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Posts posted by here_2_help

  1. 28 minutes ago, Neil Roberts said:

    I  have never taken into account the details in the above posts when it came to a "Division." Divisions of a Company are not legal entities and can not be successfully sued or contract with one another in a legally enforceable manner. The parent company of the Divisions is the actual legal entity to be sued and contracted with. Divisions can not contract with one another because you can't contract with yourself (the parent company would in essence be contracting with itself). Hoping this helps you but I am not sure it does because I don't grasp the focus of the posts above as being relevant to your question about subcontracts between divisions.

    Neil, frequently buyers are directed to treat orders between affiliated entities under a common control as if they are "arms-length" purchases. Doing so presents a number of problems, but that doesn't seem to be stopping that direction from being issued.

  2. 3 hours ago, dtonated said:

    Thanks for the response. I think you answered my question but to clarify, Center A & Center B are part of the same Business Unit reporting to the same Home Office and share the same G&A expense pool.

    I think we have a problem but cannot get others to agree with me  


    If Center A and Center B share the same G&A expense pool and therefore have the same G&A rate, then yes. You absolutely do have a problem.

  3. Hi dtonated,

    You are using terms in a way that causes confusion. There is no such thing as "part of" or "within" the "same CAS 410."

    CAS uses the terms "segment" and "business unit" which are very closely aligned in terms of definitions. There is also "home office" that may be relevant here. If I understand you correctly (and I may not), Center A and Center B are two separate segments/business units reporting to the same home office. Each has its own P&L and, most importantly, each has its own G&A rate. That is to say, Center A has its own G&A expense pool for its own management and Center B has its own G&A expense pool for its own management. If Center A and Center B share the same G&A expense pool, then you have a problem because, under CAS, they are not separate business units or segments.

    If each has its own G&A expense pool and otherwise meets the CAS definitions for individual business units/segments, then YES you can subcontract between the two separate segments. If Center B has a commercial item and meets the requirements for exemption to 31.205-25(e), then YES you can transfer at price and Center A can apply profit to the transfer price received from Center B. Note that, although you can call it a subcontract, it is technically an inter-organizational transfer between two entities under a common control. But that's a technical point and, as you have described the situation (and as I have interpreted your description) then Center A can "buy" the commercial items at price from Center B.

    Hope this helps.



  4. The only way I as a contractor would find this approach palatable would be if parties that bid on the first tranche were then excluded from bidding on subsequent tranches, and that parties that bid on the second tranche would be exluded from subsequent tranches, etc. The exclusion would apply regardless of whether the offeror received a contract. Otherwise, you are just offering multiple -- and expensive! -- bites at the same apple. It's a reverse pyramid scheme where the earliest bidders get the most work and the later bidders will get less work (based on an assumption regarding periods of performance) ... but the latter bidders will have to pay the same proposal preparation costs as the early bidders. Moreover, if you give offerors multiple bites at the same apple, the later bidders will have spent two or three or four times the proposal prep costs as the early offerors, and received less for it. Also, if you give bidders multiple bites you create an opportunity for them to use information from the early bids to upgrade their later bids ... which could be (potentially) an OCI issue.

    If you need more contractors (as opposed to bigger contracts) then I think you are better off making all the awards at one time.

    Again, a contractor's perspective, FWIW.

  5. 4 hours ago, Retreadfed said:

    Let me pose a slightly different scenario than Joel did in regard to taxes.  State income taxes are generally an allowable cost for C corps.  However, an S corp. can elect not to pay Federal taxes on its income but to have the owner(s) pay taxes on the income of the corp. as part of their personal income tax liability.  Many state follow this pattern.  Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?




  6. lotus,

    I suspect you are asking the right question to the wrong audience. There is nothing that anybody here can do to reduce your company's proposal preparation costs. Rather, I suggest you ask the question internally -- "What changes can WE make to reduce the costs of government proposal preparation?"

    To your other point, yes. The government pays those costs, whether high or low.

  7. Retread, I have tried to avoid responding. Alas, I am weak and must correct you. This is the kind of advice that gets contractors in trouble.

    Of course you are CORRECT that CAS applies contract by contract. You can't have a noncompliance with a contract that is exempt from CAS.

