Vern Edwards

@formerfedThe link is to a paper about automated contract writing, i.e., document preparation. But contract specialists do more than that. Don't they?

They are the ones who don't understand. I'm not sure that T&M is the right kind of contract for your purposes, but here is a suggested T&M line item structure. One possibility among several. 0001 - Migration Support IAW the Statement of Work - 1 - Job - Ceiling Price $... 000101 Labor Category A - (Est. Qty. ____, Unit: HR, Hourly Rate $___, Est. Cost $____) 000102 Labor Category B - (Est. Qty. ____, Unit: HR, Hourly Rate $___, Est. Cost $____) 000103 Materials (Est. Cost. $ _____) Or something like that. I presume that you are familiar with FAR Subpart 4.10 and, ideally, with DFARS 204.71 and DFARS PGI 204.71. All the estimates should add up to the ceiling price. You could use two contract line items with exhibits for labor and materials instead of informational subline items.

@Witty_Username Thanks for a very insightful post! I agree with you about time from identification of need to delivery. Another complicating factor in that concept of PALT is changes in the conditions that give rise to the need (for example, opponent strategy, tactics, and weaponry) and changes in technology.

@FreyrIs the contract for just one job or for various work to be performed from time to time within a period of performance?

@Don MansfieldWhen I post, I do not do so to please you. I don't really care what your question was. I posted what I wanted to say. But now I will answer your question. I do not know of any statute or regulation that expressly requires a small business prime to get small business representations from its subcontractors. However, not every contractual obligation is express, and I think I could make a persuasive argument in court that such a requirement could be inferred from other clauses in the contract, including FAR 52.219-8 and FAR 52.219-14. Among other things, I think failure to require subs to make representations could be an indication of bad faith.

@ji20874I don't agree with Carl's "danced around" statement. I haven't danced around anything. I certainly didn't dance around in my post this morning. I said exactly what I would do and why. As for absolute criteria for judging compliance, ideal practice would be for the contracting parties to discuss interpretation and compliance before contract award to find out how each party interprets the clause, how they would apply it, and whether they can reach a meeting of the minds. Why ignore an elephant in the room? Ideally, the parties should be able to develop a formula for determining compliance based on the language of the clause and 13 CFR 125.6, and ideally they would document their understanding. The words in the clause should be the basis for a story problem solution. But given the press of time and work and the shortage of skills in the contracting community, I doubt that ideal practice can be achieved in most cases. So, as a practical matter, it's probably best to set the matter aside for resolution at a later time, if necessary.

@C CulhamI don't get what point you are trying to make. I don't question a CO's authority to determine a contractor's compliance with 52.219-14. I question when and how it is to be done and how much work it will entail. Although your comments were addressed to me, I think your issues are with Don. I don't think we've danced around it, but I do think that some have not discussed it as intelligently as they might. I think the policy is overboard; I think the clause is poorly written; I think it's more difficult to enforce than some in this thread are giving it credit for; and I don't think that busy COs should devote any time to enforcement during performance unless they have good information about failure to comply. I have said what I would do.

A prime that promises to comply with the limitations on subcontracting would be foolish not to require prospective subs to (1) certify their size status and (2) require their own subs to so certify. The prime should do that not because they're required to do so, but because it would be a prudent act of self-preservation. As for how the prime would know that the sub is being truthful about its status, as Carl has pointed out, the prime is entitled to rely on the sub's self-certification. That's old policy. (Stalking you with praise, Carl. This time.) Now back to CO enforcement: FAR 52.219-14 takes the wind out of a would-be proactive CO's sails, first, because it does not require a contractor to provide regular "progress" reports to the CO. SBA expressly rejected that idea when it implemented the new law and policy. See 84 FR 65647, Nov. 19, 2019, at 65652-53. (Does anything else in FAR or elsewhere require progress reports? I don't know. If there is some such requirement, I'm sure Carl will find it. (Praise again, C.) But even if a contractor must report progressive subcontracting limitation status, FAR 52.219-14 and 13 CFR 125.6 may prevent the CO from taking any kind of action prior to contract completion, because both expressly state the point in time at which the contractor must demonstrate compliance. I'll quote the clause: Thus, the contractor need not be within the limitation at all times during the course of performance. What should a CO do if, say, at the 25 percent completion point, the amount paid to other than similarly situated subs is more than the limit? In light of the clause language, what can the CO do? I think nothing, as long as there is still a chance that they can be within the limit by the end. The basis for determining compliance is the percentage of the "amount paid" to subs not similarly situated by the end of performance, less the stipulated deductions of other direct costs and materials costs. That amount might not be knowable until all matters at issue between and among the parties are resolved after the work is physically complete and everyone has signed off on final payment. A CO would need both first and second-tier subcontract information to determine compliance, and would to need to know the amounts of other direct costs and materials costs to be deducted from the amounts paid. (Think about verifying compliance under each order under an IDIQ contract.) Would COs need audit assistance, or should they just accept the amounts reported? How long will all this take, especially on large contracts with lots of subcontracting. Who bears the burden of proof? Does the contractor have to prove compliance or does the government have to prove noncompliance? How much time should COs and agency lawyers be prepared to devote to all this after contracts are physically complete? How much might all this cost a small business if a CO decides to go full compliance-monkey? In my opinion, small business policy is a political policy that was easy for our reliably dunderheaded Congress to enact and for the bureaucrats to implement in regulations. I can tell it was easy because it took only a little more than 100 pages in the Federal Register and three years and a few months. See Big Is Beautiful: Debunking the Myth of Small Business, by Atkinson and Lind (MIT Press, 2018). After reading what everyone has said, here is where I stand: If I were a CO administering a contract with subcontracting limitations I would do the following: I would include a clause in the contract requiring that (1) before final payment the contractor state in writing whether they complied with the limitations and (2) provide a summary statement of the amount paid to each non-similarly-situated subcontractor. I think I could ask for that information pursuant to 13 CFR 125.6(e)(4), but I'm pretty sure I'll hear from Don about such an information request. I would send a letter to the contractor at the performance midway point reminding them of the limitation and asking for written confirmation of receipt. Upon receipt of the contractor's final confirmation, and assuming that there were no issues, I would sign a memo to file stating that I knew of no reason to think that the contractor had not complied. That's as far as I would go absent reliable information about noncompliance or direction from above. @joel hoffmanJoel, about the photo you posted—How did you manage the selfie while in that position?

