Jump to content
The Wifcon Forums and Blogs

pat

FFP contracts required to bill as T&M type

Recommended Posts

On ‎10‎/‎12‎/‎2017 at 3:02 PM, REA'n Maker said:

You might try "the FFP contract is based on an 1,880 hour standard" shtick.  Despite the glaring logical fallacy, it has always worked for me (I don't know whether to be pleased or horrified).

REA'n, can you explain why this is a logical fallacy? Would the legitimacy of this argument not depend upon the nature of the services and what is stated in the contract?

 

Share this post


Link to post
Share on other sites

PepeTheFrog thinks FrankJon knows the answer to this question, and FrankJon is just being coy, but PepeTheFrog will hop in.

The delivery, inspection, acceptance, and payment terms and clauses of FFP contracts are not designed with the intent of purchasing a set number of hours. You could do that, but it might be a stupid decision.

There are other types of contractual delivery, inspection, acceptance, and payment terms and clauses that are more appropriate for purchasing 1,880 hours of somebody's time.

FrankJon,  can you think of a more appropriate "type" of contract for purchasing 1,880 hours of someone's time?

Share this post


Link to post
Share on other sites

Every time I read this discussion thread relating to tj’s questions I have talked myself out of posting except for this time.

These are the facts per the posts by tj.  - Order against a GSA OASIS contract (large business).  Not a T&M order.  Performance Based Work Statement.

These are tj’s questions along with my response–

Q. Can I ask contractor to bill the government based on actual hours worked? 

  1. The payment clause of the parent OASIS contract must be considered.  Pursuant to the OASIS Contract at Clause 552.232-1 Payments (Deviation) Para. (a) it is stated that a contractor does not have to invoice, but that the Government must pay at the end of a service period.   Unless tj changed this requirement in the specific order tj could “ask” the contractor to “bill” tj with the mentioned detail but the contractor does not have to comply.  I agree if other terms and conditions in contract ask for the detail  on hour usage that it would need to be provided but not necessarily as an invoice/bill.

     

  1. How shall COR monitor this contract? 

     

  1. Monitoring should follow the metrics, measures, and/or plan (QASP) dictated in the PWS/SOW .   If none are stated I highly suggest that the Government determine what their quality control monitoring will include so that the contractor can fashion their quality control plan to, at a minimum,  monitor the same elements of work.   Measuring  the what of contract performance can be changed at any time.  I know some criticize Performance Based Acquisition but its concept is a fact of life as well as its use in any form even if by name only.  I suggest tj visit the following website to help on the monitoring aspect especially as discussed at Steps 5 and 7.  https://www.acquisition.gov/seven_steps/step5.html

Q.  If the contractor proposed 10 personnel monthly for certain hours, but they only provide 9 people and less hours than they proposed, Are we (government) still pay the proposed monthly price?

A.  Other responses have already addressed this and hopefully my above responses help add details for consideration.  

Share this post


Link to post
Share on other sites
2 hours ago, PepeTheFrog said:

PepeTheFrog thinks FrankJon knows the answer to this question, and FrankJon is just being coy, but PepeTheFrog will hop in.

The delivery, inspection, acceptance, and payment terms and clauses of FFP contracts are not designed with the intent of purchasing a set number of hours. You could do that, but it might be a stupid decision.

There are other types of contractual delivery, inspection, acceptance, and payment terms and clauses that are more appropriate for purchasing 1,880 hours of somebody's time.

FrankJon,  can you think of a more appropriate "type" of contract for purchasing 1,880 hours of someone's time?

Pepe, I think you're conflating issues. For the record, I am legitimately curious to hear REA'n's perspective on the situation he's described. Looking at his first post, it seems as though he's referring to a severable support service contract done on a FFP basis. He implies that it's disingenuous of him to request for the full invoice amount when personnel take leave. From my perspective, that depends on the annual level of effort specified (or "estimated") in the PWS and the annual level of effort the contractor proposed. I would guess that a small minority of Government support service contracts call for 2,080 labor hours annually. That means that we usually expect (indeed, desire) personnel to take leave, and we will agree to pay the full FFP until the allotted leave is exceeded.

