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ohnoudidnt14
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LOL @ Vern. Carl, I may try to call-in to this meeting today and ask my question there too...we'll see what happens. At this point, I'm going to put it to the contracting officer in negotiations. If they think they have the authority to remove the clause from the contract, then I can always argue "apparent authority" even if someone down the line later rules that they didn't. To Vern, don't worry, I wouldn't agree to it on a nudge and a wink..."put it in writing"! Finally to Retread...sub is "small" too, no real concern about ostensible subcontractor issues. Thanks to all.
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Follow-up, I started writing that last post after #17...by the time I finished/posted it, y'all were up to #21. It seems as if Vern is cautioning that even if the Contracting Officer thinks they have the authority to take out the clause, that authority may not hold-up if challenged. Per the previous postings, it is apparently the Contracting Officer that is charged with enforcement of the clause in the first place (and not the SBA). Therefore, if the CO agrees not to enforce it (or, more correctly, to enforce § 125.6( c ) as an alternate), is there really an issue, who would be left to challenge the performance?
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Wow...I think I've stirred up something here, so I will clarify a few things. 1) Yes, IFB, low bid 2) Since there is one prime (HUB) and only one sub (non-hub), the requirement is 50% (BTW, calculated in accordance with Vern's option 2, post #25, "Is this professor right?"). So, I didn't think it was relevant if it fell under ( d )( 3 ) (correct assumption Joel) or ( d )( 4 ) since subparagraphs ii) and iii) are the same for both. 3) Confirm that 50% is a "requirement", not a "goal". 4) The pending change CAN be considered a change "within the scope" of the original contract. 5) The change is actually laying out some methods-and-means by which we (the contractor) must accomplish most of the work. Whereas this is not ordinary for the government, we are trying to work in good-faith with them as this is a critical 24/7 occupied medical facility with work scheduling/phasing requirements that were not identified in the original bid documents. 6) Vern, the subcontractor is a specialty subcontractor for which the prime does not have the experience, qualifications, equipment, licenses, or insurance to accomplish. Technically, you are correct that it would not be impossible for the prime to perform more of the subcontractors work...just impractical. It would probably cost less for the prime to "featherbed", as Joel called it, which none of us would like to do (hmmm, would it be wasteful spending if it actually cost less?). Anyway, I don't think it would be in the best interest of the government for the prime to perform this specialty work for many reasons. In retrospect, this contract was probably not a good candidate for a HUBZone set-aside in the first place, but that's water under the bridge. 7) This contracting officer is tracking compliance with the FAR requirement...and even if she wasn't, I always intended to comply with the requirement and would not want to risk the possible result of non-compliance, after the fact. So I guess my question has evolved to this...Does the Contracting Officer have the authority to remove the FAR clause 52.219-3 from the contract associated with a negotiated change and defer to the requirements of § 125.6( c ) ? Joel points out (posting #10) that the Contracting Officer does have this authority under § 126.700 ( c ) "...after determining that at least two qualified HUBZone SBCs cannot meet the requirement." But: 1) this is clearly intended for such a determination prior to award of the contract, and 2) the condition "two qualified HUBZone SBC's cannot meet the requirement" is not necessarily an issue. Carl/Joel/Vern...is this enough information?
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Retread....that is correct.
