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Hello Wifcon Forum Members,

I've recently began reviewing a physically completed T&M/LH for closeout purposes. This particular T&M/LH contract has the following specifications under the heading "Maximum Hours and Cost" for the following two labor categories:

  1. Sr. Software Engineer  - 656 hours at $/hour
  2. Program Manager -  18 Hours at $/hour

A review of the contract invoices shows the following amount of Labor Hours billed/charged during the course of the contract:

  1. Sr. Software Engineer - 381 hours
  2. Program Manager -  38 hours

As you can see, the SSE was well under the allotted hours and the PM was slightly over. My main questions concerning this situation are :

  1. Given that the PM charged more than the 18 allotted hours, would our company need to issue a refund of the 20 hours paid in excess of the PM allotted hours?
  2. Would the fact that we were well under the total amount of allotted hours (SSE & PM allotted total hours) and came in well under the funded amount (DE obligated the excess funding) to finish the job make any difference?
  3. I read through FAR 52.232-7 - Payments under Time and Materials and Labor Hour Contracts, specifically the section concerning "Hourly Rates" and more specifically part 3 (see bold below). Would hour allotments fit into the "labor qualification" mentioned below in part 3?

"(a) Hourly rate.

(1) Hourly rate means the rate(s) prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that are—

(2) The amounts shall be computed by multiplying the appropriate hourly rates prescribed in the Schedule by the number of direct labor hours performed.

(3) The hourly rates shall be paid for all labor performed on the contract that meets the labor qualifications specified in the contract. Labor hours incurred to perform tasks for which labor qualifications were specified in the contract will not be paid to the extent the work is performed by employees that do not meet the qualifications specified in the contract, unless specifically authorized by the Contracting Officer.

(4) The hourly rates shall include wages, indirect costs, general and administrative expense, and profit. Fractional parts of an hour shall be payable on a prorated basis.

(5) Vouchers may be submitted not more than once every two weeks, to the Contracting Officer or authorized representative. A small business concern may receive more frequent payments than every two weeks. The Contractor shall substantiate vouchers (including any subcontractor hours reimbursed at the hourly rate in the schedule) by evidence of actual payment and by—

(6) Promptly after receipt of each substantiated voucher, the Government shall, except as otherwise provided in this contract, and subject to the terms of paragraph (e) of this clause, pay the voucher as approved by the Contracting Officer or authorized representative.

(7) Unless otherwise prescribed in the Schedule, the Contracting Officer may unilaterally issue a contract modification requiring the Contractor to withhold amounts from its billings until a reserve is set aside in an amount that the Contracting Officer considers necessary to protect the Government’s interests. The Contracting Officer may require a withhold of 5 percent of the amounts due under paragraph (a), but the total amount withheld for the contract shall not exceed $50,000. The amounts withheld shall be retained until the Contractor executes and delivers the release required by paragraph (g) of this clause.

(8) Unless the Schedule prescribes otherwise, the hourly rates in the Schedule shall not be varied by virtue of the Contractor having performed work on an overtime basis. If no overtime rates are provided in the Schedule and overtime work is approved in advance by the Contracting Officer, overtime rates shall be negotiated. Failure to agree upon these overtime rates shall be treated as a dispute under the Disputes clause of this contract. If the Schedule provides rates for overtime, the premium portion of those rates will be reimbursable only to the extent the overtime is approved by the Contracting Officer.

  • (i) Performed by the Contractor;

    (ii) Performed by the Subcontractors; or

    (iii) Transferred between divisions, subsidiaries, or affiliated of the Contractor under a common control.

    (i) Individual daily job timekeeping records;

    (ii) Records that verify the employees meet the qualifications for the labor categories specified in the contract; or

    (iii) Other substantiation approved by the Contracting Officer."

 

Any guidance/advice would be appreciated.  

 

V/r,

KR_2016

 

 

 

 

 

 

 

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Without your compete contract it might be difficult for anyone to answer your questions.  Here is why....

1. What does the contract's "Schedule" say with regard to ceiling?

2. Does the contract speak in any other section to what will occur if the maximum is exceeded for a labor category? 

3.  Confirm that 52.232-7 is in fact the clause in the contract  If for example it is 52.212-4 is instead the then the action regarding potential overpayment is explicit.

