here_2_help

Vern, That's a great answer. If applicable to this situation, then the new T&M rates would be lower (less profit in each labor hour rate) and there would be incentive fee available for billing fewer hours and thus a cost savings to the customer. That makes sense. Or should I say, it makes sense if you first grant that T&M would be the correct contract type rather than cost reimbursement. Thanks

I would be interested to know what the incentive is based on. It is based on costs? (I.e., if you offer lower labor rates you get a higher incentive fee.) How does that work with FFP labor rates? Is the incentive based on achieving quality or service level agreements? Is it based on timely completion of schedule milestones? Thanks H2H

JMG, Those were not facetious questions. I'm willing to bet that Dr. Carter is not the individual who will hold people accountable for complying with the BBP principles (as opposed to the actual initiatives). A lot of people, myself included. don't hold out much hope for BBP. I don't think you fix processes by adding more processes. I hope I'm wrong. H2H

Eager2Learn, What? No. Let's break it down: 1. Travel will be reimbursable and 52.216-7 will be in the subcontract. (These decisions will haunt you later, but we'll get to that.) 2. Subcontractor has approved accounting system. 3. Subcontractor's standard accounting practice is to apply indirect burdens to travel costs. (I assume that's G&A but it need not be limited to only G&A.) 4. Therefore, subcontractor MUST apply its applicable indirect burdens to travel costs. 5. However, whether or not subcontractor can BILL the indirect burdens applied to travel costs is controlled by contract terms, not the accounting system description. It is perfectly cromulent for the subcontractor to apply those burdens but not be able to bill them, though of course that will eat into its profit margin. 6. Whether or not the subcontractor must submit travel receipts with its invoices to the prime is controlled by contract terms, not the accounting system description. If you want receipts you should get them. However, be advised that you should also be prepared to pay for any additional costs incurred by the subcontractor in complying with your request. 7. Now here's the kicker. You have chosen to include 52.216-7 in the subcontract. That means the subcontractor must submit a proposal to establish final billing rates and that proposal must be reviewed and the final billing rates must be negotiated and then a final voucher must be prepared and submitted. That takes time (think years). So your goal of wanting to keep the close-out process consistent among all the subcontractors was DOA the moment you decided to include 52.216-7 in the subcontract. It is irrelevant whether the subcontractor can BILL its indirect rates; it must still comply with clause requirements. 8. You could avoid all this mess by making the travel SLIN FFP and removing 52.216-7 from the subcontract. Hope this helps.

Those principles are nice. I wonder who came up with them? I wonder who will enforce accountability for compliance with them? As for me, after a long time doing this I have come up with only one principle. It's over there on my profile picture. H2H

Big Data is real and it's powerful. But bad analysis is also real and it's even more powerful. http://www.tylervigen.com/spurious-correlations

"In times long past, this agency was the home of a mighty, noble race of beings who called themselves the 1102s. Ethically and technologically they were a million years ahead of humankind, for in unlocking the mysteries of nature they had conquered even their baser selves, and when in the course of eons they had abolished sickness and insanity, crime and all injustice, they turned, still in high benevolence, upwards towards space. Then, having reached the heights, this all-but-divine race perished in a single night, and nothing was preserved above ground."

