here_2_help

Don, fair enough. Thanks for the information. It helps!

Recently I received a question as to whether a T&M contract for non-commercial items (services), awarded without submission of cost or pricing data (certified or otherwise), was subject to CAS. There is no specific CAS exemption that is on point, so I was going to say "Sure". But then I found out that the contract was awarded via Reverse Auction, where the hourly billing rates were competed on-line via a series of iterations, and contract award was made to the low bidder. My thought was that this was not a negotiated contract. CAS applies only to negotiated contracts. So the contract would not be CAS-covered. But regulatory support for my position is lacking. What do y'all think? Is a contract awarded via Reverse Auction a negotiated procurement? If not, where can I find support for that position in the FAR? Thanks! H2H

FAR 32.1004 permits use of PBPs on a deliver item (CLIN) basis, so long as agency regulation does not prohibit that application. So that's not the problem. Your CO may be thinking that you don't qualify for contract financing. Your $10 million contract is 80% Cost Type, so you're getting $8 million reimbursed via monthly submission of public vouchers. What's left over ($2 million) may be under the contract financing threshold. Your CO cited the correct FAR rule (32.104). The problem I have is that I don't read the FAR that way. I read 32.104 as discussing contract value, not CLIN value. It states that contract financing is not available unless the individual contract value is more than $2.5 million. Nothing I saw said anything about CLIN value -- though I admit I only read the FAR and didn't delve into the Supplements. So I see your point. Still, you are getting $8 million. Are you sure you can't find a way to negotiate smaller FFP deliverables with your CO, such that your cash flow is enhanced? Hope this helps.

DCAA has tried for years to disallow contractor close-out costs that are direct charged and which are recorded after the contract's PoP. But in this case I think the issue is that the customer wanted KBR to submit an estimate for close-out activities that would have resulted in a FFP Task Order or CLIN. KBR asserted that it could not do so, unless somebody could tell them how much support they would have to provide DCAA for close-out audits (among other things). I'm naturally sympathetic to KBR's position, though I think they could have submitted a FFP bid and documented their assumptions regarding audit support, such that they could ask for a REA if DCAA audit support took significantly more hours than bid. H2H

DAMB, I don't know. It seems confusing to me, and I bet your contractor is going to argue it was confused as well. To answer your question, I don't think it matters whether the government formally disallows the overrun costs or just chooses not to adjust the incentive fee / cost share as the contractor thinks it ought to be done. In either case, the contractor will have an action that it can appeal, should it choose to do so. I'm sure others can help you more than I can.....

DAMB, just to clarify. Is this a Cost-Plus-Incentive-Fee (CPIF) contract type, or a Cost-Sharing contract type? You use both terms in your post, and it confuses me. Hope this helps.

Trying to get anybody at OMB to discuss the contents of the Circulars has proven, for me anyway, to be an exercise in futility.

caramel92, The term "subcontract" has many different definitions in Federal regulations. Vern did an article on the topic last year. You won't find an answer certain. Hope this helps.

Just finished The Human Division by John Scalzi. It is the continuing story started by Old Man's War -- a science fiction novel about the training and deployment of a future soldier (similar to Starship Troopers, for those who might know Heinlein). The catch is that all recruits must be at least 75 years old, and they must agree to leave Earth for their term of service and, instead of retiring after service, they get to colonize planets. What I like about Scalzi is his breezy writing style and witty dialog. His characters generally are well-rounded and engaging. Good stuff.

Retreadfed, I was citing an example of a directly associated unallowable cost, one that would be allowable in and of itself, but would be made unallowable because it was caused by an unallowable purpose. It was an example to show that otherwise allowable costs can be made unallowable. It was an example of why looking at the underlying purpose of transactions is just as important--if not moreso--than just looking at the transactions in a vacuum. Best to you.

I almost agree with Retreadfed. I agree you need to look at the transactions individually, but what I would look for would be the essential purpose for the transaction. For example, otherwise allowable legal costs directly associated with an unallowable purpose would, in my view, be unallowable. Not having all the facts and details, in general I tend to agree with the original poster's position(s). Costs of branding (or rebranding) are generally for purposes of calling favorable attention to the entity; hence, unallowable public relations/advertising. That being said, I would not look to make unallowable such costs as new letterhead or business cards. Hope this helps.

