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FARmer

Cost Contracting- Paying for FTEs while waiting for security approval

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Hello All,

In a cost contract, I know that we only pay for cost incurred, however, isn't unrealistic not to pay a contractor for a qualified and cleared individual that filled out all of their clearance forms correctly etc, but is unable to work because the Government (truly a Government issue) approval process takes 6+ months?

Is it reasonable to expect the contractor to foot the bill for this person for 6+months? or is this the nature of the game?

Note, without the security approval, the FTEs cannot do any work on this contract whatsoever.

Thanks

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I know that we only pay for cost incurred...

Well, that isn't quite right. According to the Allowable Cost and Payment clause at FAR 52.216-7, we pay "amounts determined to be allowable by the Contracting Officer in accordance with Federal Acquisition Refulation (FAR) subpart 31.2 in effect on the date of [the] contract and the terms of the contract."

Is it reasonable to expect the contractor to foot the bill for this person for 6+months? or is this the nature of the game?

Yes -- that's the nature of the game. Do you have a problem with that? Almost certainly, the contractor understands how the game is played, even if it is crying to you. Admittedly, I haven't seen your contract, but I have seen your situation many times (well, maybe not 6 months). If the contractor wants to, it can submit a replacement employee who might have a better chance of getting cleared.

By the way, that employee's costs might not be reimbursable as a direct cost, but the contractor knows how to include those costs in its indirect cost pools for reimbursement there. It's a cost of doing business.

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FARmer, presumably the contractor is paying these people while they are awaiting their clearance. In that case, the contractor is incurring costs. Those costs must be allocated to contracts on the basis of the benefits received by the contracts. The question then arises as to which contracts benefit from the costs. This is a fact specific question and in this case, would depend upon what the employee is doing while awaiting the clearance. Some contractors that I know of put employees in a training status (and actually train them in regard to various aspects of the contractor's business) or have them do other functions that can be charged as an indirect cost. However, it is not uncommon for the contractor to exhaust these options. They then place the employee in a holding or standby status where the employee simply waits for a clearance to come through because it is impractical to have the employee begin work on another project and then switch when the clearance comes through. Further, it is usually not practical to place the employee on unpaid leave while awaiting a clearance because the employee may find another job in the meantime. This is where the big issue comes up as to whether the cost of having the employee on stand-by can be charged directly to the contract for which (s)he was hired.

I do not see any prohibition in the FAR against the contractor doing so. We are talking about compensation costs. Such costs are allowable costs if they are reasonable. Assuming these tests have been met, the issue remaining is whether the costs are allocable in total to the contract for which the employee was hired. For these purposes, "benefit" simply means that there is some logical connection between a cost and a contract so that the contract should bear some or all of the cost. In my opinion, the only logical connection between the compensation cost and a contract is a connection with the contract for which the employee was hired. I see no connection between standby costs and any other contract. In my mind, I see no reason why the standby costs should not be treated as an allowable direct cost of the contract for which the employee was hired.

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Retreadfed,

You wrote, "Such costs are allowable costs if they are reasonable."

Wouldn't it be better to say such costs are allowable if they are reasonable (FAR 31.205-6( b )) and also meet the requirements of FAR 31.205-6( a )?

Para. ( b ) covers reasonableness. However, para. ( a )( 1 ) through ( 6 ) are in addition to reasonableness. In the context of the original posting, there might be a real problem with ( a )( 1 ), and maybe with ( 3 ).

For ( a )( 1 ), compensation costs "must be for work performed by the employee" -- but the original posting said "without the security approval, the FTEs cannot do any work on this contract whatsoever." Payment as a direct cost even where there is no contract work?

FARmer,

I'm not sure, but I'm thinking you're a Government employee. If so, you need not concern yourself with the Contractor's problems. The Contractor bears responsibility for its decisions, and knows how to allocate its costs. If the pain of carrying that uncleared and ineligible-to-work employee becomes burdensome, the Contractor can find ways to deal with it (such as charging the employee as an indirect cost or finding a replacement employee).

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I'm not sure, but I'm thinking you're a Government employee. If so, you need not concern yourself with the Contractor's problems.

Oh, for Pete's sake, that is ridiculous. ji20874, please think about what you say. That is indefensible. You did not mean that literally. Please elaborate and clarify.

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Hello All,

In a cost contract, I know that we only pay for cost incurred, however, isn't unrealistic not to pay a contractor for a qualified and cleared individual that filled out all of their clearance forms correctly etc, but is unable to work because the Government (truly a Government issue) approval process takes 6+ months?

Is it reasonable to expect the contractor to foot the bill for this person for 6+months? or is this the nature of the game?

Note, without the security approval, the FTEs cannot do any work on this contract whatsoever.

Thanks

FARmer:

It is ultimately the contractor's problem, but you DO need to concern yourself with it.

The security clearance backlog is a known problem and agencies are concerned about it.

http://federalnewsradio.com/dod-reporters-notebook-jared-serbu/2016/01/contractors-face-new-delays-getting-renewing-security-clearances/

The policy is that the government pays only for allowable costs incurred in the performance of contractually specified work. Whether that is reasonable or not depends on who you are and your point of view. It is, however, a matter of concern to government acquisition personnel, especially when a contractor must replace an employee and a long wait for a clearance can impact ongoing contract performance, causing delays and increases in allowable costs. Cleared, clearable, and qualified personnel don't grow on trees.

Unfortunately, there probably is not much you can do about the clearance backlog at your level. This is a governmentwide problem. But one thing you can do is ask internally whether the work really requires a clearance. Another thing you can do is ask whether there is contract work that the employee can do pending clearance approval. The position might require a clearance, but it may be that not all work entails access to classified sties and information and you can agree to let the employee do other work even without the clearance.

Work with your contractor as much as you can. Do what is possible to reduce the contractor's cost risk. Any CO who just shrugs and says that it's not his concern is being an ass.

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I meant that a contracting officer or contract specialist needs to understand how the game is played, instead of trying to find a way to send money to the contractor, above and beyond what was agreed to when the contract was formed. A contracting officer or contract specialist needs to understand the contract. That said, your "one thing you can do" is good advice.

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Ji, in regard to your post #4, I do not see 31.205-6(a)(1) as being a problem. Note that it does not say work done on a contract. Instead, it relates to work for the contractor in the current accounting period. The services rendered for the contractor are what the contractor requires of the employee. Here the requirement would be to show up at 8 a.m. M-F and wait to see if the clearance comes through that day. If there is a beneficial relationship between the cost of what the contractor pays the employee for doing this work and a particular contract, that cost is allocable to that contract. Here, the only possible contract that would benefit from standby costs would be the one requiring a clearance for the employees on standby. Remember, all costs have to be allocated to some contract. There is no such thing as a homeless cost.

Similarly, I do not see (a)(3) as a problem because it relates to the contractor's compensation structure which is not in issue here.

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