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Vern Edwards

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Everything posted by Vern Edwards

  1. Option Exercise Likelihood

    Given good performance by the contractor, good relations with government officials, a continuing need for the same service, continued funding, and reasonable option pricing, then I'd say the likelihood is at least 95 percent. Why wouldn't they exercise the option with those givens? Who wants to conduct a new procurement?
  2. Also known as "Don't fight the hypothetical." Google that.
  3. CDRL Debate

    Has anyone shown you anything official that says you cannot use a CDRL in a contract for commercial items? If not, then... Don't listen to can't dancers.
  4. I'm seeing symptoms of analysis paralysis.The big concern seems to be whether the trial is really free. Let's assume that KA20003 is not an idiot, has done his or her homework, and has confirmed that the trial is free. Okay? That being the case, I say that a tryout is market research. That's why the agency would be trying it, to find out about it. No one has identified a valid fiscal law issue.
  5. Wouldn't the free trial be market research?
  6. IDIQ Maximum Orders 52.216-22(b)

    You are not overthinking it. You simply don't know the rules. All the questions that you have asked were resolved at least 15 years ago. Although the maximum may be $60M for the entire set of contracts, the agency probably distributed it among the awardees by setting a maximum of $10M for each contract. When the maximum is reached for a particular contractor the agency can issue no more orders to that contractor. If it did, the other contractors could protest. In order for the agency to raise the maximum on a particular contract it would have to prepare a sole source justification and obtain approval. You need to take a class or buy a book, such as The Project Managers Guide To IDIQ Task Order Service Contracts, by Salesky. IDIQ contracting is complicated.
  7. IDIQ Maximum Orders 52.216-22(b)

    pricelesspearl: Yes. You are missing what I told you in my last post. For the Government to order more than the maximum would be tantamount to an out-of-scope modificaiton of the contract and ground for protest, as indicated by the regulations I cited. Good day to you.
  8. IDIQ Maximum Orders 52.216-22(b)

    See FAR 16.504(a)(1) and (4)(ii) and 16.505(a)(10)(i)(A). An agency may not issue an order or a set of orders the value of which would exceed the maximum quantity.
  9. PTA above ceiling price — how big a deal, really?

    You're not the only one, REA. Some pretty knowledgeable and experienced people feel the same way. It doesn't seem right. But I found one ASBCA decision that says the Government can do it, based on the board's interpretation of the language of the incentive price revision clause and FAR 16.403-1(a). It appears to be a case of first impression and there has been no other like it since. One knowledgeable person thinks the contractor's case was poorly argued. Don and I are looking further into the matter to find out if there is an official position on the interpretaiton of the clause.
  10. PTA above ceiling price — how big a deal, really?

    Don: See Southwest Marine, Inc., ASBCA 54550, 09-1 BCA ¶ 34116. I have sent it to you by email. Vern
  11. PTA above ceiling price — how big a deal, really?

    Yes. But that could refer to a situation in which the contractor exceeds the ceiling with a zero profit. They could. The question is whether they did when they agreed to FAR 52.216-16. No. For one thing, PTA is not a contract term, just an idea. PTA is not mentioned anywhere in FAR and is not a term of an FPI(F) contract. The big deal is the question whether under an FPI(F) contract the parties have agreed to apply a formula for a profit incentive to costs.
  12. PTA above ceiling price — how big a deal, really?

