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here_2_help

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Everything posted by here_2_help

  1. here_2_help

    Fee on Fee

    Hi fereirra, The subKs' costs -- including its fee -- is a cost to the prime Ktr. The Ktr can include the total cost of the subK in its total costs. As to whether fee can be, or will be, applied to the prime's total costs, that's a matter of contract type and negotiation. But in general, yes. The prime Ktr gets to treat the subK's fee as its cost and not as a component of its profit/fee. Hope this helps.
  2. Hi JTSurfah, Here are some questions for your consideration. 1. Is the contract type FFP? 2. Was adequate competition, as defined in 15.403-1©(1), achieved? I would assert that, if the answer to question 2 is "yes," then the contractor should not have submitted "certified" cost or pricing data, per the prohibition at 15.403-1(. I would further assert that, for purposes of CAS applicability, read the phrase "cost or pricing data" as "certified cost or pricing data". Based on the foregoing, I would say that if the answers to questions 1 and 2 are both yes, then the contract should be considered to be exempt from CAS. Hopet this helps.
  3. Hi JTSurfah, The CAS rules were written well before the recent (2010) changes to the definition of "cost or pricing data". They have not been updated to reflect the FAR definitional changes. Hope this helps.
  4. Often, DCAA will tell contractors that costs incurred after the contract's period of performance ends are not allowable. Auditors will require a contract mod that officially extends the PoP in order to make such costs allowable. Which is nonsense, of course. Costs lag performance in the normal course of events. By the time a lower-tier subcontractor's costs get up to the prime for billing, several months may have passed. But that doesn't keep DCAA from trying to "save" taxpayers some money by disallowing costs based on whether or not they were incurred during the contract's PoP.
  5. Hi doc4243, You don't tell us whether or not your contractor is CAS-covered or whether it has a Disclosure Statement. That would have been helpful, but your question can still be answered. 1. The contractor incurs a cost when the cost is recorded on its books. It's that simple. 2. The contractor records a cost on its books based on its established practice, which it is supposed to follow consistently. Not all contractors follow the same practice. Some record a cost when they receive an invoice, others when that invoice is paid. Still others 30 days after parts are received without the need for an invoice. It's all different. But the key point is that the contractor should have a written policy that explains its practice. Ideally this would be the Disclosure Statement. But since not all contractors are CAS-covered to the extent of having to submit a D.S. then a written policy should be sufficient. To your last point, yes. The FAR is permissive regarding the idea that a contractor might "incur" (i.e., "record") an expense prior to actually paying it. It's called "accrual accounting" and is an integral part of Generally Accepted Accounting Pratices (GAAP). The fundamental requirement is that the payment must be made in the normal course of business. One final, nitpicky point. I'm not sure how (or even if) the Government could "receive/accept" the material because you specified the material is consumable. "Consumable" means, pretty much by definition, that it's consumed during production and never shows up as a separate deliverable. Hope this helps.
  6. I don't understand the question either. But I did want to add that even a not-for-profit entity is entitled to receive a profit based on contract type and negotiated price. The "non-profit" status of a business is based on IRS rules, not the FAR. It should not affect whether the government (or prime) actually pays a profit on the subcontractor's costs. To be clear: generally speaking, "not-for-profit" status refers to the tax status of the entity as a whole, and not to the profit or fee associated with an individual contract. Hope this helps.
  7. here_2_help

    Allowable Cost

    Cajuncharlie, My intent in responding to you the way I did was not to try to make you wrong, but to make the point -- a point I think is critical -- that very few contractors are the same. What one does has no bearing on what another does. In this case, I would add that what a government agency does as far as its own practices has little if any bearing on what is acceptable for contractors to do. (I'm assuming, of course, that the question turns on whether the contractor normally charges employee training as a direct contract cost. That may not be the crux of the situation, but I had to start somewhere.) I will continue to take every opportunity to emphasize that comparing two contractors' cost accounting practices (or comparing governmental practices to contractor practices) is a false comparison that will not lead to the correct answer. H2H
  8. here_2_help

    Allowable Cost

    Cajuncharlie, You say you "agree with Joel" but it's not clear to me which part of his response you're agreeing with. Next you describe your cost accounting practice "where I work" but, as you are not performing the contract, I would assert your practice(s) are irrelevant. What matters are the disclosed or established practices for the contractor that is performing the work. In any case, I agree with both Joel and Vern that more information is needed. The question is essentially unanswerable as posted. Hope this helps.
  9. Researching, Contracts are subject to CAS unless they are exempt. Vern has posted the exemptions. If the contract you are bidding on is not exempt, it is covered. If the 230-1 Cert is in your Section K then I would expect that the Government would expect you to execute the Cert and submit it. Hope this helps.
  10. here_2_help

    CPFF TASK ORDER

    Vern, you clearly took my words out of context; Joel did a good job of augmenting my reply to assist others. To be even more clear, every single contractor employee who interacts with a government official had better be well aware of the False Statements Act and its requirements. My response "with a straight face" was clearly meant to imply a standard of honesty which is more than expected -- it's absolutely required -- in the performance of a government contract. To say my response was "wildly untrue" is, well, wildy inaccurate. H2H
  11. here_2_help

