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aordway

Is Construction Considered a Service?

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The FAR does not seem consistent when it comes to classifying construction as either a type of service, or its own separate "construction" category outside of a service. I think this is important to know so that clause prescriptions that say "include in contracts for services" are applied appropiately to construction contracts. Here is the evidence I found to support both determinations:

Evidence that construction is NOT a service:
  • Ask a Professor: Construction is a separate entity covered in FAR Part 36 and is not considered a supply or a service (https://dap.dau.mil/aap/pages/qdetails.aspx?cgiSubjectAreaID=3&cgiQuestionID=114335)
  • FAR 37.00 states that R&D Services are found in part 35, and Architect-Engineer Services are in Part 36, but it does not say that Construction is in Part 36. Omission must mean they are not services.
  • Construction is not one of the examples under the definition of Services in 37.101
  • Far 37.3 discusses that dismantling, demolition, or removal of improvements falls under the Service Contract Labor Standards unless further work which will result in the construction, alteration, or repair of a public building or public work at that location is contemplated. If further work is contemplated, the work would fall under the Wage Rate Requirements (Construction) instead.
  • FAR 36.101© says “A contract for both construction and supplies or services shall include..”, which clearly indicates construction is separate from services.
Evidence that construction IS a service:
  • Construction logically falls under the definition of services since it is a “contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task”
  • FAR 37.110(a) says “The contracting officer shall insert the provision at 52.237-1, Site Visit, in solicitations for services to be performed on Government installations, unless the solicitation is for construction.” If Construction was not a service, there would be no need to put the qualifier at the end of the sentence.
  • FAR 13.000 says “This part prescribes policies and procedures for the acquisition of supplies and services, including construction,…”

Is there an official determination on whether construction is considered a service or not?

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For this question, a sensible application of common sense will provide consistently good results.

I would not agree that "clause prescriptions that say 'include in contracts for services' are applied appropiately to construction contracts".

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I think this is important to know so that clause prescriptions that say "include in contracts for services" are applied appropiately to construction contracts.

have you examined the FAR Clause Matrix to see what clauses apply to construction?

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Guest Vern Edwards

The FAR contract classification system was created to permit the use of standard contract clauses. Under that system, construction is a unique type defined in FAR 2.101, and is not a service contract as defined in FAR 37.101. Under NAICS, construction and services are separately classified. In goods/services classification systems, construction is classified as a service.

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For what purpose do you seek to classify it?

1) To ensure the appropriate clauses are included in solicitations and awards. (If construction is a subset of services, then perhaps you need to check the construction AND service columns in the Clause Matrix). Although based on Vern's post this seems to not be the case.

2) A co-worker argued with me that construction is a service, and I was leaning more towards not a service, so i was looking for more info on the topic (since my research in the FAR provided evidence for both determinations).

3) For my own sanity (No one has yet been able to explain the contradictory evidence in my initial post. I don't understand why the FAR is not more clear that contruction is NOT a subset of services, and is its own separate category).

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1) To ensure the appropriate clauses are included in solicitations and awards. (If construction is a subset of services, then perhaps you need to check the construction AND service columns in the Clause Matrix). Although based on Vern's post this seems to not be the case.

2) A co-worker argued with me that construction is a service, and I was leaning more towards not a service, so i was looking for more info on the topic (since my research in the FAR provided evidence for both determinations).

3) For my own sanity (No one has yet been able to explain the contradictory evidence in my initial post. I don't understand why the FAR is not more clear that contruction is NOT a subset of services, and is its own separate category).

I assume that you are clear on number 1 and 2? As far as 3, why should the FAR make that clarification? What problem would it solve?

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I assume that you are clear on number 1 and 2? As far as 3, why should the FAR make that clarification? What problem would it solve?

What problem would it solve? It would solve the problem of confusion due to inconsistancy.

There are countless clauses whose prescription say "include in all solicitations and contracts for the acquisition of services". Then there are clauses like 52.237-1, whose prescription in FAR 37.110(a) says “The contracting officer shall insert the provision at 52.237-1, Site Visit, in solicitations for services to be performed on Government installations, unless the solicitation is for construction". Since the FAR specifically excludes construction from being applicable in 37.110(a) [a clause for SERVICES], then wouldn't by inference all clauses that say "include in all solicitations and contracts for services" without any sort of construction exclusion, need to be included in Construction? That's what you are left to assume due to the inconsistancy in determinations. It at the very least brings up questions, which led me to post about the topic.

