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here_2_help

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Posts posted by here_2_help

  1. sme1102,

    I think you are conflating the notion of an adequate BUSINESS SYSTEM with the notion of adequate systems to administer contract financing payments.

    There are six Business Systems identified in DFARS. Each has its own contract clause that defines adequacy criteria. A contractor must have an "adequate" business system, as defined by the appropriate contract clause. If the clause is in the contract but the contractor does not comply with clause requirements, it could be found to be in breach of the contract.

    There is one Business Systems administration clause. It is put in contracts as directed by DFARS 242.7001. As you stated, it is only to be put into "covered" contracts, which is defined at 242.7000(a) as a CAS-covered contract. Indeed, the first sentence of the clause states that it only applies to CAS-covered contracts.

    When a contract has BOTH the 252.242-7005 clause AND one or more of the individual Business Systems adequacy clauses, then there is a specified (and mandatory) process and remedy for an inadequate business system.

    Separately, other clauses (e.g., the Progress Payment clause) require a rather non-specific and ambiguous set of processes and controls so as to assure compliance with the clause requirements. But what is being required is emphatically NOT a DFARS Business System, since none of the six DFARS Business System clauses are being referenced.

    Apologies for any pedantry. Hope this helps

  2. The interesting thing (at least to me) is that the 52.232-7 clause makes a distinction between two types of subcontracted effort. The first type is effort performed by a subcontractor that "meets the labor category qualifications of a labor category specified in the contract". The second type is effort performed by a subcontractor "for supplies and incidental services for which there is not a labor category specified in the contract".

    The first type is treated as "T" in the T&M billing equation. I've always assumed that each subcontractor needed a separate hourly billing rate in the "T" equation, to avoid allegations that the contractor is getting a windfall profit by have a subcontractor perform the work and then billing it at prime contractor billing rates, but I confess I don't see that requirement in the clause itself. Did I miss something?

    The second type is treated as Direct Material -- the "M" in the T&M billing equation. The prime contractor bills whatever subcontractor payments are made at its cost plus allocable indirect expenses. It seems to me that the subcontractor is made whole here -- i.e., the subcontractor is paid its actual costs plus profit on such efforts, but the prime contractor cannot put profit on its subcontractor payments (I note there are a couple of exceptions to that general rule).

    Getting back to the question at hand, I think the answer is that the subcontractor must comply with the terms of its subcontract, but if the subcontract-specified labor categories do not map to the prime contract-specified labor categories, the subcontractor is not harmed financially. The prime is harmed to the extent that it cannot put profit on its subcontractor payments; and it has missed an opportunity to bill its subcontractor payments at prime contract hourly billing rates. None of which would affect the subcontractor in any way.

    Hope this helps.

  3. Michael11,

    Let me restate with Desparado wrote.

    You are required to comply with the labor category definitions and criteria in your awarded contract. You are required to map and remap your internal labor categories as necessary in order to comply. If you have an outlier (e.g., somebody who qualifies for your internal PM category but not for the contract PM category), you are required to map your outlier to the appropriate contract labor category as defined by the contract.

    Hope this helps.

  4. Retreadfed,

    Wintermute means a system description. An estimating system description and a purchasing system description.

    The question is whether a contractor may be required to comply with business system adequacy criteria, even though the government does not have the ability to effect payment withholds for systems found to be inadequate. The answer to that question is yes.

    The clauses relating to the individual systems existed well before the creation of the 242.7005 administration clause. As Vern speculated, the requirement to have adequate business systems is not the 242.7005 clause, but the individual business system clause(s) in the contract.

    Hope this helps.

  5. jrt132,

    Here is 2(d) in its entirety--

    "Paid sick leave accrued under this order shall carry over from 1 year to the next and shall be reinstated for employees rehired by a covered contractor within 12 months after a job separation."

    I interpret that to mean that sick leave accumulates and crosses fiscal years. However, I do NOT interpret that to mean that the accumulated sick leave is portable. The language uses the terms "reinstated" and "rehired" which strongly implies the employees are coming back to the same contractor they left. I alluded to this circumstance in my original post. The only right to the accumulated sick leave upon termination/separation is that the accumulated balance is reinstated upon a rehire action within 12 months from the original separation date. Otherwise, the accumulated sick leave is lost at termination/separation.

    I think I got the accounting treatment right in my original post.

