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KMY

Cost Type LOE Task Orders under IDIQ

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KMY,

Could you expand upon the following statement from your post to Navy_Contracting_4?

"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."

Have you considered what you would do if the contractor completes either more or less than the specified level of effort included in each task order within the specified time period (see FAR16.306(d)(2))? If less, would the contact be Terminated for Default? If more, is there an Anti-Deficiency violation?

By the way, terminations and anti-deficiencies are not areas of contracting in which I have any experience since I primarily work pricing issues. The question just came to me as I read the post.

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Thank you for all of the input, even for the condescending comments that question my intelligence. I was just gathering data to support a position on the approach. Didn't say anywhere that I agreed with the approach. I do agree that the level of competence and experience across the Contracting Workforce is at crisis levels.

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In response to my previous question/comment in my post, I found a very helpful 21 October 2010 post from Vern:

"... under a CPFF/LOE/Term for contract, the stipulation of a level of effort reduces the likelihood of cost overruns, because the contractor is not working toward completion, but only to deliver a stipulated number of hours. An overrun will occur primarily if (1) labor costs more than anticipated and/or (2) indirect costs are higher than anticipated. Quantity of labor is not a source of risk. The main source of risk is the direct labor rate. But labor rates are relatively easy to track and manage, and a competent CO will establish ceilings, so that the contractor will need the CO's approval in order to be compensated for the use of more expensive labor after award. Also, the CO should write a clause to the effect that costs incurred for hours in excess of the level of effort will be unallowable, unless personally approved in advance by the CO.

Second, any competent CO writing a CPFF/LOE/Term form contract will include a clause to the effect that if the contractor does not deliver the entire level of effort it will be entitled only to a percentage of the fixed fee that is commensurate with the percentage of the level of effort actually delivered."

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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.

I did come accross an answer on the DAU Ask a Professor FAQ that would seem to qualify the writer as someone who "should not be allowed in the same building as a cost-reimbursement contract"

Quote is below:

"Additionally, as indicated in FAR 2.101, the definition of a contract would include task orders issued under IDIQ contracts. However, in accordance with FAR 16.505( B)(3), cost or pricing data would only be required for modifications to task orders if the IDIQ contract did not establish the pricing to be used for the task order. In a CPFF IDIQ contract requiring the delivery services via task orders, normally the contract will describe the types of services to be provided in a statement of work (SOW), specify the overall contract period of performance, specify the minimum level of effort and the maximum level of effort to be used over the course of the contract performance period in terms of labor hours, and specify the exact fully burdened hourly labor rates and hourly fixed fee rates to be applied to these hours to calculate the estimated cost and fixed fee of a given task order or modification thereto. [Note: the requester confirmed that this situation is the case with their IDIQ contract.] Prior to the award of the CPFF IDIQ contract, these contract-specified hourly labor and fixed fee rates used for pricing the delivery orders would have been determined by the Contracting Officer to be fair and reasonable for the maximum amount of hours required by the contract. Therefore, as long as the total hours used to calculate the cost of given task order, whether as originally issued or as subsequently modified, does not exceed the maximum amount of hours as set forth in the IDIQ contract, or if the overall IDIQ contract performance period is not being extended, then certified cost or pricing data would not be required because the pricing factors used to calculate the task order cost and fee have already been determined to be fair and reasonable. Consequently, in the scenario described by this question, TINA would not be triggered for individual task order modifications issued within the scope of the IDIQ contract (i.e., within the specified maximum hours and contract performance period) whether or not these task order modifications, taken individually or in the aggregate, exceeded $650K in value."

Obviously, this answer was written before the cost or pricing data threshold was raised to $700k, but we now have two supposed experts in the field of contracting giving completely different guidance. It is no wonder the workforce is confused.

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The workforce is confused because, by the mass, it is ignorant.

The questions are: (1) Why is the workforce ignorant? and (2) Whose fault is it that they are ignorant?

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Question 3: When the ignorance of the mass exists from top to bottom, to whom shall they turn for sound advice and proper training?

"Where ignorance is bliss, 'tis folly to be wise" - Thomas Gray

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Question 3 illustrates the problem. Why turn to anyone? Ask yourself questions. Study. Think. Most of the questions posted here are stupid, because they could have been answered by doing a very little research and reading. Instead, people look for someone to tell them the answer, not realizing that they don't know enough to distinguish between an answer that's correct and one that's wrong. People want to be able to go to a class for two or three days and come away with answers, or go to a website and ask a stranger.

Get books and articles. Read them. Reed deeply. Study. Think the problem through for yourself and answer your own questions. That's the only hope, because the present leadership in acquisition is useless to you and you're as likely to get wrong answers as right ones from your peers.

