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T&M CLIN to acquire commercial replacement parts


Lionel Hutz

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I have a question with regard to use of a T&M CLIN to acquire commercial parts to be used to repair a commercial item.

If the Government needs recurring repair services for commercial equipment, can it award a task order contract with the following CLIN structure?-

CLIN 0001 for evaluation of the equipment to determine the problem. This could be either a fixed price flat rate (FFP) or a Labor Hour contract to pay actual time needed to determine the problem.

CLIN 0002 for the repair services. Offeror proposes a labor hour rate that is incorporated into the contract upon award. After evaluating the equipment under CLIN 0001, offeror will provide an estimated repair time. Assuming the Government agrees this is a reasonable estimate, the contractor is awarded a FFP task order for the repair work.

CLIN 0003 for replacement parts, materials, etc. This would be a T&M CLIN. The contractor would be reimbursed for the cost of the replacement parts used in the repair.

Is it a problem reimbursing the labor on a fixed price basis with the materials on T&M basis? If repair services and materials were both being reimbursed on a T&M basis, I wouldn’t see a problem. But, DFARS 212.207 Contract Type states,

se of time-and-materials and labor hour contracts for the acquisition of commercial items is authorized only for the following:

(i) Services acquired for support of a commercial item, as described in paragraph (5) of the definition of “commercial item” at FAR 2.101 (41 U.S.C. 103)…”

Paragraph (5) then includes repair services of an item customarily used by the general public that has been sold or offered for sale to the general public.

This authorization to use T&M is grounded in the acquisition of commercial services. Based on this, I don’t think you can use a T&M CLIN to purchase only commercial items. In other words, I don't think you can use a T&M CLIN to purchase only the “M” and not the “T”.

In this case, the Government is purchasing Time, but not on a T&M basis. Based on the DFARS restriction, does that prevent the Government from using T&M to purchase the Materials (i.e., replacement parts)?

If you cannot use a T&M CLIN in this way, is there another way to structure the contract to pay the contractor a fixed price for labor plus the cost of replacement parts?

Thanks!

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Guest Vern Edwards

You don't use a T&M contract to buy parts. That would be dumb. Why not have just a single T&M life item for diagnosis and repair? That's what T&M is designed for.

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CLIN 0001 - LH

CLIN 0002 - T&M

CLIN 0003 (if desired) - FFP

Here is a training/policy guide of sorts:

http://www.acq.osd.mil/dpap/dars/pgi/attachments/2006d030_overview.pdf

You might find a similar real-world example here:

https://www.fbo.gov/index?s=opportunity&mode=form&id=f82bec216949ef9c3cf28222eabe5213&tab=core&_cview=1

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You don't use a T&M contract to buy parts. That would be dumb. Why not have just a single T&M life item for diagnosis and repair? That's what T&M is designed for.

There are limited service providers in this location. There is a history of contractors providing a poor diagnosis/underestimating the expected work. Then the government is left with partially done work or paying much more than expected for the repair. In many cases, the Government would not have ordered the repair had it known how much it would have to pay. So, the desire is to have a fixed price for the repair established up front. This incentivizes the contractor to conduct a more thorough diagnosis and provide a more accurate estimate. It also allows the Government to make a more informed decision as to whether to continue with the repair.

At least this was the purported reason for wanting the contract this way. I have my doubts as to how much this will fix the problem, but I'm not going to change minds on that issue. I agree that one T&M CLIN for diagnosis and repair would be appropriate in this case. I'm simply trying to figure out if what they want to do is even possible.

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The example you provided is not quite my situation. In the example, Scott AFB Commissary has a FFP CLIN for scheduled maintenance and two T&M CLINs to cover unscheduled repairs. The two unscheduled repairs CLINs are broken into Time and Material, but in essense they function as one T&M CLIN, and the Government is procuring both the Time and Materials needed for unscheduled repairs on a T&M basis.

In my situation, there is just a contract for unscheduled repairs as needed. The question is, can those two components of unscheduled repairs (time and material) be procured in such a way that the government negotiates a fixed price for labor and pays costs for materials?

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The question is, can those two components of unscheduled repairs (time and material) be procured in such a way that the government negotiates a fixed price for labor and pays costs for materials?

If the contractor has to give you a quote for labor, it can also give you a quote for materials, and the whole repair job could be FFP. Why split it into two CLINs, one for labor and one for materials?

Even if the entire repair job is T&M, a single T&M CLIN can cover both labor and materials.

UNSCHEDULED REPAIRS

0001 Inspect and Quote

FFP (fixed-price-per-unit)

or T&M

0002 Repair (based on quote from above)

FFP or T&M

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The question is, can those two components of unscheduled repairs (time and material) be procured in such a way that the government negotiates a fixed price for labor and pays costs for materials?

