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Statutory Limits on Contract Award Amount


j_dude77

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I am asking this question just for personal knowledge.

What is the statute that states a military (MILCON) construction contract cannot be awarded if the price is over 15% of the IGE?

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1. What organization are you with?

2. Please quote the rule or source of the statement that "military (MILCON) construction contract cannot be awarded if the price is over 15% of the IGE"

3. The US Army Corps of Engineers has long held a policy that higher level authority is necessary to award a MILCON contract when the lowest qualifying bid/proposal exceeds the Government's estimate by more than 15 percent. The estimate shall include an allowance for contractor profit. I am not aware of any statutory provision that prohibits award of a MILCON construction contract that exceeds 15% of an IGE. The current USACE Acquisition Instructions at 36.205-101 are indeed entitled "Statutory Cost Limitations – Military Construction Contracts." However, the UAI doesn't cite a Statute and the rule only requires the higher level approval, not a prohibition on award above 115% of the IGE.

"(a) Award of a contract for military construction (MILCON) shall be approved by the District/Center Commander when the lowest qualifying bid/proposal exceeds the Government's estimate by more than 15 percent. The estimate shall include an allowance for contractor profit."

4. The old Engineer Contract Instructions and Engineer FAR Supplement required Division Engineer approval for such awards.

5. There IS a statutory limit on awarding Civil Works contracts that exceed the IGE or the Chief of Engineers' estimate of fair and reasonable cost to perform the work by more than 25%. This goes back to the early 20th Century and later evolutions. The Government Estimates for Civil Works projects do not include an allowance for profit, hence the 25% limit (assumes a traditionally held view of 10% as reasonable profit rate beyond the 15% cost variance). The USACE had its own construction and dredging/maintenance crews and equipment for years and years. I think that the Government used to estimate costs based upon the USACE doing the work. The stat limits were apparently to compare price differences between in-house and contracting sources and to limit out-sourcing unless it was considered to be cost effective. See 33 U.S.C. 622 and 33 U.S.C. 624.

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FYI: Here are the current USACE Acquisition Instructions for Government Estimates for Civil Works Contracts at 36.203-101. They stem from the old Engineer Contract Instructions (pre-1984) and the EFARS (Post 1984), as specifically applicable here to USACE Civil Works contracts.

"(a) Government estimates shall be based on the estimated comparable cost of doing the work by Government plant (see 33 U.S.C. 624, Limitation on [River and Harbor] Improvement Work by Private Contract) under the following conditions:
(1) If suitable Government plant is reasonably available for use within the time limits that would be allowed a contractor, or
(2) If, in the judgment of the commander, the work could be done at a reasonable cost with plant purchased or leased for the project and if the commander is prepared, if bids are rejected, to recommend doing the work with Government plant and labor.
(b ) In estimating the cost of doing the work under (a)(1) above, proper charges for labor and materials, plant depreciation, all supervision and overhead expenses, and interest on the capital invested in the Government plant shall be taken into account (the rate of interest shall not exceed the maximum prevailing rate being paid by the Government on current issues of bonds).
(c ) Under any other conditions, Government estimates shall be based on the fair and reasonable estimated cost of a well-equipped contractor doing the work. Proper charges for labor and materials, plant depreciation, all expenses for supervision, overhead, worker's compensation, general liability insurance, and interest on capital invested in plant shall be taken into account. An allowance for profit shall not be included."

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Joel,

I was hoping you would respond. I work for the Corps and I am fully aware of 33 USC 624. The UAI does reference 33 USC 622 and 624 in regard to civil works. The other reference UAI 36.205-101 is what I was wanting to know.

Please quote the rule or source of the statement that "military (MILCON) construction contract cannot be awarded if the price is over 15% of the IGE" It is what you commonly hear people say. I guess they are so used to the civil works restriction, that they assume it is the same as with MILCON.

