here_2_help

Vern, I posted: There is no time limit, except the one found at 52.216-7(d)(5), which deals with submission of completion vouchers on physically complete contracts after settlement of final indirect cost rates. H2H

I don't agree with Vern's assertion. In my view, the CDA provides statutory limits governing when a contractor can assert a claim -- i.e., a non-routine request for payment -- to the Government. I think my position is supported by the definition of "accrual of a claim" found at 33.201. It says (in part), "For liability to be fixed, some injury must have occurred." A routine payment request, either interim or delivery, is not an injury. I can think of several reasons for the contractor to delay invoicing indirect costs (e.g., awaiting DCAA audit). This would be an issue if the interim billing rates were significantly lower than estimated final indirect cost rates (see 52.216-7(e)). However, I can think of only a few reasons to delay invoicing direct costs. The only one that comes to mind on the direct side would be related to a subcontractor invoice or claim to which entitlement was disputed. (That would be treated as an incurred cost for purposes of complying with the LoF Clause, per the Federal Circuit.) Anyway, many contractors cannot invoice 100% of incurred costs for various reasons. There is no time limit, except the one found at 52.216-7(d)(5), which deals with submission of completion vouchers on physically complete contracts after settlement of final indirect cost rates. Hope this helps.

Perhaps Legal Counsel is "advocating" on behalf of the agency? What we need is an affirmative defense for contractors that's equivalent to the "special plea in fraud" defense given to the USG by statute. H2H

FYI, a sale between two affiliated entities under common control is not a subcontract (as least as defined for flow down of clauses). It's an Inter-Organizational Transfer. See 31.205-26(e). As others have pointed out before, it's a "make" not a "buy". Hope this helps.

Vern & Carl -- In my view the issue here is not whether the Government customer or the AbilityOne contractor provides the necessary equipment to perform the work. The issue here, as leo1102 has framed it, is that the Government customer doesn't have the necessary funds to pay for the equipment regardless of which entity acquires and holds title. The Government currently provides equipment as GFP. The contractor (user) has informed the Government that the GFP is at the end of its useful life. At some point during future performance, the equipment will stop working. Then it will be defective GFP. Prior to that point, the equipment may not operate efficiently or require undue amounts of repair/maintenance. Then the contractor will not be able to perform as proposed and the cause will be GFP not operating as reasonably expected. Delay & disruption. Defective GFP. I smell a nice REA coming. Which is exactly what the AbilityOne contractor is trying to avoid, by telling the Government customer that the GFP is at the end of its useful life. H2H

Hi leo1102, Not sure I can answer you definitively. But that never stops me from trying to help out. 1. I assume the Government currently has title to the 5 year-old trucks, mowers, etc. These are being tracked as Government-owned, Government-furnished property. (Note that the supplies issue is entirely separate from the tangible asset issue.) 2. The GFP is at the end of its useful life and your AbilityOne contractor says its time to replace them. You say the Government doesn't have funds to purchase the items. Instead, you want your contractor to purchase them for you. 3. You DO realize that if the contractor purchases the items, then the contractor is going to bill you for them, right? If it were my client, I would advise the contractor to send you a bill for the full purchase price the moment the items were purchased, as they would be direct costs of the contract. 4. But you don't have funds. So what you REALLY want is for the contractor to purchase the items on its own, as its own capital assets, and then depreciate the items over time into some kind of indirect cost pool. In essence then, you expect the contractor to fund the Government's needs. At the same time, if the contractor is subject to FAR Cost Principles, you will deny the contractor recovery of the interest expense it needs to finance the purchases, because it is unallowable. 5. And, to top off the situation, you are now looking to replace the AbilityOne contractor if it refuses to fund your needs. Somebody less charitable than I would say that's very close to extortion. My opinion of your approach? It violates the covenant of good faith and fair dealing. My answer to your question? No. You cannot remove an AbilityOne contractor for the rationale you are apparently cooking up. You know you need to replace the equipment. Replace the equipment. If you can't replace the equipment then I suppose you can terminate the contract but you won't be able to replace the contractor. Tell the base to cut its own lawn using its own personnel. Since there is no funding for equipment, I suppose the personnel can use their personal scissors and nail clippers. Hope this helps.

rsenn, Obviously you can do whatever you wish; however, you did make an inquiry regarding potential problems and/or issues that might arise. Let me make another attempt. You seem to be taking a piece-meal approach, where certain problems and/or issues are within your ambit and others are outside of it. That's natural. However, you will find that having somebody with a "big picture" perspective, who has cognizance over all the various moving parts, is a best practice. If that's not you, it should be somebody else. I suggested an external advisor. I'm not looking for the job; I'm giving you advice based on first-hand experience gleaned over several M&A/integration projects. H2H