If the FAR clearly and consistantly defined that construction was not a service, then there would be no need to specifically exclude construction within the prescription for 52.237-1, and there would be no doubt that clauses specifically for use in service contracts are not to be used in construction contracts.

It's just needlessly inconsistant.

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I need to agree with aordway that the FAR should be more clear and better guidance provided to the field. I have complained about this since I was a newby. We now have an even less experienced staff. Some less then 5 years from college but many are direct hires from industry that come with a high pay grade and no Government experience. They struggle with the FAR and its conflicting guidance that requires constant debate on this website. .

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I see. So what specific change would you propose? What specific words would you add to which specific sections?

BTW, what agency do you work for (if you don't mind saying)?

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Guest Vern Edwards

If the contract is not for building, altering or repairing improvements on real property, then the contract is not for construction. Period. See the definition of construction in FAR 2.101. The definition is neither vague nor ambiguous, and I don't understand all the confusion.

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I see. So what specific change would you propose? What specific words would you add to which specific sections?

BTW, what agency do you work for (if you don't mind saying)?

Very simple:

The definition of "service" in FAR 37.101 is ammended to say "Construction is not considered a service". As it stands, the definition of a service is "a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply", and construction definitely fits within this definition if that were all you were going to go on. The definition then lists SOME examples of services. Construction is not on that list, but it is not an exaustive list (therefore, it is still unclear). So by looking at the definition of services only, you do not have enough information to determine construction is not a service. If you update that definition, the problem is essentially solved.

Alternatively (or in addition to), you update the beggining of FAR 36 (perhaps 36.101), or the definition of construction in 2.101, to state "construction does not fall under the definition of services".

And for good measure, I would change the ambigous sentences I mentioned in my initial post. For example, I would change FAR 13.000 from saying “This part prescribes policies and procedures for the acquisition of supplies and services, including construction" to “This part prescribes policies and procedures for the acquisition of supplies, services, and construction." See how much clearer that would be?

P.S. I work for the Army, and as you can surmise, our office deos VERY FEW construction contracts. Hence I was looking to learn more about them.

Vern:

I agree that the definition of construction is very clear. That's not the issue. The issue is that the definition of services in 37.101 is written such that construction could fit under that definition as well. Therefore construction could be considered a specific subset of services due to the wide open services definition. Like how a square is a rectangle by definition, but a rectangle is not a square. As the construction and services definitions are currently written, construction could be considered services, but general services could not be considered construction. And then to add insult to injury, FAR 13.00 and 37.110(a) are not worded in a way so that construction is clearly considered separate from services. They are worded in a way that suggests construction is a type of services. Again, needlessly inconsistent and unclear.

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aordway,

You wrote: "There are countless clauses whose prescription say "include in all solicitations and contracts for the acquisition of services"." Can you give an example of a prescription like this?

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Guest Vern Edwards

Vern:

I agree that the definition of construction is very clear. That's not the issue. The issue is that the definition of services in 37.101 is written such that construction could fit under that definition as well. Therefore construction could be considered a specific subset of services due to the wide open services definition. Like how a square is a rectangle by definition, but a rectangle is not a square. As the construction and services definitions are currently written, construction could be considered services, but general services could not be considered construction. And then to add insult to injury, FAR 13.00 and 37.110(a) are not worded in a way so that construction is clearly considered separate from services. They are worded in a way that suggests construction is a type of services. Again, needlessly inconsistent and unclear.

You will never get absolute clarity in a rulebook written over the course of almost 70 years (since 1947) and by many different people, with many different backgrounds and levels of linguistic skill, in many different circumstances. (For what it's worth, I complain, too.) Common parlance adds to the confusion. See RORE, Inc., GAO Dec. B-410759, 2015 WL 1040445, February 6, 2015:

RORE, Inc., of San Diego, California, protests the Department of the Navy's decision to exclude RORE's proposal from phase 2 of the competition under request for proposals (RFP) No. N62473–14–R–0004, issued by the Naval Facilities Engineering Command (NAVFAC) Southwest, for construction services.

Emphasis added. It is professionally naive to think that you could ever get absolute clarity, and it's pointless to complain about the inconsistencies, vagueness, and ambiguity. As pros, our job is to deal with it and make it seem easy.

We're pros, you and I, and we know that reading and interpreting statutes, regulations, and contracts is a professional art. There are rules about how such interpretations should be made. You have to learn them, and you can do that by reading books, in this case, books such as Reading Law: The Interpretation of Legal Texts, by Scalia and Garner (2012) and An Introduction to Statutory Interpretation and the Legislative Process, by Mikva and Lane (1997). It is an art, though, not a science, and reasonable people can and will disagree. Moreover, there are a lot of unreasonable people and people who will argue for the sheer fun (or perverse pleasure) of arguing.

