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ry_lock

Tracking RDT&E and O&M Funding by the use of Separate CLIN's

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I currently work at a working capital DoD, R&D organization. Most of our funding comes from outside sponsors which comes in at a very unpredictable pace. I have CPFF R&D contracts that are funded mostly by RDT&E and Navy working capital funds. We also receive O&M funding for those contracts. We've determined O&M can be used on R&D contracts as stated in the FMR Vol 2A, Chapter 1, Paragraph 010213.

The issue at hand is the CLIN structure of the contract. Some individuals in my contract’s office require if a R&D contract will use O&M funding, a separate O&M funded CLIN needs to be created that cites specific paragraphs in the SOW that are labeled as O&M work.

There’s two problems with this:

1. The SOW’s for our R&D contracts are very broad in nature considering the tasks to be performed cannot be defined due to the unpredictability of performance (don’t want to paint ourselves in a corner by trying to define the tasks further due to the fact a new task required may be determined out of scope). Considering the SOW is broad, multiple, actual tasks performed can point back to one general task listed in the SOW, whether it be a R&D or O&M type task. Both would fall within scope of that one task. It would not be possible to define all tasks associated with an effort well enough to have each task labeled as either a R&D task or O&M task. So the CLIN that uses O&M funding can’t point to specific tasks considering the general tasks listed in the SOW can be further broken down to allow for R&D or O&M tasks.

2. If we create two labor CLIN’s: one for R&D tasks (70% of value) and one for O&M tasks (30% of value) under a CPFF contract, requirements can change which will then require 80% for R&D and 20% for O&M (by the way, it would be impossible for a contractor to price each separately as both CLIN’s site the whole SOW. We would have to give them an anticipated level of effort in which that would be just a guesstimate). If the funding comes in differently than expected (95% of the time) the administration ofmoving CPFF value from CLIN to CLIN would become burdensome. It would become such a burden that it could jeopardize expiring funding if values/LOE needs to be moved between CLIN’s first via a modification.

Considering our R&D contract allows for RDT&E, working capital funds and O&M funding, is there a reason to track it at the CLIN level by establishing separate CLIN’s? I can’t seem to come up with any regulation supporting the argument of separate CLIN’s per funding type.

The main concern is how do we know they are not using O&M funding for R&D tasks or vice versa. I believe this is tracked by the COR, sponsor, and their appropriate financial offices. And not the contracts office.

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59 minutes ago, ry_lock said:

Considering the SOW is broad, multiple, actual tasks performed can point back to one general task listed in the SOW, whether it be a R&D or O&M type task. Both would fall within scope of that one task. It would not be possible to define all tasks associated with an effort well enough to have each task labeled as either a R&D task or O&M task.

These two sentences seem to be contradictory.  Also, if you cannot do the latter, how is the supposed tracking being done? 

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I was trying to say that the SOW lists general, broad tasks. The general tasks allow for numerous tasks to be performed due to the fact they would all fall within scope of a task in the SOW due to its broad nature. If we further defined every possible task (to break out R&D and O&M) that could be required, there's high probability everything potential task required would be thought of. Hence why the SOW needs to be broad in nature.

The tracking will be done by knowing all work that was funded via CLIN 0002: O&M Labor went to O&M work. My argument is that we can't estimate the amount of R&D vs O&M work at time of RFP to price the CLIN's.

I guess the short question is whether or not a R&D contract CLIN can be funded by more than one type of funds (R&D and O&M)? If so, what can I provide as reasoning.

Or is breaking out a separate CLIN for a specific type of funding violate any regulations?

 

 

 

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@ry_lock,

Why not just have one line item for the SOW and informational sublines for the different accounting classification citations? Look at the example at DFARS PGI 204.7104-2(e)(7).

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3 hours ago, ry_lock said:

I guess the short question is whether or not a R&D contract CLIN can be funded by more than one type of funds (R&D and O&M)?

Yes, if each appropriation can be used for RDT&E effort.  If not, no. 

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I work in a Navy STRL contracting office and we do this all the time.

we use an informational CLIN with prices SLINs to allocate hours by funding (WC, RDT&E, O&M, OPN, SCN, etc.) and work via Technical Instructions. We use a holding SLIN to hold the unallocated LOE and costs and then decrement this SLIN as TIs and funds are provided. We’ve had multiple DASN reviews and they haven’t taken exception to this approach.

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16 hours ago, Retreadfed said:

Yes, if each appropriation can be used for RDT&E effort.  If not, no.

Why must the type of funds be the same? Couldn't ry_lock use informational sublines--one for each appropriation (one for RDT&E, one for O&M)--under the same line item?  

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3 hours ago, Don Mansfield said:

Why must the type of funds be the same?

They don't have to be the same.  What I was trying to point out is that the Purpose Statute (31 US.C 1301) only allows appropriated funds to be obligated for the purposes for which they were appropriated.  If a single CLIN is used in a contract for RDT&E, only funds that were appropriated for RDT&E can be used to fund that CLIN.  This does not  mean that all the funds have to be from an RDT&E appropriation.  Some agencies have general appropriations that can be used to fund all activities of the agency. 

On the other hand, sub-CLINs can be funded with different appropriations. 

In this case, setting aside whether funds are properly obligated, I am curious as to how the contractor is instructed to bill in order to avoid the government getting into a possible violation of the Purpose Statute.  If the contractor is not required to ensure proper accounting and billing against each appropriation, I don't know how the COR can track the proper expenditure of funds.