Hi rsenn, First, I like your user name! I guess you DID start the fire (misquoting Billy Joel there). Having been involved with several mergers & acquisitions of Government contractors, let me advise you first to obtain the services of an expert advisor. An attorny for sure, but perhaps also a financial advisor who has a specialty in Government contracting and accounting matters. (Pretty much every major and regional accounting firm has a few lying around.) The issues are too numerous to go into here, ranging from impact on forward pricing rates to contractor business system adequacy, from Disclosure Statements to contract novations, from the margin impact to fixed price contracts to the price impact to proposals in the pipeline. The stuff you mentioned (e.g., bank, insurance, and tax issues) are actually pretty straightforward. But the FAR and CAS stuff is a killer. And you didn't even mention potential security clearance issues! My advice -- get an expert. You won't regret it.

Yes. No. No. You need to read the CPARS/FAPISS guidance. And a rating can be litigated if necessary. Hope this helps.

Here's the thing. There is no one, right, way for a JV to operate. Some JVs are run as independent entities, with full employee populations and full direct/indirect accounting. Others are run more like co-producers, with the JV being a shell and acquiring all necessary labor and goods from subcontractors--some of which may also be JV members. And there are other possible scenarios as well--including hybrids of the foregoing two I described. We don't know how this JV operates (though we do know that it has acquired material from a subsidiary division of a non-controlling JV member). That means that it is incumbent on the JV to explain to the cognizant CO what's going on and how the JV operates. One would think the proposal would have been the place to do that, but perhaps the solicitation didn't require this issue to be addressed, or at least not addressed to the level of detail now thought to be necessary. I believe the lesson to be learned here is that the CO needs to know how the JV will operate. The JV should propose in a manner consistent with how it will operate--including providing a narrative regarding cost accounting and cost build-up. And then it needs to operate in a manner consistent with how it proposed (CAS 401 requires this, if nothing else). There's an article on this site (in the analysis section) dealing with one poor JV who ran into auditors and at least one CO who didn't understand (or wouldn't accept) how it would be operating. I would recommend that article to those interested in pursuing this topic. It was also addressed to some extent, long ago, in the ABA publication "Strategic Alliances and Teaming on Government Contracts: Winning Combinations for the Next Century". (Published by ABA in 2000.) Hope this helps.

Joel, I don't think the cost principle you cited (31.205-26(e)) would apply in this situation. Note that the original question stated that "one of the non-controlling JV partner's division, Division A" was purchasing the material. Assuming that the description "non-controlling" was correctly applied, then Division A would NOT be considered to be an affiliate under common control. Thus, the cost principle would not be applicable. The other rule on excessive pass-thru costs might apply; but we don't know the percentage of subcontracting by the JV and we don't know whether the solicitation and contract contained the restrictions, and we don't know whether the JV already addressed the issue in its proposal. Hope this helps.

shultzm, Your question was asked and has been answered, yet you seem dissatisfied with the answers provided. Are you looking for the correct answer, or the answer you want to hear? The correct answer is: There is no prohibition on applying fee on fee. You may be thinking about the cost principle at 31.205-26(e) which addresses Inter-Organizational Transfers. But a subcontract is not an IOT unless it is a "subcontract" with an affiliated entity under common control. Hope this helps.

Vern, of course you are correct. H2H

That is a great decision to read. But it deals with IR&D, not B&P. The issues involved are analogous and closely intertwined, but not the same. In fact, the differences between the two formed a significant aspect of the case. H2H

Yes. Assume contract close-out will be direct charged (it need not be). 1. The contract SOW should specify contract close-out activities and other post-delivery activities ("ramp-down"). The WBS should address this in the PMO function if nowhere else. 2. Contract funding should be provided for them. (The contractor should have bid them.) 3. The contract PoP should encompass all post-delivery activities. H2H

