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FFP delivery order is fully funded at award. Award made April 1, 2024. So, 3000 widgets are ordered, first delivery is 12 months (April 1, 2025) after award for a qty of 250, 13th month qty 250, 14th month qty 250, etc. Am I correct, that the funding will need to be good until the last delivery is made? Meaning, FY24 procurement funds need to be used? In addition, if the award was made April 1, 2024, then first delivery is April 1, 2025, should the last delivery be Mar 30, 2026. My concern is the order crosses 2 fiscal years.

Global K9 Protection Group LLC, vs. U. S. and American K-9 Detection Services, Nos. 23-210, 23-311, April 11, 2024. The Long and Winding Road Now, after four years, two remands with related remand extensions,1 two formal re-solicitations,2 two injunctions,3 three re-awards splitting the contract into two procurements,4 and approximately 34 total dog years,5 this case has finally reached its end. Judge Ryan T. Holte There is a companion opinion on the Home Page.

I think we're talking about "price analysis techniques and procedures to ensure a fair and reasonable price" as described in FAR 15.404-1(b)(2)(i), which says "Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1(c)(1))." FAR 15.403-1(c)(1)) has two main components, (A) "Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement" and (B) "Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a substantial factor in source selection." So the first question, regarding whether you can include a marginally-rated offeror in your "adequate price competition" would seem to depend on whether they "satisfy the Government's expressed requirement." Since the concept of Marginal could differ across solicitations there is probably no single answer to the question of whether a Marginally-rated offer satisfies the Government's expressed requirement. It depends on what marginal means in your situation. The second part, "Award will be made to the offeror whose proposal represents the best value" is a little less clear, some people seem to take this to mean that the very existence of a best value competition automatically makes all acceptable offers F&R, but I think if you think a bit more about how a best value tradeoff is made, e.g. The difference in price is/is not worth the difference in quality, then you find yourself much closer to the meaning of fair & reasonable, a price that is "worth it" for whatever you're getting. So I take this to mean that if you don't include the non-price details in your comparison (e.g. whatever likely brought you to a marginal rating) then a simple comparison of proposed prices received won't get you to F&R. The next question would be whether you can still use the price proposed by a marginal or even unacceptable offeror who clearly does not satisfy the Government's expressed requirement in some other form of non-FAR 15.404-1(b)(2)(i) price analysis. I would argue that you still may be able to, but you would need to know and explain how the marginal/unacceptable stuff affected the price, and again, you couldn't do a direct trade-off comparison.

Steven Koprince, Govology Legal Analyst and retired founder of Koprince McCall Pottroff will be presenting this webinar to help you understand the applicable rules and regulations in government contracts and the Federal Acquisition Regulation. These rules can be lengthy and complex–and contractors may also need to follow rules outside the FAR, such as those found in FAR supplements and the regulations of the U.S. Small Business Administration. Please join Steve as he walks you through the process. Register here. The post Govology Webinar: Navigating Government Regulations in Solicitations and Contracts, March 27, 2024, 1:00pm EDT first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

General— You have to evaluate the offeror’s ability to perform the prospective contract successfully. FAR 15.305(a). A proposal that fails to conform to a material solicitation requirement is technically unacceptable and cannot form the basis for award. Wyle Laboratories, Inc., B‑413964, May 27, 2016. This rule applies even if a solicitation is silent about it. Again, we start by asking if they satisfy the Government’s express requirements. If they don’t, their price isn’t necessarily useful for comparisons. But maybe they don’t and you want to give them an opportunity to submit a revised offer. Competitive Range— If you are going to conduct discussions, you’ll establish a competitive range. FAR 15.306(c). FAR 15.306(c) goes on to state that “[b]ased on the ratings of each proposal against all evaluation criteria, the contracting officer shall establish a competitive range comprised of all of the most highly rated proposals.” [emphasis mine] Excluding proposals from the competitive range without considering prices may be proper were proposals are found unacceptable. Possehn Consulting, B-278579.2, July 29, 1998. Tradeoff Process— A tradeoff process involves an evaluation of price in relation to the perceived benefits of an offeror’s proposal. FAR 15.101-1(c). Here, the tradeoff process “permits tradeoffs among cost or price and non-cost factors and allows the Government to accept other than the lowest priced proposal.” I am not aware that price must be considered for unacceptable offers because the offer is excluded (ineligible for award as-is by rule). In contrast, GAO has found it improper to exclude technically acceptable proposals from the competition without considering price, under solicitations that used tradeoff source selection processes. See Kathpal Technologies, Inc.; Computer & Hi-Tech Management, Inc., B-283137, December 30, 1999.

Happy April! We hope everyone had a great week. Yet another beautiful spring Friday for us at SmallGovCon! And you guessed it, it’s time for your week in review. We’ve included some fascinating articles on what’s happening in the federal government contracting world we think you will enjoy. These included how contractors may be impacted in an election year, as well as a bill to reduce red tape in procurement. Have a wonderful weekend! Small Business Research Programs: Increased Performance Standards Likely Affect Few Businesses Receiving Multiple Awards Women-owned small businesses win record $25.5B in federal contracts How election years affect federal contracting WSU’s Kansas APEX Accelerator surpasses $1 billion in government contract awards Some federal agencies want to make IT security contracting rules simpler to find Army Posts Draft Solicitation for Follow-On Space and Missile Defense Command Support Contract Disabled veterans who own small businesses target lucrative government contracts Senate bill looks to chop through red tape in procurement ABC Submits Comments Opposing Ban on Federal Contractors Considering Salary History During Hiring DOD is looking to grow its marketplace for speedy acquisitions of innovative tech Federal Government Employee Arrested for Conspiracy to Defraud the District of Columbia to Benefit His Private Company Coast Guard salutes outstanding contracting and procurement professionals with annual Head of the Contracting Activity Awards FAR Case 2023–021, “Pay Equity and Transparency in Federal Contracting” Federal Acquisition Regulation: Establishing Federal Acquisition Regulation Part 40 The post SmallGovCon Week in Review: April 1-5, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Is there any known prohibition in editing the standard form language on the SF 1442 or SF 1449 for that matter? Occasionally I will get comments from a legal review stating the font type is inconsistent and it needs to be Arial size 12 to be in accordance with the Army Writing Guide. Suppose additional or altered language was desired in Block 11 such as See 52.211-12 for Liquid Damages or 52.211-10 commencement, prosecution or work; is it permissible to change the language? and is there a specific rule one could point to say these are set in stone templates?

I recently had a disagreement with a contracting officer (KO) about the applicability of the Limitation of Funds (LOF) clause with regards to FPIF CLINs. The KO notified me that he intends to add the LOF clause to the contract and have it apply to the the FPIF CLINs. I responded that per the prescription of the clause at FAR 32.706-2(b), the clause only applies to incrementally funded cost-reimbursement (CR) contracts, so it should not be added to the contract (contact only has FPIF and FFP CLINs; no CR CLINs). He argued that the clause applies to flexibly priced CLINs, and that FPIF CLINs were in a sense a CR CLINs, since 100% costs would be reimbursed up to the Target Cost and partially up to the Ceiling Price, should the cost exceed the Target Cost. As I looked closer at the LOF clause, I began to focus on the language below from paragraph (b), and read it to mean that the clause in essence limits the Government's liability at the amount funded (allotted). However, under an FPIF contract, the maximum Government liability would be the Ceiling Price, not the amount funded. The Contractor agrees to perform, or have performed, work on the contract up to the point at which the total amount paid and payable by the Government under the contract approximates but does not exceed the total amount actually allotted by the Government to the contract. For this contract in particular, it includes a payments clause that requires periodic submittals of a revised billing price (RBP) for each FPIF CLIN for progress payments, which is based on estimates at completions (EACs). For all of the FPIF CLINs in this contract, the RBPs exceed the Target Cost and Target Price, and in some cases are at the Ceiling Price, but the contract is only funded at the Target Price amount, as the Government currently lacks the funding to appropriately fund the FPIF CLINs to the RBP amounts. My concern in accepting this clause and allowing it to be applied to the FPIF CILNs, I would effectively be lowering the the Government's maximum limitation of liability on the FPIF CLINs from the Ceiling Price to the current level of funding, which is the Target Price. Has anyone encountered this issue before? The KO acted like this clause is added all of the time to FPIF contracts. As a note, I have actually requested the clause be removed from other contracts our company holds that have no CR CLINs, and the KOs of those contracts have agreed that it should not have been inserted into those contracts. Is my assessment of the impact to the Government's limitation of liability by inserting this clause accurate? If unilaterally added, would the clause be self deleting since it only applies to CR CLINs, for which this contract has none?

