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Shawn

Authorized Leave Under a T&M type SubK

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Hi Folks, 

I'm administering a MTA/TO type subcontract awarded under a T&M basis. Due to recent wild fires in CA, the Subcontractor employees were sent home early given safety/health related concerns with the surrounding air quality. Such circumstance were no fault of the Subcontractor in which they complied with the order received based upon our direction.  As a prime contractor, we did not flow-down 52.232-7 Payment under T&M clause. However, we have similar plain language that mirrors the FAR clause. Generally speaking, the T&M subcontract allows for payment based on actual hours work with each fully burden labor rate including wages, indirect costs, general and administrative expense, and profit.  

I'm now being asked how the Subcontractor should account for its time for the hours not work. Can we simply allow the Subcontractor to invoice its time for the hours missed or consider some other equitable adjustment? Appreciate perspective thoughts on how to best remedy this dilemma. 

THanks,

Shawn

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Have the SubK charge OH and offer to process a mod to increase this year's T&M rates by the amount the OH was increased.

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Shawn,

You might want to make sure your costs (the money you give to your subcontractor for doing no work) will be reimbursed by the Government before you decide to be generous with your subcontractor.  It is easy to be generous with someone else’s money.  You might find that the Government is not nearly as generous as you are, and you might have to use your own money to pay for your generosity.

If you have a simple-minded contracting officer who does not understand correct principles, you might get away with it.  

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j120874, I think your tone was a bit strong. There may well be a case to be made for the health & safety of the employees. I have seen the government reimburse contractors for snow days and other weather-related absences.

Regardless, the prime directed the subK and should make the subK whole, even if the government might question the cost.

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If the subcontractor didn’t work, then the government doesn’t have anything to pay for. I think that it is clear that the government only pays for hours worked. 

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If the following services and supplies clause is in the contract , it excuses delays due to such causes as “fire”, but only provides for a schedule adjustment, not a price adjustment. It includes time and materials contracts.  The Default fixed-price construction clause is similar for such construction contracts. 

52.249-14 -- Excusable Delays.

52.249-10 -- Default (Fixed-Price Construction).

What clause would allow a price adjustment for an Act of God, such as fires?

Was a clause similar to these or other 52.249 clauses, which would address delay impacts (disruption to performance resulting in additional costs) in the subcontracts? 

If so, the prime might not be liable for the cost of delays due to impacts of fires. 

Otherwise, what contract term or condition would provide for reimbursement of additional costs due to an Act of God that disrupts contract performance?? This is assuming that the prime contractor directive was reasonable due to the fire?  An employer would be negligent if it allowed or required  the workforce to work under unsafe, dangerous or unhealthy conditions. Think of workman’s compensation claims or worse if they had remained...

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Joel,

The Changes clause would be the authority. The subcontract was constructively changed when the subK was directed to go home instead of working. The subK was on site, working, and then was sent home.

Does anybody else here remember how the government handled the (huge) impacts on the Gulf shipyards from Hurricane Katrina? I don't think the remedy was limited solely to schedule impacts. Same principle here.

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47 minutes ago, here_2_help said:

The Changes clause would be the authority.

We don't know that.  We don't know the nature of the "order" that the contractor received and relied upon. 

If the "order" was in the Government's sovereign capacity (or maybe even under its contractual capacity), the Excusable Delays clause applies, but it doesn't allow for payment of non-work hours (thanks, Joel).  Maybe the "order" was issued under the Suspension of Work clause or the Stop-Work Order clause, but neither of those clauses allow for payment for non-work hours.   

The original poster is going to have to provide a lot more information (maybe even the entire text of the prime contract and subcontract) before anyone here can give him much help.  That's why I wrote, "You might want to make sure your costs (the money you give to your subcontractor for doing no work) will be reimbursed by the Government before you decide to be generous with your subcontractor." 

I do not take it as a given that the prime can pay a subcontractor for non-work hours, and pass the cost to the Government.

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33 minutes ago, here_2_help said:

Joel,

The Changes clause would be the authority. The subcontract was constructively changed when the subK was directed to go home instead of working. The subK was on site, working, and then was sent home.

