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A-E 6% Statutory Fee Limitation - What is a Public Work


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This may be a seemingly basic question, but it will set the foundation and structure for me to attach subsequent learning to.

Issue: What is the contextual definition of "public work" so I can know if it applies to an Air Force requirement? Not concerned with the intricacies of applicability to design-build or services not subject to the statutory fee limitation. Simply trying to understand what they mean by public work - utility seems straightforward enough for now.

Scenario: For Architect-Engineering services for public works or utilities, the contract price or the estimated cost and fee for production and delivery of designs, plans, drawings, and specifications shall not exceed 6% of the estimated cost of construction of the public work or utility, excluding fees. - see FAR 15.404-4( c )(4)( i )( B ) and DFARS 236.606-70

Rules: I searched for "public work" in Farsite's FARSearch knowing for fact that it is used in at least a couple of Subparts, but the search results failed to produce FAR 15.404 and DFARS 236.606-70 as a result. Needless to say, I am not relying on the accuracy of FARSearch, but nothing indicates the FAR provides a definition of the term "public work". Additionally, definitions are absent from 10 U.S.C. 4540 (A-E Army), 7212 (A-E Navy), and 9540 (A-E Air Force). My copy of The Government Contracts Reference Book, the USACE Acquisition Instruction, and the Air Force Contracting Construction Guide do not mention a definition either.

I did find the following definition in See 29 CFR § 5.2(k): The term “public building” or “public work” includes building or work, the construction, prosecution, completion, or repair of which is carried on directly by authority of or with funds of a Federal agency to serve the interest of the general public regardless of whether title thereof is in a Federal agency.

Question 1: Can I proceed with the 29 CFR 5.2 definition when applying FAR/DFARS six percent statutory limitations on Architect-Engineering designs conducted under FAR 15.404-4( c )(4)( i )( B ) and DFARS 236.606-70. This definition is basically what I expected a public work to be, but this being my first A-E design requirement I want to know why I believe what I believe.

If so, it appears a design for construction of a building to be funded by the Air Force would be in the "interest" of the general public and subject to the statutory fee limitation.

Question 2: If 29 CFR 5.2 isn't an appropriate definition, where can a definition be found.

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Guest Vern Edwards
Question 1: Can I proceed with the 29 CFR 5.2 definition when applying FAR/DFARS six percent statutory limitations on Architect-Engineering designs conducted under FAR 15.404-4( c )(4)( i )( B ) and DFARS 236.606-70[?].

No, not under the rules in FAR. See FAR 2.000 and 2.101(a). There is no statutory or FAR definition of public works that is applicable to the A-E fee limitation.

Question 2: If 29 CFR 5.2 isn't an appropriate definition, where can a definition be found[?]

Since neither statute nor the FAR system provides any definition of public works as used with respect to the A-E fee limitation, FAR 1.108(a) requires use of a common dictionary definition.

According to the American Heritage Dictionary of the English Language, 5th, public works means: "Construction projects, such as highways or dams, financed by public funds and constructed by a government for the benefit or use of the general public."

According to Webster's Third New International Dictionary, it means "fixed works (as schools, highways, docks) constructed for public use or enjoyment esp. when financed and owned by the government[.]"

According to Black's Law Dictionary, a specialty dictionary, it means: "Structures (such as roads or dams) built by the government for public use and paid for by public funds."

For purposes of the Miller Act, public works has been defined to include vessels. That definition does not apply to the A-E fee limitation as stated in FAR.

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Thank you Vern. Basic order of precedence mistake on my part. Lesson learned.

My New concern - 29 CFR 5.2's definition is different from the dictionary definitions in one specific regard - public interest vs. public use. The dictionaries specify for public use. Air Force buildings in general and certain secure buildings don't appear to satisfy this requirement.

Now I'm back where I started - not knowing if the six percent A-E statutory limitation applies to a military funded and occupied building.

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It does. I suggest reading Engiineer Pamphlet EP 715-1-7 Architect - Engineer Contracting, as it applies to A-E Contracting for the USACE. The HQs proponents maintain ties to both the Industry and Congress (at least the guys I knew who wrote and kept the policy current before they retired). The EP discusses the limitation and describes what services are and aren't subject to the limitations. There is also a good background discussion of the history of 6% limitation for both CPFF and fixed-price A-E contracting by Judge Lawrence J. Block in the U.S. Court of Federal Claims Decision No: 00-207 C, March 24, 2005 in Fluor Enterprises, Inc., f/k/a Fluor Daniel, Inc. v. U.S. That case involved a CPFF contract with NOAA, but Judge Block discusses the background of the limitation in law and in the FAR as it has applied to both Civilian and Military A/E contracting. As one can learn in reading the Decision, there is more to the limitation than one can simply read into the literal wording of the laws.

http://www.publications.usace.army.mil/Portals/76/Publications/EngineerPamphlets/EP_715-1-7.pdf

A Google Search wlll yield the URL for the Fluor Decision. I have a hard copy of 44 pages.

