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KMY

Cost Type LOE Task Orders under IDIQ

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If one were to establish loaded labor rates (through total cost) and fixed fee per hour on an IDIQ Contract based upon the results of a best value competitive procurement, would that mean that those rates could be used to price subsequent CPFF LOE Task Orders without the need for submission of certified cost or pricing data even if the Task Order were over the Cost or Pricing Threshold established in FAR 15.403-4.

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Is the government defining the level of effort required for a task order or is the contractor? Does the contract contemplate using the established labor rates for CPFF LOE task orders? Why are you issuing such type task orders if you have established unit rates?

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Some examples - not saying right or wrong just how it has been done in past -

On the old Millennia contract, there were loaded labor rates that served as ceiling rates for Cost Plus and T&M orders. On the Cost Plus orders, the average of the labor rates billed for a particular labor category could not exceed the ceiling rate (Joe's billing rate could be higher as long as the average of Joe and Jack's rate were below the labor cat ceiling rate) But that was written into the IDIQ solicitation from the start so vendors knew about it when they proposed. Task Order proposals still needed the full cost build up submitted.

ITES-2S had established rates that only applied to T&M orders and Cost Plus rates could be anything.

Alliant and Alliant SB - no ceiling rates were established.

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Joel, the Government will be defining the LOE for Task Orders. The contract will contemplate using the established labor rates for CPFF LOE Task Orders. I don't understand your question with regard to established unit rates? The rates are based on a cost type scenario and as such, are not fixed.

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Woops, regarding the Millennia contract, how was that enforced? Was there a DiD that required the contractor to report the average billing rate by labor category?

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Don, that is the essence of my question. If we establish labor rates on the IDIQ, is there a need to obtain certified cost or pricing data and negotiate if the cost we are establishing for the Task Orders is based on a schedule of rates on the IDIQ. The part that I am struggling with regarding this approach is the fact that the Task Order will be cost type and that the contractor's rates may have changed since the IDIQ was established.

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KMY, I'm asking why you are competitively establishing unit prices if you don't intend to use them. Why are you issuing CPFF level of effort task orders after establishing the unit rates through competition?

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If you don't intend to use the unit prices which were established as a result of adequate competition, thenyou answered your own question. Cost or pricing data would be required. I am also assuming that that the government establishes the quantities for the task order.

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If one were to establish loaded labor rates (through total cost) and fixed fee per hour on an IDIQ Contract based upon the results of a best value competitive procurement, would that mean that those rates could be used to price subsequent CPFF LOE Task Orders without the need for submission of certified cost or pricing data even if the Task Order were over the Cost or Pricing Threshold established in FAR 15.403-4.

Questions:

1. Explain the "loaded" rates? Are they to be used for payment or just cost estimating?

2. If the rates are to be used for payment, are they fixed or are they ceilings, such that the contractor would be paid either actuals or the rates, whichever is less?

3. If the rates are used for payment, how would a CPFF task order be different from time-and-materials or labor hour? Why would you call such a task order cost-reimbursement?

4. If the rates are fixed and used for payment, wouldn't that be inconsistent with FAR Subpart 42.7 and thus a FAR deviation pursuant to FAR 1.401(a) (procedure inconsistent with FAR)?

5. What do you mean by "fixed-fee per hour"? Is the fee included in the rates or is it separately stipulated?

6. Since the contract is cost-reimbursement, I assume it requires only the contractor's best efforts. If more fee is paid for each hour worked, in what sense is it "fixed"? Why pay more fee per hour under a cost-reimbursement contract?

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KMY, as I understand your question and scenario, you have loaded rates (through total cost and not including fee) and a fixed fee amount per labor hour, and want to use these to establish the estimated cost and fixed fee for individual task orders. For example:

Labor Cat 1 400 hours @ $40/hour - $ 16,000

Labor Cat 2 800 hours @ $50/hour - $ 40,000

Labor Cat 3 1,600 hours @ $70/hour - $112,000

Total Estimated Cost - $168,000

Fixed Fee @ $4/hour - $ 11,200

Total Estimated Cost Plus Fixed Fee - $179,200

With the estimated cost and fixed fee now established for the Task Order, it would proceed as any other cost-reimbursement Task Order, with payment in accordance with the "Allowable Cost and Payment" clause.

If this desciption of your scenario is correct, I think your approach is acceptable, even recognizing that the actual cost per hour for each labor category may fluctuate over the course of the ordering period.

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Navy:

Negotiation of fee on an hourly rate basis is fundamentally unsound, and the way you show it done is even worse, with the same rate of fee for all labor categories. (You would pay fee at a rate of 10% per hour for Labor Category 1 and 5.7% per hour for Labor Category 3?)

Fee should be negotiated on the basis of the nature of the task to be performed in accordance with FAR 15.404-4 and the applicable agency FAR supplement.

Vern

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Vern,

I agree completely. I wasn't commenting on the soundness of the approach, merely whether it was acceptable from a regulatory and legal perspective. And I certainly wasn't suggesting this as a good approach. I was only trying to come up with a very simple example to describe the scenario KMY was asking about. I would never establilsh fee this way.

