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CO1559

Subcontract for Commercial Items - changes

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I discussed this issue briefly with prime contract management; their initial reaction was disappointment, and to not fight it. This questioned cost will eventually wind its way to the cognizant ACO for adjudication.

I'd change my moniker but I don't think that is allowed. I retired from the Fed about two years ago.

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You can change your alias.  All of your posts should be given the new alais you choose.  Just send me a PM and the alias you want and I can change it.

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5 hours ago, joel hoffman said:

So, is the government acquiring commercial items?  If so, FAR 12.207 would seemingly apply.  

Can the prime/sub pick and choose which terms of commercial item contracting would apply to the acquisition?  No need for cost or pricing data or  many other inapplicable requirements but - oh, lets switch from FFP to Cost Reimbursement, as we wish?  That doesn't make sense to me. 

CO1559 said that the prime contract was cost-reimbursement. Presumably, the contract is not for commercial items.

Can the prime/sub pick and choose? Yes, unless you can show something in FAR that says subcontracts for commercial items have to be FFP.

The requirement for and exceptions to cost or pricing data have nothing to do with contract type.

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4 hours ago, CO1559 said:

I retired from the Fed about two years ago.

If you're retired, why bother with an alias?

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Prime contractor acquisition procedures require commercial item subcontracts to be FFP or FFP w/econ price adjustment. In addition, IQ subcontracts can be used if prices are established as FFP or FFP w/econ price adjustment.

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CO, do the prime contractor's acquisition procedures describe what they consider to be an FFP or FP(EPA) contract?  I have seen contractor's define contract types differently than they are described in the FAR.

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2 hours ago, Retreadfed said:

CO, do the prime contractor's acquisition procedures describe what they consider to be an FFP or FP(EPA) contract?  I have seen contractor's define contract types differently than they are described in the FAR.

Contractor procedures define FFP same as 16.202-1; and FP-EPA sane as 16.203-1

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On ‎7‎/‎25‎/‎2017 at 6:23 PM, Vern Edwards said:

CO1559 said that the prime contract was cost-reimbursement. Presumably, the contract is not for commercial items.

Can the prime/sub pick and choose? Yes, unless you can show something in FAR that says subcontracts for commercial items have to be FFP.

The requirement for and exceptions to cost or pricing data have nothing to do with contract type.

Vern, the government is acquiring commercial items (services).  It is acquiring those commercial services by means of a subcontract.  If so, FAR 12.207 would seemingly apply to the subcontracting action. Cost or pricing data doesn't apply to a commercial item (service) purchase.

Of course, we don't know whether the subcontract was awarded competitively or the amount of the initial award, either. If so, then C&P data would not have been required, regardless of the subcontract type for the acquisition.

 

Quote

 

15.403-1 -- Prohibition on Obtaining Certified Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. Chapter 35).

(b) Exceptions to certified cost or pricing data requirements. The contracting officer shall not require certified cost or pricing data to support any action (contracts, subcontracts, or modifications) (but may require data other than certified cost or pricing data as defined in FAR 2.101 to support a determination of a fair and reasonable price or cost realism)—

(1) When the contracting officer determines that prices agreed upon are based on adequate price competition (see standards in paragraph (c)(1) of this subsection);

(2) When the contracting officer determines that prices agreed upon are based on prices set by law or regulation (see standards in paragraph (c)(2) of this subsection);

(3) When a commercial item is being acquired (see standards in paragraph (c)(3) of this subsection);

(4) When a waiver has been granted (see standards in paragraph (c)(4) of this subsection); or

(5) When modifying a contract or subcontract for commercial items (see standards in paragraph (c)(3) of this subsection).

 

 

 

Quote

 

.(c) Standards for exceptions from certified cost or pricing data requirements

..(3) Commercial items.

(i) Any acquisition of an item that the contracting officer determines meets the commercial item definition in 2.101, or any modification, as defined in paragraph (3)(i) of that definition, that does not change the item from a commercial item to a noncommercial item, is exempt from the requirement for certified cost or pricing data. If the contracting officer determines that an item claimed to be commercial is, in fact, not commercial and that no other exception or waiver applies, (e.g. the acquisition is not based on adequate price competition; the acquisition is not based on prices set by law or regulation; and the acquisition exceeds the threshold for the submission of certified cost or pricing data at 15.403-4(a)(1)) the contracting officer shall require submission of certified cost or pricing data...

