Can Time-and-Material Contracts Be Considered Non-Severable?

[rios0311]

I can't change the title of this thread, but a more appropriate title would have been Can Time-and-Material Contracts be considered non-severable.

We do a lot of R&D contracting. For some reason, most of these contracts are T&M. I have a few questions about this. Can Time-and-Materials contracts be non-severable? My rationale is that they cannot be non-severable because the contractor has provided something of value to us with every hour of labor that is provided to us. Additionally, I have read that Time-and-Materials contracts should not have express deliverables. I specified research contracts because many of our contracts have only a research report due at the end of the POP as the only deliverable. I don't agree with the program offices' rationale that their contract should be non-severable, since, according to them, without receiving a deliverable (their research report) they have not received anything of value.

I don't think this is the appropriate contract type for this effort, but if it was used, I don't think the deliverable should have been there in the first place since this contract type only requires the contractor's best effort and the research was of importance to the government. I think each hour of labor is a deliverable under a T&M contract. Isn't their labor or effort what we are paying?

It seems to me that T&M contracting is not appropriate for R&D contracting but I will inquire about that in a separate thread.

[DJS-Contracts]

I would think the "severability" would revolve around the nature of the work, not the type of contract.

The fact that a possibly inappropriate contract type was selected, does not of itself change the nature of the activity and transform something from non-severable to severable.

If the research effort will culminate in some result, and you cut them off before they are finished, you have only a portion of the work and therefore (possibly) only a portion of the expected result. Using that logic, the research effort would seem to be nonseverable services.

I'm assuming that the T&M contract already exists based on your question. While I agree with you that, in general, this may be a poor choice of contract type, you might look to the determination in the contract file (FAR 16.601 (d)) to try and understand why "no other contract type is suitable..." and the underlying rationale leading to the selection of this type of contract.

As an aside, as a general policy my agency (for all intents and purposes) prohibits use of T&Ms completely.

~Don

[Guest Vern Edwards]

We do a lot of R&D contracting. For some reason, most of these contracts are T&M. I have a few questions about this. Can Time-and-Materials contracts be non-severable? My rationale is that they cannot be non-severable because the contractor has provided something of value to us with every hour of labor that is provided to us.

Severability is a characteristic of a service, not of a contract type. A T&M contract can be used to buy nonseverable services. In fact, T&M contracts were designed to be used to hire a contractor to complete a nonseverable task, such as to repair a machine. The expectation (or hope) is that the job can be completed within the ceiling price. The government will pay by the hour, so that if the job costs less than the ceiling the government will pay for only the work that was necessary to complete the task. Today, however, agencies are using them for all kinds of work, including supplemental labor, which is severable.

I agree that the use of T&M is probably inappropriate for R&D, but I can't say for sure because I don't know anything about the work that is being bought.

[rios0311]

Apologies for the late response, but I was on leave. Thank you for your responses; they cleared up several doubts for me.