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10 minutes ago, Don Mansfield said:

I'm asking if the CO would be prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b). Yes or no?

I answered you.  You keep asking a circular question. 

Tell me how they comply with 1.602-1(b) if they reimburse a company for the unallowable cost of income tax. 

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2 minutes ago, joel hoffman said:

I answered you.  You keep asking a circular question. 

Tell me how they comply with 1.602-1(b) if they reimburse a company for the unallowable cost of income tax. 

Actually, you didn't answer me. I specifically asked whether a contracting officer was prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

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Don, I will let you and Joel continue your discussion as an interested by stander.  However, for my benefit, could you explain what you mean by the cost principles?  Are you referring to FAR 31.205; FAR subpart 3.2, FAR subparts 31.1 and 2 or something else?  Also, are you asking how a contracting officer should resolve a conflict between FAR Part 31 and another FAR section?

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2 hours ago, Don Mansfield said:

Actually, you didn't answer me. I specifically asked whether a contracting officer was prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

I am not going to answer you with a one answer fits every circumstance, when you won’t answer any question. 

I provided a specific example. I will clarify that the purpose of the mod in said example was to specifically reimburse a contractor for state or federal income tax expense. It was not a cost among many other types in a proposal. 

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On ‎3‎/‎14‎/‎2019 at 5:21 PM, Jamaal Valentine said:

Q: Why would we need to cite an authority?

A2: FAR includes requirements, other than the form itself, that the contracting officer 'shall cite' [insert clause] as the authority (e.g., FAR 17.207(g)) 

 

A2:  If it was required for every mod it would be so stated in Part 43.

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58 minutes ago, joel hoffman said:

I am not going to answer you with a one answer fits every circumstance, when you won’t answer any question.

Just to review the order of events, you made the following claim:

Quote

For example, it ought to be obvious that  income taxes aren’t allowable expenses for reimbursement. If not obvious, read 31.205-41 (b) (1).

I then asked:

Quote

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

You said you answered that question, but you didn't. So, I asked:

Quote

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

The ball is in your court.

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Guest PepeTheFrog
53 minutes ago, joel hoffman said:

I am not going to answer you with a one answer fits every circumstance, when you won’t answer any question. 

I provided a specific example.

joel hoffman, the bystanders are patiently and eagerly waiting for your answer about the specific question. The answer might tease out a rule or principle-- the guiding light to "[fit] every circumstance." 

That's how someone can learn. Your specific example is not helpful for learning, it's just a guarded example for you to dodge a reasonable question that might lead to a learning moment.

Can a contracting officer comply with FAR 1.602-1(b) and also deviate from the cost principles? What do you think and why?

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Guest PepeTheFrog

PepeTheFrog was not asked the question, but is willing to answer Don Mansfield.

3 hours ago, Don Mansfield said:

whether a contracting officer was prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

No, a contracting officer is not prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

6 minutes ago, PepeTheFrog said:

Can a contracting officer comply with FAR 1.602-1(b) and also deviate from the cost principles?

Yes, it is possible for a contracting officer to deviate from the cost principles while also complying with FAR 1.602-1(b).

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3 minutes ago, PepeTheFrog said:

PepeTheFrog was not asked the question, but is willing to answer Don Mansfield.

No, a contracting officer is not prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

Yes, it is possible for a contracting officer to deviate from the cost principles while also complying with FAR 1.602-1(b).

Thank you, @PepeTheFrog. I agree.

Now, do you know of anything specifically prohibiting the contracting officer from deviating from FAR 31.205-41(b)(1), assuming they complied with FAR 1.602-1(b)?

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Guest PepeTheFrog
2 minutes ago, Don Mansfield said:

do you know of anything specifically prohibiting the contracting officer from deviating from FAR 31.205-41(b)(1), assuming they complied with FAR 1.602-1(b)?

No. PepeTheFrog's understanding is that the contracting officer can seek an individual or class deviation from the cost principles, including those at FAR 31.205-41(b)(1). That's one reason why PepeTheFrog is curious to hear any else's opinion or analysis, like joel hoffman's.

