FAR Fetched

This is totally different. This was a qui tam case about TRW (now Northrop) inflated costs and billed the government for commercial projects.

I've worked with Virginia companies for almost 20 years. This is the first time I've heard a Teaming Agreement (TA) considered as an "agreement to agree in the future" (thus, unenforceable) by a court instead of an "agreement". In researching this in other State's decisions, specifically, Delaware takes a much stronger stance on a Teaming Agreement being a binding agreement. The language stated throughout the court documents have been in just about every TA I've ever done. I just wondered if this is changing the procedures for other contracts people in the Private sector.

I know a lot of posters here work on the Government 'side' but thought it was worth discussing. I've been spending a lot of time reviewing our Teaming Agreement process because of this case. This a few months old but after doing a few searches, I didn't see it discussed here (which I thought was odd). Two government contractors entered into a Teaming Agreement for the purpose of working together towards securing a prime contract from the Federal government. The companies, Information Experts, Inc. (“IE”) and Cyberlock Consulting, Inc. (“Cyberlock”), successfully put forward a persuasive bid, and the government awarded the prime contract to IE. Despite the Teaming Agreement, IE refused to use Cyberlock as its subcontractor and went on to perform the contract without it. Not surprisingly, Cyberlock sued IE for breach. The U.S. District Court for the Eastern District of Virginia determined, however, that IE did not breach the Teaming Agreement because it was not enforceable. Some key points from the case doc: ..."Upon reconsideration of the well-established Virginia legal principles regarding contract interpretation discussed above, and reading the Second Teaming Agreement as a whole instrument, the Court finds that the post-prime contract award obligations in the Second Teaming Agreement are unambiguous and constitute an unenforceable agreement to agree. In Virginia, any "writing in which the terms of a future transaction or later, more formal agreement are set out is presumed to be an agreement to agree rather than a binding contract." Virginia Power, 2012 WL 2905110, at *4. Indeed, calling an agreement something other than a contract or subcontract, such as a teaming agreement or letter of intent, implies "that the parties intended it to be a nonbinding expression in contemplation of a future contract." Id.Moreover, even if the parties are "fully agreed on the terms of their contract," "the circumstance that the parties do intend a formal contract to be drawn up is strong evidence to show that they did not intend the previous negotiations to amount to an agreement" which is binding. Boisseau, 30 S.E. at 457."... More: ...The Court finds, however, that the agreement read as a whole indicates that this particular language was not meant to provide a binding obligation but rather to set forth a contractual objective and agreed framework for the "negotiate[ion] [of] a subcontract in the future along certain established terms." Beazer, 235 F. Supp. 2d at 492. ... Here's the case http://scholar.google.com/scholar_case?q=Cyberlock+Consulting,+Inc.+v.+Information+Experts,+Inc.&hl=en&as_sdt=2,47&as_vis=1&case=7857103033436991211&scilh=0

Cornell has a good layout of the CFR. I always show this set up to contracts admins so they understand where the FAR falls into the CFR Go to Title 48, notice the Chapters. http://www.law.cornell.edu/cfr/text

Proposal seems to take a lot longer these days. I have two large proposal that I submitted late 2011 and early 2012 and they both expired. Then all of the bidders were notified to request extension their pricing for 120; the 120 days would pass then they request another 120 days, etc. etc.and they still have no "expected date" for a decision on award. This is frustrating for all parties involved: The incumbent is constantly getting their contracts extended but no guarantee the rate will increase during each extended POP.. The contractors bidding were required to submit multiple Key Personnel resumes but it's very unlikely that those same people are sitting around waiting for a job a year+. Managing B&P budgets and sales goals are impacted. The Government employees receiving the services on expired/bridged contracts notice a huge decline in productivity. The biggest problem - The contractor employees are on pins and needles each month wondering if the contract will end and will they get picked up the new contractor. It creates a very unattractive working environment. Many of these employees will find new places to work and replacing employees on an expiring contract doesn't attract the best candidates. This usually results in the awarded contractor getting staff that is loosely qualified and start up can take longer than expected. Grrr.

