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Indirect Ceiling Rate Adjustments


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We are a veteran owned small business and submitted (and won) on a large multi-award IDIQ. At the time of proposal, the USG wanted ceiling rates to be established; however, we had not had a DCAA audit prior to submission.  We naively established ceiling rates; however, we have a few hundred thousand dollar cost adjustment on a CPFF task order based on our DCAA incurred cost submission and acceptance.  We are trying to determine if we have any recourse to adjust our ceiling rates.  Through our research we have found some references and articles; however, we cannot tie together these articles into our specific IDIQ FAR/DFAR clauses.  

Bottom Line Up Front (BLUF):

1. Will the discussion board address which FAR clauses need to be in my IDIQ for the USG to enforce ceilings on a specific Task Order (CPFF)?  

2. Are there are any other insights the group has on addressing this successfully with the contracting officer?

Here are the articles:

 
We also have been reviewing the FAR clauses below.  
FAR 52.216-7 -- Allowable Cost and Payment.  I do not see where there is a discussion of ceilings, just agreed upon.  This is in our contract.
FAR 50.103-2 -- Types of Contract Adjustment.  - This is not in our contract.
(a) Amendments without consideration.
(1) When an actual or threatened loss under a defense contract, however caused, will impair the productive ability of a contractor whose continued performance on any defense contract or whose continued operation as a source of supply is found to be essential to the national defense, the contract may be amended without consideration, but only to the extent necessary to avoid such impairment to the contractor’s productive ability.
(b) Correcting mistakes
(1) A contract may be amended or modified to correct or mitigate the effect of a mistake. The following are examples of mistakes that may make such action appropriate:
(i) A mistake or ambiguity consisting of the failure to express, or express clearly, in a written contract, the agreement as both parties understood it.
(ii) A contractor’s mistake so obvious that it was or should have been apparent to the contracting officer.
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27 minutes ago, FederalContractorOBE said:

We are a veteran owned small business and submitted (and won) on a large multi-award IDIQ. At the time of proposal, the USG wanted ceiling rates to be established; however, we had not had a DCAA audit prior to submission.  We naively established ceiling rates; however, we have a few hundred thousand dollar cost adjustment on a CPFF task order based on our DCAA incurred cost submission and acceptance.  We are trying to determine if we have any recourse to adjust our ceiling rates.  Through our research we have found some references and articles; however, we cannot tie together these articles into our specific IDIQ FAR/DFAR clauses.  

You don't address the basis of the rates you submitted, and the basis for the ceiling rates to which you agreed. You don't mention how the agreement was documented.

I think those pieces of information would be helpful.

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Thank you for the quick response.  We had hired a consultant to assist in the development of our pricing model through an Excel template looking at our various cost pools and trying to forecast our future growth of direct, and non-direct labor.  We had assumed more on-site personnel than have materialized and have hired more non-billable people for our FFP work as a subcontractor.  This has created a increase in our OH & GA rates that are not tolerable.  

The ceiling rates were the same as our forecasted rates in our pricing volume for the IDIQ; what we understood was the ceiling rates (%) as the basis for the ceiling rates of the hourly labor rates.  Now the CO wants to hold us to the percentages.  

You asked about the documentation of the agreement, the task order had no ceiling rate reference; however, referenced the IDIQ as the umbrella.  Between the draft Task Order and the final Task Order Request for Proposal the contract type changes from FFP to CPFF.  The agreement I guess was documented in the contract being awarded?  Never was there a distinct discussion about ceiling rates on the CPFF Task Order.

Sorry if I am not answering the question(s); just got hit with this yesterday as the CO got around to reviewing our fee true-up invoice (which they are rejecting).  

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Your offer with ceiling rates + the Government's acceptance of your offer = a binding contract.

I haven't read your contract, and I only know what I have read here, but I am doubtful that you can successfully make a mistake-discovered-after-award case.  If you want to try, get out of FAR Subpart 50.1 and instead look at FAR 15.508.

But you did say you won a multiple-award IDIQ contract.  Generally, orders under multiple-award IDIQ contracts are issued on a fair opportunity to be considered basis, so you will have a chance to submit an offer for each order opportunity.  The Government might still be able to issue an order to you as an exception to fair opportunity, but that is not the normal approach.

Usually, a multiple-award IDIQ contract establishes ceiling rates or ceiling prices so that it can make best value selections of the IDIQ contract holders.  Then, contract holders are free to propose lower rates or prices for individual order opportunities.  You might be unable to offer lower rates or prices, but you cannot offer rates or prices higher than the ceilings you offered and the Government accepted to form the contract.

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1 hour ago, FederalContractorOBE said:

We had assumed more on-site personnel than have materialized and have hired more non-billable people for our FFP work as a subcontractor.  This has created a increase in our OH & GA rates that are not tolerable.  

I'm interested in the quoted bit above. What does "non-billable" mean in this context? What does contract type (FFP) or prime versus subcontract have to do with labor charging?

What I'm trying to say is that non-billable direct labor is still direct labor and the indirect rates should not vary based on whether direct labor is billable or not. Contract type should not impact the direct vs. indirect decision; you must treat all contract types the same and charge the same functions as direct labor regardless of contract type.

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