FAR 31.101, Objectives, states:

"In recognition of differing organizational characteristics, the cost principles and procedures in the succeeding subparts are grouped basically by organizational type; e.g., commercial concerns and educational institutions. The overall objective is to provide that, to the extent practicable, all organizations of similar types doing similar work will follow the same cost principles and procedures. To achieve this uniformity, individual deviations concerning cost principles require advance approval of the agency head or designee. Class deviations for the civilian agencies require advance approval of the Civilian Agency Acquisition Council. Class deviations for the National Aeronautics and Space Administration require advance approval of the Deputy Chief Acquisition Officer. Class deviations for the Department of Defense require advance approval of the Director of Defense Procurement, Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics."

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12 hours ago, jwomack said:

 

A2:  If it was required for every mod it would be so stated in Part 43.

I don't necessarily disagree, but the question was 'Why would one need to cite an authority?‘; I simply provided an answer to the specific question. 

Nonetheless, you raise an interesting point. What arguments can you provide to support your assertion?

The SF 30, which is referenced in FAR, directs contracting officers to "Insert in the corresponding blank the authority under which the modification is issued."

Perhaps your assertion is true when the SF 30 is not used since its use is only required as stated in FAR 43.301(a).

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My answer to the question is that it would take a class A idiot to grant a deviation to allow a KO to reimburse a contractor for otherwise expressly unallowable federal or state income taxes. Income taxes theoretically are paid by a firm on net,  after expense (costs) income. How is that in the Government’s interest?  Who would be dumber- the KO requesting such a deviation or the idiot(s) who would approve it?  Certainly a deviation is possible in theory, but let’s deal with reality in this example. 

Thus, I’m betting that the KO wouldn’t be able to satisfy FAR 1.602-1(b) in that instance. 

I had expected that Don was going to play the old hand that one doesn’t have to agree with every aspect of a proposal as long as the bottom line is fair and reasonable. If necessary,  the team might jack up (“adjust”) the government estimate or objective elsewhere to cover their tracks. 

In my opinion, that’s a “safety valve” for poor, ineffective negotiators. Especially when FAR 31.201-6 directs that “(c)osts that are expressly unallowable...[as well as costs associated with the expressly unallowable costs] ...shall be identified and excluded from any billing, claim, or proposal applicable to a Government contract.”  The negotiators for the biggest, and the most contentious  engineering firms and construction contractors didn’t even get away with that in my personal experience.

One shouldn’t have to resort to that sleight of hand trick when expressly unallowable costs are prominent and distinguishable. 

At any rate, I wanted to clarify that that negotiating option isn’t available in my example. It would be glaringly clear what the KO would be agreeing to pay for in such a mod, not buried within other costs.

Such a contract action might make it to what I call the “Shameful Acts” status in the upper right hand corner of the WIFCON Home Page.

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Guest PepeTheFrog
12 hours ago, joel hoffman said:

My answer to the question

joel hoffman, is this all some elaborate hoax? You still have not answered the question! 

It's almost like you're dodging the question because your answer will cause you some discomfort. Could that be the reason?

17 hours ago, PepeTheFrog said:

Can a contracting officer comply with FAR 1.602-1(b) and also deviate from the cost principles? What do you think and why?

 

17 hours ago, Don Mansfield said:

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

 

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Pepe, you’re not  reading between the lines. 

Not for income taxes - waiver to cost principles won’t be granted by any sane authority - in my opinion. 

Also: Not for safety responsibility - waiver shouldn’t be granted. It is a legal responsibility of the contractor. The safety clauses in (construction) contracts are mandatory and well established by public policy and enforced in the courts and boards. Government is not in the business of assuming direct safety liability for the actions of its contractors on jobsites. Could also be a Anti-Deficiency Act problem due to funding for unknown possible liability costs for health related injuries which might not surface until much later. 

Also: There is a possibility  for indemnification - in rare cases, indemnification can be approved. Very rare. Won’t go into detail here. The Chemical Weapons Disposal Program couldn’t get approval to indemnify its contractors for possible injuries or death due to accidental or negligent releases of Mustard, Sarin or VX, for example. 

