Prepaid Subscription/Lease beyond Period of Performance

[oldnavy]

I am a Prime Contractor who in the performance for a Task Order, procured a one year telecom/satcom "lease" in June.

The Task Oder PoP ends in Dec. The Satcom lease is prepaid, so there wil be no invoicing after the PoP

FMR (Vol 4, Chap 5) allows for prepaid subscriptions, rents, etc.

There are no issues regaarding FY/appropriation, Bona Fide, ceiling, severability, standard business practices, scope, etc.

The issue is simply can a prepaid telecom lease go beyond a TO's PoP?

I also have a concern now that product warranties are similarly affected, ie. we purchased an extended manufacturer's warranty for a high failure/critical component, and of course, the warranty goes beyond the PoP.

The initial take from contracts is "prepaying is bad" but they had heard of this subscription thing being ok, but were not sure how the PoP affected it?

I believe contracts are going on their gut, they really dont have the time or inclination to do research on this.

Of course the silver bullet is to extend the PoP but they are reluctant to do that for various reasons.

I suggested a "limited" PoP extenstion that only addresses the Satcom/Telecom lease - any1 heard of a limited PoP extension?

[Guest Vern Edwards]

I assume that the task order is either cost-reimbursement or T&M and that the issue is whether you can seek reimbursement for the entire costs for the lease, which includes costs for time after the completion of the order.

I doubt that the government will want to pay for the entire lease period if it's not getting any benefit after the close of the task order period of performance. However, it's possible that you could make a case that the entire cost is allowable on grounds that it had to be prepaid in full and there was no option. The only way to know is to present your case to the CO. Needless to say, you should have asked the CO before you signed the lease.

Forget about the DOD Financial Management Regulation. It does not apply to determinations of cost allowability under a contract.

And perhaps I misunderstand you, but why would a CO extend the performance period of a task order just so you can be compensated for the entire lease cost?

[joel hoffman]

...The issue is simply can a prepaid telecom lease go beyond a TO's PoP?

...I also have a concern now that product warranties are similarly affected, ie. we purchased an extended manufacturer's warranty for a high failure/critical component, and of course, the warranty goes beyond the PoP.

Oldnavy, Does the issue concern service contractor efforts after the task order completion that would be reimbursable or otherwise payable?

Regarding your warranty concerns, in FFP construction contracts, extended warranties after the period of performance are common. There is no contractor payment for warranty responsibilities. Those are simply post acceptance responsibilities.

As for the lease, is there any reimbursable contractor involvement after the period of performance? You said that the lease itself was prepaid. I am assuming too that the government is still using the leased facility after the POP, but I might be wrong. If the facility is not being used, that would seem to be more related to the wisdom or folly of paying for something of no value (government waste) than the question of whether or not it can be done.

Of course, I realize there are differences between service and construction contracts.

[oldnavy]

Vern/Joel, thank you soooooo much for responding!

The TO is FFP. A few other "ringers" - this is an FMS Case. The Host Nation and USG both want the satcom lease to go for as long as possible since the country is poor and the systems are useless without satcom.

Roger I should have consulted with the CO before entering into the lease. The TO was not specific on the type of communications connectivity or the length of service. Our proposal was VSAT but we didin't specify time period. We offered and the USG and Host Nation accepted the idea of a one year satcom service, with understanding that we might extend that if ODCs allowed at the end of the project. Of course, none of this is in writing and none of us were thinking of the ramifications of the lease extending beyond the PoP.

There will be no contractor service efforts after the PoP, no invoices will be submitted against this after the PoP. It will simply be the Host Nation operating their sites dumb and happy until the lease expires.

From what I have read, and there is very little I can find online, topics on "Prepaid Services" are written from the perspective of the USG not a contractor, and the issues seem to be wrt crossing FYs (severability, dumping money, etc.) not PoPs.

I am looking for any suggestions on information/options to offer the CO to help with a decsion.

Thanks again for listening and offering your thoughts :-)

P.S. I mentioned warranties yesterday to my USG rep as a possible canard for our telecom lease issue and he tells me that now "warranty" is a dirty word in the contracts shop and to be avoided? He couldn't give me the details but it appeared that perhaps they were afraid warranties were being used to illegally prepay for services?

[joel hoffman]

P.S. I mentioned warranties yesterday to my USG rep as a possible canard for our telecom lease issue and he tells me that now "warranty" is a dirty word in the contracts shop and to be avoided? He couldn't give me the details but it appeared that perhaps they were afraid warranties were being used to illegally prepay for services?

Wow, I wonder what they consider a "warranty" to entail. There is one thing to warranting the quality a product or service but providing preventive or other maintenance goes beyond my experiences with warranties. In my experience, that is a customer responsibility