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  1. With this background, how is the contractor being found responsible? On paper they more than meet all the responsibility standards of FAR Part 9.
  2. Ji20874, It is to your second bullet: Or, does 15 pout of 30 mean the single product has 30 deficiencies, of which only 15 have been corrected? If YES, then the contractor should get nothing -- zero -- nada -- zilch -- unless and until it delivers a conforming product with zero deficiencies. I say this as a general proposition -- I do not have the benefit of knowing what the product is, and might take a different approach under some circumstances. This is the position we are also leaning toward. Of course, due to the technical complexity of what we are working with we do try to take this on a case by case basis because not every situation is so cut and dry. However, generally we think releasing withheld payments should be an exception not the rule since we know at some point the monetary benefit (the incentive) to the contractor is lessened and the remaining issues may be deemed to be not worth their while to fix.
  3. I would agree if this situation were a one off instance, but it is not. It a consistent problem where the contractor will fix the issues with the highest priory and never get around the rest because it is not in their best interest to do so. So, I know that our position is to maintain as much leverage as we can in order to have something to hold the contractor accountable for to incentive them to resolve the remaining issues. I know sometimes it can get adversarial, but we are not trying to be inflexible or unreasonable by withholding final payments to the contractor. It's not a punishment, but history suggest making payments as the contractor progressed rarely gets us the results we need.
  4. The contractor is trying to argue that they should be able to invoice as progress is made and that they have done it in the past, which is true. That doesn't mean it's necessarily correct and PCO, fairly new to the contract, was looking for something more black and white to support telling the contractor no. This is an ongoing issue and I know that we would prefer to withhold the full amount until the contractor brings the device to full conformance. However, if the contractor can argue it's PCO's discretion then they most likely will put pressure other members of our team to put pressure on the PCO to release funds, which effectively reduces our leverage over the contractor. Our PCO is not a pushover, and is fair, so if it makes sense then they will certainly allow payment to be made on a case by case basis. However, part of our challenge is juggling whats appropriate with politics so that is why we were hoping to find a direct answer to our question, or at best a common understanding from other contract professionals.
  5. Ji20874, we do have clause 52.232-16 in our contract. I think between your responses and Retreadfed, along with some additional research (https://media.defense.gov/2007/Dec/21/2001712587/-1/-1/1/08-038.pdf), I think I have my answer. From the perspective of the 52.232-16 the contractor gets 80% of cost incurred with the remaining 20% being paid upon final inspection/acceptance in accordance with the terms and conditions of the contract. In our case, the contractor did not meet the inspection crtieria for the Government to fully accept the device. Therefore, a decision was made to conditionally accept the device and withhold the reaming 20% until the contractor corrects the known deficiencies or uncompleted work. To linked articles point, I think the PCO has latitude to allow the contractor to invoice even after conditional acceptance as long a work progress. For example, if the contractor fixes 15 out of 30 deficiencies (assuming the are all of equal monetary value) then I think the PCO could allow them invoice for half of the remaining un-liquidated, or withheld amount. However, it may be in the Government's best interest to not allow the contractor to invoice until all the deficiencies or uncompleted work is completed to meet all the inspection criteria for final acceptance.
  6. FAR 46.101 “Conditional acceptance” means acceptance of supplies or services that do not conform to contract quality requirements, or are otherwise incomplete, that the contractor is required to correct or otherwise complete by a specified date. The contractor did not deliver a device that conformed to the Government's requirement. However, the Government still accepted the device with the condition that the contractor fix the deficiencies and finish all completed work. As such, the PCO withheld a sufficient amount of money to incentivize the contractor to complete the work as allowed in FAR 46.407(f). At some point, if the contract just cannot meet the requirement then to Ji20874's point, we would remove the cost of the outstanding deficiencies or work to be performed. I think the PCO is well with in their right to take this kind of action. The question I'm trying to answer is if once the amount is withheld does the contract need to fix it all to get full payment, or should the PCO pay out as progress is made. Mind you, this is large company that has been in business with the Government for years.
