Don Mansfield

jpaynehydroid,

Is this a follow-up question to the one in the other thread? If so, the Government has the right to issue change orders if your contract contains a Changes clause. You have the right to request an equitable adjustment if the change order increases the cost of or time required for performance. When negotiating a price adjustment, the Government is not bound to whatever profit rate you proposed for the item originally.

It seems you don't like this answer, but it's going to be the same no matter how many different ways you ask it.

Let me see if I understand. The Government wants to change line items in your contract that are priced on a FFP-basis and that change will increase the cost of performance. When it comes to negotiating the profit on the change, the Government wants to negotiate a profit rate that is different than the profit rate that was originally used to price the item. Is that what's happening?

I'm not sure I understand. If the change that the Government wants would increase the cost of performance, why wouldn't you want to negotiate a change in the amount of fixed fee?

It's certainly easy to read.

brian,

You must be looking at an old FAR.

There is no FAR 5.207( c )(15)(ii).

Not on the FARSite,

Not on the Acquisition Central site.

I think that the modification can be unilateral, based on the wording of FAR 52.232-22( b ):

"The parties contemplate that the Government will allot additional funds incrementally to the contract up to the full estimated cost to the Government specified in the Schedule, exclusive of any fee. The Contractor agrees to perform, or have performed, work on the contract up to the point at which the total amount paid and payable by the Government under the contract approximates but does not exceed the total amount actually allotted by the Government to the contract."

Think of it this way, what if the contractor refused to sign the bilateral modification allotting the additional funds? I think that the Government could still compel performance by unilaterally allotting the funds. As far as what is "proper", I don't think it's a big deal.

brian,

When an agency decides to pursue a sole source acquisition, they still must give others a chance to compete. See FAR 5.207( c )(16)(ii).

Not sure if you meant it, but your post is one of the better examples of free verse that I've seen in this forum. Someone with some musical talent could make a decent folk song from your post.

The FAR doesn't contain any clauses or provisions implementing trade agreements for services--only supplies and construction.

Yes, I did. And, no, they were not. However, I don't necessarily see a problem with this. FAR 1.301( b ) only requires publication of proposed regulations in the Federal Register "when they have a significant effect beyond the internal operating procedures of the agency or have a significant cost or administrative impact on contractors or offerors." The Paperwork Reduction Act adds a requirement for rulemaking if the regulation would require a collection of information from 10 or more members of the public (see FAR 1.106). I assume the parts of the supplements that met these criteria were published in the Federal Register and the parts that didn't were not. The parts that were not would have the same status as the DFARS PGI. Of the FAR supplements I mentioned, I'm most familiar with the NMCARS. I would say that most of the content of the NMCARS does not meet the criteria for rulemaking. It's a lot of delegation of authority and send this document here for approval before sending it there.

I learned something yesterday about FAR Supplements that made me feel kind of stupid. I had always thought that a given chapter (other than Chapter 1) of Title 48 of the CFR contained a given agency FAR supplement in its entirety. However, that is not always true. For example, if you look at the the Army FAR supplement (AFARS) at the Hill AFB FARSite, you will see parts 5101, 5102, 5103, all the way up to 5153. However, most of the AFARS is not actually contained in Title 48, Chapter 51, of the CFR. The only parts in the CFR are 5108, 5119, 5145, and 5152, and only portions of these AFARS parts appear. The same thing goes for the Navy-Marine Corps Acquisition Regulation Supplement (NMCARS)--only portions of it are contained in the CFR. The Air Force FAR Supplement (AFFARS) does not appear in the CFR at all--Chapter 53 of Title 48 is reserved.

Just to be sure, I searched the Federal Register for unique phrases in the AFARS, NMCARS, and AFFARS (but not in the CFR) and, sure enough, they never appeared in the Federal Register.

Just thought I'd share in case you didn't already know this.

I would say yes. If you are soliciting more than one source, it's a competitive solicitation.

rios0311,

The pricing may stay the same, but the performance period would not. If you're talking about awarding a new contract that would be subject to CICA (not an order under an existing contract), then I am out of ideas.

rios0311,

In order to obtain the required services at this point, you will have to solicit a new offer from the contractor, correct?

I assume that, if exercised, the option would have begun 45 days ago? And the contractor has not been performing for the last 45 days? If that's true, then it sounds like you would have to renegotiate the terms of the option.

I think that you have the wrong idea if you think that Congress had in mind the punishment of agencies for failure to exercise options on time when passing CICA. Think of it this way--an option is an offer that may or may not be accepted by the Government. If the Government fails to exercise an option in strict compliance with the option clause, then they have not accepted the offer. As such, the Government will have to solicit new offers if they still have a requirement for the supplies or services. CICA requires that these new offers be solicited using full and open competition unless an exception applies.