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I agree that reading books and articles, reading deeply, studying, and thinking the problem through for yourself are all wise to do, but unless there is some consistent guidance put forth in training, then you have 1000s of professionals interprettting regulations and procedures according to what each thinks is right in their his/her own eyes and significant inconsistencies from CO to CO, even within the same office. Also, unless you are the one with the authority to make the ultimate decision, you can research and advise till the cows come home, but that doesn't prevent dumb decisions from being made because the right thing to do is "too hard" or the poor business decision is easier.

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I agree that reading books and articles, reading deeply, studying, and thinking the problem through for yourself are all wise to do, but unless there is some consistent guidance put forth in training, then you have 1000s of professionals interprettting regulations and procedures according to what each thinks is right in their his/her own eyes and significant inconsistencies from CO to CO, even within the same office. Also, unless you are the one with the authority to make the ultimate decision, you can research and advise till the cows come home, but that doesn't prevent dumb decisions from being made because the right thing to do is "too hard" or the poor business decision is easier.

That is why I no longer think of contracting as a profession and of contracting personnel as professionals.

In a real profession, like medicine, law, and engineering, professionals research, think, write, publish, read, consider, and discuss until a generally accepted course of practice emerges and then continues to evolve through further study and debate. That's how doctors finally decided to wash their hands before treating patients. In a real profession, professionals would not wait for fiat from on high and would not accept it without question if it came. They would argue, argue, argue until a consensus emerged. And then they would argue some more.

But contracting is populated by people who don't research, don't think well, barely write at all except to post incoherent or dumb questions at Wifcon that have already been answered a hundred times, and don't know how to debate. The "profession" is populated by too many people who just want to be told what to do. Wifcon Forum reflects the mindset of the contracting population. The question underlying most questions is: "Would you think for me, please," which is often abbreviated as "Please help!"

Contracting won't be a profession until more contracting people start thinking and acting like true professionals. Right now, when you ask the typical contracting person what it means to be professional they'll talk about being polite and dressing well.

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I agree with you assessment of the current state of contracting. In today's environment, argue, argue, argue and then argue some more gets you branded as an impediment and not a team player. In many cases, people can't even comprehend what you are talking about when you are trying to explain your opinion or the results of your reseach. Unfortunately, I have reached the conclusion that it is best just to share arguements with decision makers once and then let the chips fall where they may. Any additional arguing is like spitting into the wind...all it does is get your face wet.

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Unfortunately, I have reached the conclusion that it is best just to share arguements with decision makers once and then let the chips fall where they may.

I think this may show why your user name is "Chip13". :) If you are trying to persuade someone to wait longer in getting their supply or service, or to invest in more of what they see as "non-value add", you have a hard case to make. It comes down to what their goals are and who they are serving.

In a real profession, like medicine, law, and engineering, professionals research, think, write, publish, read, consider, and discuss until a generally accepted course of practice emerges and then continues to evolve through further study and debate. That's how doctors finally decided to wash their hands before treating patients. In a real profession, professionals would not wait for fiat from on high and would not accept it without question if it came.

I think I read a post recently that talked about “legal fiction”. Fiat is exactly that unless people accept it and follow it. For example, fiat money is only money because people use it like money. I am thankful when people like you and Don are patient with those of us learning to think.

As an aside, the Torah should have been an indicator to doctors that they should wash their hands. Whether an idea evolves over time or not, there is still design by God. Evolving ideas show how much people have caught on (or lack thereof) to what God has designed. Ask God for wisdom.

God spoke and it happened. That is not fiat. When you talk about professionals thinking, it almost sounds like you could be talking about Christians keeping (watching, guarding) God's commandments. The real professional (Christian) will want to understand the "Why" behind the design.

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InNeedof Wisdom, Hah, the reference to "chips" is pure coincidence. :) As far as pursuading others, guess I'll have to keep Phillipians 4:13 more pre-eminent in my thoughts!

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InNeedof Wisdom, Hah, the reference to "chips" is pure coincidence. :) As far as pursuading others, guess I'll have to keep Phillipians 4:13 more pre-eminent in my thoughts!

That is true. :) There are some proverbs that may help as well (e.g. 'A soft answer breaks the bone', or 'By long forbearing a prince is persuaded.')

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I don't see any reason to bring God into a discussion of procurement practice.

The Oxford Dictionary of English defines fiat (n.) as "a formal authorization or proposition ; a decree."

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I don't know that we can exclude Him. :) I hope I am just as questioning of federal government fiat as you are. Whenever a government acts outside its God-given scope, it leads to real confusion (like federal procurement). I guess you know my profession now. Thank You for all your help, Vern.

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