solyvive

Scenario: Buyer issued an RFP in support of their prime contract to the US Government, which would result in a 5-year, FFP competitively awarded, sole-source production contract. Despite Seller's inexperience with manufacturing and delivering this production previously, they submitted the bid and were subsequently awarded the contract. In addition to submitting a proposal, Seller invested several million dollars in capital equipment investment in order to prepare for the contract. Per the contract, all material is provided by Buyer to Seller based on the schedule provided in the proposal. After award, Seller experienced numerous schedule delays caused by several rework cycles in manufacturing. As a result, deliveries are running significantly behind schedule and profitability continues to dwindle. To compound the matter, the Buyer recently provided Seller notification of significant material delays. After evaluating the impact of these material delays, Seller asserted its right to an equitable adjustment in accordance with the contract terms and conditions. Based on the current schedule, the material delays would push several of the product deliveries into years beyond what Seller proposed. This results in a higher cost of production due to increases in labor rates and requirements to outsource operations that were previously proposed to be handled in-house. Seller's management has given the program team the directive to find a way to work with the customer to help recover the costs of extending the period of production as well as to recoup the costs of the numerous rework cycles. Request: I'd appreciate any input or guidance you may have as to (1) how poor-performance costs can be recovered through a request for equitable adjustment. (I don't think they can as this is the risk a contractor takes in accepting an FFP contract) and (2) the best way to document delays caused by rework versus delays caused by customer furnished material delays.