I am not particularly knowledgeable about GSA Schedule contracting. There are others on this site with more experience/knowledge than I have. I've been waiting for somebody else to weigh in.... I have read FAR 8.4 and visited the GSA website and reviewed the GSA Acquisition Supplement. It is not clear to me that GSA Schedule orders are subject to FAR Part 31 cost principles, or to CAS. Maybe they are, but I couldn't find it. Instead, everything I read pointed to GSA orders being for commercial products or services, to be ordered on a fixed-price or T&M basis. If I'm correct -- and I'm sure SOMEBODY will jump in if I'm wrong -- then 31.205-26 is not applicable and the affiliated parties are free to "subcontract" with each other on any reasonable basis. My answers: 1. The parent company and the subsidiary could map their rates together into an average that combines both. Or they could have separate LCATs, especially if the subsidiary has a particular expertise. 2. If 31.205-26 is not applicable, then yes, the subsidiary could map its fully burdened, with fee added, labor rates. Even if 31.205-26 did apply, the subsidiary could do so if it met the conditions of 31.205-26(e) and (f). If desired, the two entities could "split" a single earned profit in accordance with an internal budgetary agreement. 3. That's an interesting question to which I do not know the answer. Hope this helps.

Different possibly the same conclusion. Never seen it but that does not mean it isnot done (obviously). Would be interesting to view RFQ's by same agency to see if the wording is used in other solicitations. Might be their thing! Going off the basic info provided agency set a range and asked for BAFO's. I do not see wording in your posts that BAFO's have to be in the range. So one might concluded something to the effect of - Agency - Here is our range. Offerors - Here is our BAFO's. Agency - Views the BAFOs and makes the final award decision. Wording that you have provided so far does not indicate that to be considered the BAFO must be within the competitve price range. My response provided above suggests why but more to the point LPTA means they will take the lowest price of the techincally acceptable proposals not that they will take the lowest price in the competitive price range. And while you may have a view of what is reasonable price the agency would support why they believe it is reasonable. My mind wanders to this - FAR 15.404-1(b)(2)(i) - "Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1(c)(1))." Hope these thoughts help with your debrief strategy.

I do not think DEA and any other agencies actually uses a purely rotational basis to place calls and see the term as a distraction for this discussion. Why? Afterall Envirosolve was excluded from the rotation, so would not that mean that DEA was using other than a rotation basis to determine who to issue calls to(see below excerpt from the decision)? In reviewing several BPA solicitations on SAM.gov it seems that where rotation is indicated there is an out for adverse performance. In other words the calls may be rotated yet carry a BUT. I have faith that CO discreation is still used and trumps just rotating calls. "On or about July 17, 2006, DEA began excluding Envirosolve from the rotation of purchase orders for hazardous waste cleanup services among BPA holders. Envirosolve then filed the current protest challenging its exclusion. In its report to our Office in response to the protest, the agency explained that the DEA Hazardous Waste Disposal Section is presently conducting an investigation concerning the discovery of three drums containing clandestine drug laboratory waste at a location in Tulsa, Oklahoma. AR, Sept. 25, 2006, at 2. According to DEA, its initial investigation determined that the labeling on the drums indicated that the hazardous waste had been processed and transported by Envirosolve. Given Envirosolve’s apparent loss of control of the three drums of hazardous waste, the contracting officer decided to temporarily discontinue issuing purchase orders to Envirosolve during the pendency of the investigation."

It’s probably worth distinguishing what a synopsis is under FAR. That would highlight that the value isn’t in the synopsis itself. The value is in using competitive procedures in establishing blanket purchase agreements (BPA) with multiple vendors. Disseminating information through a so-called synopsis just seems to be a convenient avenue of approach for soliciting competition because the so-called synopsis is a byproduct of using SAM.gov to publish solicitations.

On March 11, 2024, the Cybersecurity and Infrastructure Security Agency (CISA) and the Office of Management and Budget (OMB) published an updated Secure Software Development Attestation Form, meaning that producers of software and providers of products containing software used by the federal government may be required to submit their attestations in the very near future. The Attestation Form, first published in April 2023, is a key cog in CISA’s implementation of software supply chain security requirements in accordance with Executive Order 14028, Improving the Nation’s Cybersecurity and OMB Memoranda M-22-18 and M-23-16. Attestation Form Applicability and Content The Attestation Form broadly requires software producers and suppliers of products containing software to affirm that their software development practices for in-scope software conform with the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-­218 and the NIST Software Supply Chain Security Guidance. Per OMB M-22-18 and M-23-16, Attestation Forms will be required from producers of third-party software used by federal agencies if the software: is developed after September 14, 2023; is modified by major version changes after September 14, 2022; or is software to which the developer delivers continuous changes to the software code (e.g., software-as-a-service (SaaS) offerings or other products using continuous delivery/continuous deployment). “Software” subject to attestation includes firmware, operating systems, applications, and application services (e.g., cloud-based software), as well as products containing software. Attestation Deadline M-23-16 explained that Attestation Form submissions would be due: for “critical software,”[1] no later than three months following OMB approval of the Attestation Form under the Paperwork Reduction Act (PRA), or for all other in-scope software, no later than six months following OMB PRA approval. OMB apparently provided PRA approval on March 8, 2024, suggesting that the respective submission deadlines will fall three and six months after that date. Separately, CISA published the Attestation Form on March 11 but has yet to confirm the submission deadlines. Crowell continues to monitor updates from OMB and CISA, and we will update this alert when the Attestation Form submission deadlines are confirmed. Attachments Download AttachmentThe Court’s Decision Granting SJ [1] As defined in OMB Memorandum M-21-30. The post Software Developments: CISA Finalizes Attestation Form, Triggering Secure Software Development Implementation appeared first on Government Contracts Legal Forum. View the full article

I’m waiting for enough information to determine what the original poster is wanting to delete. Im well aware of the differences between the different methods of deleting work . However, I don’t want or need to take the time to write a treatise about or compare each method based upon the current question with no context. Vern is correct that I’m worn out. I have enough other things to do in lieu of writing an essay on the differences between the methods. Deleting work can be easy or complicated, depending upon the desired outcome. The OP hasn’t bothered to elaborate, so why waste our time? If the OP just wants to know all the differences and details for general knowledge, they can do some relatively easy research. If they have a specific situation, it may be worth advising…

