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VA1102

Authority for De-Obligation of Excess Funds FFP - Commercial Services

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Good Morning WIFCON Community,

Scenario: I have a question regarding contractual authority on a FFP commercial services contract. This contract is for physician services paid at an hourly rate. The contract states that the annual quantity is 2,080 hours. We are at the end of the base period of performance, and the government only used 1,980 hours. I now need to modify the contract and de-obligate the excess funds. What authority do I have to modify the contract and de-obligate the excess funds?

My Thoughts: I have only two options for modifying the contract to de-obligate the excess funds. The first option is a bi-lateral modification (supplemental agreement) under the authority of 52.212-4©. The second option is a partial termination for convenience under the authority of 52.212-4(l). Other than utilizing one of these two options, I don't see any other authority I have to modify this contract and de-obligate the excess funds. I have always treated these modifications as bi-lateral, as I don't think that the de-obligation of excess funds is an administrative action. In my opinion, changing the amount of hours and associated value of the contract explicitly changes the terms of the contract. Therefore, the only unilateral modification authority I would have to take such an action would be termination for convenience.

Other Opinions: I have some folks suggesting that the de-obligation of funds is only an "administrative modification" or a "funding only modification," and that it can be done unilaterally - especially since that particular performance period is now over.

Are there any additional authorities I might have to modify a FFP commercial services contract other than those I've outlined above? Thanks in advance for any insight you can provide.

-VA1102

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VA, regarding your first question to Don, would you please clarify whether the requirement is to provide physician services for up to 2080 hours or to provide 2080 hours of physician services? Also, why were less hours provided ( I am guessing that 2080 is based upon 52 weeks X 40 hours per week = 2080)? I believe that it is important to know whether there were changes to the requirement and, if so, why.

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Good Morning Joel,

The requirement was to provide 2,080 hours of physician services. The reason that the full 2,080 hours weren't provided was that the patient workload was not as high as we initially anticipated.

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So, there were some government directed changes to send the physician home early or not to show up? Or were the services provided at other than. VA run facility? You still aren't clear. Was the government supposed to pay for 2080 hours or actual hours worked depending upon actual needs?

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This particular scenario involved physicians providing services on site at the VA. The physicians were from an affiliated medical institution (i.e. a university). The physician wasn't needed for the full 2,080 hours and thus wasn't scheduled for the full 40 hours per week. The affected physicians then provided services the university instead.

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Did the contract expressly state "2,080" hours in describing the contractor's obligation? Did it state that number as a quantity to be performed? If so, then do a bilateral modification to reduce the quantity and deobligate the excess funds in the same mod. That would be essentially the same as a T for C, but procedurally simpler. The contractor should have no reason to object. If it does, then T for C. You have to mod the contract and reduce the government's obligation before you can deobligate funds.

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Looks there were one or more changes to the commercial services contract requirement and that mutual agreement on the final price is required, based upon your information.

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If the contract is FFP for 2080 hours, then why are you deobing it? It seems to me that if the requirement turned out to not actually need 2080 hours, the Government did a bad job estimating it, but that's not the contractor's fault. If the Government wanted to pay for only the hours used, why not a labor-hour or other type of contract? Am I missing something?

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Am I missing something?

Yes. Termination for convenience. If the Government thought it needed something, but it turns out that it didn't, it can get out of the contract.

It's not a matter of fault. It's a matter of the Government's convenience. Not a new idea.

Why not another contract type? Who knows? Who cares? Dead issue.

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Vern,

Thanks. But, if I understand things correctly, the base period is over. The Government only realized it didn't need the full hours after the fact. The Government negotiated a firm fixed price. That should mean something. It's not like the Government realized the requirement changed halfway through the contract. After performance ended the Government realized they overpaid and now wants their money back. Sorry. Should have negotiated a different contract type.

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Telling the contractor in  the RFP to base their estimate on a 2080 hour year, and saying that the contractor has to be onsite 7 days a week for 52 weeks per year as a contract term, are two very different things.  Are you saying the contractor was billing you on an hourly basis under an FFP???

The government constantly confuses 'estimating methodologies' for 'contract terms'.   FFP is FFP, regardless of how the price was estimated.   They aren't delivering hours, so how can you 'T for C' them without incurring a claim? 

