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Claim versus REAs versus Upwards Obligations


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We have a bit of an issue on an upwards obligation package (for unforeseen conditions-$27K) that went up the chain. When it reached the comptroller (all other levels approved), she called and asked for the PNM and the contractor's proposal. We denied her request. We were told, after some more conversations at other various levels, that apparently, the FM manual said the comptroller has to review documentation for REAs; and that "at her GS level, (she) has the authority to review this information without signing an NDA." They seem to have the definitions mixed up for the claim, REA, and UPOB process.

Okay, from my perspective (and having worked on claims in the past), the comptroller certainly has the authority to review the documentation for claims...since the funds are released from the treasury and are not part of the contract value AND the settlement agreement has been signed. However, with regard to REAs and UPOBs, since those are part of the contract value (and funds), the comptroller has no authority to review once the contracting officer's determination has been made and legal has reviewed.

Has anyone else run into an issue similar to this?

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Guest Vern Edwards

Interesting. I never had anyone in any comptroller shop show even the slightest interest in seeing a contractor's proposal and a PNM for any contract action, even one in the mulit-millions, much less one for $27,000. Has the comptroller indicated what she will look for in those documents? Does she suspect wrongdoing? Does she suspect improper use of appropriated funds?

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Not that we know of. She believes it is in her swim lane all of a sudden to review all documentation pertaining to REAs and Upward Obligations because of the wording in their FM handbook. We do have current year funding available, but don't want to use it for this because it will cut into the funds available for our little installation. This was a definite unforeseen on a roofing job, and it passed all other levels.

She basically told the other 1102 in our office that she needed to see if it was "fair and reasonable."

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Guest Vern Edwards

Ah, she wants to pass judgment on the CO's price reasonableness determination. A power grab!

You could tell her that FAR 15.405(a), which is in the Code of Federal Regulations, says that the contracting officer "is solely responsible for the final price agreement." You could tell her that the term "comptroller" does not appear in the FAR, except with reference to the Comptroller General of the United States. (But it might appear in your FAR supplement, so check first.)

You could tell her that FAR 15.404-1(a)(1) says that the contracting officer is responsible for evaluating price reasonableness and that he or she "may" request input from "experts." You could tell her that you did not seek her input because you did not know that she was an expert in such matters and that, in any case, you already have all the experts you need for a $27,000 contract action. You could ask her if she has successfully completed any of the DAU or FAI pricing courses and, if so, on what dates. You could ask her what level acquisition workforce certification she has.

Finally, you could tell her that if she has any specific concerns or questions relating to her function you will be glad to answer them, but that otherwise you are not interesting in any second guessing on her part.

Or you could give her what she asked for and wait for developments.

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Given kathilou’s reference to “upwards obligation package” (Post #1) and implicit reference to prior year’s funds (Post #3), I suspect the issue FM is having relates to bona fide needs. (Admittedly, I can’t explain FM's reference to “fair and reasonable,” and if that is the heart of FM’s concern, see Vern’s post above.) The contractor’s proposal, and the CO’s description of the effort in the PNM, could conceivably provide some useful background on whether the contract action qualifies for treatment as an Upward Obligation Adjustment (and represents the bona fide need of the prior year) or whether it represents a current bona fide need. For folks in the Air Force, AFI 65-601v1, chapter 6 would be relevant. (I’m not saying providing these documents should be the only way to answer what I suspect is FM’s concern.)

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Kathilou, I am a little confused by something in your original post. You said that the upwards obligation package went up the chain and reached the comptroller. What was the purpose of sending it up the chain to the comptroller? What function, other than providing the funding, was she to perform in this transaction?

Also, exactly what do you mean by upwards obligation package?

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Yes, her function is to provide the funding. For us, an upwards obligation is reaching back to amend a prior year funding document for unforeseen conditions (Differing Site Conditions). We now have an "automated" form for upwards obligations, and it gets routed from the contracting officer to legal, a couple of higher up reviewers, and then to the comptroller to release funds. Bona fide need had already been determined and signed off by legal.

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Guest Vern Edwards

kathilou:

You're welcome.

But I want to point out that a price adjustment due to a differing site condition is an "equitable adjustment" under the contract clause. Your use of the term "upward obligation package" is confusing to those of us who use standard terminology. An upward price adjustment will certainly result in an upward obligation, but for clarity you ought to call the thing an equitable adjustment package, since upward obligations can be the result of other kinds of transactions.

This raises the point that equitable adjustments must be equitable, based on the impact of an event on the contractor's cost of performance. Determining the equitability of an adjustment for a differing site condition is more complex than determining price fairness and reasonableness. I doubt that your comptroller has the know-how to judge the equitability of an adjustment for a differing site condition. This is another arrow in your quiver.

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Thanks for clarifying the term "upward obligation package".

Yes, her function is to provide the funding. For us, an upwards obligation is reaching back to amend a prior year funding document for unforeseen conditions (Differing Site Conditions). We now have an "automated" form for upwards obligations, and it gets routed from the contracting officer to legal, a couple of higher up reviewers, and then to the comptroller to release funds. Bona fide need had already been determined and signed off by legal.

