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Per FAR 46.407(e), “The contracting officer must discourage the repeated tender of nonconforming supplies or services, including those with only minor nonconformances, by appropriate action, such as rejection and documenting the contractor’s performance record.” In addition, per FAR 46.407(f), “When supplies or services are accepted with critical or major nonconformances as authorized in paragraph (c) of this section, the contracting officer must modify the contract to provide for an equitable price reduction or other consideration. In the case of conditional acceptance, amounts withheld from payments generally should be at least sufficient to cover the estimated cost and related profit to correct deficiencies and complete unfinished work. The contracting officer must document in the contract file the basis for the amounts withheld. For services, the contracting officer can consider identifying the value of the individual work requirements or tasks (subdivisions) that may be subject to price or fee reduction. This value may be used to determine an equitable adjustment for nonconforming services. However, when supplies or services involving minor nonconformances are accepted, the contract need not be modified unless it appears that the savings to the contractor in fabricating the nonconforming supplies or performing the nonconforming services will exceed the cost to the Government of processing the modification.” In our specific case, there is a large business under a Firm Fixed Price supply contract that provides progress payments (at 80%) to the Contractor on a contract line item number (CLIN) that has been previously conditionally accepted via a DD250. At the time the CLIN was conditionally accepted the withhold amount was negotiated and established based on the remaining outstanding requirements not being met on contract (also known as deficiencies) and commensurate consideration was received from the Contractor to the Government for not meeting the outstanding contractual requirements. In addition, a new delivery date was negotiated and the contract was modified to extend the date of the CLIN so the Contractor could complete the outstanding requirements and deliver a conforming supply item. The Contractor has asked the Contracting Officer to establish a new withhold amount so partial payment can be made based on completion of some of the outstanding requirements since they have delivered that capability to date to the Government and partially resolved part or most of the outstanding requirements for the CLIN. There are still some outstanding requirements left to fulfill on the CLIN. QUESTION: Is it appropriate for a Contracting Officer to establish another withhold amount based on the remaining outstanding requirements and partially pay the Contractor for the requirements that have been delivered to the Government to date, even though there are some outstanding requirements the Contractor still needs to meet? If so, can the PCO establish and authorize multiple withholds and then release payments against the withheld amounts for a single CLIN? Or, once we establish a withhold for a conditional acceptance, does the Contractor only get paid the full withheld amount upon satisfying all of the remaining contractual requirements whether they are delivered to the Government incrementally or not? Thus, only one withhold would be established for the CLIN, with the full withhold amount paid upon completion, regardless of whether or not some of the outstanding
Contract Type: Design Build - FFP Scenario: First tier subcontractor to prime contractor refuses to submit its invoices in the schedule of values format required by the prime contract. Background: 1. The prime contractor incorporated the schedule of values invoicing requirement into the subcontract; subcontractor concurred and signed subcontract. 2. Subcontractor attempts to "front load" charges into its invoices and demands prime contractor pay subcontractor well in advance of what prime can bill government for said charges under the required schedule of values. 3. Prime contractor contacts subcontractor to discuss on multiple occasions; in each discussion, subcontractor advises it will not comply with required invoice format. 4. Prime contractor notifies the KO of the situation and its intent to withhold subcontractor payment in accordance with the procedures set forth in 52.232-27(e). 5. Prime contractor issues a formal subcontractor withholding notice conforming to the requirements of 52.232-27(g). 6. In reply, subcontractor notifies prime contractor to "pound sand" and continues in its refusal to submit invoices in the schedule of values format required. 7. Prime contractor notifies KO weekly of status of situation and continues (on a nearly daily basis) in its attempts to get the subcontractor to submit a proper invoice. Question: Is the prime contractor required to submit subsequent subcontractor withholding notices until the situation is resolved or will prime's actions in Item 7 above suffice? If additional notices are required, is there a specific frequency required?