Sandi78 Posted July 11, 2012 Report Share Posted July 11, 2012 To what contracts does this clause apply? Specifically, does this clause apply to a firm fixed price construction contract ? The contract is being purchased off an IDIQ, the RFP contained 'concept' design drawings (30%), it is the contractor's responsibility to bring the design to 100% and construct the project. My gut feeling is that since this is in Subpart 236.6, it only applies to architect-engineer contracts and not to construction contracts. I am hoping that someone has experience with this and can point me to a statute that allows design costs of more than six percent of the project's construction costs. Link to comment Share on other sites More sharing options...
Retreadfed Posted July 11, 2012 Report Share Posted July 11, 2012 You are misreading this DFARS section. Note that it addresses a statutory limitation on the fixed fee that is payable on CPFF contracts. It has no application to profit under a fixed price contract nor is it a limitation on the total amount of an A&E contract. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 11, 2012 Report Share Posted July 11, 2012 DFARS 236.606-70 is not a clause. It is a rule. It applies to architect-engineer contracts. It appears that the order is for a design-build project. If so, I do not believe that it is subject to the architect-engineer fee limitation. Link to comment Share on other sites More sharing options...
Sandi78 Posted July 11, 2012 Author Report Share Posted July 11, 2012 Thanks retreadfed. However, I don't see the reference to CPFF in the clause anywhere. I am trying to determine if design costs can exceed 6% of a project's estimated construction costs on a construction project. This subpart refers to contracts written to architects/engineers. Link to comment Share on other sites More sharing options...
Sandi78 Posted July 11, 2012 Author Report Share Posted July 11, 2012 Mr. Edwards - I should know better. Thanks for correcting me. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 11, 2012 Report Share Posted July 11, 2012 You are misreading this DFARS section. Note that it addresses a statutory limitation on the fixed fee that is payable on CPFF contracts. It has no application to profit under a fixed price contract nor is it a limitation on the total amount of an A&E contract. I think you are misreading it, Retread. DFARS 236.606-70(a) says: 10 U.S.C. 4540, 7212, and 9540 limit the contract price (or fee) for architect-engineer services for the preparation of designs, plans, drawings, and specifications to six percent of the project's estimated construction cost. See also FAR 15.404-4( c)(4)(1)(: For architect-engineer services for public works or utilities, the contract price or the estimated cost and fee for production and delivery of designs, plans, drawings, and specifications shall not exceed 6 percent of the estimated cost of construction of the public work or utility, excluding fees. "Fee" in the context of an A-E contract is not the same as the fee under cost-reimbursement contracts. It is professional fee and includes both cost and profit. The limitation applies to all types of A-E contracts, not just cost-reimbursement. See 46 Comp. Gen. 556, B-152306, 1966 CPD para. 110 (Dec. 12, 1966) and 46 Comp. Gen. 573, B-152306, 1966 CPD para. 111 (Dec. 19, 1966). There appears to be an issue now with the text of the statute since recodification in January 2011, but that has not been resolved. The recodification statute disclaimed any intention to change the law, and FAR and DFARS stand as they are. Link to comment Share on other sites More sharing options...
Sandi78 Posted July 11, 2012 Author Report Share Posted July 11, 2012 Mr. Edwards - any advice on how to prove this to someone. Other than the obvious - the ruling states for procurement of A-E Services and that the rule is found under the supbpart applicable to architect -engineer services. There is nothing anywhere else in the FAR Part 36 that refers to this. I have to prove this to a CO that has thirty years experience in construction. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 11, 2012 Report Share Posted July 11, 2012 I assume that you mean you have to prove that the limitation does not apply to design-build. If so, you could refer the CO to Fluor Enterprises, Inc. v. U.S., 64 Fed. Cl. 461 (2005): Under the Clinger-Cohen Act, when the circumstances appropriate for design-build procedures are in place, the agency may procure design and construction services together from a single entity and may ultimately award the contract on the basis of price factors and price competition. In this scheme, agencies may award contracts for construction services without regard to the Brooks Act of 1972, and therefore without the requirement of a negotiated bid process. See 40 U.S.C. sec. 542. Instead, since price factors may be considered for the overall project in design-build procurements under the Clinger-Cohen Act, those procurements may proceed under sealed-bid procedures, which necessarily removes them from the scope of sec. 254( and the fee limitation. Similarly, in the design-build mechanism of the Clinger-Cohen Act, the single construction entity receives a fixed price for all of its services-services that will include its design and construction work and any attendant cost. Thus, it is of little consequence how that fixed price is allocated internally by the single construction entity. Whether the single entity pours 1% or 20% of its fixed-price into design-type services, it does not affect the overall fee that the contractor receives. It therefore makes perfect sense that the sec. 254( fee limitation would not apply in the design-build scenario. The court was talking about the two-phase design build procedure described in FAR Subpart 36.3. I don't know if that is what your customer is using. Link to comment Share on other sites More sharing options...
