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1. If a firm-fixed-price contract or order is for an annual service, with performance and pricing specified by lot, can the buyer reject the entire lot and refuse to pay for any of it if just part of the work was unacceptable?

2. If a reduction in the price of the invoice is required to account for the “services” not provided, how is that reduction calculated given that the CLIN is FFP and is 1 lot?

Background for question: 

  • TO lists the Type of Contract as Firm Fixed Price and Kind of Contract as Supply Contracts and Priced Orders. Task Order is awarded unilaterally IAW IDIQ pricing.  The CLIN notes that the Service Requested is Support or XYZ Contract, FFP CLIN Type, Inspection / Acceptance at Destination, start and end date of PoP (delivery schedule just notes Qty 1 Lot, Performance Completion Date (end date). 
  • At the IDIQ level, each year has it's own CLIN for these XYZ Services.......so XYZ Support (Year 1), XYZ Support (Year 2), XYZ Support (Year 2), etc.; on the IDIQ it references PWS paragraphs....however, the order awarding / funding the services does not call out PWS paragraphs, only a PoP.
  • The inspection clauses would be governed by Inspection of Fixed Price - Services.
  • Contractor provided, invoiced and was paid for said services per Year 1 and Year 2 without issue (typical services included management, CDRL Delivery, attending meetings, etc. (basically program / contract / IPT management and administration)).
  • For Year 3, same services awarded and performed; however, invoice was rejected for non-compliance (not providing all services required).

The services awarded don't have specific completion criteria other than CDRL Deliverables, which are re-occurring (some monthly, quarterly, etc.).  Requirements also list vague items like Contractor shall attend Technical Reviews and prepare meeting agendas and minutes, attend weekly Program Meetings and conduct quarterly program reviews.

The Services cited as not provided consist of 1 quarterly meeting, 1 quarterly CDRL, and non-attendance at IPT Meetings.

Because of the "non-compliance" cited, the entire invoice has been rejected.

 

  

Edited by kburnett4112
Clarity
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@kburnett4112

Next time, start with a clearly worded question, then go into the background. Starting with a long-winded (and confusing) background is a good way to lose readers before they get to the question.

You make the reader's problem worse by not asking a clear question. I could find only one question mark in your post. It comes at the end of this sentence:

50 minutes ago, kburnett4112 said:

Additionally, if a reduction in the price of the invoice is required to account for the few items that were not provided, how is that reduction calculated given that the CLIN is FFP and is 1 lot.......so there is no item price per se or breakout of services associated with CDRLs, program management, SC Management, Program Meetings, etc. it's just one lump price for the lot?

I think what you are trying to ask is this:

If a firm-fixed-price contract or order is for a service with performance and pricing specified by lot, can the buyer reject the entire lot and refuse to pay for any of it if just part of the work was unacceptable?

Is that what you want to know?

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Thank you for clarity, I have updated the OP accordingly.

Below are my core questions:

1. If a firm-fixed-price contract or order is for an annual service, with performance and pricing specified by lot, can the buyer reject the entire lot and refuse to pay for any of it if just part of the work was unacceptable?

2. If a reduction in the price of the invoice is required to account for the “services” not provided, how is thatreduction calculated given that the CLIN is FFP and is 1 lot?

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13 hours ago, kburnett4112 said:

Below are my core questions:

1. If a firm-fixed-price contract or order is for an annual service, with performance and pricing specified by lot, can the buyer reject the entire lot and refuse to pay for any of it if just part of the work was unacceptable?

2. If a reduction in the price of the invoice is required to account for the “services” not provided, how is thatreduction calculated given that the CLIN is FFP and is 1 lot?

I cannot answer those questions without a lot more information about the nature of the service in question.

I will say, however, that if a service "lot" consists of multiple and various tasks, and if the contractor's performance of only some of the tasks was unacceptable, then I doubt that a board of contract appeals or the Court of Federal Claims would go along with rejection of the entire "lot" and refusal to pay for any of it. If the tasks were independent of one another and could be separated for purposes of QA, then I think that the government could refuse to pay only for the ones for which performance was unacceptable.  How the parties would come up with the value of each task is something they would have to work out.

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1 hour ago, Vern Edwards said:

If the tasks were independent of one another and could be separated for purposes of QA, then I think that the government could refuse to pay only for the ones on which performance was unacceptable.  How the parties would come up with the value of each task is something they would have to work out.

Should have come up with the value at solicitation stage.  It’s too late for this inspection to have its intended effect.  @kburnett4112, use this experience to work on improving the performance requirements summary and CLIN structure for your next TO/contract.

