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Hi!  I have a situation where it seems DFAS/ACO/PCO/Contractor have a different expectation of how progress payments should work on this program.  I am looking for guidance that could help everyone have the same understanding, or to weave the pieces together. I am the Contractor, small business, awarded a Task Order (which we all refer to as a "contract") under a GSA GWAC, primarily for services and material (aka not Construction).  The total value to include all options is $80M.  There are multiple CLIN types, mostly FPIF (with FFP for leased space and Cost for travel/materials).  There are no "option years" just options for different systems to be built and delivered.  These different systems are on their own CLINs, are FPIF and have their own target cost/fee & ceilings which are separate from the other CLINs, and each CLIN has its own period of performance and a requirement for its own DD250.  At award, 1 FPIF CLIN for 1 of the deliveries (CLIN 0001) was funded along with some travel funding (Cost CLIN) and 1st period of lease space (FFP). 

During this time we submitted progress payment requests - on one 1443, which only included the total for CLIN 0001 - FPIF which is for the delivery of a system.   Since we are small and its DoD, we are allowed 90% rate on costs, and received the 90% in payments. (Fee should not be included and was not.)

During this time we submitted cost vouchers for travel - which the payment matched the dollars on the cost voucher.

During this time we submitted an invoice for the FFP facilities - which DFAS witheld 90% of the amount due - to "liquidate" the progress payments being made on CLIN 0001.  (Issue #1)

Our funding for the above 3 are all on the same ACRN - which according to DFAS is why they liquidated because they do not look at the CLIN level, only at the ACRN level - unless its specifically called out in the contract that a CLIN is NOT subject to liquidation.  Our PCO and ACO did not expect this to happen, the PCO at the time (we have had 4) issued a unilateral modification, but instead of calling out CLINs that were not subject to liquidation, according to the ACO the language used calls out ALL FFP/FPIF CLINS to be eligible for progress payments.  We did not need progress payments on the FFP - lease clins as we were billing a pro-rated basis monthly (total/12months).  So we are not comfortable with submitting another invoice against our lease CLIN for fear of it being liquidated as the previous one, so is the ACO, which stated DFAS liquidating these will make the amounts of the master progress payment incorrect.  I am waiting on the current PCO to weight in on this issue and hopefully issue a modification with the original language we were expecting.  Q: Is the PCO even allowed to exclude CLINs from liquidation?

Currently, the other FPIF CLINS have been exercised and funded (again they are for a delivery of a separate system).  Each of our FPIF CLINs have a period of performance spanning 3-4 years each, CLIN 0001 which was the first to turn on, has a delivery date of 2019, whereas CLIN 0004 has a delivery date of 2022. 

It was our (the contractor's) understanding that each CLIN, since they are severable and separate in our eyes, would each have their own progress payment form.  The ACO states to put it on one form. I am hesitant due to the "liquidation" of invoices.  I am waiting on our new PCO to weigh in. This is Issue #2. 

If we put all CLINs on the same form, as we delivered our systems and earned our incentive fee, if we billed for the incentive fee, wouldn't it be liquidated because we had other CLINs with open progress payments commitments?  If so, this scenario means that we would never see any fee earned until 2022 when the final delivery is made - or even later when all the cost audits have been completed.

Is it possible to have different progress payment forms for each of the FPIF CLINs for delivery of a system?  If so, would we be able to invoice and receive any incentive fee earned even though the other FPIF CLINs are not yet completed and still receiving progress payments?

The ACO didn't think DFAS would liquidate the invoice for incentive fee as we deliver the different systems, but I do not see any language that states this in fact I see the opposite and reading the liquidation as DFAS would liquidate all other amounts owed.  

Is it possible to get the basis or progress payments changed from based on cost to performance based?  However, again each CLIN has its own milestones (SSR, PDR, CDR etc.), so we would still have the same question. 

If we have to track and perform at the CLIN level how can we get the progress payments to reflect the CLIN level - or is there no such option?  I see there is language to allow something similar if the "rate of payment (%'s) are different, but that is not the case for us.

Sorry its such a long post, I hope I included enough information on the situation.  Any advise, opinions are welcome.  This affects our long term budget so we need to understand completely how our payments are supposed to work or could work and get it documented in a modification/amendment.