However, if a waiver is approved, there will be a specific authority for the modification. It WONT be mutual agreement of the parties - here’s my Warrant number. 

Bottom line is - there is no one answer fits all.  That’s why I would not just say “yes” or “no” to the generic question. 

If an acquisition team obtained a waiver to the cost allowability rules for something - I think that would be the authority to cite  - again, its not “we mutually agreed- read my warrant”. 

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Guest PepeTheFrog
On 3/18/2019 at 11:32 AM, joel hoffman said:

The KO and it’s acquisition team would not be complying with 1.602-1(b), if they decide to reimburse a contractor for paid income taxes in a contract mod.

Income taxes are not an allowable expense and are to be excluded from proposal and contract prices, if specifically identified.

 

On 3/15/2019 at 6:51 PM, joel hoffman said:

KO’s can not idemnify contractor’s from certain legal liabilities or responsibilities per various laws, including those examples that I cited.

For example, it ought to be obvious that  income taxes aren’t allowable expenses for reimbursement. If not obvious, read 31.205-41 (b) (1).

joel hoffman, please provide PepeTheFrog the same patience and respect PepeTheFrog has afforded you. This is an important topic and is relevant to anyone who deals with cost-reimbursement contracts. Inquiring minds need to know!

You made these assertions, quoted above.

Don Mansfield and others asked you a specific question whose answer potentially falsifies your assertions. That question is:

On 3/18/2019 at 11:14 AM, Don Mansfield said:

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

You refused to answer the question, several times, in several different ways.

One potential explanation is that, if you answer accurately and honestly, it shows that you did not consider a key section of the FAR on this topic, namely FAR 31.101, which allows contracting officers to deviate from the cost principles with advance approval of the agency head or designee. PepeTheFrog does not know of a special exception to this rule (that you can deviate from cost principles) pertaining to your income taxes example at FAR 31.205-41(b)(1).

You seem to think there is a special exception to this rule. If so, where is this special exception to FAR 31.101 (deviating from cost principles) regarding FAR 31.205-41(b)(1) (income taxes)? 

Alternatively, you seem to think that your personal opinion outweighs the plain language of the Federal Acquisition Regulation, when properly read "as a whole" and harmonized with FAR 1.602-1(b) and FAR 31.101. If so, why do you think that your personal opinion outweighs the plain language of the FAR?

Alternatively, maybe you are just not capable of acknowledging when you have a "learning moment." But those "learning moments" help both you and the entire Wifcon forum.

If there is some other explanation, PepeTheFrog is waiting to hear it. This is directly relevant to the award and administration of cost-reimbursement contracts, and you are a valued source of knowledge in this forum. PepeTheFrog thanks you in advance for your reciprocal patience.

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23 hours ago, Don Mansfield said:

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

Don, this leads to my favorite answer in government contracting, "it depends."  In some instances, a contracting officer can deviate from the cost principles and comply with FAR 1.602-1 as Pepe has indicated.  However, in some instances the contracting officer cannot.  For example, if a cost is made unallowable by statute such as 10 U.S.C. 2324, I don't see how a contracting officer could agree to make such a cost allowable.  In this regard, taxes of any sort are not listed as an unallowable cost in section 2324.

Let me pose a slightly different scenario than Joel did in regard to taxes.  State income taxes are generally an allowable cost for C corps.  However, an S corp. can elect not to pay Federal taxes on its income but to have the owner(s) pay taxes on the income of the corp. as part of their personal income tax liability.  Many state follow this pattern.  Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?

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On ‎3‎/‎5‎/‎2019 at 3:23 PM, CountryTime said:

What are your thoughts on a modification to a commercial PO to enact a slight reduction in service for remaining options (52.212-4(c) as the authority) and, in the same mod, exercising the first option period citing 52.217-9 in the verbiage of the mod?  Essentially citing two authorities in the same modification.  

If you a getting a signature from the contractor, why would you need to cite multiple authorities, doesn't their signature cover both the reduction in services, as well as the exercising of the option period at that point?

