Contractor-owned equipment pricing in REA

[NenaLenz]

Negotiating pricing for construction contract REA. We are pricing contractor-owned equipment. CO has directed us to use the owner equipment rate book (EP 1110-1-8, Construction Equipment Ownership and Operating Expense Schedule). Rate book assumption of equipment life hours is much higher than the manufacturer stated equipment life hours. Contractor wants to use manufacturer-defined life hours in lieu of rate book-defined life hours. 

We think this is a reasonable approach. What do you think?

[here_2_help]

Does the contractor have any actual equipment life history to support its position?

[NenaLenz]

Not sure. Let's assume that it does not. Let's assume contractor is relying on information from the manufacturer of the equipment.

[here_2_help]

The manufacturer has incentive to estimate life on the low-end, so that it won't be sued if its equipment fails too early. On the other hand, I think it's a reasonable assumption to believe that the Rate Book takes into account actual history.

[C Culham]

23 hours ago, NenaLenz said:

Negotiating pricing for construction contract REA

So post award correct?

 

23 hours ago, NenaLenz said:

Let's assume that it does not.

Ah, but does not the contractor have history with the contract performance and agreed to pricing prior to award?  REA suggests an action with regard to the changes clause.   Contractor submits based on manufacturer, CO wants Guide.   Either, in the context of a REA seem incongruent to me.  It would seem that the contractor used something when first bidding or proposing on the contract.  For the latter if further negotiated something was used.  In this context why would you not look at what the contractor actually used to determine equipment life hours and how that measured against actual performance?  

 

[joel hoffman]

12 hours ago, C Culham said:

So post award correct?

 

Ah, but does not the contractor have history with the contract performance and agreed to pricing prior to award?  REA suggests an action with regard to the changes clause.   Contractor submits based on manufacturer, CO wants Guide.   Either, in the context of a REA seem incongruent to me.  It would seem that the contractor used something when first bidding or proposing on the contract.  For the latter if further negotiated something was used.  In this context why would you not look at what the contractor actually used to determine equipment life hours and how that measured against actual performance?  

 

31.105 (d) (1) and (2) describe how to price owned construction equipment for modifications to construction contracts, even if the contract was awarded on a competitive basis. If this is a USACE contract, it will likely have a clause prescribing the use of the EP 1110-1-8 for pricing owned equipment in mods.

Interestingly, the methodology also requires ownership, operating and repair costs to be treated as direct costs. Any covered costs included in the rates, including mechanics, oilers, fuel vehicles, and repair shops, etc., must be removed from separate direct costs, G&A and other indirect cost pools.

I had to provide DCAA auditors with detailed instructions as part of my technical analyses. They usually weren’t familiar with the EP 1110-1-8 methodology.

Most smaller contractors don’t have actual cost documentation of repair and operating costs for individual pieces of construction equipment, although they may well have acquisition costs. One must read the methodology in the EP 1110-1-8 in detail.