Milestone Payments: Kick-off Meeting allowability

[Beantown_Contracts]

The following statement has been presented as factual re: a FFP proposal where deliverables are modified hardware:

"Per FAR guidelines, and DCAA, one cannot use the program kickoff as a milestone. FAR prohibits the ordering of material, passage of time, holding of kickoff meetings, and signing of POs/Subcontracts as milestones."

Milestone 1 is stated as, "Kickoff Meeting: costs incurred in support of"

While I am in agreement that one may invoice for costs incurred vs. signing of POs, passage of time, etc., does this truly hold for the milestone 1 as stated above?

My research is not providing a definitive answer.

Thank you in advance.

V/R,

BC

[ji20874]

Are you talking about performance-based payments under FAR Subpart 32.10 Performance-Based Payments? Or, in other words, is the contract clause at FAR 52.232-32 Performance-Based Payments in the contract?

If YES, see FAR 32.1004(a)(1). There, you will read the following sentence:

The signing of contracts or modifications, the exercise of options, the passage of time, or other such occurrences do not represent meaningful efforts or actions and shall not be identified as events or criteria for performance-based payments.

You will discern that the FAR sentence differs from what was presented to you.

If NO, well, I can't help you any further. But you can ask whomever presented the statement as factual for the citation, and go from there.

[Whynot]

_{Your FAR reference is limited to the policy and procedures for performance-based payments under noncommercial purchases. See FAR Subpart 32.10 -- Performance-Based Payments.}

_{Conversely, under Subpart 32.2 -- Commercial Item Purchase Financing, the policies and procedures for commercial financing arrangements under commercial purchases are provided. There is no such limitation on payments.}

_{Contracts may provide for commercial advance and commercial interim payments based upon a wide variety of bases, including (but not limited to) achievement or occurrence of specified events, the passage of time, or specified times prior to the delivery date(s). The basis for payment must be objectively determinable.}

[Retreadfed]

I would have to question at least part of what has been presented to BC. That is the reference to DCAA. DCAA does not have any authority to establish procurement policies. It only functions are to conduct audits and provide financial and accounting advice to other procurement personnel.

[here_2_help]

Notice the wording of the proposed "milestone" -- "Milestone 1 is stated as, 'Kickoff Meeting: costs incurred in support of' "

If this is truly a PBP event, its value should not be tied to the costs of performing the event. (For the record, I agree it's a very poor PBP event.) (Source: DOD User's Guide to PBPs as well as FAR 32.10 guidance.)

Just the description makes me think that the party that proposed it knows too little about the use of PBPs (assuming we are talking about PBPs) to make effective use of them. Unsurprising, really, given past GAO audit findings in this area. The parties should just implement cost based progress payments and be done with it.

Hope this helps.

[Whynot]

I found this receent report from the DoD IG:

http://www.dodig.mil/pubs/documents/DODIG-2013-063.pdf