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Service Contract Reporting for FFP subcontracts


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4 hours ago, Neil Roberts said:

FAR 52.204-14 requires the reporting of direct labor hours expended unless the work was charged to overhead or G&A. There does not seem to be an exception for FFP contract types.

Thank you. Can you please point out where you saw that this requirement does not apply if the work was charged to overhead or G&A, I do not see it in FAR 52.204-25

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7 hours ago, Neil Roberts said:

FAR 52.204-14 requires the reporting of direct labor hours expended unless the work was charged to overhead or G&A. There does not seem to be an exception for FFP contract types.

Direct labor charged to overhead or G&A? Isn’t that a paradox? Please clarify, Neil.   Thanks.

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13 hours ago, Ksenia said:

Thank you. Can you please point out where you saw that this requirement does not apply if the work was charged to overhead or G&A, I do not see it in FAR 52.204-25

I do not see that in 52.204-25 Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, either. Your post did not indicate what clause was in your contract so I assumed from the language you used in your post, that it might have been 52.204-14 Service Contract Reporting Requirements. Please clarify what contract reporting clause you are concerned with. 

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13 hours ago, Ksenia said:

Thank you. Can you please point out where you saw that this requirement does not apply if the work was charged to overhead or G&A, I do not see it in FAR 52.204-25

Did the OP edit their second post? I didn’t notice earlier the reference to FAR clause 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment. That clause doesn’t address  the topic of “Service Contract Reporting”.

Maybe the original post is in reference to a separate topic? 

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13 hours ago, joel hoffman said:

Direct labor charged to overhead or G&A? Isn’t that a paradox? Please clarify, Neil.   Thanks.

Hi Joel. Nice to hear from you. Maybe the world would have been better off if I had just said, report labor hours that are classified as "direct" unless of course, they are not.

 

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15 minutes ago, Neil Roberts said:

Hi Joel. Nice to hear from you. Maybe the world would have been better off if I had just said, report labor hours that are classified as "direct" unless of course, they are not.

 

Hey there, Neil. Your post made me think about what a “direct labor hour” is. I looked for a FAR definition without much success. I also found a interesting definition on the Web. Does direct labor hour include all labor directly charged to a contract as a direct cost in a contractors accounting system to include supervision, safety, etc?

G&A wouldn’t normally be a direct cost. “Overhead”? Depends on whether it’s charged to one contract or shared among other like business, perhaps? 

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@Ksenia, aside from the clarification that has been requested regarding the clause number in question, are you realizing that the supplier would not normally want to reveal its actual labor hours because it is a FFP contract type, and your company did not flow any contract requirement for it to obtain access to the suppliers books and records and/or require the supplier to report such actuals to your company?

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1 hour ago, joel hoffman said:

Hey there, Neil. Your post made me think about what a “direct labor hour” is. I looked for a FAR definition without much success. I also found a interesting definition on the Web. Does direct labor hour include all labor directly charged to a contract as a direct cost in a contractors accounting system to include supervision, safety, etc?

G&A wouldn’t normally be a direct cost. “Overhead”? Depends on whether it’s charged to one contract or shared among other like business, perhaps? 

🧐 You need a definition for direct labor cost? G&A wouldn't "normally" be a direct cost?

According to the Government Contracts Reference Book, 5th ed., overhead refers to an indirect cost. The term overhead appears in 40 places in the FAR, and in none of those places does it indicate that overhead is a direct cost.

What are you and Neil trying to do to poor Ksenia?

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3 hours ago, Neil Roberts said:

I do not see that in 52.204-25 Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, either. Your post did not indicate what clause was in your contract so I assumed from the language you used in your post, that it might have been 52.204-14 Service Contract Reporting Requirements. Please clarify what contract reporting clause you are concerned with. 

My apologies, there was a typo on my end, I meant to say FAR 52.204-14, not 25

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16 hours ago, Ksenia said:

Can you please point out where you saw that this requirement does not apply if the work was charged to overhead or G&A, I do not see it in FAR 52.204-[14]

@KseniaThe clause says that you must report only direct labor hours, which are charged to contracts as direct costs.

