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"Contract" v. "CLIN" - semantics?


newanalyst

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I am not disputing that the use of T&M contracts to acquire certain commercial services is authorized or that the use of CR is prohibited – see FAR 12.207(a). I am not disputing that payment of commercial T&M is per FAR 52.212-4 Alt 1 which allows for reimbursement of material in certain situations to be at cost. All I am asking is how strong is the requirement to maximize the use of prices as opposed to the use of costs (see FAR 12.207(B)(1)(iii)) in commercial T&M? If a CLIN is a contract, is it possible to extend the prohibition on CR contract type to a T&M CLIN? The forum says no – so be it.

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ji, I think Whynot's issue is based upon this statement from his post 22: "A separate CLIN is often used for the Materials in T&M contracting. This CLIN is sometimes CR." I don't know why someone would do this as it seems unnecessary and overly complicated. To me, if there is a separate CLIN that is cost reimbursement, the contract should have the clauses for a cost reimbursement contract for that CLIN when you are not dealing with a commercial item. That raises the question as to whether the labor portion of the so called T&M contract is called a fixed price CLIN, when the price for the CLIN is plainly not fixed.

I am also confused by his post 26 when he wrote "is it possible to extend the prohibition on CR contract type to a T&M CLIN? " Earlier, he had acknowledged that a T&M contract is not a cost reimbursement contract. If that is the case, it follows that a T&M CLIN is not a cost reimbursement CLIN. Thus, I am confused as to the intent of his question?

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I'm confused, too.

I also don't understand why a separate CLIN just for the M in T&M. That makes me think the "materials" are not an incidental part of the service. If so, a T&M masquerade is inappropriate and he or she ought to use a CR CLIN.

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Guest Vern Edwards

ji, I think Whynot's issue is based upon this statement from his post 22: "A separate CLIN is often used for the Materials in T&M contracting. This CLIN is sometimes CR." I don't know why someone would do this as it seems unnecessary and overly complicated. To me, if there is a separate CLIN that is cost reimbursement, the contract should have the clauses for a cost reimbursement contract for that CLIN when you are not dealing with a commercial item.

Mightn't an agency want to limit the amount that a noncommercial T&M contractor spends on materials to an estimated cost within the ceiling price, such that the contractor would have to get the CO's permission to spend more? If so, wouldn't a separate "materials" CLIN be useful for accounting and billing purposes? Why would such a CLIN require additional clauses, other than a special clause requiring the contractor to get the CO's consent prior to exceeding the materials cost estimate? The clauses applicable to T&M should be fine

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If the agency's objective is to place a limit on the amount it pays for material, there are several ways of doing that, one of which would be to have a separate CLIN. My issue with Whynot's statement was that he said the separate CLIN would be a cost reimbursement CLIN. To me, that indicates a separate contract type. It is not clear what Whynot meant by that statement.

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Guest Vern Edwards

But since a contractor's purchase of materials under a noncommercial T&M contract is subject to the Allowable Cost and Payment clause, a CLIN for materials would be cost-reimbursement. Wouldn't it? Why would that be a problem?

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Vern, I am not sure how you envision the contract being structured if a separate CLIN is used for material. However, I do not fully accept your statement that material under a non-commercial T&M contract is subject to the Allowable Cost and Payment clause. The T&M Payments clause, 52.232-7, says that payment for materials is subject to that clause. However, there are other parts of 52.232-7 that apply to material such as the requirement to obtain materials at the most advantageous prices available. Further, while the ACP clause and 52.232-7 incorporate the cost principles from FAR Part 31, there are provisions in the latter clause that are exceptions to the cost principles. For example, if a contractor furnishes a commercial item that it manufactures, the contractor can charge that item at its catalog price, which would include profit. There is no such exception in 31.205-26. Also, if the T&M contract is for services, the Treasury's Prompt Payment regulations apply to interim payments under that contract. This would also cover the cost of materials that are included in an interim invoice. If the separate materials CLIN is not subject to 52.232-7, the Prompt Payment Act regulations would only apply to labor and not the cost of materials. Therefore, materials are subject to both the ACP clause and the T&M Payments clause. If a separate cost reimbursement CLIN is used for material and that CLIN is subject only to the ACP clause, many parts of 52.232-7 applicable to material would be rendered useless.

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However, this does not indicate that the separate CLIN is a cost reimbursement CLIN.

That's because it isn't a cost-reimbursement CLIN. It is a T&M CLIN, where travel is reimbursed at actual cost in accordance with the limitations set forth in FAR 31.205-46.

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Guest Vern Edwards

Retread and ji: You guys are confusing me. A separate CLIN for materials under FAR 52.232-7 must be a cost-reimbursement CLIN pursuant to the very terms of that clause. What other kind of CLIN could it be? Materials are to be reimbursed at cost with payment subject to the allowable cost and payment clause, which provides for reimbursement of allowable costs. That's cost-reimbursement.

Retread, as for contract structure, how about this (off the top of my head):

0001 Performance IAW the Statement of Work. 1 JOB, Ceiling Price $200,000

0001AA Labor at a fixed hourly rate of $150.00. Estimated number of hours: 1,000. Total estimated amount: $150,000

0001AB Materials at cost. Estimated cost: $50,000, which may not be exceeded without advance written approval of the Contracting Officer. Amounts in excess of the estimate incurred prior to receipt of Contracting Officer's written approval shall be unallowable.

