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Situation: Upon conducting a cost analysis of certified CoPD, it is discovered that the contractor is proposing hours for tasks which NOT contractual requirements. In response, the contractor claims that the task is company policy. I have noticed this in relation to hours to maintain a specified CMMI level that is beyond those required in the SOW or hours to do earned value on a fixed price contract.

Question: Please forgive me for my naivety as I am quite familiar with reviewing cost proposals, but I know very little with regard to CAS. I am wondering if it is company policy to perform a task, should that be covered in a contractor's disclosure statement?

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CPA--

The Disclosure Statement is a standard government form. It covers the topics that it covers. It does not cover many upon many situations. The D/S is no substitute for policies and procedures.

I run into this situation from time to time, particularly with respect to EVMS. A contract doesn't specifically require EVMS and the customer doesn't want to pay for it. Yet company policy states that there is a standard management approach across all contracts/programs, and that standard approach mandates EVMS techniques regardless of type and dollar value. What to do?

This is not a CAS issue. From the contractor's perspective, the tasks are required because policy says they are. From the customer's perspective, I would like to think that price reasonableness would be the standard, not whether certain things were or were not contractually required.

You know what would be a CAS issue, though? Treating one contract differently from the others (with respect to what costs are charged direct). That would make a nice CAS noncompliance.

Hope this helps.

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Maybe your technical evaluator counterpart is taking just the opposite approach and is giving the same vendor high marks for their extra CMMI efforts. So take HTH’s price reasonableness approach, and let the source selection authority decide if the extra effort and cost is a best value to the government.

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Situation: Upon conducting a cost analysis of certified CoPD, it is discovered that the contractor is proposing hours for tasks which NOT contractual requirements. In response, the contractor claims that the task is company policy. I have noticed this in relation to hours to maintain a specified CMMI level that is beyond those required in the SOW or hours to do earned value on a fixed price contract.

Question: Please forgive me for my naivety as I am quite familiar with reviewing cost proposals, but I know very little with regard to CAS. I am wondering if it is company policy to perform a task, should that be covered in a contractor's disclosure statement?

In addition to Here's response, with respect to the hours required to maintain a CMMI certification beyond the level required by the contract, I agree that you should look at price reasonableness as well as the firm's normal charging practices (Direct? Indirect?). You also should look at the issue of allocability (See FAR 31.201-4 -- Determining Allocability). There would appear to be no additional benefit to the Government for the increased capability over that specified for the requirement.

CPA--

The Disclosure Statement is a standard government form. It covers the topics that it covers. It does not cover many upon many situations. The D/S is no substitute for policies and procedures.

I run into this situation from time to time, particularly with respect to EVMS. A contract doesn't specifically require EVMS and the customer doesn't want to pay for it. Yet company policy states that there is a standard management approach across all contracts/programs, and that standard approach mandates EVMS techniques regardless of type and dollar value. What to do?

This is not a CAS issue. From the contractor's perspective, the tasks are required because policy says they are. From the customer's perspective, I would like to think that price reasonableness would be the standard, not whether certain things were or were not contractually required.

You know what would be a CAS issue, though? Treating one contract differently from the others (with respect to what costs are charged direct). That would make a nice CAS noncompliance.

Hope this helps.

Without further information, it would appear that a company requirement to manage earned value on all contracts may or may not be reasonable, depending upon what you mean by "do earned value" on a fixed price contract. Many construction companies, for instance, track their earned value performance on fixed price and on other pricing types of contracts in order to manage their work and to maintain their estimating systems. As Here hints, I would ask the firm to disclose its normal accounting methods for such practices and to justify why it is necessary. Ensure that the treatment of such costs are consistent (direct? indirect?).

As for reasonableness of those costs, See the following under Determining Reasonableness at FAR 31.201-3 (a):

"(a) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of specific costs must be examined with particular care in connection with firms or their separate divisions that may not be subject to effective competitive restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the contracting officer or the contracting officer’s representative, the burden of proof shall be upon the contractor to establish that such cost is reasonable."

(Check your agency supplements, too.)

Hope this also helps.

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Maybe your technical evaluator counterpart is taking just the opposite approach and is giving the same vendor high marks for their extra CMMI efforts. So take HTH’s price reasonableness approach, and let the source selection authority decide if the extra effort and cost is a best value to the government.

This is also possibly a valid point. I dont know if this is a source selection or if the government is evaluating whether or not the additional capability is considered to be of value to the Government...

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Guest Vern Edwards

The opening post said that the agency is looking at certified cost or pricing data, so I would not expect the acquisition to be competitive.

The opening question about disclosure statements aside, this seems like a simple case of a company submitting a proposal that includes a cost that the contract does not require the contractor to incur. The contractor has included the cost in its price or estimated cost. The government is wondering why it should pay the cost. The company says the cost reflects the company's management policy and the cost of performance under that policy.

