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Everything posted by here_2_help

  1. here_2_help

    Fee on Negotiated Changes

    Perhaps I simply don't agree with your characterization that, if I made such an argument, I would be "misrepresenting the facts." Facts and judgments are two different things. In any case, enjoy your moral superiority.
  2. here_2_help

    Fee on Negotiated Changes

    You're hilarious. Government negotiators do it routinely.
  3. here_2_help

    Fee on Negotiated Changes

    Vern, 1. It doesn't matter whether my argument holds water since we are negotiating. Any argument that gets the other side to hesitate, to blink, to lose confidence, is a valid argument. 2. I really really hope your last comment ("Omar lives!) was not a reference to Omar Mir Seddique, the Pulse nightclub shooter. Please tell me you were referring to something else.
  4. here_2_help

    Fee on Negotiated Changes

    Why? The answer to this question will impact my answer to your other question, which is below. In this case, the counter argument is that the contractor has floated the government a loan for the costs of the changed work, since the contract wasn't modified timely to include the additional funds. Therefore the contractor wasn't able to bill its additional costs and had to go borrow the funds, paying unallowable interest on its loan. This assumes the government is at fault for taking "well over a year" to negotiate the value of the contract mod for the changed work. If the cause for the delay is something the contractor did or did not do, then my counterargument won't work.
  5. here_2_help

    Limitation of funds notice requirements

    The SF 1408 establishes the requirements for an "adequate" contractor accounting system. There are 12 criteria. One criterion states that an adequate accounting system must be able to provide "identification of costs by contract line item and by units (as if each unit or line item were a separate contract) if required by the proposed contract." Thus, the key question is what does the contract require? Another question (as Joel posted above) is what did the parties intend? If, as 2bit posted, there is no express requirement in the contract to manage funds at the CLIN level, then he might have an argument. But as Joel has noted, there may well have been a patent ambiguity that should have been resolved before performance started. Given the various colors of money (e.g., FMS funding by CLIN) it seems fairly obvious that the correct level for funds management should be the CLIN. But who knows? Seems like the contractor and CO need to get together and resolve this quickly.
  6. here_2_help

    Maximum Profit per FAR??

    Be careful what you believe. Most of what you "hear" is nonsense. I suggest you research rather than rely on what you hear. In this case, I'll do your homework for you. See FAR 15.404-4(c)(4). There are no other maximum profit levels.
  7. here_2_help

    Paying for Proposals

    You are missing the point on many levels. Let me try to help you understand where you are going wrong. 1. The RFP instructions that state the government will not pay for proposal prep costs are there to tell bidders not to include proposal prep costs as estimated direct costs in their cost proposals. There is absolutely no prohibition on including proposal prep costs in a B&P pool allocated on the same base as is used for G&A expense allocations. (Ref. FAR 31.205-18.) One reason you don't include your proposal prep costs as estimated direct costs in your cost proposal is that you might not win. And then you have to absorb those costs out of profit. But if you include them in your B&P pool then you recover them along with your G&A expenses, against active contracts. 2. "Overstated OH and G&A" is a strange phrase to use. Please stop using it. The cost pools and associated indirect cost rates are not overstated if they are based on budgetary estimates (or actual costs). Do you mean forward-priced, estimated, OH and G&A indirect cost rates? You said "we have a five-year forwarding averaging plan on file with DCAA" which is another unclear phrase. Do you mean you have submitted a Forward Pricing Rate Proposal (FPRP) that has become an Forward Pricing Rate Agreement (FPRA)? Most small companies don't do that, so I'm not sure where you are at with DCAA. Regardless you should use the indirect cost rates in your proposal that are the most accurate estimates of the indirect rates you expect to incur. To me, that would mean (at a minimum) including the proposal prep costs in the appropriate indirect cost pool and including the contract award in your business base that is used for cost allocation. You don't "overstate" your indirect costs, you estimate them as accurately as you can. 3. If you add your proposal prep costs to your G&A expense pool, you do not "spread that cost over several bids." Instead, you will allocate your B&P expenses plus your G&A expenses to all active contracts you have during the year. To be clear: B&P and G&A expenses are period expenses, meaning you can only allocate the costs you incur during your fiscal year to contracts that are active in that same fiscal year. You can increase your out-years' estimated indirect rates based on budgeted (future) spending, but you can only recover actual spending against the actual contracts on which you are performing. 4. To answer your question: NO. The company does not "absorb" the proposal prep costs because it allocates the costs to its active contracts. If you have only FFP contracts and the actual G&A expense rate is higher than you bid, so sorry. You should have budgeted better and forecasted an increase in proposal prep costs. 4.a Also, you forgot the profit component you get to add to your cost estimate, which is not nothing. Further, you forgot the possibility that you might underrun your FFP contract, which has been known to happen from time to time, especially at contractors whose business base is growing. When the large defense contractors laid off thousands in the mid-nineties, their top-line revenue dropped but their bottom line profits shot up because their indirect costs dropped suddenly, and those costs were allocated to FFP contracts. 5. From a financial statement perspective the contract's margin, if it is awarded, is the difference between costs incurred and costs billed. By "costs incurred" I mean costs before G&A is allocated, because (as noted above) G&A is a below-the-line period expense for financial statement purposes; it is not included in Cost of Sales. So if you do a good job forecasting your expenses (including indirect expenses) then the margin equals G&A expense plus profit (it excludes OH because OH is part of Cost of Sales on financial statements). If you underrun, you make more margin; if you overrun, then so sorry. 6. It is a rational approach to add the costs of preparing a proposal, supporting fact-finding and audit, and negotiating with the government and then compare that number to the expected margin that will be earned if the contract is awarded. If the math indicates that the cost is more than the expected margin, then you should not bid. That's the business decision that needs to be made. Hope this helps.
  8. here_2_help