Contractors will often enter into mentor protégé relationships and joint ventures to leverage the experience and skills of multiple parties for various reasons. SBA regulations dictate how the capabilities, past performance, and experience of a mentor-protégé joint venture will be evaluated. But at the end of the day, what matters is, whether agencies will follow those regulations in their small business set-aside solicitations and evaluations thereunder. A recent GAO case addressed this issue, providing further guidance on the interplay of solicitation terms for experience evaluations and SBA’s rules for evaluating mentor-protégé joint ventures’ experience. SBA regulations dictate that when evaluating a joint venture’s experience, capabilities, and past performance, on a “contract set aside or reserved for small business,” the agency “must consider work done and qualifications held individually by each partner to the joint venture as well as any work done by the joint venture itself previously.” Additionally, an agency “may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.” The joint venture as a whole must “demonstrate the past performance, experience, business systems and certifications necessary to perform the contract.” Basically, if a mentor-protégé joint venture bids on a small business set-aside procurement, the agency must evaluate the members, as well as the joint venture as a whole. But, an agency can’t require the protégé member to meet the same requirements as other contractors. GAO in Akima Data Management, LLC; Absolute Strategic Technologies, LLC, B-420644.7, B-420544.8 (Comp. Gen. 2024) looked at terms under the Polaris small business pool solicitation. This is quite the well known procurement around federal contracting. So, unsurprisingly, there is some bid protest history with this procurement. In fact, the disputes in Akima revolve around agency action taken after a Court of Federal Claims (“COFC”) case. Prior to this case at GAO, the solicitation in Akima, was protested at the COFC for its terms related to submitted experience for a mentor and protégé, which stated: “a minimum of one Primary Relevant Experience Project or Emerging Technology Relevant Experience Project must be from the Protégé or the offering Mentor-Protégé Joint Venture,” and “[n]o more than three Primary Relevant Experience Projects may be provided by the Mentor.” The COFC found that these terms meant that the same evaluation criteria was was applied to all experience projects, regardless of whether the project is submitted by a protégé or not. As you recall, the SBA regulations state that the protégé will be separately evaluated from other offerors (or rather is not required to meet the same conditions as other offerors). Due to the COFC decision, the terms were updated. However, these updates were also protested, this time at GAO, bringing us to this current case, Akima. These terms protested at GAO still required a “minimum of one Relevant Experience Project” from the protégé or the mentor-protégé joint venture. However, the terms were also updated in response to COFC’s orders, to state this requirement could be met by “submitting ‘a Primary Relevant Experience Project’; ‘an Emergency Technology Relevant Experience Project’; or–new and specific to MJPVs–‘a Protégé Capabilities Relevant Experience Project'” to be evaluated on a pass/fail basis rather than on a scoring table that other offerors used. In connection with this change, effected offerors could revise portions of their proposal, including removing or replacing the projects impacted by the term change submitted by a protégé or by a mentor-protégé joint venture. If an effected proposal didn’t have one of these project experiences from a protégé or mentor-protégé joint venture, then offerors must submit a protégé capability experience project from the protégé or the mentor-protégé joint venture. Akima protested this update, stating that the solicitation should allow all offerors to update or substitute projects for experience. Absolute (the other protester), among other arguments, argued that the updated terms violated SBA regulations because it “unreasonably limits protégés from taking advantage of the experience of their MPJVs and precludes members of MPJVs from demonstrating past performance and experience to perform the contract ‘in the aggregate.'” GAO held that only mentor-protégé joint ventures were required to submit projects for protégés or mentor-protégé joint ventures, and the updates limit revisions to projects from the protégé or mentor-protégé joint venture. GAO also held that the updated terms do not violate SBA regulations because the regulations simply require agencies to “consider the work and qualifications of the individual members of the MPJV as well as the MPJV, itself, and provides that ‘partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems and certifications necessary to perform the contract.'” GAO interpreted the updated terms as providing mentor-protégé joint ventures with flexibility, through the ability to “replace any experience project from the protégé or the MPJV with one from the mentor or a subcontractor–while still providing details about the protégé’s capabilities.” Thus the terms meet the requirement to evaluate a mentor-protégé joint venture “based on the abilities of the joint venture and its members” as a whole. This case provides some great insight on: 1) the type of evaluation terms that GAO and other reviewers will see as acceptable related to mentor-protégé joint ventures; and 2) the advantages placed on mentor-protégé joint venture experience evaluations. Contractors bidding on a procurement through a mentor-protégé joint venture need to be on the look out for experience evaluation terms. If the solicitation’s terms place requirements on protégés that are the same as other offerors, or don’t consider the mentor-protégé team as a whole, then it may be seen as violating SBA rules. Additionally, mentor-protégé joint ventures (and really all contractors) should be careful to examine the effects of any corrective action or amendment to a solicitation, to ensure it meets regulatory expectations. Finally, this case serves as a great reminder to all contractors who are interested in, or are involved in the SBA’s mentor-protégé program, that the SBA’s regulations can provide significant experience advantages to joint ventures formed under SBA’s Mentor Protégé Program (such as permitting protégés to be held to different experience standards than other offerors). Need legal assistance with a government contracting matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post GAO Says: SBA’s Rules for Mentor-Protégé Joint Venture Experience Evaluations May Limit Solicitation Terms first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The Fixed-Price Incentive Firm Target Contract: Not As Firm As the Name Suggests By Robert Antonio November 2003 At the end of 1976, I met the Director of the Procurement Control and Clearance Division of the Naval Material Command in Arlington, Virginia. The Director was a legend of the contracting community and any significant Navy contract had to be approved by his office prior to award. I was there because of a controversy involving a contract to acquire a new class of nuclear cruisers. The attendees at the meeting surrounded a conference table and waited for the Director to make his appearance. After several minutes, the Director entered the room and placed a chart on the table. "What do you see?" "What do you see?" He demanded. The fellow next to me said, "It says fixed-price incentive." "No, no, look at it," the Director said. It was a chart that depicted a fixed-price incentive (firm target) contract (FPIF). "Look how flat it is," the Director said. I tried to look at the chart but I was more interested in seeing the Director. Out of the corner of my eye, I saw him dressed in a dark suit, vest, watch chain connected to the middle button of his vest and dangling perfectly from one side to the other. He had a paunch and tufts of white hair on his head and he looked like Winston Churchill—the World War II Prime Minister of the United Kingdom. He was Gordon Wade Rule—the highest-ranking civilian in Navy contracting. Years later, I met a colleague of Gordon Rule and told him about my first impressions. The colleague looked at me and laughed, "Gordon not only looked like Churchill, he thought he was Churchill." Since this first meeting with Gordon Rule, I have been interested in the FPIF contract type and how it can be used on government contracts. The Rule Contract Table 1 is the pricing structure that Gordon Rule was talking about during our meeting. For the purpose of discussion in this article, it will be referred to as the "Rule Contract." Table 1: FPIF Structure on the Navy Contract Provided by Gordon Rule. Structure Description Target Cost $76,000,000 Target Profit $9,700,000 Target Price $85,700,000 Ceiling Price 133 percent of Target Cost at $101,000,000 Share Ratio 95/5 between $64,600,000 and $87,400,000 90/10 below $64,600,000 and from $87,400,000 to Point of Total Assumption Point of Total Assumption $92,366,660 Someone familiar with an FPIF contract will notice what Gordon Rule was talking about. For those who are not, the following discussion explains the mechanics of an FPIF contract pricing structure. Mechanics of the FPIF Contract The FPIF contract includes cost and price points, a ratio, and a formula. They include Target Cost (TC): The initially negotiated figure for estimated contract costs and the point at which profit pivots. Target Profit (TP): The initially negotiated profit at the target cost. Target Price: Target cost plus the target profit. Ceiling Price (CP): Stated as a percent of the target cost, this is the maximum price the government expects to pay. Once this amount is reached, the contractor pays all remaining costs for the original work. Share Ratio (SR): The government/contractor sharing ratio for cost savings or cost overruns that will increase or decrease the actual profit. The government percentage is listed first and the terms used are "government share" and "contractor share." For example, on an 80/20 share ratio, the government's share is 80 percent and the contractor's share is 20 percent. Point of Total Assumption (PTA): The point where cost increases that exceed the target cost are no longer shared by the government according to the share ratio. At this point, the contractor’s profit is reduced one dollar for every additional dollar of cost. The PTA is calculated with the following formula. PTA = (Ceiling Price - Target Price)/Government Share + Target Cost All of these points and shares have an effect on costs, profit, and price. However, two tools in the structure—the ceiling price and the share ratio—dramatically affect the potential costs, profits, and prices. For the examples in tables 3, 4, and 5, I use the target cost, target profit, profit rate at target cost, and target price identified in Table 2. The ceiling price and share ratio will vary according to example. Table 2: FPIF Structure Used for Examples in Tables 3, 4, and 5. Structure Elements