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If you want to learn about the whole process of A-E selection, contracting, negotiating the contract, administering it, etc., at least from the USACE policy perspective, the EP is a good resource.

Oh, the Judge also attempts to explain why the 6% limitation doesn't apply to Design-Build contracts. His reasoning is different than the CORPS and other DoD components.

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Guest Vern Edwards

I think that Jamaal thinks that an Air Force building is not a "public" work. Is that right, Jamaal?

The full citation of the decision cited by Joel is Fluor Enterprises, Inc. v. U.S., 64 Fed. Cl. 461 (March 24, 2005).

The problem is complicated by the fact that Congress changed the language of the statute when in enacted the Title 41 into positive law in 2011, Pub. L. 111-350 (January 4, 2011). What had been 41 USC § 254( b ) is now 41 USC § 3905, which reads in pertinent part as follows:

(a) Cost-plus-a-percentage-of-cost contracts disallowed.--The cost-plus-a-percentage-of-cost system of contracting shall not be used.

( b ) Cost-plus-a-fixed-fee contracts.--
(1) In general.--Except as provided in paragraphs (2) and (3), the fee in a cost-plus-a-fixed-fee contract shall not exceed 10 percent of the estimated cost of the contract, not including the fee, as determined by the agency head at the time of entering into the contract.
(2) Experimental, developmental, or research work.--The fee in a cost-plus-a-fixed-fee contract for experimental, developmental, or research work shall not exceed 15 percent of the estimated cost of the contract, not including the fee.
(3) Architectural or engineering services.--The fee in a cost-plus-a-fixed-fee contract for architectural or engineering services relating to any public works or utility project may include the contractor's costs and shall not exceed 6 percent of the estimated cost, not including the fee, as determined by the agency head at the time of entering into the contract, of the project to which the fee applies.

Compare that language to 41 USC 254( b ) as quoted by the Court of Federal Claims in the Fluor decision. The new language appears to restrict the limitation to cost-reimbursement contracts and only to fee as profit. That conflicts with prior interpretations of the old language. However, Pub. L. 111-350 contained the following paragraph in § 2:

( b ) Conformity With Original Intent.--In the codification of laws by this Act, the intent is to conform to the understood policy, intent, and purpose of Congress in the original enactments, with such amendments and corrections as will remove ambiguities, contradictions, and other imperfections, in accordance with section 205©(1) of House Resolution No. 988, 93d Congress, as enacted into law by Public Law 93-554 2 U.S.C. 285b(1).

So... is the new language the correct interpretation of Congressional intent?

For a discussion of this matter, see Nash, "Postscript: Fee Limitation on Architect-Engineer Contracts," The Nash & Cibinic Report, May 2011. For an analysis of the interpretation of the original language, see Nash, "Fee Limitation for Architect-Engineer Contracts: Confusion Reigns Supreme," The Nash & Cibinic Report, October 2005.

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Thank you Vern. Basic order of precedence mistake on my part. Lesson learned.

My New concern - 29 CFR 5.2's definition is different from the dictionary definitions in one specific regard - public interest vs. public use. The dictionaries specify for public use. Air Force buildings in general and certain secure buildings don't appear to satisfy this requirement.

Now I'm back where I started - not knowing if the six percent A-E statutory limitation applies to a military funded and occupied building.

Jamaal, the Army's counterpart to the Air Force Base Civil Engineering (BCE) organization is the Directorate of Public Works (DPW). The DPW, as does BCE, is responsible for all real property facilities, including buildings . As you may know, the Air Force was established as a separate service from the Army Air Forces, a part of the U S Army, on September 18, 1947 with the passage of the National Security Act. The BCE and the DPW have similar fuctions and responsibilities.

I believe that the term Public Works, as used, starting early in the U.S. history, typically referred to construction of roads, harbors, canals, and other civil works type construction, like dams. I believe that West Point was the first College to teach Engineering in the U.S. Most non-Navy military buildings were constructed under the Army Quartermaster Corps until Circa WWII, when the Corps of Engineers was assigned to mobilize, establish, construct and expand Army and AAC Installations. The Seabees were also established in WWII.