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Joel...I always welcome your input. Here is the clause, although I've cut it off for space. See specifically ( d )( 3 ) and ( d )( 4 ). 52.219-3 Notice of HUBZone Set-Aside or Sole Source Award. As prescribed in 19.1309(a), insert the following clause: [ b ]Notice of HUBZone Set-Aside or Sole Source Award (NOV 2011) (a) Definitions. See 13 CFR 125.6(e) for definitions of terms used in paragraph ( c ). ( B ) Applicability. This clause applies only to— (1) Contracts that have been set aside or reserved for, or awarded on a sole source basis to, HUBZone small business concerns; (2) Part or parts of a multiple-award contract that have been set aside for HUBZone small business concerns; and (3) Orders set-aside for HUBZone small business concerns under multiple-award contracts as described in 8.405-5 and 16.505( B )(2)(i)(F). © General. (1) Offers are solicited only from HUBZone small business concerns. Offers received from concerns that are not HUBZone small business concerns will not be considered. (2) Any award resulting from this solicitation will be made to a HUBZone small business concern. (d) Agreement. A HUBZone small business concern agrees that in the performance of the contract, in the case of a contract for— (1) Services (except construction), at least 50 percent of the cost of personnel for contract performance will be spent for employees of the concern or employees of other HUBZone small business concerns; (2) Supplies (other than acquisition from a nonmanufacturer of the supplies), at least 50 percent of the cost of manufacturing, excluding the cost of materials, will be performed by the concern or other HUBZone small business concerns; (3) General construction. (i) At least 15 percent of the cost of contract performance to be incurred for personnel will be spent on the HUBZone prime contractor's employees; (ii) At least 50 percent of the cost of the contract performance to be incurred for personnel will be spent on the HUBZone prime contractor's employees or on a combination of the HUBZone prime contractor's employees and employees of HUBZone small business concern subcontractors; and (iii) No more than 50 percent of the cost of contract performance to be incurred for personnel will be subcontracted to concerns that are not HUBZone small business concerns; or (4) Construction by special trade contractors. (i) At least 25 percent of the cost of contract performance to be incurred for personnel will be spent on the HUBZone prime contractor's employees; (ii) At least 50 percent of the cost of the contract performance to be incurred for personnel will be spent on the HUBZone prime contractor's employees or on a combination of the HUBZone prime contractor's employees and employees of HUBZone small business concern subcontractors; (iii) No more than 50 percent of the cost of contract performance to be incurred for personnel will be subcontracted to concerns that are not HUBZone small business concerns.
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CC, yes. In our case, it is an existing contract. Prime and sub have worked out about a 50/50 split of the work, but a change order is de-scoping some of the prime's work and adding to the sub. With the change, we won't be able to meet the 50% requirement. This post has had several views already, with no other comments. I would think that the answer would apply to most socioeconomic categories where an applicable limitation on subcontracting might be compromised by a change order that applies heavily to one or more subs.
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(Another) Limitation on Subcontracting Issue Again, a FFP HUBZone construction contract in NW Fla. Based on the latest FAR clause, the HUBZone must self-perform (or subcontract to other HUBZone entities) 50% of the work…even for construction. We bid with a plan to achieve this goal. Now the contract has a change order pending that will drastically reduce the scope of work that we (the prime) were going to self-perform and increases the scope of work to be performed by a key Subcontractor. Incorporating the change, it will be nearly impossible to satisfy the referenced FAR requirement for self-performance. Given this change, the only options I see are: A ) Try to negotiate out the implicating FAR clause associated with the change (I’m not sure the CO thinks they have the authority to do that), or B ) Bid additional people (cost) to sit on their butts and watch the work being done, until we achieve the goal. Any other ideas?
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As usual, Joel is right on the mark. Thanks Joel (again) for leading me down the right path. To answer some of the other questions here: 1) Joel--Yes, 13 CFR 125.29 should be the right reference, 13CFR121.108 is what the SBA referenced...chalk it up to another error of their part. 2) Although the change DID involve remediation of hazardous materials, it was just an extension of remediation that WAS part of the original contract scope. 3) Retreadfed--I'm not sure that 13 CFR 125.15 (e)(1)(ii) applies as it reads "acquires, is acquired by, or merges with another concern". I guess technically it was "acquired by...another concern", the son. But this clause seems to intend to apply to IDIQ-type contracts (with subsequent orders yet to be placed against it) or services contracts with follow-on option years. In our case, it is a single, discrete, competitively bid construction contract. 4) Vern, missed your input on this one. Thanks to everyone.
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Update for 8(a): 13CFR124.514(d) is very clear for 8(a)s: (d) Modifications within the scope. The procuring activity contracting officer may exercise a modification within the scope of the initial 8(a) contract whether the concern that received the award has graduated or been terminated from the 8(a) BD program or is no longer eligible if to do so is in the best interests of the Government. I'm looking for exactly this, for SDVOSBs.
