Tzarina of Compliance

Yes, that is what I understood although had not articulated as efficiently. Thank you again for your generous help as always.

My agency's CPFF Term contracts specify a scope of work and then require the contractor to propose Level of Effort for the scope of work, even though no completion is presumably necessary since once you run out of LOE you stop working. In that I see a lot of similarity to the same agency's T&M where the agency establishes the price ceiling and labor rates and often also often (ill advisedly) includes level of effort per labor rate/category and a scope of work to be performed. Once again once the price ceiling is reached the work stops or if the specified level of effort by category hours need to be exceeded but ceiling is not reached, then a labor category realignment is done. I can see why you would think it is not how it is supposed to work, but here we are. Also noted on CPFF not requiring specific labor categories, but it often requires professional labor LOE and professional/technical labor is defined.

Thank you. Thats is EXACTLY why I am asking this question. So the statutory limit would apply to the prime's fee only if the subcontractor's total price (cost plus fee) is treated as a cost. This makes sense to me from structural prospective. Thank you as ever...

There is no completion under T&M either.

Agree - its best effort and completion is not require per se, but the hours are intended towards a scope of work, which does not involve bald eagles, but lets say may involve trying to accomplish some kind of improvement in mortality efforts for infants in Africa. The level of effort has a ceiling and once you get through all the hours the contract ends.

I do understand the difference. CPFF Term is a less risky proposition than T&M but both order labor in specific categories on hourly or daily basis - even though performance is defined differently. Forgetting about this, since that is not a principal reason for the questions, my questions are specific to evaluation of fees in CPFF Term contracts. V. Grateful for your input, but not your delivery tone - even though, earned as it may be..... I do recognize your superior status as the Demi God of Govcon... I am one of your students. They say if you can not explain it simply you do not understand it well enough. I am hoping for simple and understandable without judgement. Many thanks as always.

Thanks. Good point on T&M, but most of my agency's T&M contracts do specify a ceiling on level of effort as well $$ ceiling with performance toward a task. And CPFF Term contracts specify tasks to be performed within the ceiling level of effort and total estimated cost plus fixed fee. I understand that under T&M the contractor gets paid regardless of how many hours it delivers against the total ordered hours and its profit is not reduced. Under CPFF term this is obviously less risky. What I am trying to understand is how you evaluate fixed fees etc. per my questions.

No need to respond if you can not help.

No, I will not. What does that mean?

Why not? Isn't it what CPFF Term doing is ordering specific level of effort to perform on best effort basis towards some kind scope? How is T&M different other than it fixes the rates and is a lot more risk due to overcharging hours at fixed rates, substandard labor in specified categories etc.? What I mean by de-constructed is that you are getting labor hours at cost plus fees, vs fixed priced hours.

What I mean is that CPFF Term is basically ordering hours in specific labor categories at cost plus indirects plus a fixed fee. So to me it looks like a T&M contract but its less risky since you can see actual costs of labor and burdens etc and control costs a bit better this way.

I have a question for Contracting Officers who deal often with Cost Type R&D Contracts for non-civilian agencies. If you happen to consider an R&D CPFF Term (LOE) contract and the prime contractor proposes 1000 hours of level of effort, performed 50/50 with a subcontractor (no limitation on pass through charges issues). The prime proposes a 15% Fixed Fee (lets say $10,000) calculated on total costs including subcontractor costs using the weighted guidelines calculation. The Subcontractor is also CPFF Term and its cost plus an 8% (lets say $7,000) fee is included in the base for prime's proposed fixed fee. Questions: 1. Since CPFF Term is basically a deconstructed T&M, do you establish separate LOE targets for Prime & Sub and separate Fixed Fees for Prime and Sub per the proposed amounts? if not, do you establish one total LOE amount (1,000 hours) and one total Fixed Fee ($17,000). You will then pay $17 per each hour of delivered LOE and let the Prime pay out the fixed fee to sub under their subcontract from its fixed fee received for the delivered LOE. Is there a chance that Prime will then treat the sub's cost and fee as cost and charge it to you directly and then will also claim the $17 against LOE of 1,000 (double charging)? 2. Do you think establishing separate LOE and Fixed Fee for Prime and Subs is a better way (in the way T&M allows separate rates for subs)? 3.What if they change a sub and the new sub is fixed price? 4. Do you consider the 15% fee that prime proposes against the statutory limit on fixed fees?15.404-4(c)(4)(i) - i.e. sub's cost and fee are treated as cost. Or do you consider a combined fee of the prime and sub against the statutory limit? 5. As a CO do you evaluate this proposal any different in terms of cost reasonableness compared to another prime, which proposes a Fixed Fee Per Hour for all LOE, lets say at $15 per hour and commits to pay all fees to its subs from that amount? Now, what about the same situation in CPFF Completion contract ? What about CPAF? Any suggestions or thought are appreciated.