The locution, "services, including construction" or "services (including construction)" appear about 19 times in the FAR itself. They also appear in some FAR supplements. That's because construction is a service in a general sense; you are hiring someone to do something for you; you are not buying a building. However, construction is distinguished from services in the general sense by its special definition.

Now, as pros, you and I are familiar with the "canon" of interpretation that Scalia and Garner call the "whole-text" canon:

Perhaps no interpretive fault is more common than the failure to follow the whole-text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts. Sir Edward Coke explained the canon in 1628: "t is the most natural and genuine exposition of a statute to construe one part of the statute by another part of the same statute, for that best expresseth the meaning of the makers." Coke added: "If any section [of a law] be intricate, obscure, or doubtful, the proper mode of discovering its true meaning is by comparing it with the other sections, and finding out the sense of one clause by the words or obvious intent of the other."

The same rule applies to regulations and contracts. See Department of the Army-Reconsideration, GAO Dec. B-401472.2, 2009 CPD ¶ 250, December 7, 2009:

We find no merit to the Army's arguments, which would render meaningless the specific language of FAR sect. 17.207(f) that requires that an option be evaluated as part of the initial competition. The Army's interpretation of this clause would either ignore the first requirement under FAR sect. 17.207(f) or deem it to be satisfied when the second requirement is met-that is, render one of the two parts of the clause meaningless. Such an interpretation would be inconsistent with the fundamental principle that statutes and regulations must be read and interpreted as a whole, thereby giving effect to all provisions. See Sea Box, Inc., B–291056, Oct. 31, 2002, 2002 CPD ¶ 181 at 3.

See also Alliant Enterprise JV, LLC, GAO Dec. B-410352.4, 2015 CPD ¶ 82, February 25, 2015:

[W]e find no merit in AEJV's argument that the amendment introduces an ambiguity into the RFQ. An ambiguity exists if a solicitation term is susceptible to more than one reasonable interpretation that is consistent with the solicitation, when read as a whole, Poly–Pacific Techs., Inc., B–293925.3, May 16, 2005, 2005 CPD ¶100 at 3, and AEJV's interpretation of Amendment 5 is not a reasonable one.

Consider your example of rectangle and square. A rectangle is quadrilateral with four right angles. So is a square. But a square is a quadrilateral that has sides of equal length. If you and I are talking geometry and I use the word rectangle, it would not be clear whether I was including squares unless the context of the discussion made it clear that when I say "rectangle" I mean quadrilaterals other than squares. Can context help us interpret services with respect to construction?

You're concerned about the proper use of solicitation provisions and contract clauses. Let's consider FAR 46.304:

46.304 Fixed-price service contracts.

The contracting officer shall insert the clause at 52.246-4, Inspection of Services—Fixed-Price, in solicitations and contracts for services, or supplies that involve the furnishing of services, when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may insert the clause in such solicitations and contracts when the contract amount is expected to be at or below the simplified acquisition threshold and inclusion is in the Government’s interest.

The prescription does not exclude construction. Should you include that clause in a construction contract? Considered in context of the FAR as a whole, the answer is clearly no, because (1) FAR prescribes a different inspection clause for construction and so it would not make sense to include both inspection clauses in a construction contract, and (2) based on the text of 52.246-4, it would not be adequate or appropriate for a construction contract.

I don't mean to bloviate. Forgive me if I've told you what you already know. Maybe you just wanted to vent. If so, I'm sorry.

Otherwise, you and I are contracting pros. The FAR is our regulation and we are expected to interpret it. We have to interpret it as it comes to us, not as we would like it to be. That's our job. That's our special expertise. Others in our organization look to us for interpretations. That's why agencies have to have people like us. No point in complaining about our book (except to vent, which I do, too, sometimes). Most of its authors are dead or retired. I think we should take pride in our special expertise and develop it fully.

If you like, cite a clause for services with respect to which you think there is confusion about whether it should be included in construction contracts, and we'll see if we can sort it out using the "whole-text" canon.

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Vern,

Thanks for the thoughtful and detailed response. You make very good points. My initial question was indeed about figuring out which side of the fence construction fell under (services or not services), but once that was answered, the conversation did delve into a bit of complaining and a bit of justifying my initial confusion. Sometimes in the search for "why", you just have to leave it at "it just wasn't written perfectly" and call it a day. I'll take your advice and run with it. I appreciate the conversation!

