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We have a requirement for one FTE each year for a base and several option years. If we anticipate that an employee would get 80 hours Federal Holidays and 80 hours for vacation then our LOE is 1,920 hours in each year. Does anyone have a good way to divide the 1,920 hours so that the contractor can bill for a completed level of effort that is less than a year? If we just divide evenly into monthly or other periods then are we forcing vacation on the employee. For example, if person wants to take one week off at some point or carry a week forward assuming its a new employee.

Maybe this is purely a billing issue?

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Does your contract define what is an FTE? Also, does it require continuous provision of services so that in the case of the unavailability of one employee, such as on vacation or sick leave, another employee would provide the services?

As an observation, if you have an SCA employee that is entitled to two weeks vacation, that employee must have been working on SCA contracts for a long time. Remember, under the SCA vacation time does not accrue, but is only earned upon completion of the required length of service.

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What payment clause is in your contract? FAR 52.232-__.

Why do you want to invoice for a flat rate per month? If the contract allows for invoicing on a monthly basis, why not invoice only for expended effort (actual hours)? If one month has more actual hours than another, then the invoice for that month will be higher.

If the contract does not allow for invoicing on a monthly basis, then payment will be made at the end of the period for the entire fixed-price amount.

But is your contract really FFP-LOE? If so, you're buying an end result, such as a report, not hours. See FAR 16.207.

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Under an FFP LOE contract, the Contractor must "provide a specified level of effort, over a stated period of time, for work that can be described in only general terms" (FAR 16.207-1).

I have used FFP LOE contracts for service contracts that involve the deliverable of a supply, such as a final report. I typically use monthly interim payments that are a fixed amount, then include a clause that allows for the agency to unilaterally adjust the price if the LOE is less than agreed.

If the Contractor is supposed to provide a LOE of 1,920 hours a year, but the actual effort was 1,840 hours because the Contractor's personnel took a 2-week vacation, it cannot then invoice that it performed the entire LOE. Absent language to the contrary in the contract, the Contractor would need to either:

  • Provide a new employee to perform during that 80 hours;
  • Request that the agency increase the time to perform; or
  • Request a downward adjustment to the contract for the reduction in LOE.

Hope that helps.

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Does the contract require performance by a specific human being? If so, why? If not, then why are you factoring vacation time into the LOE? And why are you talking about FTE?

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The contract will define the FTE as 1,920 hours, based on the calculation in my original post. We don't require a specific person, but also don't anticipate that a contractor would have someone on standby to fill in if/when the person performing the tasks took vacation. Since we are defining an FTE to account for vacation and holiday (this is a new position, so there is no previous experience for the SCA position and the WD defines it as two weeks), the level of effort for the full year is 1,920 hours. Although the contract could be set so that the contractor isn't paid until the full LOE is expended, that doesn't seem like a reasonable approach. It might be possible for this action with a single FTE, but if the LOE was for a larger number of hours, then contractors may not be williing to complete the full LOE before receipt of some of the amount. The contract is term, so there is only a requirement to provide the 1,920 hrs.

The plan at this point is to allow billing for the level of effort expended for a month, but to include language that the contractor is in breach of contract if less than 1,920 hrs of effort are provided in the period of performance. So, if the contractor does work less than 1,920 hrs then we are at risk for the payments made before the full level of effort is complete. For this action, the risk seems reasonable.

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This is where I really have trouble understanding FPLOE contracts. I don't understand why the government defines FTEs as the level of effort. Do you think that is really best? To me, the level of effort should be defined as the sum of hours (sometimes broken down by specific labor categories) required to perform work described in the contract over a specified period of time. Of course, the lump sum can (and should) be negotiated with the contractor. Using that logic and knowing that the contractor must perform the LOE, why worry yourself with vacation time?

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What is the end result or product of your FFP-LOE contract? A report or some other deliverable?

If there is no report or other deliverable, then don't you really have a labor-hour contract? Based on what I have read above, it sounds like the FFP-LOE might be a masquerade -- that's why I wonder if there is some result that will be the product of the contract.

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VORCONS:

DOECPA's organization is using an LOE contract and is specifying the LOE as an FTE because it simply does not know what it is doing. If the contract were really an LOE (as described in FAR) there would be no need to take vacation and holidays into account. In their confusion they have chosen to use inappropriate contract terms. There is no point in trying to make sense of what they are doing or in trying to answer the opening question.

I suspect that DOECPA's organization wants 12 months of some kind of scheduled support service. If so, they could have specified a fixed price per month and handled scheduled vacation and the inevitable unscheduled absences (unscheduled vacation days, sick days, late employee arrivals, and early employee departures) in any number of ways.

They could have required the contractor to provide a substitute for the usual employee during the employee's scheduled vacation days. (Why go without the service at the employee's whim?) They could have provided for ad hoc monthly billing adjustments for scheduled vacation without a substitute and for unscheduled absences. The adjustment terms and procedure could have been specified in the statement of work or in a special contract clause. Instead, they've confused themselves, and now they want someone to tell them how to price the thing.

If the government is going to contract for employees instead of hiring them through the personnel system, then it ought to write contracting policies and procedures for such contracts and train its people in how to award and manage them.

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Mr. Edwards,

In my previous post, I stated, "I assume the contract is for a study and requires monthly reports and/or a final report." I stated this in hopes of causing DOECPA to expand upon what their organization's actual requirement is and to give DOECPA the benefit of the doubt. Is the requirement for a warm body sitting in a lab somewhere? For a SME? Or is there some type of desired result? I think you hit the nail on the head.