Neurotic, Your scenario #1, where a contractor has both a material handling pool and a TCI-based G&A expense rate is correct. Your scenario #2, where a contractor has both a material handling pool and a Value-Added Base G&A expense rate, is also correct. Your scenario #3, where a contractor has both a material handling pool and a TCI-based G&A expense rate, is wrong. Look at it this way: 1. The contractor can choose any cost allocation structure that is CAS-compliant. For example, the contractor can choose whether or not to have a material handling pool. The contractor can also choose which G&A allocation base it can use, so long as the allocation base is one of the three permitted by CAS 410 (assuming CAS is applicable). Yes, the allocation bases chosen have to comply with the requirement to have a logical beneficial or causal relationship between pool and base -- but aside from that, the contractor has lattitude to choose its structure and allocation practices. 2. In your scenario #1, the contractor has both a material handling pool and a G&A expense pool. That is fine. There is nothing noncompliant and such a choice is fully permissible. 3. The contractor has chosen a TCI base for G&A expense allocation. Also fine. That is one of the three permissible G&A allocation bases, per CAS 410. 4. CAS 410 defines the TCI allocation base. It is simple: all cost input before G&A. "All" means all. No exclusions. In particular, neither the material handling pool nor the direct material can be excluded. If the contractor were to exclude any costs, it would be "fragmenting" the base and would be in noncompliance with CAS 410. Thus, scenario #1 is fine and scenario #3 is wrong. 5. Similarly, in your scenario #2, the contractor has a material handling pool and a Value-Added Base (VAB) for allocating G&A expense. CAS 410 defines the VAB and it is a mathematical formula: TCI minus Direct Material dollars minus Subcontractor Dollars. So the direct material is excluded but not the material handling pool -- because the CAS 410 VAB formula does not prescribe it to be excluded. (I dealt with a CAS 410 noncompliance matter back in the late 80's where the contractor excluded the material handling pool in its VAB calculations, which increased the G&A expense rate. No bueno.) To sum up, you seem to be under the impression that a contractor must use a VAB when it has a material handling pool. That is not the case. Hope this helps.

My thoughts, in no particular coherent order: It's not terribly unusual for a prime to buy materials and other direct cost items (e.g., equipment) for a subcontractor, especially a subcontractor that does not have an approved purchasing system. It is a bit more unusual for a prime to have subcontractor employees submit travel expense reports and receive payment, as if the subcontractor employees were employees of the prime. It's a fact that the larger primes have negotiated sweet deals with airlines and hotels and car rental companies, often approaching what the Federal government negotiates. Primes often have sophisticated travel systems that facilitate compliance with the complex FTR/JTR rules. So I can see why the prime might want the subcontractor to use its systems. Is there a prohibition per se? I don't know of one. But to this non-attorney, it seems to cloud the independent contractor relationship between the two firms. From a practical compliance perspective, the prime is asking subcontractor employees to travel in accordance with its (the prime's) travel and reimbursement policies and procedures; I wonder how the subcontractor employees are supposed to become familar with those policies and procedures? Will they receive training? Will the time spent being trained be billable direct labor from the subcontractor to the prime? Other thoughts: what happens if the prime doesn't reimburse the subcontractor employees for their submitted expense reports? What recourse do they have? How long does the prime have to issue a travel reimbursement check? How does the prime even know where to mail that reimbursement check? Do the subcontractor employees have to disclose their home addresses, or perhaps their bank account numbers (for direct deposit)? That sounds ... risky. Those questions are just off the top of my head. There may well be others. The answers to those questions need to be written down as part of the subcontract, to avoid confusion and potential disputes. If the prime won't address them in the subcontract, I would be very reluctant to agree to the request. Hope this helps.

With all due respect to jeff4757, it feels as if his company is splitting hairs and being a bit disingenuous. Companies selling commercial items don't worry about fee on materials or FAR payment clauses. They offer their products (or services) to the market and if the government wants to buy those products (or services), then it pays the customary price without worrying overmuch about what's included in the cost build-up. On the other hand, government contractors selling their products (or services) to the DoD, to other primes, and/or to other governments, worry very much about cost build-up and application of indirect rates. They are experts (or should be) in FAR payment clauses. Just my observation; I could well be wrong. H2H

jeff4757, Are you SURE -- and I mean POSITIVELY CERTAIN -- that the government will accept your "product" as a commercial item "service". If so, then the notion of fee on any particular cost element is irrelevant, because you won't be billing costs or fee -- you will be billing a price. Right? You just put your price on the bottom-line and everything that looks like a cost build-up is not disclosed. Unless -- and this is the kicker -- the government doesn't accept the notion that your product is a commercial item service. In which case, you are back where you started. H2H