 

If the prime contractor can use any type of subcontract acquisition method and pick and choose how to administer or modify the subcontract, e.g., FFP commercial item, then allowing actual incurred cost, this would seem to allow the government and or its primes to essentially cowboy any subcontract, without regard to acquisition rules. 

If the modifications were for actual travel requirements. then I would think that the original subcontract probably should have had a separate line item for estimated travel but that may not be mandatory...

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28 minutes ago, joel hoffman said:

Vern, the government is acquiring commercial items (services).  It is acquiring those commercial services by means of a subcontract. 

Joel:

Oh, please. The Government is acquiring something from the prime. The prime is buying something from the sub. There is no privity between the Government and the sub, and the rules in FAR 12.207 don't apply to the subcontract. To call your argument strained would be generous. And cost or pricing data is not the issue; it was part of one of your earlier premises. The issue is the reasonableness of the prime's costs.

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Vern, I agree that the basic issue is the reasonableness of the prime contractor's costs. 

In evaluating the reasonableness of those costs, I would question the contractor paying more for what  was supposedly a firm fixed price subcontract,  which should not be subject to adjustment for an open verrun of its actual incurred costs. The prime should justify why it paid more than the awarded subcontract amount -  justify why  the subcontractor is entitled to a price adjustment that the prime expects the government to pay.  

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Cost or pricing  was simply an example of the differences between commercial item and noncommercial subcontract type. The argument presented in this thread appears to be that, since the government has no privity of contract with the prime's subs, the prime can define its subcontract's any way it chooses to and can define "FFP" its own way, regardless of the government's acquisition rules.  

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On ‎7‎/‎25‎/‎2017 at 10:36 AM, here_2_help said:

That's not the basis of my position. My position is that if the prime wants the benefits associated with a commercial item award then it must consistently treat that award as a commercial item. Last time I checked the FAR didn't permit cost type commercial item awards. If I'm wrong on that point then I will agree with Vern.

I agree with H2H. I just used cost or price data as an example of a "benefit" associated with a acquiring commercial items under that acquisition method. It was you who said that 12.207 doesn't apply to subcontracts.  If this were a FFP prime contract, I would agree to an extent.  In that case, unless there was some government liability for the increased cost, the cost increase would be between the prime its sub.   

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48 minutes ago, joel hoffman said:

Vern, I agree that the basic issue is the reasonableness of the prime contractor's costs. 

In evaluating the reasonableness of those costs, I would question the contractor paying more for what  was supposedly a firm fixed price subcontract,  which should not be subject to adjustment for an open verrun of its actual incurred costs. The prime should justify why it paid more than the awarded subcontract amount -  justify why  the subcontractor is entitled to a price adjustment that the prime expects the government to pay.  

You want to declare the cost to be unreasonable because the prime did not adhere to rules that apply to the Government in its dealings with primes? Where is the clause that implements your policy? Who says that a private sector FFP subcontract is not subject to adjustment based on actual costs? That's a matter of negotiation between the prime and its sub.

An FFP sub incurred additional costs and asked the prime to reimburse it, and the prime did, and you think that procedure--a procedure which would be anomalous between the Government and a prime under the FAR--makes the prime's cost unallowable as a matter of general principle? Based on what clause? Rule? Case law? That strikes me as something that a prudent business person might do under certain circumstances in the conduct of a competitive business.

Look--we've already agreed that the CO can question the cost pursuant to the rules for allowability. What the CO ultimately decides is up to the CO. I don't think there's anything more to say.

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It appears to be "questionable" - I said from the beginning that if the KO questions the reasonableness, then require the contractor to justify it. I didn't "declare the cost to be unreasonable". We don't know the full context or the details.    

When I review claims, disputes, REA's, etc. I don't "declare" anything to have merit or no merit until I become familiar with all the facts and the full context of the issues. That has been a successful approach for 46 years or so. 

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