ohnoudidnt14

Over 100 views and not a single response. I didn't expect to "stump" the experts here. Any thoughts or ideas before I give up?

Follow-up for all. Good news, the KO has "seen the light" and today issued an amendment to the solicitation removing reference to this clause (without the need for a solicitation protest). Well done! I can already see that my next battle is going to be convincing the KO that inclusion of the clause for FFP acquisitions below the TINA threshold is still not "appropriate". A lot of good information in this thread to help that cause. Thank you!

It's sounds like everything is on-the-level here. What I'm taking from your statement is that each task order under the IDIQ contract will be negotiated on a fixed fee (not a percentage fee) basis. That said, the GOV and the KTR have an "understanding" (probably NOT captured in the contract) of what the basis of the fixed fee might be (as a percentage) in most reasonably expected circumstances under the contract. Negotiations on each task-order will justify IF the circumstances of that particular order warrant more or less than what was "reasonably expected". Regulations aside for just a moment (I'll leave that to the experts here), that sounds like a reasonable approach and very helpful to the government to be able to anticipate what to expect in advance of issuing a task order. Also, I don't see it as a violation of the CPPC prohibition, because (if I understand the quote) you are only using the percentage as a guideline and are ultimately executing each Task Order on a CPFF basis. The only caution I would have (especially if this is a multi-year IDIQ) is; how do you capture this information as contracting officers and contractor project managers change, possibly several times, over the years?

Reference FAR 52.219-14 (and similar clauses). I've seen several threads in this forum discussing the calculation methodology for determining the “cost of performance incurred for personnel”. I found the “Is this Professor right?” thread (started by contractor100 on 3/23/12) to be particularly informative and, in my humble view, conclusive as to how I have been calculating such costs (Vern's #25, alternate method). So I need to throw a hypothetical situation out there that I may find myself in soon. On a FFP contract (with resulting FFP subcontracts) I may not have visibility into my subcontractor’s direct labor cost, only an agreed billing rate. How can I credibly calculate the “cost of performance incurred for personnel” if the only data I have from a FFP subcontractor is the total burdened cost of labor? Extending the hypothetical for just a minute, what if I didn't even have the burdened labor rate and purely a FFP subcontract total cost (labor and materials)? To put this in perspective, say I hire Vernon J. Edwards, Consultant, LLC to assist in contract performance. I pay the LLC $500/hr for services rendered. How could I account for the “cost of performance incurred for personnel” for these services if I have no further data than Vern's external billing rate? Although it may be inevitable, I don’t mean to get into the nuances of whether or not the LLC (or S-Corp where an owner is performing the work) actually pays a salary to the individual. That is a topic for a different thread.

I think you are definitely treading on dangerous waters here. As Vern pointed out, you have asked 2 separate questions. I would think that a well-written subcontract would include the suspension of work or stop work clauses as flow-down clauses from the Prime contract. Therefore, a Stop Work order written against the prime contract should flow-down and be applicable to you as a subcontractor. As far as your "assurances that we will be paid", there are several levels to cover, most have already been mentioned: 1) payment for re-work if the work is not accepted by the government. 2) assured payment by the prime in the event the protest is sustained or (for any other reason) the prime contract is terminated by the government (i.e., will you get paid even if the prime doesn't get paid for your work). 3) indemnity/insurance coverage in the event something goes wrong during performance. All that said, you haven't mentioned what type of contract it is. As Joel mentioned, if it involves work on "real property" or even performance on government property, you may be VERY restricted as to what you can do. In an extreme case, unless you were addressing a safety issue or somehow protecting government personnel or property, you could be deemed to be "trespassing" if you are on government property after issuance of a stop work. Of course, everything depends on your specific circumstances, type of contract, what service/product are you offering, etc. But I would definitely say that you would be proceeding at much greater risk. Tread lightly, the waters are deep.

Vern, I'm glad this thread didn't die too quickly, there is a lot of valuable information here. I've learned a lot and I'm glad it will be here for future researching Wifcon-ers (Wifconeers? Wifconians? Wifconettes? Whatever). I will try to come back here with the outcome. Thank you to all who contributed.

