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Jacques

Is a Unit Priced Contract an Indefinite Quantity Contract?

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I’m not at my office, so I’m going on memory. A FFUP contract seems somewhat indefinite in terms of quantity. I seem to recall that when FASA was passed providing a statutory basis for indefinite quantity task order contracts, the legislative history recognized the preexisting, inherent authority of contracting activities to use these types of vehicles. I’m curious whether, in the years and statutes that followed, whether statutes and/or the FAR have undermined that earlier flexibility; for instance, with the preference for multiple award IDIQ contracts.

Additionally, FAR 16.501-2( c ) provides in part, “Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with the appropriate procedures of this subpart [FAR Subpart 16.5].” I don’t pretend to know what this means, and can’t reconcile it with, e.g., DFARS Subpart 217.77--Over and Above Work--but I could see how someone might be tempted to read it very broadly.

Any thoughts on the meaning of the quoted language from FAR 16.501-2( c )?

EDIT: Maybe the Over and Above reference isn’t the best example. Another would be a contract options, including multiple-exercise options.

Edited by Jacques

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The title of the thread is "Is a Unit Priced Contract an Indefinite Quantity Contract?"

The answer is "not necessarily." An indefinite quantity contract will likely include unit priced line items. Other contract types may also use unit-priced items.

In response to your below question: "Any thoughts on the meaning of the quoted language from FAR 16.501-2( c )?", if an indefinite delivery contract includes estimated quantities of supplies or services, the cost or pricing arrangement must comply with any appropriate procedures of subpart 16.5. I assume that this would generally refer to Indefinite quantity or requirements contracts. Perhaps a definite quantity contract could contain some unit-priced, estimated quantity line items.


...Additionally, FAR 16.501-2( c ) provides in part, “Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with the appropriate procedures of this subpart [FAR Subpart 16.5].” I don’t pretend to know what this means, and can’t reconcile it with, e.g., DFARS Subpart 217.77--Over and Above Work--but I could see how someone might be tempted to read it very broadly.

Any thoughts on the meaning of the quoted language from FAR 16.501-2( c )?

EDIT: Maybe the Over and Above reference isn’t the best example. Another would be a contract options, including multiple-exercise options.

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As time passes, I am seeing more insistence that a contract with an estimated quantity MUST be set up under FAR Subpart 16.5 -- even though, as you say, there is long history and inherent authority to have contracts with estimated quantities even if FAR Subpart 16.5 never existed. I want to keep the pre-existing authority alive, but it is hard to do so -- Jacques, if you have a citation from the legislative history of FASA acknowledging the inherent authority to have estimated quantities even before FASA, I would love to read it...

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That language has been in FAR since FAC 90-33, 60 FR 49723, September 26, 1995. Neither the FAC nor the proposed rule explain it. The language did not appear in the proposed rule. It appeared without explanation in the final rule.

Since the language is clearly is in the context of "indefinite-delivery" contracts, I think it applies only to FFUP contracts with an estimated quantity and an ordering mechanism, and I think that would be appropriate. On the other hand, I do not see how it could apply to FFUP contracts that stipulate a single job and require the contractor to deliver an estimated quantity of services, with the estimate adjustable under a variation in quantity clause. Without an ordering mechanism, there is not much in 16.5 with which to comply and no need to worry about multiple awards and fair opportunities.

I don't know what the language means specifically, but I wrote something in September 1995 that might explain it. The following appeared in The Nash & Cibinic Report, June 1995 issue, under the title, "The New Rules for Multiple Award Task Order Contracting," under the heading, "The Loophole in the Definition of Task Order Contracting":

Happily for agencies and prospective contractors that find the multiple award policy unattractive, the definition of “task order contract” in the proposed rule provides a giant loophole through which they may escape the clutches of the policymakers. That definition has three components--a task order contract is a contract (1) for services, (2) that does not specify a “firm quantity” of services, and (3) that provides for the issuance of task orders, proposed FAR 16.501-2.

Under the definition, a task order contract does not specify a “firm quantity” of services. Thus, one way to avoid the task order contracting policy is to describe the contractor's performance obligation in terms of a level of effort (i.e., a firm quantity of labor hours, work units, or standard tasks) instead of in terms of minimum and maximum quantities. Such a contract would be a definite-quantity contract--not an indefinite-quantity contract--and would not fall under the task order policy coverage, which only applies to requirements contracts and indefinite-quantity contracts.

