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rios0311

Payments Clause for Personal Services Contract

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I'm looking for some assistance from anyone who has awarded a personal services contract, or from anyone knowledgeable in that area. I have two questions:

1. Can a contract have more than one payments clause?

2.  Can a personal services contract that is based on hourly rates also be a Time-and-Materials or Labor Hour contract?

I have been writing my agency's (and my) first personal services contract. Due to the size of our contracts organization and the number of contractor personnel we require, we are acquiring our personal services through a third party contractor versus contracting directly with hundreds of independent contractors.

I have been writing the contract as is if it will be a Time-and-Materials contract because labor will be billed by the hour and due to the possibility that we may require some ancillary services, such as recruiting services. The draft contract specifies a requirement for fully burdened labor rates and discusses ceiling prices.

However, I just realized that the FAR has a payments clause specific to personal services contracts - FAR 52.232-3 Payments Under Personal Services Contracts. Do I use this clause in conjunction with the Payments clause for time-and-materials contracts? Or do I only use the payments clause for personal services contract, because, contrary to what I thought, I am not awarding a time-and-materials contract? I'm ready to inform our working group that we are not awarding a time-and-materials contract, but I'd like to confirm whether my understanding is correct.

Unfortunately, for agencies that have personal service contract authority, there isn't much guidance on the topic. Like the fact some agencies consider personal services contractors to be equivalent to direct hire government employee for certain purposes, such as for travel under E2 and for defense by DOJ under Federal Tort Claims Act.

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From a contractor standpoint, if this was a non-commercial procurement, I would expect a contract that included only one of the payment clauses being considered, but not both. See FAR 32.111. Also, it appears to me that an hourly rate payment condition in a contract could be either "contract type" you mention.  However, if contractor personnel are stated to be, or in effect managed as if they are government employees, it would be a personal service contract. See FAR 2.101 definition of personal services contract and 37.104. I am just stating what my expectation is as a contractor reviewing terms that may be included in an Government solicitation/contract for this contemplated work.      

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Guest Vern Edwards

@rios0311

15 hours ago, rios0311 said:

1. Can a contract have more than one payments clause?

2.  Can a personal services contract that is based on hourly rates also be a Time-and-Materials or Labor Hour contract?

1. Yes. However, the different payment clauses must be associated with different contract line items (CLINs). See FAR Subpart 4.10.

For example, you can have a contract with a single statement of work that specifies different kinds of tasks. One task might be priced on a firm-fixed-price basis and be associated with the clause at FAR 52.232-1. The other might be priced on a T&M or L-H basis and be associated with the clause at FAR 52.232-7. So you would have one CLIN and payment clause for the first task and another CLIN and payment clause for the second. 

2. Yes, but if FAR 52.232-3 applies, then you cannot also apply FAR 52.232-7 (or its commercial items counterpart at FAR 52.212-4 Alt. I). You cannot apply two payment clauses to the same CLIN, unless you establish subCLINs.

The clause at FAR 52.232-3 prescribes payment on the basis of time worked, but it does not specify the unit of time. If you want the clause to work on the basis of labor hours and hourly labor rates, then you must prescribe hourly rates of payment. If you want to add materials, you must have a materials CLIN, prescribe the bases for payment or reimbursement, and include an appropriate payment clause.

The clause at FAR 52.232-3 applies to contracts with named individual persons for their "personal" services, such as contracts with individual experts and consultants, as addressed in FAR 37.104(f). It does not apply to personal services contracts with organizations, as described in FAR 37.104(c).

What kind of personal services contract are you planning to award? Maybe the clause at FAR 52.232-3 does not apply.

Edited by Vern Edwards
To mention SubCLINs

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Thank you very much. We plan to award a contract for personal services to an organization. We specify that the government will directly supervise and control the contractor’s employees. It will be for approximately 600 to 800 contractor personnel. The contractor’s main (and probably only)  role will be to manage payroll, benefits, and withholding, etc.

I planned on including CLINS for hourly labor and premium pay rates, and possibly a line for ODCs for the rare occurrence where we may need the contractor to perform recruiting services.

So it sounds like we should not use the PSC payment clause. So using the same reasoning, would the same apply to the use of the PSC termination clause?

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Guest Vern Edwards
1 hour ago, rios0311 said:

So it sounds like we should not use the PSC payment clause. So using the same reasoning, would the same apply to the use of the PSC termination clause?

That's correct. That clause is also for contracts that call for performance by a particular person.

The FAR coverage of personal services contracts is confused and confusing. You must distinguish (1) a contract between the government and a company under which the company allows the government to supervise the contractor's employees, which FAR calls a "personal services contract," and (2) a contract with an individual for his or her personal performance, which FAR also calls a "personal services contract." They are two entirely different things, but FAR does not make that distinction clear.

Before you do anything else, I suggest that you download the 2007 Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States Congress. You can access it here: https://www.acquisition.gov/sites/default/files/page_file_uploads/ACQUISITION-ADVISORY-PANEL-2007-Report_final.pdf

Once you have it, read the section entitled, Personal Services Contracts, pp. 400 - 404. The panel discussed the history of the FAR personal services contract coverage and reported that the FAR coverage was off base. It looks like the National Defense Authorization Act for Fiscal Year 2019 may be launching steps to clarify that coverage. See Title VIII, Sec. 820. Until then, you should inform yourself.

Also, the distinction between the two types of "personal services contracts" was discussed by Peter J. Ritenburg, Assistant General Counsel, United States Information Agency, in an article entitled, Contracting for the Services of Specific Individuals: Avoiding "Personal Services Contracts",  which appeared in the February 1996 edition of The Nash & Cibinic Report.

If you are going to write a contract for personal services, you must understand the distinction between (a) "personal service contracts" that allow the government to directly supervise contractor employees and (b) "personal service contracts" that require personal performance by particular persons. Both are addressed in FAR 37.104 as though they are the same thing, but they are not. FAR 52.232-3 and 52.249-12 apply to the latter, not to the former.

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Vern, this is extremely helpful. I really appreciate it. Very interesting to see what the 2019 NDAA holds in terms of PSCs, as it was the 2017 NDAA that expanded our PSC authority... and how ironic that it was the assistant GC for the United States Information Agency that published the article making the distinction between the two types of PSCs (I can clarify that later).

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