higleykm

Thank you everyone!

Ok thank you. Our procedures do not state one way or another and we typically follow FAR in that case. Plus in a previous company we were dinged from an auditor on this but I can't find any guidance. 

I guess my next question would be, If I have reached the threshold for a written price analysis to be needed (one was done already on the original award) and the scope changes so that I'm adding an additional amount of money under the micro purchase threshold (for the change only) would I need to do a price analysis for that change order? 

I'm trying to show where price analysis are required for the cumulative value of a contract vs the value of the contract action. I have always been taught that a price analysis needs to be completed for anything over $3500 for the cumulative value of the contract. However, I'm having a hard time finding that information in the FAR.

For example my original award is $3,000

I purchase additional quantity for $1,000

Is a price analysis needed because the procurement is $4,000. If so where does FAR state that.

Thank you in advance!

22 minutes ago, Vern Edwards said:

In order for you to find a good pricing option you must understand the features and terms of each of the various types of contracts and the obligations and risks that they impose on the parties. Coming to that understanding entails extensive study and deep thinking. The labels given to contracts, such as firm-fixed-price, do not describe how they work. Do these things:

Read FAR Part 16.

Read the key FAR clauses for each of the contract types, especially the payment clauses and the inspection clauses.

Read the Contract Pricing Reference Guides, Vol 4, Ch. 1.

Read Contract Pricing Arrangements: A Primer, Parts I and II, in Briefing Papers 09-11 and 09-12. Part I says, among other things:

If you don't do those things you will never really understand the contract types.

Thank you Vern! I will read these.

10 hours ago, here_2_help said:

I disagree that "any" cost can be charged to a cost type contract. The rules for charging contracts don't change depending on contract type. The same labor hours/dollars that would be charged to a T&M contract would also be charged to a cost-type contract.

With respect to your comment about fee, I may not be understanding your point. To my way of thinking. if you add scope to a T&M contract then you have to raise the NTE value, which permits more hours to be billed. Those hours contain a profit component. More hours = more profit. On a cost-type contract you (generally) have a fixed fee; if you add scope then you may need to add more fee (or not, depending on what's negotiated). I must be missing your point because the two situations seem generally equivalent to me.

I agree. That is why I'm trying to find why one is better than the other. I'm trying to better understand the issues with each to make the best decision. I'm confused on why cost would be better than T&M.

I thank you both for your input. It's interesting the thoughts on Time and Material. I would be interested in hearing more on the type of contracts you would use for labor and material support.  

Wouldn't you have the same risk with cost when I can bill any cost to the contract? Plus I can negotiate my fee every time my scope changes which in the long run could potentially have the same issues. Just curious. Especially if FFP is not possible. 

Im trying to find a good option. 

I have a client that is pushing us to use a cost plus fixed fee vs a time and material for our subcontractor. They believe with a fixed fee of 7% that is all the profit they would receive but my understanding is that is on top of what is built into their rates (let's say 10% in their rates) so they would be making 17% with rate build up and fixed fee.  

However with a Time and material you would just get the rate build up which is 10%. 

Any thoughts on this would be appreciated.