    HOWEVER, CAS and FAR require a contractor to be consistent in its cost accounting practices. A contractor, especially one that was recently a small business, would be foolish to establish two or more cost accounting systems or business units simply because only a few of its contracts were CAS-covered. Far better--and far more commonly--contractors have one and only one cost accounting system where all contracts are treated consistently (absent special allocations). Thus, if one contract is CAS-covered, then effectively all contracts are CAS-covered with respect to application of cost accounting practices. To do otherwise (without setting up a separate business unit with a separate cost accounting system) is to violate both the CAS rules addressing consistency as well as the FAR rules in Part 31 that also demand consistency with respect to direct vs. indirect cost determinations.

    Thus, while you are pedantically correct you are, in practice, wrong.

    Respectfully, H2H

  8. Hi Cewheaton,

    1. Did you terminate the vendor for convenience or for default? If convenience, what TforC clause was in your subcontract? If you used a government clause, please cite it. If you used a homegrown clause, please quote it.

    2. How was the subcontractor to bill your company? Please quote the billing instructions from the subcontract. Did you have a payment clause (e.g., 52.232-32 or equivalent)? If so, please quote the clause and its requirements.

    3. Was there a Milestone Plan (or Perfomance-Based Payment series of "events") in the subcontract? If so, what was the description of the Milestone/event for which the subcontractor billed you? What was the exact description on the subcontractor's invoice? Did it match the description on the subcontract's Milestone Plan?

    4. When the subcontractor's invoice was approved, who approved it for payment? What reviews were performed to ensure that payment was appropriate? What documents were reviewed--for example, was the invoice compared to the subcontract? Was it compared to a shipping receiver or bill of lading? Why did your company believe it was appropriate to pay the subcontractor's invoice?

    5. You say that no materials were procured (by the subcontractor). Did the invoice your company paid state anywhere that it was based on costs incurred?

    In other words, I think there is more information to be provided before I can provide a suggested approach.

  9. Your prime wants to convert from CPFF to CPAF ("performance-based fee payment structure")? More accurately, your prime's contract is being changed and the prime wants you to accept similar changes to your existing subcontract.


    1. What is the consideration? Will the prime increase your fee pool from 5% to 10%, for example? I don't see why you would agree to a change without consideration.

    2. How will your subcontract performance fee be determined? I get that the prime's fee will be based on a customer fee determination process, but how will your subcontract fee be determined? It needs to be documented and followed by the prime. I would not simply accept "whatever fee % the prime earns, the subK gets to bill" because the prime's fee may not be related to your company's performance.

    3. The subcontract type does NOT have to match the prime contract type. If the prime contract is CPAF, there is nothing wrong with having CPFF, T&M, or even FFP subcontracts under the prime. Why does your prime feel the types have to match?

    4. Of course, your prime cannot retroactively change contract type, though I suppose it may do so prospectively. With consideration.

  10. 45 minutes ago, elgueromeromero said:

    Yes, it's a CPFF and 52.216-7 will be included. The indirect rates aren't fixed--they're actually ceilings. The Gov't is calling them capped rates. I apologize if I said they were fixed or made it sound like they're fixed. So we can bill at our actual indirect rates up to the ceiling/caps. Hopefully that clears things up.

    Yeah, when the ceilings = the proposed rates then somebody is taking a shortcut to performing a solid cost realism analysis. If the proposed rates = contract ceiling rates, then make sure to bid rates that give you plenty of room on top. (Disclose your actual rates, of course. But propose higher rates.)

  11. 16 hours ago, elgueromeromero said:

    Retreadfed, the indirects proposed by each offeror will be the established capped indirect rates for proposal and billing purposes on task orders should the offeror be awarded a contract. 

    So it's not a cost-reimbursable contract then? Clause 52.216-7 will not be included?

    I mean, if the rates I propose become fixed for the life of the contract then, to that extent, the contract is fixed-price.

    Reimbursable labor plus a fixed multiplier is common in commercial contracts (e.g., refinery maintenance) but I've never seen it in the government contracting world. How interesting! I wonder if the CO has obtained a deviation from FAR to create this contract type?

  12. 1 hour ago, jcb2k said:

    However, can the contractor receive more money if the obligated funds have been exhausted?

