Jump to content
The Wifcon Forums and Blogs

Sign in to follow this  
chrisp

8(a) Mentor Protege Performance of Work Requirements

Recommended Posts

A few of us have been researching the performance of work requirements for a construction contract which was awarded to an 8(a) mentor-protege JV. We know that 15% of the cost of the contract must be performed by the JV, 13 CFR 125.6(a)(3) & (i), 124.510. We also know that the 8(a) partners to the JV must perform a "significant portion" of the work the JV performs, 13 CFR 124.513(d). We also know that the SBA's proposed rules aim to define significant portion as 40% of what the JV performs. What we do not know is what exactly cost of the contract means. We have read the definitions in 13 CFR 125.6(e), but have trouble practically understanding how they apply to a construction contract.

Also, we know that the performance of work requirements go toward responsibility and compliance is determined at bid time (though the proposed rules impose add'l reporting requirements.)

Further, most if not all of our jobs are firm fixed price contracts. As such, we do not deal much with the concepts of direct and indirect costs. We know that the cost of the contract does not include profit, fees, materials, and equipment. However, when you take these things out, what is left? Also, it is difficult to discern what materials means. The definition in e(4) is not very illuminating. Does this include materials used by the subs too?

Also, we believe there are misconceptions that the 8(a) partner must perform 15% of the labor. When you read the regulation, that is not what it requires of the 8(a) partner on a construction contract.

For example, how would you calculate out how much the 8(a) partner must complete on a $10 million job? Fill in whatever numbers you'd like for subcontracted $$, materials, equipment, profit, fees, etc . . .

Any practical experience or insight here would be greatly appreciated.

Share this post


Link to post
Share on other sites

A few of us have been researching the performance of work requirements for a construction contract which was awarded to an 8(a) mentor-protege JV. We know that 15% of the cost of the contract must be performed by the JV, 13 CFR 125.6(a)(3) & (i), 124.510. We also know that the 8(a) partners to the JV must perform a "significant portion" of the work the JV performs, 13 CFR 124.513(d). We also know that the SBA's proposed rules aim to define significant portion as 40% of what the JV performs. What we do not know is what exactly cost of the contract means. We have read the definitions in 13 CFR 125.6(e), but have trouble practically understanding how they apply to a construction contract.

Also, we know that the performance of work requirements go toward responsibility and compliance is determined at bid time (though the proposed rules impose add'l reporting requirements.)

Further, most if not all of our jobs are firm fixed price contracts. As such, we do not deal much with the concepts of direct and indirect costs. We know that the cost of the contract does not include profit, fees, materials, and equipment. However, when you take these things out, what is left? Also, it is difficult to discern what materials means. The definition in e(4) is not very illuminating. Does this include materials used by the subs too?

Also, we believe there are misconceptions that the 8(a) partner must perform 15% of the labor. When you read the regulation, that is not what it requires of the 8(a) partner on a construction contract.

For example, how would you calculate out how much the 8(a) partner must complete on a $10 million job? Fill in whatever numbers you'd like for subcontracted $$, materials, equipment, profit, fees, etc . . .

Any practical experience or insight here would be greatly appreciated."

Here is the wording from 13 CFR 125.6 (e)

"125.6 (e) Definitions. The following definitions apply to this section:

(1) Cost of the contract. All allowable direct and indirect costs allocable to the contract, excluding profit or fees.

(2) Cost of contract performance incurred for personnel. Direct labor costs and any overhead which has only direct labor as its base, plus the concern's General and Administrative rate multiplied by the labor cost.

(3) Cost of manufacturing. N/A

(4) Cost of materials. Includes costs of the items purchased, handling and associated shipping costs for the purchased items (which includes raw materials), off-the-shelf items (and similar proportionately high-cost common supply items requiring additional manufacturing or incorporation to become end items), special tooling, special testing equipment, and construction equipment purchased for and required to perform on the contract. In the case of a supply contract, (N/A)

(5) Off-the-shelf item. An item produced and placed in stock by a manufacturer, or stocked by a distributor, before orders or contracts are received for its sale. The item may be commercial or may be produced to military or Federal specifications or description. Off-the-shelf items are also known as Nondevelopmental Items (NDI).

