here_2_help

Here_2_help's General Rule #1 for Contract Negotiations:

Whenever one party uses the "Christian Doctrine" to justify their position or proposed action, they have already lost.

Hope this helps.

8 minutes ago, KR_2016 said:

1.  Yes, I can bill the 2016 final subcontractor invoice even though the 2014 prime contract ended.  

2. Yes, the billed costs will show up on 2016's ICA.

 

1. Yes.

2. Yes.

3.  If the billed subcontractor costs show up on the 2016 ICA then I assume I'll have to wait until 2016 ICA audit is complete to close out the Prime Contract, correct? There is no way around that I suppose. Yes, there is. You can close out your subcontract at any time based on your negotiation with the subcontractor and agreement of the final rates to be billed. Neither your company nor the subcontractor need government approval to reach agreement on rates to be used to close-out the subcontract.

1. Yes.

2. Yes.

On ‎9‎/‎13‎/‎2016 at 6:41 AM, Retreadfed said:

I would not get too excited about this decision.  Note that the Board indicated there was an apparent inconsistency between the FAR and the CAS statute and CAS rules.  However, since neither party brought up the inconsistency, the Board did not rule on the validity of the FAR provision.  To me, this is an open invitation for contracting officers to look at the statute, follow it and challenge the FAR provision if a contractor disagrees with the finding of materiality.

Retreadfed,

This weekend I went through the decision in some detail, and it occurred to me that your position offers the greatest hope to overturn the FAR Council's ill-advised 2005 FAR Part 30 and CAS clause revisions. In other words, I hope you are right that somebody, somewhere, some time, will make a decision that will lead to an appeal that will overturn the 2005 revisions, based on an impermissible conflict between statute and regulation. That would be awesome!

Paul Pompeo (Arnold & Porter), who litigated the matter for Raytheon, wrote that the materiality criteria themselves offered an avenue to consider offsetting impacts from concurrent changes, even though the FAR Council prohibited such in the 2005 revisions. (See (e)(1) in PepetheFrog's post, above.) I'm okay with that, too. But I also like your scenario.

H2H

MrJP,

Honestly, "everyone else's experience" is not going to convince your CACO to scale back the review. It's your turn and you are going to get what you get. Might as well stop complaining about it.

And I'm not convinced that the planned review is going to disrupt your work all that much.

1. You provide the files. DCMA looks at them. If you are lucky, you get immediate questions that you can quickly answer. If unlucky, questions are saved for the weekly meetings.

2. You have weekly meetings to discuss questions and concerns. You address those questions/concerns. The meeting ends.

3. Repeat for three months.

I get it's a distraction but I'm not seeing the overwhelming disruption. Is your procurement staff not prepared to defend their files?

Hope this helps.

Actually the better approach is to tell the CACO "bring it on" and dare them to perform the full-up CPSR with the review team. That way you get an approved purchasing system and the CACO learns bullying doesn't work. But that approach also assumes you have a top-notch purchasing system and are prepared to pass with flying colors. (Vern noted this in an earlier post but I'm emphasizing it.) If you have upset the CACO you will have an uphill battle; but if you pass you shouldn't ever be bothered again.

To Vern's later point ("if you let a bully bully you once") I will offer the observation that, in my personal view, there is a reason that we are seeing a lot of CoFC and ASBCA decisions involving Raytheon, CACI, Excelis, and other contractors that have, historically, been reluctant to litigate. They seem to have decided that they are not going to accept flawed (in their view) COFDs based on flawed (in their view) DCAA audit reports. They are litigating very small dollar amounts and they seem to be winning more often than not. I think there's a reason for litigating small dollar amounts and it involves an acknowledgement of Vern's aphorism. On the other hand, I might be a tad biased.

I wonder how much of a hardship it would be to print out the electronic SAP files? I realize that in SAP they are just fields, but is it possible to generate a "report" via T-Code or similar, or to download to a Business Warehouse for reporting, and then give the CACO what they want? Sure it's a pain, but then again so is supporting a CPSR.

Hope this helps.

Retreadfed,

Your point is valid to some extent, though I thought the Judge made it clear that COs have to follow mandatory FAR prescriptions, including assessing the materiality criteria. I didn't think he gave them permission to ignore the criteria because he found a potential (unlitigated) disconnect between statute and FAR. To that extent, his point was "dicta" and not precedential.

Regardless of the validity of your point, I would very very much hope that COs take the decision to heart instead of taking the course you pointed out. In this case, as the Judge noted, the individual dollar impact to Raytheon's contracts would have been less than $36.00. It cost the government and Raytheon FAR more than the amount in question to litigate the matter. In addition, how much time was lost through the DACO having to be deposed and to testify? What else could the government attorneys have been doing with the time they spent on this case? What else could Raytheon have done with the unallowable costs it incurred to appeal the COFD? Is that really how the contracting parties want the system to work?

Vern has posted several times recently bemoaning the nature of the system. I believe that individual practitioners can change the system, by using common sense instead of "protecting the taxpayers" by litigating $150,000 against a business that performed $5 billion of government work annually.

In other words, it's the principle of the decision that matters to people like me who have to deal with audit findings and negotiate with COs. The principle of the decision is "don't sweat the small stuff." I hope COs take that lesson to heart.

PepetheFrog,

My experience includes interaction with an ACO who had a remarkably similar attitude to the DACO in the ruling. In the ACO's words, if the impact to the government was equal to a GS-13's annual salary, it was material. Period. More generally, I have never, ever, seen a government employee -- DCAA auditor or DCMA CO -- review the materiality criteria you quoted above and determine a cost impact was/was not material in light of those criteria. Maybe it's happened; but it hasn't happened to me.

I wonder what is taught about materiality to COs in their CAS classes?

Hopefully the curriculum will be changing in light of this decision (unless it's appealed).

