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jeff4757

Government request to reduce FEE on a FFP proposal

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Folks,

Our firm is a manufacturer of commercial items for DoD.

In a FFP proposal, the Government is requesting a FEE REDUCTION against the subcontractor costs.

Their position is that they are unable to obtain the sub's cost data and therefore wish to reduce the FEE our firm applies to the subcontract costs.

Is there a FAR clause which may defend our position in keeping the FEE unchanged?

Appreciate any feedback!

Thank you,

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I am assuming you have told the government how much fee you are proposing at the prime level on your subcontract cost. It sounds like the government is just negotiating with you about fee. Have you told them how much fee is wrapped into the subcontractor's proposal to the prime? I am also assuming that the subcontract is FFP and for a commercial item. Are my assumptions correct?

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Guest Vern Edwards

There is no FAR clause that will help you.

I think you meant that the government has contacted you with respect to an FFP proposal that you have submitted to them. Right? They have not submitted a proposal to you. If you have proposed an FFP (firm-fixed-price) contract, then there is no "fee". The term "fee" is used in connection with cost-reimbursement contracts. If they used the term "fee" in connection with an FFP contract, then they are idiots, and you can quote me on that. (Hopefully, you have not used the term "fee" in your FFP proposal, because that would make you... well, you know.)

What they appear to want is a price reduction on some basis or other. Did they cite any regulatory or contractual basis for what they have asked for? if not, tell them that your answer is no. If they have cited some regulation or contract clause, then you have to decide whether they have justification for what they have asked for.

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It seems to me this is simply a matter of negotiation. One party asks for something, and the other party either says yes or no or something else. In a negotiation, one party might have more strength than the other. If you are in a strong negotiating position, you can just say no -- take it or leave it. If you are in a weak position, you might feel obliged to say yes even though you don't want to. It's a dance. But as Vern says, there is no FAR clause you can hide behind, and everything is negotiable, right? Maybe the overall price you are proposing is too high, and maybe reducing your profit objective on subcontract costs will allow your price to drop just the right amount so the Government can say yes.

Anyway, you might be interested in FAR 15.404-4( a )( 3 ).

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(Hopefully, you have not used the term "fee" in your FFP proposal, because that would make you... well, you know.)

I resemble that remark! :) Thank You.

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To InNeedofWisdom- your assumptions are correct.

And no, we did not mention FEE in our FFP at all. In the BASE, The contract is a CPFF with fixed price cost elements and the Gov CS used the contracted percentages as a guide.

Thanks to all

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jpayne,

What is the proposed/estimated value of the subcontract? Is the subcontract itself FFP? Is the subcontract price based on commerciality? Are you able to demonstrate that the proposed/estimated subcontract price is fair and reasonable?

In a related thought, if your company is manufacturing commercial items for DOD, how are you getting a CPFF contract? Are you saying, instead, that you are proposing a CPFF contract that has commercial items proposed within it as individual FFP CLINs? Has that approachw worked well for you in the past?

So many questions, so little info to go on.

H2H

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It seems there is some terminology confusion.

You stated, "And no, we did not mention FEE in our FFP at all". To remove the acronym, that statement would read, "And no, we did not mention FEE in our Firm-Fixed Price at all". When combined with an earlier statement in which you stated, "And no, we did not mention FEE in our FFP at all. In the BASE, The contract is a CPFF with fixed price cost elements and the Gov CS used the contracted percentages as a guide", it makes me think that you may have assigned a different meaning to FFP

Are you using FFP to mean Firm-Fixed Price, or something different??

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