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Patrick Mathern

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Posts posted by Patrick Mathern

  1. Hi Caitlin -

    If you've allowed the sub to include G&A on travel, then it's the sub's G&A rate that would be applied.  This is the cost to you, the Prime, which is what is then passed to the government.

    Applying the sub's G&A to travel does not impact whether or not you need to submit an incurred cost submission.  However, I'm not familiar with the specifics of your contract, so you will want to get clear with your contracting officer to understand whether you have ICS requirements on the travel line or not.  My guess is that they would have structured the contract in such a way to avoid an ICS on this piece, but you'll want to clarify.

  2. I am attempting to research the negotiated fee % paid by DoD (DARPA, more specifically) on CPFF contracts.  I've searched records on FPDS and SAM - I don't see anywhere that I can obtain the fee data as a percent of cost.  This leads me to believe my only path forward is a FOIA request.  Does anyone have insight into...

    1.  Whether this data already exists somewhere

    2.  Whether this is a valid FOIA request 

    3.  What agency this should be directed to


  3. @Retreadfed and @Vern Edwards:  Thanks for that input - are you saying that firms were open to R&D contracts as a way to bring in revenue in lean times?  Or what did the contractors get out of the deal that made it attractive?  Were these firms in question new to government contracting, or was having ongoing government work part of their strategy?

  4. 1 hour ago, Vern Edwards said:

    Some people, like you and Patrick, think that profits on government contracts are too low, and that all  would be better if they were higher.

    To take a step back and clarify, I'm specifically talking about profit as a tool to increase interest in DoD R&D efforts.  Increasing profit is likely to increase that interest, but I'm not saying it's the only lever or that it's the even most impactful lever.  You mentioned data rights, Vern, and I agree that this is a big factor in whether a firm decides to work with the government or not.  There are other factors as well.

    Where the WGL comes into play is how contractors and contracting officers view it as being directly related to the effort required.  Does it ask the right questions and produce the answer expected given the situation?  Small businesses surely don't believe that to be the case.  Who else might feel slighted and why?  That's where I would like to go.

    Have thoughts on this?  This group absolutely has the depth of knowledge to shed light on this.

  5. On 9/25/2021 at 9:52 AM, WifWaf said:

     If a motive is needed here, does the DFARS 215.404-71-3(b)(8) limit of 4 percent make sense from an industry perspective?  Interested to hear your thoughts here @Patrick Mathern, and any basis for a different percent of contract costs.

    I can’t speak for “Industry” as a whole at this point. This is exactly what we hope to ascertain in the near future. We are designing a survey that hopes to get some insight into this and other considerations regarding profit that results from WGL. 

    “Alternate approaches” to the WGL have been mentioned a few times in this thread, but I’ve yet to see specific examples presented that meet FAR/DFARS requirements.  Anybody have one they could share?

  6. 4 hours ago, Vern Edwards said:

    Or do you think that, as a general proposition, setting high(er) contract prices or fixed-fees during contract negotiation will motivate contractors to do better during contract performance than they otherwise would?

    I appreciate this perspective, but I think there’s a different incentive that the DoD is currently concerned with that this comment doesn’t consider: Current profit levels attract current offerors. Raising profit levels could inspire new entrants to the DoD marketplace (specifically in R&D scenarios). I don’t have hard evidence to support this, Vern, but basic economic theory holds that if you offer more money to do a job, it will be more interesting to a larger group of potential workers. 

  7. 14 minutes ago, here_2_help said:

    It's been pointed out to me before that the Weighted Guidelines don't incentivize early delivery. A contractor that can deliver a satisfactory product six months early is not entitled to receive any more profit than a contractor that promises to deliver on time.

    So much for "speed of relevance"

    Good point - what are some other areas that the WGLs miss the mark, especially in the case where the government is trying to entice new commercial entities to take on CPFFs?

  8. SpendLogic has received an award from DARPA to research the government's calculation and application of profit objectives, as they relate to R&D contracts.  Currently, this is accomplished using the Weighted Guidelines.  In industry, the Weighted Guidelines is generally regarded as a game - a subjective set of rules that have little or no bearing on reality.  Similarly, in a conversation with one Contract Specialist recently, it was noted that the WGL "uses magic to come up with a profit value."  This comment was tongue-in-cheek, but the point made aligned with the position of Industry:  The values resulting from a Weighted Guidelines analysis are generally arbitrary and mysterious with little or no obvious relation to the work being completed.