    Charging with Coverage

    NO!! I'm not resting until I reach "Diamond Diamond" status!
  9. here_2_help

    Charging with Coverage

    Given: Activities that are clearly indirect (overhead) in nature are treated as direct costs of a government contract. In the following scenarios, identify how the government has been harmed: 1. The labor was treated as allowable costs of a firm, fixed-price contract. No request for equitable adjustment was ever submitted. 2. The labor was treated as being unallowable costs of a cost-type contract, and thus were never billed. The contractor segregated those costs from the "authorized" costs of contract performance and did not use those costs as support for future cost estimates. I think CFrog was talking about Scenario 1 in his original post.
  10. I tend to agree with Neil. First, capping indirect rates is not a mandatory requirement, as far as I know. If your prime has its rates capped, it's because the government customer thinks the bid rates were artificially low. Just because your prime has capped rates doesn't mean you have to. Second, the bit about finalizing rates is poorly worded. 52.216-7 already tells the parties how to do so; and it even addresses subcontracts. If you have a NICRA, then well and good. But if this is your only cost-type contract then you and your prime are free to establish close-out billing rates without interference from the government. This was established by the Court of Federal Claims (to some extent anyway) in the US Enrichment Corp. case (July 28, 2014).
  11. here_2_help

    Defective Pricing

    True. To me, the key point is that the government may choose to treat contractor invoices for goods/services performed under contracts that have been defectively priced as being false claims. That gets expensive, fast.
  12. here_2_help

    Charging with Coverage

    This is true and it's shameful. I've had my disagreements with DCAA (more than a few, actually) but as a taxpayer I root for the auditors to do their jobs. Ever since the agency decided to measure success by measuring the amount of questioned costs (taxpayer savings) in relation to hours spent auditing, they agency has moved away from auditing smaller contractors. Even when auditors show up at larger contractors, they focus on T&M and cost-type contracts because any detected unallowable direct costs get paid back dollar for dollar. What I would say to smaller contractors who think all is well when they mischarge to certain FFP contracts instead of charging overhead is that is a habit that's difficult to break. The company's culture is being established. (You might take a close look at the image that goes with my posts, over to the left.) One day (perhaps) they will grow or be acquired by a larger company. They will enter a world that has a mix of different contract types. DCAA will be more likely to show up and perform an audit. Then the bad habit will lead to consequences. The culture of wrong-doing cannot change quickly and it will one day matter very much. Until then? *Shrug* Don't come to me for assistance. I only like to work with ethical contractors trying to do the right thing, of which there are many.
  13. here_2_help

