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huwen119

Payment Delay& Invoice Rejected on FFP contract (service)

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All,

I ran into a problem on payment/invoicing. Please find below contract facts:

(1) Service contract awarded under GSA MAS as FFP type (small contract <$1M/year), 1 base year plus 4 option years, currently on base year.

(2) No labor hours specified on the contract; deliverables are straight forward: a monthly status report and a couple of other reports.

(3) Invoices shall be submitted per FAR252.212-4(g)

(4) The PoP starts one day after the contract was awarded; contract requires all personnel be available when PoP Start.

Due to security requirements, it is impossible to staff all personnel when PoP starts, but my firm staffed all personnel in a month and during this time, all deliverables have been made and all reports have been turned in on time.

The problem: Our invoices have been rejected by KO due to insufficient staffing.

My questions are:

(1) this is a FFP type contract. Should the payment be in lump-sum as long as all deliverables are met?

(2) If the government refuses to pay, do we (contractor) have right to suspend our operation/on-site personnel?

(3) Any other options can we take? Such as file a claim or REA?

Thanks very much!

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1) What does the contract say about payments? If nothing, it is assumed payment is made upon completion of work or delivery (I.e. Commercial delivery payment) of a specific line item. You are only entitled to payment in arrears (i.e. commercial interim payments) if the contract authorizes it.

2) Unless the contract says you can stop work, you will be in default of the contract if you stop work without the agency's explicit direction. I strongly, highly, really, really recommend you continue to perform. See FAR Clause 52.212-4(d) that says you will continue to perform.

3) You could try to file a claim or REA. However, it sounds like you have failed to meet your contractual obligations. I recommend carefully reading FAR Clause 52.212-4(f) and consider whether to notify the CO of an excusable delay due to delay of the sovereign. If there is an excusable delay, and you meet the terms of paragraph (f), you are entitled to certain remedies.

Try looking at the situation from the Goverbment's perspective. You may have delivered reports, but you did not adhere to the staffing requirement. When you submitted your invoice, you essentially said you adhered to all contract requirements, but you admitted to is that you did not, but possibly because of mitigating circumstances.

P.S. I am not your lawyer.

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Ji, just to clarify and based upon OP's statement that this is a commercial item acquisition (inclusion of FAR Clause 52.212-4), FAR Clause 52.233-1 is not applicable. The correct reference is FAR Clause 52.212-4(d).

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The clause at FAR 52.233-1 is applicable, and is a good reference. Para. (d) of 52.212-4 explicitly refers to 52.233-1 and incorporates that clause into the commercial contract.

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Disputes under 52.212-4[d], are not necessarily the same as disputes under 52.233-1.

Understanding that 52.233-1 is referenced in 52.212-4[d], note that 52.212-4[d] "requires" continued performance pending final resolution of any "dispute" "arising under" the contract.

Contractors duty to continue performance under the standard Disputes clause is "authorized" not "required" continued performance pending final resolution of any "claim" "arising under", OR "relating to" the contract (see FAR 33.213).

I don't think it's easy enough to suggest reading 52.233-1 is all that is needed.

My two cents.

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Jamaal, the contractor's duty to continue performance is stated in 52.233-1(i) not in 33.213. The clause requires continued contractor performance in regard to disputes arising under the contract. If the government wishes for the contractor to continue performance when a dispute relates to a contract, then 52.233-1 Alt I is used.

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Disputes under 52.212-4[d], are not necessarily the same as disputes under 52.233-1.

Understanding that 52.233-1 is referenced in 52.212-4[d], note that 52.212-4[d] "requires" continued performance pending final resolution of any "dispute" "arising under" the contract.

Contractors duty to continue performance under the standard Disputes clause is "authorized" not "required" continued performance pending final resolution of any "claim" "arising under", OR "relating to" the contract (see FAR 33.213).

I don't think it's easy enough to suggest reading 52.233-1 is all that is needed.

My two cents.

Jamaal, a contractor's duty to continue performance under the standard Disputes clause under 52.233-1, paragraph ( i ). generally* "requires" continued performance, pending "final resolution of any request for relief, claim, appeal, or action arising under the contract..."

Alternate I may be substituted, per 33.213 and 33.215, to require continued performance, "pending final resolution of any request for relief, claim, appeal, or action arising under or relating to the contract"... , thus adding a requirement for continued performance pending resolution of any request for relief, claim, appeal, or action "relating to the contract".

33.213 -- Obligation to Continue Performance, states, in part under paragraph ( a ) (emphasis added; external links are to the FARSITE at Hill AFB):

(a) In general, before passage of the Disputes statute, the obligation to continue performance applied only to claims arising under a contract. However, the Disputes statute at 41 U.S.C. 7103(g), authorizes agencies to require a contractor to continue contract performance in accordance with the contracting officer’s decision pending a final resolution of any claim arising under, or relating to, the contract. (A claim arising under a contract is a claim that can be resolved under a contract clause, other than the clause at 52.233-1 Disputes, that provides for the relief sought by the claimant; however, relief for such claim can also be sought under the clause at 52.233-1. A claim relating to a contract is a claim that cannot be resolved under a contract clause other than the clause at 52.233-1.) This distinction is recognized by the clause with its Alternate I (see 33.215)...