Most importantly have you discussed this matter with the CO for the contract?

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17 hours ago, C Culham said:

Without your compete contract it might be difficult for anyone to answer your questions.  Here is why....

1. What does the contract's "Schedule" say with regard to ceiling? :

The funding was all under one CLIN. The funding information shown under that CLIN States: (Note: I removed the funded and POP info):

MAXIMUM HOURS AND COST

The Total amount to be paid to the contractor under this contact from (showed Period of Performance)  shall not exceed (Showed total Funded amount).

Contract Performance

Labor Rate Breakdown For Item 0001

Labor Category   Hours      Rate            Total

Sr. Software Eng      656   Pay Rate     Funded amt   

Program Manager      18     Pay Rate   Funded amt.            

Total                          674                      Total funds

KR_2016 Note: We worked a total of 419 hours, well under the total 674 hours allotted. The problem is The PM exceeded his allotted hours by 20 and the SSE worked 225 hours less than that his allotted amount.  

2. Does the contract speak in any other section to what will occur if the maximum is exceeded for a labor category? 

The language used in the contract seems to be solely concerned with not exceeding the ceiling price. The contract contains NAVAIR Clause 5252.232-9507 Limitation of Funds - Time & Material and Labor Hour Contracts, which basically states the Gov't is not obligated to reimburse the contractor for costs incurred in excess of the total amount allotted by the Gov't without modification and approval by the CO. I copy and pasted  the NAVAIR Clause  and Bolded/Underlined areas of concern and inserted a notes and a question on key points.

5252.232-9507 LIMITATION OF FUNDS - TIME AND MATERIAL AND LABOR-HOUR CONTRACTS

(NAVAIR) (OCT 2005)

(a) The parties estimate that performance of this contract will not cost the Government more than the ceiling

price specified in the Schedule or on the individual Task Order. The contractor agrees to use its best effort to

perform the work specified in the Schedule or Task Orders, and all obligations under this contract, within the

ceiling price.

(b) The Schedule or individual Task Orders specify the amounts presently available for payment by the

Government and allotted to the contract or individual Task Orders, the items covered, and the period of

performance it is estimated the allotted amounts will cover. The parties contemplate that the Government will

allot additional funds incrementally to the contract or individual Task Orders up to the full ceiling price. The

contractor agrees to perform, or have performed, work on the contract up to the point at which the total amount

paid and payable by the Government under the contract and individual Task Orders approximates, but does not

exceed, the total amount actually allotted by the Government to the contract.

KR_2016 Note: This language seems to indicate the clause is concerned with the total overall amount allotted.

(c) The contractor shall notify the Contracting Officer in writing whenever it has reason to believe that the costs

it expects to incur under the contract or an individual Task Order in the next sixty (60) days, when added to all

costs previously incurred, will exceed seventy-five (75%) percent of the total amount so far allotted to the contract

or Task Order by the Government. The notice shall state the estimated amount of additional funds required to

continue performance for the period specified in the Schedule or Task Order.

(d) Sixty (60) days before the end of the period specified in the Schedule or individual Task Order, the

contractor shall notify the Contracting Officer in writing of the estimated amount of additional funds, if any,

required to continue timely performance under the contract or for any further period specified in the Schedule or

Task Order, or otherwise agreed upon, and when the funds will be required.

(e) If, after notification, additional funds are not allotted by the end of the period specified in the Schedule or

individual Task Order, or another agreed upon date, upon the contractor's written request the Contracting Officer

will terminate the contract or individual Task Order on that date, in accordance with the provisions of the

Termination clause of this contract. If the contractor estimates that the funds available will allow it to continued to

discharge its obligations beyond that date, it may specify a later date in its request, and the Contracting Officer

may terminate the contract or individual Task Order on that later date.

(f) Except as required by other provisions of this contract, specifically citing and stated to be an exception of this

clause -

(1) The Government is not obligated to reimburse the contractor for costs incurred in excess of the total

amount allotted by the Government to this contract; and

KR_2016 Question: Is the total amount allotted the overall ceiling amount of hours/funding, or is it specific to the total amounts allotted to the individual labor categories?

