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learningtheropes, You haven't received any responses, because you haven't provided enough info. Tell us the whole story. Ed

The ceiling is the estimated cost. Read the Limitation of Cost clause. It limits the Government's obligation to the estimated cost. When a contract is not fully funded the ceiling is the amount funded per the Limitation of Funds clause.

Since 1988, I have worked subcontracts for NASA prime contractors. I can assure you Mr. Edwards is right - as usual. I would only add that you should review your new employer's internal procurement regulations for any coverage of the matter.

DW, Sorry to get you riled up. Nothing personal intended. What would your response have been if the first sentence of my reply had read "DW, I must take issue with the information you presented"?

DW, I have to take issue with you. With a labor hour contract the contractor is paid a fixed hourly rate. The number of hours is limited by a ceiling price, but the contractor's incurred costs are not involved; costs are not reimbursed. I can't see that a labor hour contract is in any way cost reimbursement, nor is it a hybrid - it's what it is, a fixed rate contract. Now, a T&M contract may be considered hybrid, since labor is paid at a fixed hourly rate and material may be reimbursed at cost. As I recall, LH and T&M contracts were at one time categorized as "Other" in the regs - ASPR, FPR and maybe early FAR. I liked that designation better that trying to shoe horn them into FP, CR, or hybrid. Ed

ERS, What is the basis for your assertion that a labor hour contract is cost type?

Q. Can the Agency Treat each option as a new contract? For instance first year Contract Awarded at $1,000,000.00 modified to $1,800,000.00 Option 1 optioned at 1,800,000.00 thus could increase t $3,500,000.00 since it didn't increase 100% in the "New Contract Period"? A. An agency can exercise an option only in accordance with the option language of the contract. Apparently, the option language in your contract does not provide for what you describe - or you wouldn't be asking the question. So, my take is that the agency is correct - the contract/modifiation for the new year will have to be processed as a new procurement, Google "cardinal change" for info on the term. Ed

To understand subcontract requirements one must read the subcontract, not FAR or DFARS. 252.225-7014 Alt 1, as it would appear in a subcontract, does not contain the simplified acquisition threshold. Therefor there is no exception for subcontracts. That shows how the DFARS authors interpret the statute.

Vern, You mentioned "full time equivalents" in your Post no. 28. Please elaborate. Thanks Ed

If you must shoehorn this kind of transaction into a FAR Part 16 type, it would be IDIQ with rates set by law or regulation. In some organizations procurement of sole source utility services are not handled in the procurement organization. Sometimes a contract is not required.