here_2_help

1 hour ago, Vern Edwards said:

 I disagree. The audience is there, but they can't afford those publications.

We're not that far apart, Vern. There is a (small) audience for in-depth discussions and analyses, sure. They want what you write but they can't afford to subscribe. (And thank you for often making your articles available to the public.) But it's hard to publish in-depth articles when NCMA's membership covers a wide spectrum of folks, from state/local government buyers to prime contract buyers to commercial buyers. For example, I was just speaking with somebody who's planning to join NCMA in a few weeks or months; she's a buyer for the local school district. She's not looking for--nor is she ready for--a deep dive into, say, FAR Subpart 15.4.

In my view, Contract Management aims for a low common denominator that will be of general interest to the majority of its readers. I quote from current Editorial Guidelines below regarding what the Editors are looking for.

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Contract Management (CM) magazine is the National Contract Management Association’s flagship publication for people and businesses working in the buying and selling communities of both the public and private sectors. With a circulation of 20,000, CM is a monthly magazine written and edited specifically for contract management professionals. Each issue provides comprehensive reporting on issues and trends relevant to contract management of all shapes and sizes.

Common article topics include, but are not limited to: alternative disputes resolution, commercial contracting, construction contract management, environmental contracting, information technology, e-commerce, e-business, education, grants management, health care contracting, international acquisition, program management, small business, state and local government contracting, and professional development.

6 minutes ago, REA'n Maker said:

The NCMA magazine is also mainly filler and sadly lacking in substance.

True but, in fairness, the audience is not there for in-depth analysis.

2 hours ago, Contractor500 said:

My question is whether the Prime can actually pay us less for an hour of on-call duty which should be labor. They want us to bill this as an ODC, but since this is labor, can I say that we must bill this to labor and not as an ODC? Is there something in the FAR that backs this up? Not sure if something like this is allowed. So, would like your thoughts on this. Thanks. 

First of all, yes. The prime can ask you to bill less than you actually incur. (This assumes that you actually incur $102.31/hour for your employee's labor. See ji20874's post.) You don't have to agree, but the prime can ask.

Second, if you were CAS-covered I would say that you have to be consistent in your cost accounting practices. Labor over there must be treated as labor everywhere. But you're not CAS-covered. Are there burdening differences between labor & ODC? I don't know your accounting system so I couldn't say. But if the transformation from labor to ODC changes the burdening, and your are required by 52.216-7 to submit a final billing rate proposal at the end of the year, then you may have an argument as to why that's a bad idea.

I would suggest you get a consultant in to assist you with these types of questions ...

If you are a small business then no, you are not subject to CAS. So your prime is asking you to (a) request less reimbursement than actual costs incurred, and (b) to treat the additional labor as an ODC? (And burden the labor as an ODC instead of as labor, I assume.)

Is that correct?

Back to Vern's question then. What do you want to know?

Contractor500, is your company subject to CAS? Is the subcontract subject to CAS?

1 hour ago, BrettK said:

Have you attended in the past?
Are you going this year (Dec 5-6 in Bethesda, MD)?
Is this a well attended conference by people who participate in Wifcon? Why or why not? Is it worthwhile?
Do you feel vendors get a lot of opportunities to interact with federal decision makers there?

I have attended several NCMA conferences in the past, including a few World Congresses, where I was a presenter. I have attended NCMA National Education Symposia--and even instructed at one of them. I don't recall with absolute certainty if I've specifically attended a GCMS -- but I think I have (once).

NCMA is a good organization--especially for people new to the field. That being said, I let my membership lapse several years ago (after being a member for ~ 20 years). Consequently, I no longer attend NCMA events.

I can't speak for other WIFCONites, but the event may be worthwhile for YOU if you are new(er) to the field.

No. I think interaction with decision-makers is limited, especially for attendees. The speakers are there to represent their agencies and the Federal government; they don't really have a lot of space to "let their hair down" and interact, assuming they wanted to. In my experience, the best way to get good one-on-one interaction is to be a speaker yourself and hang out in the green room.

When this issue comes up for companies have have supported, we typically turn to 31.205-6(h).

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Backpay. Backpay is a retroactive adjustment of prior years’ salaries or wages. Backpay is unallowable except as follows:

           (1) Payments to employees resulting from underpaid work actually performed are allowable, if required by a negotiated settlement, order, or court decree.