33.215 is the prescription for the clauses, including 52.233-1 (emphasis added; external links are to the FARSITE at Hill AFB):

33.215 -- Contract Clauses.

(a) Insert the clause at 52.233-1, Disputes, in solicitations and contracts, unless the conditions in 33.203 ( c ) apply. If it is determined under agency procedures that continued performance is necessary pending resolution of any claim arising under or relating to the contract, the contracting officer shall use the clause with its Alternate I...

* However, there have been some legal decisions (probably not applicable here) that addressed circumstances that could excuse continued performance where the contractor needed information or instructions from the government to perform and the government refused or failed to provide the needed information or instructions. Vanguard Construction, Inc. v. United States, 2015 U.S. Claims LEXIS 1158 (Fed. Cl. Sep. 8, 2015); Seven Sciences, Inc., ASBCA 21079, 77-2 BCA ¶12730; Remm Co., ASBCA 18430, 18545, 74-2 BCA ¶10876 .

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Retreadfed also said it while I was posting.

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My questions are:

(1) this is a FFP type contract. Should the payment be in lump-sum as long as all deliverables are met?

(2) If the government refuses to pay, do we (contractor) have right to suspend our operation/on-site personnel?

(3) Any other options can we take? Such as file a claim or REA?

Answers:

(1) According to the payment term in FAR 52.212-4(i), the Government must make payment "for items accepted by the Government that have been delivered to the delivery destinations." Look at the list of items in the contract. How do they stipulate payment? By unit of work or in lump sum? That will be the answer to your question.

(2) If the Government refuses to pay, whether you have a right to stop performing depends on whether the refusal is a breach of contract or a rightful refusal due to nonperformance by you. If it's a breach, then you have the right to stop performing, unless the contract includes the clause at FAR 52.233-1, Disputes, Alternate I. If it includes Alternate I, then you have no right to stop performing.

(3) If the Government has refused to pay and you dispute that course of action, then you may submit a claim to the CO seeking the payment due plus interest. The claim should be a demand for payment of the amount due with both Prompt Payment Act interest and interest on the amount claimed. The claim should not seek an equitable adjustment.

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Thanks for setting me straight.

So 52.212-4[d] and 52.233-1 are essentially the same, and Alt I is where the differences manifest?

Alt I is not used commercially?

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Thanks, all.

As mentioned in contract facts, this particular contract was awarded under GSA schedule. It is a delivery order so terms and conditions are quite simple and invoicing/payment instructions are also very succinct. For example, the contract does not say how payment will be made, either upon completion of work or meet certain line item.

However, I checked terms and conditions on my GSA schedule, 52. 212-4 and 52.212-4 (Alternate I) and 52.233-1 are all included. That said, as you all mentioned, contractor must continue performance even if without payment/pending final resolution.

Metteeec - thanks for mentioning excusable delay. I understand it is contractor’s obligation to notify our customer per 52.212-4(f) excusable delay because getting TSC in 1 day for all personnel including subs is impossible and customer should understand this fact. We have been doing that and will continue to do if there are any other delays.

If continuous engagement with the government does not work, we will have to seek REA/Claim but in the meantime, paying subs becomes a real struggle. How should we deal with that? Any suggestions?

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You will have to answer the questions: Why did you not provide the staffing levels you promised on the date you promised? Why did you accept that obligation if you did not intend or would not be able to honor it?

Once you have developed answers to these questions, then you will be ready to try to change your contracting officer's mind. If your order promised a certain staffing level by a certain date, and you didn't meet that promise, then the Government didn't get what it bargained for. I don't think you can force the contracting officer to do anything. If you can't get on his or her good side quickly, then file a claim quickly if you think you are entitled to full payment.

Everything here is based on the information above. Your attorney, with the order in front of him or her, can give you better advice.

EDIT: This comment was based on the blurb in the original posting: "...contract requires all personnel be available when PoP Start..." Does the contract or order specify staffing levels?

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huwen, you indicated that the order is for services. However, you have not identified what services are required of you. Further, you state that all deliverables, i.e., reports, have been submitted on time. You have not stated that you provided all the services required by the order. Although you have provided the deliverables, you may not have met your performance obligations in regard to the services that are required of you. You need to do some soul searching and honestly determine if you have met your performance requirements. If not do you have some excusable reason as to why you have not.

One thing we do not know is what representations you made to the government before award in regard to your ability to be fully staffed. It may be that you were ineligible for award to begin with.

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Thanks, all.

As mentioned in contract facts, this particular contract was awarded under GSA schedule. It is a delivery order so terms and conditions are quite simple and invoicing/payment instructions are also very succinct. For example, the contract does not say how payment will be made, either upon completion of work or meet certain line item.

However, I checked terms and conditions on my GSA schedule, 52. 212-4 and 52.212-4 (Alternate I) and 52.233-1 are all included. That said, as you all mentioned, contractor must continue performance even if without payment/pending final resolution.