    To your question "is there a difference between PTO and sick leave" the answer is "it depends on the policies of the contractor". Many contractors combine sick leave and vacation (annual leave) into a single PTO benefit, which is fine ... but now that approach carries a bit more risk. I'm guessing many contractors affected by this E.O. will be looking at that decision, and may decide to split the benefits into the individual components. We'll have to see.

    H2H

  6. Interesting. The accumulated sick leave carries over from one year to the next, but there is nothing in the E.O. that creates a non-forfeitable right to the accumulated sick leave. (Did I miss something?) If there is no right then the sick leave is lost upon termination (but must be reinstated in certain circumstances). If there is no non-forfeitable right then the cost of the sick leave is recognized when it is used, not when it is earned. If the employee doesn't use the sick leave, there is no cost to be recognized for government accounting purposes.

    What may be "costly" is the need to develop a tracking mechanism for the sick leave. That said, I'm guessing that the contractors most likely to be affected are the smaller ones, the ones who don't publish quarterly financial statements to the SEC. If I'm right, then the tracking mechanism can be as simple as an Excel spreadsheet. Or even 3x5 cards. Whatever works.

    As for Vern's question, "What's a subcontractor?" the answer is simple. For purposes of complying with the E.O., a subcontractor is an entity to which the prime contract requirement is flowed-down. :-)

    Hope this helps.

  7. chuparosa,

    The full incentive fee would be determined at contract completion, yes? The contract is physically complete, right? The contract mod that establishes the incentive fee is typically the final contract mod before closure, yes? If so, I'm unclear why the CO would fee the need to protect the government's interest by withholding a percentage of the incentive fee.

    Perhaps others can explain the thinking better than I can.

    H2H

  8. From Original Post --"The requirement is combination of Firm Fixed Price and Labor Hour. In discussions with one of the other Contracting Officers here, he mentioned to me that I would be required to get subcontractor proposals in order to determine the reasonableness of the Prime Vendor's rates (i.e. determining the prime's profit, etc.)."

    From Vern's Post #7 --"If the other contracting officer is making competitive buys of commercial items (services), why is he worried about the profit that the contractor is making? He should worry about the rates that he is paying."

    From Desparado's Post #8 --"With the GSA Schedules program, the prime/sub is very different from standard contracting. In short, there technically are no 'subs' in the traditional sense. The rates are already in the GSA Schedule holders contract and have been determined fair and reasonable and are the only rates that a Schedule contractor can charge."

    To sum up, the rates up to (but not in excess of) the GSA Schedule rates have already been determined to be fair and reasonable, and there is no requirement to perform cost analysis on offers/bids that use those GSA Schedule rates, so it would be wasteful to request contractors to provide subcontractor proposals in order to evaluate any profit that the contractors may be making.

    Did I correctly synthesize the answer? If not, please let me know. (As if I could stop you.)

    If I'm correct, then the question has been answered.

    H2H

  9. Speaking of passivity versus active management, once I happened across a situation on an SCA-covered contract where, when the Dept. of Labor issued new wage determinations, the COR directed the contractor to demote the affected contractor employees so as to not increase the contract price. The contractor complied with the COR direction. Many attorneys, accountants, and other governmental personnel were required to remedy the situation.

    There were other aspects of the situation, other tomfoolery unrelated to SCA compliance, but helping to untangle that hot mess was one of the highlights of my professional career.

    H2H

  10. ji -- I'm not sure your analogy holds up, because in this case I would have both ordered the box from a vendor with whom I had a contract, and signed for it upon delivery, indicating I accepted what was being provided. The problem here was that I didn't have authority to order the box, even though I (apparently) had authority to accept delivery.

    All that said, I agree that it was settled long ago that the authority to acquire is what matters, and sellers have a duty to understand the authority of those doing the ordering and accepting.

    Also, wouldn't the contract price be INCREASED to reflect an additional quantity of lumber (in excess of that contracted for) was provided and accepted?

    H2H

  11. ji -- In ladybug's post #8, it was stated that the military officer specified the point of delivery and "accepted the excess quantity." Given the issue description(s) in the various posts, I'm not willing to grant that "acceptance" as used by ladybug means "acceptance" in the contractual sense. But what if ladybug used the correct term?

    What then?

