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I support a program with contracts defined as firm-fixed price (FFP), labor hour (LH), time and material (TM), indefinite delivery indefinite quantity (IDIQ) with economic price adjustments from collective bargaining agreements (CBAs)/ wage determinations (WDs).  The contracts were awarded under FAR 15 with adequate price competition.  Due to some security aspects in the SOW the effort is considered non-commercial and agency described as design/detail.  Historically, the program has considered these contracts exempt from Cost Accounting Standards (CAS) per the exempted category (15) below, as there was always adequate price competition and they have not collected cost or pricing data with the offers.  Is this interpretation correct? 

(b) The following categories of contracts and subcontracts are exempt from all CAS requirements:

(1) Sealed bid contracts

(2) Negotiated contracts and subcontracts not in excess of $500,000.  For purposes of this paragraph (b)2 an order issued by one segment to another segment shall be treated as a subcontract

(3) Contracts and subcontracts with small businesses.

(4) Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than 9904.401 and 9904.402 are concerned, any contract or subcontract awarded to a foreign concern.

(5) Contracts and subcontracts in which the price is set by law or regulation.

(6) Firm fixed priced and fixed price with economic price adjustment (provided that the price adjustment is not based on actual costs incurred) contracts and subcontracts for the acquisition of commercial items

(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts of subcontracts valued at $7.5 million or greater.

(8-11) [Reserved]

(12) Contracts and subcontracts awarded to the United Kingdom contractor for performance substantially in the United Kingdom, provided that the contractor has filed with the United Kingdom Ministry of Defence, for retention by the Ministry, a completed Disclosure Statement (Form No. CASB-DS-1) which shall adequately describe its cost accounting practices.  Whenever that contractor is already required to follow U.K. Government Accounting Conventions, the disclosed practices shall be in accord with the requirements of those conventions.  (See 9903.201-4(d).)

(13) Subcontractors under the NATO PHM Ship program to be performed outside the United States by a foreign concern.

(14) Contracts and subcontracts to be executed and performed entirely outside the United States, its territories, and possessions

(15) Firm fixed price contracts or subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data.  

 

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This interpretation is only partially correct.  You need to start from the proposition that all contracts are subject to the CAS unless they are exempt. Exemption 15 only applies to FFP contracts awarded on the basis of adequate price completion and without submission of certified cost or pricing data.  Unless another exemption applies to  your other contracts, they would be subject to the CAS.

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2 hours ago, CS said:

I support a program with contracts defined as firm-fixed price (FFP), labor hour (LH), time and material (TM), indefinite delivery indefinite quantity (IDIQ) with economic price adjustments from collective bargaining agreements (CBAs)/ wage determinations (WDs). 

CAS is applied to individual contracts not a program. You say you have multiple contracts of various types, so obviously the exemption you cited cannot apply to all of the contracts.

Further, you did not specify what your company certified on the 52.230-1 certification which was required in Section K of your proposal submission. Did you claim exemption and, if so, upon what basis?

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16 hours ago, Retreadfed said:

This interpretation is only partially correct.  You need to start from the proposition that all contracts are subject to the CAS unless they are exempt. Exemption 15 only applies to FFP contracts awarded on the basis of adequate price completion and without submission of certified cost or pricing data.  Unless another exemption applies to  your other contracts, they would be subject to the CAS.

To clarify my government office does not require offerors to submit certified cost or pricing data with the proposals.  Thus far we have used FAR 15.401-1(b)(1) exceptions to certified cost or pricing data requirements; (1) when the contracting officer determines that prices agreed upon are based on adequate price competition. 

The circumstances of this program's competition meet the standards of adequate price competition defined in 15.403-1(c)(1) two or more responsible offerors, award made to the best value proposal, where price is a substantial factor in source selection, the determination that the proposed price is based on adequate price competition and is reasonable has been approved at a level above the contracting officer and price analysis clearly demonstrates that the proposed price is reasonable in comparison with current or recent prices.