Now, you're questioning the wisdom of doing severable support services on a FFP basis. Different issue, but I'll bite. No, I don't think FFP was necessarily intended for the "butts-in-seats, amorphous, recurring deliverables" support services we often purchase. But since most of these are thinly-veiled unauthorized personal service contracts (let's just say it), I don't think there is currently a great solution when contracting in a commercial environment. Sure, FFP-LOE or LH might make more sense in theory, but given their high administrative burden, I can't fault a CO for choosing FFP.

Is the decision to use FFP "stupid"? Personally, I don't see a great deal of risk associated with it. In my experience, contractor support personnel work the hours agreed to, and the Government pays a fair rate for it. Have you experienced otherwise?

Share this post


Link to post
Share on other sites

FrankJon, PepeTheFrog understands your viewpoint now. Thank you for clarifying.

PepeTheFrog only thinks that it "might be" a stupid decision to use FFP to purchase a set number of hours, if the better solution is to use FFP to purchase a deliverable, result, or defined service or if the better solution is to use a different contract "type" to actually purchase a set number of hours.

PepeTheFrog agrees that often the government uses FFP to dust chairs using contractor personnel. PepeTheFrog wonders if these government employees are deeply comforted by seeing contractor personnel every day, in the same office. Maybe they are just lonely and want some company?

Share this post


Link to post
Share on other sites
On 10/18/2017 at 9:28 AM, FrankJon said:

REA'n, can you explain why this is a logical fallacy?

It's akin to awarding an "FFP" contract whose SOW consists solely of the words "contractor must deliver 1880 hours".  1880 hours is a BOE, not a contract term.

 

On 10/18/2017 at 3:00 PM, FrankJon said:

He implies that it's disingenuous of him to request for the full invoice amount when personnel take leave.

I'm not sure "disingenuous" is the word you're looking for here...I'm saying I'm 100% within my contract rights to invoice for the full FFP amount whether a particular FTE was in the office on  a particular day or not; it's disingenuous of me to suggest that the 1880 hours used in the BOE have any bearing on that right, certainly.

Sure, FFP-LOE or LH might make more sense in theory

Remember: Per FAR 16.207-2, FFP-LOE is for R&D <$150K only.   

I would also maintain that the "FFP-LOE type" is redundant and unnecessary anyway: you're always measuring the suitability of the output in an FFP environment, based partially on your assessment of the inputs and achievements against goals, and on a common understanding regarding the LOE required.  An R&D SOW would merely define those desired goals more abstractly than (for example) a program support SOW.

Share this post


Link to post
Share on other sites
4 hours ago, REA'n Maker said:

I'm saying I'm 100% within my contract rights to invoice for the full FFP amount whether a particular FTE was in the office on  a particular day or not; it's disingenuous of me to suggest that the 1880 hours used in the BOE have any bearing on that right, certainly.

Thank you for clarifying. I'll stick with my original assertion that this is highly context sensitive. The amount you're entitled to bill for in that scenario depends upon the nature of the tasks, deliverables, and performance standards stated in the contract. Let's say the Government requires an Executive Assistant, and one of the duties stated in the PWS is to answer the phone. For every day the person is out of the office, no one is sent to replace him/her, and the phone rings, the contractor is not performing as required, agreed? But if the Government asked for 1880 hours of coverage, the contractor proposed 1880 hours of coverage, and the Government accepted 1880 hours of coverage, then the parties are in agreement that a certain amount of "tolerance" for non-performance has been built into the contract. There is a meeting of the minds on this point. However, if the personnel exceeds that tolerance level (i.e., works less than 1880 hours), then the Government should be within its rights to deny you a portion of the FFP based on partial non-performance. The hours may not be contractually obligated, but the work, quality of work, and deliverables are.

4 hours ago, REA'n Maker said:

Remember: Per FAR 16.207-2, FFP-LOE is for R&D <$150K only.   

