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jeff4757

Fee on ODC's (material)

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The Government has issued our company an RFP for Services.

In the RFP, the CLIN for travel and MATERIALS is stated as NON-FEE Bearing.

Our firm does not include Fee on travel and freight charges.

Our firm's position on materials is that FEE on materials is appropriate.

Do we simply take exception to their request on the basis of operating principle or does the FAR allow Fee to be applied appropriately?

Any feedback to this situation is appreciated!

Many thanks!

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Keep in mind that I have not read the RFP and can offer no advice based on its complete terms..

My thought is that the government has stated the terms that it wants. If the procurement is competitive, and others will compete for the work, then the question is not what your firm's position is, but what your firm can get the government to do. If you say you insist on fee on materials, how will it affect your chances of getting the job? If you take exception, it is possible that the government will reject your response out of hand.

That's what you have to consider. How badly do you want the work? Badly enough to forgo the fee on materials?

Good luck.

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Not only do I agree with Vern, I think this points out a common challenge in contractor pricing. Too many contractors get hung up on their preferred pricing strategy and they ignore the impacts to the bottom-line. They don't approach pricing with a flexible mindset and as a result they see problems where there are none and fail to see easily obtainable solutions.

In this case, the government doesn't want to pay fee on material. Of course not. The RFP is for SERVICES not products.

How much material is going to be acquired to support the SERVICES being provided? Is it a lot? If so, why? If not, who cares?

If you must make margin on materials, then boost the proposed fee on the labor dollars to cover your "lost" fee on the materials. The bottom line project margin will still be the same.

Hope this helps.

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Jeff, you also did not say how the contract is to be priced, i.e., cost reimbursement, T&M etc. If it is T&M, no fee or profit would be allowed on material unless it is a commercial item that the contractor sells. See, FAR 52.232-7.

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Just read posts 2 and 3. It doesn't matter why the government won't pay fee on materials. If they say they won't, then they probably won't. Period. If you want, ask them if they will reconsider before you submit a proposal. Supposing there is no statutory or regulatory prohibition on fee on materials, what would you say to them to persuade them that it's in their interest to pay fee on materials?

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jeff4757,

Are you SURE -- and I mean POSITIVELY CERTAIN -- that the government will accept your "product" as a commercial item "service". If so, then the notion of fee on any particular cost element is irrelevant, because you won't be billing costs or fee -- you will be billing a price. Right?

You just put your price on the bottom-line and everything that looks like a cost build-up is not disclosed.

Unless -- and this is the kicker -- the government doesn't accept the notion that your product is a commercial item service. In which case, you are back where you started.

H2H

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I forgot to mention our product is a commercial item per FAR 2.101.

What "product" are you referring to? I thought this was for services. In any case, that portion of the contract that you're asking about (the cost-reimbursement portion) can't be commercial, can it?

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Jeff, 52.232-7 is relevant only if the contract contains T&M CLINs. However, for the CPFF CLINs you need to look at FAR 31.205-26, particularly (e).

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$@^^!&&%*

Jeff:

You started out in this way:

The Government has issued our company an RFP for Services.

In the RFP, the CLIN for travel and MATERIALS is stated as NON-FEE Bearing.

Our firm does not include Fee on travel and freight charges.

Our firm's position on materials is that FEE on materials is appropriate.

Do we simply take exception to their request on the basis of operating principle or does the FAR allow Fee to be applied appropriately?

The sentence in bold was your question. Has it been answered to your satisfaction? If so, you are welcome and fare-thee-well.

One last thing: With all due respect to my colleagues, they have steered you off course. At this stage in the game, it doesn't matter why the government won't pay fee on materials. It might be because the contract is time-and-materials and the payment clause does not allow fee on materials. it might be because they just don't want to pay fee on materials. If you're not sure, call the contracting officer and ask. Whichever, the question for you is what to do if you want fee on materials, because if they say they won't pay it and if you say you must have it, then you might well be out of the running.

FYI, if the RFP is for commercial items, then the cover sheet should be Standard Form (SF) 1449, "Solicitation/Contract/Order for Commercial Items." If that is the case, and if the contract is time-and-materials or includes a T&M line item, then the T&M payment clause is 52.212-4, Alt. I, not 52.232-7. If you see 52.212-4 Alt I in the RFP it means that the government couldn't pay fee directly on materials even if it wanted to. But you could include fee for materials in your labor rates.

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With all due respect to jeff4757, it feels as if his company is splitting hairs and being a bit disingenuous. Companies selling commercial items don't worry about fee on materials or FAR payment clauses. They offer their products (or services) to the market and if the government wants to buy those products (or services), then it pays the customary price without worrying overmuch about what's included in the cost build-up.

On the other hand, government contractors selling their products (or services) to the DoD, to other primes, and/or to other governments, worry very much about cost build-up and application of indirect rates. They are experts (or should be) in FAR payment clauses.

Just my observation; I could well be wrong.

H2H

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