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CAS applicability to delivery orders under IDIQ contracts

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That is a remarkable assertion. So when we interpret the term "commercial item" at 48 CFR 9903.201-1( b )(6), where it states that commercial items are generally exempt from CAS, we should not use the definition at FAR 2.101 because doing so would violate 41 U.S.C. 1502? If so, then what definition of "commercial item" should we use?

Don, if we go back in history, we find that the definition of commercial item in FAR 2.101 comes from FASA. The exemption of commercial items from CAS requirements is also found in FASA. It is a principle of statutory interpretation that when a term is used more than once in the same statute that congress intended the same meaning to apply each time the term is used. Applying this principle, it is FASA, not FAR or CAS, that provides the answer to your question.

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Vern,

As you know it's my general policy not to get into extended arguments on a public forum. In addition, this issue is related to some ongoing litigation so I need to be careful what I post.

I will offer the opinion that using FAR to interpret CAS violates 41 U.S.C. 1502. The statute gives the CAS Board -- and not the FAR Councils -- "the exclusive authority to make, promulgate, amend, and rescind cost accounting standards and interpretations thereof designed to achieve uniformity and consistency in the cost accounting standards governing measurement, assignment and allocation of costs to contracts with the United States." (Emphasis added.)

And that's all I'm going to say on this topic.

H2H

H2H, you said "this issue is related to some ongoing litigation." Can you be more specific regarding the litigation such as the forum and the parties, if a complaint has been filed what the specific issue is in the litigation. If the issue being litigated is how to interpret 1.108©, I think that would be of great interest to this forum.

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Don, if we go back in history, we find that the definition of commercial item in FAR 2.101 comes from FASA. The exemption of commercial items from CAS requirements is also found in FASA. It is a principle of statutory interpretation that when a term is used more than once in the same statute that congress intended the same meaning to apply each time the term is used. Applying this principle, it is FASA, not FAR or CAS, that provides the answer to your question.

CAS apply only to nonexempt "negotiated contracts," 48 CFR ? 9903.301-1. The term "negotiated contract" is used in many places in the United States Code and the Code of Federal Regulations, but, unless I missed it, the term is not defined in the USC and is defined in only two places in the CFR: 7 CFR ? 1753.2 and 48 CFR ? 15.000. Title 7 of the CFR contains the rules about agriculture. Title 48 is, of course, the FAR system, which include the CAS. In both places in the CFR "negotiated contract" is defined as a contract awarded through other than sealed bidding.

According to Manos, 1 Government Contract Costs & Pricing 2d, ? 5.3:

A contract awarded using anything other than sealed bidding is considered a negotiated contract.[FN1]... Negotiated contracts in excess of the applicable thresholds are subject to CAS[FN5] and TINA[FN6] unless an exception applies.

Footnote 1 cites FAR 15.000. Footnote 5 cites 48 CFR ? 9903.301-1(a). Footnote 6 cites FAR 15.403-4(a)(1)(i).

The assertion that it is improper to use FAR to interpret the CAS rules is absurd. Cryptic and mystical comments about logical fallacies don't validate the assertion. Deliberate obscurity is a sure sign of the lack of a valid argument.

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The assertion that it is improper to use FAR to interpret the CAS rules is absurd, cryptic and mystical comments about logical fallacies notwithstanding. Deliberate obscurity is a sure sign of the lack of a valid argument.

Vern,

This extended part of the thread started when you asked me to explain why I posted that you and I would differ on the use of your cited FAR rule to support an interpretation that the proper contract valuation of an ID/IQ contract was the maximum ceiling amount and not another amount. I hesitated to respond, for the reason I stated in my response. Against my better judgment I provided some answer, since I thought it was only fair to you.

And now I see even providing that much of a response was a mistake. I should have remained silent. Shame on me.

Your thinly veiled ad hominem attacks notwithstanding, I refuse to be drawn into this discussion any further.

Retreadfed: I cannot and will not comment any further.

H2H

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here_2_help: That's weak. You popped in, dropped an unexplained I disagree, later gave an intentionally incomplete explanation for it and said you wouldn't say more, and then gave Don a cryptic answer. What was the point? Bad form. I would never have done anything so cheap. And you don't know what an ad hominem attack is. Here is an example of an ad hominem attack:

William Bennett?, leader? of the antirap campaign?, [has] had no trouble finding antipolice and antiwomen lyrics to quote in support of [his] claim that "nothing less is at stake than civilization" if rappers are not rendered silent. So odious are the lyrics, that rarely do politicians or journalists stop to ask what qualifies Bennett to lead a moralistic crusade on behalf of America's minority youth. Not only has he opposed funding for the nation's leader in quality children's programming (the Public Broadcasting Corporation), he has urged that "illegitimate" babies be taken from their mothers and put in orphanages.

I attacked your comments, not you. And when I attack, I don't do "thinly veiled."

Ordinarily, I look forward to your posts on issues like this one, because I have great respect for your knowledge about cost and pricing issues. I had hoped you would post, wondered where you were, and almost asked you to comment. Now, however, I hope you keep your resolution not to say anything more.