(6) Personnel. Individuals who are “employees” under ?121.106 of this chapter except for purposes of the HUBZone program, where the definition of “employee” is found in ?126.103 of this chapter.

(7) Subcontracting. That portion of the contract performed by a firm, other than the concern awarded the contract, under a second contract, purchase order, or agreement for any parts, supplies, components, or subassemblies which are not available off-the-shelf, and which are manufactured in accordance with drawings, specifications, or designs furnished by the contractor, or by the government as a portion of the solicitation. Raw castings, forgings, and moldings are considered as materials, not as subcontracting costs. Where the prime contractor has been directed by the Government to use any specific source for parts, supplies, components subassemblies or services, the costs associated with those purchases will be considered as part of the cost of materials, not subcontracting costs.

(f) Compliance will be considered an element of responsibility and not a component of size eligibility.

(g) The period of time used to determine compliance will be the period of performance which the evaluating agency uses to evaluate the proposal or bid. If the evaluating agency fails to articulate in its solicitation the period of performance it will use to evaluate the proposal or bid, the base contract period, excluding options, will be used to determine compliance. In indefinite quantity contracts, performance over the guaranteed minimum will be used to determine compliance unless the evaluating agency articulates a different period of performance which it will use to evaluate the proposal or bid in its solicitation.

(h) Work to be performed by subsidiaries or other affiliates of a concern is not counted as being performed by the concern for purposes of determining whether the concern will perform the required percentage of work.

(i) Where an offeror is exempt from affiliation under ?121.103(h)(3) of this chapter and qualifies as a small business concern, the performance of work requirements set forth in this section apply to the cooperative effort of the joint venture, not its individual members."

Rented construction equipment is not considered to be "materials". Field and home office overhead expenses, such as shops, offices, rent, labor, supplies, etc. is counted in the cost of the contract. Bonding cost is included. SBA used to tell us that, unless the materials portion of subcontracts could be identified, to include the entire cost of the subcontract in cost of the contract. Where the contractor can identify material costs within the other subcontract costs, deduct them. "Materials" are items that generally go into the work, while "supplies" don't. Supplies are usually support items, like small tools, shop supplies, office supplies, temporary fencing and the like.

Share this post


Link to post
Share on other sites
Guest carl r culham

Contract Price $10,000,000 less profit/fee where profit /fee is concluded to be $1,000,000 less costs for materials of $5,000,000 equals $4,000,000, the contract value for comparative purposes of compliance with 13 CFR 125.6. $4,000,000 times 15% equals $600,000. 40% times $600,000 equals $240,000.

Compliance with 13 CFR 125.6 is not an exercise in number crunching it is a serious matter of responsibility and program eligibility for a an 8(a) firm. 13 CFR 124.510 requires the performance of work requirements and that the firm is to certify to the performance of work requirements. A firm may be terminated from the 8(a) Program for failure to live up to the requirements of the eligibility of the Program or false certifications. See 13 CFR 124.303(10) and 13 CFR 124.501(i).

In my experience I have demanded that the firm prove its compliance even if a sealed bid price FFP contract through a competitive 8(a) set-aside. Ask the firm for the numbers that proves their required performance. It is not a matter of snooping it is a matter of Program participation for which they held to. Also note that the firm should have been figuring out whether they meet the performance requirement or not anyway as Program participation requires them to do so. In your case with the JV of a mentor/protege 8(a) this is even highlighted more as the mentor should be well aware of the requirements too!

If the firm and or JV balks or otherwise does not provide then submit the JV for a COC and let SBA do the number crunching.

Share this post


Link to post
Share on other sites

Thanks guys. Your insight was helpful. We had questions about whether materials covered the sub's materials. I have a feeling I may have to review things a couple more times before I get it all straight, but I appreciate the input.

Share this post


Link to post
Share on other sites
Thanks guys. Your insight was helpful. We had questions about whether materials covered the sub's materials. I have a feeling I may have to review things a couple more times before I get it all straight, but I appreciate the input.

I don't know positively for sure, but I think that the reason materials aren't counted in either the numerator or denominator under the "Limitation of Subcontracting" (LOS) Clause (52.219-14) is because primes will often try to claim self performance where they simply purchase materials for their subs to install.

