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  1. Can Performance Incentives Be Included on Schedule Task Orders? Can Schedule Task Orders Be of the ?Fixed-Price Incentive? Type as Described in the FAR? Multiple Award Schedule contracts are evaluated and awarded as commercial-type (FAR Part 12) acquisitions with all the clauses required for commercial contracts. As commercial Schedule contracts, their orders can be of any type permitted for commercial acquisition and not prohibited by the Schedule contract. (For example, Cost-Type contracts are not one of the permitted commercial Part 12 acquisition types. You cannot do those cost-type tasks under the Schedule contracts.) 1. What does the FAR say? FAR 12.207 says there are four, and only four, specified permissible contract types for the acquisition of commercial items. This means there are no more than those four types of permissible Schedule task orders: Firm Fixed Price (FFP) Fixed Price with Economic Price Adjustment (FP w/ EPA) Time and Material (T&M) Labor Hour (LH) In addition, FAR 12.207(d) says: "(d) The contract types authorized by this subpart may be used in conjunction with an award fee and performance or delivery incentives when the award fee or incentive is based solely on factors other than cost (see 16.202-1 and 16.203-1). " Note that the referenced 16.202-1 is the description of "Firm-Fixed Price Contracts" and includes: "The contracting officer may use a firm-fixed-price contract in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. The contract type remains firm-fixed-price when used with these incentives." Notice that this doesn't specifically extend to the FAR 16.204 Fixed-Price Incentive (FPI) contracts. The referenced 16.203-1 is the description of "Fixed-Price Contracts with Economic Price Adjustment" and includes:"( The contracting officer may use a fixed-price contract with economic price adjustment in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. The contract type remains fixed-price with economic price adjustment when used with these incentives." FAR 12.207(e) states: "(e) Use of any contract type other than those authorized by this subpart to acquire commercial items is prohibited." 2. What do the Schedule contracts say? Performance incentives are handled in the same way regardless of Schedule. This means that Schedule 874 MOBIS handles the issue of performance incentives just like Schedule 871 PES or Schedule 70 IT. The Schedule contracts include the identical following clause, which does not contradict the FAR: I-FSS-60 PERFORMANCE INCENTIVES (APR 2000) (a) Performance incentives may be agreed upon between the contractor and the ordering office on individual orders or Blanket Purchase Agreements under this contract in accordance with this clause. ( The ordering office must establish a maximum performance incentive price for these services and/or total solutions, on individual orders or Blanket Purchase Agreements. (c ) Incentives should be designed to relate results achieved by the contractor to specified targets. To the maximum extent practicable, ordering offices shall consider establishing incentives where performance is critical to the agency?s mission and incentives are likely to motivate the contractor. Incentives shall be based on objectively measurable tasks. 3. Is a Firm Fixed Price task order including performance incentives a permissible type of Schedule task order? Yes! The PERFORMANCE INCENTIVES contract clause permits them and the FAR authorizes those performance incentives as long as they are based on factors other than cost. This means that you can incentivize Schedule contractors for meeting/exceeding measured and evaluated performance measures tied to you PWS requirements. (Similarly, there isn't anything to prohibit FP w/EPA, T&M, or LH task orders with similar performance incentives based on factors other than cost.) 4. Is a ?Fixed-Price Incentive?(FPI)-type order permissible under the Schedules program? Not if those performance incentives are based on any factor tied to cost. By definition (FAR 16.204), contracts in the FPI family are based on adjusting profit and establishing the final contract price based upon a formula relating final negotiated cost to total target cost. FAR 16.402-1 notes that "(a) Most incentive contracts include only cost incentives...No incentive contract may provide for other incentives without also providing a cost incentive (or constraint)." A task order meeting the FPI-type definition, which includes a cost-based incentive in order to be properly called FPI, is not an appropriate use of the GSA Multiple Award Schedules. An FPI order (with a cost-based performance incentive factor, by definition) is not a permitted type of contract for the acquisition of commercial services of the type found on the Schedule contracts.
