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MV2009

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Posts posted by MV2009

  1. 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.

     

  2. 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.

  3. 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?

  4. 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.

  5. 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.

  6. 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? 

  7. 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.

  8. 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.

     

  9. 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.  

  10. 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

  11. H2H, CPARS is always a consideration. My main issue with it is there is no overall rating within the system (outside the question of whether you would or would not award to them). This non-compliance would likely be written up in the management or quality section. But if everything else is rated at very good or better, I would argue that this issue gets diminished. CPARS is a reactive tool during the period it is evaluating, the intent was to be proactive and have contractors propose better and put more focus on this so there is no issue in post award. I fully acknowledge that the CPARS should be used in evaluations of future awards and contractors can use the information to improve performance after the rating and thus some would say it can be proactive to preventing future issues.

    Why was I recommending financial vs CPARS is because money is the main motivator in for profit firms. I know that if I get fees assessed on my bank account if the balance is too low or if I don't transfer funds into the account, I actively seek to avoid getting those fees assessed and manage my accounts accordingly.

  12. Thanks, that is what they are referencing on why it can not be done. All I am trying to do is ensure the contractor does comply with the contract. If there is another way I am all ears but often times these issues would never rise to the level of termination but something needs to be done to ensure more care is done on this. In terms of studying the subject, do you have any recommendations?

  13. Thanks for all the responses. Vern, I was talking in general sense when I stated terms and conditions of the contract. For purposes of discussion, let's assume there was a contract attachment that specified what guidelines the contractor must follow and it failed to follow those guidelines during performance. This is costly to the Government and consideration should be provided for this event. I agree that the Inspection clauses for Cost Reimbursement broadly state the intent of this clause and therefore, this special clause does not appear to violate the intent of the CPFF contract type as defined in FAR 16.306(a). The special clause would take the language in the Inspection clauses a step further as it would set a floor as to what the minimum amount the reduction in fee would be. This floor was being done in case there is a severe event that warranted termination (very unlikely).

    I was told this couldn't be done because the special clause is not in agreement with the intent of FAR 16.306(a). I do not agree with that as the fee is fixed and does not change as long as both parties adhere to the contract. I appreciate everyone's thoughts so far.

  14. Anyone know of an online resource that shows all the changes to the FAR and its preceding regulations? I'm looking to see when and why the following at FAR 16.306(a) was incorporated:

    "The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in work to be performed under the contract."

    The reason I am looking for this is because I'm having a discussion about including a special clause to a competitive source selection. This special clause works as a negative incentive where if the firm does not comply with the terms and conditions of the contract, this clause would be enforced and the contractor would lose at least a specified portion of the fee per the clause. The intent of this clause is to encourage the contractor to put more focus on its administration of the contract but if they do not, the Government has a way to enforce non-compliance quickly vs. handling this in a sole source post-award environment (where getting consideration is often a time consuming effort). I am being told I can only use the applicable termination clauses to enforce non-compliance because FAR 16.306(a) specifies when the fee can change. While I agree the text states that the fee is fixed at time of award and doesn't change unless changes in the work occur, it is not clear to me whether the writers were considering post award administration issues that may arise and whether they would not agree with this type of clause being added to the contract. To me, the fee is fixed provided the contractor and Government adhere to the contract. If either party changes the contract or does not adhere to it, consideration is required. I don't think this type of clause violates the intent of the CPFF contract type based on that understanding. All this clause does is resolve the consideration issue for a specific issue when non-compliance occurs in a post award environment.

    Sometimes understanding the context as to why the language was incorporated can provide better insight and help me know if I am off base or not. Any insight, recommendations, or thoughts are welcome.

    Note: This clause does not override the termination clauses, it merely sets a floor as to what the minimum consideration would be for non-compliance.

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