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InNeedofWisdom

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Posts posted by InNeedofWisdom

  1. Do you know of any defense contractor(s) that have excluded any interorganizational transfers from the population submitted to DCMA for CPSR review? If so, did they go so far as to exclude interorganizational transfers at price for commercial items? Do you think it is reasonable for a defense contractor to interpret FAR 44.101 and FAR 44.303 to allow for exclusion of any (or all) interorganizational transfers (at price or cost)?

  2. ...can the "incentive" be a monetary incentive, like X dollars given to the contractor, or X amount of percentage of the contract price given to the contractor? If it can be monetary, then how is the contract still FFP?

    I see your point that the price is not 'purely' fixed if the contractor can earn additional monetary incentives based on factors other than cost. Others may know why the FAR council wrote FAR 16.202-1 to allow for a FFP contract to include these kinds of incentives.

  3. How can a fixed-price contract contain "incentives" on its PRS?

    Here is a quote from FAR 16.202-1.

    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. [emphasis added]

  4. HOWEVER, recent court decisions (KBR) have confirmed that a contractor under a cost-type prime contract is responsible for ensuring that prices paid for subcontracted goods and services are fair and reasonable, just as would be the case if the Government were purchasing the goods/services directly. The principle applies regardless of subcontract type. If the Government asserts that the prices paid were unreasonable, the burden is on the contractor to show why the prices were reasonable. If the contractor cannot show that through evidence, then the costs incurred (i.e., the prices paid to the subcontractors) will be disallowed.

    This is DCAA's new favorite method of identifying big dollars to question, which will then be reported to Congress as "taxpayer savings".

    As a follow-up question, do you know if this has happened on FFP contracts that include CPFF CLIN's? I am trying to understand what triggers FAR 52.216-7 Allowable Cost and Payment to be included in the contract. If FAR 52.216-7 was included in an FFP contract because of a CPFF CLIN, it should only apply to the CPFF CLIN. But how does the contracting officer know whether or not FAR 52.216-7 must be included in a contract when most CLINs are FFP instead of CPFF? Is it more of a case-by-case situation where contracting officers use their judgment on each contract?

  5. Today was the first time I saw the following assertions made by DCAA at http://www.dcaa.mil/guidance.html.

    GUIDANCE

    When contractors enter into agreements to provide goods and services to the Government, they must follow government acquisition guidance and regulations. DCAA assesses contractor compliance with these regulations based on the type of contract with the Government...

    Likewise...

    FAR – Federal Acquisition Regulations: Acquisition regulations for contractors doing business with the government

    and...

    DFARS – Defense Federal Acquisition Regulation Supplement: A supplement to the FAR that provides DoD-specific acquisition regulations for contractors doing business with DoD

    Do you agree with DCAA's guidance? Do you know anyone who is trying to follow DCAA's guidance? If so, are they succeeding?

  6. If I understand correctly, you are asking if certain parts of a company are subject to DFARS 252.242-7005 versus specific contracts. Like you say, DFARS 252.242-7005 only applies to CAS-covered contracts.

    9903.201-1 CAS Applicability says in (a) "...Negotiated contracts not exempt in accordance with 9903.201–1( b ) shall be subject to CAS..."

    DFARS 252.242-7005 should have an impact on the business systems of a company which deal with its CAS-covered contracts that have this clause incorporated into them. IF IHO or Corporate HQ play a role in a business system that impacts a contract with DFARS 252.242-7005, then IHO or Corporate HQ should be affected by this clause.

  7. Excerpts from the Testimony of Frank Kendall, Under Secretary of Defense AT&L, on April 30, 2014

    http://www.armed-services.senate.gov/imo/media/doc/Kendall_04-30-14.pdf

    Page 2: “The hard part of bringing change to the Pentagon is not announcing new policies; it is following up to ensure that those policies are actually implemented, understanding their impact, and making any needed adjustments. Time and constancy of purpose are essential if this process is to be successful.”

    Page 4: “The ability to perform strategic analysis on major defense acquisition programs, set target cost goals, and execute accordingly – without fear of being punished for not spending the money – makes huge dividends for the Department.”

    Page 6: “…LPTA should be used with professional judgment about its applicability. This technique works well when only minimal performance is desired and contracted services or products are objectively defined.”

    Page 7: “…I am finding that bureaucratic tendencies tend to grow and to generate products for use within the bureaucracy itself, together with the comfortable habits of years and even decades are hard to break.”

    Page 8: “Competition works…Simply put, I want every defense contract to be worried that a competitor may take his work for DoD away at some point in the future.”

    Page 11: “It is not enough to know acquisition best practices; acquisition professionals must understand the “why” behind the best practices—that is, the underlying principles at play.”

    Page 13: “We need to make decisions and track our performance via data and robust analysis, not anecdote or opinion. It isn’t always easy to look in the mirror, and some government institutions or industry firms may not like what the report reveals, but the road to improvement has to begin with an understanding of where the problems lie.”

    Page 15: “We are in the process of losing 10s of thousands of engineers and skilled production workers from our industrial base.”

    Page 16: “…one fact became strikingly apparent to me: our system, over time, has accumulated levels of unnecessary statutory and regulatory complexity that is imposed on our program managers and other professionals.”

    Page 17: "I believe the evidence supports the assertion that we are making progress. Equally clearly, however, there is still ample room for improvement and much more hard work for us all to do."