A contract could stipulate a single level of effort for the entire contract and empower the agency to issue orders for whatever labor-hour mix it needs within that level of effort, or it could stipulate a separate level of effort for each labor category, work unit, or standard task. A “Variation in Quantity” clause or partial convenience termination could provide for equitable adjustments to unit prices if the agency finds that it needs to purchase less than the specified level of effort, and the contract could be written to include options for increased quantities of hours in the event the agency wanted to be able to increase the level of effort. However, stipulating a level of effort for units of input (i.e., hours) does not eliminate the labor productivity problem. Thus, the irony of the FASA and proposed FAR definition of “task order contract” is that it excludes a type of indefinite-delivery service contract to which the application of the multiple award preference policy would be theoretically appropriate.

I wrote that almost 20 years ago (!!!), almost three months before the final rule was published. Although I was talking about firm quantities, I think the loophole could have been worked using an estimated quantity. IDIQ contracts today usually don't contain estimated quantities (although they once did). They contain minimum and maximum quantities. The FAR councils didn't want agencies avoiding the statutory multiple award rule by awarding contracts with estimated quantities and an ordering mechanism, leaving out a min and max, claiming that the contracts were not IDIQ contracts, because there were no min and max, and arguing that 16.5 doesn't apply.

Although FAR 16.501-2( c ) does not say so in express terms, it is referring to contracts with estimated quantities and an ordering mechanism. The FFUP flight services contracts that I mentioned in the other thread comply with the rule. They include IDIQ clauses and there are multiple awardees. The unit pricing applies at the task order level.

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As time passes, I am seeing more insistence that a contract with an estimated quantity MUST be set up under FAR Subpart 16.5 -- even though, as you say, there is long history and inherent authority to have contracts with estimated quantities even if FAR Subpart 16.5 never existed. I want to keep the pre-existing authority alive, but it is hard to do so -- Jacques, if you have a citation from the legislative history of FASA acknowledging the inherent authority to have estimated quantities even before FASA, I would love to read it...

In another thread, I identified some services that were unit-priced prior to FASA as part of single award service contracts. Is there something in the tail wagging the dog contracting software systems that doesnt allow for fixed-price service contracts with estimated quantities?

Of course, single award construction contracts with estimated quantities have been around since long before the FAR (36.207). And there are indefinite delivery type construction contracts and task orders that may use estimated quanties of unit-priced items..

EDIT: See USAF unit-priced commercial services solicitation for Runway rubber removal services at Luke AFB, AZ: https://www.fbo.gov/?s=opportunity&mode=form&id=af1e6a0940479e0437383b51b4339437&tab=core&_cview=1

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Vern,

I appreciate your point. The use of the conjunction "and" instead of "or" is crucial to correct understanding...

16.501-1 Definitions.

As used in this subpart--

Task-order contract means a contract for services that does not procure or specify a firm quantity of services (other than a minimum or maximum quantity) and that provides for the issuance of orders for the performance of tasks during the period of the contract.

A contract for services that procures an estimated quantity of services and does not provide for the issuance of orders for the performance of tasks during the period of the contract is not forbidden anywhere in the FAR -- there is a long-standing history supporting such contracts, including fixed unit price contracts. Anyone errs who supposes that a contract for services that does not procure or specify a firm quantity of services MUST be an indefinite-delivery contract.

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ji20874:

Agreed.

You might be interested to know, in light of the concluding posts in the other thread, that I have discovered a GAO decision holding that an FFUP contract for services was an FFP contract for purposes of complying with the requirement to use only FFP contracts when conducting a sealed bid procurement. Even better, I discovered a GAO decision that sustained a protest against a solicitation for housing maintenance services because the agency unreasonably insisted on using an FFP lump sum contract instead of an FFUP contract, deeming the lump sum approach too risky and, therefore, unduly restrictive of competition. I'm writing a blog post now that will discuss both decisions in light of the claim that COs may not use FFUP contracts to buy services.

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ji20874,

In the other thread, you wrote:

An approach using the contractor's hours as the payable unit is a labor-hour contract.

