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CTA - payment between partners


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What are the parameters that govern arrangements between Contractor Teaming Arrangement partners?

All the research I've been able to do centers on the fact that the award is actually made between the Govt and each contractor (let's use two for this example). For convenience one contractor may act as lead and submit joint invoices, but both contractors have an award.

As the lead contractor (A) submitting the invoices and managing the overall project, we would like to negotiate a fee from the other contractor (B). They are willing to pay a fee, but are concerned that our arrangement would trigger the price reduction clause if the fee is a % of their labor category rate. For example, the rate on B's schedule the rate is $100. The govt pays $100/hr to lead contractor, but lead contractor pays $95/hr to B (taking the 5% fee off).

Since the award is between the Govt and Contractor B would this trigger the price reduction clause? I would think not because the award is btwn B and Govt, but how do we explain the arrangement between A & B? Does this establish a new commercial rate? Could this affect the GSA rates based on the Most Favored Customer and Basis of Award? Let's say the Basis of Award is all commerical customers - does this impact the GSA rates?

I am operating under the assumption that this fee arrangement is licit, because it was used by a different company and a large defense contractor. The Large Defense contractor was B and so I'm sure if it would have triggered a price reduction or was illegal, they never would have done it.

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I'm not sure that B's sale to A is a sale to an eligible ordering activity (though I could be wrong). I'm assuming we're talking about Multiple Award Schedule sales and pricelists. If B's GSA price is $100 and he sells to A, a commercial entity, for $95, I believe B may trigger the price reduction clause. But it may depend. Some price reduction clauses are triggered by certain cost elements (such as G&A or fee; i.e., a lower commerical G&A or fee rate is the trigger) rather than the fully burdened price rate. If this is a bid for services based on burdened labor hours, possibly a new GSA price has to be submitted to and approved by GSA for each Wage Determination geographical region, and, within certain parameters the GSA price may be customized for this bid. I also think that under certain GSA MAS contracts separate task orders can be awarded to team members, but I'm not sure exactly how that would work.

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GSA sales do not trigger the price reduction clause. Read the price reduction clause.

There shall be no price reduction for sales?

(2) To eligible ordering activities under this contract

Are you saying that A is an eligible ordering activity? Because I thought such A to B agreements were considered "commercial." The language about CTA's just doesn't address agreements btwn the company's...

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Under a CTA each party's GSA sales are separate. It is not a prime subcontract arrangement. It is against FASB and GAAP for both parties to record revenue on this sale transaction. Each party records revenue separately. The fee from the team partner is the only revenue that is recorded by the team leader. That is not a GSA transaction.

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Under a CTA each party's GSA sales are separate. It is not a prime subcontract arrangement. It is against FASB and GAAP for both parties to record revenue on this sale transaction. Each party records revenue separately. The fee from the team partner is the only revenue that is recorded by the team leader. That is not a GSA transaction.

I think what is confusing about this for us is that GSA wants to just have one invoice so our work is combined. Does this affect your answer? I'm not an accountant so unclear about how revenue is recorded but would think something is recorded for the Contractor B $'s going through our system...

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No it doesn't matter which party submits the invoice. I would try to submit separate invoices for each schedule, but if you can't, then make sure each party's schedule is clearly separated on the one invoice. This will facilitate the IFF - which each party is separately responsible for.

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