in our scenarios the failure to exercise the option was an oversight. Moreover, four months had passed between the expiration of the contract and the modification to extend it, during which time the then former contractor apparently did not perform. Our scenarios can be distinguished in several ways. In our first scenario, in which the contract has not yet expired, the CO could argue (a) that the parties are still in a contractual relationship and (b) that the matter is thus one of contract administration and the contractor can waive the CO’s failure to provide timely written notice. In our second scenario, in which the contract has expired but the contractor has continued to work, the CO could argue that while he did not formally exercise the option on time he had provided the preliminary written notice and that the contractor’s continued performance shows that he had “constructively” exercised it with the contractor’s assent. Our third scenario is more problematic. The original period of performance expired and the contractor stopped working. However, the CO could argue that he issued a timely preliminary notice, his failure to exercise the option was an administrative oversight, not an intentional decision let the contract come to an end, and the two-week period in which the contractor had stopped work was very brief in comparison with the four months in Washington. That might be enough to distinguish the situation from Washington National. But while the third scenario might not fall squarely within the shadow of Washington National, it certainly falls within its penumbra. We suspect that in the first scenario, in which contract has not yet expired, the CO might get away with late exercise of the option. We are doubtful about the other two scenarios, especially the third. As Ralph and Steve Feldman discuss in 1 GOVERNMENT CONTRACT CHANGES § 11:34 (2013), the boards and courts have, on occasion, treated the improper exercise of an option as a constructive (within scope) change, even though continued performance could have been ordered under the “Changes” clause. See, e.g., Griffin Services, Inc., ASBCA 52280, 02-2 BCA ¶ 31943, 2002 WL 1788533, and General Dynamics Corp., ASBCA 20882,77-1 BCA ¶ 12504, 1977 WL 2191. In one case, Alliant Techsystems, Inc. v. U.S., 178 F.3d 1260 (Fed. Cir. 1999), the contractor asserted that the exercise of an option was improper and ineffective and submitted a claim seeking a declaration that it was not required to perform. The Government terminated the contract for default when the contractor refused to perform as demanded by the CO. The Federal Circuit held that the exercise of the option had not been in accordance with the clause and was thus ineffective. However, the court also held that under the “Disputes” clause the contractor had been required to “proceed diligently” with the CO’s order to perform pending final resolution of the claim, because the claim arose under that clause and was thus a claim “arising under” the contract. We have no idea whether such administrative oversights happen often. We suspect that when they do happen the parties simply complete the paperwork after the fact and go on about their business, which seems a reasonable thing to do in light of the disruption and amount of work that would follow from a decision not to do so. Moreover, it seems unlikely that a prospective protester would become aware of what happened. Of course, such oversights should not happen at all. VJE
  15. Tracking LOE in FFP subcontracts

    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.
  16. Invoicing for unworked hours under a FFP TO

    This is a classic example of a question to which the answer depends entirely on a close reading of the actual contract language as a whole. The question cannot be answered reliably on the basis of a secondhand description of what the contract says and the relating of a few facts, especially a muddled relating.
  17. Missed Option but Have a J&A

    What does what most COs would do, and what you have seen COs do, have to do with the points that I have made? Well, if you think that four hours or half a day is a significant savings of time, then I won't argue. Huh? Look up far-fetched and implausible. Really, FrankJon, that's a hoot. This: It is well established that out of scope work can be added to a contract through bilateral modification. FrankJon, I don't understand why you have posted in this thread. I don't know if you are trying to understand one of my points, trying to dispute one of them, or are trying to make a point of your own. But I'll continue with you if you have anything useful to say.
  18. Invoicing for unworked hours under a FFP TO

    @MAY-D-FAR-B-WIT-U It is not possible to answer that question based on the information that you provided.
  19. Missed Option but Have a J&A