    Now that is interesting. The effect of your example is to make both profit and cost entitlement subject to adjustment based on the profit sharing formula. In all my years in contracting I have never entertained such an idea. I have considered zero profit, but not negative profit. I was so started (and intrigued) by the sudden realization of what you were saying that I called two experts, both of whom you know, both of whom have extensive knowledge of and experience with FPI(F) contracts, to ask if they had ever heard of such a thing. Neither had, and one was livid at the thought. They think that target profit is reduced by the overrun until it reaches zero, at which point the incentive is no longer effective. They do not think that cost entitlement is affected by anything other than the principles of cost allowability and the ceiling price. I pointed out that the plain language of FAR 52.216-16 does not expressly preclude the use of a negative number in calculations of total final price. They were not impressed. They said that the clause clearly provides for the adjustment of "target profit," not cost entitlement. When target profit minus the contractor's share of an overrun reaches zero, no further adjustment is to be made. The incentive stops working. You don't start subtracting from incurred cost. I looked at FAR 16.401-1(b) and found: According to that description, adjustments are to target profit or fee, not to cost entitlement. At this point I do not agree that FAR 52.216-16 stands for the proposition that cost entitlement is to be reduced by the contractor's share of a cost overrun. I believe that cost entitlement under an FPI(F) contract is limited only by the cost principles and the ceiling price. But see FAR 16.403-1(a). I could find no case law or other discussion of the idea that cost entitlement is to be reduced by the the contractor's share of an overrun. Since you're with DAU I wonder if you could put this issue to DPAP, ask for their interpretation, and let us know their response. One of my experts said that before the guidance in Better Buying Power this issue was not likely to come up. If any reader can shed the light of experience on this issue, please chime in.
  13. PTA above ceiling price — how big a deal, really?

    Don: I think I understand. FAR 52.216-16(d)(2)(ii) addresses a situation in which the total final negotiated cost exceeds the target cost. It says: So you are saying that if the total final negotiated cost is equal to or greater than the ceiling price, and if the total target profit minus the contractor's share of the overrun yields a negative number, then the total final negotiated cost is still reduced by the contractor's share of any overrun. An adjustment is made even though the target profit minus the contractor's share is less than zero. The effect is to produce a final price that is less than the ceiling price, even though the contractor has incurred costs equal to or greater than the ceiling price. In other words, sharing continues even after there is no profit left to reduce. Thus, PTA can exceed ceiling price. Do I understand correctly?
  14. PTA above ceiling price — how big a deal, really?

    Don: You keep sending me back to your equation. Can you explain with words? Suppose that the contractor's cost has reached the ceiling price of $3,250,000 and it then incurs another dollar. What happens as a result? What is the contractual effect on each of the parties?
  15. PTA above ceiling price — how big a deal, really?

    Don: You say your example shows the PTA can exceed the ceiling price of $3,250,000, up to $3,437,500. I asked you: You answered: The definition I use for PTA is based on the description in the DOD Contract Pricing Reference Guides, Vol. 4, Ch. 1: "the cost at which the contractor assumes total responsibility for each additional dollar of contract cost." If in your example $3,250,000 is the most that the Government will have to pay the contractor, an amount at which the Government will not pay the contractor $1.00 more, I do not understand how the Government will share some of the costs in excess of $3,250,000 up to $3,437,500. It seems to me that if $3,250,000 is the most that the Government will have to pay the contractor, then if the contractor incurs a cost greater than that amount the contractor will be totally responsible for it. Am I wrong about that? Although I know that equations can produce at PTA value in excess of the ceiling price, I do not think that such numbers match the definition of PTA in the CRPGs or in the Incentive Contracting Guide and thus do not constitute Points of Total Assumption. I think that you believe that the PTA equation defines PTA. I don't. I think the equation is a way to determine the amount of the PTA, but that it yields an accurate PTA value only up to the ceiling price, at which point it works no longer. I think our disagreement is about definitions, not math. But I'll wait for your explanation.
  16. PTA above ceiling price — how big a deal, really?

    My only issue in this thread is whether the PTA of an FPI(F) contract can exceed the ceiling price. It cannot. It can equal the PTA, but it cannot exceed it. The PTA is the cost at which cost sharing stops and the contract becomes FFP. To the best of my knowledge the concept of a PTA was first discussed in either the 1965 or 1969 Incentive Contracting Guide. The 1969 Guide explains that "[A]ll costs incurred beyond the PTA are in a firm-fixed-price area and have the effect of reducing profit by one dollar for each dollar of cost incurrence." Based on that description, the PTA can be equal to but never higher than the ceiling price. The 1969 Guide included an equation for calculating the PTA, which is still in use, but the equation stops working when incurred cost equals ceiling price, It does so for no other reason than that the clause at FAR 52.216-16, Incentive Price Revision--Firm Target (OCT 1997), paragraph (a) states: "in no event shall the total final price of this contract exceed the ceiling price." However, the PTA equation can produce a result higher than the ceiling price, because it does not reflect the contractual limitation. Some people are conflating PTA with the mathematical outcome of the equation, but that equation produces a valid result only at or below the ceiling price. This should be very easy to understand. By definition, the PTA can never exceed the ceiling price. If you accept incentive theory, then it goes without saying, or should, that a particular share ratio is appropriate for a particular situation.
  17. PP Neutral Rating