The program is national, so we re-compete several regions yearly.  For the past five years we have never had fewer than 7 responsible offerors provide proposals.  The best value determination uses technical, past performance, and price factors.  

With the FFP contract line item type and and adequate price competition, are these two circumstances alone sufficient to justify CAS exemption?  Are the contracts still subject to CAS unless some additional exemption circumstance was applicable? 

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14 hours ago, here_2_help said:

CAS is applied to individual contracts not a program. You say you have multiple contracts of various types, so obviously the exemption you cited cannot apply to all of the contracts.

Further, you did not specify what your company certified on the 52.230-1 certification which was required in Section K of your proposal submission. Did you claim exemption and, if so, upon what basis?

I see how my use of "support" was misleading, I meant to convey I am the contract specialist not the contracting officer, but I am writing this from the Government perspective. 

The program has a national footprint, so we have several regional contracts executing the same government program for national coverage.  The string of descriptors is applicable to all of the contracts individually.  Each contract has FFP contract line items, some being for labor hours others being for materials, and the FFP labor hours are subject to economic price adjustments. Then among program's contracts the only thing that differs among them are the physical locations of the places of performance, all other aspects of the contracts are designed the same (SOW, clauses, deliverables schedule, etc.).

We have not noted FAR 52.230-1 in Section K for the offerors to / not to certify since, up to this point, the contracting officers have been working off the assumption that it does not apply.

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In your first post you said:

18 hours ago, CS said:

I support a program with contracts defined as firm-fixed price (FFP), labor hour (LH), time and material (TM), indefinite delivery indefinite quantity (IDIQ) with economic price adjustments from collective bargaining agreements (CBAs)/ wage determinations (WDs)...  Historically, the program has considered these contracts exempt from Cost Accounting Standards (CAS) per the exempted category (15) below, as there was always adequate price competition and they have not collected cost or pricing data with the offers. 

Emphasis added. You then asked: "Is this interpretation correct?

The answer is no. The LH and T&M contracts should not have been exempted because there was adequate price competition and your agency did not obtain cost or pricing data.

As you know, 48 CFR 9903.201-1(b)(15) unequivocally exempts firm-fixed-price contracts awarded (1) on the basis of adequate price competition and (2) without submission of cost or pricing data, regardless of dollar value. That exemption (No. 15) did not cover the LH and T&M contracts, even if they were awarded based on adequate price competition and even if you did not obtain cost or pricing data. It does not cover them because it does not mention them. But there are other possibilities.

Exemptions 2, 3, and 6 might cover the LH and T&M contracts. In other words, while they were not exempt because they were (1) awarded based on adequate price competition and (2) without submission of cost or pricing data, they might have been exempt if they were valued at or below the TINA threshold (exemption 2), whether you had adequate price competition or not; if they were awarded to small businesses (exemption 3); or if they were being used to buy commercial items (exemption 6).

Get it? The answer to your question--was the interpretation correct--is in the plain language of 48 CFR 9903.201-1. The answer is no, the interpretation was not correct.

If each contract has different line items for different contract types, or if the contracts permit issuance of differently priced orders, then I think you have to apply CAS on a line-item-by-line-item or order-by-order basis. H2H, is that correct?

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Vern,

The FAR Councils have stated in promulgating comments that CAS is applied to a contract not to CLINs. This creates challenges when, for example, trying to value an ID/IQ contract for CAS applicability purposes.

In a related note, I was interested in CS' comment that 52.230-1 has not been put into solicitations because the CO's have been assuming the resulting contracts would be exempted.

The prescription at 30.201-3 states "a) The contracting officer shall insert the provision at 52.230-1, Cost Accounting Standards Notices and Certification, in solicitations for proposed contracts subject to CAS as specified in 48 CFR 9903.201 (FAR Appendix)."

So the insertion is mandatory, but it's mandatory only if the CO thinks the contract will be subject to CAS.