Metteeec - thanks for mentioning excusable delay. I understand it is contractor’s obligation to notify our customer per 52.212-4(f) excusable delay because getting TSC in 1 day for all personnel including subs is impossible and customer should understand this fact. We have been doing that and will continue to do if there are any other delays.

If continuous engagement with the government does not work, we will have to seek REA/Claim but in the meantime, paying subs becomes a real struggle. How should we deal with that? Any suggestions?

huwen, if this is a FFP order for commercial services, then 52.212-4 (Alternate I) doesn't apply, does it? That alternate is prescribed for time and materials or labor-hour orders. You said that no labor hours are specified on the contract. You said that deliverables are straight forward consisting of a monthly status report and a couple of other reports.

You are confusing me (not hard to do). What do the monthly "status reports" address? Progress toward completion of a final deliverable(s)?? What (in very general terms) do the other reports address? Are you performing certain services on a recurring basis, at specifically established prices?

Depending upon the type of service, recurring or final deliverable(s), it appears that the order may provide for periodic payments upon completion of recurring services (at some unit price?) or for payment only upon final completion of a service.

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Like Jamaal, I too am a little confused about interpretating FAR Clause 52.212-4(d), 52.233-1, and 52.232-1 Alt 1. Vern indicated that the Contractor may stop work in the case of the Government not paying if it constitutes a breach and FAR Clause 52.233-1 Alt 1 is not included. I am assuming Vern said that because failure to pay may be a dispute "relating to the contract" where a "claim that cannot be resolved under a contract clause other than the clause at 52.233-1."

However, in the case of non-payment by the Government, couldn't you consider the Prompt Payment Act and the automatic interest adjustment under FAR Clause 52.212-4(i)(6) as the mechanism to resolve a payment-related dispute? If the answer is yes, wouldn't the contractor be obligated to continue performance in the case of non-payment, even if FAR Clause 52.233-1 Alt 1 was not included in the contract?

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However, in the case of non-payment by the Government, couldn't you consider the Prompt Payment Act and the automatic interest adjustment under FAR Clause 52.212-4(i)(6) as the mechanism to resolve a payment-related dispute? If the answer is yes, wouldn't the contractor be obligated to continue performance in the case of non-payment, even if FAR Clause 52.233-1 Alt 1 was not included in the contract?

Prompt payment provides a remedy for late payments. rhuwen119 is not complaining that the government paid or is paying late. huwen is complaining that the government is refusing to pay what it owes. Refusing to pay despite entitlement is a breach. I know of no FAR contract clause that provides a remedy for a government breach. Thus, a claim based on a breach is a claim relating to a contract.

However, maybe it could be argued that the payment clause is itself the basis for the claim and that the remedy is payment with interest. If so, then it's a claim arising under, and the contractor must continue to perform. I'll do some research if I get a chance. Or one of you could do it.

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Brings up a great opportunity to solicit research techniques. As of now I have the internet (FAR websites, Board/Court Websites, Wifcon, and Google) and hardback books. Where is everyone getting their information?

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Retreadfed – Good point. Either way government could hold us accountable even if we made our deliverables on time due to insufficient staffing level.

Joel -In terms of Monthly Report, we are required to provide a summary of work performed, issues, future operations. However, something really confuses me is that this is FFP with only one labor CLIN (no SLINs). Govt still requires us to record burn rate for each LCAT on Monthly Report. In addition to Monthly Report, a couple of other reports include SOPs and some meeting briefings and documents.

The services provided to the government are on a recurring basis at established prices.

In terms of payment schedule, all it says on the contract is “The Government shall pay the Contractor as full compensation for all work required, performed and accepted under this contract, inclusive of all costs and expenses, the firm-fixed price stated in this contract.”

Having said that, we are stuck between a rock and a hard place...

Considering this is a delivery order from GSA, all terms and conditions from our schedule will govern this TO. Even though I don’t believe contract terms self-deletion rule, in this case, I am assuming 52.212-4 (Alternate I) doesn't apply.

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Due to security requirements, it is impossible to staff all personnel when PoP starts, but my firm staffed all personnel in a month and during this time, all deliverables have been made and all reports have been turned in on time.

Simple question: Does the contract expressly specify staffing requirements? You said that the contract does not specify labor hours. Does it specify types and numbers of positions? Does it in any way indicate what job positions must exist and be filled? Or is staffing left entirely to the contractor's discretion?

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Vern - yes, according to SOW, all required personnel must be on site when PoP starts and our price quote/proposal (with LCATs and estimated hours) was incorporated in the contract by reference.

However, as mentioned before, the contract was awarded on Friday and PoP starts on following Monday. All required personnel must have top secret clearance.

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Now it is becoming a little clearer. Your proposal was incorporated into the "contract"? "Order"? It identified estimated numbers and types of labor categories to be used to perform the work and you didn't provide that many personnel for at least the first period. The KO is not happy. Is this now essentially a question of whether or not the detailed proposal is binding on a lump sum "order" ? "contract"?

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If you accomplished all work and if the only shortfall in performance was failure to have everyone in place on Day One, then withholding the entire payment is over the top.

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huwen119:

Forgive me for duplicating a previous question, but I want to be sure I understand.

Does the contract specify how many people you have to provide (by number)?

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