Don, thanks. It's nice to know I'm not completely losing it. Vern, YOU ROCK! This IS a FAR Part 14 IFB.

Wait, Don, you've edited your post so that both remaining options start with "When the total estimated contract or order value is below the thresholds identified in FAR 15.408(n)(2)(i)"...does this mean that you are agreeing with my AND hang-up and the KO DOESN'T have the discretion when the estimated contract or order value is ABOVE the stated threshold?

Vern (#20) - I like it...to the point. I guess my second question is: How the hell, using only appropriate regulatory references, can I convince the KO to get this out of the solicitation? Don - I'll admit I was a bit hung up on "and", but based on your (and wvanpup's) interpretation, the exclusions of FAR 15.408(n)(2)(i)( B )(2) might as well not be there because you are giving the KO full discretion regardless of anticipated contract value or contract type. Retread - I know your question was directed at Don, but I figure 15/208(n)(ii) incorporates the "additional exceptions" mentioned in ( B ). Joel – I’m still attempting to get the clause removed completely and am struggling with the disclosure requirements as this is a low-bid / IFB. Thank you to everybody...this is what makes WIFCON so valuable. (Vern, I look forward to being a student in one of your classes someday).

Thanks again Joel. I'm going to save some of your language for use in the inevitable future negotiations. Meanwhile, I'm hopeful that the KO will come around and just take the clause out. Any modification proposal will be consistent with the original bid concept and will not have any unnecessary layering. That said, there are several subs and sub-subs that will be performing on-site, it's the nature of the project.

Thanks Joel, you are putting my mind at ease. Don's interpretation "that the KO may insert the clause for solicitations with a value less than the thresholds when appropriate and may use it on any contract type when considered appropriate" addresses two separate issues...what about when the value is ABOVE the stated threshold? Doesn't the exclusion at (n)(2)(i)( B )(2)(i) apply? If not, then why have it? For what it's worth, for this GC contract, we generally would not satisfy the "measuring stick" of 30% on any reasonably conceivable modifications...thus the concern in the first place.

Don. I've always appreciated your input to postings on Wifcon. Glad you chimed-in here. So, even the way you have re-written the clause at (n)(2)(ii), it still doesn't give the KO authority to include the clause IF the order value is ABOVE the thresholds of 15.408(n)(2)(i). The exclusion for "A firm-fixed-price contract awarded on the basis of adequate price competition" from (n)(2)(i)( B )(2)(i) is, thus, still valid? If this isn't right, then there is no reason to have the exclusions of (n)(2)(i)( B )(2) because the KO would have the authority to include it at their discretion on any action.

wvanpup: Thank you for your kindness in calling it a typo. Yes, the clause is referring to the threshold for obtaining cost or pricing data. However, to interpret this as you do in your items #1 and #2, why would the first part of this be necessary? Again the clause reads: “The clause may be used when the total estimated contract or order value is below the thresholds identified in 15.408(n)(2)(i) AND for any contract type, when the contracting officer determines that inclusion of the clause is appropriate.” What you are saying is that you read the clause the same as if the words "when the total estimated contract or order value is below the thresholds identified in 15.408(n)(2)(i) and" were not there???!!! Joel: Great to hear from you (yes, I'm donning my usual camouflage). 1. This IS an IFB for a set-aside, FFP single award construction contract? 2. The information NOT required with the original bid. 3. The intent is clearly to apply to modifications and the K.O wants that horsepower...but how do we counter the "front" type accusations when we are a GC and the contract is a very multi-discipline contract with 10-12 first-tier subcontractors. Any modification would likely result in subs performing 70% or more of the work for that change. 4. As a SDVOSB, SB, EDWOSB, WOSB, or 8(a) set-aside, the prime contractor performance requirement is 15% of the labor (disregarding any discussions on "similarly situated entities" that may help satisfy the 15% requirement). 5. The "exception for FFP contracts with adequate competition" is precisely why these clauses do not belong in this contract. 6. Good suggestion to consult counsel, just a major expense for a (very) small business to have to consult counsel when bidding just because a few clueless contracting officers want to exert their will. Most contracting officer's aren't this way, but a few bad eggs! Finally to H2H (and Joel's response): As an IFB, I can include any costs that I want............then sit back and watch the low bidder do the work. So, I am deeply concerned that the KO will use this clause to disallow a significant amount of my normal mark-up in what could be substantial changes. I argue that this clause is clearly not applicable to a "FFP contract awarded on the basis of adequate price competition" [15.408(n)(2)(i)( B )(2)(i)] and is NOT subject to addition at the contracting officer's discretion because the total estimated contract value is anticipated to be above the threshold for certified cost and pricing data [15.408(n)(2)(ii)].