Going back to your file maintenance example, what if the deliverable unit were an hour of file maintenance? See below:

---- ------------------------- --- ---- ---------- --------

ITEM DESCRIPTION QTY UNIT UNIT PRICE AMOUNT

---- ------------------------- --- ---- ---------- --------

001 FILE MAINTENANCE 2,000 HR $60 $120,000

. IAW PWS SECTION 4 FOR

. UP TO 5 TRANSACTIONS

. PER HOUR

Are you saying that this approach would make the contract a labor hour contract?

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Yes.

Because the payable unit is the contractor's labor hour, not the file maintenance transactions (the work of the contract). As an aside, the contractor is in total control of how much it gets paid because it decides how efficiently it will work -- for five transactions, the contractor could do it all in one hour or could make it last for five hours (one transaction per hour) -- there is no direct relationship between the work of the contract (file maintenance transactions) and the price paid to the contractor.

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Where can I apply for that job? From 1-5 transactions per hour at $60/ hour....

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Yes.

Because the payable unit is the contractor's labor hour, not the file maintenance transactions (the work of the contract). As an aside, the contractor is in total control of how much it gets paid because it decides how efficiently it will work -- for five transactions, the contractor could do it all in one hour or could make it last for five hours (one transaction per hour) -- there is no direct relationship between the work of the contract (file maintenance transactions) and the price paid to the contractor.

Ok, but wasn't the payable unit in your example a month? I did not think it was the file maintenance transactions. So you don't have to go back and look:

---- ------------------------- --- ---- ---------- --------

ITEM DESCRIPTION QTY UNIT UNIT PRICE AMOUNT

---- ------------------------- --- ---- ---------- --------

001 FILE MAINTENANCE 12 MO $10,000 $120,000

. IAW PWS SECTION 4 FOR

. UP TO 1,200 TRANSACTIONS

. PER MONTH

As you can see, I just took your example and converted the deliverable unit to hours instead of months.

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That's not a labor-hour construct. It's also not a fixed-unit-price construct. We will pay the contractor a fixed amount of $10,000 per month for processing uo to 1,200 transactions -- the payable unit is the month, and the payment amount is fixed regardless of whether the contractor provides 30 or 300 labor hours during the month.

Changing the deliverable unit from contractor labor hours to months means we no longer care about contractor labor hours, and it is no longer a labor hour construct.

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That's not a labor-hour construct. It's also not a fixed-unit-price construct.

Oh, I thought you had posted that line item as an example of a fixed-unit-price contract. I guess I was wrong.

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Actually I can't wait to see Vern’s blog.

In this particular case I hope the blog addresses the following:

I would agree that a contract can have FFUP with in it but I depart when it is stated or illustrated, which it was by a few posters in another thread, that the Units for which the Firm Fixed Price is applicable to can be estimated without further being addressed in a solicitation/contract. It would seem the FAR is explicit about this. By example:

1. For construction when the prescribed variation in quantity clause is used (Ref. 36.207 Pricing fixed-price construction contracts.(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They may be priced—(1) On a lump-sum basis (when a lump sum is paid for the total work or defined parts of the work),(2) On a unit-price basis (when a unit price is paid for a specified quantity of work units), or(3) Using a combination of the two methods and subpart FAR 11.7). In this case the contract becomes a Fixed Priced Contract with a clause that provides for an equitable adjustment due to the variation in estimated quantity.

2. For supplies when the prescribed variation clause is used and in such a case the contract becomes a Fixed Price (supply) Contract (Ref. FAR 11.7).

3. For services when those services are for services that involve the furnishing of supplies and in such a case the contract becomes a Fixed Price (supply) contract. (Ref. FAR 11.7).

4. For commercial item services where the commercial market practice supports that it is done. I conclude here that as such a contract becomes a Fixed Price Contract.

I find nothing in the FAR that states that a contract type in full is defined as a “Firm Fixed Unit Price” contract nor do I find any allowance within the FAR that provides that for services not defined as “commercial item” with estimate quantities can classified as Firm Fixed.

All in all in my view is that if folks want to insist that contracts can be FFUP there are only such if the quantities are specified unless an appropriate FAR or otherwise approved clause is used allowing for "estimated" quantities. Absent the dealings with estimated as provided for in the FAR I would suggest that the contract is a FUP.

It would seem this conclusion is supported by the following quote from this thread –

http://www.wifcon.co...rice#entry18074

" As for terminology, fixed-price contracts based on an estimated number of units with fixed prices and subject to adjustment based on actual unit quantities are still called "firm-fixed-price" (even though they aren't, really). See FAR 36.207."