    I'm looking for anyone that might have knowledge on how the WGL calculations came to be.  For example, WHY is the standard value for performance risk 5%?  Why not 4.72% or 6.39%?  I'm familiar with the regulatory history, but would like to know more about the origins of the calculations themselves.

    Anybody have this knowledge or source material tucked away somewhere?

  9. Regarding this...

    28 minutes ago, WifWaf said:

    I suggest putting all my cards on the table, and just sending my weighted guidelines.

    I would never recommend sending your weighted guidelines.  There are too many pitfalls and a good negotiator will be able to shoot down your points without much effort.

    This is subjective, but here's my two cents based on experience:  Save profit for last and be prepared to start talking bottom-line pricing before too long.  It's not the norm to come to full agreement on all elements of cost and profit.  Bottom-line negotiations allows each side to get what they need out of the agreement and show whatever profit they want.

  10. 16 minutes ago, Freyr said:

    IMy thought process: If someone accepted a job for $30/hr and finds out the work is way more involved after their start date, they may ask for $50/hr or quit. Especially if historical data shows the incumbent personnel made $50/hr, I'd say that even though they accepted $30/hr there's a high risk that rate may go up and therefore may not be realistic. On the other side of it, if someone accepted a job for $300/hr that might be realistic but likely it's not going to be fair to the Government or reasonable if other data shows that the position is normally accomplished at $80/hr.

    Is certified cost or pricing data (CCOPD) required in this situation?

    At the very least, this is a poor explanation.  If no CCOPD requirement applies, then as Joel notes, the author should at least provide an explanation of the data that they used to arrive at this conclusion.  Same applies if CCOPD is required, but the requirement for supporting data is greater. 

    As for the details above, you may be going too deep for what's required.  If the author can cite and provide the supporting data (and any calculations) that led to their stated conclusion, that should be sufficient.  

  11. The DCMA CIG Handbook does cite "uses same production line as commercial items" as support for an assertion of commerciality, but it is not an acceptable basis in and of itself for claiming commerciality.

    Your first big hurdle is to be able to draw a connection between the item and a commercial market for this or similar items.  If you can't do this, the likelihood of withstanding scrutiny of "the customarily used by non-government..." part of the definition is extremely low and it's likely to be rejected as invalid.  The supplier should walk through each phrase of the definition they're claiming and provide support on how they meet each.

  12. If your Prime is FFP, use the same with your subs and leave it to them to figure out their indirects and profit.  Your budget is what it is...they can either do the job for that price or they can't.  Their rates are irrelevant as long as they provide the contractual deliverable.  No need to get hung up on "mandating" rates...they are under no obligation to do the job if it loses money for them. 

  13. So the short answer is "likely yes."

    If you determine that it's subject to Certified Cost or Pricing Data (exceeds $2M and is not otherwise exempt based on flowdown or exemptions listed in 15.403-1 shown here) then you'll need to write a cost analysis.  That analysis covers each cost element separately as well as profit.

    Taking it one step further, if you need training on cost analysis or want to outsource this effort, this is something we do regularly on behalf of DoD Primes and would be happy to do so for your company as well.



  14. Question:  Why would you WANT to reduce G&A?

    If the answer is that you want your price to be competitive with other bidders, then simply reduce your fee.  Avoid screwing around with how you collect and report your costs.  G&A costs are real dollars.  Reducing the G&A rate means those costs have to be covered somewhere else.

    Also, if this Prime is eligible for cost-reimbursable work, it likely means that they have an accounting system that has been determined adequate.  You don't want to mess that up by playing games with costs.


  15. Hey there Gonzo -

    If I'm understanding correctly, you're looking to get to the point where you show up on the radar...you haven't been notified by the DCMA of a CPSR yet, correct?

    If that's the case, don't spend your time shoring up what's already been done, just fix things going forward.  CPSR's typically cover a 12 month period that ends as close as is practical to the date the CPSR happens.

    Time estimates are difficult to determine.  You could burn 500 hours just on policies and procedures if you're starting from scratch.  In a nutshell, you need to shore up your policies and procedures, implement new templates, and then train everyone on all of the above.  Your incremental effort will lie in the policy/procedure/template development as well as training and implementation time.