 

I think you're right to be wary of over-usage of FFP-LOE, but I would suggest that your interpretation is overly-strict. By my reading, I can use FFP-LOE for any purpose and any dollar amount. "Suitable for investigation or study in a specific research and development area" does not restrict me from using it for other purposes. At best, this is a recommendation. And the $150k threshold is waivable.

Share this post


Link to post
Share on other sites
6 hours ago, PepeTheFrog said:

Maybe they are just lonely and want some company?

It's to get the smug satisfaction of looking at someone who is lower than us on the food chain (technically speaking).

Share this post


Link to post
Share on other sites
On 10/20/2017 at 6:52 PM, FrankJon said:

the food chain

For the record, PepeTheFrog is a carnivorous, apex predator who eats members of the senior executive service for breakfast.

 

On 10/20/2017 at 6:35 PM, FrankJon said:

I think you're right to be wary of over-usage of FFP-LOE, but I would suggest that your interpretation is overly-strict. By my reading, I can use FFP-LOE for any purpose and any dollar amount.

PepeTheFrog has to agree with FrankJon in practice because the theory went totally out the window. FFP-LOE is the new labor hours-- meaning, the government often uses FFP-LOE when they want labor hours but can't get approval. 

Share this post


Link to post
Share on other sites
2 hours ago, PepeTheFrog said:

FFP-LOE is the new labor hours-- meaning, the government often uses FFP-LOE when they want labor hours but can't get approval. 

Emphasis added. Pepe, you are one of my favorites. But, I have to ask you: What is your evidence for the truth of that assertion?

Share this post


Link to post
Share on other sites
39 minutes ago, Vern Edwards said:

Pepe, you are one of my favorites. But, I have to ask you: What is your evidence for the truth of that assertion?

Thanks, Vern. PepeTheFrog cannot prove that assertion with hard evidence or statistics.

It comes from personal experience, observations, and conversations with a wide range of 1102s and contractors. The federal government hates labor hours (LH) contracts because they're not willing to admit that they did a poor job of monitoring and administering LH contracts. LH contracts are common across the globe and throughout history. Sometimes you want to buy somebody's time. To avoid the hassle and scrutiny, 1102s "cheat" by using FFP-LOE, billed monthly, pro rata, based on hours. So, they have something similar to a LH contract but called FFP-LOE. (The contractor bills the government each month for X hours worked that month, which creates a sort of "hourly rate," instead of billing the government for a uniform monthly fraction of the FFP-LOE contract price.) Clueless, indifferent, or complicit 1102 management is fine with it.

PepeTheFrog isn't saying this is a good practice, just calling attention to it. In fact, PepeTheFrog remembers a few WIFCON threads and articles where Vern and others have described the important differences between the inspection, acceptance, and payment clauses for FFP-LOE vs. LH vs. other "types" of contracts, e.g. "Contract Pricing Arrangements: A Primer" from Briefing Papers circa 2009. PepeTheFrog thinks that many of these 1102s who "cheat" with this method do not know about the important differences.

Share this post


Link to post
Share on other sites

 

On 10/20/2017 at 6:35 PM, FrankJon said:

but I would suggest that your interpretation is overly-strict.

I view it more as "respecting the intent", which is 100% clear, as further indicated by the "Limitations" section:

Quote

 

This contract type may be used only when --

(a) The work required cannot otherwise be clearly defined;  (b) The required level of effort is identified and agreed upon in advance; (c) There is reasonable assurance that the intended result cannot be achieved by expending less than the stipulated effort; and (d) The contract price is $150,000 or less, unless approved by the chief of the contracting office.

 

Trying to shoehorn a non-R&D type effort into an FFP-LOE is just flat-out game playing and unprofessional, particularly if you are trying to extend the concept to a multi-million dollar effort not related to R&D/special studies.  If a contracting office makes it harder to award an FFP (the government's preferred contract type!) than to waive the restrictions on a FFP-LOE , they should be immediately disestablished, and their warrants ceremoniously burned.

