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Firm Fixed Price Contracts

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#1 josmim2002

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Posted 22 October 2012 - 08:50 AM

Vern,

With a Firm Fixed Price (FFP) contract, what happens to the dollars that are left at the end of the contract? Do they go to the contractor or stay on the contract and get deobligated? Thanks for your help.

#2 leo1102

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Posted 22 October 2012 - 08:58 AM

Under a FFP contract, the contractor is owed all monies obligated under that contract. However, there are instances where the contractor invoices for less and the money can be deobligated in a bi-lateral modification. My suggestion is if the contractor has submitted his final invoice, and once that invoice is paid, issue a bilateral modification to deobligate remaining funds prior to closeout.

#3 Navy_Contracting_4

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Posted 22 October 2012 - 10:33 AM

Under what circumstances would there be dollars left at the end of a firm-fixed-price contract? What happens to those dollars may depend on the answer.



#4 Vern Edwards

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Posted 22 October 2012 - 10:44 AM

Under an FFP contract, the dollars obligated should equal the total price. Ordinarily, when the contractor performs acceptably it is entitled to payment of the price. Thus, there should not be any dollars left. In order to answer your question I would have to know why there are dollars left.

#5 ji20874

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Posted 22 October 2012 - 11:13 AM

Sometimes we do FFP contracts with estimated quantities, such as for construction. We deobligate any left-over money in preparation for closeout.

Sometimes we do FFP contracts for supplies or services, and for reasons unknown to us the contractors invoice for less than the contract amount. We pay the amount the contractor invoiced. Sometimes in this case, we ask for a contract release statement and then deobligate any left-over money for closeout.

#6 josmim2002

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Posted 22 October 2012 - 04:11 PM

Our book keeper, who is no longer with us, did not bill the customer correctly. Thus, leaving dollars on the contract. After we realized the error, we tried to retrieve the funds, but were denied by the funding activity. They requested back up timesheets. However, the work is complete and there aren't any. Thanks for your assistance in helping me clear this up.

#7 josmim2002

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Posted 23 October 2012 - 07:15 AM

Our book keeper, who is no longer with us, did not bill the customer correctly - for some reason she billed it by the hour like a T&M contract. Thus, leaving dollars on the contract After we realized the error, we tried to retrieve the funds, but were denied by the funding activity. They requested back up timesheets. However, the work is complete and there aren't any. Thanks for your assistance in helping me clear this up.

#8 here_2_help

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Posted 23 October 2012 - 11:28 AM

josmim2002,

Your terminology is a little confusing. What do you mean "tried to retrieve the funds"?

Did your company submit a final invoice on the contract (DD250Z)? If so, then I would say chalk this one up to experience. If not, submit one and see what happens.

Hope this helps.

#9 Navy_Contracting_4

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Posted 23 October 2012 - 12:18 PM

Our book keeper, who is no longer with us, did not bill the customer correctly - for some reason she billed it by the hour like a T&M contract. Thus, leaving dollars on the contract After we realized the error, we tried to retrieve the funds, but were denied by the funding activity. They requested back up timesheets. However, the work is complete and there aren't any. Thanks for your assistance in helping me clear this up.

Why would anyone need back up timesheets for a firm-fixed-price contract? Was this a firm-fixed-price level-of-effort contract? Did you provide the full level-of-effort?

#10 josmim2002

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Posted 23 November 2012 - 11:59 AM

To Navy_Contracting_4 - Yes, this is a firm fixed price level-of-effort contract and we did provide the full level-of-effort.

To Here to Help - Yes, we submitted a final invoice on 9/26/2012 to the WAWF. The WAWF rejected the invoice because there were no timesheets to account for the remaining funds. The hours that were remaining were for vacation and holidays, which were not billed to them throughout the life of the contract (this was the error I mentioned in my earlier post).

On 18 Oct 2012, I received a SF 30 (modification to deobligate funds). This modification was sent to us after we submitted our final invoice on 9/26/2012 for $10,061.76 (for 248.5 - holiday and vacation hours, which were inadvertently not billed throughout the contract lifecycle). Which, by the way, is the exact amount of the invoice.

#11 Pennybeth

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Posted 23 November 2012 - 01:51 PM

Are you sure this was a firm fixed price level of effort contract, or was it a labor hour contract with an estimated number of hours required? If the work performed were commercial services under a labor hour contract containing clause 52.212-4 Alt I, Deviation 1 -- FEB 2007 (which is a clause included in the GSA TAPS schedule contracts), then payment would be made only for "direct labor hours performed" which would not include holidays or vacation hours.

#12 here_2_help

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Posted 23 November 2012 - 10:03 PM

I have to admit to more than a little confusion here. The OP says the contract type is FFP, yet timesheets are apparently required to support invoiced hours. Also, most contractors with which I'm familiar (but not 100%) do not consider vacation and holiday hours to be direct labor hours. (One of the few exceptions I have seen to that general rule was when the paid time off hours were part of the H&W component of Davis-Bacon and/or Service Contract Act Wage Determination.)

josmin2002, I'm afraid you will need to get yourself a good attorney to help you sort this puzzler out.