Generally, the Government must exercise options in strict compliance with the option clause in order for the exercise to be valid. However, there are cases where the contractor was found to have waived the "strict compliance" rule by performing without objection. If the "strict compliance" rule can be waived implicitly, then I presume it can be waived explicitly. As such, if you can get the contractor to agree to waive its right to strict compliance with the option clause, then I think you can exercise the option. However, if the contractor wants to enter into negotiations for the terms of the remaining options, then I think that would be a sole source negotiation requiring justification.

A risk that the Government runs with an invalid option exercise is that the contractor can claim that the exercise was a constructive change and, as such, request an equitable adjustment. This is why I suggest getting an explicit agreement releasing the Government from any such claims up front.

brian,

What would be an example of an acquisition of commercial items directly from another Federal agency?

Thanks for the history lesson, Vern.

Historically, "small purchases" (the name we formerly used for what we now call simplified acquisitions) were considered to be a form of negotiated procurement, regardless of the process used to make the award, because competition was limited to a certain class of business firms. That categorization goes back a long way. But when the Competition in Contracting Act was passed, in 1984, that categorization was dropped, because it was no longer needed. Now, simplified acquisition is usually treated as a category of its own.

Vern,

Were set-asides over the small purchase threshold considered "negotiated" pre-1984, even if sealed bidding was used?

Also, check your answer to "What is negotiation?" in The Source Selection Answer Book (2000 edition).

Question:

The contractor’s proposal for deleted work is less than the estimated cost included in the contract. Since the contract already includes the estimated cost for the out years (estimated cost/fee ceiling), then why would the Government not reduce those years for what was initially proposed which is incorporated as estimated costs under the contract? This seems to be a reasonable baseline to reduce the work based on what is priced in the contract. Otherwise if we accept the contractor’s proposal of the reduction of work they are entitled to the additional fee. Had the contractor’s estimate for the out years been more than the contracts estimated cost/fee, the Government would not reduce the estimated contract value that was never included in the estimated cost to begin with. It seems like the appropriate methodology to reduce the contract value would be to use the estimated contract cost for the year priced, less actuals, plus estimated cost to close out the work, and all other years be based on the estimated contract cost priced in the contract…

Let me introduce you to the "Would have cost" rule, which dates back (at least) to a 1958 court decision. Courts and boards have consistently held that the proper starting point for pricing deleted work is the best estimate at the time of the change. Read more about it under "Deductive Changes" (p.663) here:

H2H,

I say it's negotiated based on FAR 15.000, which states: "A contract awarded using other than sealed bidding procedures is a negotiated contract (see 14.101)." I interpret that to mean that if you did not use the procedures in FAR part 14 to award the contract, then it's a negotiated contract. Actual negotiation need not take place.

Can I just give an estimated OT hours in the RFQ and have them incorporate that into their overall price?

That's one way to do it. If you are reasonably confident about your estimate, I think that approach would be fine.

Don, what do you make of the fact that 32.104(d)(2)(ii) refers to as total value of $2.5 million? I am confused by the used of "contract price" in 32.104©(2)(i) and "total value" in (ii). If looking at orders against IDVs we used the $2.5M total value why would that be different for individual contracts. Reading the FAR literally I would agree with you but is this a matter of this section being poorly written?

The use of "total value" makes things murkier. I tend to agree with dcarver's common-sense interpretation, but if someone were to argue that cost-reimbursement task orders should be counted toward the "total value" I would not be able to definitively prove them wrong. That would be consistent with FAR 1.108( c ).

Progress payments are contract financing payments.

The argument fails to address the Recording statute. Let's say the CO notifies the contractor that funds are available based on the belief that funds just have to be appropriated, not apportioned, to comply with FAR 52.232-18. The contractor would then be required to deliver the supplies and/or perform the services specified in the contract. As such, an obligation has been created. Pursuant to the Recording Statute, an obligation must be recorded by the agency in the amount of the obligation that was created. When you put a line of accounting on a contract document and a dollar figure, you are communicating the amount of the obligation created and to which appropriation it should be charged. The agency accounting office uses this information to record the obligation in the agency's books. In your scenario, it sounds like an obligation would be created but not recorded.

Those making the argument may come back with "We'll just record the obligation later--when the funds come in." Agency financial management policies may place limits on how much time may pass between the creation of an obligation and the recording of an obligation. DoD adheres to the "Ten-Day Rule" in Volume 3, Chapter 8, 080301( A ) of the DoD Financial Management Regulation.

I agree with dcarver. FAR 32.104 refers to contract price--not contract value. The FFP CLIN has a price of $2 million. The CPFF CLIN has an estimated cost and a fixed fee of $8 million--not a price.