    My recommendation:  find a consultant that can sell you pre-packaged policies and procedures, then use in-house labor to implement tools that will get your folks up to speed (plug SpendLogic *here*) and train to the procedures and tools that you've implemented.

  16. Lots of good detail in the replies here. For the short and sweet (and actionable) version, here you go:

    The only way to “justify” this in a PAR is to get additional fact-based information from the supplier and to include these in the price analysis. It’s common to be directed by management to justify a price...but it’s hard to do. I’ve been there and don’t envy you.

    If these costs truly turn out to be contingency costs (which amounts to profit if they don’t come to fruition,) you’re going to have findings if this package is pulled in a CPSR. In this case, your best bet is to have a price adjustment clause in both your negotiated subcontract as well as your negotiated Prime contract. 

    One last option if these are contingent costs is to write the PAR on the price you truly believe to be fair and reasonable (excluding contingent costs) and then having Management provide an authorization to agree to the price offered. Cite it as “best obtainable” and get a Management signature from someone with sufficient authority to make this call. It’s a CYA game at that point, but will generally be accepted in a CPSR. 


  17. 1 minute ago, joel hoffman said:

    A cost realism analysis is discussed under 15.404-1 (c) as one form of COST analysis. 

    Take another look, Joel.  While it's discussed in 15.404-1(c), it's actually set forth specifically in 15.404-1(d) and is separate from either cost or price analysis.

    Having said that, and to your point Joel, it most closely resembles cost analysis in that you're evaluating separate elements of cost.  My original response aimed at avoiding confusing cost realism with cost analysis of certified cost or pricing data.

  18. Neil, in reference to...

    On 5/21/2019 at 7:04 PM, Neil Roberts said:

    As to the business practice, I still believe that all cost reimbursement contracts are essentially negotiated and therefore "adequate price competition" has no place in those awards whether there are one or more bidders. Therefore, certified cost or pricing data should be required when over the threshold. I could perhaps be persuaded  with a well reasoned case or interpretation otherwise.

    ...the purpose of competition is to motivate sellers to set forth a proposal based on the stated award criteria.  "Adequate competition" simply requires two or more bidders to respond with responsive and viable offers.  If that criteria is met, the bidders are relieved of the requirement for certified cost or pricing data.


    • 2 bidders (self explanatory and objectively determined)
    • Responsive offers (self explanatory and objectively determined based on comparison of proposal with RFP)
    • Viable offers (this is where cost realism comes into play)

    If the viable offers hurdle wasn't cleared, I would work with the bidder(s) to come to terms on that point.  They will likely be motivated to participate when given a choice between cost realism and submitting certified cost or pricing data.

  19. 1 hour ago, VipinOwl said:

    It is my understanding that when awarding a CPFF prime contract, even given adequate price competition, cost realism must be performed, and as such cost or pricing data must be obtained, so price analysis alone will not suffice.

    Depends on what you mean by "price analysis."  If you consider analysis of other than certified cost or pricing data to fall under cost analysis, then so be it...you're conducting cost analysis instead of price analysis.  Just note that you're NOT required to obtain certified cost or pricing data and conduct a full FAR 15 compliant cost analysis.

    Cost Realism is very different from Cost Analysis.

  20. You’ve mentioned cost analysis here - if you’ve documented adequate competition, per FAR 15.403-1, you alleviate the certification requirements. The contracting officer wouldn’t be required to do a cost analysis unless the competition is somehow determined inadequate. 

    Your cost reimbursable contract type will subject you and your sub to accounting system adequacy questions. That’s potentially a much bigger issue than price reasonableness, although the two go hand in hand. 

  21. The only reason I can surmise that the COO would want to talk Contribution Margin is that you're currently heavy on indirect (fixed) costs.  If you have had a sudden downturn in business or if you missed winning a large contract that was already figured into annual revenue, then the COO is going to be very concerned with covering that shortfall.  H2H is correct in the defective pricing comment, but based on what you're saying, I'd guess (and yes, it's a complete guess) that your COO is covering shortfall rather than building a windfall.

    As for the difference in Gross versus Contribution, this site does a good job of explaining it:  https://www.investopedia.com/ask/answers/122314/what-difference-between-gross-margin-and-contribution-margin.asp

    An excerpt:  "In comparison with gross profit margin, [contribution margin] is a per-item profit metric, as opposed to the total profit metric given by gross margin." 

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