You hint that the modification will be for a differing site condition but you said in an earlier post that you "have current year funding available, but don't want to use it for this because it will cut into the funds available for our little installation."

Not that we know of. She believes it is in her swim lane all of a sudden to review all documentation pertaining to REAs and Upward Obligations because of the wording in their FM handbook. We do have current year funding available, but don't want to use it for this because it will cut into the funds available for our little installation. This was a definite unforeseen on a roofing job, and it passed all other levels.

She basically told the other 1102 in our office that she needed to see if it was "fair and reasonable.".

The general rule is that as long as the modification was associated with the original scope and was in-scope due to an existing contract clause such as a differing site condition (I am assuming FFP contract) or defective design, etc., the modification is properly charged to the original year funds, unless they are no longer available. I don't think that you "have current year funding available", if the origianl year funds are still available for in-scope changes that would have been necessary to complete the contract. The fact that the original year funds aren't locally available doesnt necessarily matter.

So perhaps, the comptroller just wants to verify which funds are appropriate for the modification...

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Please cite a source for that, Joel. We have to provide sources.

Sorry - I was at lunch.

VOL 1 REDBOOK,

Chapter 5, Availability of Appropriations: Time

B. Bonafide Needs Rule,

7. Contract Modifications And Amendments Affecting Price, discussed on pages 5-33 through 5-37

.http://www.gao.gov/assets/210/202437.pdf

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We should be using prior year funds for this, if they exist, before using current. However, if no prior year funds are available, then we would go to current. My point was that we absolutely need the prior year funds, because we are low in our current controls. To add to this, I received an email today with a memo from 2010 on "Guidance for Administration of Appropriations After the Period of Availability." Apparently, financial management reads this memo to say that they are the final "approvers" and must see all documentation, regardless of whether or not it is procurement sensitive.

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We should be using prior year funds for this, if they exist, before using current. However, if no prior year funds are available, then we would go to current. My point was that we absolutely need the prior year funds, because we are low in our current controls. To add to this, I received an email today with a memo from 2010 on "Guidance for Administration of Appropriations After the Period of Availability." Apparently, financial management reads this memo to say that they are the final "approvers" and must see all documentation, regardless of whether or not it is procurement sensitive.

That is what I suspected, at least regarding the role of the Comptroller to review, approve and provide the proper appropriation to use for the modification. Im not sure that they have any authority regarding the actual settlement, itself.

At any rate, we used to encounter this often with some of our clients, who wanted to use current year funding because they had no prior year, original appropriations. We would have to explain that just because the Installation or Command didnt have them, one had to reach up the line to somebody who could tap into them, because they were still available for such obligation purposes unless all of those (AF) appropriations were exhausted.

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Guest Vern Edwards

Well, it is true that the comptroller would have the final say on the proper choice of funds. But I don'k know why they need the PNM and the contractor's proposal to make that determination, unless they are concerned about whether the price adjustment is for work that is within scope. It frankly amazes me that a comptroller would want to see that stuff.

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kathilou:

You're welcome.

But I want to point out that a price adjustment due to a differing site condition is an "equitable adjustment" under the contract clause. Your use of the term "upward obligation package" is confusing to those of us who use standard terminology. An upward price adjustment will certainly result in an upward obligation, but for clarity you ought to call the thing an equitable adjustment package, since upward obligations can be the result of other kinds of transactions.

This raises the point that equitable adjustments must be equitable, based on the impact of an event on the contractor's cost of performance. Determining the equitability of an adjustment for a differing site condition is more complex than determining price fairness and reasonableness. I doubt that your comptroller has the know-how to judge the equitability of an adjustment for a differing site condition. This is another arrow in your quiver.

Again, thank you for this, Vern. It gets deeper...

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In the email sent by the financial clerk today with the ASN memo, she actually "corrects" the contracting officer in their determination. I absolutely agree that they have the final choice in the type of funds, but reading contract information to determine whether the work is in or out of scope is not their area. What's their technical expertise?

Here are some examples from her email:

"3. UPOB (deleted): KO- (deleted): (deleted) was supposed to provide a re-determined price to (deleted), additional information was provided to her on 0x/x/20xx, the UPOB was modified by (deleted) on0x/x/20xx nothing from (deleted). Please see enclosure number 4 letter (K & L) of the attached Guidance of Admin of APPNS after the Period of Availability (Tilted "Documentation and Approval of Contracts Changes Resulting in Upwards Obligations Adjustments"),

for additional supporting documents from the contracting office."

(this one is ours, we asked what a re-determined price was and got no answer)

(the following are other KOs)

"2. UPOB (deleted): KO- (deleted): The contract reference on the UPOB SOW is for the removal and installing of a fence, no reference of service calls, this is REA with no legal statement."

The rest are like this:

"4-7. UPOB 1(deleted): KO-(deleted) : Please see enclosure number 4 letter (K & L) of the attached Guidance of Admin of APPNS after the

Period of Availability (Tilted "Documentation and Approval of Contracts Changes Resulting in Upwards Obligations Adjustments"),

for additional supporting documents from the contracting office.

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Guest Vern Edwards

You've got a real problem on your hands -- an ambitious, aggressive interloper.

The conflict between offices will have to be resolved at a higher level.

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