    How does the Limitation of Cost affect this situation?

    And what if the the contractor has reached the contract ceiling amount, and exhausted all funds?

    1. No, except in extenuating circumstances. For example, if a contract was Terminated for Convenience or there was a Stop Work order that affected the ability to control indirect rates.

    2. It controls the situation. Failure to comply with the clause's requirements means the customer is not obligated to fund your overrun.

    3. Same answer as No. 1.

  13. 51 minutes ago, Retreadfed said:

    Thus, the estimated cost contained in the contract would still the estimated cost of the contract for Limitation of Cost purposes.

    Completely agree. Further, provisional billing rates are not the optimum method for preparing Estimates-at-Completion, unless the provisional billing rates are equal to the actual (or target) cost rates for the periods of performance. Said another way: using PBRs to manage Limitation of Funds clause compliance is not the recommended practice.

  14. I'm not going to tell you whether or not FICA taxes are applied to uplifts. That's a job for an employment tax lawyer. If you are not getting your position from an employment tax lawyer, you are likely getting a wrong position.

    However, I am comfortable discussing whether overhead, G&A, and/or Profit should be applied to your uplifts. The answer is: it depends. It depends on (1) what your allocation base used for overhead is; (2) what your G&A expense allocation base is; and (3) whether or not you want to propose profit on the uplifts. Your company needs to decide what its answers are and then follow them consistently.

    There is no "right" answer. There is only what your company elects to do. For example, treating uplifts as a component of direct labor dollars may reduce your overhead and G&A expense rates (assuming they are allocated on direct labor dollars). On the other hand, if you don't allocate G&A expense to ODCs, then treating uplifts as if they are ODCs may make your proposed costs lower than they otherwise would be.

    If you have multiple contracts in hand, then the answer(s) to the questions facing this proposal may impact revenue/earnings from those contracts, and needs to be considered. For example, if you lower your G&A expense rate by adding uplifts into the G&A allocation base, then your FFP contracts are going to get cheaper and you will earn extra margin on them.

    Figuring out the right strategic answer for your company is not a quick and dirty discussion. It's a shame your company had to wait until it was preparing its cost estimate to address the issue.

  15. 54 minutes ago, marcfgov said:

    So if policies and procedures are being followed, controlled environment, checks and balances, approvals, etc. then there would be minimal risk and the scanned image should be acceptable.

    I can refer to the contractor's environment as a basis.  It not, we will just say the originals are all in thermal ink or how about classified and printed in disappearing ink!

    Sounds like a reasonable approach.

    In another related anecdote, receipts related to classified meetings are interesting. In my experience, the traveller takes an exacto knife and literally excises any information related to location from the original receipt before attaching it to the expense report. The expense report does not report a location of the meeting. The business purpose of the meeting is invariably "classified meeting." Fortunately, classified customers tend to have classified auditors, as well. They tend to understand national security concerns.

  16. 16 hours ago, rsenn said:

    My BD guys tend to bring me teaming agreements where we'd be a sub to a prospective prime contractor.

    The TA's usually indicate that we would get to help the prospective prime win, and bear the proposal costs and related costs of doing so, but that we are not guaranteed anything, even if they do win.  Sometimes there is a vague intent or aspiration mentioned, something like we'll intend to split the work 60/40, but it's too ill defined to be enforceable.

    To me, this is a problem, but my BD guys think it is just fine.   Why do they resist negotiating something more defined and enforceable?  What will it take to change their behavior?

    1. What does history tell you? When the prime wins, do you get the promised work, or not?

    2. Sounds like your company is in a weak competitive position. If the primes needed you, you'd get a better deal.

  17. 11 hours ago, ji20874 said:

    I said it "might" be helpful.

    It is still on the DCAA website, and it speaks to two principles pertinent to this discussion:  

    1. DSSR rates do not apply to contractor employees; and
    2. If a DCAA auditor wants to challenge a contractor's rates, he or she has to have a better reason than citing the DSSR.  

    Wouldn't you agree that these two principles are still valid today?  If there is an appeal, the original poster's counsel will want to know about this letter.

    Yes, those two principles are still valid. You were correct to ressurect them.

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