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KMY - On Millennia, it was enforced at time of each invoice. Was built into the invoicing requirements that for Cost Plus orders the vendors not only had to show the individual person's billed rate for the period in the back-up but also an average rate for each labor category. If the vendor did not provide, we could reject the invoice and make the resubmit with the info or do the calculation ourselves and short pay the invoice if it was over.

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As I understood KMY, the fee would be payable at a fixed amount per hour worked, regardless of the number of hours worked. Thus, the fee would not be fixed, but payable at a specific amount per hour, although it may be stated as a fixed fee when the order is issued. Maybe I have misunderstood his premise.

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KMY said those rates (loaded labor rates through total cost and fixed fee per hour) would be "used to price subsequent CPFF LOE Task Orders." I postulated a simplistic scenario of what I understood him to be asking about, but haven't received either confirmation or correction. I do believe you may have misunderstood the premise, but who knows? Only KMY.

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If one were to establish loaded labor rates (through total cost) and fixed fee per hour on an IDIQ Contract based upon the results of a best value competitive procurement, would that mean that those rates could be used to price subsequent CPFF LOE Task Orders without the need for submission of certified cost or pricing data even if the Task Order were over the Cost or Pricing Threshold established in FAR 15.403-4.

Even with the labor and fee rates you must request certified cost or pricing data if the order exceeds $700,000 and if none of the exceptions applies. That's because certified cost or pricing data are required before the award of a "negotiated contract," and a CPFF LOE task order is a negotiated contract. See FAR 2.101 for the definition of contract, FAR 15.000 for the definition of "negotiated contract," and FAR 15.403-4(a)(1)(i) for the requirement for certified cost or pricing data. The price for CPFF LOE task orders is not established at the time of award of the underlying IDIQ contract. See FAR 15.401 for the definition of "price." The price is established after the award of the underlying contract -- prior to the award of the task order, whether CPFF term or LOE. The establishment of hourly rates for cost estimating purposes does not constitute establishment of prices for orders.

I will add that it is stupid to establish "loaded" hourly labor rates and an hourly fixed fee rate in order to estimate costs and set fee for a CPFF contract of any kind, whether completion or LOE. Doing so is just a scheme to avoid the work of real task planning and real cost estimating. If you have to be told why it's a bad idea, then you don't understand CPFF contracts. Anyone who would do such a thing should not be allowed in the same building as a cost-reimbursement contract, much less be given responsibility for negotiating or managing one. It's that kind of stupidity, laziness, and incompetence that prompts criticism from IGs, the GAO, and other watchdogs, prompts Congress to pass more laws, and results in more regulation and limits on discretion.

The more I see and hear of what some people do in this business the more convinced I become that Incompetence is at crisis levels within the contracting workforce.

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Questions:

1. Explain the "loaded" rates? Are they to be used for payment or just cost estimating?

The loaded rates through total cost and fixed fee per hours would be used to establish the task order total cost and fixed fee based on the LOE placed on task order.

2. If the rates are to be used for payment, are they fixed or are they ceilings, such that the contractor would be paid either actuals or the rates, whichever is less?

The rates are not to be used for payment as they are not ceiling rates and the contractor would be entitled to reimbursement of their cost incurred.

3. If the rates are used for payment, how would a CPFF task order be different from time-and-materials or labor hour?

Why would you call such a task order cost-reimbursement? The rates are not used for payment.

4. If the rates are fixed and used for payment, wouldn't that be inconsistent with FAR Subpart 42.7 and thus a FAR deviation pursuant to FAR 1.401(a) (procedure inconsistent with FAR)? Rates are not fixed. N/A

5. What do you mean by "fixed-fee per hour"? Is the fee included in the rates or is it separately stipulated?

The fee is not included in the rates, it is separately stipluated and would be used to establishe the fixed fee dollars on the task order based upon the level of effort for each labor category. The fixed fee per hour would not be the same for each labor category.

6. Since the contract is cost-reimbursement, I assume it requires only the contractor's best efforts. If more fee is paid for each hour worked, in what sense is it "fixed"? Why pay more fee per hour under a cost-reimbursement contract?

More fee is not paid for each hour worked, since the fixed fee for the task order was established based on the fixed fee per hour in the iDIQ, but the contractor will be reimbursed for actual costs and the entire fixed fee, assuming that all of the hours on task order are worked.

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Joel,

We do intend to use the unit prices which were established as a result of adequate competition to establish the total cost and fixed fee for the task orders, but the loaded labor rates, exclusive of fee, do not represent fixed or ceiling rates, just a competitively established estimate of cost per hour of labor. The government established the LOE on each Task Order.

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Navy_Contracting_4

You are correct that that the loaded labor rates would be used to price subsequent CPFF LOE Task Orders based on the Government specified LOE. There would be a separate fixed fee amount per hour by labor category that would be used to establish the fixed fee on the Task Order. The contractor would be reimbursed their actual expenses plus the fixed fee, assuming that they worked all of the hours specified in the Task Order.

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