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About MV2009

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  1. Interesting read. Federal contracting is managing scared and that is no way to manage a business. The net results of doing so are fear, delays, and mistakes. If you want to look for improvements in contracting start with looking at aligning the incentives of the acquisition team and focus with the end state in mind. FAR Part 1 is clear we need to manage risk not avoid it.
  2. Retreadfed, I agree with you the point is to fund up to the contract value but if I don't know if the funds will ever come outside of the guarantee received prior to award, its bad practice to encourage performance to continue. Vern, you are correct that the costs associated with the stop work and restarting the work or contractor requesting termination would be more expensive. I don't know why it is hard for agencies to fully fund or provide accurate and realistic funding increments.
  3. Agreed. I assume the intent behind this paragraph was to address when the additional funds would be added to the existing line item on contract or to provide clarity in case the Government was silent. The inclusion of this paragraph in this clause is interesting as it gives the contractor the flexibility to work at risk with an option to get reimbursed. If the contractor wants to work at risk, that should be a business decision outside of the contract and I don't understand why the Government would want to discuss handling this in the clause. To me, it seems like the paragraph, encourages the contractor to continue working if it knew that additional funds would be allotted.
  4. I'm on the government side of the equation and interpret the info SLIN the same way you do. On separately priced SLINs, the PoP should be considered direction from the Contracting Officer and thus would make costs incurred at risk prior to the start date of the new SLIN unallowable for that line item.
  5. I've seen agencies do either approach when performing incremental funding modifications on service contracts...the reason being the long lines of accounting are different. (I.e the initial funding was done in FY16 and the next increment will be done in FY17). I can provide further detail if my response is insufficient.
  6. I have been looking for the answer and am hoping someone here can explain the intent behind paragraph i of 52.232-22 as well as its purpose. As written, is this paragraph saying that if the contractor incurs cost that are in excess of the amount previously allotted by the Government those costs shall be allowable to the same extent as if incurred afterwards unless the Contracting Officer issues a termination or other notice and directs that the increase is solely to cover termination or other specified expenses? It appears the formatting is off in the clause, otherwise its not clear to me what subparagraph (i)(1) is saying. Assuming its formatting, the Contractor could work at risk and would be reimbursed when the Government provides additional funding unless the Contracting Officer directs otherwise? If so, lets take the following examples and get your thoughts on it: 1) Funding is added to the contract by adding a new informational SLIN (PoP at the priced CLIN level remains unchanged) and Contracting Officer provides no direction outside of the effective date of modification. Since PoP is not specified at the informational SLIN level, can the contractor bill for costs incurred prior the additional funds being allotted on contract? 2) Funding is added to the contract by adding a new separately identifiable line item with a PoP identified at the line item level. Does the PoP specified at the line item count as guidance from the Contracting Officer?
  7. Amazon understands the risk to its business model and is trying to limit its exposure. When your core competency is dependent on external forces outside of that competency, it is critical your business looks at ways to minimize its risk to those forces. This is especially true when consolidation occurs in your supplier networks. The Government needs to be aware and consider this especially in SETA contracting for highly technically skilled program offices.
  8. Vern, to pull on this statement little: "However, the contractor may have an excuse for nonperformance if the government's refusal to accept the ECP leaves performance impossible or commercially impracticable." Isn't there ways that the contractor can eliminate or reduce this risk before it becomes impracticable? I know it is common practice in the auto industry for the major auto manufacturers to set up agreements to ensure their suppliers do not go end of life immediately. If a contractor is not doing that, doesnt the contractor have some of the blame in not reducing this risk? Industry is needed and handing them a large financial loss is not a good strategy, regardless who is at fault. I am having heartburn accepting a clause that precisely says if a redesign is needed it will impact the build of systems and will change the terms of agreement to include profit and cost upwards. Contractors should know when they sign the contract whether it can complete the current build or not, especially under any fixed price contract type regardless of when it decides to procure the material (i.e. just in time or at time of award) during the build process. The fact that large defense contractors aren't doing what the auto industry (which also deals with end of life issues) is doing is somewhat concerning to me.
  9. H2H, Let's assume it is a FFP contract type and the contractor agreed to deliver the product. During the build, the contractor says it can no longer deliver because one of the parts it intended to use in the build for the system went end of life and can no longer purchased it. In this instance, are you saying the contractor is no longer contractually obligated to deliver the product it agreed to provide? While that may put the CTR in a tough spot in terms of meeting the requirement, the contractor agreed to the contractual relationship and should have done everything to reduce or eliminate that risk during the build process. This risk should be borne by the contractor under any fixed-price arrangement is my argument. For contracts where the Government can place orders in the future on a unilateral basis, I said I could understand the need for language pertaining to those uncertainties but was advocating that the unilateral option may not be the best idea and it should be a bilateral agreement so parties understand the risk prior to starting the effort. Is there something that I am missing that requires the Government to accept an ECP? If a redesign is required it is likely the whole system would need to be retested, not sure I would want to continue any performance of a production build if the system would need to undergo test which may result in secondary impacts. If I am buying a system, I would want to know up front whether the redesign is required prior to entering the contract. If that cannot be known, clearly, some of the risk has now shifted to the Government and if the Government were to agree to a special clause then the Government's profit position would need to reflect that.
