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Posts posted by here_2_help

  1. If you're a contractor and you don't have anything that prohibits you from billing the pre-contract costs in the final voucher then why are you hesitating? Believe me, if the government has an issue they will let you know quickly.

    Alternatively, check with your company's government accounting group. Ask how the costs were treated in the appropriate year's final billing rate proposal (also known as "incurred cost submission"). If the costs were claimed as being allowable on Schedule H, there you go. Presumably the costs were already audited by DCAA as part of finalizing that year's indirect rates.

    They say cash is king...

  2. Michael11,

    Title would transfer as determined by the contract type, CLIN/SLIN structure, and funding. For example, if you have a reimbursable material/supply CLIN then (unless your contract says otherwise) title transfers when the cost is charged to the contract. If all CLINs are FFP then title transfers only as specified in the contract.

    Have you read your contract? Does it have any 52.245 clauses? If so, what does the clause say about title transfer?

    Hope this helps.

  3. 5 hours ago, Symera said:

    What I'm really looking for are the CAS, FAR and DFAR clauses that specifically state that absent other contractual agreements, costs prior to start date cannot be billed to the customer.

    Vern is right with respect to the contract.

    To answer your question (which does not ask about the contract) the answer is "you won't find what you're looking for" because they don't exist. Quite to the contrary, as Vern gave you the rules on pre-contract costs already.

  4. You will not find the answer in the FAR. You will find the answer in authoritative AICPA guidance. SAB 104 or whatever the kids are calling it these days.

    The answer, as I recall from days long gone, is that you recognize revenue when you have performed all the actions required by the contract. From my point of view, you have performed all required actions when the item has arrived at the customer's receiving dock, since it was already inspected. However, I understand there's a risk that the item may have been damaged in transit, in which case ...?

    Whether you need "proof" that all actions were taken would seem to be a matter for your Controller and your external auditors to discuss.

    To reiterate: you will not find your answer in the FAR.

  5. Question (in multiple parts) from the peanut gallery: Assuming you award the contract vehicle as (vaguely) described, how will individual tasks be priced? Will they be called out and priced in the overall Blanket Purchase Order?  Where is contractor Program Management priced?

    If yes, then what happens if the contractor encounters differing site conditions? What happens if the (urgent) need is for a service that is not covered by the listing of priced tasks? What happens if the need is on a weekend or holiday--how is that priced? What happens if the contractor needs a different skillset from the one it priced? What about escalation of labor costs over time?

    If not, then who pays for the costs of proposing and negotiating the individual orders? To me, there would need to be a PM task order that funded proposal preparation/negotiation costs because those costs would be direct-charged to the contract.

    Thanks for any answers you would care to share with the peanut gallery.

  6. 9 minutes ago, Neil Roberts said:

    Did you terminate the subcontract and already include payment for the cancellation charge? Did you issue a final change notice that closed out the subcontract at the  amount already paid? Did you include FAR 52.216-7 in the subcontract suitably modified to indicate that the Government determines final allowable cost and payment? Did you request a Government audit of the subcontractors termination claim and allowable costs? Did the subcontractor grant your firm access to the subcontractors financial books and records and did your firm do a review of allowable costs that found the charge to be allowable? What was the reasoning?

    Interesting questions. I would boil 'em all down to: what was your rationale for issuing a CPFF subcontract? Did you know what you were doing when you did so?

  7. 2 hours ago, Sunnyo said:

    The Prime Contract will be Time-and-materials and I am inquiring on how the prime and the sub can split the prime's profits.  The Prime, verbally, agreed to 60/40 split but I'm not sure how that works.  I.e. would I take 40% of the FTE?

    Don't confuse labor hours/FTEs and associated costs with profit. Profit is the difference between the costs incurred and the amounts billed/reimbursed.

  8. Sunnyo,

    The hourly labor rates on a T&M contract are essentially firm fixed price (FFP) rates. You are allowed to bill a rate per hour (per labor category). That rate is fixed. Doesn't matter if the hour is an overtime hour or a straight time hour; you still get to bill only one rate per hour (per labor category). That FFP rate must include all your costs and all your profit. How do you calculate profit? The same way you would on any FFP contract. You propose something and you negotiate it and eventually the contract is executed. The executed contract specifies the FFP rate per hour per labor category. Your costs are still your costs. The difference between your costs and the amounts you bill is your profit or loss.

  9. 8 hours ago, Sunnyo said:


    The Prime sent us a letter stating, “Upon award of contract they will utilize our company at the Sub”; however, this is very vague.  Should we draft a subcontractor contract with the Prime stating an exact percentage?

    What normally happens in Sub/Prime relationships in a T&M contract?  Does the Sub get a percentage of the “end profits” or the Sub receives funds based off of the Sub’s FTE allocation?

    1. Yes. You should have an enforceable contract now that obligates the Prime to award to you a subcontract consistent with your expertise. You can agree on a fixed number of FTEs, a number of labor hours by category, or a percentage of the Prime's FTEs/hours -- or whatever other metric makes sense.

    2. You seem to be reaching for a Joint Venture relationship, where the profits are shared, instead of a Prime/SubK relationship. The profit paid to the SubK in a T&M contract is paid on the SubK's labor hours (see 52.232-7). You normally don't see any more profit distribution than that. But that's not to say that you can't ask for something else on top of your profit-per-labor hour.

    Hope this helps.