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I disagree, WifWaf. If the contractor fails to perform or adequately perform services and it is not possible to re-perform or perform the services, the government doesn’t have to pay for the non-performed services, assuming that the following clause is in the contract.

“52.246-4 Inspection of Services - Fixed-Price.

As prescribed in 46.304, insert the following clause:

Inspection of Services - Fixed-Price (AUG 1996)

(a) Definitions.Services, as used in this clause, includes services performed, workmanship, and materialfurnished or utilized in the performance of services.

(b) The Contractor shall provideand maintain an inspection system acceptable to the Government covering the services under this contract. Complete records of all inspection  work performed by the Contractor shall be maintained and  made available to the Government during contract performance and for as long afterwards as the contract requires.

(c) The Government has the right to inspect and test all services called for by the contract, to the extent practicable at all times and places during the term of the contract. The Government shall perform inspections and tests in a manner that will not unduly delay the work.

(d) If the Government performs inspections or tests on the premises of the Contractor or a subcontractor, the Contractor shall furnish, and shall require subcontractors to furnish, at no increase in contract price, all reasonable facilities and assistance for the safe and convenient performance of these duties.

(e) If any of the services do not conform with contract requirements, the Government may require the Contractor to perform the services again in conformity with contract requirements, at no increase in contract amount. When the defects in services cannot be corrected by reperformance, the Government may (1) require the Contractor to take necessary action to ensure that future performance conforms to contract requirements and (2) reduce the contract price to reflect the reduced value of the services performed.

(f) If the Contractor fails to promptly perform the services again or to take the necessary action to ensure future performance in conformity with contract requirements, the Government may (1) by contract or otherwise, perform the services and charge to the Contractor any cost incurred by the Government that is directly related to the performance of such service or (2) terminate the contract for default.”

The question that begs to be asked is, what did the COR do to assure that the contractor was performing the required services, since he/she knew that they didn’t perform all the services?

The government QA/CA team should raise the issue to the contractor and COR after the first incidence of non-performance. There were multiple incidents and repeated incidents of non-attendance at IPT meetings.

One needs to know and use the contract administration tools available.

 

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17 hours ago, Vern Edwards said:

then I think that the government could refuse to pay only for the ones for which performance was unacceptable.  How the parties would come up with the value of each task is something they would have to work out.

I agree, assuming (per the described scenario) that it is too late to perform those tasks now. 

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I have a bone to pick for some of the sharp tools that might have been included, but instead are lacking in the typical assortment given to the Contracting Officer when they deal with nonconforming services. 

As I understand it, the 2-in-1 Invoice most often used in WAWF (Wide Area Workflow) for FFP Services, does not allow for partial acceptance (it's all or nothing) on invoiced quantities. And often the Unit of Issue modeled in a template or routinely used for the sake of convenience in a line item is "Month" instead of something that might allow for acceptance of lesser quantities such as "sq. feet" or "acres" to give just two examples. I've seen a procedure to make a Govt estimate ahead of time based on such useful measures, but still accompanied by a suggested CLIN structure that specified "month" as the unit of measure...go figure?

Let's think it over. What kind of signal are we sending? What kind lessons might be learned by the contractor if the Contracting Officer does not have the readiest tools available to deal promptly and effectively with nonconforming services which fail inspection and for which reperformance is not possible?

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18 hours ago, FAR-flung 1102 said:

I have a bone to pick for some of the sharp tools that might have been included, but instead are lacking in the typical assortment given to the Contracting Officer when they deal with nonconforming services. 

Why must contracting officers be "given" tools?

Hell, why don't they make their own?????

The problem is that contracting officers in particular and contracting practitioners in general have not devoted any substantial time to thinking about what they buy when they buy services.

FAR reflects government experience buying supplies. There is a 57-word definition of supplies in FAR 2.101, but there is no definition of services. In fact, there is no definition of services anywhere in FAR. The definition in FAR 37.101 is for "service contract," not for services. Yet we spend more money on services now than on supplies. Most contracting officers cannot give a coherent explanation of the concept of services.

How many articles have you read from the voluminous literature on the unique problems of buying services? How much time have you spent thinking about the nature of services, about what kind of thing they are, about what all services have in common and of the different species of services? How much time have you spent discussing those things with your colleagues?

Hmmm?

As a class, contracting practitioners simply do not think deeply about their business. Not much at all, based on the evidence. So we see "lot" "LO" being used as a unit of delivery for services, even though it's generally inappropriate. The same could be said for "month." We see contract line item structures not properly aligned with work statement task structures. We see failures to think through the problem of price reductions for unacceptable task performance and to establish appropriate contract terms to supplement the Inspection of Services clause. 