Does anybody else here remember how the government handled the (huge) impacts on the Gulf shipyards from Hurricane Katrina? I don't think the remedy was limited solely to schedule impacts. Same principle here.

Yes. The costs were allowable as fringe benefits if certain conditions were met: https://www.acq.osd.mil/dpap/policy/policyvault/2005-1405-DPAP.pdf

However, joel is correct that the contractor only gets paid for hours worked, at least under a Government T&M contract. We don't know the exact payment terms in the subcontract, but if they are essentially the same as the FAR clauses for T&M payment then the contractor would not be entitled to payment for hours not worked. Presumably, these costs would be recovered through the hourly rate, which should include indirect expenses. 

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Don,

Thanks for the link to the DoD memo -- actual, real examples are helpful and instructive as a starting point.

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54 minutes ago, here_2_help said:

Does anybody else here remember how the government handled the (huge) impacts on the Gulf shipyards from Hurricane Katrina?

I had a client that was impacted by Katrina.  It had CPIF contracts.  The big issue they faced was the cost of redoing work that had already been done.  The government paid for the increased costs, but did not adjust the incentive structure.  In addition, because of diversion of labor to recovery projects, where workers were paid premium wages, the client had to recruit new employees and pay them premium wages in order to be competitive with other employers.

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22 minutes ago, Retreadfed said:

I had a client that was impacted by Katrina.  It had CPIF contracts.  The big issue they faced was the cost of redoing work that had already been done.  The government paid for the increased costs, but did not adjust the incentive structure.  In addition, because of diversion of labor to recovery projects, where workers were paid premium wages, the client had to recruit new employees and pay them premium wages in order to be competitive with other employers.

And they were Cost Reimbusement contracts which have different risk allocation than fixed price contracts. The clauses that I referred to don’t apply to CR contracts. 

I would also note that USACE fixed price civil works projects that would be subject to damage due to flooding have historically included provisions for reimbursement for damage to permanent works caused by flooding or overtopping of cofferdams, etc. 

Fixed-price Military Construction projects, traditionally do not provide for reimbursement for repairs to damaged work, except in very limited circumstances. 

Just a different approach to risk allocation, as MILCON projects have statutory Program Amounts and Statutory cost limits. Contractors have been able to obtain builders risk and similar insurance coverage, which is considered in the PA and required by the FFP construction contracts.  

Civil Works programs, aside from often being located on rivers and coasts, have been much more flexible in funding authority and  possibility for obtaining additional funds for repairs to damage by flooding, storms, wind, etc. Certain risks have not been insureable  due to the location and type of work involved on civil works projects. 

At least that is what I was taught years ago in my USACE construction contracting classes. DAU may or may not teach background or distinctions in risk allocation between military and civil works construction. I doubt that civil works projects are even covered as they are under Title 41, not Title 10. 

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29 minutes ago, ji20874 said:

Don,

Thanks for the link to the DoD memo -- actual, real examples are helpful and instructive as a starting point.

You're welcome, ji.

See also 7-2124 of the DCAA CAM (October 2014):

Quote

 

7-2124 Administrative Leave Due to Weather-Related Closures

When contractor personnel receive paid administrative leave due to inclement weather, the allowability and accounting treatment of such payments should be evaluated
on a case-by-case basis in accordance with FAR 31.205-6. Paid absences are fringe benefits that, per FAR 31.205-6(m)(1), are allowable to the extent that they are reasonable in nature and amount and are required by law, employer-employee agreement, or an established policy of the contractor. The reasonableness of the amount paid is generally not an issue. The issue is whether or not the circumstances warranted the payment of administrative leave. Some factors to consider in determining reasonableness include the severity of the weather conditions and whether other businesses and organizations in the same geographical location were closed. The fact that the Federal Government suspended similar operations in the area due to the weather generally would support that it was reasonable for the contractor to incur the administrative leave costs. If the costs are determined to be allowable, they should be charged in accordance with the contractor’s disclosed or established cost accounting practice for charging paid absences.

 

 

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I’m guessing here that the employees were paid by their employers for the day that they were sent home. Is that the issue in question here? Or does it involve additional days beyond the first day? 