I would also argue that "may be used only" is synonymous with "shall" in this context (think of the "may be used only on public roads" language in a rental car agreement.)

 

2 hours ago, PepeTheFrog said:

To avoid the hassle and scrutiny, 1102s "cheat" by using FFP-LOE, billed monthly, pro rata,

Please don't tell me they also avoid the hassle and scrutiny of optioned FFP Supply contracts by awarding  Fixed-Ceiling-Price Contracts with Retroactive Price Redetermination!!

Share this post


Link to post
Share on other sites

@REA'n Maker:

You wrote: "I view it more as 'respecting the intent', which is 100% clear...." Then you quoted FAR 16.207-3(a):

Quote

This contract type [FFP Level-of-Effort Term] may be used only when-- (a) The work required cannot otherwise be clearly defined....

That passage is not objectively clear.

What does it mean to say that "work" cannot be "defined"? What does the passage mean by "work"? Process or result? Presumably, "defined" means specified or described. If you cannot specify or describe the work you want done, how can you specify a level of effort doing that work? Effort doing what, exactly? That passage is utter nonsense. Of course, individuals can ascribe any meaning they want to a passage, whether the passage is objectively clear or obscure.

To me, LOE contracts are appropriate when you can specify a work process that has no inherently definite beginning or end and for which you cannot or do not want to specify a result. Observe wildlife from the highest point of Juniper Ridge in the Dark Divide of Skamania County, Washington, 24 hours a day for 14 calendar days, and report any sightings of Sasquatch.

You wrote:

On 10/23/2017 at 1:27 PM, REA'n Maker said:

Trying to shoehorn a non-R&D type effort into an FFP-LOE is just flat-out game playing and unprofessional...

Really? I don't agree. FFP-LOE is suitable for many kinds of services, such as wildlife observation, tracking, and control; wildland fire-fighting services; testing; non-R&D investigations; inspections and other QA tasks; observation services of various kinds; etc., etc.

Your statement is based on too rigid a doctrine of professional propriety.

 

Share this post


Link to post
Share on other sites

 

On 10/23/2017 at 4:27 PM, REA'n Maker said:

....particularly if you are trying to extend the concept to a multi-million dollar effort not related to R&D/special studies

I would say "wildlife observation, tracking, and control; wildland fire-fighting services; testing; non-R&D investigations; inspections and other QA tasks; observation services of various kinds;" would fall into the Special Studies arena.

Share this post


Link to post
Share on other sites

Well, if you think fire-fighting is a form of special studies, that's fine with me. I can fit all kinds of services into your conception. :lol:

Share this post


Link to post
Share on other sites
19 hours ago, Vern Edwards said:

Well, if you think fire-fighting is a form of special studies, that's fine with me. I can fit all kinds of services into your conception

That was your scenario, not mine....I was willing to concede that rather questionable example in favor of the overall gist of your argument.  Henceforth,  I shall endeavor to couch my agreement with your arguments in a more pedantic manner to avoid future confusion and/or criticism.

On 10/24/2017 at 11:05 AM, Vern Edwards said:

To me, LOE contracts are appropriate when you can specify a work process that has no inherently definite beginning or end and for which you cannot or do not want to specify a result.

Beginning: there's a fire.   Middle: deploy to fire zone.  End: Put out fire.  Ergo, a terrible application of an FFP-LOE.  

To your point above, one potential outcome of an FFP-LOE  is "there is not enough available information to reach a conclusion/result at this time", and that places the government at a huge risk. Hence the $150K threshold.  There are sound business reasons for discouraging contracts that may produce little or nothing of value, and when it's an absolute necessity  to employ such a vehicle, placing strict limits on your exposure.  That's not "doctrinal"; that's ethical and professional. I don't need the FAR to tell me not to do stupid stuff.

 

Share this post


Link to post
Share on other sites
1 hour ago, REA'n Maker said:

To your point above, one potential outcome of an FFP-LOE  is "there is not enough available information to reach a conclusion/result at this time", and that places the government at a huge risk.