           (2) Payments to union employees for the difference in their past and current wage rates for working without a contract or labor agreement during labor management negotiation are allowable.

           (3) Payments to nonunion employees based upon results of union agreement negotiation are allowable only if-

                (i) A formal agreement or understanding exists between management and the employees concerning these payments; or

                (ii) An established policy or practice exists and is followed by the contractor so consistently as to imply, in effect, an agreement to make such payments.

(Emphasis added.)

So, no. Contractors do not automatically get to claim reimbursement of underpaid wages via submission of an REA, because the compensation costs are unallowable in most circumstances. I guess we can split hairs about what "negotiated settlement means" in this context but, in my experience, the phrase refers to a negotiated legal settlement--an interpretation that is supported by the other two circumstances in that same sentence.

2 hours ago, Guest108830 said:

But have not seen any support that states, Prime must provide all mandatory flowdowns, etc. to sister and treat as Prime / sub relationship even though its an inter-organizational transfer. 

Vern is correct. If the company treats the situation as a contract between affiliated entities, then that's what it is. It is a buy. If the company treats the situation as an interorganizational transfer then no contract is necessary as it's a make.

See FAR 15.401 Definitions, as well as FAR 15.407-2(b) Definition.

10 minutes ago, Needforspeed said:

Following completion of a contract, the contractor agrees to let DCAA drop their contract in their software, and the software generates a bill to the contractor for anything they charged that was out of bounds.

DCAA already does a lot of data analytics. Or at least the agency tries to. Results have been ... mixed. To my knowledge, nobody has tried to use data analytics on an individual contract (kind of defeats the notion of "big data"). On the other hand, as I noted, compensation is likely to be a cross-cutting issue well suited for ACO or DACO/CACO adjudication.

10 minutes ago, Needforspeed said:

Is surveilling a contractor’s direct labor so closely post award really a job of the CO and is it a good use of their time to do it to such a micro level? If we can’t trust the contractor to do the right thing, why are they getting a cost reimbursement contract award in the first place?

Interesting question. Most larger contractors have one or more ACOs, DACOs, and perhaps even a CACO. You'd like to think that compensation, likely being cross-cutting across multiple contracts, would be something addressed at a level higher than a PCO. On the other hand, see this DoD IG audit report, or perhaps this DCMA Manual at 3.7.d.

28 minutes ago, REA'n Maker said:

Now that I'm wearing my CO hat again, If I was still with DoD I would be engaging with DCAA, but because I'm not with DoD anymore, it's definitely a problem when you don't have someone who can look at a vendor's books and make a reasonable judgement based on experience and recognized benchmarks. 

The thing is that DCAA auditors do not have the training, experience, or judgment to evaluate the reasonableness of contractors' compensation levels. See, for example, the appeal of J.F. Taylor at the ASBCA. Or the appeal of Metron. The auditors try but they (generally) cannot put together supportable positions.

Which puts the responsibility back on the CO's shoulders--rightly or wrongly.

I agree that TINA does not require you to provide certified cost and pricing data. However, that's not the same thing as providing non-certified cost information necessary for the prime to assure price reasonableness of your rates. If you're going to use foreign workers then your fringe benefit model for them will be entirely different--if you applied the same fringe rate to their labor, you'd (potentially) be making a windfall profit. The prime has a responsibility to assure itself (and its customer) that's not happening.

To your questions:

1. Yes, you can try. But what if the prime declines? What then?

2. Maybe but what if the PO prices include inter-company profit? Now you are pyramiding profit. How to you show your prime that's not happening?

Good luck.

2 minutes ago, Needforspeed said:

Unfortunately no, Joel. I am the resource, albeit not at the expert level. Much to Vern’s chagrin.

I deduce from your posts that you work at a small(er) contractor. I'll guess you're the contracts person, and are being asked to do things not found in the NCMA CMBOK.

Good luck. Even if I'm wrong about you and your role, good luck.

On 10/9/2022 at 8:41 AM, joel hoffman said:

H2H, are you referring to a DCMA legal office or to a Contractor’s legal office? Just curious. 

DCMA Legal

1 hour ago, Needforspeed said:

Help, would you extend this to job application data, as well?

I have used the rate of applicant turn-downs (i.e., the ratio of offers made to offers accepted) to show government auditors why we needed to jump the pay rate for certain positions. I should say that I have "tried" to use the ratio, because I have had mixed success in doing so.