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Carl:

What? Now you say:

I would agree that a contract can have FFUP with in it but I depart when it is stated or illustrated, which it was by a few posters in another thread, that the Units for which the Firm Fixed Price is applicable to can be estimated without further being addressed in a solicitation/contract.

That's not the position you took in the other thread. Here is how that dialogue went, starting with your first post (#22):

So what has me perplexed is that nobody has presented validation that a FFUP contract is allowable except in the procurement of supplies or construction. I would submit that a FFUP contract for services is not allowed by the FAR. Reference FAR Subpart 11.7.

I responded (#24):

See FAR 16.102:

Quote

(a) Contracts resulting from sealed bidding shall be firm-fixed-price contracts or fixed-price contracts with economic price adjustment.

( b ) Contracts negotiated under Part 15 may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part (see 10 U.S.C. 2306(a) and 41 U.S.C. 3901). Contract types not described in this regulation shall not be used, except as a deviation under Subpart 1.4.

FFUP contracts are described in FAR 36.207 as a type of fixed-price contract. Nothing in FAR Part 16 prohibits their use for other acquisitions. See FAR 1.102(d) and 1.102-4(e). Such contracts have been in use in the acquisition of services since at least as far back as the mid-1940s. As far as I'm concerned, failure to mention service contracts in FAR 11.7 is administrative oversight. Anyway, nothing expressly prohibits.

You then said (#26):

Not convincing arguments in my book in Vern's post #25. FAR 36.207 is for construction and now we can stretch to the whole of the FAR?

(My post was actually #24. Don Mansfield posted #25.)

Okay, so this was your position in the other thread: A CO cannot use a firm-fixed-unit-price contract to buy services, because (1) that contract type is mentioned only in FAR 36.207, which addresses construction, not services; (2) FAR Subpart 11.7 provides standard FAR variation in quantity clauses only for contracts for supplies and for construction, not for services; and (3) FAR does not expressly permit the use of FFUP contracts to buy services.

Have I mischaracterized or misrepresented your position at that time? I ask because that argument is unsound and unacceptable. It could be justified only as a rhetorical device to teach trainees how not to interpret the FAR. I presume that you did not intend to make such an argument or to otherwise argue that FAR does not permit a CO to use an FFUP contract to buy services. I must have misunderstood you. Did I?

In your last post you said that your position is:

I would agree that a contract can have FFUP with in it but I depart when it is stated or illustrated, which it was by a few posters in another thread, that the Units for which the Firm Fixed Price is applicable to can be estimated without further being addressed in a solicitation/contract.

I don't know what that means. Whatever it means, can I take your last post to be a retreat from your earlier position that a CO cannot use an FFUP contract to buy services?

(1) Do you now agree that FAR permits a CO to use an FFUP contract to buy services?

(2) Do you agree that it is permissible for a CO to write a variation in quantity clause for such a contract that is similar to the ones FAR prescribes for supply and construction contracts?

If you agree with those two propositions, then I'll let the matter lie without inquiring further into what the heck else you were talking about in your last post.

That's all I need to know, Carl: Do you think (1) that FAR permits a CO to use an FFUP contract to buy services and (2) that a CO may write a variation in quantity clause for a service contract? Yes or no? No need to make a new argument either way, just tell me if the answers are yes or no.

Edited by Vern Edwards

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I closed the previous topic that was very similar to this one and I am not pleased to see it back here. The posters need to put an end to this topic quickly--and not force me to close it again.

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This is not meant to be critical, but in Carl's last post, he said, in part:

1. For construction when the prescribed variation in quantity clause is used (Ref. 36.207 Pricing fixed-price construction contracts.(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They may be priced(1) On a lump-sum basis (when a lump sum is paid for the total work or defined parts of the work),(2) On a unit-price basis (when a unit price is paid for a specified quantity of work units), or(3) Using a combination of the two methods and subpart FAR 11.7). In this case the contract becomes a Fixed price contract with a clause that provides for an equitable adjustment due to the variation in estimated quantity.

I didn't understand the last sentence. A construction contract that contains estimated quantities of unit priced items is a fixed price contract. The VEQ clause for construction doesn't authorize a variation of the quantities. The contract language will authorize payment for actual quantities of work performed to complete the described scope. Within a range of 85 - 115% of the estimated quantity, the government will pay the contract unit price for the work.