I chose to post to this thread because I've had numerous debates with...we shall call them, "decision makers"...on this very issue. My arguments have led to both successful and unsuccessful outcomes in convincing the "decision makers" of my rationale. Although, the latter seems to prevail more often.

The first sentence of DOECPA's original post states, "We have a requirement for one FTE each year for a base and several option years." If this statement is true, I don't even need to read the remainder of the post to conclude that FP LOE is not the appropriate contract type. Moreover, and the premise of my argument is, the agency doesn't have a requirement for any type of contract. They have a staffing need, rather it be on a temporary or permanent basis.

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DOECPA suggested in his first post that maybe he was just identifying a billing issue, one with no contracting or cost accounting issues associated with it. If nothing else, this thread has kicked over the rock, and revealed some fundamental and significant contracting and cost accounting issues that were hiding underneath.

I'd be interested to know what DOECPA intends to do with the issues identified.

H2H

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DOECPA -

So you have a Labor Hour requirement, and a proposed FFP-LOE contracting approach. Just a guess, but I will bet a significant sum that you are working for an agency where LH/T&M is never an option even when it is the correct contract type for the requirement (DOD perhaps?). Being commercial, Cost types are off the table, and you have no completion scope, so straight FFP isn't an option.

If the above is correct, then you are probably going down the only path possible. So you have 1 seat for an SME for a year to provide support services (limited by space or funding), and now the question is if you lock them in to provide an LOE on a fixed price basis, how to define the LOE, and how to deal with the practical considerations of the single FTE requirement over a 12-month POP.

I agree with going with 1,920 on an annual basis as your LOE. If the SME is working on a Government Site, you are compensating or 80 Federal Holiday hours plus 80 hours of vacation. Really, in setting up your LOE, you are simply defining that your requirement is for 1,920 hours to be performed within 12 months by a single contractor employee (with the single FTE driving the definition). It shouldn't be that way, but if cost-type and LH are off the table, then it is an unfortunate fix.

As to the billing question, with FFP-LOE I would set up monthly LOE's so that you would have full performance of the monthly LOE to trigger the payment each month. I understand that practically speaking with 1 FTE that is difficult, but I have used language (as suggested by others above) which allows a KTR to reduce the total LOE by up to 80 hours in a given period to cover vacation (if you choose this route, first put the LOE back up to 2,000 Hours). Payment in an FFP-LOE is triggered by delivery of the whole LOE. If you are paying along the way then you are involved in some form of financing arrangement. If you structure your LOE in monthly blocks then the KTR can satisfy the monthly LOE and trigger the monthly payment. Of course, the trick with one FTE is if they get sick on the final day of the period, coming up 8 hours short with no time in the period to make it up, how do you choose to enforce the terms. The KTR is in default. If you simply prorate out the 8 hours and accept delivery, then you really have a LH contract. At a minimum, I would ask for performance of the 8 hours in the next period and seek consideration for late delivery, once completed.

I have recently seen an "FFP-LOE" OSD contract in which the LOE included 5,000 hours to be performed within one-year, with a payment instruction for the KTR to bill monthly on a labor hour basis. This certainly isn't FFP-LOE and I can't wait to see how OSD settles up at end in the event that the KTR only delivers 4,999 hours. Hard to deny payment for default when you've paid almost the entire amount and treated the entire effort as a LH contract. On the flip side, if OSD is willing to prorate the 1 unperformed hour out of the effort, then it was truly a LH contract the whole time.

Good luck on your procurement!

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So you have a Labor Hour requirement, and a proposed FFP-LOE contracting approach. Just a guess, but I will bet a significant sum that you are working for an agency where LH/T&M is never an option even when it is the correct contract type for the requirement (DOD perhaps?). Being commercial, Cost types are off the table, and you have no completion scope, so straight FFP isn't an option.

If the above is correct, then you are probably going down the only path possible.

FFPLOE is not the only path possible, and it is not the appropriate path.

If the government's requirement is for a contractor to provide one person to do specified work during specified hours on Federal working days over the course of a number of months, then that is what the government should specify, not a number of hours per year. Using an FFPLOE contract for such a service would be inconsistent with the intent of FAR 16.207-2 and gives rise to needless complications.

All the agency need do is specify that the contractor must:

provide one person,

to do specified work as directed,

on each Federal working day,

during specified hours of the day (adjustable by the CO),

during a specified number of months.

The parties could then negotiate a fixed-price per month. They could negotiate a standard fixed-price per month regardless of the number of working days in a month (my preference) or they could negotiate a separate price for each particular calendar month based on the number of working days in the month.

If the government is willing to do without the service when the contractor’s employee decides to go on vacation or take a vacation or sick day, no matter what inconvenience that might cause, then the parties could negotiate scheduled/unscheduled absence terms. They could negotiate a clause that would allow for a limited number of hours per day, days per month, and total hours and days during the period of performance on which the contractor need not provide a person, with or without advance notification, but always with pro rata price adjustment. Any breach of any limit on absences would be a breach of contract, and the government's remedy would not be restricted to pro rata price adjustment. They could negotiate an advance agreement on pro rata price adjustments for ad hoc application whenever the contractor uses part of its allowance of such hours or days. They could also negotiate a weather closure/government shutdown clause with a pro rata price adjustment schedule.

FFPLOE contracts cause confusion when not used for their intended purpose. They are not appropriate for use in acquisitions of annual, scheduled, severable support services. In my opinion, the use of an FFPLOE contract for the acquisition of annual, scheduled, severable support services is professional malpractice and reflects a lack of professional imagination. I'd say the same about using T&M and L-H contracts for such services.

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