Jamaal recently expressed an interest in the Forum about resources to learn more about A-E and construction contracting, in working for the Air Force.

(P.S., I was once an Air Force Civil Engineer. I have nothing against BCE and AF folks. My best friend at my first assignment was a TSgt contract specialist. 😍)

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Guest Vern Edwards

Judge Block is not the ultimate arbiter. There are other interpretations of the fee limitation. See Comptroller General to the Secretary of Defense, B-152306, 1966 CPD ¶ 110; 46 Comp. Gen. 566 (December 12, 1966). Prior to Judge Block's decision in Fluor, that GAO decision was the source for most interpretations of the A-E fee limitation.

Also, Jamaal, the limitation clearly applies to contracts awarded by the Department of Defense, so an Air Force building reasonably can be construed to be a "public" work. It is owned by the public and it's for public use in the sense of public purposes. There is no doubt or controversy about that.

I forgot that Jamaal works for DOD. So I should point out that the statutory fee limitation as applicable to DOD contracts is stated in 10 USC § 2306( d ), which reads in pertinent part as follows:

The fee for performing a cost-plus-a-fixed-fee contract for architectural or engineering services for a public work or utility plus the cost of those services to the contractor may not be more than 6 percent of the estimated cost of that work or project, not including fees.

GAO told the SecDef that the omission of any mention of fixed-price contracts in the statute was "an inadvertent error." However, that omission was continued in the positive law codification of Title 41.

There is no definition of "fee" in FAR. Thus, according to FAR rules of definition, "fee" as used in FAR is to be defined in accordance with the common dictionary, unless context indicates otherwise. A careful reading of FAR 15.404-4( c )(4)(i)( B ) in conjunction with FAR 36.606(a) shows that fee, as used in connection with the A-E fee limitation, refers to total contractor compensation, not just the profit component. That is consistent with the common dictionary definition of fee. Fee as profit is a term of art, not a common dictionary word. See also the discussions of "fee" in the current edition of The Government Contracts Reference Book.

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Judge Block is not the ultimate arbiter. There are other interpretations of the fee limitation. See Comptroller General to the Secretary of Defense, B-152306, 1966 CPD ¶ 110; 46 Comp. Gen. 566 (December 12, 1966).

Also, Jamaal, the limitation clearly applies to contracts awarded by the Department of Defense, so an Air Force building reasonably can be construed to be a "public" work. It is owned by the public and its for public use in the sense of public purposes. There is not doubt or controversy about that.

There is no definition of "fee" in FAR. Thus, according to FAR rules of definition, "fee" is to be defined in accordance with the common dictionary, unless context indicates otherwise. A careful reading of "fee" in FAR 15.404-4( c )(4)(i)(B ) in conjunction with FAR 36.606(a) shows that fee, as used in the A-E fee limitation context, refers to total contractor compensation, not just the profit component. That is consistent with the common dictionary definition of fee. Fee as profit is a term of art, not a common dictionary word. See also the discussions of "fee" in the current edition of The Government Contracts Reference Book.

I agree. But I thought that his discussion was interesting.
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Joel: Prior to posting my original inquiry I tried to search the EP but, the link I had in the USACE Acquisition Instruction wouldn't work. I will review your link this afternoon.

ji2/Vern: I original believed the requirement was a "public" work when I received the package to purchase the design. Since I'm trying to train myself and this is the first A-E I figured I needed to know what the fee was and what the limitation applies to.

It seemed reasonable to assume what "public" in public work meant especially when the FAR didn't make mention of it and I subconsciously decided this building was a public work. I failed to intentionally make that decision when I blew by FAR 1.108(a).

After reading several dictionary definitions, my thinking is that maybe public use means something since the Federal Government has "public" buildings (court houses, passport processing, museums, etc.) that have public access for public use.

Yes, I am questioning whether a non-secured building within the base is "public" since it's not for public use, per se, like other federal buildings. Maybe this is futile.

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Guest Vern Edwards

Jsmaal:

A public work is something built for the benefit of the public (like an ICBM silo or a BLM campsite restroom) with public funds. That's all there is to it.

At some point, to those of us who have been around for a while, your continued uncertainty becomes tiresome ignorance. Some people have to learn some things through experience, and explaining is fruitless.

Since what we say isn't convincing, ask your boss, and do what she says.

Vern

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Understood and I have asked locally prior to posting of course. Nobody really spent time considering or examining what a public work means or is - it was just a assumed.