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19 hours ago, uva383 said:

I work in a Navy STRL contracting office and we do this all the time.

we use an informational CLIN with prices SLINs to allocate hours by funding (WC, RDT&E, O&M, OPN, SCN, etc.) and work via Technical Instructions. We use a holding SLIN to hold the unallocated LOE and costs and then decrement this SLIN as TIs and funds are provided. We’ve had multiple DASN reviews and they haven’t taken exception to this approach.

It sounds like this would cause for a lot of administration. How do you know exactly how much, for example, 10,000 LOE cost? Are these fixed price contracts? If you obligate $1,000,000 for 10,000 hours and price the SLIN in this way and the contractor comes back saying they expended the 10,000 LOE but it costed them $900,000, do you move $100,000 off that SLIN? OR if they say they completed the 10,000 LOE for $1,100,000, how do you move funding onto that SLIN? Seems you better hope you have additional funding that is the same FY and color to cover the increase considering you can't have SubCLIN's under SubCLIN's to establish different lines of accounting.

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We've determined O&M money can be used to fund efforts in the SOW in support of R&D work (FMR Vol 2A, Chapter 1, Paragraph 010213). I found a great write up on this located here: http://www.strategicinstitute.org/other-transactions/appropriations-ots/. It talks about OT funding but the point they make is relevant to R&D contracts funding. 

My argument is if a single CLIN sites the whole SOW, which allows for R&D work that is capable of being funded with RDT&E, O&M, working capital funds, then breaking out a separate CLIN for O&M work seems pointless to me, hence the reasons we can't without causing an administrative nightmare.

I'm trying to find somwhere that would state that O&M and RDT&E funding can be used to fund the same CLIN that sites the whole SOW. I guess a route forward could be to have my Comptroller provide approval.

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26 minutes ago, Retreadfed said:

In this case, setting aside whether funds are properly obligated, I am curious as to how the contractor is instructed to bill in order to avoid the government getting into a possible violation of the Purpose Statute.  If the contractor is not required to ensure proper accounting and billing against each appropriation, I don't know how the COR can track the proper expenditure of funds.

I think this is where Legal's concern is with a single CLIN that uses RDT&E and O&M funds.

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On 1/9/2019 at 7:33 PM, ry_lock said:

I can’t seem to come up with any regulation supporting the argument of separate CLIN’s per funding type. 

Does DFARS 204.7103-1(a)(4) answer your question?

Quote

204.7103-1  Criteria for establishing.

...

     (a)  Contract line items shall have all four of the following characteristics...

          (4)  Single accounting classification citation.

                    (i)  Each contract line item shall reference a single accounting classification citation...

There are exceptions provided in the DFARS.  But if those exceptions do not apply, that is probably the issue.

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5 hours ago, Lionel Hutz said:

     (a)  Contract line items shall have all four of the following characteristics...

          (4)  Single accounting classification citation.

                    (i)  Each contract line item shall reference a single accounting classification citation...

No. We fall under (iii) When the use of multiple accounting classification citations is authorized for a single contract line item, establish informational subline items for each accounting classification citation in accordance with 204.7104-1(a).

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8 minutes ago, ry_lock said:

No. We fall under (iii) When the use of multiple accounting classification citations is authorized for a single contract line item, establish informational subline items for each accounting classification citation in accordance with 204.7104-1(a).

Neither 204.7104-1(a), nor 204.7103-1(a)(4)(iii) authorize using multiple accounting classification citations in a single CLIN.  They merely say that when you are authorized to do so, you should use an information subline item in accordance with 204.7104-1(a).

204.7103-1(a)(4)(ii) identifies three situations in which multiple accounting classification citations for a contract line item is authorized:

Quote

(A)  A single, nonseverable deliverable to be paid for with R&D or other funds properly incrementally obligated over several fiscal years in accordance with DoD policy;

(B)  A single, nonseverable deliverable to be paid for with different authorizations or appropriations, such as in the acquisition of a satellite or the modification of production tooling used to produce items being acquired by several activities; or

(C)  A modification to an existing contract line item for a nonseverable deliverable that results in the delivery of a modified item(s) where the item(s) and modification are to be paid for with different accounting classification citations.

Does your situation fall in one of the above three scenarios?  If so, bring DFARS 204.7103-1(a)(4)(ii) to the legal office's attention.  If not, you're out of luck unless you can find some other authority to include multiple accounting classification citations on one contract line item.

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10 minutes ago, ry_lock said:

I should have put this first: we fall under (ii)(A)

How do you fall within (ii)(A) when you are using multiple appropriations?  That section appears to apply when different years of the same appropriation are used to fund a CLIN.  It specifically refers to "R&D or other funds" not R&D and other funds.

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5 hours ago, Lionel Hutz said:

Does your situation fall in one of the above three scenarios?  If so, bring DFARS 204.7103-1(a)(4)(ii) to the legal office's attention.  If not, you're out of luck unless you can find some other authority to include multiple accounting classification citations on one contract line item.

Multiple accounting classifications under a single line item is also permitted when using separately identified subline items. DFARS 204.7104-1(b)(1)(i):

Quote

 

 (b)  Separately identified subline items.

              (1)  Subline items will be used instead of contract line items to facilitate payment, delivery tracking, contract funds accounting, or other management purposes.  Such subline items shall be used when items bought under one contract line item number—

                    (i)  Are to be paid for from more than one accounting classification.  A subline item shall be established for the quantity associated with the single accounting classification citation.

 

Contrast the examples at DFARS PGI 204.7104-2(e)(6) and (7).

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