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CC, the references you mention have to do with who "controls" a SDVOSB for the purpose of qualifying. We really don't have an issue there. We were an SDVOSB, we had an ownership change...and we weren't a SDVOSB. There are not disagreements with that. We finished work on all prior awarded contracts, we submitted NO more bids under new SDVOSB set-asides. I think FPDS may actually be right, in that it identifies the status at the time the contract was awarded and recognizes that changes "within the scope of the original contract" still qualify as far as any applicable goals they may be tracking, etc. Through the 8(a) application, we are dealing with an SBA rep. that doesn't understand that we were well within our rights to finish the SDVOSB contract that was correctly awarded to the company at a time that we were a SDVOSB. As much as our example is an SDVOSB, I would think the answer will apply to HUBZones that lose that status, companies that grow to the point they are no longer "small", companies that are purchased by other individuals or companies, and 8(a) graduates. Thus, it may be helpful to many readers of these discussions. I'll take this a step further for SDVOSBs, the case NEIE, Inc. v. United States, No. 13-164 C (2013) confirmed that the SDVOSB status was required at the time that their proposal was submitted, even though they would not have qualified at the time of contract award. I'm hoping we'll find out soon where Vern was going with this...
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To CCulham...updated reps & certs. Did not qualify as a SDVOSB any longer. With regard to 13CFR 121.404(g), the status as "small" was never a contention ("very small" actually). I'm looking for something similar as it applies to the various socioeconomic classifications...in my case, SDVOSB.
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Yes, definitely. The SBA rep. is looking at every action in FPDS as a new contract action, even if it is just a mod. Apparently, for a mod., FPDS identifies the socioeconomic categories (correctly) that were applicable at the time of contract award and not at the time the mod is executed.
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Scenario: 1. SDVOSB (or plug in any other socioeconomic category) performing on several FFP, competitively bid, construction contracts. 2. The ownership of the business passes from father to son, acknowledged that the business no longer qualifies as a SDVOSB. 3. Made all appropriate changes in SAM, Reps&Certs. Clearly, the company is permitted to complete any active contracts, irrespective of the change in small business status. One particular active contract had subsequent change orders (that amounted to more than the original contract) based on unforeseen site conditions. Now, in the process of applying for 8(a) status (for which the son would qualify), the SBA is questioning the execution of those MODIFICATIONS as if they were AWARDS under the SDVOSB program during a time when the company was clearly not a SDVOSB. The SBA is using terms such as "Presumption of Loss" clauses under 13CFR121.108 associated with "misrepresentation". Can anyone point me to specific references where I can validate that the firm was correct to complete the contract and that the status at time of award of the original contract (and NOT any subsequent modifications) is what had to satisfy the applicable set-aside. I'm not sure if the answer would be different if this were a services-type contract and we were talking about executing an "option"...but I don't think so. I have seen several 8(a) companies land 5-8 year IDIQ type contracts with one base year and one year extensions just prior to graduation, yet still perform throughout the option years. Any insight would be greatly appreciated. I'm certain that we were correct to complete the performance of the SDVOSB contract and am ticked that we have to defend ourselves from these attacks, coming from the SBA of all places! Thank you.
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It was a negotiation of a change to ultimately be a bilateral agreement as Joel described. It was quite brutal and the gov was definitely not acting in good faith (but no, they did not have JAG present). More to follow.