    CPFF TASK ORDER

    I am interested in your assertion and await citations and support for your position.
  12. here_2_help

    CPFF TASK ORDER

    Vern. Wayforward did, in the 8/2/11 6:05 PM post.
  13. here_2_help

    CPFF TASK ORDER

    The standard for cost allowability is NOT "necessary, essential, and unavoidable". See FAR 31.201-2. Cost allowability may turn on "reasonablenes" which has a longish definition that includes the phrase "that which woudl be incurred by a prudent person in the conduct of competitive business". In another part of the definition, there is the phrase: "the type of cost generally recognized as ordinary and necessary for the conduct of the contractor's business or the contract performance." If wayforward's program team can look a Government auditor in the eye and say, with a straight face, that all claimed expenses incurred were necessary for contract performance, then they are good to go. H2H
  14. here_2_help

    CPFF TASK ORDER

    Hi wayforward, In my view, the estimated cost is, indeed, "one big pot of money to get to the end result" so long as the money is spent on efforts or items necessary to accomplish the SOW, and is reasonable in amount, and is allowable and allocable to the Task Order. If your PMs think they can withstand an audit that would hold them to those standards, then I tend to agree with their POV. Hope this helps.
  15. This may be stretching things but I'm nominating a CAS requirement from the FAR Appendix at 9904.403-40?(3)-- There's a very similar provision at 9904.418-50(f) that also uses the term "may agree".
  16. "What gets my goat was that Secretary of the Air Force Donley assured the public and Congress that Boeing had been awarded a "fixed-price" contract and the only way the company would be able to bill more to the taxpayers would be through change orders, which he promised to control at the highest levels of the Service. Just this week, Dr. Ash Carter (USD, AT&L) told the public not to worry about Boeing, because it was a "fixed-price program" Here's one quote from a news article on the subject -- The Pentagon's top weapons buyer dismissed concerns on Friday that Boeing is projecting huge cost overruns in developing a new Air Force refueling tanker, saying it was a fixed-price contract and company losses were 'not our problem.' Defense Undersecretary Ashton Carter said Boeing had made a commercial decision to offer a below-cost bid for development of the aircraft in hopes of making up its losses during production of 179 of the aircraft through the 2020s. ? Carter, answering questions about defense procurement at the Brookings Institution think tank on Friday, dismissed reports of Boeing's cost overruns, saying, 'It's not our problem because it's a fixed-price contract and it was written with ... protections for the taxpayers.' He said the issue was the value of the contract at its ceiling price. 'The fact that Boeing decided that it would lose money in the development phase, presumably in the hopes of making money in the production phase, was a decision that they made, and that's not a problem from the Defense Department's point of view,' Carter added. We know the difference between FPIF and FFP contract types. I'm concerned that our DOD leadership does not." ----------------------------------------- H2H: Thanks for posting that. Let's hope it was simple ignorance.
  17. here_2_help

    Labor Charging on US Gov FAR regulated business

    Whynot, Here we are once again, on one of the now infamous WIFCON thread tangents were two or more posters argue passionately about some minor point that has nothing much (if anything) to do with the original poster's question. To your question, no. None of the contract clauses/solicitation provisions you cite "allow for contract labor to be based on IOT". In fact, each of those clauses quite clearly distinguishes between (a) labor performed by the contractor/offeror, ( labor performed by subcontractors, and ? labor performed by other "divisions, subsidiaries, or affiliates" of the contractor/offeror under common control. If they were all the same thing, then there would be no need to differentiate them within the clauses/provisions. Let's bottom-line this. I'm not going to perpetuate this tangent any further. Either you accept my position or you don't; but if you don't accept what I'm saying then you need to better explain/support your position. Hope this helps.
  18. here_2_help

    Labor Charging on US Gov FAR regulated business

    Whynot, I understand what you are saying. Unfortunately for you, you would be wrong. H2H
  19. here_2_help

    Labor Charging on US Gov FAR regulated business

    Whynot, You are replying to something I didn't post. I never posted that a credit needed to be created to account for the difference between IOT cost and a transfer at price. Indeed, the original post inquired about "contract labor" not IOT labor. H2H
  20. here_2_help

    Labor Charging on US Gov FAR regulated business

    Chuck, It is possible, just barely, that Company A has a practice that labor which qualifies for a particular job category is both costed and billed at that job category's established rate, regardless of where that labor is sourced. Were I their advisor, I would caution against such a practice because it creates a pretty unsavory perception. And I could create a scenario where what you describe takes place, and the difference between actual labor costs and labor category "costing" is treated as a credit to an indirect rate pool, and I could probably pull it off with DCAA as being a compliant practice. There would be some hard scrutiny and some hand-waving involved, but I think I could successfully get through an audit so long as I had a credit to offset the preceived "profit". The thing is, by your own admission you lack a lot of the necessary facts, as well as the education and experience, to form a solid opinion as to whether Company A is doing an acceptable thing, or not. I would encourage you to discuss your concerns with your Ethics Department and try to learn why Company A thinks what it's doing is okay. You may be surprised. And if you don't get satisfaction, then you can drop a dime to the IG Hotline with the confidence that you tried as hard as you could to get answers from Company A. H2H
  21. here_2_help