Generally speaking, most government folks are used to OPM scales/locality pay rates and have trouble accepting that contractor pay doesn't really work that same way.

13 hours ago, Needforspeed said:

The burden of proof is on the contractor to demonstrate reasonableness. ... Are there cases where the government disallowed unreasonable increases in contractor direct labor...

Yes, the burden is on the contractor to demonstrate reasonableness if challenged. Normally, the contractor points to market survey data. Also, as part of an "adequate" accounting system, the contractor should have an adequate compensation system. In other words, a CO can rely (generally) on a contractor's accounting system adequacy rather than review every single wage rate actually paid. In addition, there are "salary caps" or ceilings that form an absolute barrier for labor cost allowability. (31.205-6(p).)

Of course, if the CO disallows any costs (including labor) the contractor has the right of appeal. 

To your other question, I am not aware of any cases. I did a quick review of the Manos chapter on compensation, and the only cases I saw that discussed disallowance were focused on specific elements of compensation (e.g., severance or bonus) and not on general reasonableness.

5 hours ago, Vern Edwards said:

@here_2_helpRegarding the origin of COVID-19?

See Science, "The Huanan Seafood Wholesale Market in Wuhan was the early epicenter of the COVID-19 pandemic," by Worobey, and 17 other named authors, 26 July 2022, pp. 951-959. The summary:

However, being an "early epicenter" is not the same as being the origin.

Science is the peer-reviewed academic journal of the American Association for the Advancement of Science. It has been published since 1880.

I subscribe to Science. So should all who want to be informed about scientific developments.

I have sent you the article.

That's not what I was looking for, Vern. I was hoping Joel could point me to the source of his assertion that the Chinese government "loosed" the virus on the world--implying intention.

1 hour ago, joel hoffman said:

If they [China] can loose COVID 19 upon the whole world, what else would they do?

Citation needed, please.

1 hour ago, Needforspeed said:

My question is what, if anything, controls, caps, or surveils the direct labor costs the contractor can charge in performance of the award, if it is silent in the award document? ... What, if anything, prevents the contractor from charging the time, business as usual?

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31.201-2 Determining allowability.

      (a) A cost is allowable only when the cost complies with all of the following requirements:

           (1) Reasonableness.

           (2) Allocability.

           (3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances.

           (4) Terms of the contract.

           (5) Any limitations set forth in this subpart.

(Emphasis added.)

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31.201-3 Determining reasonableness.

      (a) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of specific costs must be examined with particular care in connection with firms or their separate divisions that may not be subject to effective competitive restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the contracting officer or the contracting officer’s representative, the burden of proof shall be upon the contractor to establish that such cost is reasonable.

      (b) What is reasonable depends upon a variety of considerations and circumstances, including-

           (1) Whether it is the type of cost generally recognized as ordinary and necessary for the conduct of the contractor’s business or the contract performance;

           (2) Generally accepted sound business practices, arm’s-length bargaining, and Federal and State laws and regulations;

           (3) The contractor’s responsibilities to the Government, other customers, the owners of the business, employees, and the public at large; and

           (4) Any significant deviations from the contractor’s established practices.

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31.205-6 Compensation for personal services.

      (a) General. Compensation for personal services is allowable subject to the following general criteria and additional requirements contained in other parts of this cost principle:

           (1) Compensation for personal services must be for work performed by the employee in the current year and must not represent a retroactive adjustment of prior years’ salaries or wages (but see paragraphs (g), (h), (j), (k), (m), and (o) of this subsection).

           (2) The total compensation for individual employees or job classes of employees must be reasonable for the work performed; however, specific restrictions on individual compensation elements apply when prescribed.

           (3) The compensation must be based upon and conform to the terms and conditions of the contractor’s established compensation plan or practice followed so consistently as to imply, in effect, an agreement to make the payment.

           (4) No presumption of allowability will exist where the contractor introduces major revisions of existing compensation plans or new plans and the contractor has not provided the cognizant ACO, either before implementation or within a reasonable period after it, an opportunity to review the allowability of the changes.

           (5) Costs that are unallowable under other paragraphs of this subpart  31.2 are not allowable under this subsection 31.205-6 solely on the basis that they constitute compensation for personal services.