Subs, thanks for the input. I'm surprised that we haven't hear from Vern and Joel on this topic yet...but WHY would you set aside the language of the FAR that clearly states "and" and not "or"? There is plenty of case precedence that essentially ruled that if the lawmaker intended it to be "or" they would have said so. Meanwhile, it reads "and" until such time as the language is changed. Perhaps I'm too anal on this one, but isn't that what the courts would see. I'm looking to get this clause taken out of the solicitation because I can see it turning into the CO attempting to deny a prime contractor markup on his subcontractor. On a FFP construction project that is crazy and would put most GCs out of business.

Thanks. As with any contract modification, I would disclose all of these costs anyway. It just seems like a lot of trouble to go through for a clause that shouldn't be in this contract in the first place. Worse, I just know this contracting officer to be uncooperative based on years and years of experience with him. He's never worked these clauses in before and feels that GC's add no value and are only in business for the mark-up. I can see that he's working them in now to try to eliminate as much mark-up as possible and having to go to battle with every change. I need to retract my previous interpretation on the definition excluding "charges for the cost of managing subcontracts and any applicable indirect costs and associated profit/fee based on such cost". This means that the GC can markup their own costs, but markup on subcontractors may still be deemed "excessive pass-through" by the CO. So, now I have a significant objection to these clauses being included. Does everyone else interpret 15.408(n)(2)(ii) the same way that I do? That is, “The clause may be used when the total estimated contract or order value is below the thresholds identified in 15.408(n)(2)(i) and for any contract type, when the contracting officer determines that inclusion of the clause is appropriate.” (emphasis added). Because of the word "and", this contracting officer's discretion to use the clause is only applicable if the total estimated contract is below the simplified acquisition threshold...right?

To Boof...just because the contractor (OEM) offered the replacement in this instance AFTER attempting to fix (or at least inspecting) the widget AND having been paid to repair 19, doesn't mean the same price would be offered in a bid to purchase new. I would say the government should check to make sure the OEM didn't discover some flaw that may compromise other in-service widgets, but should otherwise take the contractor up on their offer. For all the information we have, it is in the best interest of the government and I at least hope that common sense would prevail rendering repair-by-replacement as acceptable. We would accept this in our personal consumer items, why not the government. Okay, I tend to oversimplify things, but "get 'er done!"

Scenario: A competitive-bid solicitation for a FFP general construction Navy contract in GA under any of the various socio-economic categories. This solicitation includes FAR clauses 52.215-22 and 52.215-23: Limitations on Pass-Through Charges, with the obvious intention of applicability to any change orders. Whereas these clauses are not intended for FFP contracts “awarded based on adequate competition” per 15.408(n)(2)(i)( B )(1)(i), the contracting officer responded to a solicitation question by quoting 15.408(n)(2)(ii) that states “The clause may be used when the total estimated contract or order value is below the thresholds identified in 15.408(n)(2)(i) and for any contract type, when the contracting officer determines that inclusion of the clause is appropriate.” (emphasis added). Forgetting for the moment that this acquisition is NOT below the threshold for obtaining cost and pricing data (and thus 15.408(n)(2)(ii) should not apply), as a general contractor managing a very multi-discipline project with multiple working subcontractors, there is hardly a modification that I can contemplate that a subcontractor, lower-tier subcontractor, or some combination thereof, is not performing at least 70% of the cost of the work. So I guess my question is: Do I have any reason to be concerned that these clauses are included given that 52.215-23(a) specifically excludes “charges for the cost of managing subcontracts and any applicable indirect costs and associated profit/fee based on such cost” from the definition of “Excessive pass-through charge”?