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When I was a DoD contracting officer many years ago, I was aware that DFAS cares nothing about the text of the contract or the contract's FAR clauses, and does wherever it wants when paying invoices -- this leaves PCOs and ACOs to find workarounds to try to respect the contract's text.  It seems that hasn't changed.

 

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I agree it's overly complex and frustrating when a single contract (or in your case task order) has multiple CLINs with multiple payment clauses and with multiple payment instructions. As you have noted, you can group all the progress payment CLINs together (especially if they are funded by the same ACRN) for purposes of making progress payment requests and liquidating based on deliveries. That seems to be the easier approach, especially if it aligns with ACO/PCO and DFAS expectations. But you don't want to do that because it delays billing fee, since your "deliveries" are smaller than your ongoing progress pay request values.

Q: Is it possible to pull your FFP CLINs out of progress pays? Can the PCO/ACO mod the contract so that progress pays are NOT authorized for your FFP CLINs?

If that won't work then I have trouble seeing how you get out of this situation, which sucks because the DOD is not supposed to treat small businesses in such a cavalier fashion.

Q: Can you get the SADBU or the SBA advocating for you?

If all else fails ....

Q: Are you willing to file a certified claim for profits you believe have been wrongfully withheld because of DFAS' interpretation of your contract, an interpretation with which the parties who drafted it disagree?

Hope this helps.

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Thanks for the responses, I am going with the first Q, here_2_help asked and I was wondering if anyone could weigh in on the language that I would like to propose to our PCO to add.  I do not know if its allowed (legal?) and I do not want to ask the PCO to do something that may not be allowed:

"SECTION  G -  CONTRACT ADMINISTRATION/PAYMENT DATA:

The following have been modified: PAYMENT INSTRUCTIONS DFARS PGI 204.7108 DFAS Special Payment Instructions:

The Contracting Officer has determined that none of the standard payment instructions identified in  paragraphs (d)(1) through (11) of DFARS PGI 204.7108 are appropriate for the following reasons: this contract contains complex funding with both multiple ACRNs and CLINs; and - per FAR 32.104 - since the contractor is a small business concern, the contracting officer must give special attention to meeting the contractor's contract financing need.

If the contractor requests progress payments, requests should be at the CLIN level and submitted as separate progress payment requests.  The contractor may submit only 1 progress payment request per month, per request. (ex.  CLIN 0001 is PPR0001A submitted monthly, while CLIN 0002 is PPR0001B and submitted monthly.)  As CLIN deliveries are completed and accepted by the PCO, the contractor shall submit the final invoice, to include any incentive fee amounts earned and the contractor shall be entitled to payment of the approved amount, of which these payments shall not be subject to liquidation for any other CLIN.

 

ALL FFP CLIN invoices shall be submitted, no more frequently than on a monthly basis, at a prorated amount that coincides with the period of performance (ex.  Period of performance is 12 months, contractor may submit a monthly invoice for 1/12th of the total FFP amount). These invoice payments shall not be subject to liquidation against any other contract CLIN. Since an alternate payment terms are being offered, these CLINs are not eligible for progress payments.

 

All COST CLIN claims shall be submitted using cost vouchers, no more frequently than on a monthly basis, these payments shall not be subject to liquidation against any other contract CLIN."

Any thoughts or red flags? Again, I am a contractor so I do not know all the rules that the various government parties have to follow so any feedback is appreciated. 

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ConMan411,

One of the problems with the FAR is that it is written with the general assumption that every contract will include only one contract type.  When a contract contains two or more contract types, as yours does, it often makes sense to apply FAR stipulations driven by contract type at the CLIN level, rather than at the contract level.  Would that make sense for you?  If so, maybe something as simple as the following might suffice:

  • SECTION  G -  CONTRACT ADMINISTRATION/PAYMENT DATA
    Agreement of the Parties Regarding Progress Payments.  The parties agree that progress payments under the clause at FAR 52.232-16, Progress Payments, will be administered at the CLIN level. Accordingly, the word "contract" in that clause is understood to mean "contract line item (CLIN)."  Accordingly, computation of amounts, liquidation, and so forth will occur at the CLIN level rather than at the contract level.  

 

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@Don Mansfield PepeTheFrog is alerting the Deviation Patrol! Is this a deviation?