This puts the CO in the perhaps difficult position of interpreting whether or not CAS is applicable. As we've seen demonstrated in this thread, it's a complicated question and one that is easy to get wrong. If a CO makes the wrong interpretation, somebody (IG?) might allege a public law has been violated. I don't know but it seems to me that if I were a CO I would put 52.230-1 in almost every solicitation, except for those that are obviously exempted (e.g., small business set-asides or awards under the SAT), and put the burden on the offeror to tell me whether the resulting contract award would be exempt from CAS through executing the certification. 

Hope this helps.

 

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H2H:

I'd be interested in seeing the FAR councils' comments. Were they in the Federal Register? Can you provide a cite?

Of course, the FAR councils' comments are not legally binding. I wonder if there is something more authoritative.

My own thought is that in this kind of circumstance each CLIN must be treated as a separate contract. But that's just an opinion.

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Vern,

Please see comment #31 to FAC 2005-001 (3/09/2005)--

As for the issue of CAS-covered versus non-CAS-covered tasks, a contract cannot contain both CAS covered and non-CAS-covered tasks. In order for CAS-coverage to differ between tasks, each task would have to be a separate contract.

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4 hours ago, here_2_help said:

As for the issue of CAS-covered versus non-CAS-covered tasks, a contract cannot contain both CAS covered and non-CAS-covered tasks. In order for CAS-coverage to differ between tasks, each task would have to be a separate contract.

I don't understand. What do you mean by "task"? Do you mean work described in a CLIN or an order? Couldn't a contract include one CLIN that is CAS-covered and that specifies one task and another that is not CAS-covered and that specifies another task? What regulation prohibits that?

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Vern,

I was quoting the FAR Councils. You'll have to take up the meaning of their terms with them.

In my mind it's fairly clear that CAS applies at the contract level and not at the CLIN level. I believe the FAR Councils said as much in the quote I provided. I believe that's how DCAA interprets it also.

Now if you're asking me whether I like or agree with those positions, then I will say I do not like them. In particular I think ID/IQ contracts should be handled differently for CAS purposes. But my opinion matters little. To quote Leo McGarry, "And I think there shouldn't be instant replay in football, but that' s not my call."

ETA: If I accept the proposition that CAS applies at the CLIN level, then I think you have real problems complying with the CAS clause 52.230-6 and its definitions. One would have to calculate cost impacts at the CLIN level rather than the contract level, which would seem to contradict the clause requirements.

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The FAR Councils were responding to a question about task order contracts. Here's the complete comment and response:

Quote

 

31. Comment: One respondent stated that one of the many situations that greatly affect the cost accumulation calculation that is not addressed in the proposal is the trend toward task order contracts that may have both fixed fee and incentive fee tasks, as well as CAS covered and non-CAS covered tasks.

Councils' response: Nonconcur. The Councils believe that this situation is adequately covered by the language at FAR 30.605(h)(5), and the definition of “Affected CAS-covered contracts” at FAR 30.001. . . .
As for the issue of CAS-covered versus non-CAS-covered tasks, a contract cannot contain both CAS-covered and non-CAS-covered tasks. In order for CAS-coverage to differ between tasks, each task would have to be a separate contract. In such cases, the definition of affected CAS-covered contracts would exclude the non-CAS covered tasks from the computation of the cost-impact.

 

 

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Here's FAC 2005-1, Item VI, 70 Fed. Reg. 11743, March 9, 2005, comment 31, at page 11748. I cut and pasted and apologize for the formatting.

Quote

 

Task Order Contracts

 

31. Comment: One respondent stated

that one of the many situations that

greatly affect the cost accumulation

calculation that is not addressed in the

proposal is the trend toward task order

contracts that may have both fixed fee

and incentive fee tasks, as well as CAS

covered and non-CAS covered tasks.