  2. Could a Schedule T&M/LH Determination & Finding Be Done as a Class D&F at the BPA Level? Vbus - Could a Schedule Ordering Officer properly craft a broadly written D&F at the Schedule BPA level (rather than for each individual Schedule task order) satisfying the current (1/28/2011) FAR 8.405-2(e), FAR 12.207( and FAR 16.607(d)(1) requirements and applying to all T&M/LH task orders under the Schedule BPA? [Note: those are the current references for the FAR relating to the T&M/LH D&F. Those FAR citations could change when FAR Case 2009-043 becomes a Final Rule. That Final Rule will significantly revise FAR 8.405-2(e).] There isn?t anything in the FAR specifically prohibiting a BPA-level T&M/LH Class D&F for Schedule task orders under a BPA. The FAR changes proposed by FAR Case 2009-043 are silent when it comes to something like a Schedule BPA D&F applicable to all T&M/LH task orders under that BPA. In cases where the FAR is silent and where I see no persuasive regulatory intent to the contrary, I typically embrace the important FAR Part 1 guiding philosophy that if an action isn?t prohibited by the FAR (or other regulations, policy, etc. - - things that can vary from one ordering agency to the next when it comes to Schedule ordering) and makes good business sense, then a Contracting Officer can feel free to do it. My favorite sentence in the whole FAR is: ?Rather, absence of direction should be interpreted as permitting the Team to innovate and use sound business judgment that is otherwise consistent with law and within the limits of their authority.? (FAR 1.102-4(e)) In support of that Contracting Officer would be the fact that the FAR creates ?Class D&Fs? (FAR 1.703) in order to obviate the need to prepare individual separate D&Fs when circumstances are similar. Note that the standard for a Class D&F is ?essentially identical justifications? (FAR 1.703). But will all the task orders under a particular Schedule BPA be ?essentially identical? enough for such an approach? Maybe. That is a question of fact that could turn on the scope of a particular BPA and the anticipated task order(s) details. If the facts were with them, I don?t see any reason why a CO with good writing skills couldn?t prepare a broadly written Class D&F applicable to every T&M/LH order under their Schedule BPA. Looking at the four required elements of the T&M/LH D&F in FAR 12.207((i) through (iv), I can envision circumstances where it would be possible to write a convincing Class D&F at the BPA level. While there is no FAR prohibition against a T&M/LH D&F at the BPA level, I could certainly understand how a more cautious Ordering Officer might feel the need to write a D&F for every T&M/LH task order under a Schedule BPA, particularly if there was an uncomfortable level of uncertainty at the BPA level or where the task orders would not have the ?essentially identical justifications? required for a Class D&F by FAR 1.703. That CO would also likely point back to the FAR 1.701 definition of D&F as something prepared ?as a prerequisite to taking certain contract actions.? That CO might reasonably conclude that issuing a Schedule BPA that doesn?t obligate a single dollar and might never be used is not a ?contract action? but, instead, the ?contract action? that actually triggers the D&F requirement in the first place is the issuance of the task orders when and if the Schedule BPA is used. (I purposefully will not open the ?BPA is not a contract? issue here, as there are other places on WIFCOM where there is appropriate discussion on that topic.) Of course, there is a possibility that what emerges in the Final Rule from the rule proposed in FAR Case 2009-043 might have some additional relevant information. For all I know, Schedule BPAs could have been brought up and discussed in any submitted comments on D&Fs there, giving some (perhaps persuasive) additional information as to regulatory intent on this specific question. We will see. In the absence of something to the contrary emerging in the Final Rule, I cannot see any specific FAR-level regulatory impediment (and remember that ordering agencies can supplement the FAR with their own stricter requirements here) to a Class D&F applicable to multiple T&M/LH task orders with essentially identical justifications prepared along with a Schedule BPA. Dave Clemens 1/28/2010
  3. On 1/19/2011 GSA posted the following FAQ and response at its new Interact blog for Multiple Award Schedules. It reads: Question:Is a Determination and Finding under FAR 12.207((ii) required when a time and materials order is placed under GSA schedules? Answer: A D&F is not required. Follow the ordering procedures in FAR 8.405-1 and 8.405-2. I believe that this response is incorrect, unsupported by the FAR, contradicts authoritative (FAR-based) GSA publications, and is contrary to clear regulatory intent. A. Background: In addition to FAR SubPart 8.4 requirements, FAR 12.207((ii) requires the contracting officer to execute a determination and findings (D&F) for time-and-materials (T&M) type contracts that (a) no other type is suitable; ( includes a ceiling price in the contract or order that the contractor exceeds at its own risk; and (c ) authorizes any subsequent change in the ceiling price only upon another determination, documented in the contract file, that it is in the best interest of the procuring