REA'n: Is it still a huge risk if I use FFP-LOE for severable support services? Might it be more appropriate than FFP for this type of contract? I would say "usually not" and "quite possibly," respectively.

Going back to my Executive Assistant example, the Government is seeking a body to perform miscellaneous tasks and turn in miscellaneous deliverables on a daily basis and between certain hours. In short, we're buying the contractor's time, not a defined outcome (let's put aside the personal services question for now).

On ‎10‎/‎20‎/‎2017 at 1:34 PM, REA'n Maker said:

it's disingenuous of me to suggest that the 1880 hours used in the BOE have any bearing on that right, certainly.

You've implied that FFP is not the best contract type to buy time, and I would tend to agree that defined deliverables work best for FFP. So then what is the best type for buying time in a commercial environment? T&M/LH is the other option, although that is so administratively burdensome many 1102s will avoid it like the plague. Plus, like FFP-LOE, there's no guarantee of what we get with T&M/LH.

But this brings me back to the risk question: In the situation I've described (or even a more complex situation involving support services), what is the risk of FFP-LOE? If the personnel are not performing, the Government will catch on pretty quickly and complain to the contractor. The contractor ought to react accordingly. In the highly unlikely event that the contractor were to make the claim that the Government isn't paying for results (i.e., "tough luck"), well then there's always T4C and the PPIRS threat. Plus, if the personnel were simply recalcitrant, I can't imagine it would be difficult to justify withholding payment for bad faith.

Like you, I agree with attempting to follow the spirit of the FAR, even when other alternatives might technically be available. This is just to show that the situation is not as clear-cut as you make it seem. In the case of commercial, severable services - which comprises a significant portion of the Government's annual spend - I do not think there is an ideal contract type available in the FAR. Returning to the issue I formerly put aside, I'll stick my neck out (make it quick and clean, Vern :)) and say that the reason for this is because the FAR doesn't contemplate personal services being commonplace, which they now are. How we get that genie back in the bottle, I do not know.

Share this post


Link to post
Share on other sites
3 hours ago, REA'n Maker said:

Beginning: there's a fire.   Middle: deploy to fire zone.  End: Put out fire.  

The Forest Service never contracts for a contractor to put out a fire.  The Government retains complete control, and hires contractors almost as employees to work under Government direction.

 

2 hours ago, FrankJon said:

You've implied that FFP is not the best contract type to buy time, and I would tend to agree that defined deliverables work best for FFP. So then what is the best type for buying time in a commercial environment? T&M/LH is the other option...

I think so many people have done things wrong for so long that it is hard to have a correct understanding.  In my contracting officer practice, I can easily see a requirement for a warm body to do assigned tasks for 1,880 hours over the course of a year as a firm-fixed-price requirement.  The requirement is 1,880 hours and that can be FFP on either a lump sum or per hour basis.

  • CLIN:  001
    Supplies/Services:  Secretary IAW SOW
    Qty:  1,880
    Unit:  HR (hour)
    Unit Price:  $50.00
    Amount:  $94,000
    Period of Performance:  one year, maximum 8 hours per Government work day
    Contract Type:  FFP

The above is a FFP arrangement, not a T&M/LH arrangement.  The contractor is obligated to deliver 1,880 hours over the course of the year, and is in default if it only delivers 1,779.

If you want to buy hours, you can buy them FFP -- whether for a fixed quantity or an estimated quantity.

For T&M/LH, we are not buying hours -- we are buying accomplishment of something where we are uncertain as to the actual number of hours that might be needed.  If I need my cuckoo clock repaired, and the clockmaker and I estimate about 10 hours of work and $100 in parts in a T&M/LH contract, I don't buy 10 hours -- I buy one repair job, as follows:

  • CLIN:  002
    Supplies/Services:  Clock Repair IAW SOW
    Qty:  1
    Unit:  JB (job)
    Unit Price:  $600
    Amount:  $600
    Ceiling Price:  $600
    Labor Category:  Clockmaker III
    Fixed Hourly Rate:  $50
    Contract Type:  T&M

 

Share this post


Link to post
Share on other sites
On ‎10‎/‎27‎/‎2017 at 4:13 PM, ji20874 said:

The requirement is 1,880 hours and that can be FFP on either a lump sum or per hour basis.