If you just checked 13 E, "required to sign this document..." and obtained their signature, then you really don't need an authority.  Your authority becomes the mutual agreement of the parties presumably acting in good faith.  That said, the form does instruct the user to "CHECK ONE" and appears to refer to blocks 13 A - D, some of which are fill-ins.  No judge is going to ding you if you have signatures from both contracting parties, with or without cited authority or checking any of those other boxes.  I know that many COs I worked under asserted that it was always a good idea to cite something incorporated into the contract.  Hence, they typically cited the commercial items changes clause.  I do not think citing one of these clauses means the specialist did not think about it.  To the contrary, maybe they overthought it.  Perhaps in most cases it's just the user of the form trying to fill it out per its exact instructions.

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4 hours ago, PepeTheFrog said:

One potential explanation is that, if you answer accurately and honestly, it shows that you did not consider a key section of the FAR on this topic, namely FAR 31.101, which allows contracting officers to deviate from the cost principles with advance approval of the agency head or designee. PepeTheFrog does not know of a special exception to this rule (that you can deviate from cost principles) pertaining to your income taxes example at FAR 31.205-41(b)(1).

You seem to think there is a special exception to this rule. If so, where is this special exception to FAR 31.101 (deviating from cost principles) regarding FAR 31.205-41(b)(1) (income taxes)? 

Alternatively, you seem to think that your personal opinion outweighs the plain language of the Federal Acquisition Regulation, when properly read "as a whole" and harmonized with FAR 1.602-1(b) and FAR 31.101. If so, why do you think that your personal opinion outweighs the plain language of the FAR?

Alternatively, maybe you are just not capable of acknowledging when you have a "learning moment." But those "learning moments" help both you and the entire Wifcon forum.

If there is some other explanation, PepeTheFrog is waiting to hear it. This is directly relevant to the award and administration of cost-reimbursement contracts, and you are a valued source of knowledge in this forum. PepeTheFrog thanks you in advance for your reciprocal patience.

Pepe, I already acknowledged that the acquisition team can request advanced approval to deviate from the Part 31.2 cost principles, which apply to the expressly unallowable income tax example. I said that I don’t think that it would be approved. There would have to be some extremely  good justification to request approval to deviate from what is the intent stated in 31.101 : “To the extent practicable, all organizations of similar types doing similar work will follow the same cost principles and procedures..” It will take more than “both sides agree, so give us approval to deviate” from a a cost principle which expressly disallows paying the cost of income taxes.

So- the KO cannot deviate from the cost principle concerning income taxes and comply with 1.602-1(b) if it can’t get approval via 31.101 to deviate. 

The safety example would be directly deviating from public policy, expressed in various regulations and mandatory FAR clauses and/or specifications. It’s not a cost principle in 31.2. Who do you think would allow a KO to contradict that?  

Indemnification isn’t a cost principle in 31.2. It is a legal matter. A Contracting Officer cannot, under their own authority or by mutual agreement of the parties, indemnify a contractor from any liability due to hazardous wastes or other legal responsibilities. And there might well be unfunded, indeterminate liabilities associated with indemnification issues, as I previously quoted that could lead to ADA violations. 

If a KO can obtain approval to deviate from a cost principle or any other legal or regulatory requirement - AND if they comply with 1.602-2 AND if they  are exercising sound business judgement in the best interest of the government, they can modify a contract, accordingly.  

There will be an applicable authority that can be cited. It won’t be “by mutual agreement of the parties; see my Warrant No. XXXXX.”

EDIT:  see also: 

“1.602-2   Responsibilities.

Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment. Contracting officers shall—

(a) Ensure that the requirements of 1.602-1(b) have been met, and that sufficient funds are available for obligation;

(b) Ensure that contractors receive impartial, fair, and equitable treatment; 

(c) Request and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate; and

(d) Designate...”

 

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4 hours ago, joel hoffman said:

If an acquisition team obtained a waiver to the cost allowability rules for something - I think that would be the authority to cite  - again, its not “we mutually agreed- read my warrant”.  

