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Requirements for an Increase in Estimated Costs


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All,

There is a discussion in my office on the correct path to increase the estimated cost (and funding) on a CPFF contract that is going to eventually exceed the estimated cost in order to complete. In this case, there has been no Government-directed change in the requirements. It is an R&D completion contract that, due to some performance complications, cost more than was competitively proposed and the Government wants to continue to fund  to have an executable program. The LoF clause says that the estimated cost must be increased as well. So, the office discussion has revolved around what is needed to continue to incrementally fund the contract.

One thought is the contractor submit a ROM to the PCO to and all parties sit down and determine if the new estimated costs to complete is within the programs budget/schedule to continue. If so then we increase the estimated costs and continue to incrementally fund and if not then we terminate the contract.

A second thought was the contractor submits a proposal and all costs are evaluated and once agreed the estimated costs to complete are increased and we incrementally fund. Some pushback with this is schedule. The program cannot afford the additional time to have a completed program as it puts other missions at risk. Second, is the understanding of FAR 15.403-2(b) which states "Certified cost or pricing data are not required for proposals used solely for overrun funding or interim billing price adjustments." If they aren't required to certify does a proposal add more value then a ROMN if the Government can still feasibly determine its in the best interest to move forward. 

 So, I thought I'd come to this board to discuss/receive feedback and see if I can get some other opinions. Thanks.

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1 hour ago, Contract Noob said:

…Some pushback with this is schedule. The program cannot afford the additional time to have a completed program as it puts other missions at risk.

Didn’t understand this. Does this mean that this program must be complete within the present period? What is the governments objective? To complete the program or contract requirements within the schedule period ? To complete as much as possible within the period?

 

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@Contract Noob

3 hours ago, Contract Noob said:

There is a discussion in my office on the correct path to increase the estimated cost (and funding) on a CPFF contract that is going to eventually exceed the estimated cost in order to complete.

Your first option is probably the norm in most offices that handle cost-reimbursement R&D.

3 hours ago, Contract Noob said:

If they aren't required to certify does a proposal add more value then [sic] a ROMN if the Government can still feasibly determine its in the best interest to move forward[?] 

It might add more value, depending on what you mean by "value" and what you would learn from each. What in your mind is the difference in content between a "rough order of magnitude" estimate and a "proposal" estimate? Do you think that either of those terms describe specific content?

What info do you need to make a funding decision?

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Noob,

You need to read the LoF clause, and then do what the clause says.  It really is that simple.  

Are you (I assume you represent the Government) going to allot additional funds to allow completion of the contract's unchanged terms, including unchanged performance period?  That is a simple YES or NO question.

If YES, will you allot additional funds to cover all or just part of the projected overrun? 

Make your decision, and do the unilateral modification.  Yes, unilateral.

If the contractor insists on an extended performance schedule, you may terminate the contract now, maybe for the contractor's [anticipated] default.

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1 hour ago, ji20874 said:

Make your decision, and do the unilateral modification.  Yes, unilateral.

@ji20874You might want to clarify that. Not all funding mods are properly unilateral. See 52.232-22 paragraph (d):

Quote

(d) Sixty days before the end of the period specified in the Schedule, the Contractor shall notify the Contracting Officer in writing of the estimated amount of additional funds, if any, required to continue timely performance under the contract or for any further period specified in the Schedule or otherwise agreed upon, and when the funds will be required.

Emphasis added. If the funding mod includes an "otherwise" performance agreement, then it must be bilateral.

Actions under paragraphs (g) and (i) might also warrant a bilateral agreement.

 

 

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I agree that a modification that includes an "otherwise" performance agreement should be bilateral, but that isn't what we're talking about.  The original poster says nothing else is changing, and my comment was clearly premised on nothing else changing -- so if nothing is changing except the funding, then certainly yes to unilateral.

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12 hours ago, ji20874 said:

The original poster says nothing else is changing...

@ji20874Not true. The OP says that there have been "complications," an overrun, and that the parties will have to determine a new estimated cost before the agency decides whether to continue to fund the contract or terminate.

On 7/7/2022 at 8:07 AM, Contract Noob said:

It is an R&D completion contract that, due to some performance complications, cost more than was competitively proposed and the Government wants to continue to fund  to have an executable program. The LoF clause says that the estimated cost must be increased as well... One thought is the contractor submit a ROM to the PCO to and all parties sit down and determine if the new estimated costs to complete is within the programs budget/schedule to continue. If so then we increase the estimated costs and continue to incrementally fund and if not then we terminate the contract.

A change in the parties' agreement about the estimated cost must be bilateral.

You have be careful about what you say to noobies like Contract Noob.

But you have clarified your post. Thanks.

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And it appears that the program cannot “afford” to extend the performance period. I didn’t understand if that was a cost restriction or simply a time constraint. If it is a time constraint then it would seem that the government will have to accelerate the remaining effort. Depending upon the reasons, if any, for “performance complications” , the acceleration costs perhaps may be considered a change? 

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On 7/7/2022 at 8:07 AM, Contract Noob said:

One thought is the contractor submit a ROM to the PCO to and all parties sit down and determine if the new estimated costs to complete is within the programs budget/schedule to continue. If so then we increase the estimated costs and continue to incrementally fund and if not then we terminate the contract.

What would be the basis for termination...I assume for the government's convenience?  

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