H2H

#13 Vern Edwards

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Posted 24 November 2012 - 05:52 PM

Some agencies require timesheets for FFP/LOE contracts as a way to verify the that the LOE was delivered.

The contract ordinarily should have required payment on a lump sum basis, not an hourly basis. But who knows? Many COs have no clue when it comes to FFP/LOE contracts. The same goes for many contractors. If the bookkeeper was billing by the hour -- for whatever reason -- then when he or she sent the last invoice before leaving the company it may be that not all of the hours had been delivered at that point. The thing to do would be to invoice for the balance. Presumably, the accounting records will enable the parties to figure it out. Timesheets should not be a problem, assuming that the contractor is keeping decent records, which may be an unjustified assumption.

Despite all my years in this business, I am still astonished by the way companies get themselves into government contracts without knowing what they're doing. Some of the questions we get here from people -- in government and industry -- who have contracts but don't understand them or know how to manage them are amazing, and, frankly, amusing. But I'm not complaining. It keeps me in rice and beans.

#14 Navy_Contracting_4

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Posted 26 November 2012 - 10:18 AM

To Navy_Contracting_4 - Yes, this is a firm fixed price level-of-effort contract and we did provide the full level-of-effort.

Does the contract explicitly allow for counting holiday and vacation hours toward the required level-of-effort? I have never seen such an arrangement, and can't imagine how one can consider time spent on vacation as effort expended in pursuit of an objective. As a side note, I wonder if there could be a problem with accounting for holidays and vacations as direct effort on this contract, but as indirect on others.

#15 Whynot

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Posted 26 November 2012 - 12:20 PM

It looks like the contract was for the services of a single person – probably by name for an annual fixed price. This person worked a normal year minus holidays, vacation and sick days. The customer probably did not contract for 2080 hours but contracted for a “full time person” – not an FTE for 2080 hours. The bookkeeper invoiced on a periodic monthly basis based upon actual hours worked (direct). What hourly rate the bookkeeper used we do not know. Did the bookkeeper divide the total annual fixed price by 2080 hours or did the bookkeeper divide the total annual price by 2080 hours adjusted for utilization (2080 minus holidays, vacation and sick). If the bookkeeper used the 2080 rate then the bookkeeper used a rate that was too low.

It would be interesting to see some of the actual terms of the contract.

I think you may be able to use the actual direct hours and re-invoice with an adjusted hourly rate.

#16 here_2_help

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Posted 26 November 2012 - 04:41 PM

It looks like the contract was for the services of a single person – probably by name for an annual fixed price. This person worked a normal year minus holidays, vacation and sick days. The customer probably did not contract for 2080 hours but contracted for a “full time person” – not an FTE for 2080 hours. The bookkeeper invoiced on a periodic monthly basis based upon actual hours worked (direct). What hourly rate the bookkeeper used we do not know. Did the bookkeeper divide the total annual fixed price by 2080 hours or did the bookkeeper divide the total annual price by 2080 hours adjusted for utilization (2080 minus holidays, vacation and sick). If the bookkeeper used the 2080 rate then the bookkeeper used a rate that was too low.

It would be interesting to see some of the actual terms of the contract.

I think you may be able to use the actual direct hours and re-invoice with an adjusted hourly rate.


Whynot, are you looking at something not in evidence on this thread, or are you just pulling this information out of a rectal database? I mean, you may be right ... but how can you possiblly know, or offer advice based on your chain of assumptions? But maybe that's just me....

josmim2002, based on your posts, I suggest that your company invest in a qualified government contracts advisor to assist you with your questions. I would also suggest that your bookkeeper should not be invoicing without a second set of knowledgeable eyes on the outgoing invoice ... but perhaps you've already figured that out for yourself.

H2H

#17 JGarza

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Posted 12 June 2013 - 11:27 AM

Sometimes we do FFP contracts with estimated quantities, such as for construction. We deobligate any left-over money in preparation for closeout.

Sometimes we do FFP contracts for supplies or services, and for reasons unknown to us the contractors invoice for less than the contract amount. We pay the amount the contractor invoiced. Sometimes in this case, we ask for a contract release statement and then deobligate any left-over money for closeout.

 

I understand the deobligation after receiving the release of claims.  My main questions is, do you have to "De Scope" the project before deobligating funds because it is a FFP contract?



#18 summerlady51

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Posted 21 August 2013 - 12:38 PM

I can't believe I'm jumping in on this but it sounds to me as if WHYNOT is right.  However, when dealing with labor hours as the billable unit for especially by the person and not a total number of hours based on continuous staffing, both the company and the government need to know what to expect.  If you awarded a contract based on a fixed hourly rate for each direct labor hour, then each direct labor hour should have been accelerated to cover holidays, leave, benefits, etc.  So you would only bill for the hours actually worked but you would collect revenue to allow you to pay your employee for time off. 

 

If money is left on the contract, then your employee did not work as many direct labor hours as anticipated originally. 

 

I am confused how what appears to be a T&M type billing is really a FFP.  But then it takes all kinds.....I've been on the receiving end of this type of stuff.  I try at first to get the contractor and my staff on the same page but if the contractor won't cooperate, then it is their loss.






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