Sandy Emergency - DOD Procurement

[MDJohn]

Client is a transport company. DOD sent a lettter contract by e-mail to client seeking to hire client to move equipment to NYC immediately. By its terms, DOD letter contract is an "undefinatized contract action" that contemplates the parties negotiate a definitive contract action. Letter contract contains a NTE of $X million.

DOD wants client to sign and return letter contract and commence performance immediately. Client is happy to provide the services, but wants to make sure the acquisition is properly documented.

Is this the proper paperwork? Does the letter contract pose risks to the contractor of nonpayment or unlimited liability? The letter contract provides that if the DOD and contractor cannot agree on defiinitive terms, then the CO may determine a reaonable price or fee under FAR 15.4 and FAR 31, subject to contractor appeals under the Disputes clause. Is there a risk that the CO's determination of a reasonable price or fee will be unreasonably below market?

Would it be better for DOD to use SF 26 and check in box 13 the box for 10 USC 2304© and attach a short schedule?

Can client use its standard shipping terms and conditions?

Client does not have a GSA schedule or any other current multiple award contract.

Thanks,

J

[ji20874]

Does the letter contract contain any unit prices? or just $X Million for the whole contract work? Is the whole contract work bound somehow, or is it open, too?

This is one of those situations where your client needs to decide if it wants the work under the unpriced circumstances, or not. I tend to think the risk to your client is low, as the contracting officer probably won't want to quibble over pennies or nickels and will likely easily agree to market prices at definitization. But if not, your client can use the disputes process.

This is a business decision, pure and simple, with some risk and a potential for reward. Is it worth it?

[Guest Vern Edwards]

Is this the proper paperwork?

That is impossible to answer on the basis of the limited information that you have provided. "Paperwork" could refer to the terms of the contract or could refer to the administrative paper to support the contract action. You have asked a huge question that is unanswerable by anyone here.

Does the letter contract pose risks to the contractor of nonpayment or unlimited liability? The letter contract provides that if the DOD and contractor cannot agree on defiinitive terms, then the CO may determine a reaonable price or fee under FAR 15.4 and FAR 31, subject to contractor appeals under the Disputes clause. Is there a risk that the CO's determination of a reasonable price or fee will be unreasonably below market?

There is a risk of all of those things, but it is impossible to say how great the risk is on the basis of the limited information that you have provided. My guess is that the risk is not excessive, but that your client may have a paperwork hassle when it tries to get paid. My guess that they'll get paid eventually, but it may not be as much as they think they should get and it may take a while to get what they can.

Would it be better for DOD to use SF 26 and check in box 13 the box for 10 USC 2304© and attach a short schedule?

I don't understand that question. I don't see how using a particular form and checking a particular box on the form will make much difference in terms of your concerns.

Can client use its standard shipping terms and conditions?

I doubt it, but it's impossible to say without first seeing those terms and conditions. I wouldn't count on it.

I think the previous poster has made the main point. Under the circumstances, your client will not be able to dot all the i's and cross all the t's in advance. They will have to decide whether they want the business and how much risk they're willing to take. I think there is risk, but my guess is that it is not huge.

[Navy_Contracting_4]

Client is a transport company. DOD sent a lettter contract by e-mail to client seeking to hire client to move equipment to NYC immediately. By its terms, DOD letter contract is an "undefinatized contract action" that contemplates the parties negotiate a definitive contract action. Letter contract contains a NTE of $X million.

DOD wants client to sign and return letter contract and commence performance immediately. Client is happy to provide the services, but wants to make sure the acquisition is properly documented.

Is this the proper paperwork?

There's nothing about using a letter in lieu of an SF-26 that makes this in any way inadequate. Whether it includes all the proper paperwork we can't tell. For example, does it include the text of, or references to, FAR 52.216-23, -24 and -25? All letter contracts are required to include them, along with "the clauses required by [the FAR] for the type of definitive contract contemplated. . ." (see FAR 16.603-4.)

Does the letter contract pose risks to the contractor of nonpayment or unlimited liability?

The risk of nonpayment is almost zero. We can't determine the risk of unlimited liability, because we don't know how specifically and definitively the work is described, or whether the "NTE" amount is effectively a "ceiling price." Does FAR 52.216-25 include a paragraph (d), capping the firm fixed price to be negotiated? If so, you need to ensure that it is high enough to cover completion of the work described. If the work described is open-ended, then you should be wary of including a ceiling on the firm fixed price to be negotiated.

The letter contract provides that if the DOD and contractor cannot agree on defiinitive terms, then the CO may determine a reaonable price or fee under FAR 15.4 and FAR 31, subject to contractor appeals under the Disputes clause. Is there a risk that the CO's determination of a reasonable price or fee will be unreasonably below market?

I agree with ji2074 and Vern Edwards that this risk is reasonably low, and that in the unlikely event that the client believes the CO determined a price unreasonably below market, there is an avenue for redress.

Would it be better for DOD to use SF 26 and check in box 13 the box for 10 USC 2304© and attach a short schedule?

Can client use its standard shipping terms and conditions?

Client does not have a GSA schedule or any other current multiple award contract.

Thanks,

J

I agree with Vern's comments.

As a final note, in my experience, in emergency situations like this, CO's are interested in getting essential work going quickly, and not in stiffing contractors. Does your client want to help the country in recovering from disaster? Yes, it's a business decision, and you don't want to expose your client to undue risk, but it's more than just that.

[here_2_help]

Just chiming in here with another two centavos worth of advice.

If you accept a UCA, then you need to realize that, for all intents and purposes, you have accepted a cost type contract. This is true even if the parties intend to definitize to a firm, fixed-price type downstream. One day, you will be asked to prepare a proposal to definitize the UCA, and one of the primary foci of the government auditors and negotiatiors will be on your "actual costs incurred". That is to say, actual allowable costs. Reasonable in amount. Allocable under the applicable allocation criteria. That stuff.

You may risk cost disallowances and/or other allegations if your accounting system is inadequate to support audits and fact-finding with respect to your actual costs incurred.

Hope this helps.

[Don Mansfield]

For example, does it include the text of, or references to, FAR 52.216-23, -24 and -25? All letter contracts are required to include them, along with "the clauses required by [the FAR] for the type of definitive contract contemplated. . ." (see FAR 16.603-4.)

The OP said that DoD issued the letter contract, so it shouldn't include FAR 52.216-25. DoD has its own "Contract Definitization" clause at DFARS 252.217-7027. See DFARS 216.603-4( b )(3).

[MDJohn]

Thanks. Very helpful. My apologies for lack of details.

The letter contract references DFARS 252.217-7027.