The parties have to talk about it. If the company is proposing to charge the CMMI costs directly to the contract, and if the contract does not require the contractor to perform the work, then the government has asked a good question.

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  • 1 year later...

My suggestion (yes I know this is an old post so probably will not help now) - If they are charging you to generate an EVMs like report require that they provide it to you in Contractor format. Obviously on FFP this is not something they will want to do. Should make negotiations interesting.

By the way, CostPriceAnalyst, what was your result?

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My suggestion (yes I know this is an old post so probably will not help now) - If they are charging you to generate an EVMs like report require that they provide it to you in Contractor format. Obviously on FFP this is not something they will want to do. Should make negotiations interesting.

By the way, CostPriceAnalyst, what was your result?

amthomf, I don't agree with requiring another deliverable. Every deliverable costs money and takes time, which, if I were the contractor, I would then add to the previously proposed price. Then the Government would spend time and costs to receive, review(?), file(?) - for what purpose? Many firms track their own earned value performance and maintain cost records for their internal use as a prudent and necessary management function. I dont agree with make-work requirements or deliverables that serve little or no useful purpose to the government, plus tracking the contractor's earned value on a fixed price contract is generally the right and a prudent function - of the contractor's management team.

I agree with H2H's post above.

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I definitely respect your opinion so I guess I need to re-analyze. But if you paid for something and you aren't changing the format how much more expensive should it be? Also, you say the deliverable serves little or no useful purpose - If you're in a sole source environment and would like to know how well you did in negotiations, data concerning the actuals may be very valuable to future efforts/negotiations.

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Amthomf, we pay for accounting systems and personnel on FFP contracts but don't have unlimited ccess to their routine accounting information. We pay for many internal operational and management functions but don't have access to most of their products on firm fixed price contracts.

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Joel,

Understand but is it really that unreasonable to ask for? Some of the hours I'm seeing in proposals related to this issue seem excessive and yes we take exception to them in negotiations but how well we do....well that is a nother question. Thanks for discussing.

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Joel,

Understand but is it really that unreasonable to ask for? Some of the hours I'm seeing in proposals related to this issue seem excessive and yes we take exception to them in negotiations but how well we do....well that is a nother question. Thanks for discussing.

amthomf, I would generally consider it unreasonable to ask for such data on a FFP contract just to track contractor performance. However, I dont know who your contractor is or what the specific circumstances or proposed staffing are.

I will say that, on two large, multi-hundred million dollar FFP construction contracts on an extremely complex Defense program, I did have some government and consultant project controls experts working side by side with the contractors' production superintendents and field office project controls staffs. Their role was to act as laisons between the government and the contractor to get the projects completed with as little government impact due to design issues, government provided process equipment or changes. They had access to the contractors' earned value data and attended the daily internal production meetings.

The firms were among the top 10 US constructiobn contractors in terms of construction volume. This was a Level I Defense program, however with high visibility and pressure to minimize cost and schedule growth. Shay Assad was actually the President of one of the firms at the time.

These were exceptions to the general rule not to share internal contractor management information with a customer on a FFP contract.

We were also provided access to the earned value (productivity) records during contract execution in support of evaluating and settling impact claims and REA's for loss of productivity due to government action or inaction on one contract. That would generally be reasonable to require, in my opinion. If a contractor provides advance notice of expected impacts, it would be reasonable to expect to have access to its earned value (detailed) data.

I'm not talking about the summary level reports that contractors provide under the DoD EVMS contract clause. I'm talking about the underlying data to is used to provide those reports on a real-time basis.

If you want to discuss your situation in more depth, you can contact me off-line.

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On the FFP contracts discussed above, we achieved enhanced access to the contractors' staff and management data through partnering with the firms. Cost reimbursement construction contract include clause 52.236-18, Work Oversight in Cost-Reimbursement Construction Contracts, which I believe gives the government more access to a contractor's management systems. There may be other clauses but I don't have time to research them today.

Work Oversight in Cost-Reimbursement Construction Contracts (Apr 1984)

The extent and character of the work to be done by the Contractor shall be subject to the general supervision, direction, control, and approval of the Contracting Officer.

(End of clause)

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Guest Vern Edwards

Joel wrote:

I don't agree with requiring another deliverable. Every deliverable costs money and takes time, which, if I were the contractor, I would then add to the previously proposed price.

There are two main categories of data costs: (1) the cost or creating or obtaining the data and (2) the cost of reporting the data, including formatting and transmittal. If the contractor is already preparing the data for itself, then the added cost of asking them to deliver it to the government in the contractor's own format should be no more than the cost or reproduction and transmittal.

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