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StillTrucking

Sub Overran - Trying to Fix a Year Later on Closed CLIN

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Hi there,

I work for a very, very small contractor and frankly, I'm embarrassed to even post this question.

A year ago, my firm and a very large subcontractor verbally agreed to deobligate funds from CPFF purchase orders we had issued them. On my end, we worked the funding de-ob with the Government. After the de-ob was finalized with the Government but before we pulled back the funds from the subcontractor, the subcontractor submitted new invoices and stated they no longer agreed with our mutual agreement to de-ob X dollars. Looking back, it's obvious we should have deobligated the funds from the Subcontractor prior to asking the Government to process a deobligation (Yes, yes... yet another reason my tail is tucked. We have since changed our ways).

As the prime contractor, I feel as though we were never given a bonafide reason for their change of heart nor any kind of reasonable explanation for the new invoices/charges when all work was supposedly complete. I also believe they are trying to throw their weight around and bully us into submission using their big name and reputation.

We have yet to pay the invoices because we think they are full of it. As you can imagine, they are ticked.

Bottomline: I need to "find" an extra $100K for my prime CPFF contract. The unpaid invoices are on a closed CLIN and closed Contract (closed last year). I don't have any extra money on that closed CLIN. What are my options in fixing this? They are driving me crazy and I'm sure they are saying the same.

Ack.

Humbly,

StillTrucking

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Private firms do not obligate or deobligate funds. (I am relying on the convential meaning of the words "obligate" and "funds" as used in government contracting.) Only government officials obligate or deobligate funds.

Private firms can enter into contracts and subcontracts and, depending on the terms of the contracts and subcontracts, they might be able to terminate them in whole or in part.

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Vern,

Forget "deobligate" then. We had a handshake to "downscope" the subs funding through a purchase order mod. Before we could downscope the subcontractor's purchase order, they overran our agreed revised cost and fee. Sadly, this happened after the Government pulled back the money from me, the prime. Now I'm left holding the bag trying to figure out how to pay folks when I have no money in house.

I've never run into this before so I'm not sure where to start. File a claim? I don't know.

- StillTrucking

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Well, the obvious answer is that a handshake isn't good enough. If the government had already modified your contract with them before you modified the contract with the sub, then you are holding the bag. If you can afford it, you might want to check with a good attorney, who might be able to get you off the hook.

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StillTrucking,

If you believe you had an agreement and the invoices were submitted in bad faith -- if you REALLY believe it -- then I have a different answer for you.

Do not pay the invoices. Do nothing.

Force your subcontractor to file a claim against you. Your defense will be that the sub breached an oral agreement and did not deal with your company in good faith.

I don't post this lightly. It's definitely a risky move. But I'm assuming at this point you don't plan to work with the subK again.

(Not a lawyer. Consult a lawyer before doing anything.)

Hope this helps.

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That might work. "Get lost. We made a deal." Use the invoice as a wrapper for dead fish.

One point of clarification, however. Since the issue is between two private parties, the sub would not "file a claim." That language makes sense in the context of a government-contractor issue, but not in the context of an issue between private parties. The distinction between an invoice and a claim does not really exist in such dealings. Instead, the sub might initiate a lawsuit by filing a complaint in state or federal court.

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Vern,

You're right, of course. The subK would file a lawsuit at the local court. Although the question was initially framed in terms of government contract rights and obligations, the reality is that this is a business dispute, and would likely be adudicated in accordance with the UCC and state laws.

(Not a lawyer. Thinking about playing one on TV.)

H2H

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