here_2_help

No. The rates must be trued-up for all contracts but whether the customer sees the impact of the true-up depends on the individual contract terms

Let me see if I understand. The government provided the contractor with equipment or some other item of government-furnished property (GFP). The GFP is currently in used but serviceable condition. The contractor would like the government to abandon the GFP "in place" so that the contractor can then take title, then use the (now former) GFP for a trade-in credit to reduce the cost of acquiring new equipment, which it would then own. Is that right? If so, your question "should the government allow this?" is hard to answer without knowing the circumstances. For example, can the current contract or future contracts be performed without the need for new equipment? Are there cost savings associated with using new (versus used) equipment, and will the government see those cost savings (if any) reflected in current and/or future contract prices? I would also like to know why the government felt the need to provide the original items of GFP to the contractor. Was the contractor unable to perform without the GFP? What happens if the GFP is taken away by the government? What does the contractor do then? Also, is the GFP capable of being used on any other contract or just on this contract (or series of contracts) for just this one particular government customer? In other words, if the government gives the contractor title, does that lead to the contractor using the GFP on commercial contracts? Lots of questions over here, with no way to give you a good answer until some clarity is provided.

CFO, have you read your contract to see if there is a contract clause that answers your question?

Yes, that's what CAS 418 says at 418-50(g)(3). I have rarely seen that provision put into practice.

From what I gather, there are two processes in play here: (1) annual "true-up" between budgeted (or "target") and actual G&A rate to clear any over/under variance (which may be carried on the balance sheet); and (2) whether the impact of the true-up (either debit or credit) can or should be passed on to a customer. With respect to (1), if the contractor has any contract that includes 52.216-7 or any CAS-covered contract, then this process must be executed at least annually. With respect to (2), contract terms and conditions will govern whether any resulting impacts from the true-up process may (or must be) passed on to the customer.

The ability to negotiate such a payment clause out of a subcontract depends on several factors. One important factor is prime contract type. If the prime contract contains 52.216-7, then the prime's ability to enforce a "pay when paid" clause may run afoul of-- In other words, the clause requires the prime contractor to pay its suppliers within 30 days after submitting its invoice to the Government.

Thought I would post to let people know that the original author of the LinkedIn post has now resigned from the NCMA Board of Advisors. As I posted earlier, I know the guy. I think it's a shame that NCMA lost a resource because some people didn't like either the message or the delivery.

I have personal relationships with several people who served on the Section 809 Panel. The Panel did some good work and some changes were made as the result of the Panel's reports. That said, there were not enough changes. No substantive changes resulted. A lot of work by some very smart people for ... not very much, in my view. The truth is that when you touch the budget process you are also touching the political process. You are in essence asking the same people who use the current process to their advantage to also spearhead reforms that might tend to reduce the influence they currently have. Not something many individuals will be eager to champion. Again, all my opinion.

Sorry for being late to this party: I just wanted to address the above question. The answer is provided (in detail) in CAS, not the FAR. See CAS 418. However, there is also a higher-level answer in FAR Part 31, at 31.203-3 ("Indirect Costs"). So, yes. The contractors' indirect cost pool allocation bases should--and must--contain all contracts being performed, if those contracts receive benefit from the activities in the pool. Being provided three hours to learn FAR Part 31 is like me being provided three hours to learn FAR Part 15.

An incisive article. Opinion backed by research and fact, as I've come to expect from Vern. I would add my opinion that revising the acquisition process without revising the budgetary process at the same time seems doomed to failure. Unlike Vern, I don't have any research and facts to support my opinion. Yet it remains my opinion, based on working in this government contracting world for 40 years now.

I read Mark's LinkedIn OP. He's a smart guy. But he's also very opinionated and not at all shy about sharing his opinions. (I routinely receive similar feedback but, then again, I didn't post what he did on LinkedIn.) My take on his assertion was "meh." I don't think it really matters all that much, nor does knowing the "acquisition chronological order" of the FAR Parts aid in finding what one might need to find. In that vein, I agree with dacaan regarding the "so what". I teach the FAR (using Vern's amazing hands-on method) and we have never, ever, needed to map the various FAR Parts to the acquisition lifecycle. If that's important info for somebody, then good for them. The entire assertion strikes me as "interesting, if correct, but I have better things to think about."

Dang, but that was a helpful thread! I miss Vern's input so much ... and trust that he's doing well (physically) these days.

A nice article! It's been awhile since I've read CM, but this article seems meatier than the ones I remember.