  10. 8 hours ago, MiamiSB said:

    Hello everyone--

    I'm a small business owner, preparing my first quotation for the federal gov't.  I have a couple questions about option years which I'm hoping to get some help with.  In particular:

    [1] If I'm understanding things, the gov't is in complete control when it comes to exercising, or not exercising, option years.  I.e. if three years down the road, we don't want to provide this service anymore, we nonetheless must, if the gov't wants it.  Is that right?

    [2] Any rules-of-thumb for pricing option years?  Of course we're accounting for inflation, but there's also the risk that four years from now, our company will be much bigger and these contracts will no longer make sense for us.  Is it typical to see much, much higher prices quoted for future years?

    [3] Does the gov't look at the option years, or just the base year, when deciding whom to award the contract to?

    Many thanks!

    1. Yep. You are in for the long haul.

    2. No it is not typical to see much higher prices quoted for future years, unless the goods/services being provided are subject to a lot of cost volatility. In theory, if your company is much bigger four years from now then the marginal cost of providing your goods/services should actually decrease, because your General, Administrative & Selling costs shouldn't scale linearly with revenue growth.

    3. Typically they look at the whole enchilada but your solicitation should tell you exactly how your bid will be evaluated.

    4. You need a good advisor. This forum is a good place for answers but you need your own person who understands your business.

    Hope this helps.

  11. Readers may want to check out the recent ASBCA decision in Assessment and Training Solutions Consulting Corp. (No. 61047. Oct. 3, 2017). It discusses an interesting argument between government negligence versus faulty contractor maintenance.


    The law of bailment imposes upon the bailee the duty to protect the property by exercising ordinary care and to return the property in substantially the same condition, ordinary wear and tear excepted. Id. When the government receives the property in good condition and returns it in a damaged condition, a presumption arises ‘that the cause of the damage to the property was the Government's failure to exercise ordinary care or its negligence.’ … However, when the parties enter into an express written contract, the rights and obligations of the parties are determined by the provisions of the contract. … In this case, contrary to the Navy's argument, the criteria for government liability are the same under the common law of bailment and the express contract -negligence. The Board has applied the common law presumption when an express written contract exists if the common law is consistent with the written contract. (Internal citations omitted.)


  12. 1 hour ago, Retreadfed said:

    Justice1, how did the additional expense cause your indirect rates to go up?  Indirect cost rates usually work in the inverse to direct costs.  Thus, if direct costs go up, indirect costs usually go down.  Indirect cost rates should not be affected by revenue since they are based on costs, both direct and indirect.

    Yes. This.

    Also, the only reason that the LOE hours were burned faster than anticipated is because the contractor's labor was more expensive than anticipated. Either (a) the wages paid to direct-charging employees were higher than budgeted/bid, or (2) the indirect rates actually experienced were higher than budgeted/bid. (Or a combination of 1 and 2.)

    The story may well turn out to be that the small business didn't do a good job of forecasting indirect rates and actuals came in higher than anticipated (for whatever reason), which caused the LOE hours to be burned faster than planned. Happens all the time.

    Next question for Justice1: for purposes of complying with the Limitation of Cost/Funds clauses in your contract, did you use your provisional billing rates or did you use your YTD actual indirect rates or did you use a combination of YTD actual rates plus a forecast of where you expected those rates to be at year-end? One of those choices is wrong, one is right, and the other is kind of in the middle.

  13. 1 hour ago, Vern Edwards said:


    It was a level of effort task order. What if the contractor delivered the full level of effort, but delivered it sooner than planned, which seems to have been the case? There was no shortfall in direct labor, but it was expended in less than a year. How if at all would that affect the contractor's argument?

    Yes. I got that. I was just trying to be nice. Also thinking about other readers, who may be facing a situation closer to the one I described.

  14. 3 hours ago, Vern Edwards said:

    You should consult an attorney.

    Vern is correct.

    That said, whether or not you can recover increased indirect rates allocated to in-scope work, in excess of funding, will turn on whether the rate increases were truly "unanticipated"--which is to say, a complete surprise.

    Given your scenario, I'm skeptical. I cannot see a connection between the situation you describe and an increase to indirect rates. The direct labor that you charged to the CLIN in excess of funding will still receive applicable indirect burdens. Consequently, I don't see how that "extra" labor is in any way connected to your increased indirect rates.

    Had you stopped work when you reached your funding limits, you might be on stronger ground, because then you could argue that your provisional billing rate calculations were based on a full year's worth of direct labor, and the resulting shortfall in direct labor led to higher indirect rates than originally calculated. But given your scenario, I'm not seeing it.

    Hope this helps.

  15. 19 hours ago, MAY-D-FAR-B-WIT-U said:

    One of the CORs (contract supports several programs and we have 2 CORs) just notified us that one of the contractor personnel was only at his duty location about half the time  in the last few months and he was completely absent last month. The contractor invoiced and was paid in full for both months.

    The COR kept track of the exact hours worked, but [approved the contractor's invoices anyway, while knowing that the contractor was not fully performing the required services]

    Not sure the fault lies fully with the contractor on this one.

  16. My opinion is that you made a poor choice in selecting the subcontract type. My opinion is that you used a subcontractor to bypass your prime contract LOE restrictions, and the COR caught you doing so. 

    Too late to change the subcontract now, I guess.

    In future, similar, situations you may want to consider a Fixed Unit Rate subcontract where each day has an associated FFP amount and each day counts as 8 hours against your LOE restrictions.