Structure Amounts Target Cost $10,000,000 Target Profit $1,000,000 Profit Rate at Target Cost 10% Target Price $11,000,000 Ceiling Price At the ceiling price, the government's liability for cost within the terms of the original contract ends and the contractor pays for all costs above the ceiling price. The setting of the ceiling price significantly affects the relationship between the government and the contractor once the target cost has been reached. The example in Table 3 includes 4 different ceiling prices and the same 70/30 share ratio. Remember, the ceiling price is stated as a percentage of the target cost. Table 3: FPIF Target Costs and Profit with Different Ceiling Prices and Constant 70/30 share ratio. Dollar Costs Ceiling Prices (Percent of Target Cost) 115 120 125 130 $8,000,000 $1,600,000 $1,600,000 $1,600,000 $1,600,000 9,000,000 1,300,000 1,300,000 1,300,000 1,300,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,500,000 850,000 850,000 850,000 850,000 11,000,000 500,000 700,000 700,000 700,000 11,500,000 0 500,000 550,000 550,000 12,000,000 500,000 0 400,000 400,000 12,500,000 1,000,000 500,000 0 250,000 13,000,000 1,500,000 1,000,000 500,000 0 PTA $10,714,286 $11,428,571 $12,142,857 $12,857,143 As can be seen, there is no difference in profit for any of the examples where costs are less than the target cost. This is because the ceiling price affects the cost and profit structure somewhere after the target cost is exceeded. Since the ceiling price is used to determine the PTA, it also results in different PTAs. Notice the PTAs for each ceiling price. Prior to the PTA, but after the target cost is reached, the 70/30 share ratio is in effect and the government shares 70 percent of all overruns and the contractor shares 30 percent of all overruns. Once the PTA is reached, the contractor’s profit will be reduced on a dollar-for-dollar basis up to the ceiling price. Remember when Gordon Rule said "Look how flat it is?" He was referring to the incentive curve. The incentive curve reflects the amount of potential profit for each cost level throughout the FPIF structure. The smaller the profit increment as costs increase, the flatter the incentive curve becomes. The flatter the curve becomes, the closer it approaches a cost plus fixed-fee (CPFF) contract since the fixed-fee on a CPFF remains constant for all levels of costs. By increasing the ceiling price on an FPIF contract, the government's share in cost overruns and the contractor's opportunity to recover costs is placed at a higher dollar level. The higher the ceiling price, the flatter the FPIF incentive curve is because it is being stretched in length. Share Ratios To compare the effect of share ratios on an FPIF structure, Table 4 includes 5 different share ratios ranging from 50/50 to 90/10. As mentioned earlier, the government's share of savings or overruns is the first number in the share ratio. In Table 4, a simple share ratio structure is used—one with the same share ratio throughout the structure— to analyze the effect of different share ratios. Share ratios can be complex and can include more than one share ratio. However, to explain the effects of different share ratios, a simple structure is adequate. Table 4: FPIF Target Costs and Profits with Different Share Ratios. Dollar Costs Share Ratios (Government/Contractor) 50/50 60/40 70/30 80/20 90/10 Contractor's Profit Based on Share Ratios Above and Costs In Left Column $8,000,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 8,500,000 1,750,000 1,600,000 1,450,000 1,300,000 1,150,000 9,000,000 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 9,500,000 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,500,000 750,000 800,000 850,000 900,000 950,000 10,600,000 700,000 760,000 820,000 880,000 900,000 10,700,000 650,000 720,000 790,000 800,000 800,000 10,800,000 600,000 680,000 700,000 700,000 700,000 10,900,000 550,000 600,000 600,000 600,000 600,000 11,000,000 500,000 500,000 500,000 500,000 500,000 11,500,000 0 0 0 0 0 PTA $11,000,000 $10,833,333 $10,714,286 $10,625,000 $10,555,556 Prior to the target cost, the different share ratios provide profits based on the contractor’s share of saved costs alone. Under the 50/50 share ratio, a contractor can increase its profit by $1 million when costs are $2 million less than the target cost because its share is 50 percent of any savings. On the other hand, with the 90/10 share ratio, a contractor can increase its profit by only $200,000 when costs are $2 million less than the target cost because its share is only 10 percent of any savings. The message is clear—there is less incentive to reduce costs as the government share increases. Once the target cost is exceeded, a contractor with a 50/50 share ratio has its profit reduced quickly below the PTA because it is sharing in half of the cost overruns above the target cost. On the other hand, the reduction in profit is less dramatic for the 90/10 ratio. In effect, the incentive curve is being flattened below the PTA. Take another look at the overrun structure for the 50/50 and 90/10 share ratios. Ceiling Prices and Share Ratios Working Together Now that you have seen the basics for different ceiling prices and different share ratios, it is time to see how they can work together. Table 5 illustrates the effect of different share ratios coupled with different ceiling prices. Compare a 50/50 share ratio with a 115 percent ceiling price structure to that of a 90/10 share ratio with a 135 percent ceiling price structure. Quite a difference! Table 5: FPIF Target Costs and Profits with Different Ceiling Prices and Share Ratios. Dollar Costs Share Ratios Combined with Ceiling Prices 50/50 115 60/40 120 70/30 125 80/20 130 90/10 135 $8,000,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 8,500,000 1,750,000 1,600,000 1,450,000 1,300,000 1,150,000 9,000,000 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 9,500,000 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,500,000 750,000 800,000 850,000 900,000 950,000 11,000,000 500,000 600,000 700,000 800,000 900,000 11,500,000 0 400,000 550,000 700,000 850,000 12,000,000 (500,000) 0 400,000 600,000 800,000 12,500,000 (1,000,000) (500,000) 0 500,000 750,000 13,000,000 (1,500,000) (1,000,000) (500,000) 0 500,000 13,500,000 (2,000,000) (1,500,000) (1,000,000) (500,000) 0 PTA $11,000,000 $11,666,667 $12,142,857 $12,500,000 $12,777,778 The 50/50 share ratio and 115 percent ceiling price structure is referred to as a “tight structure” because it places a good deal of cost control incentive on the contractor. On the other hand, the 90/10 share ratio and 135 percent ceiling price structure is referred to as a “loose structure” because there is less cost control incentive placed on the contractor. With the combination of a high ceiling price and a high government share, we have flattened the incentive curve significantly. Now, with what we have seen so far, let's go back to the contract that Gordon Rule was complaining about in 1976. To do this, we will compare a moderate FPIF structure with a 70/30 share ratio and 125 percent ceiling price to the Rule contract. Table 6: Moderate FPIF Structure Compared to the Rule Contract. Dollar Costs Profit Dollars Profit Rate 70/30 125 Rule Contract 70/30 125 Rule Contract $60,000,000 $14,500,000 $10,730,000 24,17% 17.88% 65,000,000 13,000,000 10,250,000 20.00% 15.77% 70,000,000 11,500,000 10,000,000 16.43% 14.29% 75,000,000 10,000,000 9,750,000 13.33% 13.00% 76,000,000 9,700,000 9,700,000 12.76% 12.76% 80,000,000 8,500,000 9,500,000 10.63% 11.88% 85,000,000 7,000,000 9,250,000 8.24% 10.88% 90,000,000 5,000,000 8,870,000 5.56% 9.86% 95,000,000 0 6,000,000 0% 6.32% 100,000,000 5,000,000 1,000,000 Loss 1.00% 101,000,000 6,000,000 0 Loss 0% As Table 6 shows, there is quite a difference between our moderate FPIF structure and the Rule contract. Look at the $95 million dollar cost level. Here the moderate FPIF results in no profit while the Rule Contract provides a 6.32 percent profit rate and a dollar profit of $6 million. This difference is caused by the higher ceiling price and the higher government share of overruns on the Rule Contract. Take a look at the profit rate on costs before the target cost is reached. It increases more slowly on the Rule contract as costs are reduced below the target cost of $76 million. Here, the flattening effect of the higher government share on any cost savings is evident. What Was Gordon Rule Saying? With the basic mechanics of an FPIF contract under your belt, we can go back to that day in 1976 when Gordon Rule said "What do you see?" "What do you see?” "Look how flat it is." Well, a CPFF is a flat curve. For example, on a CPFF contract, the share ratio is 100/0 because the government shares all of the cost savings and overruns within the original contract terms. Additionally, the ceiling price could be infinite if the government wishes. So, a CPFF contract has a 100/0 share ratio and whatever ceiling price the government is willing to accept. Gordon Rule was claiming that the FPIF example in the "Rule Contract" was, in fact, a CPFF contract. Was he right? In Table 7, a CPFF contract structure is compared to the structure of the Rule Contract. Table 7: CPFF Contract Structure Compared with the Rule Contract Structure Dollar Costs Profit Comparison (Dollars) Profit Comparison (Profit Rate) CPFF Rule Contract CPFF Rule Contract $60,000,000 $9,700,000 $10,730,000 16.17% 17.88% 65,000,000 9,700,000 10,250,000 14.92% 15.77% 70,000,000 9,700,000 10,000,000 13.86% 14.29% 75,000,000 9,700,000 9,750,000 12.93% 13.00% 76,000,000 9,700,000 9,700,000 12.76% 12.76% 80,000,000 9,700,000 9,500,000 12.13% 11.88% 85,000,000 9,700,000 9,250,000 11.41% 10.88% 90,000,000 9,700,000 8,870,000 10.78% 9.86% 95,000,000 9,700,000 6,000,000 10.21% 6.32% 100,000,000 9,700,000 1,000,000 9.70% 1.00% 101,000,000 9,700,000 0 9.60% 0% For the CPFF contract in Table 7, the fixed-fee is set at the same rate as the target profit on the Rule contract—$9.7 million at a cost of $76 million. Remember that between $64,600,000 and $87,400,000, the share ratio on the Rule contract was 95/5. So, the CPFF share ratio of 100/0 is quite close to that of the Rule contract at 95/5 between $64.6 million and $87.4 million. After $87.4 million, the Rule contract converts to a 90/10 share ratio until the PTA which is between $92 and $93 million. Notice how the percent of fee on costs closely parallels the percent of profit on the Rule contract. As Gordon Rule emphasized, it is flat—it is nearly a CPFF contract. Abuses of the FPIF The Federal Acquisition Regulation (FAR) at 16.403-1 (b) explains that an FPIF contract is appropriate when a fair and reasonable incentive and a ceiling can be negotiated that provides the contractor with an appropriate share of the risk and the target profit should reflect this assumption of responsibility. The FAR further points out that an FPIF is to be used only when there is adequate cost or pricing information for establishing reasonable firm targets at the time of initial contract negotiation. Further, FAR 16.401 explains that incentives are designed to motivate contractors to meet government goals and