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No, not an ACE contract. I'm glad to see general concurrence with my position. I don't mind NOT bringing the subcontractor, if they have any comments regarding the subcontractor's portion of the scope of work, it just won't get resolved in this negotiation...but I will bring some backup. Thanks
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She is at it again!!! I have a change order negotiation scheduled in a couple of weeks to negotiate a change order to a FFP, SDVOSB set-aside, construction contract. My contracting officer is trying to dictate that I not bring anyone else to the negotiation including subcontractor representatives (even though they represent a majority of the scope of the change) and key project managers that have first-hand knowledge of the site conditions. I am confident that this move is an attempt to isolate, outnumber, and overwhelm me (they plan to have 6 people present including a SME and JAG rep.) and is far from operating in "good faith". Isn't it up to me who I have present at the negotiation? Please help me with some regulatory and/or FAR references that support my position (or prove me wrong with the same supporting the CO's position). Thanks
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Hi all. Obviously this has been a very thought provoking posting and I appreciate all of the input. My apologies for my misplaced #34, it was in response to Vern's #20. Usually, I attempt to satisfy any limitations on subcontracting solely on direct labor cost (construction is still based on "labor" costs, not total contract). Any contracting officer can see, based on certified payrolls, that I've already satisfied the requirements without even considering indirect labor costs and it is not an issue. For some contracts the limitations were recently increased. Adding to that my (owner/officer) direct effort, the wage rate of which is not reported via certified payrolls, my success satisfying such limits is not as obvious. You've put my mind at ease, that I'm probably not subject to any type of audit anytime soon. Unfortunately, I am dealing with an inexperienced, unreasonable, and even belligerent contracting officer. I have repeatedly stopped her from imposing her will, by citing either contract or FAR clauses (how DARE I actually read the contract, huh?). I was (and remained somewhat) concerned that she will take actions to entice an audit, just to be vindictive, rather than work with me. My next battle is probably going to be quantifying my costs for a delay by the Government. Thank you all again. PS Vern, please stay active. I have enjoyed reading your posts on several discussion threads.
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Not really. So, if you were the contracting officer just doing a check for your own satisfaction and all you had to go on was certified payroll that showed the owner's hours, but not wages....what would you assume as the owner's base rate for the purpose of evaluating the prime contractors portion of the labor performed? 1) the applicable Davis-Bacon rate for the nature of the work, 2) $1/hr more than the highest paid individual reported (if any), 3) $0, 4) some other arbitrary figure?
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Thank you all again for your insight on this topic. H2H, your info regarding the S-corp is 100% on the mark and may help a lot of readers of these discussions. As a (very) small business owner, you pay your employees first, even if it means you go without. Referencing back to my original question, I'm sure you can all understand that it is frustrating as heck that if I decide to "go without" for a few weeks, it adversely effects my "limitations on subcontracting" calculation, even though my true effort on the contract is unchanged! I'll be consulting with an experienced accountant very soon.
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Thank you all for some great insight. To follow-up: H2H-1, your suggestion to get a good accountant who understands cost accounting for gov contracts is probably the best advice yet. I've been stalling as long as I can from the conversion from a cash basis to an accrual basis. FYI, as an S Corp, the K-1 earnings pass through as personal taxable income. If I'm real good at the books, this will account for half of my income for the year to minimize my taxes. H2H-3, your interpretation was almost correct. I am not having a problem complying with Davis-Bacon reporting, compensation paid to an owner is not reported (but direct hours are). My problem is then how a contracting officer will figure (or assume) those wages when validating against any applicable subcontract limitations (wouldn't it be reasonable for them to assume the Co. has paid Davis-Bacon required wages for the applicable labor category). CC - very good insight, but I guess one thing wasn't clear that impacts all of this. Most of the contracts are low-bid FFP competitive, thus the gov does not have any cost or pricing data. Finally, to FedCon - The way I read the GAO ruling is "GO" for using the revised rule. Thanks again to all. I'm not sure that I really have an answer other than "make sure you pay yourself" and "get an accountant", but those are both good.