One factor that could bear on the determination of cost allowability was the duration between the time the subcontractor acquired the goods/services and the time it was asked to provide proof of competition. I've seen several recent DCAA audit reports that questioned similar costs literally a decade after incurrence. In my view, it is not reasonable to expect a commercial entity to retain detailed purchasing records for that length of time. Of course, the contract language controls. But I believe that other factors may also be relevant. Hope this helps.

1102skier, You should read DCMA Policy No. 131, which states (in part)-- 1.4.2.3. Contractor Business Systems Review Panel. When the COs final determination disapproves a business system in accordance with the applicable business system clause, the CO shall obtain a higher-level review from the Contractor Business Systems Review Panel prior to notifying the Contractor in writing that the system is disapproved. The CO shall submit, via email to the DCMA-AQ Contractor Business Systems Policy process advocate, a copy of the functional specialist or auditor report, Contractor’s response to the initial determination, and final determination notice, as approved by the CMO Contracts Director and/or the Director of the CACO/DACO Division of the Cost and Pricing Center. 1.4.2.3.1. The purpose of the Panel review is to ensure -- - Significant deficiencies identified in the CO’s initial determination notification and the Contractor’s response have been fully evaluated and discussed by the CO and functional specialist or auditor, and CMO Contracts Director or Director of the CACO/DACO Division of the Cost and Pricing Center, and - Consistent application of business system criteria and policy requirements. 1.4.2.3.2. The Panel will be composed of the following individuals – - Chair: Director, Contracts Policy - Member: Contractor Business Systems Policy Process Advocate - Member: Specific Business System Policy Process Advocate (e.g., Estimating System Policy) - Member: Operations Representative (Cost/Pricing Center Representative for CACOs/DACOs) - Member: Legal Representative (DCMA-GC) - DCAA HQ Representative, as applicable Hope this helps.

Rob, Under the new DFARS business systems regime, the only thing that matters (officially) are the adequacy criteria associated with each of the six business systems. Any "significant" deficiency has to be in relation to one of the criteria. That being said, the fact of the matter is that DCAA has decided, on its own, to revise the official DFARS definition of "significant deficiency" so that nearly any deficiency will be found to be significant. The good news there is that a CO still has to make the final call and have that call reviewed by a Board. The other piece of good news is that, so far, the Review Boards seem to be making reasonable decisions and have had no problem overruling a CO when the reviewers believe there is insufficient basis to support a finding of a "significant deficiency". Regardless, you should have a corrective action plan in place and be working on it, whenever DCAA alleges some issue, no matter how minor. Hope this helps.

Back in my day environmental remediation was always cost-reimbursement, for the very reason that CSalt posted. You never know what you're going to find until you get into the dirt. Plus, those pesky regulators keep changing their minds about "how clean is clean?" For example, let's discuss INEL's "Pit 9"-- http://www.id.doe.gov/news/PressReleases/PR101130.htm Hope this helps.

Vern & Don -- Thanks. Retreadfed -- Yes, in the sense that an IR&D project is a cost objective. I was thinking about the TRW case (ASBCA No. 51530, 2002) where the court found that TRW's MOU with Odyssey was a contract not B&P. But on re-reading the case I see it dealt with B&P and not IR&D. And 31.205-18 expressly makes IR&D costs associated with cooperative agreements allowable IR&D. So all is good. I was overthinking. Thanks to all. Very helpful. H2H

In the sense that a contract has direct costs, whereas a TIA may be an agreement with respect to IR&D costs, which allocate to contracts. H2H

Related Question: Is a Technology Investment Agreement (TIA) -- as defined by Part 37 of the DoDGARS -- a contract or not? It is defined by DCMA as a "non-procurement instrument" but that doesn't really answer my question. If it's a contract then my client needs to allocate indirect costs to it; but if not, then it does not. Any answers? Thanks

DOECPA, A company need not use its executed FPRA rates. A company need not use its FPRR rates--ever--since that's the government's "recommended" position. When a company knows its projected rates will significantly deviate from the FPRA rates, it would be subject to a TINA violation ("defective pricing") if it were to use its FPRA rates without disclosing that it knew its FPRA rates were no longer valid. What I'm trying to say is that a company is not bound by an FPRR or FPRA set of rates, regardless of whether or not the awarded contract will be subject to CAS. Hope this helps.