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REA'n,

The original poster never explained the situation.  He or she failed to answer whether the contract requirement was to provide a physician for (a) a fixed 2,080 hours; or (b) an estimate of up to 2,080 hours.  Either way, a bilateral modification based on the agreement of the parties will solve this (essentially, a no-cost settlement) -- a termination for convenience shouldn't be necessary, but can be used if the contractor won't sign the proferred bilateral modification.  If the requirement was for (a), then a termination for cause would be possible, but the original poster is making excuses for the contractor so he or she won't be able to make it stick.

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The original poster never explained the situation.  He or she failed to answer whether the contract requirement was to provide a physician for (a) a fixed 2,080 hours; or (b) an estimate of up to 2,080 hours. 

Agreed, but as a purely intellectual exercise: 1) how would one contract for 2080 hours on a "normal" FFP?   2) Is the KTR delivering only hours?  How is that possible without being (in practice and regulation) a LH contract?  3) What happens if the KTR works more than 2080? Can he file an REA/claim?

Here's the statement I'm focusing on:

Quote

This contract is for physician services paid at an hourly rate. 

Glaring Issue #1: Was the COR tracking hours?  

Glaring Issue #2: Did the contract require the contractor to submit hours?

Everyone is paid at some form of hourly rate, or at least what they are paid can be converted to an hourly rate.  There is simply no other way to price a service contract (i.e., you don't just say "Meh; $120,000 seems about right"). But that has nothing to do with the terms of an FFP award.

We are all prisoners to our experience, but FWIW, I have fought this "award as an FFP/manage as a LH" nonsense for years.  As a proud former 1102, it pains me that many offices play the game of soliciting in an FFP environment and managing in a LH environment, simply because they don't want to do the work associated with justifying a LH approach.  Then the COR "manages" by counting contractor  butts in seats, and refuses to certify the full invoice because Billy Bob went to Disneyland last week.

And voila, when it comes time to close, you have money left on an FFP, which should technically be impossible.  What other scenario could produce such a result? (other than systems/lag issues, which with integrated finance and contracting systems, are increasingly rare.)

If I were the contractor, I would demand full contract payment. Period.

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One other big question is simply, "how is it even possible for a doctor put in 5 days a week/52 weeks per year onsite at a VA hospital when we know for a fact that the government is closed for at least 10 holidays every year?"

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21 minutes ago, REA'n Maker said:

One other big question is simply, "how is it even possible for a doctor put in 5 days a week/52 weeks per year onsite at a VA hospital when we know for a fact that the government is closed for at least 10 holidays every year?"

Are you kidding me? Who is going to tell the patients thatt the hospital is closed 10 days a year?

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1 hour ago, REA'n Maker said:

Agreed, but as a purely intellectual exercise: 1) how would one contract for 2080 hours on a "normal" FFP?   2) Is the KTR delivering only hours?

As an intellectual exercise: 1) By awarding an FFP level of effort contract. 2) What the contractor must deliver must be specified in the contract.

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55 minutes ago, REA'n Maker said:

One other big question is simply, "how is it even possible for a doctor put in 5 days a week/52 weeks per year onsite at a VA hospital when we know for a fact that the government is closed for at least 10 holidays every year?"

VA hospitals are never closed for holidays. You weren't thinking when you asked that question.

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VA hospitals are never closed for holidays. You weren't thinking when you asked that question

I was thinking of my experience with VA contracting when answering that question - the contract doctors typically aren't on-call; they are the ones taking scheduled appointments. I've also seen them contracted on Indian reservations because of the travel time involved to the nearest VA facility:

Hours of operation: 8 a.m. - 5:30 p.m.
Monday through Friday
Closed on weekends and Holidays
Voice messaging system available 24 hours

http://www.washingtondc.va.gov/patients/appointments.asp

My reference to "normal" FFP precluded the "LOE" option because of its limited application, and an FFP LOE doesn't fit the scenario of a fixed set of tasks over a fixed time.  The only reason for saying it is "done" is because the PoP is complete, not because they have delivered something.  

