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Kafka Esquire

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About Kafka Esquire

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  1. On June 24, the FAR Councils issued an Interim Rule, effective immediately, that changes the amount of allowable executive comp. The Rule applies to “contracts” issued after June 24. The FAC states that the revised compensation cap “will apply to the costs of compensation … for contracts awarded, and costs incurred, on or after June 24, 2014. The Rule is just vague enough -- or we are simple-minded enough -- that our contracts and finance teams are scratching our heads (each scratching his/her own, not each others' ... that would just be weird. ). Here is a link to the FedReg: https://www.federalregister.gov/articles/2014/06/24/2014-14379/federal-acquisition-regulation-limitation-on-allowable-government-contractor-compensation-costs?utm_content=next&utm_medium=PrevNext&utm_source=Article Here are the issues / questions on which we are grappling: First, as to costs, the rule as written applies to contracts awarded, AND costs incurred on or after June 24. Is it reasonable to suggest that the new cap would apply to costs incurred AFTER June 24 even if they were incurred under a contract that was awarded BEFORE June 24? Or, just to costs incurred under a contract that was awarded after June 24? Second, as to the word “contract,” the FAR definition of contract includes “orders.” The definitions of task and delivery orders include the phrase “an order … placed against an established contract.” In the context of an IDIQ contract, we are confused. The rule clearly applies to IDIQ, MAC, Basic Ordering Agreements and other top-level ordering vehicles awarded AFTER to 6/24 (and to all task/delivery orders issued under those top-level agreements). But: 1. For IDIQ, GWAC, Basic Ordering Agreements and other top-level ordering vehicles awarded BEFORE to 6/24, are task / delivery orders issued after 6/24 subject to the new FAR compensation cap? 2. For multi-year contracts that contain unexercised options as of 6/24, are the options that are exercised after 6/24 subject to the new FAR compensation cap? 3. For incrementally funded contracts awarded prior to 6/24, will an incremental funding mod issued after 6/24 be subject to the new FAR compensation cap? 4. For proposals submitted prior to 6/24, what is a company’s obligation (or ability) to update the proposal for the new FAR compensation cap? Thoughts/comments appreciated.
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