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Vern Edwards

Proper Interpretation of the T&M and L-H Payment Clause

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There is an interesting new decision by the Armed Services Board of Contracting Appeals concerning the proper interpretation of FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts.

The Army Corps of Engineers refused to pay an 8(a) contractor for hours worked as uncompensated overtime by salaried employees under a labor-hour contract, because the contractor did not record the hours as expenses. The Corps argued that the payment clause turned the salaried employees into hourly workers. There was no question that the hours were worked and that the employees were paid their salaries. The board found the Corp's interpretation of the clause to be unreasonable and legally indefensible.

GaN Corporation, ASBCA No. 57834, July 13, 2012. http://www.asbca.mil...13.12%20WEB.pdf

The Corps of Engineers should be ashamed of itself for taking this to the board. It's interpretation was so outrageous as to come close to bad faith.

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The government's position in GaN is not an isolated incident. I have had to battle two contracting officer's from two other agencies over the same issue.

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Well, now you have support. (How did your battles come out?)

I'm writing the case up for The Nash & Cibinic Report's September issue. The Corps' interpretation is simply not supportable based on the language of the clause. The judge's rejection of that argument was brusque.

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After much wailing and gnashing of teeth, they eventually came around to our point of view, although they felt the contractor was getting a windfall.

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I'm glad you won out. I think the Corps' interpretation of the clause was ridiculous and that taking the case to the board was a travesty of good contracting.

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