I doubt that anyone alive today could answer your question. But the files may still exist... somewhere.

What do you mean by that? What do you mean by "Service Contracting 101"? You have used that phrase several times now. I can say with confidence that I have read and written more about service contracting than you have ever read or thought about, and I don't know what you mean by that.

No it's not. Under 52.219-14 the standard is amount paid at the end of the job. Progress reports don't mean diddly squat if there are outstanding compensation issues to be settled or important work yet to do. And a few classes do not a rocket scientist make. I asked you: I and everyone else will be standing by.

And if you had thought about the clause and the turns things can take during performance, you'd know that the plan does not mean diddly squat once the contract has been awarded and performance has begun. Things don't always turn out as planned. The criterion is amount paid. Anyway, I think you're a civil engineer. If so, what do you know about rocket science?

@joel hoffmanAnd you're not being very thoughtful. If you were, you would realize that the clause is potentially very problematical for primes and contracting officers. Your many war stories about what you did when don't impress me. Try some analysis of the clause. What are the implications of the "amount paid" criterion for small subs relying on very big primes to do difficult work very close to the limitation? Try conjuring up some scenarios and working them through for us, instead of telling us another tale.

See 13 CFR § 125.6, which says in part: See also FAR 52.219-14(f). The limitation is based on the amount the government pays the contractor and the amount the contractor pays to subcontractors. It is not based on the contract price and subcontract prices. The amount paid will not be known until performance has been completed and all payment-related issues are resolved. Compliance may not be predictable or determinable on the basis of periodic reviews of invoices. Too much complaining, interrupting, and threatening by the CO on the basis of interim assessments might become the basis for a claim based on government interference. And what about line items? What if the line item structure renders the contract severable (divisible) as opposed to entire? Does the clause apply to the entire contract payment, even if the line item structure renders the contract severable? Both the SBA reg and the FAR are silent on that question. Under some contracts it may be very difficult to determine, during performance, how the contractor stands with reference to compliance. A determination may have to await resolution of contractor requests for equitable adjustment and subcontractor claims. Compliance might depend on things like unanticipated supply chain interruptions, shortages, materials cost increases (such a lumber late last year and earlier this year), and cost allowability. When all is said and done, noncompliance might come as a complete surprise to everyone. It might not be determinable until years after the contract is physically complete. The policy and its implementation are crummy.

Hear! Hear!

Bloomberg Government reported on September 20 that average PALT has increased 72 percent in the last five years. What that doesn't say is that five years ago it was already taking too long. Mission failure.

No. Our bureaucracy and its processes are deadened by it—sickened by overburden and confusion about priorities.