Not only do I agree with Vern, I think this points out a common challenge in contractor pricing. Too many contractors get hung up on their preferred pricing strategy and they ignore the impacts to the bottom-line. They don't approach pricing with a flexible mindset and as a result they see problems where there are none and fail to see easily obtainable solutions. In this case, the government doesn't want to pay fee on material. Of course not. The RFP is for SERVICES not products. How much material is going to be acquired to support the SERVICES being provided? Is it a lot? If so, why? If not, who cares? If you must make margin on materials, then boost the proposed fee on the labor dollars to cover your "lost" fee on the materials. The bottom line project margin will still be the same. Hope this helps.

jeff4757, The government has broad lattitude to see whatever they want to see, especially when you are asking for a contract price adjustment. Even if you are within your contractual rights to deny access, somebody can call the IG and get a subpoena, and then you'll have to hire attorneys and you will STILL have to give the CO what s/he wants to see. Payroll records are actually one of the easiest things to audit and there is very little risk to your company, especially if you have passed DCAA audits in the past. The only issue would be if you somehow manipulated hourly/salary rates, which (if you've passed prior DCAA audits) seems like a very remote possibility. Finally: You are a government contractor; you will be audited from time to time. There is no sense complaining about it. Or: what Vern said. H2H

The section of 52.216-7 Vern quoted in #42 concerns submission of final invoices after settlement of indirect cost rates ("billing rates"). It acknowledges that final billing rates will likely be agreed-upon/determined literally years after physical completion of the contract. Once those final billing rates are agreed-upon or determined, the contractor has 120 days to submit the contract's final invoice. That's all it says. It does not address routine submission of vouchers for interim payments. H2H

And yet, many upon many private sector employees buy such services routinely, even though they are not themselves experienced practitioners in that marketplace. When my employer(s) want to do a major ERP implementation, they do not write a detailed SOW. Instead, they partner with the service provider and go -- together -- on a journey that (hopefully) ends with a successful implementation. They hire smart and qualified experts based on a statement of qualifications and past performance and referrals and interviews. They negotiate a price, whether per hour or for the job and -- if they're smart -- they put a huge award or incentive or bonus at the end to motivate performance. Then they let the experts drive the project. I realize there are constraints on what can be done at the Federal level, but that's how it's done in the marketplace. If the government wants to enter the marketplace as a contracting party instead of as the sovereign, it needs to do so in the way the other contracting parties operate. Just my two cents. But this is important, in my view, because if Kendall wants his innovation and commercial agility (as he says he does) then this is one of the things that needs to be changed. H2H

And right there is the fallacy at the heart of commercial item services. There are several -- many -- providers of SAP implementation services. They range from the mega-huge (Accenture) to the smallest boutique consultancy. There can be no doubt that these entities routinely provide their services to non-governmental entities in the commercial marketplace. It's a large and well-documented market. But the problem is: THERE ARE NO MARKET PRICES. None that can be documented. It's not like Accenture has a catalog. Nope. The price is determined by the scope of the effort and perhaps competitive pressures. You want Accenture, you call and they come and you discuss scope and they discuss pricing. The scope and pricing is negotiated and then documented in a contract. If you're not the Federal government, you get Accenture's contract with very little flexibility on the Ts and Cs. The problem with commercial item services is that the Government is trying to buy commercial services but is unwilling to accept the acquisition methods commonly used in marketplace. At least, that's how I see it.

Hey! Nobody made me an SAP SME. In fact, if I were to call myself that, it would generate disbelieving laughs and derisive guffaws around the work place. I'm FAR from any kind of SAP SME, except I have been through a couple of "interesting" implementation experiences, and I've gotten some lessons learned through the usual painful methods -- which is why Item 5 in the list made me laugh. It's so true! That said, I walked down the hall and found my business process analyst, and he told me that BADIs, BAPIs, and SQVIs are all methods of accessing data in a database in order to generate a report. Kind of like a "macro" in Lotus 1-2-3. (Which is really more my speed.) So: NOT coding. H2H

speculation again but I have never seen an SAP implementation without a lot of "customization" which means coding.

