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sme1102

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About sme1102

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  1. Vern, I fully understand now. Thanks Thanks Vern. But how is the "price value" determined? Are you saying the ACO should look at the physical work accomplished and estimate the percentage of work completed, then multiply that percentage by the contract price? That makes sense to me. But it also seems very subjective and arbitrary.
  2. Thanks Vern. But how is the "price value" determined? Are you saying the ACO should look at the physical work accomplished and estimate the percentage of work completed, then multiply that percentage by the contract price? That makes sense to me. But it also seems very subjective and arbitrary.
  3. With regards to the formula, PP=((A+B+C)/D)*D) - E. The part "((A+B+C)/D)*D" mathematically equates to PP=((A+B+C) - E. It doesn't make sense to me because it means the company will be paid its costs with no reduction. That effectively is a cost reimbursement type contract, not fixed-price with progress payments. Consider paragraph (c) of the clause: c) The Government will retain until final completion and acceptance of all work covered by the job order, an amount estimated or approved by the Contracting Officer under paragraph (b) of this clause. The amount retained will be in accordance with the rate authorized by Congress for Naval vessel repair contracts at the time of job order award. The "authorized by Congress" refers to 10 USC 2307 (Contract Financing). See: https://www.law.cornell.edu/uscode/text/10/2307 10 USC 2307 (g) reads: (1) The Secretary of the Navy shall provide that the rate for progress payments on any contract awarded by the Secretary for repair, maintenance, or overhaul of a naval vessel shall be not less than— (A) 95 percent, in the case of a firm considered to be a small business; and (B) 90 percent, in the case of any other firm. Being a large business, perhaps the progress payment amount would equal PP=(A+B+C) x 90% - E. The problem I have with the contracting activity using 10 USC 2307 (g) is the contracting activity is not Navy and the work is not for a Navy vessel. It is for the U.S. Army Landing Craft Utility (LCU) 2000 vessel. The contract has been awarded with the only terms in the contract being DFARS cause 252.217-7007. There is no clause mentioning 90% or any other rate. If you haven't guessed, I am with DCMA and we been delegated the contract for administration and payment. So far, I see the payments during the contract as being (A+B+C) x 90% - E, with the cumulative to date not exceeding the contract price. After the work is completed and accepted, the contractor would submit an invoice for the remaining amount which has not been paid. But what happens if the contractor's performance costs exceed the contract price? Do we pay the company the full price without all work being performed or delivered? With the standard Progress Payment clause 52.232-16, when costs exceed price, we reduce the payment amount using a loss-ratio factor in accordance with FAR 32.503-6(g). I might infer from paragraph (3) of 252.217-7007 that I could reduce the payment in a loss situation in a similar way as when there are normal progress payments in a loss contract. (3) The Contracting Officer shall approve progress payments based on the value, computed on the price of the job order ... Assume the price is $1,000,000 and the contract cost is $2,000,000. The value of the completed work to the Government would be 50% of the incurred cost ($1,000,000 / $2,000,000). To the Government, the value of the work cannot exceed the contract price. Hence, we must reduce the incurred cost to reflect the true value to the Government. The periodic progress payment would then equal: ((A+B+C) x 50%) x 90% - E
  4. It's ambiguous to me. 1. Does this mean PPs will be paid based on the percentage of incurred labor and materials calculated using the contract price as the base? For example, with a contract price of $10,000,000, incurred material cost of $1,000,000 and incurred labor cost of $1,000,000, the PP amount would be 20% of the contract price -- ($1,000,000 + $1,000,000)/ $10,000,000) 2. Or does it mean you pay based on the percent of materials and labor incurred to the total estimate of materials and labor. For example, the estimated total material cost for the contract is $2,000,000 and the total estimated labor cost is $5,000,000. The total direct estimated direct cost to complete the contract is $7,000,000. The first month the contractor incurs $300,000 material and $400,000 in labor, or $700,000. $700,000 / $7,000,00 = 10%. 10% x Price of $10,000,000 = $100,000 as the PP.
