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I have a CPFF task order to issue against a basic contract our office has issued/awarded. However, I vaguely remember whether or not the prime can charge fee on the total subcontracting cost (inclusive of fees) or just on their direct/indirect cost (exclusive of fees). Is it acceptable for the prime to charge fee on the sub's fee as well?

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Hi fereirra,

The subKs' costs -- including its fee -- is a cost to the prime Ktr. The Ktr can include the total cost of the subK in its total costs. As to whether fee can be, or will be, applied to the prime's total costs, that's a matter of contract type and negotiation. But in general, yes. The prime Ktr gets to treat the subK's fee as its cost and not as a component of its profit/fee.

Hope this helps.

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fereirra,

Perhaps you are thinking about T&M? If the contract type was time-and-materials or labor-hour then the applicable payment clause prohibits the payment of fee on materials, which includes subcontracts for supplies and incidental services for which there is not a labor category specified in the contract. See FAR 52.232-7(B)(7).

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Are there any other regulations that would speak to "fee on fee" where a prime is applying indirect costs and fee to a subcontrators price (inclusive of fee)?

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Are there any other regulations that would speak to "fee on fee" where a prime is applying indirect costs and fee to a subcontrators price (inclusive of fee)?

shultzm,

Your question was asked and has been answered, yet you seem dissatisfied with the answers provided.

Are you looking for the correct answer, or the answer you want to hear?

The correct answer is: There is no prohibition on applying fee on fee.

You may be thinking about the cost principle at 31.205-26(e) which addresses Inter-Organizational Transfers. But a subcontract is not an IOT unless it is a "subcontract" with an affiliated entity under common control.

Hope this helps.

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Are there any other regulations that would speak to "fee on fee" where a prime is applying indirect costs and fee to a subcontrators price (inclusive of fee)?

Shultzm, I noted that you aren't the original poster here. Are you still concerned about the situation in the other thread where one of the JV members is selling materials to the joint venture that it is part of, then the JV marks it up again? I'm not at my computer but FAR 31.2 contains a general principle that there is no presumption of reasonableness and the contractor must justify reasonableness. Why can't the JV buy the materials directly - why does one of the members have to individually purchase them, mark them up and sell to the JV, of which it is a member? Why is that reasonable? There might be a valid reason, I don't know.

EDIT: See FAR 31.201-3 for general discussion of determining reasonableness.

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