I have recommended books and articles about services. I have written a number of published articles about contracting for services. Here are some titles, all of which have appeared in The Nash & Cibinic Report:

  1.  PERFORMANCE WORK STATEMENTS: The Policymakers' Monster—Where Is Our Theseus? (February 2021)
  2.  IDIQ CONTRACTS FOR SUPPORT SERVICES: What Are They Really? (October 2018)
  3.  FIRM-FIXED-UNIT-PRICE vs. TIME-AND-MATERIALS: A Good Alternative For Services Acquisition (April 2015)
  4. COMPETITIVE PROPOSALS: What Is Their Predictive Value? (November 2014)
  5.  SERVICE CONTRACTING: Three Unsolved Problems (November 2011)
  6.  CONTRACTING FOR SERVICES: Challenges For The Next Generation (December 2010)
  7. “TRADECRAFT” IN SERVICES ACQUISITION: DOD's New Policies (November 2010)
  8.  NONCONFORMING SERVICES: What Are The Government's Rights Under Fixed-Price Service Contracts? (April 2008)
  9.  SERVICE CONTRACT QUALITY: We've Got More Thinking To Do (March 2008)
  10. OBLIGATING FUNDS FOR SERVICES UNDER IDIQ CONTRACTS THAT CROSS FISCAL YEARS: What Are The Rules? (May 2006)
  11.  THE ACQUISITION ADVISORY PANEL AND PERFORMANCE-BASED SERVICES: A Wasted Year
  12.  PRICING SERVICE CONTRACTS (May 2005)
  13.  A CHANCE TO FIX PERFORMANCE-BASED CONTRACTING (April 2005)
  14.  THE SERVICE CONTRACTING POLICY MESS (November 2001)
  15.   LONG-TERM SERVICE CONTRACTING IN THE YEAR 2000 AND BEYOND (September 1999)
  16.   PROMISES, PROMISES: SERVICE CONTRACT COMPETITIONS (November 1997)

That list covers 25 years. Yet not one practitioner has taken up one of those articles as a starting point and run with it, not even to say they think it's wrong.

Not one practitioner.

Not one.

But who reads? Who thinks? Who writes down their thoughts? Who shares their thoughts with colleagues? Who devises and experiments with solutions?

No bleeping body, that's who! And old-timers like me are getting older every day. We're not going to be around forever. 

WHO IS GOING TO PICK UP THE BLEEPING BALL?

Give tools to contracting officers? Give?

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19 hours ago, Vern Edwards said:

FAR reflects government experience buying supplies. There is a 57-word definition of supplies in FAR 2.101, but there is no definition of services. In fact, there is no definition of services anywhere in FAR. The definition in FAR 37.101 is for "service contract," not for services. Yet we spend more money on services now than on supplies. Most contracting officers cannot give a coherent explanation of the concept of services.

In addition to this rather damning fact, I would add that the CASB Disclosure Statement (DS-1) was last revised and reissued in February, 1996. Literally more than twenty-five years ago. I wonder if any aspects of Federal acquisition have changed in the past 25 years? (Sarcasm.)

The current DS-1 reflects government experience buying supplies. The focus is on manufacturing. There is but short shrift given to labor.

I have a services provider preparing its first DS-1 right now, and I'm spending a fair amount of time translating the ancient language and concepts into their language. So much is not addressed, and so much that is addressed in simply N/A to a services provider. I tell them it's a government form and they have to complete it as written, notwithstanding that most of the questions are N/A or require detailed explanations on the continuation pages.

In my view, its shameful how little attention has been paid (by those who are paid to pay attention) to bringing the Federal acquisition environment into the 21st century. The CAS Board is the poster child for negligence in this area.

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On 5/21/2022 at 8:16 PM, C Culham said:

Hey folks....does the contract payment clause count for anything?  And any other terms and conditions that count for measurement and payment.?

And if they do maybe the OP ought to check them out!

 

 

This clause is in harmony with with the Inspection of Services (FP) clause that I quoted above:

“52.232-1 Payments.

As prescribed in 32.111(a)(1), insert the following clause, appropriately modified with respect to payment due date in accordance with agency regulations, in solicitations and contracts when a fixed-price supply contract, a fixed-price service contract, or a contract for nonregulated communication services is contemplated:

Payments (Apr 1984)

The Government shall pay the Contractor, upon the submission of proper invoices or vouchers, the prices stipulated in this contract for supplies delivered and accepted or services rendered and accepted, less any deductions provided in this contract. Unless otherwise specified in this contract, payment shall be made on partial deliveries accepted by the Government if-

       (a) The amount due on the deliveries warrants it; or

       (b) The Contractor requests it and the amount due on the deliveries is at least $1,000 or 50 percent of the total contract price.       (End of clause)”

The two clauses are complementary.