objectives. The guidance in the FAR, although general, appears sound. However, what happens when people and the survival of their programs or their organizations are involved? Unfortunately, the FPIF can be manipulated and abused by government and/or industry. It can be used to submit below anticipated cost offers, to hide huge anticipated overruns, or to deceive the uninitiated who only recognize the phrase "fixed-price." One Industry’s Experience with the FPIF In the 1970s, 1980s, and into the 1990s, a series of General Accounting Office (GAO) reports discussed cost overruns on shipbuilding contracts. For the most part, these reports discussed FPIF contracts. Table 8 provides a summary of the anticipated cost overruns on most shipbuilding contracts during this period. Table 8: Anticipated Cost Overruns and Savings Reported on Shipbuilding FPIF Contracts. Report Date Number of FPIF Contracts Expected Costs Above Target Costs Expected Savings Below Target Costs Number of Contracts Expected to Finish at Target Number Dollars Number Dollars 1987a 22 19 $1,413,000,0000 3 $25,900,000 N/A 1989b 46 25 3,297,000,000 6 315,000,000 15 1990c 44 24 3,784,100,000 6 230,800,000 14 1992d 45 32 4,400,000,000 3 102,000,000 10 a Navy Contracting: Cost Overruns and Claims Potential on Navy Shipbuilding Contracts, GAO/NSIAD-88-15, October 16, 1987, p. 7 b Navy Contracting: Status of Cost Growth and Claims on Shipbuilding Contracts, GAO/NSIAD-89-189, August 4, 1989, p. 2 c Navy Contracting: Ship Construction Contracts Could Cost Billions Over Initial Target Costs, GAO/NSIAD-91-18, October 5, 1990, p. 12 d Navy Contracting: Cost Growth Continues on Ship Construction Contracts, GAO/NSIAD-92-218, August 31, 1992, p. 11 As we can see from the table, the majority of the contracts had cost estimates for completion that exceeded the original target costs. Additionally, the amount of estimated cost overruns dwarfed the amount of estimated savings in each GAO report. These numbers defy the law of averages. If we simply look at these results without asking questions, we would declare the FPIF contract type as ineffective. However, there is more to it than that. During the 1970s and 1980s, the commercial shipbuilding market was shrinking for U. S. shipbuilders and the U. S. Navy became the “sole-customer” for their work. At the same time, the Navy emphasized competition on its contracts and placed more emphasis on price in making decisions for contract awards. Price became more important because of tight budgets. The industry, recognizing that its commercial market had dried-up, placed survival above profit and cut prices in a frenzy of low-ball offers. Since the government was the sole customer, it had pricing power over its contractors. According to the GAO One shipbuilder said the Navy has sent a message that ship contracts will be awarded based on price and the response has been to bid aggressively. 1 How aggressive was the bidding? Here is one example. Navy analyses indicate that both contracts were awarded at a substantial cost risk to the government based on comparisons of the proposed prices with the Navy's estimates. In both of these awards, the Navy believes that there is a strong possibility that the contractors will exceed ceiling prices. 2 Yes, under these two contracts target cost was not the issue. The Navy concluded that the contractors offered to work at a loss somewhere beyond the ceiling price. Beware of the Hidden Target Cost If an industry or a contractor is trying to survive in a competitive environment, how might it approach the FPIF. As we have seen, contractors will bid below cost when they believe it is in their interest. Does the FPIF provide an opportunity for a contractor to offer a very low price, expect a very large overrun, and hope for a small profit? Yes, it does. Table 9 provides a theoretical example that includes an FPIF with a 95/5 share ratio and a 135 percent ceiling price. Included in the table is a "proposed target cost" which is the official offer amount that the contractor submits to the government. In the second column, there are a range of the contractor's real goals for its target cost. Table 9: Example of a Potential Contractor's View of a FPIF. Contractor's Proposed Target Cost Contractor's Actual Goals Target Cost Cost Overrun Overrun Rate Dollar Profit Profit Rate $100,000,000 $100,000,000 $0 0.00% $10,000,000 10.00% 100,000,000 105,000,000 5,000,000 5.00% 9,750,000 9.29% 100,000,000 110,000,000 10,000,000 10.00% 9,500,000 8.64% 100,000,000 115,000,000 15,000,000 15.00% 9,250,000 8.04% 100,000,000 120,000,000 20,000,000 20.00% 9,000,000 7.50% 100,000,000 125,000,000 25,000,000 25.00% 8,750,000 7.00% 100,000,000 126,315,789 26,315,789 26.32% 8,684,211 6.88% 100,000,000 129,807,000 29,807,000 29.81% 5,193,000 4.00% 100,000,000 130,000,000 30,000,000 30.00% 5,000,000 3.85% 100,000,000 135,000,000 35,000,000 35.00% 0 0 100,000,000 140,000,000 40,000,000 40.00% 5,000,000 Loss Assume that the contractor sets a goal of a 4 percent profit on costs. From past experience, the contractor expects that the government will be willing to negotiate a 95/5 share ratio, a 135 percent ceiling price, and a 10 percent profit rate at target cost. The contractor proposes a target cost of $100,000,000 but is really focusing on the 4 percent profit amount. At that profit rate, the contractor's actual target cost goal is $129,807,000. The government determines that the offer is fair and reasonable and negotiations are completed. At the time of agreement on the pricing structure, $100,000,000 is the contractual target cost and the contractor's actual goal is $129,807,000 for a target cost. In effect, the contract is negotiated with nearly a 30 percent cost overrun and a 4 percent profit. A Government Incentive to Underestimate Costs Does a government organization ever have an interest in understating the cost of an item? The President's Blue Ribbon Commission on Defense Procurement, popularly known as the Packard Commission, gave us the following answer. Once military requirements are defined, the next step is to assemble a small team whose job is to define a weapon system to meet these requirements, and "market" the system within the government, in order to get funding authorized for its development. Such marketing takes place in a highly competitive environment, which is desirable because we want only the best ideas to survive and be funded. It is quite clear, however, that this competitive environment for program approval does not encourage realistic estimates of cost and schedule. So, all too often, when a program finally receives budget approval, it embodies not only overstated requirements but also understated costs. 3 If the government has an interest in underestimating the cost of a system, it can use an FPIF to its advantage by simply loosening the pricing structure of the FPIF contract. Let's look at an actual example—the original contract for the Trident submarine awarded in 1974. Table 10: Fixed-Price Incentive Pricing Structure for the Trident Submarine.4 Pricing Elements Pricing Structure Target Cost $253,000,000 Target Profit $32,400,000 (12.8% of Target Cost) Target Price $285,400,000 Ceiling Price $384,000,000 (152% of target cost) Share Ratio 95/5 from target cost to $279,600,000 85/15 from $279,600,000 to PTA 70/30 below target cost As can be seen, the contract had a 95/5 share ratio and an incredible ceiling price of 152 percent of target cost. Here is what Gordon Rule had to say about this pricing structure When the Navy negotiates a 95/5 share above target cost for the first 26 million of overrun of target, the target cost figure is patently phoney. Moreover, when the Navy negotiates a 95/5 share and then also a 152% ceiling, the target cost figure is patently ridiculous. First priority for the future must be the negotiation of more reasonable target costs for our FPI shipbuilding contracts and if the budget has to be changed, then change it. 5 Once a system receives budget approval with an understated cost, the government must find a way to contract for it at that underestimated cost. The FPIF provides the opportunity in two ways. First, it allows the government to hide expected overruns at the time the contract is awarded. Or, in Gordon Rule's words, it allows the government to include "an obvious overrun of target cost built in." 6 Second, the term "fixed-price" can be used to disguise a cost-reimbursement contract. For example, in regard to the Trident contract, the Commander of the Naval Ship Systems Command, explained 7 People said, "That's a CPFF [cost-plus-fixed-fee] contract under another name," and I said, "Right. You want to call it that, do what you like. Call it what you please." ... I suppose it's a matter for some slight chagrin that what really ought to have been a CPFF contract turned out to be something else, or to have a different label on it, but I don't feel bad about it. 8 Some Final Thoughts Does the FPIF contract have a place in federal contracting? I think it does when it is used as it is intended. However, it can and has been abused. In testing an FPIF structure, there are a number of things I ask. Here are several. Is the government's share of savings significantly lower below the target cost than its share of losses above the target cost. For example, is there a 50/50 share ratio below the target cost while a 95/5 share ratio exists above target cost. This alerts me to the possibility that the real target cost exceeds the negotiated target cost in the contract. Is the ceiling price above 135 percent of target cost? Although a 135 percent ceiling price is generous, anything above it is excessive. Does the share ratio flatten out around the target cost for an extended period? For example, is there a share ratio of 95/5 or 100/0 from 10 percent below target cost to 10 percent above target cost? This effectively converts the extended part of the FPIF structure to a cost plus fixed-fee contract. If I do identify a suspicious FPIF structure, I turn to the facts surrounding the negotiation of the target cost. For example, Is the government's budget for the item unrealistically low? Does the government have pricing power over the contractor? In short, can the government dictate the contractor's price because of market conditions? Is the contractor in survival mode or is the contractor trying to gain a foothold in a program area? If there was a final proposal revision, did the contractor's price drop substantially? 1 Navy Contracting: Cost Overruns and Claims Potential on Navy Shipbuilding Contracts, GAO/NSIAD-88-15, October 16, 1987, p. 9 2 Ibid 3 President's Blue Ribbon Commission on Defense Procurement, Final Report, June 30, 1986, p. 45. 4 J. Ronald Fox and Mary Schumacher, "Trident Contracting (C): Negotiating the Contract," John F. Kennedy School of Government, 1988, pps 6 and 7. 5 Hearings before the Committee on Armed Services, United States Senate, 94th Congress, Second Session, Part 8, Shipbuilding Cost Growth and Escalation, p. 4658. 6 Fox and Schumacher, p. 8. 7 In 1976, the Naval Ship Systems Command was renamed the Naval Sea Systems Command. Copyright © 2023 by Robert Antonio