For clarification, I completely appreciate the view of this being rooted in uncertainty, however, I don't let uncertainty impede progress or decisions. I make a decision based on what I know and move forward. I'm not interesting in everything being clear or perfect, I just want to be informed. I previously deleted a portion of my intended post where I said something along the lines of this is by no means a show stopper and tradition suggests it's not an issue...realizing this could appear trivial and futile to seasoned professionals. With that being said, I've never liked the argument of historical precedence and tradition - there is usually a "why" in there and as I read through the background of the limitation in law it becomes clearer.

Institutional inertia and precedence is often the reference for why people do plenty of silly things such as un-priced IDIQs with un-priced options. Instead of improving their argument people say things like it's always been that way, or that's just how we do it.

I've received more than enough references and didn't mean to suggest the provided information wasn't convincing me. Everyone confirmed my original thought that yes this applies. I just wouldn't feel confident in training or telling somebody why if they asked me. Nonetheless, I have plenty of references related to the subject to delve into and consider this inquiry closed.

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Guest Vern Edwards

Jamaal:

Your statement that "there is usually a 'why' in there" simply is not true. As I tell my students, Don't ask why. Who knows?

Contracting is not a science. There is a great deal of imprecision in its terminology. As for public works, public means "of or concerning the people as a whole." Oxford Dictionary of English (2013). Works, in this context, means constructed things, buildings and such. Congress wanted to limit the amount paid to A-E firms for designing publicly owned constructions. It's that simple.

You're over-thinking this. You have seized upon the least controversial of all aspects of the A-E fee limitation, and it's clogged your thinking. Move on. Don't be one of those people who can't act because he gets hung up on trivia. If public works were a controversial term, there would be all kinds of litigation about its meaning. There is none.

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Not considering the "why" is something new to ponder.

Rest assured getting hung up is rarely my issue in practice. I've proudly moved forward in the A-E procurement. I do, however, spend hours of my free time researching work related issues. I have several A-E fee limitation topics to study the least being the meaning of public works - agreed. The information in your 9:23 post is particularly intriguing.

In the end, Pareto's principle and the "rule of the inch" I'm looking to implement locally would suggest little time should be spent on things rarely disputed.

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Institutional inertia and precedence is often the reference for why people do plenty of silly things such as un-priced IDIQs with un-priced options. Instead of improving their argument people say things like it's always been that way, or that's just how we do it.

Jamaal, if you are referring to multiple award construction ID/IQ's, I totally disagree with the idea of locking in prices for construction costs or for option years. Find somebody over at the BCE office who subscribes to ENR magazine and read a few issues. Every month, ENR tracks various material prices and the building cost indices and you will see costs and prices rising and falling. Suppliers, skilled ltrade labor and subcontracting markets are quite volatile, often depending on what other projects are going on - the law of supply and demand. Conditions may require offering incentives to attract labor or overtime to meet schedules or job conditions.

The best thing to do is to let competition for task orders determine pricing. Each project - especially those for repair and alteration of buildings has different risks, general conditions, design conditions, etc.

We lhave learned that job order contracting with single firms using a fixed unit price book doesnt necessarily produce the best motivation or quality of work or management. The unit-priced books are based upon Means Estimating or other similar price books. Such price books dont always differentiate between self performed and subcontracted work and are based upon a reporting from many sources - not a specific contractor's own experience - and not adjusted for specific risks or conditions.

You are wasting your time trying to come up with new theory concerning public works and A/E contracting. "Public" also means that they are owned by the public - not private owners. "Works" is an old term. Just realize that every military facilitiy (look up "facilities" in the Air Force's real property regulations.) has an associated category code and facility number - whether it is a sewer, road, drainage system, a building, a runway, barracks, mess halls, chapels, hangars, restricted areas, etc. "Public has nothing to do with whether or not they are open to the "public".

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Guest Vern Edwards
You are wasting your time trying to come up with new theory concerning public works and A/E contracting. "Public" also means that they are owned by the public - not private owners. "Works" is an old term.

Yeah, "works" is old. B.Gen. U.S. Grant made famous use of the word on February 16, 1862, at the Battle of Fort Donelson, when he sent this message to the Confederate commander, B.Gen. Buckner:

Sir: Yours of this date proposing Armistice, and appointment of Commissioners, to settle terms of Capitulation is just received. No terms except unconditional and immediate surrender can be accepted. I propose to move immediately upon your works. I am Sir: very respectfully Your obt. sevt. U.S. Grant Brig. Gen

(The "works" were public.)

The message earned U.S. Grant the nickname "Unconditional Surrender" Grant.

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