Thank you. This is exactly what I was trying to figure out. There are two issues really - one is whether we would modify the option year to add additional targets, funding and fee that the contractor could not achieve in the base year CPFF completion - that seems to be the question of bona fide requirement and the need to allow the contractor to try to get the additional targets and would probably require a J&A since the option would be modified (i.e changed). The second part is whether the funding from base could be carried over and the answer seems to be yes, if the funding is multi or no year. Thanks again.

Many thanks! Happy Thanksgiving!

Thanks, Don, so thats my question. So the option periods are considered new needs for the purpose of obligation of funds? So if the base period was funded with say multi year or no year funding) and the funds were still unexpired, they could be used for option years because you could re-obligate them until they expire.

Many thanks. I guess my question is more on the appropriations side. If the base period is one year money which is allotted to the contract for the base year, would it be possible to roll it over to options and spend it in the option years. Is it considered one contract for the availability of funds or separate contracts?

This is a good point. I think yes, the completion targets would be "rolling over" to the next year so to speak. For illustration. Base Year has a target of mobilizing $50MIl in private investments with an incentive paid in fixed fee for every $10MIL mobilized = $200K in fixed fee. The contractor mobilized $30MIL and earned $600,000 in fixed fee. The Option year of the contract wants to continue mobilizing private investment for an additional $25MIL and the next year an additional $25MIL. So the question is if the contractor failed to mobilize $50MIL by $20MIl short in Base period, but manages to mobile this additional $20MIL in Option Period, so the total mobilization is $45MIl instead of $25MIL in the first option period- should I roll over the unused costs and unearned fixed fee? Or does the base and options represent complete contracts in themselves? The contract does not say anything about funding being available cumulatively for the option periods.

One CLIN. This is a contract for non-severable services. It is funding technical assistance in a agricultural sector with completion targets in each year.

Scenario: CPFF Completion Multiple Year Contract. Base Period is 2 years. Two Option Periods at one year each. The awarded amounts: Base Period: Cost Ceiling $10MIl Fixed Fee $1MIL Option Year 1: Cost Ceiling $5MIl Fixed Fee $500k Option Year 2: Cost Ceiling $5MIl Fixed Fee $500K Base Period is fully funded with the Appropriation of the FY in which the original contract was awarded. Contractor finishes Base Period under the Cost Ceiling (Total Cost at $8MIl) but does not complete all the Completion Targets, and only earns about half of the $1MIl Fixed Fee. Can the agency "roll-over" unspent funding and fixed fee to Option Period One? I know that the Option Period must be exercised as originally awarded, but can the Agency use the Base period funding as the initial obligation for Option Year funding? Also can they use the unspent base period funding to modify/change (bilaterally) the Option Period Contract by increasing completion targets and estimated cost and fixed fee?

Thank you!

Does anyone know where I can find the original study Defense Financial and Investment Review June 1985 or other relevant reading? I assume it discusses how the weighted guidelines for the DOD Structured Profit/Fee Objective risk ranges (2-7% etc) were set?. I am looking to see how this study could be leveraged by other smaller agencies to develop its own profit/fee objectives and ranges for assigning risk (why 2-7%? and not 2-15%?). Many thanks for any help or any helpful reading on this (other than Nash and Cibinic Cost Reimbursement Contracting which I have of course read).

Many thanks, Don.

c) If the Contractor does not have an approved purchasing system, consent to subcontract is required for any subcontract that - [...] (2) Is fixed-price and exceeds - [...] (ii) For a contract awarded by a civilian agency other than the Coast Guard and the National Aeronautics and Space Administration, either the simplified acquisition threshold, as defined in FAR 2.101 on the date of subcontract award, or 5 percent of the total estimated cost of the contract. Which one applies? The SAT or 5% of the total contract cost? I always thought that consent is required for Fixed Price Subontracts which exceed SAT. What if the total contract is at $70 MIL of estimated cost. Would consent be required at $250,000 or at $3.5MIL? It does not say "greater of" or "lesser of" It is the same issue with Alternate I for notifications for fixed price subcontracts. Thanks as always.

Good point, looked at the IDIQ, nothing on evaluation except for this: b) The Contractor must furnish key personnel as stated in task orders. (c) The key personnel specified in task orders are considered to be essential to the work being performed thereunder. Prior to replacing any of the specified individuals, the Contractor must immediately notify both the Contracting Officer and USAID Cognizant Technical Officer reasonably in advance and must submit written justification (including proposed substitutions) in sufficient detail to permit evaluation of the impact on the program. No replacement of key personnel must be made by the Contractor without the written consent of the Contracting Officer.

Thanks all. @formerfed made me look at validity of the offer and it expired at 9 months (!!!! last month) and no extension has been requested (🙄 typical), so this works with timing and also with any potential protests. As always..... merci