(2) The contractor is not obligated to continue performance under this contract or individual Task Orders

(including actions under the Termination clause of this contract), or otherwise incur costs in excess of the amount

then allotted to the contract or Task Order by the Government, until a modification is executed increasing the

amount allotted by the Government to the contract or Task Order.

(g) The ceiling price shall be increased in accordance with the provisions of FAR clause 52.232-7, "Payments

Under Time-and-Materials and Labor-Hour Contracts".

(h) No notice, communication, or representation in any form other than specified in subparagraph (f)(2) above,

or from any person other than the Contracting Officer, shall affect the amount allotted by the government to this

contract or an individual Task Order. In the absence of the specified notice, the Government is not obligated to

reimburse the contractor for any costs in excess of the total amount allotted by the Government to this contract,

whether incurred during the course of the contract or as a result of termination.

(i) When and to the extent the amount allotted by the Government to the contract or an individual Task Order is

increased, any costs the contractor incurs before the increase that are in excess of the amount previously allotted by

the Government shall be allowable to the same extent as if incurred afterward, unless the Contracting Officer

issues a termination or other notice and directs that the increase is solely to cover termination or other specified

expenses.

(j) Change orders shall not be considered an authorization to exceed the amount allotted by the Government

specified in the Schedule or individual Task Order, unless they contain a statement increasing the amount allotted.

(k) Nothing in this clause shall affect the right of the Government to terminate this contract or an individual

Task Order.

3.  Confirm that 52.232-7 is in fact the clause in the contract  If for example it is 52.212-4 is instead the then the action regarding potential overpayment is explicit.

Yes, FAR 52.232-7 is contained within the reference clauses. 52.212-4 is not in the contract.

4. Most importantly have you discussed this matter with the CO for the contract?

This is an older contract and the CO is no longer available. My next step was to contact our ACO for direction, but I wanted to gather some opinions from WIFCON members first. I don't want to sound like a fool when talking to the ACO. :rolleyes:

 

Hello C. Culham,

Thank you for the reply, I've attempted to answer your questions above. My answers are in bold.

 

V/r,

KR_2016

 

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KR - Thanks for the additional information.  Others may weigh in now as well but my view is that of yours.   The ceiling price seems to rule and the maximums placed on the hours for each category are for lack of a better way of saying, simply a measure to help guide effort but will admit it still seems confusing as to the real purpose of placing the max on the hours.   Leads me back to the approach of discussing with, as you note, the ACO.   I could be reading the tea leaves wrong but if the ACO has done due diligence on a completed order one might think that the ACO would have brought the matter to your attention already.   Having said this and reading between the lines that in this case "contract" means Task Order and there is potential for further Task Orders to be issued it would be important to understand the Agency view of what the maximum really is intended as - another ceiling so to speak or just a guide of sorts.

Nothing definitive from me but hope it helps.

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On 11/2/2016 at 1:35 PM, KR_2016 said:

I've recently began reviewing a physically completed T&M/LH for closeout purposes. This particular T&M/LH contract has the following specifications under the heading "Maximum Hours and Cost" for the following two labor categories:

  1. Sr. Software Engineer  - 656 hours at $/hour
  2. Program Manager -  18 Hours at $/hour

There is no way for any of us to know what the contracting parties intended by "Maximum Hours and Cost." The meaning can only be discerned by reading the contract as a whole, and maybe not even then. But here's a thought: the parties must have meant something when they stated maximum hours and costs. What could it have been? Why state maximums if not to serve as some kind of limit? Absent other information (which I am not interested in seeing), I do not see any inherent conflict between the terms of FAR 52.232-7 and an additional agreement as to the maximum hours and costs to be incurred for work by a person or persons in two particular labor categories.

KR_2016 has asked for "guidance/advice." I assume that "KR" means contractor. If so, then, contractor, contact the government's contracting officer and ask for his or her interpretation. If you disagree with the contracting officer's response, then make your own interpretation, prepare an argument in support of it, attach any supporting documentation you have that was created during contract formation or contract administration, and try to change the contracting officer's mind. You will either succeed or you won't. If you don't, then you can decide whether to submit a claim and appeal if the claim is denied.

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