If the actual quantity performed falls outside the range, the government will also pay the contract unit price - unless one or both parties demands an "equitable adjustment to the contract price". The equitable adjustment is only allowed if the contractors's cost increases or decreases solely due to the variation outside the range. In other words, if the unit cost for the work outside the range changes, then an equitable adjustment would be made. However, the work isn't actually "re-priced" based upon actual cost incurred but only adjusted after comparing the contractor's cost per unit inside and outside the range.

For underruns, the contractor will generally not be able to recover all of its fixed costs or mob type costs and might not be able to reach full productivity, so will likely request an adjustment of some sort. However, it can only recover up to 85% of its fixed/mob costs because there wouldn't have been any adjustment had it performed 85% of the work. Productivity adjustment could be allowed if the contractor can show what the productivity would have been at 85% of estimated quantity.

For overruns, unless the actual cost per unit to the contractor for the work outside the range changes one way or the other compared to the unit cost for the work within the range, there would not be any adjustment and the work would be paid for at the same unit price. The government often tries to obtain a price reduction for the work beyond 115%, due to the contractor having recovered all of its mob and set-up costs. Even though the unit price theoretically includes fixed (time related) costs, if the overrun causes an increase in the overall time to complete the contract, the individual unit priced line item might only cover a share of the total job fixed costs per day. Thus the contractor might seek the other portion of the extended overhad type costs ( in addition to a time extension).

There are all sorts of possibilities to consider but my point is that we don't simply throw out the contract unit price and re-price the work outside the 85-115% range based upon actual costs. The VEQ clause doesn't authorize overruns or authorize either party to completely re-price the overrun or underrun work. The adjustment is based upon the "Victory" principle (Victory Construction Co. v. U.S., 510 F.2d 1379 (1975)). This was affirmed in Foley Co. v. U.S., 11 F.3d 1032 (CA Fed, 1993).

I used to deal with such modifications on a regular basis. Dredgers are the only type of contractor who can skillfully and consistently claim that any work outside the range ends up costing them more per unit than the work within the range !😂

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Bob:

I cannot understand why you threaten to close the thread. Carl had taken a position with which I strenuously disagree. Now he appears to have changed it. He must have an opportunity to clarify what he believes.

The discussion is not as tough as others you and I have seen. Heck, you can read tougher arguments in Plato. Arguments can get personal. Criticism can get fierce. So what? Read the letters in The New York Review of Books. Tough arguments happen in real life. Have you seen former Vice President Dick Cheney's recent remarks about President Obama on TV? You see much, much worse in comments to The Washington Post. This thread really ought to be allowed to reach a conclusion or simply die through loss of energy. Don and ji20874 had a tough discussion recently, and it was a good one. It died when the participants got bored with it. It was entertaining.

The issue here is how the FAR should be read and interpreted. It's an important issue today, because prominent people are saying that COs are too rule-oriented, too inclined to find reasons to say No, you can't do that, too averse to innovation. We need to explore what constitutes "rules bound" behavior and what constitutes reasonable adherence to regulatory constraint, and that kind of exploration entails thrashing things out. This is the kind of discussion we should be having, instead of being restricted to answering namby-pamby questions about things like exercising options under GSA FSS contracts and other dumb questions from people who won't do their own research. People who want to read boring Q&As can go to Ask A Professor.

I've edited my last post. Carl's light potshots don't offend me -- I'm an old timer and am used to that kind of thing and I can throw a counterpunch, even at 70, half-blind, and with an injured right arm. You have to be tough to be a CO. Now, please, let the thing go on. This kind of fight is the best part of Wifcon Forum as far as I'm concerned. If these kinds of arguments didn't happen from time to time, I would have dropped out long ago.

But it's your site, not mine. Close the thread if you think you must. I'll use my spare time to write a book if you don't want tough debate.

Vern

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The issue here is how the FAR should be read and interpreted. It's an important issue today, because prominent people are saying that COs are too rule-oriented, too inclined to find reasons to say No, you can't do that.

I'm also inclined to think that some KO's**are too rule-oriented and won't act unless there is a very specific rule or cookbook instruction to follow and I'm not a prominent person.

For instance, one must read well past the verbiage in 11.702 to understand the basis of any equitable adjustment due to a variation in estimated quantities on a construction contract.