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From Part 2

“Construction” means construction, alteration, or repair (including dredging, excavating, and painting) of buildings, structures, or other real property. For purposes of this definition, the terms “buildings, structures, or other real property” include, but are not limited to, improvements of all types, such as bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, cemeteries, pumping stations, railways, airport facilities, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, and channels. Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing, or assembling of vessels, aircraft, or other kinds of personal property (except that for use in Subpart 22.5, see definition at 22.502).

From Part 37

“Service contract” means a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a nonpersonal or personal contract.

Pretty much sums it up for me. Not a service.

P.S. The Site Visit clause for construction is 52.236-27.

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Why isn't delivering a stapler the performance of an identifiable task? It takes people to make a stapler. But buying a stapler is a commodity, not a service -- and buying the erection of a building is construction, not a service. It really is simple [well, sometimes it is hard to tell the difference, but that is the exception, not the rule -- the rule is simple].

I'm with the crowd that doesn't think this is a difficult issue.

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Guest Vern Edwards
buying the erection of a building is construction, not a service.

That's correct if you're talking in the context of FAR. But in other contexts, construction is considered a service.

The World Trade Organization considers construction a service ("construction services")

https://www.wto.org/english/tratop_e/serv_e/construction_e/construction_e.htm.

The Organization for Economic Co-operation and Development (OEDC) considers it a service

http://www.oecd.org/trade/services-trade/41707878.pdf

Some states, counties, and cities have divisions or departments of "construction services."

Many construction companies advertise that they offer "construction services."

See "Protecting Owners from Subcontractor Extra-Work Claims," by John Colangelo, in Construction Lawyer (Jan. 1989):

[C]onstruction contracts are outside the ambit of the Uniform Commercial Code's Statute of Frauds, sec. 2-201, since construction is a service, not ‘goods' under U.C.C. sec. 2-105.

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I understand - I'm talking within the context of the FAR -- that's what this whole string is about...

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I understand - I'm talking within the context of the FAR -- that's what this whole string is about...

I agree. The question concerned whether a construction contract is also a FAR service contract to include the service contract clauses (I am assuming that the OP is referring to those clauses prescribed for service contracts) in addition to the clauses prescribed for construction contracts. in the FAR matrix, there are clauses prescribed for service contracts that are not applicable to construction contracts. There are some that are checked for both, where applicable.

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Guest Vern Edwards

What's really interesting is that "construction" is defined in FAR Part 2, and that definition applies throughout the FAR. FAR does not define "construction contract."

FAR defines "supplies" in Part 2, and that definition applies throughout FAR. It does not define "supplies contract" or "supply contract".

FAR defines "service contract" (not services per se) in FAR 37.101, and that definition applies only in FAR Part 37. The only other definition of "service contract" in FAR is in 22.001.

FAR does not define "service" or "services", per se, despite the fact that the word is used throughout the FAR. For example, FAR 7.502, "Applicability," says:

The requirements of this subpart apply to all contracts for services. This subpart does not apply to services obtained through either personnel appointments, advisory committees, or personal services contracts issued under statutory authority.

So, what are services?

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Does the term have to mean the same thing regardless of context? Does it mean the same thing in 41 USC 111 & 41 USC 131 as it means in 10 USC 2330? Does it mean the same thing in 10 USC 2330a as it does in these other references? Why limit yourself to just the word, "services"? Why look solely at the word, when sometimes it is the phrase that is defined, like "advisory and assistance services" (10 USC 2212), "installation support services" (10 USC 2679) or "supplies and services (including construction)" (used throughout Titles 10 & 41 and often not defined at all). Can't a "service contract" for purposes of the prevailing wage provisions of the Service Contract Act mean something different than a contract that includes the provision of services?

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Guest Vern Edwards

Does the term have to mean the same thing regardless of context?

No, of course not. But "service" should mean something. Right? What's a service? FAR 1.108(a) says that if FAR does not define a term, it has the "common dictionary meaning." Well, one of my dictionaries defines "service" (n.) as follows:

1.