@C Culham I did not state the basis for pricing and payment; I'm not interested in the basis for pricing and payment at this time; and I did not ask about pricing and payment. I am only interested in and asking about the meaning of the term "effort". Thanks for your response, but I asked formerfed and I'll wait for his. He defined effort as exerted energy.

@C CulhamI wasn't offended. I just explained how I got my number. It's not an issue with me, and the difference in our counts is not important to me. I'm the Beginner here. I have never seriously thought about the meaning of "effort" in "level of effort." But something has come up that has made me ask myself the question: What does "effort" mean? What is a unit of "effort"? It seems to me that those are questions that you must be able to answer if you are going to state a "level of effort". And I have spent several days trying to come up with a suitable answer. Is an hour a legitimate unit of effort, even if the work of one hour is more difficult than the work of the next hour or the previous hour? In such a case, is the amount of effort in each hour the same? And, if not, then is an hour a true unit? Are we confusing a pricing technique with an appropriate term of specification? I'm looking for answers and I'm trying to prompt thought. And you are going to refuse to answer because you think I posted my question in the wrong category?

On March 7, 2024, Deputy Attorney General (DAG) Lisa Monaco delivered remarks at the American Bar Association’s 39th National Institute on White Collar Crime announcing a new Department of Justice (DOJ) pilot program that incentivizes whistleblowers to report corporate misconduct by offering monetary rewards. Likening the program to “the days of ‘Wanted’ posters across the Old West,” DAG Monaco explained that individuals who help DOJ discover otherwise unknown, “significant” corporate or financial crime could receive a portion of the resulting forfeiture. This program will encourage whistleblowers to report a broad range of criminal activity by bridging the divide between DOJ’s priorities and other whistleblower mechanisms such as the False Claims Act’s qui tam provision (which is only available for fraud against the government), and programs at the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and other federal agencies (which only cover misconduct within their respective jurisdictions). By placing a bounty on corporate actors, this DOJ pilot program—which will be developed by the Department’s Money Laundering and Asset Recovery Section (MLARS)—underscores the need for companies to take stock of their compliance programs and enhance their internal reporting infrastructure. DOJ’s Focus on Financial Crime and Corruption Although the Attorney General was already authorized to pay awards for information or assistance that lead to civil or criminal forfeitures—and did so on occasion—the sharpening of this tool as part of a targeted program demonstrates DOJ’s continued effort to crack down on corporate misconduct. Notably, DAG Monaco made clear that foreign and domestic corruption and financial crimes are particular focus areas, and highlighted that DOJ is especially interested in receiving information about: Criminal abuses of the U.S. financial system; Financial corruption cases outside the jurisdiction of the SEC, including FCPA violations by non-issuers and violations of the recently enacted Foreign Extortion Prevention Act; and Domestic corruption cases, especially involving illegal corporate payments to government officials. Pilot Program Guardrails: Key Parameters and More Information to Come Under the pilot program, individuals who come forward with truthful information about “significant corporate or financial misconduct” may be offered cash payments, but only where there is no competing financial disclosure incentive (i.e., by other federal whistleblower program or qui tam), and only if the individual was not involved in the criminal activity itself. Further, the information must not have been previously known to the government and must be provided voluntarily—meaning, not in response to any government inquiry, preexisting reporting obligation, or imminent threat of disclosure. Whistleblowers are also second in line to victims, who must be properly compensated before any rewards are paid. DOJ also expects to provide rewards to whistleblowers only in cases involving penalties above a certain monetary threshold. Though that threshold is yet to be determined, in subsequent but complementary remarks Acting Assistant Attorney General (AAG) Nicole Argentieri signaled that DOJ welcomed input on the appropriate threshold amount, and noted—as a datapoint—that both the SEC and CFTC limit rewards to cases involving sanctions of at least $1 million. Key Takeaway: Investment in Compliance is a Priority In the wake of this announcement, companies should carefully examine their internal compliance and reporting structures to ensure that they encourage the reporting of wrongdoing through internal channels. At a minimum, this compliance health-check should consider the following: Gauging the degree to which organization-wide training, communication, and other educational efforts drive awareness of reporting mechanisms and anti-retaliation policy; Assessing (and updating, as appropriate) the company’s whistleblower investigation policies, protocols, and training on same to ensure completeness and consistency across business functions; Identifying concerns that are raised through all channels (i.e., exit interviews, cultural surveys, 360 reviews)—not only those raised via formal reporting pathways; Tracking report response and resolution times, as well as any remedial efforts; Monitoring additional key metrics related to whistleblower investigations—i.e., volume of reports, patterns of reports, whether reported issues are substantiated or unsubstantiated, whether reports are raised anonymously or not—and assessing those results at the business unit level; and Identifying whether complainants indicate a fear of retaliation, and if so, whether those fears are concentrated in a particular business unit. Further, this new incentive for whistleblowers heightens the pressure on companies to carefully weigh whether to make use of DOJ’s voluntary self-disclosure mechanisms. In DAG Monaco’s own words: “these incentives reinforce each other and create a multiplier effect, encouraging both companies and individuals to tell us what they know as soon as they know it.” The post DOJ Offers Cash “Carrot” to Whistleblowers; Foreshadows “Stick” of More Corporate Enforcement appeared first on Government Contracts Legal Forum. View the full article

