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Gwestbury

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About Gwestbury

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  1. I've only made it through the first hour but his is interesting testimony. Thank you for sharing and please forgive if this is thread shift. My initial reaction is that none of these politicians own a BMW car because they obviously have never been to the BMW parts counter. Also, did I hear the IG lady say that profit margins over 15% are unreasonable? Spare parts buying is very difficult as the decision to put the buyer in a sole source situation was as part of the system acquisition or as part of the decision to extend the life of a system. As a former buyer for Hughes Aircraft we were put in this situation from our suppliers every time we received an order for AWG9 spares; that radar system had vacuum tubes in it and was extended by the F-14B upgrade well into the 90's. That a VC company has developed their business model out of exploiting DOD's (and Boeing) reliance on these spares is rather disgusting on its face, it's also perfectly legal. I doubt TransDigm has the authority to compel the DOD buyers into signing their purchase at these egregious prices.
  2. Yes Bob, I should have expanded in more detail on the original post. My bad. Yes this is what I'm trying to do but was looking for a little support beyond just the regulation. I can't find any discussion (other than ours) and was hoping I could find a court case, board decision or something that could amplify my advice beyond "you can't do that." Thanks.
  3. Thanks kevlar51. Sorry I didn't post any context but work got in the way. I have a customer that continually attempts to limit their risk under cost reimbursement contract vehicles despite the basics that you point out. A while back they had included the following language in a Draft RFP (why I had posted this the Award section): The Contractor is responsible for total performance under this Contract, including selecting the specific approaches and methods to perform all work. For all Contract work within the control of the Contractor, the consequences of any adverse Contractor work performance; consequences of any regulatory actions in response to adverse Contractor work performance; and/or inability to accomplish the Contractor’s proposed technical approach shall not be a basis for an upward adjustment to the cost and/or award fee and/or the firm fixed price. This language was deleted after the pre proposal meetings but I believe it reflects their ongoing sentiment . I've just wondered if they are butting up against the limitation of warranties in CR vehicles.
  4. Is there some sort of background history on the policy behind the limitation of warranties at FAR 46.705(a) in cost reimbursement contracts? I can't identify any board cases or decisions that include discussion of this provision, but then again I'm not the greatest search engine user. Thanks in advance.
  5. Thanks for the reply. I also spoke with a legal expert on interdivisional matters and he believes my issue is squarely FAR 31.205-26(e). Making the commercial exemption claim is really our only hope; otherwise we might as well just fold them in to the federal segment if they, indeed, want to do federal work. Now I just have to relay the bad news....
  6. My company holds several cost type contracts and under one of these contracts we are performing a task that includes the use of a subcontracted fabricator. Based on the need to better control the quality of our end product on this job our management team has decided to get into the fabrication business and purchase this said fabricator. This subcontractor, who has done very little FAR based work at any tier in the past, will become owned by our parent company and will therefore be under common control with us. Of course the first question from the management team to me was what other work that we have could we give them to expand the revenue of their new toy. So what would be a good answer? I've gone down the road in my head of moving buy work to make work and it doesn't look too good. This small business fabricator will now become a segment of a large business under common control with us. I'm sure they are not currently able to support cost transfers as required by 31.205-26(e) and taking the commercial exemption would be a difficult sell for most of this work. We don't have any formal Make v Buy programs but the general statement at 15.407-2 is enough to require me as a contractor to ensure lowest overall cost. I would have a great technical argument but almost no supporting information on cost. Certainly our own desire to expand revenue with a new acquisition isn't going to satisfy. In a previous Circle Bar W life I remember we competed affiliates and kept the transactions on the buy side. We put in place OCI mitigation to include our ACO opening the proposals if necessary. As I recall our customer really didn't like this approach though. Any other ideas? "Don't do it" doesn't seem to be an option! Thanks in advance.
  7. Thanks. An advance understanding would have helped greatly with my affiliates and will be "Option 3" of my interdivisional transfer policy. If I could get the customer to agree to something other than 52.216-7 our company would certainly agree to a less than what we consider cost position just to avoid the foreign (to them) process. It would look something like this: The affiliate would certify its cost in accordance with its accounting practices and native audit. The cost would be transferred using their standard practice (cost plus intercompany profit is our company wide standard practice). During our IC audit DCAA could consider those costs as "estimated" in accordance with 6-313 then question the intercompany profit and a percentage of costs based on statistical analysis (documented of course). We take the hit to unallowable on our books and everybody is happy. Only problem is that on most of our projects we are in a teaming arrangement of some sort and do not have a direct relationship to the CO. That means seeking an advance understanding on a transfer that might end up being 1% of the project's overall annual costs. Instead it just gets dumped on me!
  8. Hello all- I'm a past member of this board, a continual lurker, and have just re-registered after reading this thread. Thank you for this discussion as interdivisional transfers are near and dear to my heart. I'm a Contract Manager for an international company with close to 80 separate legal entities performing as one company. Our company, an LLC, was established specifically to do business with the Government and is CAS Compliant (most days). We have moved most of the U.S. based performing resources into the LLC and have, thereby, solved many of the problems we had on this side of the pond. However, one of our selling points is access to the technologies and technologists that we have in other divisions abroad. Currently I am managing six different interdivisional transfers to sister companies performing U.S. contract work in Europe. After six years I can tell you that interdivisional transfers have caused more heartburn then any other issue that I've encountered in my 25+ years of dealing with the government! Quickly, here are a couple of points of note: Interdivisional transfers at cost are make and not buy (FAR15.407-2) and are not considered as subcontracts. As such you can treat them differently than subcontracts in terms of indirect pools. For us we use a determining factor based if we consider the effort "staff augmentation" and have criteria defined to make the determination. FAR 31.205-26(e), "on the basis of cost incurred" can ONLY be interpreted as 52.216-7 if you have a cost type prime. This a really poorly thought out idea IMO. The goal seems to be to remove any opportunity to pyramid fee, but because of the 52.216-7 requirements I have had divisions failing accounting system audits, floor check audits, and have had to require them to submit IC submissions, all for $40k in annual cost. Throwing out the rest of Part 15 (T&M no fee, fixed price no fee, etc.) and with no way to bring materiality (or sanity) in to the equation makes dealing with affiliates much worse than subcontractors. 6-313, Intercompany Transfers, of the Audit Manual states, "Under these conditions, amounts in excess of actual or estimated cost should be questioned." Has anyone ever gotten DCAA to accept "estimated" costs as part of an incurred cost audit? Our foreign divisions can do an o.k. job of estimating what the Government considers allowable costs but have a hard time accumulating and reporting in a manner that the DCAA will accept. It appears from this guidance that they could accept less than full compliance but they won?t. Interdivisional transfers at price are still considered make but are identified separately in in proposal in accordance with FAR 15.2. In our accounting system we treat these the same as subcontracts but I do not treat them as subcontracts for Subcontracting Plans and other reporting. I have pushed hard with my customer to obtain exemptions based on commercial knowing that it's a real stretch for most services but also knowing it's the only way to bring some sanity to the process for smaller efforts. One little issue that's been growing with DCAA European are indirect allocations to our affiliates from our parent as part of the affiliate's IC audit. They say that because the affiliate includes those allocations in its indirect calculations then the costs must be supported with an Incurred Cost Submission and audit. DCAA over here has asked for support for indirect allocations from the parent as part of our audits but has never asked for an IC Submission from the parent. I am currently in the process of writing a policy for interdivisional transfers to our LLC. If someone out there already has such an animal I would love some insight. Thanks again for addressing this issue, and I welcome any input you might have.
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