    What are you talking about? If a CO fails to exercise an option in a timely manner, a contract extension would be, by definition, out of scope. Extending such a contract on a sole source basis would be a new procurement requiring a J&A and all of the procedures and file documentation of any other new procurement, whether it is done by supplemental agreement mod or a new contract document with a new contract number. The OP, fedcontract, understands that. As I told the fedcontract, the difference would be mainly clerical and not worth arguing about. All the same, it's ridiculous for his legal office to object to a supplemental agreement solely on the ground that the period of performance has expired, and I see no reason to put up with ridiculous objections from a legal office. Especially from a legal office. I expect more from them. Again, doing a bilateral mod instead of a new procurement would not be that much simpler. In fact, after so much time had passed it probably would be easier to write a new contract than a supplemental agreement. In any case, since the mod would require a J&A, do you think the CO would wait three or four years to request approval to extend a service contract on a sole source basis? If he did, do you think he would get it? Do you think the contractor would agree to the same prices as had been stipulated for the three or four year old expired option? Please don't waste my time with half-baked reductio ad absurdum arguments. Huh? In light of what I've said, how would extending the contract by supplemental agreement instead of by preparing a new contract document circumvent CICA? Read the thread again.
  20. Missed Option but Have a J&A

    What do you mean by "expired contract"? When does a contract "expire"? I know when the completion or delivery schedule or the period of performance of a contract expires, but many contractual obligations continue in effect for years after those dates. Liability for latent defects might continue for up to six years after delivery. The contractor's right to submit a claim to the CO continues for six years after the event which commenced the accrual of the claim. Obligations under warranties may remain in effect for many years. Obligations to retain records and cooperate with government auditors remain in effect for years after final payment. So when does a contract "expire"? I know of no statute, regulation, or common law doctrine to the effect that the parties to a government contract cannot extend that contract after the delivery schedule or the period of performance has expired. Go down to your legal office, go to the cubicle of the person who says that you can't modify an "expired contract", and demand that he or she show you the law, regulation, court, or board decision that supports their contention. If you can modify a contract years after the period of performance has expired in order to settle a claim, you can modify it after the period of performance has expired in order to extend that period. If the person in your legal office insists that you can't, demand that they show you where it says so.
  21. Missed Option but Have a J&A

    I don't agree with it, either. But why argue about it? There is no law or regulation about it that I know of. The difference in your case between issuing a mod and writing a new contract is mainly clerical. A new contract might be a little more paperwork, but not enough more to make it worth arguing about. P.S. You intended to exercise the final option, not "issue" it.
  22. Missed Option but Have a J&A

    How old is the old contract? If FAR or your agency supplement prescribes different clauses or newer versions of the old clauses, or if new policies otherwise apply, then the proper thing to do is update the contract terms accordingly. You can do that by bilateral modification of the old contract or by issuing a new contract.
  23. Tracking LOE in FFP subcontracts

    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. Or maybe the contractor's upper management will want to assign the employees to other work or cut them loose.
  24. Default Clause to extend Period of Performance

    Emphasis added. Pursuant to FAR 52.236-2(a)(1), that's a Type I differing site condition: But since, according to the "case in point", a redesign will be necessary, the appropriate clause to use would be the Changes clause, FAR 52.243-4. The "case in point" cannot be resolved under the Differing Site Conditions clause, the Suspension of Work clause, or the Default clause, because none of those clauses authorize the CO to make the necessary design changes. Use of the Differing Site Conditions clause is appropriate when a differing site condition will impact the contractor, but not require changes to the design. Since the contractor must perform in accordance with a changed design, and if the change might cause an increase or decrease in the cost of or in the time required for performance, then the contractor might be entitled to an equitable adjustment, including profit---remedies that neither the Suspension of Work clause nor the Default clause provide. See? Plain English. My issue about researching cases is not whether cases might be useful. They can be very useful in the right hands. The issue is time and know-how. Unless a CO is a lawyer, or otherwise very experienced in finding and analyzing cases, it is better for him or her to start with a secondary source---a hornbook or other treatise, such Administration of Government Contracts or Government Contract Changes---than it is to start researching and citing cases in support of arguments. A good secondary source will provide appropriate case citations and explain the cases.