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Vern Edwards

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  1. What's the point of continuing this discussion if you won't provide a straightforward answer to the question: Why target = ceiling? You should be able to answer that in just a few simple sentences, without the irrelevancies. Why is target = ceiling an essential feature of your use of FPI? How is it in the government's best interests? Give me the contract number(s) or name the project. Let's take a break until Tuesday. It's a holiday weekend.
  2. Because you're not really thinking of an FPI(F) when you propose a target and a ceiling that are the same. That's not a concept that I know to have been used in the entire history of FPI(F) (which goes back to WWII). There is nothing that "specifically" (expressly) provides for such a thing, including the instructions for completing the incentive price revision clause. The FAR is silent about what you want to do, so, legally, it can be done, but why do it? See FAR 1.102-4(e): Why is identical target and ceiling, something that as far as I can determine is inconsistent with 57 years of written guidance in FPI(F) structuring, in the best interest of the Government and sound business judgment? Here's what you said in your opening post: The first sentence is the real rationale. As for the second, why would FPI(F) do those awful things for a DB construction project when it didn't do them for the first GPS satellite development project in 1977, which used an FPI(F) with a 75/25 share ratio and a 120 percent ceiling? The launch and spacecraft performance were a great success. Come on. The only rationale you have provided since (that I can remember) was this: Now, Joel, be fair. Read what that says. That's not a rationale (argument) for identical target and ceiling, which is a radical departure from long-standing FPI(F) guidance and practice. The fact that you were asked to research and develop guidance is not a rationale for the guidance you are developing. True, FPI(F) is simpler than FPI(S), but how is that a rationale for identical target and ceiling? What comes after that "thus" in the last sentence of your second paragraph does not logically follow from the three sentences that go before it. The fact that CM@Risk isn't suitable isn't a rationale for identical target and ceiling, either. Talk about bureaucratic resistance. I can tell you now that if you recommend that without a better rationale than you've given here you are likely to face a long, uphill struggle to get anybody to write that into any regulation or guidance. Why would they? If I were at a meeting with you in which you made that recommendation I would ask you to tell us when such a thing would be appropriate and why? And you'd be done for if your only explanation was that it would be appropriate because it would match what's in the DBIA Manual of DB Practice. I would ask, if you're trying to match DBIA's guidance, why not simply recommend that we adopt the GMP contract type that they use? Why corrupt the FPI(F), which we think has worked well. (Actually, there is no evidence that it has.) Joel, how hard would it be to identify a target cost and profit, add the contingencies to set a ceiling price, and set a share ratio that you think would motivate the contractor to manage the contingencies and control their costs? Do that and you don't have to recommend or justify anything to anybody. If you want to use FPI(F), why not just use a standard-practice FPI(F)? Joel, I'm not trying to be difficult. I'm trying to help you prepare for questions you might get from the conservative, cautious staffers you mentioned earlier. After all, you were concerned enough about the identical target and ceiling yourself to post a long thread asking if it would be okay. If I were a staffer and you brought this to me for review I would hone right in on that identical target and ceiling and not let go until you hollered, relented, or provided a reasoned argument in support. You don't have to agree with me about FPI(F), just gin up a decent argument for what you want to do. Don't wreck your cause by constructing a rickety framework for it. If I were in your place I would recommend Government adoption of GMP. I'd find a Government sponsor. Vern
  3. D&F Signature Authority over $1Billion

    The word billion does not appear in the FAR. It appears only five times in the entire FAR System: three times in the DFARS and twice in the DOE supplement. None of those five relate to any D&F for a multiple award IDIQ.