Hmmm. If I interpreted the allegations correctly, the Hon. Senators are saying that DOD is conspiring with Transdigm to make only small (less than $2 Million) orders for spare parts, rather than buy in quantities that would require submission of certified cost or pricing data. Seems to me that decision would be within the discretion of the KO. And as for Boeing, they seem to allege that the company is using subsidiaries in some fashion to avoid providing cost or pricing data. I'm not sure how -- maybe by claiming commercial item status? In any case, the letter then says Boeing IS providing the data upon request, so I'm not really sure what the issue is. Looking forward to receiving enlightenment.

1. Evaluate each account for risk of incurring unallowable costs. The scrub approach depends on (a) likelihood of incurrence, (b) how much risk the company is willing to take and (c) effort to review. 2. Document your risk analysis. Determine which accounts will be scrubbed -- and how. 3. If you are doing less than 100% transaction reviews and projecting the results, ensure your approach is statistically valid (see FAR 31.201-6(c)). EZ-Quant is the "go to" stat sample program but there are others. In all other circumstances, assume that if DCAA finds anything, they will question the cost they find. 4. After-the-fact scrubs are not a good substitute for 100% allowability reviews at the point of entry into the accounting system. Good luck!

My point is/was: the government may be prevented from asserting its claim. I was less concerned about a potential contractor claim, as the subtext of the original question seemed to be that the contractor was satisfied with the status quo.

The six year clock -- the Contract Disputes Act's statute of limitations -- starts running when a party knew or should have known that it had suffered damages. (Not a lawyer, but that's what I've been told.) So, the question is when the government should have known that it may have been misbilled (assuming it was misbilled). When should it have known that the contract did not comply with 52.216-7 requirements to submit an annual (certified) proposal to establish final billing rates (assuming none was ever submitted)? These are questions for a judge to determine, based on the facts & circumstances presented by the parties. Or the contractor could convince itself that it properly billed and then submit a $0.00 final invoice. Or the government could send in the auditors. Ten years of inactivity is not a great story ... regardless of whether you're the government or contractor.

Agreed this approach is not in accordance with FAR/DFARS/PGI. It's a poor substitute for actual Program Management. Questions: 1. Do you expect DCAA to audit the contractor's invoices? If so, how? Are they going to audit against the contract as formally bilaterally modified, or against MOCAS-reported funding, or perhaps against some PM's notion of what the funding should be? 2. Do you expect MOCAS to track all the funding movements? If so, how quickly do you expect that to happen? How quickly do you expect to issue/receive bilateral contract mods? Not a fan of this approach.

I work with contractors all the time. Most are simply unaware of their contractual obligations. (I ask them if they've read their contract, and they tell me they've read the SOW. Nobody ever reads the clauses incorporated by reference.) The larger contractors are aware, but struggle to have solid processes that support proper notification. Some PMs are reluctant to acknowledge an incipient overrun. Others have trouble pulling actual costs from their accounting systems in a comprehensible manner. The ones who are both larger and have adequate EV systems are the ones who can both project overruns and report IAW clause requirements. Unfortunately, the number of those contractors is rather small in comparison to all the rest. So, yes. It can be done and IS being done by a few of the larger, knowledgeable, experienced primes with good systems. As for the rest, not so much. As contracting officers, you can help the rest of them learn by adhering to the clause requirements and refusing to fund cost growth that is not reported timely as required by the clause.

I think you are right to be concerned. The subcontract is to support your ID/IQ contract, right? So why would there be a PoP that extended beyond the need? I don't see it.

Ask the prime to flow down to you their exemption certificate.

If I understand the situation correctly, the company is moving to a pay-as-you go model. There is no liability on the balance sheet. Is that correct? If so, what does CAS 408 say? It occurs to me that the company can estimate its liability, based on historical usage trends. A liability for the estimated annual usage can be booked. Let DCAA audit that value.

There are no real metrics because -- as you've posted -- each company is different. You don't need KPIs when the situation is clearly evident for those who have eyes to see. Does your company conduct exit interviews? If so, what do they tell the company's executives? The metrics that matter are all about attrition and retention. Those numbers speak loudly.

I wonder if ReadtheContract believes the original question has been satisfactorily addressed?

Contractor employees stay in service-issued tents, eat at the DFAC (or eat MREs) and, in general, are treated like service members all the time. This situation is hardly unusual, though it should have been covered in the solicitation. However, such employees are usually compensated for those inconveniences. They typically receive an "uplift" that covers deployments to difficult locations, such as FOBs. If the government intended that contractor employees were to be deployed to military bases, that definitely should have been covered in the solicitation. This is a real gap. Was it patent or latent? I don't know. What does the government want to accomplish here? When did it determine its objectives? If I'm the contractor, I'm going to tell the contracting officer that my contract has been changed, and I want an equitable adjustment. Not for the cheap facilities, but for compensating my employees for the inconvenience.