Vern, Speculation but based on my contractor experience, the deliverable is the system that is tested and found to meet functional specs. Nothing else. H2H

Vern, I'm not sure there's a tremendous distinction between consultants and software developers in an SAP implementation. SAP is a fully coded system, of course. It comes ready to use right out of the box. But almost nobody uses the vanilla, ready-to-use, version and it typically requires significant customization to meet the users' specific circumstances and business process needs. That customization journey is often guided by "consultants" who are large teams of diverse SMEs (or what they will tell you are SMEs). Consulting teams include IT folks, change management folks, business process mapping folks, project management folks, etc. In my experience, the consultants run the project and the users are there to provide input and testing. SAP consulting is a bustling industry and good SAP consultants are worth their weight in platinum. H2H

apsofacto, Again, I'm not a government employee -- just a person who's been around for a few decades on the other side of the table. That said, obviously there are a number of "customers" -- including the customer who approves the invoices -- but the real customers are the system users. If the users aren't satisfied then it's a failed implemention, regardless of what the testing reports showed. I get it that some users are never going to be satisfied, because *change is BAD* but I assume you are spending the money for a valid reason. I assume the current system is less than satisfactory. Thus, I assume the new system creates value to the users, the agency, and the taxpayers. Forgive me if I'm just being naive. But if I'm right, then a wide customer satisfaction survey 6 months after "successful implementation" would be a good thing. It's not like people don't use SLAs and other satisfaction metrics in IT acquisitions. So it's very customary. And it would show whether value was created for the users, or not. If you like you can issue multiple surveys to multiple "customer" communities, and you can weight them the way you want. Just document the communities and the associated weightings in the award fee plan, and then follow the plan. Those are my thoughts, for what they're worth. Hope they help.

I'm not a government employee, but I'm confident that the implementation will be won or lost based on the requirements definition and business process mapping. Speaking as a employee at a company which did a fairly recent SAP implementation, I would have recommended going with one vendor for all modules (to keep finger-pointing at a minimum) and I would have recommended issuing an award fee contract, with a whopping big award fee pool that would be doled out based primarily on customer satisfaction. And I would reserve a significant piece of that pool for a customer feedback survey about six months after "go-live" because, in my experience, it takes that long for the problems to surface. Edited to add: fixed price seems weird to me. You want the contractor to take as long as necessary to get the blueprinting and initial testing done right. You don't want corner-cutting and use of less senior personnel in order to keep margins where they were supposed to me. That might just be me, though. Hope this helps.

napolik, Yes, exactly. That's where I was coming from. The information provided can be misused in a way that will create grounds for a protest. In other words, I don't see an upside and only a downside for the CO. H2H

Vern, In all sincerity, if the CO asked one (or more) offerors those questions, would the offeror be required to answer? I ask because the "how" would not seem to be in the Section M evaluation criteria. My position would be I'm offering FFP labor category rates and I'm willing to live with them after award; why would the government care how those rates were developed in a competition? Maybe I just pulled them out of thin air. In all seriousness, so what? How is my methodology germane to a determination of price reasonableness, which is (presumably) based on price comparison amongst competing bids? If the CO thinks the offeror's proposed FFP rates are too low, s/he can verify that the offeror fully understands the requirements. I get that from The Contract Pricing Reference Guide (Chapter 8)--though I read it to say that if cost realism analysis is going to be performed, Section M should clearly state that will be the case. I also read it to say that proposed FFP prices should not be adjusted as the result of any price realism analysis performed. What am I missing? H2H H2H

To be very clear: the contractor should NOT claim the adjustment is a cost. It is not a cost and cannot be traced to the contractor's cost records. It's not a cost reduction or a cost adder; it's simply what it is -- an adjustment to reach the desired FFP labor rate. It's the kind of adjustment contemplated by FAR 3.501, I think. It's not "buying-in" but it is offering a price that is lower (or higher) than cost plus profit in order to win a price competition. H2H