  4. Thanks, Joel. I'll read your last post carefully later today. A couple of things: You have referred to a DBIA publication 510 a couple of times. I can't find a DBIA publication 510. I called DBIA just now and spoke with someone in their publications office who told me there is no DBIA 510. She said she checked their archives, too. Please check that reference and provide a complete citation. Thanks. I'm curious--Why not just go for a FAR amendment to expressly authorize the use of GMP and to provide appropriate clauses? Alternatively, if the FAR councils won't act, why not propose a class deviation for adoption in agency supplements ? It seems to me that the FPI approach is a halfway measure. Vern
  5. Joel: Okay, let me play devil's advocate. Pretend that I'm one of the staffers you described earlier, and you have presented your design-build proposal (above) for use of an FPI(F) contract--with (a) identical target price/ceiling price, (b) a 50/50 share ratio, and (c) a separate contingency line item--to me for review and comment. Among other things, you said: I have no objection to the use of an FPI(F) pricing arrangement for design-build contracts. I wouldn't use one, but that's a CO call. But what you propose is a departure from standard FPI(F) practice, and I object to (1) the identical target price/ceiling price and (2) the distinct line item for contingencies on the grounds that you have not provided a good rationale for either feature of your proposal Identical Target and Ceiling Prices The identical target price/ceiling price, while not expressly prohibited by FAR, is radically inconsistent with the long-standing guidance on structuring an FPI(F), going back to the 1960s and presently reflected in the Contract Pricing Reference Guides, Vol. 4, Section 1.3.1. You give no rationale for that extraordinary feature of your proposal. Why should/must they be the same? How is that consistent with orthodox incentive theory? Why couldn't the target price be the ceiling price minus the quantified contingencies? That would give the contractor a motive to control costs arising from the contingencies, which your scheme does not provide. See the next section. Distinct Line Item For Contingencies While I think it's a good idea to identify and discuss contingencies during discussions leading up to contract award, I don't understand your notion of establishing a distinct line item for them. Do you intend to fund it? What would be the deliverable(s) stipulated in such a line item? See FAR 4.1003. Would "contingencies" be the deliverables and the obligation? How so? Establishing a distinct line item for contingencies that is not subject to the cost sharing incentive would give the contractor no contractual motivation to control those costs. The contractor would have an incentive to underrun the GMP, but since the GMP would exclude the contingencies the incentive would not apply to them. What your scheme appears to do is relieve the contractor from any responsibility for managing contingencies and their costs, which is inconsistent with your statement that the Government's doesn't want to assume the entire cost risk for possible contingencies. Moreover, the contractor would have a basis for submitting a claim if the Government refused to approve a "draw". Moreover, some current guidance on the use of guaranteed maximum price indicates that the contingency is typically a 3 to 5 percent add-on within the maximum price, which is not what you're proposing. See Carney, Contracting Methodologies and Project Delivery Systems, Maryland Construction Law Deskbook, Ch. 2 (2017): Emphasis added. If that is, in fact, "typically" the case, why do you want to establish a distinct line item from which the contractor can "draw", whatever that means? It seems to me that you have proposed a feature that requires more explanation. Summary The objective that I discern in your scheme is to develop a Government contract type that is consistent with guidance published by the DBIA. You have not made a case for adoption of DBIA guidance other than that you like it. Your proposal strikes me as a scheme to get around the limitation that some see in the second sentence of FAR 16.102(b) by calling your GMP cost-plus/fixed-price hybrid an FPI contract. I see no insurmountable legal or policy issues with the use of an FPI(F) contract for design-build. But if you use it, use it in accordance with standard practice, and apply the cost sharing incentive to contingency costs. Set a target price that excludes specified contingencies, and include contingencies within the ceiling price. In that way the Government and the contractor will share the risks arising from the contingencies. I see no value added by your proposed departures from long-standing standard practice. Let me know if I have misunderstood anything that you've said.
  6. Is your contract cost-reimbursement? Fixed-price? Something else?
  7. The underlying problem is that too many government contracting personnel simply do not understand the concept of CONTRACT and the principles and fundamentals of contract law, and yet they are or want to be CONTRACTING officers. It appears that the concept, principles, and simply is not taught anymore, at least not in sufficient depth. Read enough questions at Wifcon and your experience will verify the truth of what I'm saying. The proper response to at least a third of all questions posted at Wifcon Forum is: Read your contract. What does it say?