joel hoffman Posted July 11, 2012 Report Share Posted July 11, 2012 To what contracts does this clause apply? Specifically, does this clause apply to a firm fixed price construction contract ? The contract is being purchased off an IDIQ, the RFP contained 'concept' design drawings (30%), it is the contractor's responsibility to bring the design to 100% and construct the project. My gut feeling is that since this is in Subpart 236.6, it only applies to architect-engineer contracts and not to construction contracts. I am hoping that someone has experience with this and can point me to a statute that allows design costs of more than six percent of the project's construction costs. In addition to the discussion in Fluor Enterprises Decision that Vern referenced, DFARS 236 supplements FAR Subpart 36.6 - which is applicable to the acquisition of architect-engineer services. A design-build contract is a construction contract, not an A-E services contract. If you work for USACE, you may refer the KO with more than 30 years experience to Engineer Regulation 1180-1-9, especially paragraph 8, found at: http://140.194.76.129/publications/eng-regs/ER_1180-1-9.pdf Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 11, 2012 Report Share Posted July 11, 2012 Joel: Do you think the same is true if the agency is not using two-phase design build to award the order? Is it true if the order is issued without competition? Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2012 Report Share Posted July 12, 2012 Joel: Do you think the same is true if the agency is not using two-phase design build to award the order? Is it true if the order is issued without competition? Vern, I think the same is true if the agency uses the competitive One Step Selection Procedures authorized for Military Construction under 10 USC 2862. I'm not aware of any other authorized DB acquisition method other than the fact that the 2 Step sealed bidding process under Part 14 was being used by at least Air Force and the Navy prior to enactment of 10 USC 2862 and the 2 Phase method under 10 USC 2305(a) or 41 USC 253m. I do remember the judge in the Fluor Decision explaining that the reason that the 6% fee limitation doesnt apply to design-build contracts is that they are authorized as competitive acquisition procedures. The judge developed the logic that the 6% fee limitation was instituted to regulate non-competitively negotiated contracts for A-E services. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 12, 2012 Report Share Posted July 12, 2012 Thanks, Joel. Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2012 Report Share Posted July 12, 2012 I assume that you mean you have to prove that the limitation does not apply to design-build. If so, you could refer the CO to Fluor Enterprises, Inc. v. U.S., 64 Fed. Cl. 461 (2005): The court was talking about the two-phase design build procedure described in FAR Subpart 36.3. I don't know if that is what your customer is using. Vern, I forgot to mentioned that the Fluor Enterprises Case involved a civilian agency (NOAA, I believe). Therefore, the court wouldn't necessarily have addressed the One Step Turnkey Selection D-B method in 10 USC 2862 for Military Construction. However, that method is priced the same way as the 2 Phase method authorized for both Military and Civilian agencies under 10 USC 2305(a) or 41 USC 253m. If an agency is still using the Two-Step Sealed Bidding method in FAR Subpart 14.5, that is also a competitive method. My first D-B project was a 250 unit Military Family Housing project at Castle AFB, California in 1971. It used the DAR (predeccessor to FAR) 2 Step Sealed Bid method. I don't remember if the bidders furnished completed designs in Step 1 or if the Contractor completed the design after award. I wouldn't recommend use of that method today. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 12, 2012 Report Share Posted July 12, 2012 Thanks, Joel. What in your experience leads you to recommend against the two-step sealed bid method? I think I know, but I'd like to read your thoughts. Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2012 Report Share Posted July 12, 2012 Thanks, Joel. What in your experience leads you to recommend against the two-step sealed bid method? I think I know, but I'd like to read your thoughts. You're welcome, Vern. Here are some reasons that I wouldn't recommend use of the 2 Step sealed bid method for design-build projects (at least for permanent Military Construction). - On my 2 Step DB housing project, the exteriors of our houses looked like barns with detached carports. There were 125, back to back duplexes with no eaves or roof overhangs. The siding was T-111 (pre-finished, 4X8 plywood with vertical battens). The material specs were based upon HUD 235 housing with military criteria sprinkled in. On one of these weekends in California, I want to drive down to Atwater and see what they look like 40 years later. - It unfairly taxes the industry in the competition for the D-B contract. It costs the D-B construction and design team a lot of unreimbursed design, bid and proposal expense to prepare design proposals for step one. This is already a major industry gripe concerning the use of the One-Step Turnkey Selection method (10 USC 2862). The risk is relatively high because a firm has little visibility of its odds of winning the contract in a One Step Turnkey ot Two Step Sealed Bid process. The use of the 2 step IFB and One Step Turnkey selection methods drove the industry to get Congress to implement the 2 phase D-B selection process. - Consequently, none of the advantages of the 2 Phase process are evident using the 2 Step IFB process. - The 2 Step IFB process emphasizes lowest price over technical quality or performance capability. In that respect, it has some similaries to the lowest priced technically acceptable method. We identify minimum acceptable quality and/or qualifications. Since we aren't willing to pay for better performance, we probably won't get it if it costs any more than minimum compliance. - It doesnt allow bargaining for better performance than the bare minimum solicitation requirements for