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Can anyone explain in simple terms what the key difference is between a Labor Hour and Fixed-Price-Level-of-Effort Contract type? Obviously one is a cost type contract and one is a fixed price, but other than that.

AND, for that matter, is the only difference between a Fixed-Price-Level-of-Effort and a Fixed-Price Contract that one is based upon hours or level of effort and the other (the latter) based upon deliverables?

I also noticed in the FAR that the government doesn't like to see FP LOE above $100 without permission from the CO. Does anyone have any experience dealing with that?

Thanks in advance for any help.

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Under an FFP LOE contract, the contractor promises to deliver a stipulated level of effort, e.g., 1,000 hours, doing work of a certain kind, in return for a firm-fixed-price. The contractor is not paid by the hour, or for completion of the work, but for delivery of the stipulated number of hours. The contractor is entitled to payment of the price only upon delivery of the level of effort.

Under an L-H contract, the contractor is paid by the hour until specified work is completed or the contractor reaches the ceiling price, whichever comes first. If the contractor has not completed the work by the time it has reached the ceiling price, the contracting officer may increase the ceiling price and require the contractor to continue working.

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br549,

I believe a Labor Hour contract is a hybrid, with elements of both a fixed price contract in that the hourly rates are fixed; and a cost type contract in that the quantity of hours are not fixed.

The requirments for such a contract are also different than either a strictly fixed price or strictly cost contracts, which I am daily reminded in my present job. An example is that a labor hour may not require detailed cost information to be presented to the government, but HCA approval must be obtained in order to for the contract duration to be more than 3 years. That shows that requirements for such a contract are in someways less stringent than a pure cost type of contract, but more stringent than a pure fixed price contract.

Since a Labor Hour contract is a hybrid, it is both a cost type contract AND a fixed price type of contract simultaneously.

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DW, I have to take issue with you. With a labor hour contract the contractor is paid a fixed hourly rate. The number of hours is limited by a ceiling price, but the contractor's incurred costs are not involved; costs are not reimbursed. I can't see that a labor hour contract is in any way cost reimbursement, nor is it a hybrid - it's what it is, a fixed rate contract. Now, a T&M contract may be considered hybrid, since labor is paid at a fixed hourly rate and material may be reimbursed at cost. As I recall, LH and T&M contracts were at one time categorized as "Other" in the regs - ASPR, FPR and maybe early FAR. I liked that designation better that trying to shoe horn them into FP, CR, or hybrid.

Ed

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Why is your issue with "me", rather than the information? Labor Hour and T&M contracts are both described by the same FAR section, 16.6, so they share the same designation and category. If you want to categorize them differently, knock yourself out but I choose to treat them the way my agency and the FAR treats them. Notice that I did not take issue with you, so please have a little courtesy in this forum.

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DW, Sorry to get you riled up. Nothing personal intended. What would your response have been if the first sentence of my reply had read "DW, I must take issue with the information you presented"?

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