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siwilliams

Rates and Updated Proposal

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I have a CPFF contract awarded competitively. If I submitted a cost growth proposal for over $700K (scope changes/rates/overruns). its my understanding that we would need to provide Certified Cost & Pricing Data. The proposal was submitted a while a go and when the government was ready to discuss, I updated the pricing with current G&A rates due to my belief that the change falls under TINA. At this point some of the data was actuals. Based on the new rates, its significantly higher than the original cost growth proposal. Government wants us to agree to cap the rates for the out years. My question is three-fold (1) is that ok even if our rates change during those years? (2) I thought there was some type of provision that pretty much forbids the government from forcing an agreement that could significant and detrimental impact to the health of a company, did I imagine this provision? (3) Can the government make the decision to make the award based on the previous proposal?

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Guest Vern Edwards

(1) Yes, it's OK for you to agree to cap your rates in the out-years. You would be agreeing not to seek reimbursement of amounts that exceed the caps. Whether you should agree to do that is up to you.

(2) There are several provisions in the laws and regulations that forbid the government from intentionally acting in a manner that is designed to injure a contractor. To do so would violate the common law "covenant of good faith and fair dealing". See also FAR 1.602-2( b ).

But I don't know what you mean by "forcing an agreement". How would the government "force" you to "agree" to something? They could ask you to do it, insist that you do it, demand that you do it, refuse to give you what you want unless you do it, but I don't see how they could "force" you to do it, unless they talking about sending the SEALs or a drone to kill you if you don't agree.

(3) I don't understand the last question. What "award" are you talking about? I thought you were asking about a contract modification. Are you talking about a proposal to add out-of-scope work to the contract?

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No drones or SEALs here- just very strong demands. Yes, the "award" I'm referring to is just the change to the contract value for the out-of-scope work. Probably the wrong terminology, but I'm referring to the increase to the estimated cost ceiling.

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siwiliams,

Your government customer does not have to agree to modify your contract to increase estimated costs in the amount you proposed. The government can negotiate a different amount with you. As you described the scenario, I have the feeling that the contractor does not have a good handle on its indirect rates and if I were your customer I would try to protect myself from further requests for funds based on rate increases by seeking to have you agree to cap your rates with respect to future contract billings. As Vern posted, though, you don't have to agree with that approach.

You and your customer are negotiating. I suggest you worry less about regulation and more about convincing your customer why your position is reasonable. Just a thought.

Hope this helps.

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No drones or SEALs here- just very strong demands. Yes, the "award" I'm referring to is just the change to the contract value for the out-of-scope work. Probably the wrong terminology, but I'm referring to the increase to the estimated cost ceiling.

si, terminology is important in this case. You mentioned "overruns" as well as "out-of-scope work" in posts #1 and #3 above. Regarding the out-of-scope work, are you referring to work that is truly different than the scope described in the contract? The disctinction is important because adding such work and the pricing for it might require agreement by both parties, which would not allow the government to unilaterally determine the contract price.

On the other hand, the government might be able to unilaterally modify the contract for the portion of the modification that is simply for cost overruns or updated rates. Then, if you don't agree, you may initiate a claim and provide evidence of actual costs or more accurate rates.

EDIT: H2H posted #4 while I was typing. I agree with his post (at least as posted at 09:27 CDT).

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