If the contractor has to give you a quote for labor, it can also give you a quote for materials, and the whole repair job could be FFP. Why split it into two CLINs, one for labor and one for materials?

Even if the entire repair job is T&M, a single T&M CLIN can cover both labor and materials.

UNSCHEDULED REPAIRS

0001 Inspect and Quote

FFP (fixed-price-per-unit)

or T&M

0002 Repair (based on quote from above)

FFP or T&M

DFARs 204.7103-1( b ) states, "All subline items and exhibit line items under one contract line item shall be the same contract type as the contract line item." So, you could not have one CLIN that would reimburse on both a T&M and FFP basis.

That raises the question as to whether the Government could simply have a FFP CLIN for both labor and materials. If there were a reasonable subset of replacement parts, that would be my recommendation. But due to the number of types of equipment and parts involve, the universe of potential replacement parts is too great to ask an offeror to price in advance. Yes, a contractor can give us a "fixed price" for replacement parts at the task order level. But my understanding is that a task order contract must have some sort of fixed unit price at the contract level to be considered a fixed price contract.

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Guest Vern Edwards

This is easy. IDIQ contract. CLIN 0001: L-H with rates for the diagnosis and proposal. CLIN 0002: Unpriced (TBD) FFP for the repair based on proposal or unpriced FFP with labor rates. Write a clause explaining how it works.

Why you would want to pay for parts on a reimbursement (T&M) basis is a mystery to me.

But my understanding is that a task order contract must have some sort of fixed unit price at the contract level to be considered a fixed price contract.

Where did you get that idea?

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This is easy. IDIQ contract. CLIN 0001: L-H for the diagnosis and proposal. CLIN 0002: FFP for the repair based on proposal.

Why you would want to pay for parts on a reimbursement (T&M) basis is a mystery to me.

How would you recommend calculating Total Price for purposes of evaluation? Assume there are estimates for expected repair hours and expected total cost of replacement parts. The Government could multiply the proposed labor hour cost by the estimated hours. But, how do you account for the parts portion in the evaluation of price?

Or maybe you don't need to? If you evaluate the offerors labor hours alone, can you then, at the task order level, accept a fixed price that also includes parts as long as it is determined to be fair and reasonable?

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Whether legal or not, I developed a scheme to resolve potentially hundreds of design conflicts/interferences during construction of a huge ~6 story or more (memory) pollution abatement system as part of the construction of a Chemical Weapon Demilitarization/Disposal Plant at Umatilla, Oregon. We needed a method to quickly implement numerous, individually small changes that could cause delays and disruption that would cost thousands of dollars more per day than the cost of the alterations.

My solution was to add a lump sum ($1 million or so) CLIN to issue individual FFP "job orders" against, which were all relatively small (a few thousand to less than $100k) Our ACO authorized, approved and issued each job order against the CLIN after our Resident Engineer Office (RE) staff reviewed the scope and proposed FFP price with fixed labor and small tools and supplies priced on an FFP basis and materials on FFP or at Cost basis and after they either determined the job order proposal acceptable or conducted relatively simple discussion/negotiations with the Systems Contractor. The Contractor was performing most of the work directly with some trade subs. The Systems Contractor's field engineers and or superintendents scoped and developed the labor and material requirements, sometimes jointly with our Resident Engineer Office staff. We developed a relatively simple, numbered job order form, containing all the approval signatures and the scope and price information (details were by attachment).

The job orders were only to be used on non-controversial, simple physical work that could not wait to be issued by separate modifications without impacting/disrupting or stopping work on the PAS.

The job orders were managed and paid for under the single CLIN , without issuing further mods or sub-CLINs (based upon my recollection of 16 year ago events). We adjusted the final cost of the CLIN for underruns upon completion of the PAS. This probably violated all of the tail wagging the dog DFARs and automated contracting rules but it was managed and worked.

This arrangement worked very well. I think we implemented a similar arrangement on our Plant In Anniston Alabama

.

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Guest Vern Edwards

In my opinion, the problem described by the OP and the problem's solution are matters of elementary commercial item contracting know-how. ji20874 provided a perfect and entirely orthodox solution in Post #6. Based on the description of the problem, anything that is any more complex than what he proposed does not make any sense to me at all.

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I can envision that or an approach something similar to that used by thousands of automobile dealer Service departments. Sometimes you don't know the exact source of the problem or extent of wear or every part needed until you tear down the assembly to repair it.

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I can envision that or Some system something similar to that used by thousands of automobile dealer Service departments. Sometimes you don't know the exact problem or every part needed until you tear down the assembly to repair it.