Regardless, FFP-LOE doesn't mean you bill by the hour, or that you aren't entitled to the full FFP absent a scope change.  VA needed a doctor for a year.  The contractor provided a doctor for a year. Scope met; payment deserved.

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1 hour ago, REA'n Maker said:

[A]n FFP LOE doesn't fit the scenario of a fixed set of tasks over a fixed time. The only reason for saying it is "done" is because the PoP is complete, not because they have delivered something.  

I don't know where you got that idea, but that's dead wrong. As an Air Force CO I've negotiated FFP-LOE R&D and study contracts with fixed tasks and a deadline. And the limitations in FAR 16.207-3 are not absolute and can be waived by appropriate authority.

As for your experience with the VA, well, that's your experience. I don't know what contract physicians do for them.

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I don't know where you got that idea, but that's dead wrong

I "got that idea" from FAR Part 16:  "A firm-fixed-price, level-of-effort term contract is suitable for investigation or study in a specific research and development area."  That's not even including the specific stipulations under 16.207-3

Why in God's name would I award  "study" contract with a $150K ceiling, or get a waiver,  for routine physician services under a Part 12 buy?  That would be wacky. 

So if a CS came into your office and requested a waiver to the FFP-LOE restrictions, under  a Part 12 buy, would you  approve it?

Quote

I don't know what contract physicians do for them.

The same thing they do for everyone else in the private sector, hence the commercial contract. I can 100% assure you it's not "investigation or study in a specific research and development area".  

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1 hour ago, REA'n Maker said:

FFP LOE doesn't fit the scenario of a fixed set of tasks over a fixed time.  The only reason for saying it is "done" is because the PoP is complete, not because they have delivered something.

REA'n Maker,

What does "level of effort" mean, in your opinion?

PepeTheFrog suspects you didn't mean that the FFP-LOE contract is "done" solely when the PoP is complete, without other conditions being met. In your opinion, what other conditions must be met to receive payment for the FFP-LOE contract?

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Why in God's name would I award  "study" contract with a $150K ceiling, or get a waiver,  for routine physician services under a Part 12 buy, as the OP stated?  That would be wacky and stupid.

I was not addressing that circumstance. I was addressing your uninformed remarks about the use of FFP-LOE contracts for "a fixed set of tasks over a fixed time." In any case, the fact that a contract type is suitable for one thing does not mean that it's not also suitable for other things. The FAR limitations do not restrict its use to study contracts. FFP-LOE contracts have been used for decades for initial development of weapon systems, among other things. They are useful for many kinds of services acquisitions, including commercial services. The $150,000 limitation is routinely waived in some agencies.

If you would like to learn something about FFP-LOE contracts instead of expressing uninformed opinions, read: "The Firm-Fixed-Price Level-of-Effort Contract: A Mystery In An Enigma," in the July 2012 issue of The Nash & Cibinic Report, published monthly by Thompson Reuters. The article begins as follows:

Quote

The firm-fixed-price level-of-effort (FFP-LOE) term contract described in Federal Acquisition Regulation 16.207 is something of a mystery to many practitioners, who are not sure what this contract is, how it works, or when to use it.

It ends with this:

Quote

The FFP-LOE contract is more important than the brief coverage in the FAR suggests, and it merits close study and thoughtful consideration if the confusion about its nature and appropriate use is to be dispelled.

Too true. There is more to know in heaven and earth than what's in FAR. Much more.

As for "wacky and stupid," I have no personal experience with that.

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16 hours ago, REA'n Maker said:

Agreed, but as a purely intellectual exercise: 1) how would one contract for 2080 hours on a "normal" FFP?   2) Is the KTR delivering only hours?  How is that possible without being (in practice and regulation) a LH contract?  3) What happens if the KTR works more than 2080? Can he file an REA/claim?

What about a Fixed Price Unit Price contract with an estimate of 2080 hours and a variation in estimates clause? 

I'm not suggesting that is the answer, I'm actually asking whether that would work.  There is another thread discussing FFPUP contracts where Vern and Don discussed whether the "unit price" could be simply a labor hour or whether it had to be based on some other unit of measuring the service.  (http://www.wifcon.com/discussion/index.php?/topic/2955-ffp-unit-price-versus-tm/)  But I'm not sure that was ever resolved.

 

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