    Subcontractor R&D Work

    I have no problem with Cajuncharlie's answer, but I hope that one day the government, and the Primes, will wake up and realize that awarding FFP subcontracts does NOT reduce program risk. In fact, it often increases it. I could rant here for a long time and provide concrete examples. But I'll simply say that the cost associated with managing change orders often exceeds the cost of the changes themselves, especially when one factors in the opportunity cost -- i.e., engineers and program managers (not to mention contracting folks) who spend their time reviewing change orders and modifying program baselines, instead of executing the program. The two parties involved here -- the Prime who wants to award a FFP R&D subcontract and the SubK who is thinking about accepting a FFP R&D subcontract with deliverables based on the research -- are both extremely foolish. Just my opinion, of course.
  22. here_2_help

    Labor Charging on US Gov FAR regulated business

    As I previously posted, the contractor -- any contractor! -- needs to comply with the payment terms of its individual contracts. You haven't told us what the contract requires, so we cannot tell you whether Company A's billing practices are compliant with contract requirements. You want to know if Company A's disclosed cost accounting practice can "violate FAR provisions" but you haven't told us what FAR clauses you think the company is violating. Let me answer your concern(s) this way: 1. A company's CASB Disclosure Statement establishes/discloses its cost accounting practices and NOT its billing practices. Nowhere in any Disclosure Statement will you find a discussion about billing practices, since billing practices vary by contract clause. 2. A company must consistently follow its disclosed, or established, cost accounting practices. That same thing cannot be said of billing practices, since they vary by the requirements associated with indivdual contract clauses. 3. When DCAA reviews a contractor's CASB Disclosure Statement, it looks for two things. (1) Does the Disclosure Statement adequately describe the contractor's cost accounting practices? (2) Are those cost accounting practices compliant with applicable CAS requirements? FAR doesn't usually enter into the discussion, unless a specific FAR Cost Principle conditions cost allowabilty upon compliance with a Cost Accounting Standard (e.g., 31.205-18). Does this help you?
  23. here_2_help

    Labor Charging on US Gov FAR regulated business

    Contractor "A" is a division of company that does a majority of it's business with the US Govt in the Defense industry. Rates are perodically submitted for approval by DCAA, at the moment they are not approved. The disclosure statement is reviewed by DACO, the current one was submitted 10/28/2010 and not yet approved. The direct labor dollars paid to a Contractor "A" employee gets burdens (O/H, Fringe, BOSC, ITSC, G&A, COM and Fee) which compounds to approximatly 3.8 time the direct rate as a charge to the Govt. If an employee is paid $50/hour the Govt is billed at approximately $190. Contract labor employees are employed by another company which Company "A" contracts with for that persons service. If the Contract labor person makes $50/hour then the cost to Company "A" is $50 plus the Contract labor company's fee plus G&A, COM and Fee are a multiplier of roughly 1.4 (not 1.26) or about $70/hour. Company "A" realizes a gain of about $120/hour ($190 minus $70) for each hour worked by the Contract labor person. Just a clarification. Company "A" bills the Govt at the $190 rate and pays for that service at $70/hour Okay, I just saw your clarification. It looks like Company A has a T&M contract, is that correct? If so does the contract contain 52.232-7 and is the clause dated February 2007? If yes, then your question boils down to whether Company A is complying with the requirements of that clause. That's a yes/no answer that DCAA should be able to answer relatively quickly. H2H
  24. here_2_help

    Labor Charging on US Gov FAR regulated business

    It's difficult to get at your point, but let me try to interpret. 1. Company A bills the U.S. Government for "contract labor" (i.e., labor incurred by 3rd party suppliers) at its cost plus 26% plus fee. 2. Company A bills its own employee direct labor at its cost plus 280% plus (maybe) fee. These practices have been disclosed to the government in the company's Disclosure Statement. So, presumably, Company A is CAS-covered and has received CAS-covered contract awards valued at more than $50 million in a single fiscal year. Meaning Company A is not a small business and is likely to be of decent size. Your concern is ... what? That Company A's labor is too expensive and Company A should fire all its employees and just hire contract labor from 3rd parties? That Company A won its contracts based on a price determined via use of its disclosed practices, but the Contracting Officer could NEVER have concluded that the contract price was fair and reasonable, so Company A won its contracts unfairly? That Company A employees who receive fringe benefits and training and management support should not be more expensive than job shoppers who are paid statutory minimums (in terms of benefits, and told simply to show up at a company to report for work? Clearly, I'm not getting your concern. Could you articulate it more clearly, please? As you described the situation, it seems perfectly fine and normal and within Defense Industry SOP to me. Hope this helps.
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