    Charging with Coverage

    1. The notion that overhead "comes out of the bottom line and is not covered by Revenue" is nonsense. I'm not saying that you (CFrog) believe it, but anybody who spouts such rubbish should be required to attend remedial accounting classes. (a) Overhead is not the same as profit. (b) Overhead is, by definition, allocated to active contracts and is bid and billed as a fee-bearing contract cost. In other words, contractors make a profit on their overhead. (c) Since overhead is billed, it is part of revenue. 2. I've been doing this since Reagan funded Peace Shield (aka Star Wars) and I have never witnessed nor heard about rampant, systemic, mischarging of indirect personnel or indirect functions. Does it happen? Sure. But when it happens employees get disciplined. Anybody with contract clause 52.203-13 knows what happens next. 3. With respect to FFP contracts, yes. I have seen certain PMs say that, once they deliver the budgeted profit to Corporate, then anything left over is theirs to spend as they wish. And then the Purchasing folks and the Property folks start talking about "authority to acquire" and then DCAA starts interviewing people about what they are doing and how that activity benefits the contract. And then you are back to 52.203-13 land again. 4. Contractors of a certain size and maturity are expected to have an "adequate" accounting system. Many defense contractors have the DFARS clause 252.242-7006. See (c)(1) of that clause. In other words, a contractor could lose its adequacy determination through systemic mischarging of indirect labor to contracts. Further, the biggest defense contractors have the DFARS clause 252.242.7005. If those contractors lose accounting system adequacy they will be on the receiving end of a payment withhold, the pain of which they likely won't even notice since they will be paying a lot of lawyers to work out a False Claims Act settlement, the pain of which they likely won't even notice since they will suddenly have great difficulty receiving any cost-type contracts until adequacy is restored. To sum this all up, most contractors know that the benefit of moving indirect costs to direct costs is short-lived; and the benefit is far outweighed by the severe and long-lasting pain of getting caught doing so. I'm not saying you (CFrog) are lying or even mistaken. I'm saying that the contractors where you saw that happening are living on borrowed time. They're dead men walking, and they don't even know it.
  14. How are you managing IP rights? Is the plan to have the contractors share the source code, then to steal it for re-engineering, and then tell the contractors "no thanks, we'll do it ourselves"? Because if that's the plan I'm not liking it. I don't think the contractors' lawyers will like it either.
  15. Seems to me the question is whether a CO would or could use Part 12 procedures, without using any Part 15 procedures, if market research determined that at least one potential offeror was a non-traditional defense contractor ("NTDC"). If the CO thought some offerors were NTDCs but some were not, could the CO use Part 15 procedures for the others but use Part 12 procedures for the NTDCs? For some reason, I think that would be problematic. So I think that leaves our CO with the same option -- use Part 12 or Part 15 procedures, but pick one and stick with it. If the CO uses Part 15, then the NTDC would seem to be stuck with that choice. But perhaps I'm over analyzing this. What do others think?
  16. Carl, With respect to Scenario 1, Item 3, I would correct your statement to read "ALL small businesses are non-traditional defense contractors..." by statute, small businesses are exempt from CAS coverage, so that makes them non-traditional defense contractors, according to the DFARS definition. With respect to Scenario 2, if there is competition, the CO is prohibited from requiring certified cost or pricing data, but may request information other than certified cost or pricing data. Correct? In this scenario, I see the small business providing sufficient information to support price reasonableness, but not more. That same DFARS rule that implemented the permissive guidance that sparked Don's blog post also provided a hierarchy of information other than certified cost or pricing data for COs to use. I hope they follow it...
  17. here_2_help

    how to structure emergency service

  18. Don, Yes, what you write is in line with my interpretation of the rule. It has potential benefits to small business IF contracting officers take advantage of the flexibility it offers. A small business is a non-traditional defense contractor, under the new DFARS rule. So is a segment of a traditional defense contractor, if it qualifies. Contracting officers may use Part 12 procedures to acquire goods and services from non-traditional defense contractors without making a determination that the goods/services being procured are commercial items, regardless of dollar value. So far, so good. But how many COs will actually take advantage of this new rule? Even before the rule, how many COs were comfortable making pure Part 12 acquisitions without going over to Part 15 to borrow some process steps? To my way of thinking, that's the concern. That concern is exacerbated when I see the discretion baked into the language: "may" gives a lot of discretion. Show me guidance memos and instructions directing implementation of the new "permissive" rule and I might dance a jig. Until then, I remain a bit skeptical.
  19. Seems to be one and the same, but you should check with the contracting officer. If we're right then you can file off the title of your SB plan and call it an SE plan and there you go.
  20. here_2_help

    how to structure emergency service

    I feel stupid because when I have an emergency at home or in the office, we just call the repair folks and they come over. I know I have to pay extra for expedited or weekend service. I have also had home warranties (a type of insurance policy) where I called the administrator and described my problem. If my problem was covered (and it usually was) then they dispatched a repairperson or service team. I'm feeling stupid because I can't figure out where the FAR wouldn't allow a contracting activity to have a BOA with a repair service (or more than one service) that would allow for a previously negotiated premium to be paid, over and above the normal "commercial item" services that were customarily provided, for expedited service. For example, the charge is $100 per visit, plus parts. If 2-4 hour turnaround time is desired, the BOA would say that the charge is $500 per visit. The BOA would allow the services to be initiated verbally (based on authorized government person making the request) and the contracting officer would followup with the paperwork later. Again, I feel stupid because I just thought that's how it would work.
  21. here_2_help

    Problem of the Day

    Can we apply the above to the original poll question, and say "too bad for the government if its rule-makers do not timely follow the direction of Congress and implement the statute correctly into the regulations." Given that's the case, why do those rule-makers continue to have employment at taxpayer expense?
  22. here_2_help

    Software Roulette

    Wrong. Other viable options include, but are not limited to-- Jamis Unanet Procas
  23. here_2_help

    Degrees and experience

    Sure. Absolutely. Just don't try to ever pass those pieces of paper off as the real thing. For example, Oracle defines its certification, and Oracle is a big company with lots of legal resources. You might find Oracle taking an interest in another company that tried to redefine an Oracle certification as simply being a piece of paper without any substance behind it. Have fun! Everybody should get a participation ribbon.