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Prime contractor markup on subcontractors
ohnoudidnt14 replied to ohnoudidnt14's topic in Contract Administration
Sorry everyone...computer glitch on my end duplicated this post. Bob, feel free to delete one and consolidate responses (if any) if you can. -
Help! I am a prime contractor working on a (competitively bid, edwosb set-aside) FFP Air Force construction project in NW Florida. I am processing a change order and the government contracting officer is indicating that I will not be able to add overhead and profit markups on my subcontractor’s markups. I AM permitted to account for my additional labor, materials, and supervision hours (with markups), and normal OH and profit markup to the subcontractor’s direct cost, but NO OH or profit markup on the portion of my total subcontractor’s price that result from his OH and profit markup. These costs are a part of my subcontractor’s price and are my “direct cost” (as I read FAR 43.203( b )(2)). Further, there is no place on the AF Form 3052 to segregate these costs as subcontractor costs would be added as a direct cost in column 9. The subcontractor effort will probably be less than 70% of the change, but this isn’t relevant since FAR clauses 52.215-22 or 52.215-23 “Limitations on Pass-Through Charges” are NOT included in the contract and, as I understand them, are intended for cost reimbursable type contracts anyway. The contract does include standard limitations on subcontracting that apply to the total value of the contract (labor, as this is a construction project), not to a specific change order. Can anyone give me a definitive source that I can reference for this Contracting Officer confirming that a prime contractor’s overhead (and profit) markup on subcontracted efforts (based on total subcontract price) is allowable? Of course, I am willing to negotiate in good faith if they return the same. If it helps, like most small business, CAS is not applicable and we do not have separate G&A and Overhead pools, only one comprehensive overhead rate. Thanks
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Help! I am a prime contractor working on a (competitively bid, edwosb set-aside) FFP Air Force construction project in NW Florida. I am processing a change order and the government contracting officer is indicating that I will not be able to add overhead and profit markups on my subcontractor’s markups. I AM permitted to account for my additional labor, materials, and supervision hours (with markups), and normal OH and profit markup to the subcontractor’s direct cost, but NO OH or profit markup on the portion of my total subcontractor’s price that result from his OH and profit markup. These costs are a part of my subcontractor’s price and are my “direct cost” (as I read FAR 43.203( b )(2)). Further, there is no place on the AF Form 3052 to segregate these costs as subcontractor costs would be added as a direct cost in column 9. The subcontractor effort will probably be less than 70% of the change, but this isn’t relevant since FAR clauses 52.215-22 or 52.215-23 “Limitations on Pass-Through Charges” are NOT included in the contract and, as I understand them, are intended for cost reimbursable type contracts anyway. The contract does include standard limitations on subcontracting that apply to the total value of the contract (labor, as this is a construction project), not to a specific change order. Can anyone give me a definitive source that I can reference for this Contracting Officer confirming that a prime contractor’s overhead (and profit) markup on subcontracted efforts (based on total subcontract price) is allowable? Of course, I am willing to negotiate in good faith if they return the same. If it helps, like most small business, CAS is not applicable and we do not have separate G&A and Overhead pools, only one comprehensive overhead rate. Thanks
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As a (small) business owner, qualifying under several socio-economic programs, performing on a Federal construction contract, I am exempt from reporting requirements in accordance with Davis-Bacon. That is, whereas I have to report employees time/pay in accordance with Davis-Bacon, I am exempt from reporting wages (if any) paid to myself. How would the contracting officer (or SBA if subject to a later audit) allocate my compensation when it comes to calculating the labor portion as it relates to any applicable limitations on subcontracting? I often go without pay, if I chose to do so, for the betterment of the business. In some cases, I am the only employee performing on some small contracts. If it truly is calculated on “actual pay”, then I may not satisfy the goals even though I (owner and qualifier of the small business) may have performed a majority of the hours. More commonly, I have one or two employees performing along with me, but may not meet the 25% goal (or 15% or 50% depending on the contract/applicable FAR clause) if my own time is assumed to be worth NOTHING whether I actually paid “nothing” or not. Also, technically, as a single-owner subchapter S corporation my real “salary” is not figured until my personal and corporate taxes are filed the following year. I’ve reviewed all of the methods of calculations posted in the forums here and elsewhere, but haven’t seen how this might be addressed. Can anyone give me any insight into how the SBA (or any other auditing agency) would figure this (including any references)? Thank you in advance for your time and consideration and thank you Bob for allowing me to post this.