10 minutes ago, ji20874 said:

SECTION  G -  CONTRACT ADMINISTRATION/PAYMENT DATA
Agreement of the Parties Regarding Progress Payments.  The parties agree that progress payments under the clause at FAR 52.232-16, Progress Payments, will be administered at the CLIN level. Accordingly, the word "contract" in that clause is understood to mean "contract line item (CLIN)."  Accordingly, computation of amounts, liquidation, and so forth will occur at the CLIN level rather than at the contract level.  

 

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Pepe,

No, it is not a deviation. We do it all the time. For example, if a contract contains both fixed-price and cost-reimbursement CLINs, we commonly say that FAR 52.246-2 applies only to the fixed-price CLINs and FAR 52.246-3 applies only to the cost-reimbursement CLINs -- in doing so, we apply the clauses at the CLIN level instead of at the contract level -- but the text of those clauses speaks of "contract", not "CLIN". Is that a deviation?  No, it is common practice and good sense.

As Vern once taught us, a CLIN is a contract within a contract.  See http://www.wifcon.com/discussion/index.php?/topic/2722-contract-v-clin-semantics/.

Do you have anything to add that will be helpful to the original poster?

 

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1 hour ago, PepeTheFrog said:

PepeTheFrog is alerting the Deviation Patrol! Is this a deviation?

Thanks for the tip, Pepe. No, I don't think that's a deviation. I think ji's clause is clarifying the terms of a contract that is a combination of contract types. It's not like he's making up his own rules.

Carry on.

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1 hour ago, ji20874 said:

Do you have anything to add that will be helpful to the original poster?

 

5 minutes ago, Don Mansfield said:

Thanks for the tip, Pepe.

You're most welcome, and thank you. PepeTheFrog, as a side-armed and self-deputized member of the Neighborhood Watch, always shares information with the local Deviation Patrol. If you see something, say something.

Deviation Patrol lives matter! They're the thin redlined contract that keeps scriveners safe from the savages.

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ji20874 - Thank you for the language!  Thanks to everyone for weighing in, I do appreciate it.  I am going to see if the PCO could agree to the language offered by ji20874 and let him know it has also passed the Deviation Patrol check! :)

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ConMan411,

Good luck!  However, as I said in my first comment, sometimes it seems that DFAS cares nothing about the text of the contract or a contract's clauses, and does wherever it wants when paying invoices -- so while this text might be helpful in memorializing the intent of the parties, it might not solve the DFAS problem.

By the way, I think you could adopt this approach without the clarifying text -- but I suggested the text since there is not a meeting of the minds.

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I guess I am hoping that if I can have the PCO put clear language in the contract, then that will tell the ACO how to enter it into the system, which should tell DFAS how to pay it.  A wish and a prayer I suppose. 

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ConMan411

Cost and FFP items should each be on there own ACRNs.  If your invoicing and shipping, the liquidation is a moving target.  Progress Payments usually apply contract wide to all FFP ACRNs (unless otherwise specified).  If a CLIN has cost and FFP elements you can get overpaid. 

ACO should know that.  Don't want to mix those items up under same ACRN.  FFP under one ACRN, cost under another; will make life a lot simpler.

 

 

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Postaward -  Unfortunately all CLIN types were funded with 1 ACRN, I have inquired if we could go back and have separate ACRNS for each CLIN but was told by our former ACO it was too much work and could cause more confusion at this point (we are over a year into the program).  We aren't shipping and invoicing in the most technical sense, we invoice for contractor use facilities (FFP) while requesting progress payments (cost based) for the build we are doing, which isn't to be delivered for a couple of more years.  However, the facilities invoice was liquidated (payment withheld) by DFAS due to our ongoing progress payments on our delivery CLIN (FPIF) - since they share the same ACRN (per DFAS).

I did speak with my new ACO since my original post, and there is concern that if we invoice for facilities again, it will get liquidated (payment withheld) and it will impact the master PPR numbers, it won't be balanced or something to that effect, maybe its the same issue that you bring up in your post. So I cancelled our most recent invoice due to this concern but I have not heard back from my PCO regarding the requested language/clarification so I am not sure what the PCO may decide to do yet on the entire issue.

We would rather not submit PPRs or invoices until we have a clear understanding (or reach the end of our financial runway without payment), because I was also told that its very hard to get your money back once DFAS takes it, even if it was an error.  I am on the contractor side so I have to temper down what I think should be able to happen to the limitations the COs have on what can actually be done.  Any additional information or suggestions on the ACRN are welcomed as well. Thank you  (and everyone else on here) for your input, it is appreciated. 

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