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Prepaid Credits


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Scenario:

1280 IT “Prepaid Consulting Credits” (credits are the equivalent of hours) purchased as a FFP subscription. PoP on the contract is 25 Sept 2013 – 31 January 2014. FY13 O&M Funds used. Invoice was submitted 01 October 2013 and paid 15 October 2013. The contractor did not perform any of the 1280 “Credits” during the period of performance (or to date for that matter).

Contractor has stated they view the “credits” are still valid for use (their normal procedure is credits are valid for 12 months). Requiring Activity obviously still wants the contractor to perform.

Issues:

- Bona fide need – bought this with FY13 funds, it’s the second half of FY14 and no actions have been completed by the contractor.

- Contract PoP has lapsed, invoice has been paid = final acceptance of service? Even though nothing was done?

- If the contractor does perform now, after the PoP, is this an ADA violation?

I’m not the KO. But I do feel the contractor performing now, after the PoP is inappropriate (bona fide need, voluntary services, contract PoP has lapsed). My instinct is that the appropriate course of action would be for the contractor to not perform, Terminate for Convenience, and the Gov’t to try to recoup the money collected by the contractor through negotiations (or possibly litigation).

Any thoughts? Need more information?

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ChrisM.,

Did the contract require the contractor to perform? If not, what would be the basis for a termination of any sort? In this case, the contractor has "volunteered" to perform work even though, by your description of the contract, it need not do so. Given that, what would be the basis for trying to recoup funds already paid? What would be the basis for litigation?

Typically, the contractor offers reduced prices in return for the customer taking the risk that there will be insufficent demand for the services. In this case, it seems the contractor made out financially but is still willing to perform in the name of customer relations. Sounds like a great contractor.

Hope this helps.

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The contract had a PWS and specific tasks for the contractor to accomplish, however, none of the tasks were accomplished within the period of performance. Basis for terminating the contract would be the validity of the contract. By the FAR definition, a contract is a "mutually binding legal relationship obligating the seller to furnish the supplies or services and the buyer to pay for them". No services were furnished by the seller. Further, the basics of a contract are offer, acceptance, consideration, legal purpose, and competent parties. In this situation, what consideration did the Government recieve? Wouldn't the lack of consideration be suitable grounds for terminating the contract and recouping the funds?

Aren't volunteer services an ADA violation?

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The government received the right to order services in consideration for payment. Indeed, though you did not specify it, I suspect the contractor offered reduced pricing in consideration of the fact that the government was taking the risk that the services would not be ordered. This is a common commercial arrangement.

H2H

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If the Government never ordered any services, what provision in the contract allows recovery of funds already paid. I assume that the contractor invoiced within the terms of the contract. I agree with Heretohelp.

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The contract had a PWS and specific tasks for the contractor to accomplish, however, none of the tasks were accomplished within the period of performance. Basis for terminating the contract would be the validity of the contract. By the FAR definition, a contract is a "mutually binding legal relationship obligating the seller to furnish the supplies or services and the buyer to pay for them". No services were furnished by the seller. Further, the basics of a contract are offer, acceptance, consideration, legal purpose, and competent parties. In this situation, what consideration did the Government recieve? Wouldn't the lack of consideration be suitable grounds for terminating the contract and recouping the funds?

What were the specific tasks for the contractor to accomplish that it did not accomplish? Are they something other than the credits?

My understanding of "credits" is prepayment for a certain amount of services (e.g., by making the payment you are entitled to X hours of tech support). Is that the situation? If so, don't we need to give the contractor something to do to take advantage of the credits (if we don't, what does the contractor do to honor the credit arrangement)?

With respect to your argument about lack of consideration, the consideration the Government received was the promise to perform a certain amount of work. Think of it as kind of an option; we pay a certain amount for the ability to require the contractor to provide a certain level of service in the future. We do not get our option payment back just because we never require the contractor to actually do anything.

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I'm going to go out on a limb, but based on the date of the award, it appears that program may be trying to bank their money at the end of the fiscal year.

What was the basis for the amount of credits ordered? Did your program folks have previous history to support the amount of credits ordered for the performance period? Would credits only be used under the order if someone from the program office asked for support from this contractor?

I've seen this before when program has tried to purchase "training coupons" at the end of the year which would be used whenever, but there were no specific needs cited. No bona fide need? No shoes? No service!

Is there any reason why you cannot effect a 6 month period of performance extension so the program can use what they purchased? It sounds like the Government was responsible for the contractor not performing so consideration should not be an issue. (otherwise, if they were refusing to perform, a T4D would be on the table instead of a T4C).

I would also consider revisiting the appropriateness of contracting for credits if one has to pay up-front for them instead of paying as they are used. End of fiscal year is coming up and that program office may want to redirect where their funds go.

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If only there were a CPARS-like report where the contractor graded the performance of the CO and COR. What an interesting feedback loop that would be!

(Never gonna happen.)

H2H

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Guest Vern Edwards

Well, in this case the contractor might give them a high score, since they paid him in advance for work he did not do and now want to cite appropriations law as the basis for deciding that they can't get it back.

Is this a great country or what?

In case you haven't seen the news, the Russians are paying us back for sanctioning them by announcing that we cannot use the rocket engines that we bought from them for launching military satellites to launch military satellites. And they want to know how our astronauts are going to get up to the space station and, more importantly, how they're going to get back to Earth.

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If only there were a CPARS-like report where the contractor graded the performance of the CO and COR. What an interesting feedback loop that would be!

(Never gonna happen.)

H2H

It may be closer than you think. Did you see CONSULTANT LISTS DHS’ MOST (AND LEAST) ANNOYING CONTRACTING OFFICERS or Doing business with DHS: Ranking DHS’s contracting officers ?

It certainly isn't CPARS, but it does provide some discrimination between various COs. Who knows where it may lead?

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Chris M, would you please answer our questions? Since you discussed demanding repaymeny, I really don't understand what the contractor didnt do that it was supposed to do in order to be paid. It would appear that the government would have had to place an order for assistance (?) and/or did the contractor not provide the required assistance after being being contacted? Thanks

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Posted Yesterday, 12:17 PM by Styrene: Is there any reason why you cannot effect a 6 month period of performance extension so the program can use what they purchased? It sounds like the Government was responsible for the contractor not performing so consideration should not be an issue. (otherwise, if they were refusing to perform, a T4D would be on the table instead of a T4C).

Could you mutually agree to extend the period of performance, as offered by the Contractor?

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