So what else does one need to know concerning the scenario in the original post and the two questions in kburnett’s second post? kburnett shouldn’t need step by step instructions to obtain a deduction.

 

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The government’s automated contracting software certainly ought to be able to handle a change to add a credit (deduction) line item or credit (deduction) subline item or other method of deduction. The contract provides for deductions. I can’t believe that the tail wagging the dog software programs can’t handle a deduction to an invoice through a reduction of the contract price .

Edit: For example, If the “lot” is paid out in monthly increments, the KO could reduce a monthly payment to reflect the deduction for unperformed services and modify the overall lot price now or later to reflect deductions.

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Joel and Carl, you raise the question: what is the Government's intended purpose for including an inspection clause?

Yes yes, I agree with you that there are clauses available for the CO and COR to gang up on the Contractor's Contracts Manager.  These are there to fall back on, despite the Contracts Manager and very likely the CO not having read them at the time of meeting minds and signing.  I have had to use these myself, and the effect on a contract like the described situation here is usually ticky tacky and saves us a few bucks for a few months, at great expense of time, and with much hand-wringing.

But I said:

On 5/20/2022 at 9:07 PM, WifWaf said:

It’s too late for this inspection to have its intended effect.

And I meant the inspection clause and its saber-rattling language ideally deters bad performance.  It is best used as something we point to in Section B or C alongside the description of the most critical thing we are buying, to highlight what matters most to us be performed.  That way the Contractor's President on up cannot miss the CO carrying a big stick.

Joel, read FAR 52.246-4 again, and highlight to yourself where it says "contract requirements".  When you see its use of that term, what do you think the Contractor thinks it means in kburnett's stated situation?  There is no NSN for services.  This term is really up to us to define unambiguously and with a mission-focus in the solicitation, through our tradecraft of writing the CLIN description or statement of work.

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36 minutes ago, WifWaf said:

Joel, read FAR 52.246-4 again, and highlight to yourself where it says "contract requirements".  When you see its use of that term, what do you think the Contractor thinks it means in kburnett's stated situation?  There is no NSN for services.  This term is really up to us to define unambiguously and with a mission-focus in the solicitation, through our tradecraft of writing the CLIN description or statement of work.

The OP described the contract requirements that were not met. It doesn’t matter that the CLIN was for a lump sum. Pay for the required services that were performed but don’t pay for required services that weren’t performed and can’t be made up later. 

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1 hour ago, WifWaf said:

Joel and Carl,

I just threw out the payment clause and other contract terms and conditions regarding measurement and payment as advice as other places to look for the OP to help solve their dilemma.   Vern gave the best answer already.

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Vern’s advice was spot on, procedurally. You and I just provided some contractual terms to base it upon.  The clauses which should be in the contract provide an answer to the OP’s first question. You pay for the required services that were provided and don’t pay for required services which weren’t provided and can’t be made up. 

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Wow, this is really getting away from OPs question.  In part that is

Quote

If a reduction in the price of the invoice is required to account for the “services” not provided, how is thatreduction calculated given that the CLIN is FFP and is 1 lot?

I assume the OP knows what the payment and inspection clauses mean.  Just guessing here but I think the OPs contract has a bunch of services lumped under a single CLIN and prices as a “lot.”  So I think the question boils down “how to a calculate a partial reduction when some of the work isn’t acceptable?”

Vern answered that earlier.

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19 minutes ago, formerfed said:

Wow, this is really getting away from OPs question.  In part that is

I assume the OP knows what the payment and inspection clauses mean.  Just guessing here but I think the OPs contract has a bunch of services lumped under a single CLIN and prices as a “lot.”  So I think the question boils down “how to a calculate a partial reduction when some of the work isn’t acceptable?”

Vern answered that earlier.

Im surprised that a KO or contract specialist needs help to figure how to take a credit deduction for part of a “lot” (essentially a lump sum item) that wasn’t provided. 

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Under an FFP service contract, each instance of nonperformance or unacceptable performance of a task that cannot be re-performed is a breach of contract,  and the government need not pay for such performance.

Now suppose an FFP service contract requires the contractor to perform a service for one year and the CO has developed a CLIN stipulating a quantity/unit of 12 months and a monthly unit price. And suppose further that the SOW requires performance of 10 tasks in each month and that in one particular month the contractor's performance of one of the 10  tasks was unacceptable and cannot be re-performed. The government does not have to pay for the unacceptable performance.