H2H

FYI, a recently published (redacted) ASBCA decision sustains a contractor's appeal of a COFD related to changes in cost accounting practice. The DACO "abused her discretion" by failing to strictly follow FAR 30.602, specifically the mandatory consideration as to whether the cost impact from the contractor's changes to cost accounting practices was material in amount. A very important decision for those dealing with CAS compliance.

http://www.asbca.mil/Decisions/2016/58068 Raytheon Company, Space & Airborne Systems 8.9.16 (REDACTED VERSION).pdf

Hi Lara,

That's a good question. I would start by looking at what your company expects to see for such additional services. Are these additional services to be performed during the normal workweek, or are they urgent/emergency services to be performed whenever the tasking comes in? Based on your answer, I would then look at who will be performing those services -- existing staff or additional staff, and how much they will be paid for performing them (straight time, premium overtime, shift differential, etc.). I would figure out what the labor cost was actually going to be and then burden it appropriately, including a profit component. That's what I would submit.

Hope this helps.

As Vern noted -- but I will emphasize -- the strength of the government's position is based on two main pillars: (1) where did you charge the costs of the consultant, and (2) did your submission meet the definition of a claim?

Hope this helps.

An interesting negotiating tactic but one that is not well-grounded in regulatory reality. See 31.205-42(g)(1) for settlement expenses that are "generally allowable" -- expressly including certain consultant costs.

Hope this helps

LM_ABITWT,

You are the contractor, right? You are proposing the personnel. Do you have a coherent and logical story to tell the customer if asked? What's your plan? If you have a good story, then I would make it a part of your technical approach -- be proactive.

Hope this helps

PepeTheFrog,

Some of us follow Jim Wright, CWO, USN(R), on Facebook and on Twitter and on his website (www.Stonekettle.com). He is optimistic about America and explains why. On the other hand, he has less optimistic things to say about certain politicians and certain special interest groups, and says those things in a way consistent with his military service -- i.e., his language is definitely NSFW. This is by no means an endorsement ... just responding to your serious question. PM me and I'll send you a link.

Vern,

Do we reform it agency by agency or from the top down?

I've read plenty of award-winning novels that were able to tell a cracking good story in less than 508 pages.

So I tried to read through the new final rule, "Fair Pay and Safe Workplaces" -- and thanks Bob (once again) for keeping me informed on new regulations. Anyway, the .pdf version clocked in at 508 pages long. 508 pages. That was not a typo.

Is this some kind of record?

I'm used to reading proposed and final FAR rules, but the length of this one defeated me. I guess I'll wait for the law firms to summarize the new requirements.

Unrelated to contracting, N.K. Jemisin's The Fifth Season just won the Hugo Award for best SF/Fantasy novel of 2015. I highly recommend it. It is lyrical and fierce and subtly didactic. NPR reviews the book: http://www.npr.org/2015/08/04/427825372/fifth-season-embraces-the-scale-and-complexity-of-fantasy

H2H

Vern,

http://knowyourmeme.com/memes/old-man-yells-at-cloud

1 hour ago, Vern Edwards said:

Nothing disgusts me more than a government contractor who is easily intimidated by an absurd stance taken by some damned auditor. If you enter into government contracts, know the facts, know the rules, know your contract, be ready to make rational arguments, and be ready to go to the mattresses. If you can't do that, then get a job selling cotton candy to children at county fairs. And try not to let the kids beat you up and take your goods.

Not sure if that was directed at me or a general yelling at clouds, but in case it was directed at me, we were not intimidated. The company hired some expensive attorneys who filed 4 separate claims at the CoFC, and settled them for what was felt to be reasonable amounts. It's a bit fuzzy now but I don't think we even had to go through discovery to get to the settlements.

38 minutes ago, Matthew Fleharty said:

I'd love to see/hear the rationale behind DCAA's allegation, if that's something you could share.

Well, I could share the auditors' rationale, if it existed. But unfortunately they had none. Or at least nothing that I can recall. It was far from the most egregious finding they "found" that year.

I'm not going to post anything about that time when DCAA alleged that the company's account with Southern California Edison, to supply electricity for the entire plant, was a subcontract. I'm not going to post anything about the need to provide a contractual agreement with the "subcontractor." Nope. On the bright side, they didn't allege SCE was a consultant, the way they did with our environmental remediation provider, who had been cleaning up a former site for the past 20 years.

H2H

1 hour ago, Whynot said:

If there is not additonal context besides the statement:  pre-award costs incurred prior to the period of performance are unallowable , can work begin prior to award and its cost be allowable so long as its cost is not incurred prior to award?

If you begin work then presumably you are having personnel charge time for performing work. Where do you propose they charge their time?

Time has to be charged somewhere....

Unless you are proposing that company personnel perform work and just not record the associated labor hours? Or perhaps you are proposing that company personnel perform work and then -- after contract award -- record those pre-award hours as if they were post-award hours? Because if that's where you're at, I really, strongly, recommend you reconsider your plans.

3 hours ago, Whynot said:

I have an effort whereby pre-award costs incurred prior to the period of performance are unallowable.

Does “incurred” in the cost accounting world mean “performed”?

No. "Incurred" does not mean "performed". As Retreadfed has correctly posted, the definition of "incurred" may very well depend on context. But I generally equate "incurred" with "recorded". For example, a contractor can record the cost of material at different points in time. Some record the cost upon receipt of an invoice; others record the cost upon receipt of the goods; others record the cost upon payment of an invoice. In fact, CAS permits at least 5 different timing choices (see Disclosure Statement at 2.3.0). When costs are recorded to a government contract (cost objective) they are deemed to have been incurred with respect to that contract. Normally they are not deemed to have been incurred until they have been recorded on the contractor's books and records.

Hope this helps