I get that Vern, I guess I'm hung up on the Government's ability to push almost 1M in revenue through a company while restricting any type of profit.

So facilitating this purchase under the Contractor's contract vehicle lowered its profitability. Why make these purchases for the government? I'm not sure of the Contractor's requirements here but if I received a request to supply ~900k with no fee I simply wouldn't respond to the request unless I absolutely had to.

What a horrible precedent - loosely apply the definition of Facilities to avoid paying a reasonable profit under a CPAF Services Contract. The Judge's ramblings about the history of profiteering was ridiculous as no one said the profits were unreasonable or exceedingly high. This case also had nothing to do with Contractor changing it's price or raising fees when the Government was in need - it simply wanted the profit it reasonably expected during the performance of a "services contract". Also, what a horrible job by the Contractor's legal team. This was just stupid on Contractor's part: "SGS alternatively asserts that NASA cannot rely upon FAR 45.302-3© as a bar to the payment of fee (profit) on the cost of facilities SGS purchased for NASA pursuant to the change orders because the regulation is not expressly incorporated into or included in the parties' contract."

Okay, my serious response. This isn't a method of 'Contracting' per se but more of company's business processes.

I use "Dexterous Contracting" to handle Agile Project Management.

How is the ANC "re-applying for another 9 years" if the subsidiary is newly acquired?

I read Retred's post as the Contract had a base year and X amount of options which have all been executed. Also - why wouldn't -8 be read into the contract? It sounds like it should have always been there in the first place. Is it safe to assume the contractor is looking for a rate increase in line with the last few years of escalations (e.g. 3%)?

That sounds like a ceiling.

I thought court adjourned at the end of page two but it looks like this moved to the court of appeals quickly.

Your honor The Government is arguing the ceiling does not matter "now", with their way of applying the formula for this contract. This is the same entity that established the ceiling higher than the Target Price knowing, apparently, that it could never be reached with their way of applying the formula. Clearly, the ceiling was meant as a cap on cost overruns during performance. The cost was higher than the target yet $2M lower than the ceiling established by the same entity whose position is now that the ceiling doesn’t matter. Can the Government come up with a reason or a 100/0:0/100 scenario applying the formula "their way" where the ceiling is higher than the target price for a reason?

Stand down counselor, we're in recess [gavel sound]

So the statement that "the ceiling doesn't matter" only applies to this case, yes?

Can you provide a link to where from this statement is derived?

16.403-1 Fixed-price incentive (firm target) contracts. (a) Description. A fixed-price incentive (firm target) contract specifies a target cost, a target profit, a price ceiling (but not a profit ceiling or floor), and a profit adjustment formula. These elements are all negotiated at the outset. The price ceiling is the maximum that may be paid to the contractor, except for any adjustment under other contract clauses. When the contractor completes performance, the parties negotiate the final cost, and the final price is established by applying the formula. When the final cost is less than the target cost, application of the formula results in a final profit greater than the target profit; conversely, when final cost is more than target cost, application of the formula results in a final profit less than the target profit, or even a net loss. If the final negotiated cost exceeds the price ceiling, the contractor absorbs the difference as a loss. Because the profit varies inversely with the cost, this contract type provides a positive, calculable profit incentive for the contractor to control costs. From what's provided in this thread, I would think that the contractor is paid $68M for negotiated Costs and $2M in profit. Don - I have to disagree with you, the contractor should only absorb the difference as a loss when the ceiling is exceeded, not the target (from my experience with these contract types). Vern - I'm not sure where your $61M number is coming from in post #2

Yup. I just ripped apart a boilerplate Subk from a mega-large company that put: "...reference to the Government or Contracting Officer shall mean [large Prime contractor]..." in before the list of Government contract clauses. I never let this fly.

FAR 19.101 doesn't apply; it's for determining affiliation and eligibility to participate in a SBA program. It has nothing to do with our issue as your company was already awarded the contract under the set-aside program (assuming it wasn't awarded to a joint venture of yours and another company).

I agree based on what you've provided. I don't see this as an OCI issue.

You might as well get the protest paperwork ready now too.

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