As a general rule, the CO could not reduce the contract price by one entire month's payment if the performances of the other nine tasks were acceptable. That would not be  reasonable. So, in order to avoid disputes over the amount of payment reductions, the contract should include a schedule showing the amount to be a deducted from each  month's payment for each task that was not acceptably performed and cannot be re-performed.

Now if the tasks must be performed on a daily basis, the schedule must show how much is to be deducted for each day of unacceptable performance.

There is a lot more to this, but you get the idea.

Of course, instead of this formulaic approach the parties could take a relational approach. But that requires a lot more knowledge and skill.

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On 5/21/2022 at 8:16 PM, C Culham said:

Hey folks....does the contract payment clause count for anything?  And any other terms and conditions that count for measurement and payment.?

And if they do maybe the OP ought to check them out!

I have reviewed the payment clauses and payment for these CLINs (since they are FFP) is upon acceptance of the DD250, which is to be submitted at the end of the PoP.

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On 5/22/2022 at 4:29 PM, joel hoffman said:

So what else does one need to know concerning the scenario in the original post and the two questions in kburnett’s second post? kburnett shouldn’t need step by step instructions to obtain a deduction.

So the invoice was submitted in WAWF and was rejected.  I would agree that, IAW the payments clause, if USG believes all services were not rendered, then they should approve partial payment of the invoice, deducting for what services they believe were not provided....." 

This was my first direction to the USG; however, they instead rejected the invoice in full, noted reasoning for the rejection, and requested a proposal for possible resolutions.  

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6 hours ago, joel hoffman said:

Im surprised that a KO or contract specialist needs help to figure how to take a credit deduction for part of a “lot” (essentially a lump sum item) that wasn’t provided.

The issue is that this CLIN / Lot of services is comprised of re-occurring services (monthly, quarterly or annual submissions of several CDRLs), weekly contractor support during technical reviews, management reviews, team meetings; engineering support, testing, etc.

Thus figuring out what deduction is fair for non-delivery or late delivery of 1 CDRL delivery (out of at least 200) and performance of 1 PMR (which is 1 quarterly meeting) is difficult given that the Contractor is supporting 7 other weekly meetings and is providing re-occurring support.

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5 hours ago, Vern Edwards said:

Under an FFP service contract, each instance of nonperformance or unacceptable performance of a task that cannot be re-performed is a breach of contract,  and the government need not pay for such performance.

Now suppose an FFP service contract requires the contractor to perform a service for one year and the CO has developed a CLIN stipulating a quantity/unit of 12 months and a monthly unit price. And suppose further that the SOW requires performance of 10 tasks in each month and that in one particular month the contractor's performance of one of the 10  tasks was unacceptable and cannot be re-performed. The government does not have to pay for the unacceptable performance.

As a general rule, the CO could not reduce the contract price by one entire month's payment if the performances of the other nine tasks were acceptable. That would not be  reasonable. So, in order to avoid disputes over the amount of payment reductions, the contract should include a schedule showing the amount to be a deducted from each  month's payment for each task that was not acceptably performed and cannot be re-performed.

Now if the tasks must be performed on a daily basis, the schedule must show how much is to be deducted for each day of unacceptable performance.

There is a lot more to this, but you get the idea.

Of course, instead of this formulaic approach the parties could take a relational approach. But that requires a lot more knowledge and skill.

I agree with this approach; the difficulty is that the USG is disputing that these services were provided; however, the invoice rejection is the first formal notification of "non-performance," and these instances occurred over a year ago.

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Thanks, kburnett. So, it appears that you are the contractor. How much detail was provided for the invoice? Was it simply request for payment of the lot item?  If so,  then did the government reject it, indicating what services it says weren’t provided?

You stated that the rejection was the first “formal notification” of non-performance? Not sure what that specifically means…

Without any more information, it would look like some mediocre contract admin by the government, IF they waited until you submitted your invoice to inform you of the non-performance.

If the non-performed work is minimal, you could call the KO or government point of contact and offer a credit deduction (and/or submit it in writing). Then, if it is acceptable to the government or if y’all negotiate an amount, ask if you can resubmit a reduced invoice reflecting the agreed deduction. That shouldn’t be very difficult for a small amount. There may be more steps to formalize it but electronic communications should be relatively quick.

There might be a contract mod needed but it may be possible that the mod could follow the reduced invoice and payment. It’s worth asking…

Of course, all this assumes that you and the government have some type of reasonable contractual working relationships and communications procedures.

EDIT: Sorry,  I missed your earlier comment where the government asked for a credit proposal.
Also, it looks like you have a problem determining what the missed work is  —- but you said it is minimal?  If the government identified the specific instances do you have corresponding data to refute it?  If not, and it is truly minimal, is it worth further delay in getting paid?

 

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