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I started this string and harvested several pearls of wisdom from the exchange. It reveals a vast knowledge of the federal contracts business. Wouldn?t we all agree that opposing positions have even more credibility when egos are not allowed to obscure a vigorous debate on the issues?

I may be completely off base because you both go back many years and this is the way you do it. If that?s it, then my comments are only because I haven?t spent enough time on this terrific forum to know that. Otherwise I enjoyed the ride. You guys are great. Shake hands and continue to offer each other differing opinions.

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H2H said that "this issue is related to some ongoing litigation, " then indicated that he can't go into more explanation. Yes, it seems like a teaser to originally offer an opinion that one can't discuss. H2H did offer a Mea Culpa for saying anything about it. I think we probably ought to allow him (or her) to leave it at that for now.

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CAS apply only to nonexempt "negotiated contracts," 48 CFR ? 9903.301-1. The term "negotiated contract" is used in many places in the United States Code and the Code of Federal Regulations, but, unless I missed it, the term is not defined in the USC and is defined in only two places in the CFR: 7 CFR ? 1753.2 and 48 CFR ? 15.000. Title 7 of the CFR contains the rules about agriculture. Title 48 is, of course, the FAR system, which include the CAS. In both places in the CFR "negotiated contract" is defined as a contract awarded through other than sealed bidding.

According to Manos, 1 Government Contract Costs & Pricing 2d, ? 5.3:

Footnote 1 cites FAR 15.000. Footnote 5 cites 48 CFR ? 9903.301-1(a). Footnote 6 cites FAR 15.403-4(a)(1)(i).

The assertion that it is improper to use FAR to interpret the CAS rules is absurd. Cryptic and mystical comments about logical fallacies don't validate the assertion. Deliberate obscurity is a sure sign of the lack of a valid argument.

I don't see a connection between the quoted post and this response. Am I missing something?

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We don't need to shake hands. I both like and respect H2H. I just didn't like what he did. I hope that he respects me, although I know that he has not liked things that I have done. No big deal. No need for peacemakers.

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I don't see a connection between the quoted post and this response. Am I missing something?

I don't understand your comment, so I don't know if you're missing anything. The quoted post is mine. What response are you referring to?

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I don't understand your comment, so I don't know if you're missing anything. The quoted post is mine. What response are you referring to?

Going back to your post of 4:48 yesterday, you start with a post I made earlier that day responding to a question Don asked of H2H. You then launch into a discussion that does not appear to be related to my post which you quoted. I don't see a connection between my post that you quoted and what you stated thereafter. Thus, my question as to whether I am missing something.

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Oh.

Don made the point that if you couldn't use FAR to interpret CAS, then how would you know how to define "commercial item" as used in CAS 9903.301.

You responded by making the point that "commercial item" is defined by statute, which I took to mean that you did not think that he he had proved his point, and that it's okay to rely on statute to interpret CAS, but not on the FAR.

My response was to point out that you have to know what a "negotiated contract" is in order to apply CAS 9903.301. That term is not defined in statute, only in two titles of the CFR, one of which is FAR. My point is that you need the FAR in order to define "negotiated contract," which shows that you need FAR in order to interpret CAS and that it is not improper or impermissible, as H2H has asserted, to rely on FAR 1.108( c) in order to determine the dollar value of an IDIQ contract for purposes of application of the CAS dollar thresholds.

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Looks like I wasn't so far off - go figure.

http://www.asbca.mil/Decisions/2012/57400%20MCC%20Construction%20Corporation%207.16.12%20WEB.pdf

"Contrary to the government's contention, FAR 2.101 does not define a task order as a contract in the first instance. FAR 2.101 defines a task order as "an order for services placed against an established contract or with Government sources." While a task or delivery order may also be a contract under some circumstances, see AmerescoSolutions, Inc., ASBCA Nos. 56824, 56867, 11-1 BCA ~ 34,705 at 170,906, the plain meaning ofthe Act does not suggest such an interpretation here."

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Whynot,

Note that the ASBCA was trying to interpret the word "contract" as it was used in the Small Business Competitiveness Demonstration Program Act--not as it is used in the FAR.

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In light of the above ASBCA decision, do you think that "contract opprtunities" or "contracting opportunities" in FAR Part 19 could refer to either contracts or task orders or both? The language is very close.

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the terms are used elsewhere in FAR part 19.

Likewise, FAR Part 5, Publicizing Contract Actions, does every task order fall within a “contract action”? Maybe we have to look beyond the word contract, and look to its usage, such as “contract opportunity” and “contract action”.

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"Contract opportunities" appears once in FAR part 19--at FAR 19.201(d)(11). "Contracting opportunites" appears once in FAR part 19, at FAR 19.402( c )(2), as part of the term "prime contracting opportunities." Neither term is defined in the FAR. Since the applicable definition of "contract" at FAR 2.101 is broad enough to include task orders, I would interpret "contract opportunities" to include opportunities for task orders. "Contracting opportunities" appears to be synonymous with "contract opportunities", so I think that would include task orders, too.