  5. Can anyone tell me how progress payments will be calculated using DFARS clause 252.217-7007 (Payments)? Some relevant paragraphs in the clause read: (a) “Progress payments,” as used in this clause, means payments made before completion of work in progress under a job order. (b) Upon submission by the Contractor of invoices in the form and number of copies directed by the Contracting Officer, and as approved by the Contracting Officer, the Government will make progress payments as work progresses under the job order. (1) Generally, the Contractor may submit invoices on a semi-monthly basis, unless expenditures justify a more frequent submission. (2) The Government need not make progress payments for invoices aggregating less than $5,000. (3) The Contracting Officer shall approve progress payments based on the value, computed on the price of the job order, of labor and materials incorporated in the work, materials suitably stored at the site of the work, and preparatory work completed, less the aggregate of any previous payments. (4) Upon request, the Contractor will furnish the Contracting Officer any reports concerning expenditures on the work to date that the Contracting Officer may require. (c) The Government will retain until final completion and acceptance of all work covered by the job order, an amount estimated or approved by the Contracting Officer under paragraph (b) of this clause. The amount retained will be in accordance with the rate authorized by Congress for Naval vessel repair contracts at the time of job order award.
  6. I interpreted your posting to mean the clause does not apply to the contract as a whole, but only to the line items authorized for progress payments. The clause does not specifically mention information is restricted to line items authorized for progress payments. It only mentions the "contract", except when it requires the costs applicable to items delivered, invoiced, and accepted (Line 20a of the request form) shall not include costs in excess of the contract price of the items. I do not administer progress payments and I do work for DCMA.
  7. I believe where the clause reads "the contract", it means the "contract". The contractor will only claim eligible costs on Line 11 of the Request for Progress Payments, which would not include any costs for line items excluded by other terms of the contract. The Government needs to know about the entire contract because it administers the entire contract. The contractor will be required to obtain financing to complete performance other than progress payments. This could be from an external source or from internal resources. In any case, the government needs to validate the company can complete all requirements with all financing available -- not just the line items authorized for progress payments. The government also needs to ensure the company may not be operating in a loss contract position, that is, the contract cost will exceed the contract price. It doesn't matter whether one or more line items are excluded from progress payments. If the contractor cannot complete the contract because it cost are more than planned, then the government is at risk. The Title part of the clause states title “vestiture shall occur when the property is or should have been allocable or properly chargeable to this contract.” It does not read title only vests in property related to line items authorized for progress payments. In case of monies due to the government because of issues related to progress payments, the government can take title to any property allocated to the contract to obtain the necessary resolution.
  8. In accordance with the Progress Payment Clause, 52.232-16, progress payments are paid on the total contract basis. The parties can agree that costs for specific CLINs are only allowed as eligible costs, or costs for specific CLINs are not allowed as eligible costs. For example, a separate clause may be written that states progress payments are not authorized for CLIN 0001, or progress payments are only authorized for CLINS 0005, 0006, and 0007. Unless the line items are service items, all invoices should be based on an acceptance documented on a Material Inspection and Receiving Report (i.e., a DD250 or an IRAPT receiving report in DoD's Wide Area Workflow e-Business Suite). The price for delivered and accepted items is not paid via a receiving report, nor is it the vehicle for paying the price of delivered and accepted fixed-price line items. Progress payments are financing payments in advance of delivery. They are not delivery invoice payments. Line items for services may be accepted via a receiving report, but these days, they may not use the receiving report as the acceptance vehicle. Progress payments may be authorized for fixed-price services line items.
  9. The DFRAS Business System clause 252.242-7005 only is incorporated in contracts when the same contract is covered by the Cost Accounting Standards. This does not mean there are not other terms and conditions which require an adequate business system. For example, the Progress Payment clause 52.232-16 requires the contractor to maintain an accounting system and controls for administration of the clause. That could be in contracts awarded to small business which are exempt from CAS. Thus CAS does not drive CBS and CBS does not drive CAS. Notwithstanding that the Business System Clause is not in the contract, the contracting officer could always reduce the financing amount based on supportable rationale and documentation. The CO would have to demonstrate the amount the Government was impacted because of a system deficiency. The CO cannot arbitrarily reduce the amount. The CO is also required to notify the contractor of the intended action and allow for discussion before reducing the payment. . The Business System clause provides way to reduce the financing payment because the contractor already agreed to the procedure when it signed the contract.
  10. Joan, Can you tell me why you asked the question about whether a CAGE code is required when there is a requirement to submit a CAS Disclosure Statement? Thanks
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