Councils’ response: Nonconcur. The

Councils believe that this situation is

adequately covered by the language at

FAR 30.605(h)(5), and the definition of

‘‘Affected CAS-covered contracts’’ at

FAR 30.001.

 

FAR 30.605(h)(5) requires that the

computation of the cost-impact include

a calculation of the total increase or

decrease in contract and subcontract

incentives, fees, and profits associated

with the increased or decreased costs to

the Government in accordance with 48

CFR 9903.306(c). Thus, if the task

involves a fixed fee, the contractor

would need to compute the increase or

decrease in that fixed fee as a result of

the change or noncompliance.

Conversely, if the task involved an

incentive fee, the contractor would need

to compute the increase or decrease in

the incentive fee as a result of the

change or noncompliance.

 

As for the issue of CAS-covered

versus non-CAS-covered tasks, a

contract cannot contain both CAScovered

and non-CAS-covered tasks. In

order for CAS-coverage to differ

between tasks, each task would have to

be a separate contract. In such cases, the

definition of affected CAS-covered

contracts would exclude the non-CAS

covered tasks from the computation of

the cost-impact.

 

The key language is in red. That language is not legally binding unless it was included in FAR, and I don't believe it was.

I don't see any reason why the word "contract" could not apply to a single line item in a multiple line item contract. How do agencies apply CAS to multiple line item contracts when the line items are differently priced? Anyone know?

 

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Yes, the contract as a whole verses the traits of the CLINS issue is exactly where my office is running into interpretation confusion.  I think I poorly phrased my original question, but the contracts we are managing all the same excepting the place of performance.  There are not some FFP, some LH, some TM contracts etc. 

We have a single combination type (FAR 16.102(b)) contract structure set up with FFP LH CLINS (labor and OT) subject to economic price adjustment, the actual hours are the IQ, and some FFP materials CLINS not subject to price adjustment.  This structure is then replicated for each region, but for purposes of the question it could be assumed this was a single contract.

So then for a combination type contract which includes FFP... How do we determine which "contract type" is the ultimate descriptor? Can we select the "contract type" as FFP to interpret CAS for the whole? Are the CLINS differently defined as LH or TM if the rates are ultimately FFP and it is the quantities that are IDIQ?

Thanks for all the engagement on this question, I am learning a lot.

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Vern, I cannot answer your question from an agency policy perspective, but I can provide you with an anecdote that shows how some offices are addressing that issue.  I know of at least one situation where a contractor received a contract that contained CLINs for commercial items and CLINs for non-commercial items.  The contract contained the appropriate clauses for a contract for commercial items and made them applicable to the CLINs for commercial items.  Similarly, the contract contained the appropriate clauses for the CLINs for non-commercial items.  The total value of the contract exceeded $50M, but the value of the CLINs for the non-commercial items had a value of only approximately $10M.  The local DCAA and DCMA offices responsible for the contractor took the position that the value of the total contract ($50M) should be used in determining the value of the contract for CAS purposes.  Further, because no CAS exemption otherwise applied to the CLINs for the non-commercial items, the contract was a single CAS covered contract with a value of over $50M meaning that the contract was subject to full CAS coverage and the contractor was required to file a Disclosure Statement.  It is my understanding that this position was blessed by DCAA and DCMA Headquarters.

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DCAA and DCMA never saw an application of CAS that they didn't like. :lol:

Their position in that case makes no sense to me. Don't you just love bureaucracies!

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Retread,

If the contractor really disagreed with the agency, and felt strongly about it, it could have raised the matter in a pre-award protest or a post-award claim.  By not doing so, it acquieses in the determination by continuing to play the game.  I understand that this is a business decision that the contractor has to make.

 

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You know, according to WIFCON's bid protest database -- and THANK YOU BOB FOR SUCH A GREAT RESOURCE -- there are remarkably few protest decisions with respect to FAR Part 30 requirements. As we all know disappointed offerors will protest at the drop of a hat ... so I wonder why CAS administration is so rarely used as the impetus for a protest?

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