$106 Million FFP/LOE Contract for Vehicle Sustainment

[Don Mansfield]

I came across this announcement this morning:

Army Awards $106 Million Vehicle Sustainment Contract. Science Applications International Corp., McLean, Va., was awarded a $106,275,386 firm-fixed-price level-of-effort contract. The award will provide for the sustainment services of the Mine Resistant Ambush Protected Vehicle, and provides the joint logistics integrator capability for integrated logistics, engineering, and fielding services. Work will be performed in McLean, Va.; Kuwait; Afghanistan; and Iraq, with an estimated completion date of September 19, 2012. One bid was solicited, with one bid received. The U.S. Army Contracting Command, Warren, Mich., is the contracting activity.

Now, here's the FAR guidance on the use of FFP/LOE contracts:

16.207 Firm-fixed-price, level-of-effort term contracts.

16.207-1 Description.

A firm-fixed-price, level-of-effort term contract requires?

(a) The contractor to provide a specified level of effort, over a stated period of time, on work that can be stated only in general terms; and

( The Government to pay the contractor a fixed dollar amount.

16.207-2 Application.

A firm-fixed-price, level-of-effort term contract is suitable for investigation or study in a specific research and development area. The product of the contract is usually a report showing the results achieved through application of the required level of effort. However, payment is based on the effort expended rather than on the results achieved.

16.207-3 Limitations.

This contract type may be used only when?

(a) The work required cannot otherwise be clearly defined;

( The required level of effort is identified and agreed upon in advance;

© There is reasonable assurance that the intended result cannot be achieved by expending less than the stipulated effort; and

(d) The contract price is $150,000 or less, unless approved by the chief of the contracting office.

Some questions came to mind.

1. Given the FAR guidance, did the Army use the right contract type?

2. Or, is the FAR guidance out of touch with reality (i.e. do FFP/LOE contracts have a wider application than what's described at FAR 16.207-2)?

What do you think?