In this case, a "plain reading" of the 1984 clause at 52.211-18 has been interpreted by the courts and by ASBCA, for example, to generally not allow complete re-pricing of quantities outside the 85-115% boundaries. There can be exceptions for negligent establishment of estimated quantities. This interpretation varies from the often used method that I was familiar with as a consulting engineer, where the agreed unit price only bound the parties within some +/- range of 10% or 15% outside the estimated quantity. Heck, the COE's own former board of contract appeals used the latter interpretation of 52.211-18, which was in direct conflict with ASBCA's interpretation. It was finally settled in court that the ASBCA interpretation was correct.

In addition, the construction VEQ clause has nothing to do with authorizing use of estimated quantities or authorizing variations of those quantities, unlike the supply contract versions. Those clauses appear to cover actual variations in the scope. The construction clause isn't intended to be applied to pricing changes to or additions/deletion of the some of actual scope or work or to adjustments for differing site conditions.

[**Our acquisition instructions refer to a contracting officer as the "KO". :wacko: ]

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All:

Under the Terms Of Use there is Rule 1.

1. No personal attacks on another individual user. Personal attacks DO NOT include a disagreement with another poster's views. Users understand that professional disagreement and professional argument are a part of the learning process. Personal attacks include such things as calling a poster ignorant, unprofessional, etc. These posts will be removed as soon as they are seen.

While a personal attack on a user is not acceptable an attack on a poster's position or argument is acceptable. This rule has remained untouched for years and it is intended to allow for professional disagreement and professional argument.

I allow great leeway to keep debate going.

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I'm also inclined to think that some KO's**are too rule-oriented and won't act unless there is a very specific rule or cookbook instruction to follow and I'm not a prominent person.

I agree. But there is something worse than being merely rule-oriented. That is the tendency to clap together a far-fetched, nay-say argument using disparate parts of the rules. Such an argument might go something like this:

Premise: FAR Part 16 says you can any contract type of combination of types described in FAR when contracting by negotiation (any process that is not sealed bidding).

Premise: FAR Part 16 does not expressly say that you can use FFUP to buy services.

Premise: FAR Subpart 36.2 describes FFUP contracts, but that subpart applies to construction, and not to services.

Premise: FAR Part 37, which applies to services, says nothing about using FFUP contracts.

Premise: FAR Subpart 11.7 provides standard variation in quantity clauses for supplies and construction, but not for services.

Conclusion: Therefore, you cannot use FFUP contracts to buy services and you cannot use variation in quantity clauses in service contracts.

All of the premises are true, but the conclusion does not follow from the premises. Thus, that is not a valid argument. The argument not being valid, the conclusion cannot be true on those grounds. FAR does not require that it say that something is permissible in order for a CO to be able to do it. In fact, FAR says exactly the opposite. If the rules (including case law) do not say you have to, then you don't. If the rules do not say you cannot, then you can. The only bedrock criterion of sound practice is whether the practice is in the best interest of the government. Obviously, it is not in the best interest to do that which is expressly forbidden or to fail to do that which is expressly required. Otherwise, "sound business judgment" should prevail.

Steve Kelman, Harvard professor and former OFPP administrator, described the phenomenon of the patched together argument in his book, Procurement and Public Management: the fear of discretion and the quality of government performance (1990), American Enterprise Institute for Public Policy Research, Washington, DC, pp. 25 - 26:

The contracting people are the agencies' own in-house leash holders. While there are some exceptions, in general contracting officers often try to reduce the exercise of discretion by the technical or program people, partly through their role as guardians of the regulatory process... The contracts people generally serve as a lobby for allowing less discretion than the regulations do... Indeed, I was repeatedly surprised how many common procurement practices are not mandated by the procurement regulations, but come from a procurement culture that has developed in contracting offices... In government, the source of the unique knowledge and expertise of contracting officers is the regulations. They are evaluated by how few regulatory violations they allow or how few "waves" the4 procurement causes. Because the exercise of discretion generates the congressional investigations and media stories, contracting officers tend to be safe rather than sorry. Given their lack of program responsibility for what is procured, they have little to compensate them for taking risks.

It does not matter whether you believe that is true. What matters is that enough people believe it's true to lower the esteem of the contracting career field. They are not seen as problem solvers; they are seen as problem posers. The patched together nay-say argument doesn't just violate the rules of valid inference. It reduces what is supposed to be a profession to administrative/clerical status.