Clearly, the notion of the use of a separate CLIN (or SUBCLIN) for materials and consideration of that to be a cost-reimbursement CLIN (or SUBCLIN) troubles the two of you. I don't understand why.

Retread, what do you mean when you say that you don't "fully accept" my statement? You accept some part of it, but not all? What part don't you accept? As for exceptions to the allowable cost and payment clause, that clause and 52.232-7 provide for several exceptions. So what? You always read a contract as a whole. When you integrate the terms and read them as one they make perfect sense.

ji20874, a fixed hourly rate labor CLIN or SUBCLIN and a cost-reimbursement materials CLIN or SUBCLIN would be two parts of a single T&M undertaking. The contract would be T&M entire under a single ceiling price. Why is it important to you that a separate materials CLIN not be considered a cost-reimbursement CLIN?

I don't get it.

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It's semantics -- a T&M contract allows for materials on a direct reimbursement basis -- just call it T&M. Heck, the time portion of a T&M contract is fixed-price (a fixed-price per unit of labor), but we don't call it fixed-price (or labor-hour).

If I had a T&M contract and I provided separate CLINs for time, materials, and travel (as shown in the GSA example), I would categorize all three CLINs as T&M. I wouldn't call the first CLIN fixed-price (or labor-hour) and I wouldn't call the materials and travel CLINs cost-reimbursement. I would code all three CLINs as T&M in my automated system. My T&M D&F would cover all three CLINs. I would not do anything required by FAR Subpart 16.3, Cost-Reimbursement Contracts.

Stay in your lane. If we start talking cost-reimbursement for the M in T&M, then smple-minded reviewers and attorneys are going to start looking in FAR Subpart 16.3 for guidance. A cost-reimbursement contract (or CLIN) requires a written acquisition plan signed at least one level above the contracting officer (FAR 16.301-3( a )( 2 )) -- I have no intention of ever doing that for the M portion of a T&M contract. It's professionally sloppy to insist on using "cost-reimbursement" to describe the M portion of a T&M contract.

That's why.

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Guest Vern Edwards
I would code all three CLINs as T&M in my automated system... If we start talking cost-reimbursement for the M in T&M, then smple-minded [sic] reviewers and attorneys are going to start looking in FAR Subpart 16.3 for guidance.

Fair enough. That makes sense to me. Now I understand our differences.

You are thinking of the need to cope with automated systems and "simple-minded reviewers and attorneys." You are concerned about fitting into the categorizations of software programmers, which require a formal designation of a CLIN with which the system can cope. And you don't want to deal with confused and ignorant staff blockheads who'll want acquisition plans and approvals for a simple materials CLIN. I get it now, but I'm too old for that.

I still think in terms of what things really are, without concern for automated systems and their protocols and the dummies in the staff offices. If a CLIN is for work for which the contractor will be compensated on a cost-reimbursement basis, then I think it's a cost-reimbursement CLIN. I don't think it's "professionally sloppy" to call a CLIN what it is. I think it's professionally pathetic to have to call a thing something other than what it is in order to fit it into the mindsets of nonprofessionals. Yet I understand the sad world in which contracting "professionals" have to work today, dominated by finance people and information technologists. Happily, I don't work in a drudge contracting office. Happily, I never did.

So I understand you, and I see your point. Given those terms, there's no point in discussing this further. Thanks for clearing things up and filling me in.

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I understand ji's position. Mine is a little different. I have been trying to figure out what Whynot meant by the use of a cost reimbursement CLIN for materials. What he was saying raised this situation in my mind

CLIN 0001 Labor (T&M) subject to 52.232-7

CLIN 0002 Materials (cost reimbursement) subject to 52.216-7

In this scenario, materials would not be subject to 52.232-7.

As for your example, that would be the way I would prefer to have the contract structured. That makes perfect sense.

As for not accepting your statement that materials under a T&M contract for non-commercial items are subject to 52.216-7, I should have said that I do not accept that they are subject only to that clause, because they are also subject to 52.232-7.

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Guest Vern Edwards

I have been trying to figure out what Whynot meant by the use of a cost reimbursement CLIN for materials. What he was saying raised this situation in my mind

CLIN 0001 Labor (T&M) subject to 52.232-7

CLIN 0002 Materials (cost reimbursement) subject to 52.216-7

In this scenario, materials would not be subject to 52.232-7.

Retread:

You have to read contracts as a whole and integrate the parts. Both 52.216-7 and 52.232-7 must be included in T&M contracts. You are reading a lot into your CLIN 0002 phrase "subject to 52.216-7" when you interpret it to preclude the application of 52.232-7 to that CLIN. A court might well interpret that phrase as nothing more than an annotation that is in accord with the sentence in 52.232-7 that says, "Payment for materials is subject to the Allowable Cost and Payment clause of this contract."

See also FAR 16.307(a)(1): "If the contract is a time-and-materials contract, the clause at 52.216-7 applies in conjunction with the clause at 52.232-7, but only to the portion of the contract that provides for reimbursement of materials (as defined in the clause at 52.232-7) at actual cost."

I don't think there is much chance on relying on the 52.216-7 language to read 52.232-7 out of your CLIN 0002.

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