You've gotten some very good advice here. H2H's comment about being consistent is very important and is likely based on CAS 402. See specifically interpretation no. 1 (9904.402-61) which states: "This interpretation does not preclude the allocation, as indirect costs, of costs incurred in preparing all proposals. The cost accounting practices used by the contractor, however, must be followed consistently." Good luck

H2H has some good, comprehensive considerations (as usual). Sorry, I live in the low bid FFP construction world and sales tax is a way of business that the government can very seldom use an exemption for (how's that for ending a sentence with a preposition). The original post did refer to a construction contract, but no information regarding contract type. Cocur with H2H's: "If the sales tax being proposed is being legitimately assessed by a state/local taxing authority and there is no exemption available to the contractor and the contractor's practice is to include such tax payments as direct costs of its contracts, then we would expect those tax payments to be included in the total proposed cost used to evaluate proposed fee or profit."

Without looking up any specific references, sales tax is still a direct cost to the contractor. There should be no reason to treat it any differently than any other direct cost with regards to profit.

Just a follow-up, although one key trade, this one will involve at least 4 different subs/trades (likely 5-6).

You are absolutely correct that 52.219-29 is the correct reference for the EDWOSB, 52.219-14 is what I am used to seeing for SDVOSBs. The 15%/25% conditions are the same, however, for both...so I refer back to the original question. Is there something out there that confirms my position that NAICS 237XXX should fall under "General Construction" and only NAICS 238XXX is "Special Trade Contractors"? To jj, FAR 52.236-1 is NOT included. I do plan to ask the question. I'm not sure about protesting if I don't like the answer, but if I can ask the question with "references" it may serve well to further my case.

A recently posted NAVFAC solicitation for construction services under NAICS 237XXX as an EDWOSB set-aside identifies a 25% limitation on subcontracting. FAR 52.219-14 Limitations on Subcontracting confirms a 15% requirement for “General Construction” and a 25% requirement for “Construction by Special Trade Contractors”. Other agencies (USACE, VA) have concluded that “Special Trade Contractors” refers ONLY to NAICS 238XXX (I assume based on the Title of NAICS 238…“Specialty Trade Contractors”) and further conclude that 237XXX falls under “General Construction”. I plan to ask about this as an official question during the Q&A to the NAVFAC contracting office QUESTION 1 - Does anyone on this forum know of any definitive reference (or ruling) for determining which NAICS would fall under “general construction” vs. “special trade construction” as it applies to all of the various limitations on subcontracting clauses. QUESTION 2 - Can the CO, in ANY solicitation, supersede the FAR requirement(s) and impose a limitation on subcontracting higher than the FAR-required limitation. I ask because the FAR clause is not only incorporated by reference, but the 25% is explicitly stated in the solicitation. Of course, no mention is made of the 2013 NADA and “similarly situated entity” discussions, but I’m not really addressing those at this time. Any help that the forum can offer here would be greatly appreciated as I’m sure the answer would apply to SDVOSB and 8(a) set-aside acquisitions as well.

OK, so the CO and the contractor disagree. Prime contractor mark-up is the only remaining area of disagreement after negotiations. Neither will budge and the CO is issuing a contract mod based on what she thinks it "should be". She, the CO, processed the mod on a SF30 and added a "release of claims" clause. Ok, so we're clearly not going to sign that, but can someone help me with the process here? As see it, even though it is a unilateral change, once I get the "release of claims" clause removed, shouldn't I sign the SF30 to acknowledge the change confirming that we will "proceed diligently with performance of the contract" per the Disputes clause. Following that, if I submit a claim, the CO will not issue a COFD that contradicts her own position...so I will be forced to appeal or file suit (and unlikely able to recover legal fees). Any suggestions?

Vern...thanks for the tip, I will definitely look that up. I logged into the telecon that Carl mentioned, asked my question...they couldn't answer and suggested I email my question to hubzone@sba.gov. Heck, we already know their answer.