The nay-sayer who relies on invalid argument is the enemy of our profession.

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"The nay-sayer who relies on invalid argument is the enemy of our profession."

That's a true statement insofar as it goes. But it does not go far enough; not nearly far enough.

The supervisors, managers, and SES-level "leaders" who reward risk aversion and punish risk-takers are the enemies. The "leaders" who fix process problems by adding more processes are the enemies. The "leaders" who promote (or appoint) those who lack technical competence are the enemies.

You get the behavior you incentivize. Nothing more or less.

In contrast, Google X's leadership is telling its employees they need to "fail faster".

http://money.cnn.com/2015/03/18/technology/google-x-astro-teller-sxsw/

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Vern –

“What?”

A contract should not be called a firm-fixed-unit-price contract (FFUP), because that contract type is not mentioned anywhere in the FAR. A contract can be a firm fixed priced contract and be based on all line items being fixed quantity unit priced basis ( FAR 36.207). The FAR 16.102 at (a) seems to support this when it says “….contract types not described in this regulation shall not be used..”.

When a contract uses a fixed unit price that has an estimated quantity for unit priced item(s) the line item is no longer “firm fixed price” it becomes “fixed priced”. Therefore “FFUP” to describe a line item in a contract where the quantities are “estimated” is not appropriate.

And to your other questions:

“Do you now agree that FAR permits a CO to use an FFUP contract to buy services?”

No.

Why in case others want to know? As stated above the CO would use a FFP contract if the quantities for the unit price items are fixed. The CO would use a FP contract if the quantities were not fixed. I do agree that Line Items can be FFUP or FUP.

“Do you agree that it is permissible for a CO to write a variation in quantity clause for such a contract that is similar to the ones FAR prescribes for supply and construction contracts?”

Cannot provide a Yes or No answer as I am unsure what “such a contract” is.

For others that might allow other than a Yes or No answer here is my thought. A CO would not need to write a variation in quantity clause for a contract (or a line item in a contract) where the quantity is fixed for the unit priced item(s). As to writing a variation in quantity clause for a service, non-commercial item contract where the quantities for the unit priced item are estimated, my answer is actually I do not know and here is why. The FAR has no prescribed clause for a service contract that does not include supplies and based on discussions in threads found elsewhere in Wifcon I have yet to reach a conclusion if a CO can simply write their own clause to add to a contract if that clause is not prescribed and already contained in the FAR.

All - I will admit that I was not explicit enough in my previous posts so it may appear my position is varied. It has not. My overall concern is that we have bastardized the FAR to such a point that terms of art like FFUP as a contract type become common use when by strict interpretation of the FAR there is no such type of contract. Big deal or not? I will let each of you decide but has been discussed inside and outside this forum that use of terms is important in Federal acquisition.

Joel – I apologize for the post that took you off in another direction. I fully understand the operation of the variation in quantity clause.

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I still say a fixed-unit-price with an estimated quantity contract is FFP.

Here's why -- FAR 16.202-1 "A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract."

It is important to focus on the price of the item or service, not the amount eventually payable to the contractor. So a contract that establishes a line item for file maintenance services with an estimated quantity of 1,200 transactions and a firm-fixed-price of $2.50 per transaction is FFP. Maybe 1,199 transactions generate, and we'll pay 1,199 x $2.50 = $2,997.50. Maybe 1,201 actions generate, and we'll pay 1,201 x $2.50 = $3,002.50. Either way, the price for the transaction is firm and it is fixed. FPDS-NG and FAR Part 16 give us no other category other than FFP for this sort of contract, and that's okay because FFP fits.

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Carl:

You wrote:

When a contract uses a fixed unit price that has an estimated quantity for unit priced item(s) the line item is no longer “firm fixed price” it becomes “fixed priced”.

Help me out, Carl. FAR 36.207 says, in pertinent part:

(a) Generally, firm-fixed-price contracts shall be used to acquire construction. They [FFP contracts] may be priced—

(1) On a lump-sum basis (when a lump sum is paid for the total work or defined parts of the work),

(2) On a unit-price basis (when a unit price is paid for a specified quantity of work units), or

(3) Using a combination of the two methods.