Yes, I know a lot about this issue because I deal with it frequently -- as in, just about every other week. Vern, you nailed it. I only have a couple of points to add, for the general benefit of those who might be following this thread. 1. The language Vern quoted (quite appropriately) is not especially clear. Terms such as "specific requirement" and (elsewhere) "provision" are open to interpretation. Vern used a dictionary, which is a start, but also not dispositive. I would expect all mature contractors to have a written policy establishing when proposal prep costs are charged as direct contract costs, and when they are charged as B&P. 2. Note the key phrase is "requirement of an existing contract" (not future contract). More on this to follow. 3. Note that CAS 402-61 is not worded in the imperative. In other words, a contractor may elect to charge proposal prep costs as direct costs in certain circumstances (e.g., follow-on efforts) but is not required to do so. Once the contractor has established a practice, however, it is expected to follow that practice consistently. The proper charging of proposal prep costs is determined on a case-by-case basis, based on the individual facts and circumstances. There are only a few "bright line" rules and Vern already quoted them. Speaking personally, one of my rules of thumb is to look at the outcome of the proposal. If the proposal results in a new contract award, then I tend to bias towards B&P. But if the proposal results in a modification to an existing contract, then I tend to bias towards a direct charge. Another rule of thumb is that if the contractor has discretion whether to bid or not, then it's probably B&P. An offer of conditional reimbursement is a trap. As in, "I will reimburse your proposal prep costs as direct costs in the new contract, if we decide to award. Otherwise, you can recover as B&P." That obligates the customer to nothing and, similarly, does not create a requirement in an existing contract--which is what the Standard looks for. I can tell y'all that if a DCAA auditor can't find a proposal preparation requirement in the SOW of an existing contract, or there is no written request from the CO telling the contractor that it must submit a proposal as a requirement of the current contract, then there is a high probability of the proposal prep costs being questioned and the contractor being cited for a noncompliance with CAS. Hope this helps

Cajuncharlie, Why would you make that statement? What support do you have for your position? If subcontract close-out during prime contract performance would be charged as a direct cost, why would that exact same activity be charged as an indirect cost simply because the period of performance ended? How is that consistent, or even compliant with the requirements of CAS 402? Why should all other customers pay for an activity that benefits only a single, individual, contract? The plain fact is that each contractor will have its own business practices. Some with charge close-out direct and others will charge close-out indirect. That's why a Disclosure Statement is a useful tool for figuring out what a particular contractor actually does; or (in the absence of a DS-1) a contractor's written policy. I'm concerned that your direction may mislead CO's or buying commands such that they don't think they have to fund such activities, when in many cases they may have to. H2H

Hi RCB, You need to review 31.205-18, CAS 420 and CAS 402 (Interpretation No. 1). Bottom line is that proposal prep costs may be charged as direct contract costs if "required" by the contract. Otherwise, such costs are B&P and treated accordingly. Hope this helps.

The subk's billing to you (as prime ktr) must be in accordance with the terms & conditions of the subK you awarded to that entity. The subK's billings to you are your contract cost. That cost must be burdened consistently with how you burden other contract costs and, indeed, all other subK billings to all other contracts. Normally your Disclosure Statement describes this but you probably don't have one so you are left with your "established" practices, which you are expected to follow consistently. And, as has been pointed out, your prime contract controls how you bill those costs. Bottom line -- you need to distinguish between cost accounting and billing practices. Hope this helps

Hi Cajuncharlie, Not sure if your post was directed at me or not, but I'm not clear on the linkage between incurred costs and TINA disclosures. Could you please elaborate? Thanks H2H

Vern, I take your points. My concern was in considering what would happen if the sweep (performed after agreement on price) found that certain certified cost or pricing data were not accurate, complete, or current? The price was already agreed to. All the contractor would be doing would be documenting its own defective pricing. Whereas, were the sweep performed prior to the handshake, the risk of defective pricing would be reduced, because any new information could be disclosed prior to the handshake. That was (and still is) my thinking, anyway. H2H

Jim111, I'm not at Vern's expert level or anything, but wouldn't it make sense to first cover the cost growth on the CPFF via mod, and then do another bilateral mod to convert to FFP? Hope this helps?

I'm wondering what the purpose of performing a sweep AFTER the date of price agreement would be? H2H

Yet, that is EXACTLY what DCAA expects Contracting Officers to do. H2H

Whynot, your question implicitly assumes that the contractor adjusts the calculated hourly salary cost for its employees by the total hours worked in the pay period. That is not a mandatory adjustment and many contractors do not make it. For example, if a salaried exempt engineer works a standard 80-hour two-week pay period and receives $3,200 in gross salary during that period, we would calculate the hourly rate at $40 ($3,200/80 = $40). You assume that if that same engineer worked 100 hours in that same two-week pay period (80 plus 20 hours of UCOT) his calculated hourly rate should be $32 ($3,200/100 = $32). That's how it works at some contractors, but by no means all of them. There are various ways of accounting for UCOT -- including ignoring it altogether if immaterial in amount -- and your method is just one of them. Hope this helps.