I agree. Although in my experience, most auto repair is done on a T&M basis. They provide a quote, but are not bound to it. You pay the actual labor hours. In this case, the Government is looking to make the quote binding, i.e., FFP.

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I wish I could pay for the actual repair hours. Normally, they use their NADA or other labor hour guide and charge that times their hourly shop rate plus the disposal and other miscellaneous fees.

Each line item is estimated as though that is the only work to be done and includes a contingency allowance. I have had experiences where the dealer had to remove the water pump to replace the thermostat. I told them to replace both and they tried to quote me labor for both separate operations. I negotiated the extra labor out. They said they need contingency in case a bolt seized or stripped. I said I'd pay the extra time if that did happen. It didn't.

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Before asking why our contracts were firm fixed price, I will say that the first two plants at Johnston Island and Tooele were cost reimbursement with tremendous cost and schedule growth. After completing those plants, the Army decided to replicate the Tooele as-built design for the remaining eight COUS plants under firm fixed price construction phases of the overall cost reimbursement type Systems life cycle contracts. It was a debatable decision with mixed results and which involved extremingly challenging government multi-agency Program Management efforts.

Yes. FFP with duplicate design was clearly the way to go. Because the site conditions were exactly the same and the state regulations were exactly the same and the regulators were just as easy to work with.

Note: Sarcasm.

H2H

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Complicate that with a Systems Contractor (one of the top five or six DoD defense contractors) that once unsuccessfully tried to delve into major, firm fixed construction culture by acquiring several premier engineering design firms and reputable construction companies, a workforce from the nearby Hanford Nuclear Reservation with the highest quality construction quality but highly unionized and a cost plus background). The parent Corporation divested itself from its engineering and construction Division, after losing billions of dollars on several firm fixed price projects, including two of our sites.

And who was the SME who ran that E&C Division, I wonder? I wonder what he's doing today?

:-)

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And who was the SME who ran that E&C Division, I wonder? I wonder what he's doing today?

:-)

Shay Assad. Last time I checked he was one of the most Senior Executives in DoD acquisition.

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POST WAS EDITED :

Yes. FFP with duplicate design was clearly the way to go. Because the site conditions were exactly the same and the state regulations were exactly the same and the regulators were just as easy to work with.

Note: Sarcasm.

H2H

The design was adapted for each site, as necessary to fit the site conditions and site inventory of weapons and agents. The state regulators didn't significantly affect the design conditions and operations were based upon the nature of the specific weapons configurations and types of nerve agents and/or mustard. The same major process equipment was used and the government furnished the equipment for reverse assembly of each type of weapon or agent container. The process was essentially the same at every incineration site. Explosive safety measures are the same regardless of the location of the plant.

Chemical Demiilitarization by incineration involved standardized processes, such as moving from storage to plant, temporary in plant storage, movement into the plant, disassembly, draining and handling of agent, destruction of the propellants and agents, metal parts cleaning, brine storage and disposal and dunnage handling and disposal. The pollution abatement system is essentially the same, explosion proofing and containment of poisoness blast elements is the same, security considerations are the same, RCRA is the same. The basic site footprints were similar for standardization. The facilities were designed for the industrial processes and operations that occurred within them. Of course, they were designed for seismic security and blast protection was a major consideration that created great construction challenges. Obviously, foundations must fit local conditions.

These facilities weren't intended to be economical, they were designed for safety, surety and security. Very early in the program I suggested putting all the munitions at the seven or eight remaining CONUS sites into specially built train, spend a billion or two dollars to upgrade the rail routes, then ship them at one or two mph, under heavily armed military security - to the plant in Tooele, Utah that was built to destroy 47% of the US stockpile of Chemical Weapons. As the program is now somewhere 30 billion stage, that would have been much cheaper and maybe faster. But politics (local jobs and money infusion) and hysteria created by a couple of environmental wacko groups resulted in having to destroy all the stockpile where they were stored. Guess what? We shipped the entire European stockpile by train to ports then shipped it all to Johnston Island in the Pacific, then destroyed it there, without incident (years ago). I'm pretty sure that few if anyone even knew or knows that.

As it is, the last two plants have been under contract since about 2002 and DoD stretched the schedule for those sites out by 10 years or more, even though one site has only about 2% and the other maybe five percent of the original stockpile. One site has only mustard (a single "campaign") and the other has very small quantities of a wide variety of weapons, which could have relatively easily and cheaply been shipped to other sites that have all completed operations and are being or have been torn down and the sites restored. STUPIDITY and gutless politicians at the State and National levels are responsible for the ballooning of cost and schedules for this. Of course, the mad scientists who devised the weapons with little or no thought concerning safely disposing of them can also be blamed.

NOTE: Anger, Frustration, Saracasm and Reaction to Greed, Politics, Politicians and Insanity

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