The U.S. Court of Appeals for the Federal Circuit held in Avue Technologies Corp. v. Department of Health and Human Services that an appellant’s non-frivolous allegation of a contract with the government via an end-user license agreement (EULA) incorporated into another contractor’s Federal Supply Schedule (FSS) agreement was sufficient to establish jurisdiction under the Contract Disputes Act (CDA). The Federal Circuit addressed a situation in which the Food and Drug Administration (FDA) purchased a software license from an authorized reseller of Avue’s products through a task order issued under a General Services Administration (GSA) FSS contract. The task order and contract incorporated an undated and unsigned version of Avue’s EULA. After the task order expired, Avue alleged that the FDA was misappropriating data in violation of the EULA terms and conditions, Avue’s intellectual property rights, and the Trade Secrets Act. Avue submitted a claim to the FDA, but the contracting officer instructed Avue that it would need to have the reseller submit a pass-through claim on Avue’s behalf. Avue appealed to the Civilian Board of Contract Appeals on a deemed-denial basis. At the Board, the government initially moved to dismiss the appeal for lack of jurisdiction on the basis that Avue was not a “contractor” within the meaning of the CDA. The Board initially denied the motion but later sua sponte ordered the parties to file supplemental briefs addressing whether a software license is a procurement contract. As discussed in a previous alert, the Board then dismissed the appeal on the basis that the EULA was not a procurement contract within the meaning of the CDA. The Federal Circuit reversed the Board’s decision. Relying on its precedent in Engage Learning, Inc. v. Salazar, 660 F.3d 1346 (Fed. Cir. 2011), the Federal Circuit explained that, to establish jurisdiction under the CDA, a plaintiff needs only to allege the existence of an express or implied contract with the Government. The appellant’s obligation to prove the existence of an enforceable contract must be resolved as a decision on the merits. Because Avue alleged that it was a party to the FSS contract and the FDA task order by virtue of each incorporating the EULA, the Board had jurisdiction to hear the appeal. On remand, the Board still must consider whether Avue was a party to the FSS contract and FDA task order, or otherwise has enforceable rights through the agreements. For now, this case stands as a notable reminder of the complexities potentially associated with EULAs incorporated into third-party contracts. The post Just Trust Me on This: Allegation of Contract’s Existence Is Sufficient to Establish Jurisdiction Under Contract Disputes Act appeared first on Government Contracts Legal Forum. View the full article

What if DCAA already agreed to the now current year target rates which are different from the ones first proposed? Agree about disclosing it - of course. But is there an actual obligation to amend your pricing if required to sign a C&P certificate - if the government doesn’t ask for a final proposal revision?