  8. What does "combines" mean? I don't understand what would constitute "combining" special standards of responsibility with evaluation factors and then categorizing all of them as evaluation factors. Please provide an example.
  9. One additional point. If an RFP establishes a special standard of responsibility, and if an agency eliminates a lower priced small business offeror on the basis of that standard and must refer the matter to the SBA, the question may arise whether SBA is bound by that special standard when deciding whether to issue a COC. As far as I can tell the answer is no. See Geochemical Testing, Inc., GAO B-203757, 81-2 CPD ¶ 519: Capitalization in original. That's an old decision, but I did not find anything more recent on that issue. I checked SBA's regulations and Standard Operating Procedure for COCs and found no mention of special standards of responsibility.
  10. Yes, correct with regard to SBA COC issues. Whether LPTA or price only, if you eliminate a lower-priced small business offeror on the basis of either an LPTA pass/fail assessment of responsibility type evaluation factors or a price-only determination of nonresponsibility, then you must refer that offeror to SBA for COC consideration before making an award.
  11. You can use responsibility type considerations as pass/fail evaluation factors in an LPTA source selection. However, a key distinction between special standards of responsibility and comparative evaluation factors is that the GAO has decided that if you use any traditional responsibility consideration such as those listed in FAR 9.104-1 as a comparative evaluation factor, then the SBA's Certificate of Competency program, FAR Subpart 19.6, does not apply. But if you use a responsibility consideration as a pass/fail evaluation factor, then the SBA's Certificate of Competency program does apply. So suppose that you conduct an LPTA source selection and the only nonprice evaluation factors are experience and past performance, to be evaluated pass or fail. And suppose that you determine, pass/fail, that a small business offeror with a lower price than the winner is technically unacceptable on the basis of experience. In that case you would have to refer the small business offeror to the SBA for Certificate of Competency consideration before making an award. See e.g., Estrategy, Inc., GAO B-406419, 2012 CPD ¶ 171, footnote 3: See also Sanford and Sons, Inc., GAO B-231607, 88-2 CPD ¶ 266, DA Defense Logistics HQ, GAO B-411153.3, 2015 CPD ¶ 58, and many other such decisions. Of course, this applies only when an agency rejects an offer from a small business. FAR 15.101-2(b)(1) warns you about this with regard to past performance, but fails to warn you that it applies whenever you use a responsibility-type factor such as those mentioned in FAR 9.104-1 as pass/fail evaluation factors. See Alternative Procurement Strategies: An Obscure Aspect Of The FAR, The Nash & Cibinic Report, May 2001: If you're not afraid of the chance of having to refer a small business offeror to SBA for COC consideration, then you can save a lot of evaluation time by sticking to responsibility determinations rather than turning responsibility-type factors into pass/fail evaluation factors.
  12. Not necessarily. The contract could be FFP-LOE. Look, what you "monitor" (i.e. contract quality assurance) depends on what the contract requires from the contractor. There is no general principle that you "monitor" output vs input. You might well "monitor" input. You might "monitor" output. You might "monitor" both. It depends on what the contract says. The objective is to make sure you got what you were promised. as described by the contract, whatever it was.
  13. DW, please cite something authoritative in support of that assertion--a regulation or an SBA decision.
  14. I can't say that. Sorry.
  15. If the PWS in fact requires it, then yes. You can demand it.
  16. @H2H: The PWS concept is defunct. People call work statements "performance work statements" because they're told they must. Maybe some people think their SOWs really are performance work statements. But in the entire history of government contracting there have been very few "real" performance work statements. PWS is a meaningless label.
