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RL Contractor

CPFF LOE Calculations

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We have a large CPFF LOE contract with a base year and four option years. The contract calls out the required LOE per contract year.  Does the final LOE calculation need to performed at the end of each contract year, or can it be done at the end of the contract as a whole?  As an fyi, we bill fee at a % of monthly cost, knowing the final fee will be adjusted.

Regardless of the timing, we will most certainly not meet the required level of effort. Since LOE is not performed at the CLIN level, how do you know what CLIN to return fee to after the final calulation is performed? For example, let's say the LOE calculation determines we owe $5K back in fee over the entire contract. It is not feasible to credit back a certain amount to each CLIN since the calculation was not done at the CLIN level.

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You realize that your failure to provide the promised level of effort is a real failure, right?  Unsatisfactory in CPARS and so forth?  I'm not aware of a principle that says you get a percentage of the fixed fee based on the percentage of your promise that you deign to deliver.  What if the contracting officer allows zero fee, and demands a return of fee already paid?

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I didn't negotiate the contract with the customer, so I am not sure why that form was forced on us.  However, we will meet all criteria in the statement of work and we are not failing in our performance.   It is not like we are to research for "x" number of hours; we have specific tasks to carry out which will be completed.  The customer is well aware that we will not be meeting all the hours, and is structuring our follow on contract the same way.   

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Maybe you don't have a LOE contract.

If your contract calls for completion of specific tasks, and you satisfactorily complete them and meet all criteria in the statement of work, then you are entitled to 100% of the fixed fee.  Your performance of the work at an actual cost less than the estimated cost should help towards an EXCEPTIONAL rating in CPARS for the Cost Control factor.

You are entitled to 100% of the fixed fee if your CPFF contract is of the completion form (contractor calls for specific tasks or outcomes) rather than the LOE or term form (contract obligates the contractor to devote a specified level of effort for a stated time period).  See FAR 16.306(d)(1) and (2).

So, back to your original posting.  In your contract, did you agree to and promise to provide a required LOE per contract year, or did you merely agree to an estimated LOE?  Since we don't have your contract, I don't think anyone here can answer your question about fee entitlement without this answer. 

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Does your contract have a level of effort (LOE) clause? Typically CPFF term type contracts have a clause that specifies how the fixed fee is handled when the full LOE is not delivered. If you don't have an LOE clause, how was the fee to be invoiced l? Based on a flat rate per hour delivered? As a percentage of the invoice? I would suggest you contact your PCO to determine what to do if your full LOE isn't going to be delivered.

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Thanks for the help.  I work in accounting for a very small company, and none of us seem to understand the LOE completely.  So, first it says:

LEVEL OF EFFORT - ALTERNATIVE I (MAY 2010)

(a) The contractor agrees to provide the total level of effort specified in the next sentence in performance of the work described in Sections B and C of this contract.  The total level of effort for the performance of this contract shall be XXX total man-hours of direct labor, including subcontractor direct labor for those subcontractors specifically identified in the Contractor's proposal as having hours included in the proposed level of effort.

(b)  The Government shall make payments to the Contractor, subject to and in accordance with the clause in this contract entitled "FIXED FEE" (FAR 52.216-8) or "INCENTIVE FEE", (FAR 52.216-10), as applicable.  Such payments shall be equal to eight percent (8%) of the allowable cost of each invoice submitted by and payable to the Contractor pursuant to the clause of this contract entitled "ALLOWABLE COST AND PAYMENT" (FAR 52.2167), subject to the withholding terms and conditions of the "FIXED FEE" or "INCENTIVE FEE" clause, as applicable (percentage of fee is based on fee dollars divided by estimated cost dollars, including facilities capital cost of money)  Total fee(s) paid to the Contractor shall not exceed the fee amount(s) set forth in this contract. (c)  The fee(s) specified in SECTION B, and payment thereof, is subject to adjustment pursuant to paragraph (g) of the special contract requirement entitled "LEVEL OF EFFORT."  If the fee(s) is reduced and the reduced fee(s) is less than the sum of all fee payments made to the Contractor under this contract, the Contractor shall repay the excess amount to the Government.  If the final adjusted fee exceeds all fee payments made to the contractor under this contract, the Contractor shall be paid the additional amount, subject to the availability of funds.  In no event shall the Government be required to pay the Contractor any amount in excess of the funds obligated under this contract at the time of the discontinuance of work. (d)  Fee(s) withheld pursuant to the terms and conditions of this contract shall not be paid until the contract has been modified to reduce the fee(s) in accordance with the "LEVEL OF EFFORT" special contract requirement, or until the Procuring Contracting Officer has advised the paying office in writing that no fee adjustment is required.

Then there is a "Fee Schedule for Engineering Services Items" which includes the headers "Items" (CLIN), "Hours", "Estimated Cost", "EC Hourly Rate", "Fixed Fee (FF) (8%)"FF Hourly Rate", "Total EC + FF" and "Total Hourly Rate".

So if the government reduces our fee in the end, which I know they will, how do I know what CLIN to apply the credit to since the calculation is not done by CLIN?

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Here it is.

(g)  If the total level of effort specified in paragraph (a) above is not provided by the Contractor during the period of this contract, the Contracting Officer, at its sole discretion, shall either (i) reduce the fee of this contract as follows:
 
         Fee Reduction = Fee (Required LOE - Expended LOE) /Required LOE

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What you posted states that the contracting officer has discretion to take action from a list of at least two possible courses of action.  You only listed one.  This indicates you did not state the entire paragraph.

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On 8/22/2017 at 3:48 PM, RL Contractor said:

Does the final LOE calculation need to performed at the end of each contract year, or can it be done at the end of the contract as a whole?  A

Is the contract annually funded? If so, then the answer is yes, based on the bona fide needs rule.

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The rest of the paragraph stated "or (ii) subject to the provisions of the clause of this contract entitled "LIMITATION OF COST" (FAR 52.232-20) or
"LIMITATION OF COST (FACILITIES)" (FAR 52.232-21), as applicable, require the Contractor to continue to
perform the work until the total number of man-hours of direct labor specified in paragraph (a) above shall have
been expended, at no increase in the fee of this contract."  However, we already know we will not continue to perform the work as we are about to start a follow-on contract.

Thanks for the help, including Vern's answer above regarding the bona fide needs rule.

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Clarification: By yes, I meant that if the contract is annually funded the calculation must be done at the end of each contract year.

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