  7. It is my understanding that progress payments occur under the normal execution of the contract. If progress are not being made then the PCO can work with DCMA in order to suspend progress payments or reduce the liquidation amount, that is true. Theoretically, if the liquidation rate is 80% of incurred cost then roughly 20% of the CLIN value should be remaining when delivery is made. If the contractor delivers a fully conforming widget on time they can liquidate the remining amount. However, in our case they did not, so technically the PCO stopped the progress payments when they decided to withhold X dollars for a non-conforming widget because that amount can't be paid out until the device is fully conforming...or unless the contractor make progress and the PCO approves payment to be made. That's the question we are trying to answer. Do they only get paid if they fully conform, or do they get paid if the PCO determines sufficient progress has been made to release some of the withheld amount. Also, I'm not a professional on progress payments so if I'm way off base I'd be open to feedback.
  8. Let's assume the contractor was to deliver a technically complex widget under CLIN 0001 at a specified date in accordance with the terms and conditions of the contract. The date came and the contractor informed the Government they could not make delivery in accordance with the contractual date. Due to the needs of the customer (urgency), the PCO took the advice of our technical team and accepted a non-conforming widget in order for the customer to at least received some benefit. As PER FAR 49.607(e) the PCO calculated the amount of work remaining to fix any deficiencies or non-completed work and withheld that amount. The decision to withhold verse reduce the price was because we are in a sole source environment and the customer needs the widget in order to meet operational needs. A price reduction would mean that certain capabilities for the widget would have been removed from the requirement and the widget would never be fully conforming. I hope that helps. If not please feel free to ask more questions.
  9. Per FAR 46.407(e), “The contracting officer must discourage the repeated tender of nonconforming supplies or services, including those with only minor nonconformances, by appropriate action, such as rejection and documenting the contractor’s performance record.” In addition, per FAR 46.407(f), “When supplies or services are accepted with critical or major nonconformances as authorized in paragraph (c) of this section, the contracting officer must modify the contract to provide for an equitable price reduction or other consideration. In the case of conditional acceptance, amounts withheld from payments generally should be at least sufficient to cover the estimated cost and related profit to correct deficiencies and complete unfinished work. The contracting officer must document in the contract file the basis for the amounts withheld. For services, the contracting officer can consider identifying the value of the individual work requirements or tasks (subdivisions) that may be subject to price or fee reduction. This value may be used to determine an equitable adjustment for nonconforming services. However, when supplies or services involving minor nonconformances are accepted, the contract need not be modified unless it appears that the savings to the contractor in fabricating the nonconforming supplies or performing the nonconforming services will exceed the cost to the Government of processing the modification.” In our specific case, there is a large business under a Firm Fixed Price supply contract that provides progress payments (at 80%) to the Contractor on a contract line item number (CLIN) that has been previously conditionally accepted via a DD250. At the time the CLIN was conditionally accepted the withhold amount was negotiated and established based on the remaining outstanding requirements not being met on contract (also known as deficiencies) and commensurate consideration was received from the Contractor to the Government for not meeting the outstanding contractual requirements. In addition, a new delivery date was negotiated and the contract was modified to extend the date of the CLIN so the Contractor could complete the outstanding requirements and deliver a conforming supply item. The Contractor has asked the Contracting Officer to establish a new withhold amount so partial payment can be made based on completion of some of the outstanding requirements since they have delivered that capability to date to the Government and partially resolved part or most of the outstanding requirements for the CLIN. There are still some outstanding requirements left to fulfill on the CLIN. QUESTION: Is it appropriate for a Contracting Officer to establish another withhold amount based on the remaining outstanding requirements and partially pay the Contractor for the requirements that have been delivered to the Government to date, even though there are some outstanding requirements the Contractor still needs to meet? If so, can the PCO establish and authorize multiple withholds and then release payments against the withheld amounts for a single CLIN? Or, once we establish a withhold for a conditional acceptance, does the Contractor only get paid the full withheld amount upon satisfying all of the remaining contractual requirements whether they are delivered to the Government incrementally or not? Thus, only one withhold would be established for the CLIN, with the full withhold amount paid upon completion, regardless of whether or not some of the outstanding
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