  17. Good grief! Well, remember the fight over whether the FAR Part 12 prohibition against "cost type" contracts prohibited use of T&M? If only the reg writers would be clear and would adjust their wording to clarify their intent as soon as these kinds of disagreements emerge. Never going to happen, and they are impervious to argument and criticism. You got that right. But I would simply argue that GMP is really FFP or less and that FAR clearly permits it. You could always ask DPAP for an "official" interpretation, if there is such a thing. I'll see in Nash would be willing to write an update to his piece. Small caliber ammunition, but it might be of some help. Legislation is unlikely. Congress is dysfunctional.
  18. Joel: A simpler way need not be expressly allowed by the FAR. It only need not be "specifically" prohibited by the FAR. See FAR 1.102(d) and 1.102-4(e). In his article, Prof. Nash argues that the sentence in FAR 16.102(b), "Contract types not described in this regulation shall not be used, except as a deviation under Subpart 1.4," should not be read so as not to permit use of any contract type that is not named in Part 16. Several types are in use that were or are not named in FAR. Firm-fixed-price with award fee contracts were used for several years before being specifically mentioned, and were reported as FFP. Award term contracts have been in use now for a decade and are not specifically mentioned. Share-in-savings contracts are used without specific mention in FAR. I think a GMP contract is ultimately FFP, but is hybridized with CPFF-type terms below the maximum price. I think the contract should be reported to FPDS as FFP. The actual cost provision is not truly CPFF, because unlike the CPFF described in FAR, the contractor would be required to complete the work in order to be entitled to payment, and you don't need a limitation of cost clause, because you've got the guaranteed maximum price. So it should not run afoul of the prohibition against use of CPFF construction contracts by DOD. Trying to teach people who don't ordinarily use FPIs about an FPI that is not really an FPI as described in FAR and the Contract Pricing Reference Guides, which has a separate ceiling price and a "point of total assumption", is going to be more trouble than it's worth, especially if, as you indicated, most can't administer DB GMP contracts. What happens if, as part of an REA, the contractor seeks a ceiling price that is higher than the target price? You're going to have to write a provision that prohibits such an REA. Would that require a FAR class deviation? If it did, and you didn't get one, would it be enforceable? Why bother with all that? Who would reasonably complain about a contract type that provides for payment of either a firm-fixed-price (the maximum) or actual costs and a fee, whichever is less? After all, the maximum is considered fair and reasonable, right? As for a name for the contract type, you could call it "FFP (or Less)". I have attached the Nash article to this post. The article is copyrighted, attached with permission, and must not be further disseminated. Best of luck to you. Vern SELECTING THE TYPE OF CONTRACT LIMITS ON DISCRETION.pdf
  19. tj: Your answer to my Question 1 does not tell me whether the contract states that the contractor must deliver the estimated hours. The CLIN description says "estimated," right? Not required? If it's only an estimate, then I would think the hours are not required. But a sound response to your inquiry would require a legal analysis of the entire contract, not just the CLIN descriptions. Your answer to my Question 2 suggests that you cannot deny payment of the monthly rate because the contractor did not provide 10 persons per month, because you said the contract does not say that the contractor must provide 10 persons per month. Your answer to my last question indicates that the contractor must provide the information that the PWS says it must provide. But, again, a sound response to your inquiry would have to be based on a legal analysis of the entire contract, not just the PWS.
  20. The contractor is bound by the terms of the contract. Two questions for tj2015: 1. You say that the CLIN description said hours are "estimated," but does the contract say that the "estimated" hours must be provided? 2. You say that the contractor proposed 10 persons per month, but does the contract say that the contractor must provide 10 persons per month? If the contract does require 10 persons per month, does it say how many hours each person must perform? Does the contract say that the contractor's invoice shall (not should) include a detailed breakdown of the actual hours worked?