 

           (6)

(i) Compensation costs for certain individuals give rise to the need for special consideration. Such individuals include:

                     (A) Owners of closely held corporations, members of limited liability companies, partners, sole proprietors, or members of their immediate families; and

                     (B) Persons who are contractually committed to acquire a substantial financial interest in the contractor’s enterprise.

                (ii) For these individuals, compensation must-

                     (A) Be reasonable for the personal services rendered; and

                     (B) Not be a distribution of profits (which is not an allowable contract cost).

                (iii) For owners of closely held companies, compensation in excess of the costs that are deductible as compensation under the Internal Revenue Code ( 26 U.S.C.) and regulations under it is unallowable.

b) Reasonableness-

(1) Compensation pursuant to labor-management agreements. If costs of compensation established under "arm’s length" labor-management agreements negotiated under the terms of the Federal Labor Relations Act or similar state statutes are otherwise allowable, the costs are reasonable unless, as applied to work in performing Government contracts, the costs are unwarranted by the character and circumstances of the work or discriminatory against the Government. The application of the provisions of a labor-management agreement designed to apply to a given set of circumstances and conditions of employment (e.g., work involving extremely hazardous activities or work not requiring recurrent use of overtime) is unwarranted when applied to a Government contract involving significantly different circumstances and conditions of employment (e.g., work involving less hazardous activities or work continually requiring use of overtime). It is discriminatory against the Government if it results in employee compensation (in whatever form or name) in excess of that being paid for similar non-Government work under comparable circumstances.

           (2) Compensation not covered by labor-management agreements. Compensation for each employee or job class of employees must be reasonable for the work performed. Compensation is reasonable if the aggregate of each measurable and allowable element sums to a reasonable total. In determining the reasonableness of total compensation, consider only allowable individual elements of compensation. In addition to the provisions of 31.201-3, in testing the reasonableness of compensation for particular employees or job classes of employees, consider factors determined to be relevant by the contracting officer. Factors that may be relevant include, but are not limited to, conformity with compensation practices of other firms-

                (i) Of the same size;

                (ii) In the same industry;

                (iii) In the same geographic area; and

                (iv) Engaged in similar non-Government work under comparable circumstances.

(Emphasis added.)

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The Court holds that the United States breached the Contract by charging Ohio for unauthorized O&M costs and Ohio is entitled to summary judgment on this claim. The record demonstrates that the United States charged Ohio for two types of expenses that are not related to the Project.

I can help the United States in designing a cost accounting system that considers such concepts as "allocability" and helps to allocate costs in reasonable proportion to the benefits received by the parties.

United States, if you're interested, call me.

2 hours ago, C Culham said:

Question #2: Yes you must pay the required wage/benefit.   If USDOL finds out you are not in absence of a mod too bad, you as the contractor must pay the required SCA wage/benefit. 

As companies I have supported in the past have found out, to their di$may.

In my experience, contractors are expected to comply with prevailing wage requirements, whether or not the CO modifies the contract.

Okay. I have not asked but I suppose we can.

• Legal won’t allow an FMS FFP contract.

Background:

The DFARS was revised 11/27/2019 (84 CFR 65304) to implement Sections 829 and 830 of the 2017 NDAA, which required use of FFP contract types for FMS (unless and exception or waiver applies).

The DFARS was revised 08/30/2021 (86 CFR 48339) to eliminate the requirement to use FFP contract types for FMS. DFARS Section 225.7301-1 was removed and reserved.

My understanding is that, currently, there is no direction regarding appropriate contract type to use for FMS. DFARS 225.7301 (b) states: 

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Conduct FMS acquisitions under the same acquisition and contract management procedures used for other defense acquisitions.

Issue:

To me, that DFARS guidance tells contracting officers to use the appropriate contract type, following the guidance of FAR Part 16 and DFARS Part 216. However, instead I'm being told (by DCMA contracting officers) that:

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Legal won’t allow an FMS FFP contract.

Question:

As I know there are many DCMA contracting officers here, I'm asking whether this is a local thing or something that's found in guidance outside the FAR or DFARS? To be clear, I am dealing with experienced COs who frequently deal with FMS cases. I would expect them to be aware of the latest guidance on the topic. However, this one seems to be an instance of the pendulum swinging a bit further than I would have expected. I'd like to push back but, you know, "Legal says" is kind of final these days.

Should I push back, or should I simply accept what I'm being told?

I am grit personified, but unfortunately not a contracts person, so I probably skewed your poll results.