here_2_help

I would like to understand why this was not considered to be a T4C situation. What was the thinking?

In my view, if the BOE stated that the staffing was based on "closeout experience with other programs" then the other programs should have been identified, and actual labor hours for analogous tasks should have been provided for analysis. The contractor's failure to submit the information violates the requirements of FAR Table 15-2-- "The requirement for submission of certified cost or pricing data is met when all accurate certified cost or pricing data reasonably available to the offeror have been submitted, either actually or by specific identification, to the Contracting Officer or an authorized representative." Hope this helps.

Vern asked in his original post whether entrepreneurial government was a mistake. I think that question misses the fundamental point. Entrepreneurial or prescriptive, unchecked government with lax internal controls and ineffective oversight is always a mistake. Same holds true for private industry, tool. As Boeing, Enron, and many others have learned. Same holds true for military command, though I'm not qualified to judge. H2H

Retreadfed, I'm sure you are correct. Just waxing nostalgic for a minute, based on your comment. H2H

Retreadfed, "Generally, contractors can only receive an equitable adjustment for contractual acts of the government. Generally, sovereign acts of the government do not entitle contractors to an adjustment." Remember when GD sued the Feds for $26 million under the Federal Tort Claims Act for DCAA professional malpractice? (Sergeant York, DIVAD) They won, for a little bit (reversed on appeal on other grounds). Good times, good times. Hope they come again, real soon. H2H

Assuming you are a contractor, the answer is "it depends". It depends on your disclosed or established practices, it depends on whether the affected employees normally direct charge, it depends on whether you want to upset your customer. In short, there is nothing in the regs that would prohibit you from doing so, unless the matter has ripened into a legal proceeding--in which case not allowable. Hope this helps.

Postaward, I think that the issue is not whether the contractor's offer was accepted, but rather whether the contractor's invoices complied with contract terms. They did not. However, the contract mod will allow the contractor to bill employees at T&M rates appropriate to the employees' qualifications. This reduces the value of the "non-conforming" hours that were billed, but not as much as if the government rejected all non-conforming labor hours (a decision which was likely within its rights). The mod acknowledges that the government received value for the services provided, just not as much as the contractor had originally billed. In my view, the government's request for an additional $500 has little to do with consideration, and more to do with sending a little message regarding the contractor's misbehavior. It's a very small penalty--almost a gnat's bite--but it does communicate to the contractor that its misbehavior was wrong. There's really no need for the little sting, but if that's the only price the contractor pays, it's well worth it. (I wonder what the CPAR report will say...) Hope this helps.

Thanks for the new info. It's always nice to get all the facts. Based on your new facts, I would pay the mod and thank my lucky stars that there was no Form 2000 referral to the Department of Justice. You do realize that many law enforcement personnel would describe your "non-conforming labor costs" as a false claim, right? H2H

Infoseeker, Yes, I think you could make a decent case that the regulation as promulgated goes beyond what the enabling statute intended. In fact, one or more industry associations pretty much said exactly that in the public comments to the proposed rule. As it does with many comments that offer an unpalatable point of view, the DAR Council ignored the substance of the comment and published the rule that it wanted to publish--thus setting the stage for potential downstream litigation. Contractors have to report into DTIC. That's the rule. Smart contractors will figure out procedures to ensure that the reporting is done. Less smart contractors will ignore the requirement and risk getting costs questioned. If I thought DCAA had the resources to review the matter in depth, I might be more concerned. Or if I thought that DCMA would sit patiently on its collective keister while indirect rates were held up just that much longer while DCAA reviewed the reporting, I might be more concerned. Quite honestly, I'm not all that concerned. At worst, I think it will be a YES/NO determination. At best, auditors will ignore the requirement because they have more important issues to worry about.

Infoseeker, I don't believe the matter has ever been litigated, so we don't know whether or not a Court would conclude that CAS clauses are subject to the Christian Doctrine. Whether the mod would be unilater or bilateral is probably fact/circumstance dependent. Speaking for the contractor, we would be very happy to have the clause removed from the contract if we agreed it did not belong there. No consideration required. Hope this helps.

I can see the next step. This government agency will set up roadblocks at various intersections, manned by DCAA auditors. The auditors will audit the contents of any vehicle that attempts to cross the intersection, and will demand a percentage of the estimated value of the contents, in order to make the government whole from "questioned costs." Anybody who refuses to pay up will have their vehicle impounded and sold at auction. For the record, I agree with Vern's (unpublished) response to this particular CO. H2H

CAS coverage status is determined at the time of award. Modifications to a contract do not change the coverage status. If the original contract was FFP and awarded pursuant to adequate price competition without submission of (certified) cost or pricing data, then that contract was eligible for a CAS exemption. However, the parties may have (mistakenly) agreed to subject the contract to CAS because the CAS clauses are not self-deleting. (I.e., if they are not deleted then they are applicable.) If you believe that the parties did not intend the contract to be CAS-covered and it was eligible for a CAS exemption, I would suggest you mod the contract to eliminate the CAS clause. Hope this helps.

If it was FPP, the scope was known. Why did the subK overrun?