a. Work that is done for others as an occupation or business: has done service for us as a consultant.
b. The performance of work or duties for a superior or as a servant: found the butler's service to be excellent.
c. An act or a variety of work done for others, especially for pay: offers a superior service to that of his competitors; provides full catering services.
2.
a. Assistance; help: was of great service to him during his illness.
b. An act of assistance or benefit; a favor: My friend did me a service in fixing the door.
3.
a. The serving of food or the manner in which it is served: The service was good, but the food was lousy.
b. A set of dishes or utensils: a silver tea service.
4.
a. Employment in duties or work for another, as for a government: has been in the company's service for 15 years.
b. A government branch or department and its employees: the diplomatic service.
c. A department or branch of a hospital staff that provides specified patient care:the anesthesiology service.
5.
a. The armed forces of a nation: joined the service right after college.
b. A branch of the armed forces of a nation.
6.
a. The installation, maintenance, or repairs provided or guaranteed by a dealer or manufacturer: a dealer with full parts and service.
b. The provision to the public of something, especially a utility: a town without sewer service.
c. The system or equipment used to provide something to the public: The electrical service was damaged in the storm.
7. Sports
a. The right of serving in many court games.
b. A serve: Her first service hit the net.
8. A religious rite or formal ceremony: held services in the evening; a memorial service.
9. Copulation with a female animal. Used of male animals, especially studs.
10. Law The serving of a legal process, such as a summons or court order.
11. The material, such as cord, used in binding or wrapping rope.
12. An answering service.
Another dictionary defines "service" as follows:
  1. the occupation or condition of a servant

    1. employment, esp. public employment: diplomatic service

    2. a branch or department of this, including its personnel; specif., the armed forces, as army, navy, or air force

    1. work done for a master or feudal lord

    2. work done or duty performed for another or others: repair service, public service

  2. the serving of God, as through good works, prayer, etc.

    1. public worship

    2. any religious ceremony: the marriage service

    3. a similar, but nonreligious, ceremony, as for a burial or marriage: graveside services

    4. a musical setting for a religious service

    1. an act giving assistance or advantage to another

    2. the result of this; benefit; advantage

    3. friendly help; also, professional aid or attention: the fee for his services

  3. the act or manner of serving food: a restaurant noted for its fine service

  4. a set of utensils or articles used in serving: silver tea service

  5. a system or method of providing people with the use of something, as electric power, water, transportation, mail delivery, etc.

  6. installation, maintenance, repairs, etc., provided by a dealer or manufacturer to purchasers of equipment

  7. the act or manner of serving the ball in tennis, etc., or one's turn to serve

  8. ARCHAIC devotion, as of a lover to his lady

  9. ANIMAL HUSBANDRY the act of bringing a male animal to copulate with a female

  10. LAW notification of legal action, as by the serving of a writ

  11. NAUT. any material, as wire, used in serving (ropes, etc.)

Which of those do you like for FAR 7.502? How about FAR 37.601 and 37.602? Do we get a choice? Is there a criterion of choice? Must we take the first one, on grounds of lexical statistics? Or can we chose any that seems okay in context? Do those contexts require different definitions? Does it matter? If I hire a contractor to develop a new launch vehicle and provide four prototypes for testing purposes, do I have a service contract, a supply contract, or both? Have you ever awarded such a contract? If so, how did you classify it?
Do any of those help us to understand what we buy when we buy services, so we can think about the issues to be resolved and the terms to be specified?
Doesn't it seem curious that there is no definition of service or services when services account for the largest share of annual obligations? No? Are they simply anything that is not supplies or construction?

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Vern wrote:

But "service" should mean something. Right?

...

Which of those do you like for FAR 7.502?

He had lots of other great questions in his post, but I found his question relating to FAR Subpart 7.5 particularly intriguing. The Subpart is concerned with “inherently governmental functions.” While by its terms FAR 7.502 limits the applicability of the subpart to “all contracts for services,” the policy expressed in FAR 7.503(a) is expressed broadly: “Contracts shall not be used for the performance of inherently governmental functions."

So, consider a couple hypotheticals. Should I not worry about FAR Subpart 7.5 if I can buy a book (or subscription for regular updates to a book), call it a supply, and then tell all my State Department employees to just abide by the recommendations in that book and its updates? See FAR 7.503( c )(4) (“determination of foreign policy”). Should I not worry about FAR Subpart 7.5 if I can characterize software as a supply, buy some artificial intelligence software that (assume for sake of argument) was able to actually direct and control Federal employees? See FAR 7.503( c )(7) (“direction and control of Federal employees”). (Note that in both my examples, the “content" of the book or software is either not completely known or is subject to change following purchase.)

In other words, for purposes of FAR 7.502, I would offer that among the many potential definitions of the word, “services,” a broad one would probably best reflect the intent of the drafters of the Subpart (or of the OMB Circular, what have you). (Don’t get me wrong. I’m not saying it would not be a colorable argument to use a narrower definition of services to limit the reach of the Subpart; but for me, the better interpretation is the broader one.)

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