design, materials, equipment, past performance, experience, key personnel, higher life cycle cost effectiveness, key subcontractors, etc. - It severely restricts evaluation of performance capability factors that would relate to responsibility as defined in FAR 9.1. Once we moved away from IFB's to RFP's, the quality of performance of most firms improved, knowing that their reputation could make a difference for award of future work. We also weeded out most of the dirt bags. - The days of quonset huts and plain looking, cheap construction on Military installations is long gone. The military is looking for aesthetically pleasing, high performing (energy saving and sustainable construction) facilities, with low life cycle costs (not necessarily lowest initial price). A highly capable, experienced design-build team with a solid past performance record is highly desirable and often essential to obtain a timely, quality project. We should emphasize high quality within the identified budget and let competition control excessive pricing. The 2 step sealed bid process is not the optimal acquisition process for modern day Military construction project goals and objectives. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 12, 2012 Report Share Posted July 12, 2012 Thanks again, Joel. Very clear and sound objections. Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2012 Report Share Posted July 12, 2012 I know I'm being wordy - sorry. I forgot to add that I don't think that use of the 2 step sealed bid D-B method under FAR 14.5 allows us to go into discussions once the bids are opened. We might discover that all bids exceed the available budget. We only know at that point that our minimum requirements aren't affordable or could be revised to reduce costs. I don't know if we can combine the Subpart 14.5 procedures with with the 14.404-1 (e) and (f) procedures to cancel the IFB and continue by conducting negotiations. Been there - done that - don't really like it much, anyway. If we bust the budget when using the RFP process, either with a new Part 15 contract or a task order competition under Subpart 16.5, we can conduct discussions - as pointed out in other WIFCON threads. Then we can determine if we need to revise the requirements to obtain a more affordable price. Been there - done that - like it a lot. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 12, 2012 Report Share Posted July 12, 2012 In Two-Step Sealed Bidding under FAR Subpart 14.5, you can have discussions after Step One to make unacceptable proposals acceptable, FAR 14.503-1(f), but not during or after Step Two, which is carried out as pure sealed bidding. I think you conduct Step Two using the procedures in Subpart 14.4. I don't see why not. There really is no reason to use Two-Step anymore, but I think a few are done every year. Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2012 Report Share Posted July 12, 2012 Sandi78, sorry for straying from your original question. Hope we answered your question. Link to comment Share on other sites More sharing options...
Sandi78 Posted July 13, 2012 Author Report Share Posted July 13, 2012 Yes you did. So far, I think the CO sees it our way now. No problem straying - I always learn something. Link to comment Share on other sites More sharing options...
Retreadfed Posted July 13, 2012 Report Share Posted July 13, 2012 Joel, not wanting you to feel ancient, but if you did contracting in 1971, it was done pursuant to the ASPR. The DAR did not come into being until 1978 or 79. There are still a few of us mossbacks around who remember those regulations. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 13, 2012 Report Share Posted July 13, 2012 The Armed Services Procurement Regulation (ASPR) became the Defense Acquisition Regulation (DAR), 32 CFR Ch. E, on March 8, 1978, 43 Fed. Reg. 15150, April 11, 1978. (The change was made retroactively.) Section 160.3, Definitions, provided as follows: § 160.3 Definitions.(a) Acquisition. Any relationship entered into to acquire property or services for the direct benefit or use of the Department of Defense to include the management and business functions and disciplines involved in establishing and continuing the relationship. ( Contracts. A function including tasks, skills and activities essential in conducting contractual relationships in the acquisition of property and services by the Department of Defense. The term "contracts" shall replace the term "procurement" as used in the context of an acquisition function throughout the Department. ( c) Procurement. The term "procurement"shall not be used to identify functions of the Department of Defense to acquire property and services except as relates to the budgetary process. The ASPR Committee became the DAR Council. Link to comment Share on other sites More sharing options...
joel hoffman Posted July 13, 2012 Report Share Posted July 13, 2012 Joel, not wanting you to feel ancient, but if you did contracting in 1971, it was done pursuant to the ASPR. The DAR did not come into being until 1978 or 79. There are still a few of us mossbacks around who remember those regulations. Yep, I was lazy. Good catch. I knew that DAR replaced ASPR sometime in the late 1970's. However, I forgot the term "ASPR" the other day. I didn't take the time to look it up, sorry. I wasn't "doing" contracting at that time in the Air Force, other than to negotiate the various user requested changes to that contract. I was the project engineer after the contract had been awarded several months earlier. BTW, I still have a partial copy of the ASPR in my office at Chez Hoffman, far from here... Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted July 13, 2012 Report Share Posted July 13, 2012 Chez Hoffman is in Mobile, right? Where the heck are ya? Link to comment Share on other sites More sharing options...
joel hoffman Posted July 13, 2012 Report Share Posted July 13, 2012 "I'm stuck in Folsom Prison..." Actually, my TDY office is on the Prison property, near Folsom Lake, CA on the American River. Link to comment Share on other sites More sharing options...
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