Overhead and G&A are indirect costs. Labor charged to overhead and G&A pools are indirect costs, and thus are indirect labor.

  1. Please go to FAR Part 2 and look up the definition of direct cost and the definition of indirect cost.
  2. Then go to FAR 31.202 and read the discussion of direct costs.
  3. Then go to FAR 31.203 and read the discussion of indirect costs.
  4. Then go to FAR 31.001 and read the definition of cost objective.

After doing those things come back here if you need further clarification.

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38 minutes ago, Vern Edwards said:

@KseniaThe clause says that you must report only direct labor hours, which are charged to contracts as direct costs.

Overhead and G&A are indirect costs. Labor charged to overhead and G&A pools are indirect costs, and thus are indirect labor.

  1. Please go to FAR Part 2 and look up the definition of direct cost and the definition of indirect cost.
  2. Then go to FAR 31.202 and read the discussion of direct costs.
  3. Then go to FAR 31.203 and read the discussion of indirect costs.
  4. Then go to FAR 31.001 and read the definition of cost objective.

After doing those things come back here if you need further clarification.

Thank you! Thats helpful!

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17 hours ago, Vern Edwards said:

🧐 You need a definition for direct labor cost? G&A wouldn't "normally" be a direct cost?

According to the Government Contracts Reference Book, 5th ed., overhead refers to an indirect cost. The term overhead appears in 40 places in the FAR, and in none of those places does it indicate that overhead is a direct cost.

What are you and Neil trying to do to poor Ksenia?

I didn’t try to do anything to her. I didn’t advise or address her.  But I did incorrectly  mention the word “normally” in reference to G&A in my response to Neil. That is wrong.

Yes - Labor charged to G&A is not a direct cost.

As for the term “overhead”, what one is referring to depends upon one’s perspective. A direct cost objective can be at a contract level or at a task level depending upon one’s perspective. 

I was wondering if supervisory labor, on-site or off-site,  higher level management labor and other similar non-production labor to perform the services, if directly charged to a service contract, would be included in the annual reporting requirement for a service contract.

For construction contracts, on-site project supervision and management salaried labor costs  are referred to as “field overhead” or “general conditions”, although it is a actually a direct cost to the contract in the contractor’s accounting system, rather than indirectly charged to a contract.

Such costs are often, in practice, spread over all activities for unit pricing or lump sum pricing of individual activities. Yet, they are direct costs to the contract. 

Off-site management and support labor for some firms, like the Bechtels and Raytheon’s were direct charged to service and construction contracts wherever possible, in my experience with them.

Other contractors often indirectly charge for such project support and management, admin, payroll, safety, training,  etc. . 

Not all firms have “overhead” accounts, separate from G&A, particularly smaller firms.

That, plus I didn’t understand what Kensenia was initially asking or what Neil said in his first reply to Kensenia are why I didn’t respond to Kensenia or describe what labor costs are direct for service contract reporting purposes. 

I don’t understand what Congress is really trying to track, either.

The labor for management, supervision, and other support for those actually performing the services may be direct or indirect costs depending upon the scope and size of the service contract and the company organization and accounting structure.

The report doesn’t include lower tier subcontractor labor hours either. This could be a significant share of service activities.

The amounts invoiced during the reporting period might not directly correspond to the number of labor hours expended, either. 

 

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15 hours ago, joel hoffman said:

I don’t understand what Congress is really trying to track, either.

From House Report 111-366, pp. 941-942:

Quote

In the absence of complete and reliable information on the extent of their reliance on service contractors, Federal agencies are not well-equipped to determine whether they have the right balance of contractor and in-house resources needed to accomplish their missions.

They want agencies to track and report the extent to which they rely on service contractors. Direct labor hours are those spent directly performing or supporting agency work.

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edit: I’m not responding this in response to Vern’s last post above.  I didn’t read it until after I posted. Wanted to verify that construction contracts are also included in the reporting.

Labor hour reporting in FAR Part 4 - Administrative and Information Matters

4.000 Scope of part.

This part prescribes policies and procedures relating to the administrative aspects of contract execution, contractor-submitted paper documents, distribution, reporting, retention, and files.