agency to change the ceiling price. The FAR requirements are additive and not mutually exclusive, as GSA?s Multiple Award Desk Reference [summer 2010 Edition, page 17] makes clear when it says: ?NOTE: If other than a Firm Fixed Priced order is placed, include the basis for the determination to use a labor hour or time-and-materials order. (FAR 8.405-2(e)(7)(i) in addition to the differing D&F requirements at FAR 12.207( and 16.601(d)? There is nothing in FAR 12.207 or FAR 16.601 stating that those D&F requirements do not apply to Schedule T&M Task Orders. In fact, the FAR Council made it even clearer in FAR Case 2009-043 (9/27/2010 Fed. Reg.) that the Schedule order T&M D&F requirements don?t simply stop at FAR 8.4 and that those D&F requirements from other parts of the FAR specifically do apply to Schedule T&M task orders. FAR Case 2009-043 simply confirmed and ratified what GSA instructors have consistently taught Ordering Officers in the MAS Desk Reference and in other GSA training materials since the SARA panel addressed this issue back in 2006: ?The requirement for executing a determination and findings when acquiring commercial services on a time-and-material or labor-hour basis is not new? This proposed rule therefore builds on the existing Services Acquisition Reform Act (SARA) Panel recommendation to permit the use of time-and-materials and labor-hour contracts or orders when acquiring commercial services as long as a determination and findings is executed by the contracting officer consistent with FAR 12.207 and FAR 16.601 when ordering services under Schedules. Therefore, the determination and findings requirement is proposed to be added to FAR subpart 8.4 for Schedule orders to make it clear that contracting officers must execute, prior to placing the order, a determination and findings that a fixed-price order is not suitable. The FAR is proposed to be further revised as follows: (1) At FAR 8.405-2, Ordering procedures for services requiring a statement of work, paragraph (e), Use of time-and-materials and labor-hour orders for services, is added to incorporate the requirement for a determination and findings consistent with FAR 12.207 and 16.601(d). (2) Section 12.207((4) is added as a cross-reference to 8.405-2(e) for determination and findings when using Federal Supply Schedules.? FAR Case 2009-043 makes it clear there is nothing new here. Schedule T&M orders have never specifically been exempt from the FAR 12.207( D&F (and the FAR 16.601 D&F, although the FAQ is silent on that particular D&F) as GSA?s MAS Desk Reference points out. B. Questions: (1) The ?ordering procedures in FAR 8.405-1 and 8.405-2? are silent when it comes to the FAR 12.207((ii) D&F. What is the FAR reference for the recent GSA FAQ?s assertion that a FAR 12.207((ii) D&F is not required for T&M task orders placed against the Schedule contracts? (2) Does GSA's recent assertion on its blog that Schedule T&M task orders are somehow exempt from the requirements for the FAR 12.207((ii) D&F contradict the statement (see extract in Section A above) appearing in GSA?s MAS Desk Reference and the clear regulatory intent of the FAR Council as shown in FAR Case 2009-043? C. Comments: (1) There is nothing in the FAR, the GSAM, or the Schedule contract clauses stating that the D&F requirements of FAR 12.207((ii) do not apply to T&M Schedule task orders. The assertion that Schedule T&M orders are somehow exempt from the Part 12 D&F requirements simply isn?t supported by anything in FAR 8.405-1 and FAR 8.405-2. (2) GSA?s own MAS Desk Reference (2010) is correct when it clearly states that the FAR 8.4 requirements aren?t the only FAR requirements of concern to the Ordering Officer when it comes to the D&F for T&M Schedule task orders. The words ??differing D&F requirements?? in the MAS Desk Reference are of particular significance. Nothing in those Part 12 or Part 16 requirements sets up an exception for Schedule task orders. Even if somebody actually believed there was something (an implied exemption?) there to the contrary, FAR Case 2009-043 explicitly sets the matter to rest with respect to Schedule T&M orders. D. Conclusion: Telling Ordering Officers that they need not be concerned with preparation of the FAR 12.207( D&F when it comes to their Schedule T&M task orders is not supported by the FAR, is contrary to GSA's FAR-based MAS Desk Reference, and contradicts five years of policy on T&M contracting. I've suggested to GSA that their unsupported (and unsupportable) FAQ response on their MAS Interact blog be immediately removed. Instead, the FAQ on the GSA blog can be best answered by extracting the language from page 17 of GSA's own current [summer 2010] MAS Desk Reference into a replacement FAQ response: Answer: Yes, a T&M D&F is required. With respect to the T&M determination required by FAR 12.207(, T&M Schedule task orders are no different than other T&M contract actions. If other than a Firm Fixed Priced order is placed, include the basis for the determination to use a labor hour or time-and-materials order. (FAR 8.405-2(e)(7)(i) in addition to the differing D&F requirements at FAR 12.207( and 16.601(d). [Of course, when FAR Case 2009-043 is effective, you will want to update the exact FAR references in the preceding suggested revised answer to conform exactly.]
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