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Yep, I would agree. I don't know why the title of the recent UAI at 36.205-101 reads "Statutory Cost Limitations – Military Construction Contracts."

i just checked my old copy of the EFARS and it didn't include that statutory wording. I have a copy of the ECI around here somewhere but don't have time to search for it...

It was probably something that the reviewers overlooked. I don't kniow who all reviewed the UAI outside of the USACE National Contracting Organization.

Feel free to call or email me if you want to. I'm still in the USACE Directory. :)

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There is no telling. I just remember everyone saying that the EFARS needed to be updated, then one day BAHM!!!! UAI.

I admit reviewing the document but only the "new" Design-Build clauses in detail, since I developed or helped develop them over about 20 years. I "leafed through" the rest of the document and noticed that it mostly reflected the EFARS, plus updates thereto. Where the language appeared to be the same as EFARS, I didn't review it closely. They didn't include some of my recommendations beyond the DB clauses nor did I have an opportunity to review the final edits. I was primarily concerned about the clauses because I have tried to get them instituted into policy for over 17 years. Some other services, such as the AF National Guard Bureau adopted them years before us after attending my DB Course! :lol: Hey - if any reader is in the Air Force National Guard Bureau, I suggest updating them. :wub:

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What is the statute that states a military (MILCON) construction contract cannot be awarded if the price is over 15% of the IGE?

I would add that the Army National Guard has a regulation, NGR 420-10, on the issue of program validity, which unlike the USACE higher level review requirement, could halt a construction award where the amount exceeds the Government Cost Estimate. Section 5-1( b )(2) provides, in part, that the signed programming authorization remains valid if the project cost will not exceed 125% of the estimated cost AND programming is less than 2 years old.

"All completed, signed NGB Form 420-Rs or DD Forms 1390/1391 remain valid only if the project does not exceed its USPFO approved scope or 125% of its estimated cost and if the form is less than two years old. In those cases, the form requires amendment, staffing, and approval as if it were a new project, before the project may continue."

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  • 4 weeks later...

j_dude77 and Joel mentioned 33 U.S.C. 624 which prohibits awarding a covered contract if the bid price exceeds the IGE by more than 25%. Here is a link to a recent COFC protest decision that interprets the relationship between that statute and the HUBZone price adjustment preference.

http://www.uscfc.uscourts.gov/sites/default/files/FIRESTONE.AQUATERRA112213.pdf

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  • 1 year later...

Joel,

I was hoping you would respond. I work for the Corps and I am fully aware of 33 USC 624. The UAI does reference 33 USC 622 and 624 in regard to civil works. The other reference UAI 36.205-101 is what I was wanting to know.

Please quote the rule or source of the statement that "military (MILCON) construction contract cannot be awarded if the price is over 15% of the IGE" It is what you commonly hear people say. I guess they are so used to the civil works restriction, that they assume it is the same as with MILCON.

Yep, I would agree. I don't know why the title of the recent UAI at 36.205-101 reads "Statutory Cost Limitations – Military Construction Contracts."

i just checked my old copy of the EFARS and it didn't include that statutory wording. I have a copy of the ECI around here somewhere but don't have time to search for it...

It was probably something that the reviewers overlooked. I don't kniow who all reviewed the UAI outside of the USACE National Contracting Organization.

Feel free to call or email me if you want to. I'm still in the USACE Directory. :)

Rip Van Winkle, here...

j_dude77,

The USACE corrected the USACE Acquisition Instructions at 36.205-101 "Cost Limitations – Military Construction Contracts." in the November 2014 update

to delete the word "Statutory" from the title. The Summary of Revisions explains:

36.205-101 Cost Limitations–Military Construction Contracts
The title at UAI 36.205-101reflects the title as written in the EFARS. The term “Statutory” is removed from the title at UAI 36.205-101. The limitations given in EFARS 36.205-100(a) and ( b ) are not based upon any statutory restriction or mandate. (Administrative Clarification)
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