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elgueromeromero

Can a Contractor Hire Federal Employees to Assist on a Federal Contract

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A contractor wants to know if he can use federal employees to accomplish work on a federal contract. He’s proposing to pay the agency directly or reimburse the agency for the employees’ time via a modification to decrease his contract price. I’ve never heard of a contractor doing this, and have some concerns regarding potential liability and/or OCI issues, but I haven’t been able to find any regulation or policy that speaks specifically to this. The federal employees work for the same agency that awarded the contract, but weren't involved in any way during the source selection and haven't been involved in the contract since the award. Common sense and my gut feeling is that he cannot do this, but I'm sure if I tell him this isn't allowed, he'll ask what specific regulation prohibits this arrangement.

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Guest jrt132

You may want to do some reading on Public-Private Partnerships. There is a a Government organization as a "subcontractor" on a contract I manage. In this contract our company is required to "subcontract" a certain percentage of the work to the Public Partner.

And there are associations for everything:

http://www.ncppp.org/

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You may want to do some reading on Public-Private Partnerships. There is a a Government organization as a "subcontractor" on a contract I manage. In this contract our company is required to "subcontract" a certain percentage of the work to the Public Partner.

And there are associations for everything:

http://www.ncppp.org/

I don't think this type of arrangement would qualify as a public-private partnership - it's basically just subcontracted work where the contractor wants to pay the federal employees to help him perform certain tasks required in his contract in a more efficient manner. I'm assuming that under your contract the contractor is not paying the Government?

Has anyone else heard of a contractor hiring/paying federal employees to assist them in completing a federal contract?

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Guest jrt132

We do in fact pay the Government. We are a the prime contractor for an Air Force contract and the Air Force is using the Public-Private Partnership to fulfill the requirements of 10 U.S. Code § 2464 and 10 U.S. Code § 2466. In short, our customer (one Air Force organization) directs the contractor to "subcontract" a portion of the work the another Air Force organization. Our contract actually mandates how much work much be "subcontracted" with the Public partner over the life of the contract.

For other examples, look at FBO.Gov RFP FA8823-13-R-0009. It is discussed in the PWS.

I, too, would be interested in hearing others experience with subcontracting with the Government.

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Why bother with all that? Why not just agree that certain work will be done by the Government and certain other work will be done by the contractor and then specify any responsibilities at interfaces? Why talk about "hiring" the Government? Even if allowed, it's just a needless complication.

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Why bother with all that? Why not just agree that certain work will be done by the Government and certain other work will be done by the contractor and then specify any responsibilities at interfaces? Why talk about "hiring" the Government? Even if allowed, it's just a needless complication.

Vern, the original post indicated that the Contractor is proposing to pay the agency directly or reimburse the agency for the employees’ time via a modification to decrease his contract price.

elgueromeoromeo, If this is possible, has your your organization determined the effective, loaded government employee labor rates (including, for example, direct hourly, fringe benefits and retirement, departmental overhead, organizational overhead, etc.)? I'm not sure about where the credited funds would go to either...

There is an administrative cost to the Government to modify the contract. Would the Contractor or the Government be responsible for the performance of the work by the government employees? The employees would not be performing other, supposedly necessary tasks that they would otherwise be doing. What is the benefit to the Government for his type of arrangement?

Doesn't seem like the Government should be agreeing to this on an existing contract.

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Joel:

I know what the original post said. I think it's a stupid idea.

A contractor wants to know if he can use federal employees to accomplish work on a federal contract. He’s proposing to pay the agency directly or reimburse the agency for the employees’ time via a modification to decrease his contract price.

If the contractor has a contract to do certain work, but doesn't want to do the work itself and would prefer that it be done by government employees, it should propose that the government do the work instead and offer a deductive modification or partial termination for convenience and a price reduction. If the government agrees and there will be an interface between the work of the two parties, then they should negotiate an agreement assigning responsibility at the interface.

The notion of a contractor "using" government employees, even if legal, which I doubt, is silly. Think of the potential legal complications and conflicts of interest. As for paying the agency directly, why would the agency be happy about paying the contractor then getting the money back only to have to put it in the Treasury? So it gets money from the Treasury, obligates it on the contract, gets it back, and then has to put it back in the Treasury. Genius. Real genius.