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ji has provided some good advice to check to see what the status of payment to the prime contractor will be.  Some agencies, such as NASA, use provisions in their contracts that allow contractors working on NASA facilities to be paid for days when NASA employees are excused from work. 

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1 hour ago, joel hoffman said:

And they were Cost Reimbusement contracts which have different risk allocation than fixed price contracts. The clauses that I referred to don’t apply to CR contracts. 

Joel, as a clarification, my comments to which you were responding were intended only to respond to H2H's question, which was open-ended and not limited to any particular contract type.

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1 hour ago, joel hoffman said:

I’m guessing here that the employees were paid by their employers for the day that they were sent home. Is that the issue in question here? Or does it involve additional days beyond the first day? 

Approximately 1.5 days were missed in our situation. I believe CA labor law may come into play for those Subcontractor employees in a non-exempt capacity.  At this juncture, we've recommended the impacted Subcontractor's employee(s) to contact their respective employer for guidance on how to best charge their time. Our CO has confirmed such time as allowable absent any provision in the SubK.

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56 minutes ago, Retreadfed said:

Joel, my comments to which you were responding were intended only to respond to H2H's question, which was open-ended and not limited to any particular contract type.

Righto. 

I was really responding to H2H concerning Katrina, however, I missed the “shipyard” . 

Since you mentioned Katrina, CPIF and rework, i wanted to distinguish between various types of contracts if you were perhaps referring to construction contracts, where risk allocation can vary widely depending on contract types and project types.  

There is no one rule or standard for entitlement to reimbursement. 

 

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50 minutes ago, Shawn said:

Approximately 1.5 days were missed in our situation. I believe CA labor law may come into play for those Subcontractor employees in a non-exempt capacity.  At this juncture, we've recommended the impacted Subcontractor's employee(s) to contact their respective employer for guidance on how to best charge their time. Our CO has confirmed such time as allowable absent any provision in the SubK.

Interesting. I wonder how it is allowable as a government cost  - especially for time beyond the initial 1/2 day. If the unit prices per labor hours are going to be reimbursed, not only would the taxpayers be paying for time not worked on a time and material basis but for profit on those hours, too. 

Appears to be very generous...particularly so if the clause that I cited above is in the contract in addition to the 52.232-7 clause, itself.  

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3 hours ago, Shawn said:

Our CO has confirmed such time as allowable absent any provision in the SubK.

Your contracting officer might be looking at it from the wrong direction -- rather than saying non-work hours are payable "absent any provision in the SubK," I think the correct way to approach it is to say that non-work hours are not payable (by the Government) unless specifically allowed for in the prime contract (with the Government).  Really, no one cares what you pay your subcontractor -- that's between the two of you -- the real question is whether the Government will reimburse YOU for the money you give to your subcontractor.

But if your contracting officer thinks you can pay your subcontractor and simply pass the cost to the Government, well, that goes back to what I said earlier about how you might get away with it.

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6 hours ago, Don Mansfield said:

Yes. The costs were allowable as fringe benefits if certain conditions were met: https://www.acq.osd.mil/dpap/policy/policyvault/2005-1405-DPAP.pdf

However, joel is correct that the contractor only gets paid for hours worked, at least under a Government T&M contract. We don't know the exact payment terms in the subcontract, but if they are essentially the same as the FAR clauses for T&M payment then the contractor would not be entitled to payment for hours not worked. Presumably, these costs would be recovered through the hourly rate, which should include indirect expenses. 

Which is why I answered the original question the way I did. The subcontractor would not be paid for hours not worked; but the rate per hour worked would be adjusted (to the extent necessary) to compensate the contractor for the additional indirect costs incurred. A rather imperfect analogy would be unabsorbed overhead costs recovered in a stop-work situation.

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H2H,  I did not read where the government directed that the subcontractor employees leave. 

 Even if the government did direct it, We don’t have enough information to know that the order wasnt absolutely necessary due to health and welfare, i.e. that the site was unsafe because of smoke from the California forest fires.I don’t see where that would’ve created any liability on the part of the government.

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