Olga

I am looking for some guidance on the best way to handle a situation of a client:  a company is considering a sale of one of its subsidiaries which is implementing Government contracts.  The process of  finding a suitor, sale and subsequent novation of existing work is likely to take a year or more.  To continue maximizing commercial value, the company obviously does not want to stop bidding on new work while this whole process is going through.  Questions:  1.  Does the company have the responsibility to disclose in its bids that it is in the process of sale to another contractor?  2. In order avoid issues down the line or the agency finding out of the sale and assigning a high risk, should the company include some information in the proposal?  3. Once the sale goes through, would the Government be willing to open the closed solicitations in order to update the proposals of the said company with new company info? 4.  If you are a CO, would you and what would you prefer to know about the possible sale?

I know there was a thread in regard to the same situation after the sale, but in this case the buyer is yet to be identified.  Many thanks in advance

On April 13, 2016 at 1:16 PM, Olga said:

The CLIN estimated budget states fee separately but the obligation give one amount to cover costs (and fee if any).  I guess there is no way of knowing how this would play out since "and fee if any" may be interpreted as an allocation....

The courts have ruled in two cases that if the Schedules specifies express allocation for costs and fees, the contractor would be held to those allocations. Textron Defense Systems v. Widnall, 143 F.3d 1465, 1469 (1998)

But if the schedules does not specify express allocation by cost and fee and simply has one amount, the contractor can recover up to the total obligated amount for costs and is entitled to fee above the obligated amount. John J. McMullen Assocs., Inc., ASBCA No. 22450, 79-1 BCA 13,818 and Allied Signal Aerospace Co., ASBCA No. 46890, 95-1 BCA 27,462.

So in this case, the Schedule does not make such specific allocation between cost and fee, but simply says the total amount is "for costs (and fee if any)".  Do you think an argument can be made for the McMullen case or do you think the "and fee if any" would be considered "express allocation"?

The Schedule Obligated Amount clause, simply refers to the obligated amount in accordance with the LOF clause.  The LOF clause refers "The Schedule specifies the amount parentally available"...   So if you go to the Schedule, the only place where it is specified is Cost, Fee and Obligation Clause, that says what it says "funding is available for costs (and fee of any".     It is at odds with the LOF clause itself, which says the obligation is for costs and not fee.   No deviation approved.    Since the obligation specified in the schedule does not have separate amounts for costs and fee, I am wondering how this obligated amount would be applied if dispute occurs.  Would it cover all performance costs up to the limit per the LOF clause and then the fee would be paid proportionately to the work delivered (the exceptional performance is relevant in that the work was delivered and accepted) above the obligation?  The bigger question is as a Contracting Officer, when obligating the money under the CPFF contract, do you obligate costs and fee separately or do you make a reserve for fee without putting that amount in the contract?  Thanks

The question is does the funded value cover only costs or costs AND earned fee?  The LOF clause 52.232-22 states at 

(b) The Schedule specifies the amount presently available for payment by the Government and allotted to this contract, the items covered, the Government’s share of the cost if this is a cost-sharing contract, and the period of performance it is estimated the allotted amount will cover. The parties contemplate that the Government will allot additional funds incrementally to the contract up to the full estimated cost to the Government specified in the Schedule, exclusive of any fee.

If the Contractor incurred costs up to the obligated funding, can it still recover earned fee above the obligated funding limit?

I would like some help with the probable outcome for this question.  A CPFF term contract for $60MIL incrementally funded.  The Government funds only $30MIL and extends the contract twice to continue performance, but still does not reach the full obligation.  Now the contract is ending and no more funding will be obligated.

The Schedule Obligated Amount clause says that the funds are allotted for "allowable costs (and fee if any)" (emphasis added).  The contract includes the LOF clause 52.232.22.

The Contractor realizes it has made an accrual mistake in the accruals of incurred costs and has a deficit of $1MIL over the obligated amount if you include the earned fee.  Without counting the earned fee (CPFF term = LOE delivered x fee per day), the Contractor has incurred costs within the obligated amount.

The performance was accepted and lauded by the client as Exceptional.  The Contractor mistakenly relying on available funds numbers offered  to the Government and with acceptance performed more work than originally planned for the same obligated amount.

The Government argues that since no timely notification under the LOF clause was provided, the costs would not be reimbursed since the obligation covers costs and fee and the Government is not obligated to reimburse above the obligated amount.

Cost Reimbursement Contracting (Cubinic and Nash) states under Control of Funding Limitation of Funds clauses, that if the "funds are allotted in a single figure, it has been held that the contractor can apply the full allotment to performance costs".

Would this argument work in the scenario above?  If the Government refuses, is this a legitimate claim argument?

Many thanks.