This is a notion that could have arisen only in the mind of someone who is incapable of thinking up simple proposals and plans.

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Guest jrt132

Hi, Vern.

I would like to add, the arrangement is a needless complication and many conflicts of interest have arouse out of this directed arrangement, which now need to be mitigated. The same Government organization that we "subcontract" with also provides the IV&V on the software we maintain, which is the same software they now maintain.

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I just want to note that there may be occasions where arrangements like that described in this thread are advantageous, and that, at least in DoD, industrial facilities have authority to sell certain articles and services to non-government entities under 10 USC 2563. As for Vern's roundabout scenario with paying money to the contractor, then getting it back only to deposit it into the Treasury, 10 USC 2563 addresses it thusly:

"(e) Deposit of Proceeds.— Proceeds from sales of articles and services under this section shall be credited to the funds, including working capital funds and operation and maintenance funds, incurring the costs of manufacture or performance."

I don't know about any similar authority at any of the civilian agencies.

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I hate long quotes, but I think it might be useful for people to see that 10 U.S.C. 2563 is of very limited application:

(a) Authority To Sell Outside DOD.—
(1) The Secretary of Defense may sell in accordance with this section to a person outside the Department of Defense articles and services referred to in paragraph (2) that are not available from any United States commercial source.
(2)(A) Except as provided in subparagraph ( B ), articles and services referred to in paragraph (1) are articles and services that are manufactured or performed by any working-capital funded industrial facility of the armed forces.
( B ) The authority in this section does not apply to sales of articles and services by a working-capital funded Army industrial facility (including a Department of the Army arsenal) that manufactures large caliber cannons, gun mounts, recoil mechanisms, ammunition, munitions, or components thereof, which are governed by regulations required by section 4543 of this title.
( b ) Designation of Participating Industrial Facilities.— The Secretary may designate facilities referred to in subsection (a) as the facilities from which articles and services manufactured or performed by such facilities may be sold under this section.
( c ) Conditions for Sales.—
(1) A sale of articles or services may be made under this section only if—
(A) the Secretary of Defense determines that the articles or services are not available from a commercial source in the United States;
( B ) the purchaser agrees to hold harmless and indemnify the United States, except as provided in paragraph (3), from any claim for damages or injury to any person or property arising out of the articles or services;
( C ) the articles or services can be substantially manufactured or performed by the industrial facility concerned with only incidental subcontracting;
(D) it is in the public interest to manufacture the articles or perform the services;
(E) the Secretary determines that the sale of the articles or services will not interfere with the military mission of the industrial facility concerned; and
(F) the sale of the goods and services is made on the basis that it will not interfere with performance of work by the industrial facility concerned for the Department of Defense.
(2) The Secretary of Defense may waive the condition in paragraph (1)(A) and subsection (a)(1) that an article or service must be not available from a United States commercial source in the case of a particular sale if the Secretary determines that the waiver is necessary for reasons of national security and notifies Congress regarding the reasons for the waiver.
(3) Paragraph (1)( B ) does not apply in any case of willful misconduct or gross negligence or in the case of a claim by a purchaser of articles or services under this section that damages or injury arose from the failure of the Government to comply with quality, schedule, or cost performance requirements in the contract to provide the articles or services.

(d) Methods of Sale.—

(1) The Secretary shall permit a purchaser of articles or services under this section to use advance incremental funding to pay for the articles or services.
(2) In the sale of articles and services under this section, the Secretary shall—
(A) charge the purchaser, at a minimum, the variable costs, capital improvement costs, and equipment depreciation costs that are associated with the articles or services sold;
( B ) enter into a firm, fixed-price contract or, if agreed by the purchaser, a cost reimbursement contract for the sale; and
( C ) develop and maintain (from sources other than appropriated funds) working capital to be available for paying design costs, planning costs, procurement costs, and other costs associated with the articles or services sold.

The rest of the statute discusses deposit of proceeds, relationship to arms export control act, and definitions.

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