Thank you for sharing, ji. I've never encountered a FFP contract structured in this way, and I can't think of a reason as to why it would be a bad idea for support services.

Share this post


Link to post
Share on other sites
On 10/27/2017 at 11:13 AM, REA'n Maker said:

Beginning: there's a fire.   Middle: deploy to fire zone.  End: Put out fire.  Ergo, a terrible application of an FFP-LOE

Completely off base.

On 10/27/2017 at 1:13 PM, ji20874 said:

The Forest Service never contracts for a contractor to put out a fire.  The Government retains complete control, and hires contractors almost as employees to work under Government direction.

Thank you, ji20874.

The government contracts with firefighters to fight a wildfire in an effort to contain it, not to put it out. Not even heavy rain is certain to extinguish a wildfire. They will smolder for weeks or months after containment. The contractor agrees to do certain work, not to be responsible for containing the fire. No contractor would promise to contain or put out a wildfire within a firm schedule and for a firm-fixed price, because containment depends on too many independent variables, such as terrain, weather (temperature, humidity, wind, likelihood of rain, likelihood of lightening, etc.), and aerial visibility.  Moreover, large wildfires are not fought by a single contractor.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

Henceforth,  I shall endeavor to couch my agreement with your arguments in a more pedantic manner to avoid future confusion and/or criticism.

Well, sometimes knowledge of facts matter, in which cases a little pedantry is helpful.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

To your point above, one potential outcome of an FFP-LOE  is "there is not enough available information to reach a conclusion/result at this time", and that places the government at a huge risk. Hence the $150K threshold.

FFP-LOE contracts do not require a "conclusion/result" other than the expenditure of the specified level of effort. There is very little risk to the Government from an FFP-LOE contract. There is certainly no "huge risk." The reason for the $150,000 limitation is not to avoid risk, but to limit the use of contracts that do not specify an end result. Requiring activities should be required to specify an end result whenever possible. A contracting officer should be able to think critically about arguments that specification of an end result is not feasible or desirable. Approval by a CCO is a very low level of control.

On 10/27/2017 at 1:13 PM, ji20874 said:

For T&M/LH, we are not buying hours -- we are buying accomplishment of something where we are uncertain as to the actual number of hours that might be needed.

Thank you, ji20874, for pointing out a basic fact about T&M that many practitioners have not learned. Let me add that I hope that nobody out there is buying just hours. What you buy, at minimum, is a specified effort that is to be measured in hours. Practitioners who talk seriously about buying hours under a government contract should be sent to a re-education camp.

 

Share this post


Link to post
Share on other sites
On 10/27/2017 at 11:13 AM, REA'n Maker said:

There are sound business reasons for discouraging contracts that may produce little or nothing of value, and when it's an absolute necessity  to employ such a vehicle, placing strict limits on your exposure.

The specification of a level of effort is no more likely to produce little or nothing of value than the specification of an end result. it is generally well known that some results are worthless. May we not not devote a level of effort to testing a promising cure for breast cancer just because we cannot be sure that the effort in question will produce one? That's a matter for critical thinking, not for doctrinaire applications of a single sentence in the FAR.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

I don't need the FAR to tell me not to do stupid stuff.

And I don't need it to tell me not to say stupid stuff.

Share this post


Link to post
Share on other sites
2 hours ago, Vern Edwards said:

Practitioners who talk seriously about buying hours under a government contract should be sent to a re-education camp.

Vern, do you mean this specifically with regard to T&M, or as a broadly applicable statement? 

Share this post


Link to post
Share on other sites

Broadly applicable.

I can't think of a case in which the government would want to buy just hours. It would want to buy the performance of some kind of work. It would specify the work, and it might say how much of work the contractor is to do in terms of hours ( or days, weeks, months, or years), but it would not want only hours.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×