    H2H

  12. ladybug108

    In your post #4 you wrote "No one authorized the contractor to accept any excess quantity" but you also wrote that the customer requrested the delivery. I assume the customer did not specifiy the quantity to be delivered because, as you wrote, "the assumption was made that the quantity was in the contract."

    Are you now saying that the quantity of lumber to be delivered was NOT in the contract? If the quantity was not specified, how did you arrive at a contract price in the first place?

    *Shakes head*

    H2H

  13. H2H,

    Can you expand on some of the risks aside from having our procedures found to be inadequate? What is the fuller scope of the potential pitfalls?

    Sure. If you have a DoD or DOE contract, and you are other than a small business (as you stated you were), then any cost reimbursement contract of sufficient size will likely contain the contract clause 252.242.7006. That clause establishes 18 criteria that define an "adequate" accounting system. Criteria Nos. 9 and 10 require:

    (9) A timekeeping system that identifies employees’ labor by intermediate or final cost objectives;

    (10) A labor distribution system that charges direct and indirect labor to the appropriate cost objectives;

    DCAA's audit opinion as to whether a contractor complies with any (or all) of the 18 criteria is highly subjective and may often turn on the judgment of the individual auditor who is looking at your policies, procedures and practices. In my experience, certain auditors may assert that a failure to complete timesheets daily (or at all) is a noncompliance with one or both of the criteria listed above. On the other hand, your company may get a pass. You cannot predict what the auditor(s) will say.

    If DCAA asserts you have policies, procedures or practices that are noncompliant with any of the 18 criteria, then they will tell your ACO that you have a "significant deficiency" in your accounting system. If the ACO agrees with DCAA (and in my experience that's the most likely course of action) then you have an inadequate accounting system and the customer may impose payment witholds up to 5% on any of your CAS-covered contracts.

    More importantly, it's going to be tough for you to win any future cost-reimbursement work without an adequate accounting system.

    Hope this helps.

  14. I did some more research. There are people who take this sort of stuff seriously ... or at least seriously enough to write down a plausible explanation. I found this --

    "C-beams are 'cutter beams,' a type of directed-energy weapon which slices ships apart. It's unusual to see them glitter because, like lasers, they don't generally shine at right angles to the beam path. Near the Tannhäuser Gate, however, there's a high enough concentration of interstellar hydrogen that a small portion of the beam will scatter so that an observer can see the beam path."

    Essentially then, the replicant was describing a space battle.

    Hope this helps.

  15. What about the film, Article 99? Here's a summary --

    "When Dr. Peter Morgan (Kiefer Sutherland) begins his medical internship at a Veteran's Administration hospital, he expects to breeze through on his way to a cushy practice. Instead, he's thrust into a bizarre bureaucratic maze where the health of patients is secondary to politics. And the temperature really rises when he teams up with some freewheeling physicians, led by Dr. Richard Sturgess (Ray Liotta), who think they've learned how to break the rules-and save lives-without getting caught."

    H2H

  16. Maybelline,

    You will be negotiating your contract with the Prime Contractor. If it were me, I would start (as you did) with 52.212-5 and then stop. I would take exception to everything not listed in that clause. Then I would wait to see how the Prime responded.

    At the end of the day, it is the Prime Contractor, not your company, that has the responsibility for complying with the clauses in its prime contract with the USG. That responsibility includes complying with applicable flow-down requirements. If the Prime fails in executing its responsibility, it has to suffer any consequences, not your company.

    Hope this helps.

  17. Joel, retreadfed, policyguy --

    I agree with retread and disagree with Joel. Here's my thinking.

    I believe that the "notification" discussed at FAR 3.1003( B) refers to a contractor disclosure as required by the clause 52.213-13. That clause dictates the when, where and how of a contractor disclosure.

    If "notification" means something else -- such as "brought to the Contracting Officer's notice" then there would be no need to specify the format of the disclosure, or to specify the recipients, or to discuss the content. All that language would be superfluous. And we know that we have to interpret the regulations as a whole, so as to give meaning to all words.

    So I think it's fairly clear that "notification" as contemplated by that clause and by the FAR subsection does not refer to anonymous postings on commercial websites.

    That is not to say that the Contracting Officer doesn't have responsibilities outside those prescribed by 3.1003 ... just that 3.1003 prescribes required actions given a certain, specified, set of circumstances -- i.e., receipt of a required contractor disclosure to the agency OIG.

    H2H

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