For our third entry in our “Why File” series, we will be covering one of the two big bid protest routes, a “pre-award” Government Accountability Office (GAO) bid protest. Most contractors are fairly familiar with GAO bid protests that occur after an agency makes their award decision (more on this in a later “Why File” post. But contractors may be less familiar with pre-award bid protests at GAO. We will cover some of the most common reasons pre-award protests are filed at GAO, based primarily on contracting regulations and bid protest cases. As always, please keep in mind, despite the commonalities discussed below, the question of whether to protest is highly fact-specific and demands careful consideration. What is a “pre-award” protest? First, it is important to establish just what a pre-award protest is. The name sort of gives away its meaning, but a pre-award protest is a bid protest filed at some point prior to the award decision. Note that the term pre-award protest is not found in the GAO rules or the FAR, but it is a helpful way to categorize certain types of protests. However, be careful, that does not mean the bid protest filing deadline at GAO is the award decision date. As discussed below, filing for such a protest could be due prior to a bid submission due date, within 10 days of a competitive range decision, or another date which occurs prior to the award decision. It is, as with all things federal contracting, quite fact specific (for more specifics on pre-award protests, check out our entry on them in our Back to Basics series). Pre-award protests can be filed at more tribunals than just GAO, such as the U.S. Court of Federal Claims, but as GAO is more common for contractors to utilize, we will focus here on GAO. That being said, many of the concepts for why a pre-award protest could be filed are universal. With that out of the way, lets discuss some of the reasons a contractor may file a pre-award protest. 1. The solicitation’s terms are unclear. The most common reason for filing a pre-award protest is that a solicitation’s terms are confusing or don’t make sense. Often contractors will look at a solicitation, interpret a term a certain way, but the agency meant it another way. This can be a fatal flaw to an otherwise superb proposal. To prevent such a thing from occurring, GAO actually provides contractors a way to protest solicitation terms, before finding themselves on the losing end of a proposal due to a misunderstanding. GAO in its regulations state that “protests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals shall be filed prior to bid opening or the time set for receipt of initial proposals.” So, if a contractor sees contradictory terms, or confusing terms within a solicitation, one way to force the agency to address it, is to file a pre-award protest. A great example of why such a protest is important is covered in a previous blog here on SmallGovCon. In One Community Auto, LLC, B-419311 (Comp. Gen. Dec. 16, 2020), a contractor–after award decision–raised a concern via post-award protest that the evaluation factors were ambiguous or indefinite. GAO agreed that “the language in the solicitation is internally inconsistent” but because the protest was filed post-award, it was dismissed as untimely. GAO noted that a “protest based upon alleged improprieties in a solicitation that are apparent prior to the closing time for receipt of initial proposals or quotations” must be filed prior to the closing time for proposals. It is very important for contractors to raise solicitation terms often and early, or they may face an unfortunate award decision, with no recourse. When facing solicitation term confusion, there are generally two categories these issues fall into: Overly Restrictive Terms or Terms that Do Not Match Industry Norms: One category of solicitation terms that will get commonly protested are terms that overly restrict competition, or that are so off base that they don’t match industry norms. A good example of this type of protest at GAO is a recent protest of the CIO-SP4 procurement which we blogged about here. In that protest, the solicitation called for submitting experience, but the amount of experience one could submit varied depending on if they were in a mentor protege relationship or not. This basically overly restricted certain offerors, while giving great leeway to others. Similarly, there can be protests that argue the terms are too restrictive as they don’t meet the subject industry’s norms. This can be a tough protest to win though, as GAO uses a standard of if the agency’s terms were reasonable (we have a blog on this type of case here). Ambiguous or Inconsistent Terms: This other category of solicitation terms protests is much more apparent on its face. Often contractors will see terms that contradict other portions of the solicitation (making it impossible to satisfy either term), or that just plain don’t make sense. A great example of this, are the terms from the One Community Auto case discussed earlier. While the case was dismissed as untimely, GAO did state the terms were inconsistent (and presumably would have been a successful pre-award protest). One Community Auto highlighted terms that sometimes felt more appropriate to a lowest-price technically acceptable while others were more fitting of a best-value tradeoff (both separate and distinct evaluation methodologies). This type of solicitation concern and confusion is one that would be raised in a pre-award protest as it presents ambiguities, or inconsistencies. (PLEASE NOTE: In rare cases, ambiguous solicitation terms can also be protested after award, but this is rarely successful, as the ambiguity of the term must not be apparent at all until after award. GAO often calls this a latent ambiguity) 2. The Agency will not communicate on Solicitation questions. This reason for filing is sort of an extension or outgrowth of reason #1. However, it is a little different than protesting strictly on solicitation terms. Often solicitations will have the ability for Q&As with the agency. Or offerors will reach out to the agency with questions on their own, as there is no restriction on contacting the agency with questions on a solicitation. Sometimes, these Q&As or communications can contain great information for contractors, or resolve solicitation term issues that would have necessitated a pre-award protest. Unfortunately, this is not always the case. Occasionally agencies are not very communicative or responsive to questions. Their responses may be rather lacking, only lend to more confusion, or the agency may not respond at all. This lack of communication leads to more ambiguities with solicitation terms, contradictions with solicitation terms, and confusion among contractors. Contractors may find that the best way to get the response they are looking for, or any formal response to concerns at all, is to file a pre-award protest. The agency then has to directly respond, through the bid protest, to those concerns. Such a protest could also spur a corrective action by the agency in which they correct the terms in the solicitation or finally respond in some fashion to the basis of the communications they previously ignored. 3. To stay contract award or decision. While this is not a technically a basis to file a pre-award protest, it is an added bonus for contractors who feel there are issues in the solicitation and need more time to prepare, want to continue performing the previous contract for a while longer, or are excluded from the competitive range and hope for another shot at the award. When a pre-award protest is filed with GAO, the FAR states “a contract may not be awarded unless authorized.” While it is not a guaranteed stay of award, it will at least cause an agency to pause its award decision. That being said, a stay of award decision is the most likely outcome, as unless the agency completes multiple steps outlined in the regulation to overcome the stay, it cannot award the contract until the protest is complete. Often, contractors may see solicitation terms or communication issues present in a solicitation, but not think it rises to the level of protesting. However, if that same contractor is the incumbent performing a bridge contract, or is a contractor that needs more time to work on the proposal, they may see this potential stay as a good reason to take a shot at a pre-award protest. Of course, if a contractor finds itself excluded from the competitive range, it may hope that the protest of that decision will result in it getting another chance at award, which is only helped by a stay of award decision. Speaking of which… 4. Contractor is excluded from competitive range. A common way to structure a solicitation is to allow the agency to set a competitive range of offers, thus whittling down the amount of offerors progressively until the final award decision is made. When a contractor doesn’t make that cut, it is called being excluded from the competitive range. A competitive range is typically set to eliminate certain offerors, then have discussions with the remaining offerors. The unlucky offerors who find themselves on the outside looking in sometimes will simply think that they have no way to debate the competitive range decision until after award or that it is not an award decision that can be protested. That is incorrect. GAO states that protests other than those based on solicitation terms “shall be filed not later than 10 days after the basis of protest is known or should have been known (whichever is earlier).” If there is a required debriefing (which does sometimes occur with competitive ranges), then the protest “shall not be filed before the debriefing date offered to the protester, but shall be filed not later than 10 days after the date on which the debriefing is held.” There is no designation that such a protest must be “after award” or something along those lines. As exclusions from competitive range occur prior to a final award decision, they stand as a great reason to file a “pre-award” protest. The protest of course will feel similar to a post-award decision, discussing evaluations, etc. but it will still be a pre-award protest. Bonus: Debriefing complexities about pre-award protests. With all this in mind, it is important to note something that could actually prevent you from protesting a pre-award matter. Our blog on this provides more information, but it is important to keep in mind that if offerors postpone a pre-award debrief until after award decisions are made, then they lose the right to protest based on any information that could have been discovered in the pre-award debriefing. If a contractor finds itself excluded from competitive range, and is offered a debrief, then choosing to postpone that debrief until after award will prevent any possible protest from happening based on viable grounds discovered as part of that delayed debriefing that could have come out in the earlier debriefing. Though the reasons for protest represent a wide array of situations, they all contain one common thread—they all are filed prior to an award decision. GAO, through its case law and regulations, has carved out a way for contractors to address things prior to any award decision. These pre-award protests can be filed to help rectify the wrong of an exclusion from competitive range, or be used to help clean up a less than stellar solicitation. As with all protests, it is very fact specific as to why and when a contractor should file a protest. If you find yourself facing a confusing solicitation, excluded from the competitive range, or not getting clear communication back from an agency, don’t hesitate to reach out to a federal government contracts attorney to discuss your possible pre-award protest options. Questions about this post? Email us. Needing legal assistance? Give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Why File: A GAO Pre-Award Protest first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

It is not mandatory to have a Forward Pricing Rate Agreement (FPRA). Oftentimes they are more trouble than they are worth. The contractor should propose its best estimate of future indirect rates to be incurred during contract performance and be prepared to support its estimate during a proposal fact-finding or audit just like any other estimate. That said, normally DCAA likes to see detailed budgets for the upcoming year with outyear adjustments based on known events/trends, such as award of large contracts. If you read 52.217-6, it is clear that the provisional billing rates should be the contractor's expected actual rates, and that the billing rates should be adjusted as necessary (either prospectively or retroactively) to prevent any significant under or over billings. In my experience, a NICRA covers audited, negotiated rates. It is the document that establishes final billing rates, not provisional or interim billing rates. To be clear, I'm not saying that a NICRA cannot be used to establish provisional billing rates; I just haven't experienced that scenario. There is another set of rates, which is what the contractor uses to establish contract costs during performance, prior to receiving audited/negotiated final rates. Those rates may be linked to an FPRA or a NICRA, or they can be the contractor's best estimate of actual indirect cost rates to be incurred during the current year. Note that these rates are not subject to government approval, but they are critical because they help establish contract Estimates at Completion and thus drive tracking of costs incurred against funds provided. So ... there can be overlap between actual rates, billing rates, and forward pricing rates--especially for the current or upcoming year. A contractor with cost-type contracts should understand where the sets of rates overlap and where they differ. That contractor should be monitoring variances and proposing adjustments to provisional billing rates as required by 52.216-7. That contractor should be updating its (internal) forward pricing rates based on what it sees in the future, especially if those same rates are also used to estimate fixed-priced contracts. Frankly--and without meaning to condescend--understanding the interaction of indirect rates between actual, provisional, final, and forward pricing is fundamental to managing cost-type work, regardless of whether you are on the contractor or government side. I'm frequently surprised how many people--especially those in contracts--don't understand the interplay. I strongly recommend a thorough read of 52.216-7 for any individual who wants to better understand billing rates. For forward pricing rates, see Table 15-2.

Maybe I should limit that comment to the CICA stay, which is a huge incentive to file a protest regardless of merit. The incumbent can make way more money continuing to bill for a month or two on a $100M contract than they will ever spend on a protest. All they have to do is ask and viola, CICA stay, and the money keeps rolling in! (I have to say; I got a good laugh out of Vern's post regarding approach. So true. Everybody uses it as a key term in solicitations and evaluations, but the implication in common English is that to approach something is a precursor to actually doing something. "OK, now that you've approached it, what do you plan to do when you actually get there?" 🤔😄🤣)

Agreed. My recollection is that in the move its use was implied to be imperative to provide ease for contractors in viewing solicitations/contracts across all agencies so stuff was essentially in the same place. And the format of FAR 12.303 is built upon (my terminology) in FAR clasue 52.212-4 paragraph (s) Order of Precedence. Even the small ones by my experience attempt UCF but are organized poorly and provide in some cases of conflicts that could not/cannot be solved by a simple application of paragraph (s) of 52.212-4. Consistency is the key and agencies should consider a waiver to paragraph (s) that provides for use of full UCF at the discreation of the CO. I never understood why FAR 12 departed from UCF for commercial product/item as in my experience there is no real uniform contract format in the commercial market place. I guess I could be wrong but the commercial terms and conditions I have viewed suggest no consistency across the commercial market place. Overall I have always thought the UCF was good as well but it seems the "to the maximum..." is read as an imperative rather than discreationary.