"The CO does not need a contract clause for an audit, not if the contractor hopes to settle without litigation. No big deal." My point was that the CO should not need an audit to negotiate an equitable adjustment. H2H

I don't see why not. I've heard Shay Assad, Charlie Williams, Jr. and Ron Youngs all mention that DCMA is seriously considering use of independent third party auditors. So if it's not policy now, I don't think it's prohibited. But I'm curious whether you've read FAR 15.504-2 and whether you've concluded that you need field pricing assistance. What's preventing you from negotiating a fair price, even without an audit report? Hope this helps.

"A JV of two large businesses would be a separate legal business entity..." And you know this to be a factual statement ... how? [Citation Needed] H2H

RJH46, Your question is vague and really cannot be answered by anybody except a lawyer. And even then, the answer will need to be very fact-specific. Here's a link to a similar case decided by the Court of Federal Claims. Hope this helps.

From the excerpt posted above, the clause is clear that the percentage of subcontracted services is determined by a ratio of the prime's cost of contract performance to the prime's total cost. The ratio is calculated as follows: The numerator is the prime's total cost of contract performance--with total "cost of contract performance" being "labor cost" plus G&A expenses allocable to labor cost, where "labor cost" equals direct labor cost plus all overhead costs allocable to direct labor. The denominator is the prime's total contract cost, including all direct and indirect costs, which obviously includes subcontracted services. It's just division. If the math says the prime is performing 51% then the prime is complying. That's how I see it. Comments about G&A allocated to subcontractors' costs, or treatment as labor costs, seem irrelevant. Hope this helps.

The interesting question here is whether your contract with the staffing agency qualifies as a "subcontract" for purposes of advance consent as well as for purposes of flowing-down prime contract clauses. If it does qualify as a "subcontract" for those two purposes, then you may indeed have a problem. But if not, why not? My view is that if you entered into the staffing agency contract for the sole purpose of staffing this contract, then it is likely a subcontract. But if you entered into a staffing agency contract for the benefit of the entire company, then it is not a subcontract for purposes of consent and flow-down. But by no means is there a bright-line answer, and by no means is my view bullet-proof. Vern has a nice summary of this muddy swamp of an issue in April's N&C report. It's worth finding. Hope this helps.

Okay, I'll agree that a suggestion that was clearly only a suggestion would not be unwise. In this case we seem to have a very small contractor. But at larger companies, the contractor's project manager has little (and sometimes zero) abilty to affect employee compensation. So let's just add that the CO who makes such a suggestion should understand that it may be futile. H2H

Infoseeker, The requirement for a DOD CO to determine that a contractor's IR&D projects are of interest to DOD is not new. I agree with you that this requirement has been inconsistently applied and that COs lack policy guidance as to how to make a proper decision. Yet, the requirement has been around for quite some time. The only new aspect here is the requirement to report into DTIC, and the threat that a failure to report will render IR&D costs unallowable. Hope this helps.

Infoseeker, DCAA's "limited scope" audits were designed to confirm or refute prior audit findings that indicated that one (or more) "business system" control objectives (now called adequacy criteria) were not functioning. If the limited scope audit confirmed a non-functioning control objective, then DCAA would recommend system disapproval. This has been happening since early 2010. However, current DCAA policy is to perform full-scope audits on the business systems for which it has "ownership". Too bad everybody who knows anything--including GAO--believes the agency lacks adequate resources to perform full-scope system audits with the kind of detail necessary for the CO to make an informed decision. Expect DCAA to be unable to fulfill its side of the business system bargain. I'm not going to address your other comments on DCAA. However, I will suggest that you need to review and undestand DCMA's business system implementation approach. It goes a long way to reducing my apprehension that DOD Contracting Officers will simply rubber-stamp poor quality DCAA audit reports. My understanding is that the contractor will have opportunities to rebut DCAA audit findings. Moreover, I believe that any CO decision to disapprove a contractor's system will need to be Boarded. So while I share some of your concerns about DCAA's abilty to fulfill its roles and responsibilities, I think DCMA has charted a pretty good path (at least in writing). Hope this helps.

Vern, I've spent some time reading Administration of Government Contracts but I haven't spent enough time to give you a strong answer to your question. Let me offer what I have and I expect you'll tell me to do better. Here's where I am. The Contracting Officer is a special individual because s/he has the authority to legally bind the government--unlike other authorized representatives. Accordingly, the CO needs to be mindful that even a "suggestion" can be taken as contractual direction by the contractor. In this situation, a "suggestion" might be used as the catalyst for a claimed change. It might even be viewed by the contractor as an attempt to take advantage of the government's superior bargaining position to coerce or threaten the contractor into making a change in its employee compensation under an implied threat of contract termination. Now, in your hypothetical scenario none of these things was the CO's intent--yet by virtue of position and actual authority, a simple "suggestion" leaves the government vulnerable to contractor assertions along the lines I noted above. Best I can do right now. H2H

Vern, I don't think you pointed the question at me, but I have a thought. I don't think it would be improper to make the suggestion. I only wish a CO would take that kind of ownership of the work. No, it would not be improper, but it would not be wise. A better course would be to prepare an accurate past performance report documenting that contractor performance was degraded because of excessive turnover in personnel. That doesn't solve today's problem, but it makes it harder for the contractor to create a similar problem in the future.

If you want the right answer you need to tell us what payment clause is in the contract.