    Thank you, Don.
  18. PTA above ceiling price — how big a deal, really?

    Thank you, Don.
  19. PTA above ceiling price — how big a deal, really?

    Don: In your analysis, is the ceiling price the most that the Government will have to pay to the contractor? Are the parties still cost-sharing above that amount?
  20. PP Neutral Rating

    With which specific statement(s) do you disagree? I made several. Please clarify.
  21. PP Neutral Rating

    If an agency requests information about past performance in the form of completed questionnaires, and if an offeror submits no questionnaires, then the proper response by the agency is a finding of "No record" or "No information" or simply 'None" with respect to past performance. The agency should not evaluate them unfavorably on "compliance with solicitation requirements," which would be stupid. "No record," "No information" or "None" would not be an evaluation--an assessment of value. It would be just a statement of fact under the rules of source selection. The GAO does not think that such a procedure constitutes evaluating the offeror unfavorably. When comparing that offeror to one with good past performance, the agency might find the other offeror to be a better value in that regard. It might consider the offeror with none to be better than one that has poor past performance. Those are matters of opinion. I think it would be a very long stretch to call such an opinion a penalty. A penalty is "the imposition by an agency or court of a fine or other punishment; a judgment for monetary damages or equitable relief; or the revocation, suspension, reduction, or denial of a license, privilege, right, grant, or benefit." The courts have ruled that there is no private right of action against an agency that violates the Paperwork Reduction Act. A person or an organization cannot sue an agency because it did not seek and obtain OMB approval or display an approval number. A person or an organization can cite an agency's violation only as a defense against a "penalty." The key to the success of what you recommend would be whether an attorney could persuade a tribunal that a finding of "None" or "No record" or "No information," or that a consensus of opinion about which of two offerors is better, would, in and of itself, constitute a penalty. I have not studied the PRA and the implementing regulations closely at all, but it seems to me that in order to comply agencies would have to seek approval of each and every RFP on an individual basis, since the burden associated with various RFPs will be very different. I doubt that class approval would comply. I think that such individual approvals would be impracticable, and it appears that OMB has interpreted the law as not covering RFPs. That is probably within its discretion in interpreting and applying the law. Congress could take action if it disagrees, and it has not done so. So...
  22. PP Neutral Rating

    Don: Sorry, but I still don't understand downgrade.Downgrade from what to what? Thanks for the reference to OMB 9000-0037. I was referring to FAR 1.106. Why does it refer OMB 9000-0037 to FAR 15.2, since the pre solicitation notice rules are not in that subpart? How have agencies gotten away with requesting proposals all this time without an OMB Control No.?
  23. PP Neutral Rating

    Don: What do you mean by "downgrading"? If an offeror has no record of past performance, then the appropriate evaluation finding is None. In that regard, see SITEC Consulting, LLC; VariQ Corporation; Logistics Systems, Inc., B-413526.4, 2017 CPD ¶ 124, April 3, 2017: Finding that some good is better than none does not constitute downgrading none. Also, assuming that the past performance questionnaire is considered to be part of the proposal, wouldn't it be covered under the Paperwork Reduction Act by OMB Control No. 9000-0037, which covers FAR Subpart 15.2, "Solicitation and Receipt of Proposals and Information"? Wouldn't putting that OMB control number in the proposal preparation instruction or past performance questionnaire satisfy the display requirement?
  24. I want it on record that I did not request that any action be taken against the offending poster. I did not contact the webmaster about this.
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