( b ) Lump-sum pricing shall be used in preference to unit pricing except when

(1) Large quantities of work such as grading, paving, building outside utilities, or site preparation are involved;

(2) Quantities of work, such as excavation, cannot be estimated with sufficient confidence to permit a lump-sum offer without a substantial contingency;

(3) Estimated quantities of work required may change significantly during contraction[.]

Now, Carl, that sounds to me like (a) firm-fixed-price contracts can be lump-sum or unit-priced and ( b ) FFP unit-priced contracts can contain estimated quantities. FAR 36.207(a)(2) says "specified" quantity. It does not say "definite" quantity. My dictionary defines specific as "clearly defined or identified." An estimated quantity is a clearly defined or identified quantity. See Maintenance Incorporated and Worldwide Services, Inc. GAO Dec. B-208036, 83-1 CPD ¶ 631 (June 9, 1983), in which the GAO found that a contract for meal services with estimated quantities, unit prices, and a variation in quantity adjustment provision was "firm-fixed-price":

Maintenance protests that the contract to be awarded under the IFB does not meet the requirement of Defense Acquisition Regulation (DAR) § 2–104 (1976 ed.) that a contract awarded after formal advertising be of the firm fixed price type. The protester proffers two reasons for its contention: 1) the amount paid to the contractor per meal will vary with the number of meals actually served between 80 and 120 percent of the Government estimate, and 2) the IFB expressly requires the negotiation of the contractor's price for services where the actual number of meals served varies from the Government estimate by more than 20 percent. We find no merit in the protester's contention…

The regulation at DAR [Defense Acquisition Regulation] § 2–104 does require that contracts awarded after formal advertising be of the firm fixed price type (except that fixed price contracts with economic price adjustment may be used when some flexibility is necessary and feasible). The DAR describes a firm fixed price contract as providing for a price that is not subject to any adjustment by reason of the cost experience of the contractor in the performance of the contract. DAR § 3–404.2.

First, the fact that the rate of payment to the contractor for each meal (between 80 and 120 percent of the Government estimate) may vary with the number of meals served does not run afoul of these requirements, since the rate of payment is fixed by the prices offered in Part A and Part B without regard to the cost experience of the contractor.

Second, concerning the provision for price negotiation for meal services in excess of 120 percent or less than 80 percent of the Government estimate, the DAR provision authorizing the use of requirements contracts recommends that, if feasible, the contract should state the maximum and minimum limits of the contractor's obligation to deliver and the Government's obligation to order. See DAR § 3–409.2(a); 52 Comp. Gen. 732 (1973). Where the Government deviates from these limits the contractor could be entitled to an equitable adjustment, see Chemical Technology, Inc., ASBCA No. 21768, 78–2 BCA ¶13, 338 (1978), or to some other amount as specifically stated in the contract, see Broken Lance Enterprises, Inc., ASBCA No. 22588, 78–2 BCA ¶13,433 (1978). Such an adjustment, however, does not change the fact that the contract is a firm fixed price requirements contract for the quantities between the stated minimum and maximum. Indeed, DAR § 3–409( c ) recognizes that requirements contracts with stated minimum and maximum quantities may provide for firm fixed prices. See Spaces Services International Corporation, B–207888.4, .5, .6, .7, December 13, 1982, 82–2 CPD 525.

We therefore deny Maintenance's protest that the IFB contemplates other than a firm fixed price contract.

As you see, the specified price can be a range and, as Joel pointed out, the variation in quantity adjustment clause merely provides for an equitable adjustment, which is something available under all FFP contracts and does not convert them from FFP to merely "fixed-price."

In light of FAR 36.207 and the GAO's decision, I don't understand why a unit-priced contract with estimated quantities and a variation in quantity clause is not a "firm-fixed-price" contract under FAR. But we can agree to disagree about that.

You also said:

As stated above the CO would use a FFP contract if the quantities for the unit price items are fixed. The CO would use a FP contract if the quantities were not fixed. I do agree that Line Items can be FFUP or FUP.

So it's my name, "FFUP," that you object to. To you, an FFUP contract would contain unit prices and definite quantities. Is that correct? Okay by me.

And using your terminology, a contract with unit prices and estimated quantities would be "FUP." Is that correct? Well, okay by me. I'll agree to call them whatever you like. FUP it is.

Now let's get down to business. Do you think that a CO can use an FUP contract to buy services? I mean a contract with unit prices, an estimated quantity, and a variation in quantity clause. Yes or no?

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