Joel,

You're being provoked by stolid antagonists, and you've fallen into the trap.  You are seasoned practitioner.  Heck, you were taking DAU classes in the 1990s when some of these guys were still playing beer pong or worse yet, getting/giving wedgies.  There are a lot of unnecessary details in this debate, much like in Congress.  But here's the bottom line and these things you actually already know.  There is a rather short list of conditions that need to be met to have a legally-binding contract; this is Contracts 101, which I had the distinct pleasure of learning about from a beautiful blonde prosecutor in a night class.  Included in that list is competency/clarity of mind/sobriety, i.e., I cannot draft the contract out on a bar on a cocktail napkin after imbibing several Tom Collins with the other guy, albeit I can have a binding contract scribed onto a cocktail napkin in the absence of wide-ruled paper [and] this is the big one, the terms of the contract must be entirely legal, which is to say, not contravening any statute.  For instance, I cannot contract to sell you two large shipping containers full of illegal narcotics, nor can we contract with one another to go into partnership to offer a service that aids people in evading state or federal tax law.  You get the point.  I hope this served as a reminder of the rudimentary, as well as offering some degree of entertainment.

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SPOILER ALERT

On ‎3‎/‎19‎/‎2019 at 12:14 AM, Don Mansfield said:

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

No ... @joel hoffman just has caveats (as many would), but the answer is NO.

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3 hours ago, Retreadfed said:

However, in some instances the contracting officer cannot.  For example, if a cost is made unallowable by statute such as 10 U.S.C. 2324, I don't see how a contracting officer could agree to make such a cost allowable.

I suppose that's true, but I can't find any stated limits on an agency's authority to deviate from the FAR. FAR 1.402 begins with "Unless precluded by law, executive order, or regulation..." So would a statute have to expressly say that deviations are precluded?

4 hours ago, Retreadfed said:

Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?

 Good question. I know that I don't know the answer.

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1 hour ago, Guardian said:

Joel,

You're being provoked by stolid antagonists, and you've fallen into the trap.  You are seasoned practitioner.  Heck, you were taking DAU classes in the 1990s when some of these guys were still playing beer pong or worse yet, getting/giving wedgies.  There are a lot of unnecessary details in this debate, much like in Congress.  But here's the bottom line and these things you actually already know.  There is a rather short list of conditions that need to be met to have a legally-binding contract; this is Contracts 101, which I had the distinct pleasure of learning about from a beautiful blonde prosecutor in a night class.  Included in that list is competency/clarity of mind/sobriety, i.e., I cannot draft the contract out on a bar on a cocktail napkin after imbibing several Tom Collins with the other guy, albeit I can have a binding contract scribed onto a cocktail napkin in the absence of wide-ruled paper [and] this is the big one, the terms of the contract must be entirely legal, which is to say, not contravening any statute.  For instance, I cannot contract to sell you two large shipping containers full of illegal narcotics, nor can we contract with one another to go into partnership to offer a service that aids people in evading state or federal tax law.  You get the point.  I hope this served as a reminder of the rudimentary, as well as offering some degree of entertainment.

Thanks, Guardian and thanks for reminding me.

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4 hours ago, Retreadfed said:

Let me pose a slightly different scenario than Joel did in regard to taxes.  State income taxes are generally an allowable cost for C corps.  However, an S corp. can elect not to pay Federal taxes on its income but to have the owner(s) pay taxes on the income of the corp. as part of their personal income tax liability.  Many state follow this pattern.  Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?

https://caselaw.findlaw.com/us-federal-circuit/1468581.html

 

 

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13 hours ago, here_2_help said:

Thanks Help. I did read 31.205-41(b) incorrectly. It only mentions Federal income taxes and excess profit taxes, not state income taxes being expressly unallowable.

I stand partly corrected!!  Yes Pepe, I will admit it when I discover that I am incorrect. 

31.215-41 (b)(3) does state that taxes for which an exemption from are available to the contractor directly are unallowable, as determined in the referenced case law. Thus, if a prime or subcontractor pays taxes that an exemption is available for, it would be an unallowable cost for reimbursement.

Edited by joel hoffman
Error Admitted error admitted. Error admitted.
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