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jcb2k

Indirect changes and billings under CPFF

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Hi all,

I'm curious about the following scenario:

1. A contractor has a CPFF contract with a gov't agency;

2. obligated funding for the contract has been exhausted prior to the end of PoP;

3. at the end of the contractor's fiscal year (let's say 2018, December), a provisional rate change has been approved by DCAA, causing the indirect rates for the previous calendar year to increase or decrease.

Given that obligated funding has been exhausted, and DCAA has approved higher-that-originally-approved indirect rates, can the contractor still submit revised invoices and be paid by the gov't? If so, where do the funds to pay the revised invoices come from? Alternatively, if the provisional rates are lower, is the contractor required to submit revised invoices for the year and refund the gov't?

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What does the rate agreement letter say about when the new rates are applicable?  Generally, such an agreement contains a disclaimer that the rates established in the agreement do not change any contract cost limitations.  Thus, the estimated cost contained in the contract would still the estimated cost of the contract for Limitation of Cost purposes.

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51 minutes ago, Retreadfed said:

Thus, the estimated cost contained in the contract would still the estimated cost of the contract for Limitation of Cost purposes.

Completely agree. Further, provisional billing rates are not the optimum method for preparing Estimates-at-Completion, unless the provisional billing rates are equal to the actual (or target) cost rates for the periods of performance. Said another way: using PBRs to manage Limitation of Funds clause compliance is not the recommended practice.

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My view: I am assuming the contractor has been paid all amounts up to and including the total contract funds, no further contract funding is contemplated for any reason and there has been no final closeout approved and processed. If so, there is nothing available contractually to pay the contractor at this time. However, the contractor may submit a new claim the reflects the increased DCAA approved  rates for a prior year (question whether that is provisional or final rate that was approved), so that when the closeout is finalized, they may receive reimbursement for all cost and fee accepted per the final closeout action. Those amounts may be for a higher or lower amount than the claimed amount, and may or may not exceed the contract funding. If it does, no additional payment should be expected by the contractor.

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Hi All,

Thanks for the responses! It seems I left out some important info. The rate letter applies to retroactively to all of 2018, and says all contract payments should be adjusted to reflect the new rates (i.e., more money for the contractor, or a credit submitted to the government). However, can the contractor receive more money if the obligated funds have been exhausted? How does the Limitation of Cost affect this situation? And what if the the contractor has reached the contract ceiling amount, and exhausted all funds?

Also, the letter doesn't say anything about affecting contract cost limitations.

Edited by jcb2k
*edit*

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1 hour ago, jcb2k said:

However, can the contractor receive more money if the obligated funds have been exhausted?

How does the Limitation of Cost affect this situation?

And what if the the contractor has reached the contract ceiling amount, and exhausted all funds?

1. No, except in extenuating circumstances. For example, if a contract was Terminated for Convenience or there was a Stop Work order that affected the ability to control indirect rates.

2. It controls the situation. Failure to comply with the clause's requirements means the customer is not obligated to fund your overrun.

3. Same answer as No. 1.

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Adding to what H2H said, because of the Limitation of Cost clause, contractors are expected to monitor their indirect cost rates.  If doing so indicates that the rates will be higher than anticipated and result in an overrun, the contractor is required to give the government notice of the overrun before it occurs.  If the contractor does not, any overrun costs are at the contractor's risk.  The exception to this is that the contractor did not know of an overrun and had no way of knowing of an overrun before it occurred.  Thus, if the contractor did not monitor its indirect costs, but such monitoring would have disclosed the overrun, the contractor should have known of the overrun in this case.

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For your Reference:

From “Government Contract Associates”

LIMITATION OF COST AND FUNDS CLAUSES.  

https://govcontractassoc.com/limitation-of-cost-and-funds-clauses/

 

 

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