  10. Related to this topic, is it normal for fixed price contracts to include language that would allow the contractor to receive an equitable adjustment to the contract price or targets if a redesign is required? To me, this language shifts the risk from the contractor to the Government and the Government has no way to mitigate this risk unless it takes on a role of overseeing the contractor's suppliers (which is something I am not advocating for). For procurements that will occur immediately after award, I have some concern that the contractor does not know whether it can build the system on a fixed price basis at time of award. I can understand the potential need for this language if the parties are agreeing to options or being able to order future systems under an IDIQ. Industry has a valid point that the if the Government has the unilateral option to require the contractor to perform, the Government may reject the ECP and require the contractor to perform in accordance with the contract, which greatly increases risk to the contractor (if a redesign is required). From my perspective, if the out-years are the concern, wouldn't it make more sense to make any future order/modification bilateral to allow the parties a chance to determined if they it can do the build or not prior to the execution of the contract action vs. adding this language on contract?
  11. H2H, I agree and understand DMS is a much larger issue and this is just a small portion of it. I excluded monitoring DMS (i.e. determining the quantity, monitoring its BOM) because it is currently being done on a cost line item funded as a separate contract action on a term basis. I agree that the cost of re-engineering a system or sub-system far outweighs the cost of doing an end of life buy. Both parties understand this and the contractor likely uses this information in its pricing strategy for the end of life buy. That puts the Government at a disadvantage in negotiations and makes these smaller buys extremely time-consuming. This is especially true when the PO history shows a lower price paid than the historical quotes and the end of life quote is higher than both of those data points. I agree with you that the push to COTS and the time it takes for a system to reach production and sustainment means that this problem will continue to get worse.
  12. H2H, Thank you for the response. My apologies for not providing sufficient details in my initial post and not responding in a more timely fashion. #1 - I`m interested in both industry and Government comments on this issue. #2 - FAR 15.402(a) requires supplies be purchased at fair and reasonable prices. I was not sure if anyone had any creative ideas to handle these issues as they are appearing frequently and causing issues negotiating fair and reasonable prices and could cause serious program impact if not order (i.e. redesign). I have seen where repairs were handled on a cost-reimbursement contract line item where each repair was not negotiated individually. I was not sure if someone was employing a similar method for these types of buys. #3 - I was referring to the data provided from the contractor. Some times I can find the OEM pricing via a Google search but it is unclear whether that price is accurate or dated and if the distributor pricing on a 3rd party website is a good price. The prime contractor may get better pricing than the quoted price on a 3rd party website. This appears to be especially true after a quick review of the contractor's purchase order history of the part. The purchase order history is routinely lower than the proposed end of life pricing. #4 - The contractor typically provides a very short suspense. Since it is FFP and below the threshold, they will not provide certified cost or pricing data and they will not provide any additional information. This is problematic as it puts the the burden on the buyer because of the short timeline and the fact that failure to award may result in the part no longer being available, which may require a redesign of the system. #5 - The information I would like to see is the quote and the actuals from historical end of life buys to include the labor to procure and sell-off the procurement. Getting a short suspense and not obtaining the data necessary to support a position make these low dollar value procurements extremely difficult to determine a fair and reasonable price. Personally, I think these buys should be done a cost basis if the quoted pricing is dramatically different than the PO history in order to meet the end of life procurement timeline and the contractor is not providing sufficient information to support its position. The FAR is clear that contract type is a matter of negotiation. I understand that these buys are predominately done on a FFP basis but it is hard to assess the quoted FFP price to be fair and reasonable without additional data from the contractor. This is especially true when PO history shows a price that is different from the FFP price proposed. I appreciate any feedback.
  13. I am hoping to get some input as to how individuals are handling the procurement of end of life parts and see if there is a better way. Currently, we have been negotiating each end of life buy individually. For purposes of discussion, please assume the following factors: 1) A Diminishing Manufacturing Sources and Material Shortages Program is not in place. 2) The procurement of the end of life parts are required to support repairs of fielded systems On these low dollar value procurements, it can be difficult to assess the price being fair and reasonable without data from the firm. Routinely, the proposed price is not aligning to the historical data I have readily available. Additionally, they are not willing to provide the support or they will not provide the information in a timely fashion before the part goes end of life thus forcing a potential re-design situation.
  14. Agreed, I read it. No matter what approach you use, common sense and knowing why they are doing it is key vs. people just looking at data and accepting the data without any understanding of it . The latter is where problems come into play.
  15. JMG, while the methodology of using average rates proposed is allowable, it might not be good business sense to rely soley on that techinque and may lead to issues in performance. Especially, in complex acquisitions that require a high skill set and if the average rates proposed were significantly lower than the median rates on the BLS. I would caution againist using the average rates proposed approach exclusively for realism