As far as FAR part 5, "contract action" is defined at FAR 5.001 as follows:

"'Contract action,'as used in this part, means an action resulting in a contract, as defined in Subpart 2.1, including actions for additional supplies or services outside the existing contract scope, but not including actions that are within the scope and under the terms of the existing contract, such as contract modifications issued pursuant to the Changes clause, or funding and other administrative changes."

Given that definition, a task order within the scope and under the terms of an existing contract would not be a "contract action." Alternatively, if such a task order were a "contract action", it would be excepted from the synopsis requirement pursuant to FAR 5.202(a)(11).

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Gibson, don't think in terms of contract actions. The general rule is, "If the initial contract is covered, changes and amendments thereto are also subject to CAS, even though they might otherwise be exempted ($500,000 or under, for example). If, however, the initial contract is not covered, changes and amendments are not covered." Cibinic & Nash, Cost-Reimbursement Contracting (3d Ed. 2004), at 661.

In this Wifcon thread from 9 Nov 07, Vern discussed how "CAS may apply on a task order by task order basis." It isn't obvious to me whether I've misunderstood his post, he has changed his mind or if the issues in the two threads are distinguishable.

Prior to 4 Nov 93, "net awards" in the CAS meant "the total obligated value of negotiated prime contract and subcontract awards received during the reporting period." (emphasis added). The CASB redefined "net awards" on 4 Nov 93 to mean the total value of negotiated covered prime contract and subcontract awards, including the potential value of contract options received during the reporting period.

The issue as I understand it (which apparently is not very well) is whether task orders against an ID/IQ contract should be treated like options for purposes of assessing CAS coverage. The FAR Council appears to believe that they should. Is the "total value" of an ID/IQ contract (when no longer tied to a government obligation) its ceiling? Probably [edit: for a priced IDIQ]. Nash & Cibinic in the article I cited earlier attempts to distinguish task orders from options, but they don't go so far as to suggest that the contract minimum should be used in assessing whether CAS applies. They did, however, recommend something other than contract ceiling. However, this article--while after the CAS change--was before FASA (and, of course, before the comment in the Federal Register). I don't think anyone would fault a CO for using the ceiling.

Bumping up an old topic.... I cannot find the 9 Nov 07 on "CAS may apply on a task order by task order basis." Perhaps it is too old to query.

I have an FFP IDIQ supply contract. The contract contains five option years; all with negotiated/priced CLINS established prior to the basic contract award.

Question: What portions of this contract are/ would be CAS covered? Would it be each delivery order, each option year (though exercise of an option year does not generate a delivery order), or the five year IDIQ contract in its entirety? I cant seem to find a clear answer anywhere and looking for some opinions. Thanks

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Below is the post requested which was titled CAS Covered, or Not? It was posted by Vern and the entire thread looks interesting. I'll see what I can do to add the entire thread to the archives. Below is Vern's post:

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Posted on Friday, November 09, 2007 - 09:23 am:
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This thread raises an interesting issue concerning IDIQ contracts that has never been resolved.

According to here_2_help, all CLINs of the hypothetical IDIQ contract are to be firm-fixed-price. Presumably, the offerors are to propose labor rates (presumably "loaded"). The total amount for labor and for other direct costs applicable to each task order will be negotiated on a task order by task order basis. Here_2_help has not said whether the contract would be multiple award or single award.

If I understand the situation correctly, and I'm not sure that I do, the hypothetical contracting officer has taken the position that CAS will/might apply to individual task orders because amounts for other direct costs will be negotiated on a task order by task order basis, without adequate price competition. Is that right, here_2_help?

If that's the situation, see FAR 16.505(B )(3), which reads as follows:

"Pricing orders. If the contract did not establish the price for the supply or service, the contracting officer must establish prices for each order using the policies and methods in Subpart 15.4."

I maintain that the hypothetical contract will not establish the price for the services to be acquired thereunder. It will merely establish an advance agreement on the amount that the contractor may include in its proposed task order price for an hour of labor, including cost and profit. The price for the service described in each work statement will be the total amount agreed upon for each task order, which will be negotiated prior to issuance of the task order. That being the case, and depending whether the contract would be multiple award and on how the task orders would be awarded, there may not be adequate price competition for task order pricing. That being the case, TINA and CAS may apply on a task order by task order basis.

This has been a long-standing, lurking issue that no one has wanted to face because of the unpleasant implicatioins. I feel very comfortable with my position. Some will argue that price has been established because the parties have agreed upon fixed labor rates, but that position is an insult to the intelligence of a knowledgeable and competent contracting professional. That argument may be valid if orders would be priced on a T&M or L-H basis, but not if they will be priced on a firm-fixed-price basis, under which the contractor will not be paid by the hour, but for task completion.

I think the hypothetical contracting officer is right, assuming that the contract meets other CAS criteria. But I'd wager that he/she thinks that TINA would not apply on an order-by-order basis, a position which would be inconsistent with his/her position on CAS.

As for the legal status of the working group guidance, no one has cited a specific statement within that 60 page document. I have not read it in more than 20 years, I have no intention of reading it to find out what you are all referring to, and, in any case, I'm not a lawyer so you probably don't care about my opinion as to its legal standing.

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