What Retreadfed said. As far as I'm aware, there is no requirement -- none -- that requires a contractor to use any particular indirect rate for developing a cost estimate. TINA is a disclosure requirement, not a use requirement. CAS doesn't address any particular rate, it addresses cost accounting practices. H2H

Statler, I don't know. I'm not a lawyer and this is stretching what I think I know about this stuff. You should ask a lawyer. That said, the crux of the issue is how the JV will operate with respect to its members. Will the members second employees to the JV -- i.e., will they be rebadged? The JV could be a shell, with no employees and everything subcontracted out, but it doesn't sound like that's your plan. Instead, it sounds like the JV will be populated for core admin functions, with other work being subcontracted out. Again, if you are subcontracting to a small business then I don't see much risk -- but what do I know? If you are subcontracting to a large business then of course the limitation on subcontracting is in play. This final point bears repeating -- WHEN YOU PROPOSE A J.V. YOU NEED TO FIGURE OUT THE RUN RULES AHEAD OF TIME AND EXPLAIN THEM TO THE CONTRACTING OFFICER. There's an analysis article on the WIFCON reading page that illustrates why this is critical. Now go talk to your lawyer. H2H

In a related note, I have been corresponding with an acquaintance who has left the private sector and has been trying to get a specialist job with DCMA (not an 1102 position--something very specialized). I received this email from him recently-- ... you are not going to believe this, or maybe you will...after being told that I was their top choice (by far), and to wait for an offer, the [ ] position was filled with someone else. When I asked what happened, I was basically told that they thought I was overqualified, and they really just wanted [ ], and that I could do much more...but that they had posted the job at a 13 by mistake, and it should have been a 12. When I asked if they hired the person as a 12 or 13, they said a 13! So they would rather OVERPAY an underqualified person than Underpay a highly qualified person? Maybe I am not cut out for government work, this has been the most frustrating and exasperating thing in my life. .... H2H

Hi Statler, The purpose of the limitation on subcontracting is to prevent a small business from acting as a "front" for a large business, right? So if the JV prime is a small business and all the JV members are small businesses, why are you concerned about specific application of the 50% limitation? In your scenario, it appears to make little difference. With respect to your question-- I would ask you how the JV was proposed. What did the JV tell the CO with respect to how it would operate? Also, if the JV members get a share of the JV's operating profits, I would hope they are entering into cost-plus-no-fee subcontracts. The operations of a JV in government contracting is something I've been interested in for a while. I'd like to hear how this works out for you. H2H

All, This has been a very helpful discussion. You helped me to solve two problems! Up until now, it was the opinion of some very savvy and seasoned (contractor) folks that the only way to close-out an FP Incentive contract was to either (1) wait until final rates had been negotiated for all years of performance while funds to pay the incentive fee expired, or (2) convert the contract type to firm, Fixed-price and then close it out. You all have given me a third option, which I very much appreciate. Thanks!

Retread, There's no issue with including contract costs in the bases. [Hypertechnical language follows] The FP Incentive contract costs ARE included in Schedule H. The issue is whether they need to be listed in Schedule I. [End Hypertechnical language] The thing is, even though we won't know the price until the incentive is calculated, we already know the costs. They won't change. (Well, I suppose a major audit finding in the indirects could affect the costs, but only in a downward direction. And most DCAA disallowances have a de minimus effect on rates.) Certainly, it would be unusual to have the direct costs change to any great extent, absent some kind of fraud finding. The incentive provisions are profit/fee provisions only, and they are based on the incurred costs. That's why this is so vexing. So much work for no value .... Off to update some schedules for DCAA! H2H