  8. Of Course! :) I am not sure if there are generally accepted standards besides the definition for "added value" from FAR 52.215-23(a). It looks like the writers of this clause intentionally gave examples that some might otherwise question. If a contractor cannot qualify for at least one of the examples below, it seems like they could have a hard time persuading the contracting officer of "added value."

    FAR 52.215-23(a) “Added value” means that the Contractor performs subcontract management functions that the Contracting Officer determines are a benefit to the Government (e.g., processing orders of parts or services, maintaining inventory, reducing delivery lead times, managing multiple sources for contract requirements, coordinating deliveries, performing quality assurance functions).

  9. If, as has been posited, travel is a cost CLIN, it is fraud, not just "improper," for a contractor to bill the Government at per diem when it reimburses its employees at actual cost. On the other hand, there is nothing improper about a contractor who always reimburses employees at per diem, regardless of actual costs incurred by the employee, to bill the Government at per diem...

    I agree with you. :) When you say, "...always reimburses employees at per diem..." that means (for CAS covered contracts) that the defense contractor follows its disclosure statement and (for all contracts) its company policy. In the hypothetical example, a fraud alert was given to investigators.

  10. Good Morning,

    Experts like Vern, Don, and H2H will be able to answer your question about the Christian Doctrine. I would have a statement ready about the value added by the subcontractor, but I would not submit it to the contracting officer unless requested to do so. Here is a similar topic thread that you may find useful:

    http://www.wifcon.com/discussion/index.php?/topic/1433-limitations-on-pass-through-charges/?hl=%2Bpass+%2Bthrough

  11. InNeed, looking at your post 7, I hope you do not think there is anything improper about a contractor providing its employees a flat per diem rate (lodging plus M&IE) and leaving it up to the employee to live within that flat rate and permitting the employees to keep any difference between their actual expenses and what they are provided by their employer.

    You are right. :) It is just improper when the defense contractor says (by disclosure statement and company policy) that it will reimburse employees at the lower of actual cost or per diem, but then bills the government for per diem (even when actual cost paid by the employee is 50-75% lower).

  12. ...The contractor proposes costs at the maximum amount -- the lodging portion of the per diem rate -- but expects to only reimburse employees for a fraction of that amount. That is not a CAS 401 noncompliance (though it may be defective pricing). Do not confuse cost accounting practices with estimating techniques; they are different creatures....

    ...Contractors do not find lodging that is 50% of the maximum lodging amounts in any given locality. I'm not saying it's impossible, but it's really really unlikely. The GSA methodology used to calculate the lodging amount for any given locality almost ensures that any lodging more luxurious than a Courtyard is going to exceed the limit...

    Thank You, H2H. I am learning about CAS. What you say makes sense. It might be defective pricing if the defense contractor did not let the customer know how much its actual costs were expected to be, but it should not be a CAS 401 non-compliance. Actual cost is allowed to be estimated at per diem.

    I am with you in thinking that the situation doesn't "smell right." You might be amazed with what happens OCONUS (v. CONUS). When defense contractor employees get to pocket the difference between actual lodging cost and per diem lodging cost, they find very creative ways to maximize their return.

    In the above hypothetical example, the defense contractor had a history of allowing its employees to pocket the difference between actual cost and per diem. After the disclosure statement inconsistency was identified, they started billing the government for only actual cost (or per diem, if lower).

  13. How can the contractor do this without violating CAS?

    I am glad you asked. :) You are right that if the "unnecessary" labor charged to the contract was determined by the contracting officer to be unauthorized, it would not be allowable; and the contractor would violate CAS 405 if it billed this cost instead of segregating it appropriately as unallowable.

    When I say "unnecessary" labor, I am thinking more of "inefficient" labor that would otherwise be unproductive and charged to overhead. The likelihood of this hypothetical situation is increasing with the significant decreases in defense spending. If the company does not lay off these unproductive people, they may find "less-than-efficient" ways to keep them on hoping for future contracts.

  14. ...what is inconsistent between the practice used in estimating the cost and the practice used in accumulating and reporting the cost?

    What is the impact of "inflating the NTE," and if there is an impact can't you just negotiate the NTE down if you disagree with the amount estimated?

    Is there fee attached to the CLIN (typically, at least at my agency, a cost CLIN for travel does not include fee)?

    If there is no fee, what is the problem?

    Great Questions! :) This helps me to get a sanity check and put any potential issue in perspective. The starting point for this thread is that the hypothetical defense contractor actually stated in the proposal that lodging was being proposed at actual cost. If the defense contractor had the premise that estimated actual cost equaled the maximum per diem allowance, then the proposal makes perfect sense.

    You are right about an inflated NTE limit having limited or no impact for a CR travel CLIN. If the defense contractor knew actual lodging costs were going to be 50% to 70% of per diem AND there was only one CLIN with all cost elements included, the defense contractor could put "unnecessary" direct labor on the contract that would otherwise have been charged to overhead as idle time.

    Yes, there is no fee on the CR CLIN for travel. I appreciate your perspective inside a government agency. I am actually on the other side trying to help a defense contractor stay out of trouble. :) If no one sees a serious problem with the situation, it looks like the hypothetical defense contractor would just need to clarify its statement about proposing lodging at "actual cost" (i.e. per diem). Thank you for your help.

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