Subpart 4.17 - Service Contracts Inventory

4.1702 Applicability.

      (a) This subpart applies to–

           (1) All FAIR Act agencies, except DoD as specified in 4.1705;

           (2) Solicitations, contracts, and orders for services (including construction*) that meet or exceed the thresholds at 4.1703; and

           (3) Contractors and first-tier subcontractors.

4.1705 Contract clauses.

      (a) The contracting officer shall insert the clause at 52.204-14, Service Contract Reporting Requirements, in solicitations and contracts for services (including construction*) that meet or exceed the thresholds at 4.1703, except for indefinite-delivery contracts. This clause is not required for actions entirely funded by DoD, contracts awarded with a generic entity identifier, or in classified solicitations, contracts, or orders.

[The FAR Matrix for FP and CR Construction contracts indicates that the Clause 52.204-14 is applicable to construction contracts.]

52.204-14 Service Contract Reporting Requirements.

(a) Definition.

      First-tier subcontract means a subcontract awarded directly by the Contractor for the purpose of acquiring supplies or services (including construction*) for performance of a prime contract. It does not include the Contractor’s supplier agreements with vendors, such as long-term arrangements for materials or supplies that benefit multiple contracts and/or the costs of which are normally applied to a Contractor’s general and administrative expenses or indirect costs.

…b) The Contractor shall report, in accordance with paragraphs (c) and (d) of this clause, annually by October 31, for services performed under this contract during the preceding Government fiscal year (October 1-September 30).      

…(c) The Contractor shall report the following information:

           (3) The number of Contractor direct labor hours expended on the services performed during the previous Government fiscal year.

           (4) Data reported by subcontractors under paragraph (f) of this clause.

(f)  (1) The Contractor shall require each first-tier subcontractor providing services under this contract, with subcontract(s) each valued at or above the thresholds set forth in 4.1703(a)(2), to provide the following detailed information to the Contractor in sufficient time to submit the report:                

                …(ii) The number of first-tier subcontractor direct-labor hours expended on the services performed during the previous Government fiscal year.

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1 hour ago, Vern Edwards said:

From -942:

They want agencies to track and report the extent to which they rely on service contractors. Direct labor hours are those spent directly performing or supporting agency work.

Yes, I think they want to know the number of labor hours expended to actually perform the services, including construction, for the sake of consistency. I’d include their direct supervision. 

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  • 2 months later...

Joel

In one of your posts you said

On 10/29/2022 at 8:23 PM, joel hoffman said:

For construction contracts, on-site project supervision and management salaried labor costs  are referred to as “field overhead” or “general conditions”, although it is a actually a direct cost to the contract in the contractor’s accounting system, rather than indirectly charged to a contract.

Such costs are often, in practice, spread over all activities for unit pricing or lump sum pricing of individual activities. Yet, they are direct costs to the contract.

Joel, I don't know what "spread over all activities" are you saying this field person was not proposed or currently being billed as a FE?  If I was the owner I wouldn't want a field supervisor PE on my project? splitting his hours and attention to any project other than mine? So the accounting system, in practice, is allocating costs spread out over several project sites but the person is at one specific construction site? 

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18 hours ago, general_correspondence said:

Joel

In one of your posts you said

Joel, I don't know what "spread over all activities" are you saying this field person was not proposed or currently being billed as a FE?  If I was the owner I wouldn't want a field supervisor PE on my project? splitting his hours and attention to any project other than mine? So the accounting system, in practice, is allocating costs spread out over several project sites but the person is at one specific construction site? 

I didn’t say any of those things.  Field Office personnel assigned to a construction site would be counted as direct labor hours for the reporting requirement for the contracts they are assigned to.

If the person is working on multiple projects and direct charging their time to them, then the reporting would likewise be appropriately apportioned to the multiple projects.

Likewise, if the person is actually charged to overhead or G&A, then they aren’t a direct cost to the various contracts and wouldn’t be included in the direct labor reporting, right? 

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