@C Culham@joel hoffmanWhen Joel was doing whatever it was he was doing to enforce limitations on subcontracting back in 1989-1997, we weren't obligating one-half trillion dollars each year on contract actions. We hadn't yet felt the full effect of President Clinton's decimation of the civilian acquisition workforce in his pursuit of a government that works better and costs less. We hadn't suffered 9-11 and felt the impact on acquisition. There was no Department of Homeland Security. We weren't acquiring supplies and services in support of two wars, anti-terrorist operations at home and all over the world, and massive IT expansion. We weren't in a pandemic. We weren't processing the numbers of contract actions that we are today. The FAR was not 1,992 pages long. The DFARS was not 1,300+ pages long. The new 13 CFR 125.6 and FAR 52.219-14 are almost indecipherable. I have read them several times, and I still can't say that I understand it fully. ME! It was written by incompetent semi-literate people. Acquisition today is more complex than it has ever been, and much of today's workforce is inexperienced, poorly-trained, short-handed, and overburdened. I say to hell with "proactive" enforcement on limitations on subcontracting. If someone complains or presents a set of facts suggesting that a contractor is breaching its contract, and if there is time to investigate, then go to it. Otherwise, keep your eyes on the prize, which is getting what our government needs, when it needs it, where it needs it, at a fair and reasonable price. Remember the movie "Patton"? Remember the scene in Sicily where some GI's held up a column while they tried to move two mules off a bridge, resulting in the column getting strafed by enemy aircraft? Remember what Patton did? (July 22, 1943) Well, I say we need more Pattons in acquisition. The mission is to acquire what our country needs, when and where we need it, at a fair and reasonable price, all at the speed of relevance. I'm an ex-paratrooper, and I say, advance toward the sound of the guns, even if you're all alone on a dark drop zone. Mission. Mission. Mission. Everything else is just a distraction. When Congress gives us what we need to do what they want done, better training and more people, we'll pay more attention to the distractions. That's MY personal enforcement standard.

@WifWafBrace yourself. You may soon be hearing from Carl Culham about your duty to proactively enforce the clause. As for me, I wouldn't spend even one minute enforcing the clause unless compelled to do so by some higher power. 🙄

Presumably, Congress and executive branch policymakers and planners. It is management information about what the government buys. See, for example, the following from a 2008 report by the Congressional Budget Office, "Contractors' Support of U.S. Operations in Iraq (August 2008)": Emphasis added. When you buy half-a-trillion dollars a year worth of stuff, planners and budget makers like to know what it is—for example, what your military needs and buys when it goes to war. For other mentions of use of the PSCs, see Congressional Research Service, Defense Acquisitions: How and Where DOD Spends Its Contracting Dollars. https://www.everycrsreport.com/files/20180702_R44010_3dbc3cecbdbf9321a06cd672ead10348033320c8.pdf

Another fact: Searching the Federal Register, I found 144 entries published between 1983 and today that involved rules about limitations on small business subcontracting. Think of the time and effort that went into preparing, staffing, and coordinating 144 Fed Reg entries. Think of all the time spent quibbling about wording, interpretation, and application. Ponder how many breaches of 52.219-14, intentional and unintentional, have gone undetected. Think how much time and effort would have to be spent to prevent, detect, and remedy such breaches. In the movies, communist bureaucrats are often portrayed as tedious apparatchiks. (See, "Ninotchka.") But when it comes to being apparatchiks, no one tops us.

I have nothing to contribute to the substance of this thread, but I do have some facts that might interest you all. In the 1984 Code of Federal Regulations, in the paperback edition published by the Government Printing Office, Title 48, the FAR, Part 19, occupied pages 253 - 283. In the 2020 Code of Federal Regulations, in the paperback edition, same format as in 1984, Title 48, Part 19, occupied pages 428 - 501. Count the pages. Calculate the average growth per year. This happened during the terms of both Democrat and Republican presidents and Congresses. We work in a utopia of rules. I find this very discouraging.

You're beating a dead horse. I'm satisfied with the position I have taken, and I'm not going to "wade through" that stuff in order to deal with pointless quibbling. I expect each agency to set its own policy about warrant authority, and I expect the statement of policy to be clear. If a CO isn't sure about his or her authority they should ask the appointing authority.

Both T&M and L-H contracts use the same payment clause, FAR 52.232-7. So how do you tell the difference between them? The answer is to look at the contract schedule. The Schedule of a T&M contract (see the Uniform Contract Format, Part I, Section B ) should include a contract line item (or subline item, see FAR Subpart 4.10) for labor and a contract line item (or subline item) for materials. The statement of work should describe the work to be done and identify the kinds of labor and the kinds of materials that the contractor is required to use. The contractor can invoice for both labor and materials. The Schedule of a L-H contract should include a contract line item for labor, but not for materials. The payment clause defines ODCs as materials. The statement of work should be clear that the parties agree that the contractor is not required to provide materials. Since there is no line item for materials in an L-H contract, the contractor cannot invoice or voucher for materials. So the answer to your question is No. ODCs, which are materials, cannot be charged to a L-H contract. See ji20874's reference to FAR 16.602. If the contract requires the contractor to provide materials and includes a line item (or subline item) for materials, then it is not a L-H contract.

That's a strange interpretation of FAR 1.603-3(a), which says: If there are any limitations, then the appointment shall state them, but there don't have to be any limitations other than the ones stated in statute and regulation.