  21. Special standards of responsibility, FAR 9.104-2, like general standards of responsibility, FAR 9.104-1, are pass/fail standards that must be met in order for an offeror to be considered qualified to perform the contract work. An offeror either meets the standard of it doesn't. If it does, it's qualified. If it doesn't it's not. Agencies do not use responsibility standards to compare offerors to each other. The GAO refers to special standards of responsibility as "definitive responsibility criteria." See Prime Mortgage Corp., GAO B-238680, 90-2 CPD ¶ 48: Special standards are specific and objective standards of responsibility that are used in a specific procurement or class of procurements. See NEIE Medical Waste Services, LLC, GAO B-412793.2, 2016 CPD ¶ 213: A general standard of responsibility such as experience, see 9.104-1(e), becomes a special standard when it is stated in specific (definitive) terms, such as a requirement that an offeror must have performed within the past two years two contracts similar to the prospective contract in terms of scope, dollar value, and duration. Again, the standard is pass/fail Unlike special responsibility standards, evaluation factors are used to compare offerors to each other. For instance, if experience is used as an evaluation factor, the offerors are compared to each other on experience, and the one with more or better experience is evaluated more highly than one whose experience us not as good. So the key difference between special responsibility standards and evaluation factors is how they are used. Responsibility standards are used to determine whether an offeror meets a threshold requirement for qualification. Evaluation factors are used to compare offerors and rank them. Considerations such as experience or past performance could be used as a special responsibility standard or as an evaluation factor. See Sanford and Sons Co., GAO B-231607, 88-2 CPD ¶ 266:
  22. Okay, Joel. But 52.216-17 does not cover all of that. And your first post was 2,556 words just to ask one question, not to make a point, and to which you got only two responses. I'm just trying to persuade you to do something simpler than what you seem determined to do. I didn't realize you weren't open to suggestions. Now I am, and I'll quit offering unwelcome ideas.
  23. What some readers of this thread might not understand is that a Guaranteed Maximum Price (GMP) contract is a CPFF contract. But unlike a Government CPFF contract, the contractor is obligated to finish the work. It is not a "best effort" contract. The owner agrees to reimburse the contractor's costs, but only up to the guaranteed maximum price. At the GMP the contractor is fully responsible for all additional costs to complete. For the sake of those who are not familiar with GMP, here is the text of a model GMP clause for a commercial GMP contract: It should be clear from that text that the clause describes a hybrid of CPFF and FFP. The contractor is paid the lesser of its actual costs or the GMP. The clause does not give the contractor a share of the savings, but paragraph (e) could easily be rewritten to do so. I'm pointing these things out to you because I hate FPI contracts. The administration of such contracts is difficult. They greatly complicate the process of contract modification. I don't think you would be doing a good thing by trying to implement the use of GMP through the use of FPI. I think FAR Part 16 allows you to mix features of contract types. Others may disagree, but there is a long-established tradition of doing so. In a May 2000 article, Selecting The Type Of Contract: Limits On Discretion?, Ralph Nash interpreted FAR 16.102(b) to permit the use of GMP for design-build and discussed how the FAR appears to limit agency discretion in use of contract types. Among many things, he said: I'd be happy to provide you with the full text of his article if you have no other access to it. If the people you must work with on your project will not accept an interpretation of FAR that permits the use of GMP for design-build, then I urge that you seek a class deviation of FAR amendment permitting the use of GMP for design-build rather than using FPI contracts with identical target and ceiling prices. I truly believe that the use of FPI contracts would make construction KOs and contractors very unhappy in the long run. I've adwarded and administered several of them, and I cannot think of a worse contract type for construction contracting than FPI. Vern
  24. That's the question you asked three days ago. What you meant of course was not "specifically" but expressly. Don answered your question some time ago. FAR does not say that the target price and the ceiling price must be different numbers. The inventors of FPI and the authors of the incentive price revision clause presumed that the numbers would be different, but nothing says that they must be in so many words. I was not "alluding" to that question at all.
  25. Bull, and by calling it FPI anything you're leading your people into a contract admin disaster.