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Zack

Period of Performance and Questioned Costs

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Good morning,

I've been using this forum as a resource for some time but this is my first post-

My scenario:

A prime contractor for DOE performing audits of its T&M subcontractors. One of these subcontractors performed work past the subcontract's period of performance. The subcontract agreement does not state what the ramifications of doing this is. The prime contractor paid the invoice with these costs. The subcontract value was not exceeded and everything was to complete the agreed to statement of work, only the period of performance was exceeded. No amendment ever made to extend the period of performance. All of the work was performed within the prime contractor's contract period with DOE.

My questions:

  1. Would the auditor question the costs outside the subcontract's period of performance?
  2. If so, would it just be on the grounds of FAR 31.201-2, that the costs are only allowable if they comply with the terms of the contract? Or does other criteria exist to question the costs?
  3. If questioned, would the contracting officer call those costs unallowable?
  4. If an amendment was executed today to extend the period of performance, would that resolve the issue? Would the age or completion date of the subcontract affect this?

 

Thanks in advance. I tried providing all the relevant data I could think of.

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Vern - Please let me know what information would allow this question to be answered and I will provide it.

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1. It sounds like the subcontractor did not complete its work on time. It also sounds like the late completion did not affect the work under the prime contract. Are those two understandings correct?

2. If they are, then all we're talking about is a breach of the subcontract, not of the prime contract. Is that correct?

3. If that is correct, then was the subcontract work essential to completion of the prime contract work?

4. If the subcontractor failed to complete the work on time due to its own fault, is the prime going to seek a price reduction from the subcontractor?

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1. Correct the work was not completed on time. Also correct that it did not affect the prime contract.

2. Correct, only the subcontract was breached. Not the prime contract.

3. Yes the work was essential, but the subcontract was for a couple months and the prime contract with DOE is for 6+ years.

4. The audit is covering work that was already accepted and paid for by the prime (and then DOE) several years ago. The payment to the subcontractor was not reduced for being overschedule, nor did the subcontract have a clause to reduce the price if schedule was not met.

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From my experience....

 

1. Yes

2. Auditors would not necessarily cite to a clause. They would just say "outside period of performance."

3. Maybe. Probably.

4. Yes

 

Hope this helps

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H2H - Thanks for the reply!

 

Are there any regulations, OIG or GAO reports, or other authoritative criteria that could be used to say these costs are allowable despite being outside the period of performance?

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Zack, why are you talking about allowable costs on a T&M subcontract?  The cost principles only determine what is paid for material, not labor.

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Zack,

If a contract mod is not available, I've had luck (sometimes) in arguing the nature of the contract -- i.e., completion versus best efforts. I have had success from arguing that the requirement to complete performance supersedes the contract PoP. But in all cases, getting the mod was the most effective course of action.

H2H

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