I used to see it often on non-small business set-aside construction contracts, where the prime has to self-perform a specified amount of the work with its own forces under the Performance of Work by the Contractor Clause (52.236-1) . I would reject that because it isn't self performance with ones "own forces". Congress or SBA got it right (or at least better) when they developed the LOS clause for small business set-asides. Note that, even though the same clause is used, there are slight variations in the SBA rules for interpretation of the LOS clause for 8(a) and for HubZone contracting.

Share this post


Link to post
Share on other sites

We now are facing this issue with a non-8(a) or set aside contract. Are the rules different for large business jobs? I know all the meat of the regulations are in FAR 125.6, but those rules seem to apply just to small business contracts. Here, it would be really helpful if materials didn't count in the cost of the contract.

I think these are the applicable FARs for non-small biz jobs: FAR clause 52.236-1 & 36.501 as joel referenced earlier.

Can you help? Are materials still excluded from the cost of the contract on large business jobs?

Share this post


Link to post
Share on other sites
Guest carl r culham

Chrisp - Yes they are different.

Basically Limitations on Subcontracting (52.219-14) is a measure to ensure that the firm is performing the work as a small business or in the case of your earlier question, and my post, a dual measure in the case of an 8(a) firm to ensure they are not only a performing as small business but performing the work within the eligibility requirements of the 8(a) Program. In other words specific to a small business small business set aside a small business firm that fails to meet the subcontracting limitations could be deemed to be other than a small business and not eligible for award of the set aside procurement - it is a size determination factor.

Performance of Work by the Contractor (52.236-1) has its purpose as stated in FAR 36.501(a) which is to assure adequate interest of the contractor in the performance of the work.

As to the measure to use in calculating for FAR 52.236-1 I have never seen a formula but maybe others have and will post for you. When I encountered the need to calculate I again would do my own best effort which might include, depending on the type of contract, going to the contractor for information to assist in confirming compliance.

Share this post


Link to post
Share on other sites

I found the following template calculation guide online. I think it was on the national guard's website. I think this may be only for 8(a) jobs though. I think I saw a different calculation for non-small biz jobs which may not have included the line to take out materials, but I am having a hard time re-finding it. Actually, I just relocated it and it is below the 8(a) calculation.

A. Clearly describe the work to be self-performed:

_______________________________________________________________________

_______________________________________________________________________

_______________________________________________________________________

B. Show Calculation of Self-Performed Work:

B.1 Total Proposed Price: $_______________

B.2 Subtract all G&A, home office overhead, prime ($______________) contractor's markups for profit, bond, state use tax, etc. on self- performed and subcontracted work

B.3 Subtract identifiable cost of materials to be incorporated ($______________) into the work

B.4 Remainder is "Total Cost of the Contract" = $______________

B.5 "Work to be self-performed": = $______________ (only cost for mobilization and utilization of owned or rented plant and equipment to be operated by the contractor's own employees, labor for equipment operated by contractor's own employees; contractor's own labor to fabricate or to install materials into the finished construction; (NON Design/Build Only: performance by the contractor's own employees of design work, land surveys and other engineering or technical specialist services required by the contract); supplies to directly support the aforementioned work to be accomplished by the contractor's own employees; and the contractor's own job overhead costs. NO MATERIALS!

B.6 % Self-performed Work = Line B.5/ Line B.4 X 100% = _____________

I found this second calculation template which lends credibility to the idea that materials may be included in the "cost of the contract" for non-8(a) jobs. Notice, it doesn't have line B.3 as the other does. On page 31 of 516 of the word doc found at the link below (hopefully it works), it gives some good information on this point. The document is from 2000, but I still believe it may be helpful.

http://www.google.com/url?sa=t&source=...PTg&cad=rja

Use a format similar to the following to identify and calculate cost of the work to be self-performed. Refer to the definitions pertaining to "Self-performance of work", "On the site" and "Total amount of work to be performed under the contract". Include this information in the envelope for Volume II (Pro Forma Requirements), if undetermined until the specified deadline for proposal submission. Otherwise include it in Volume I (Performance Capability) in TAB A:

A. Clearly describe the work to be self-performed: _______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

B. Show Calculation of Self-Performed Work:

B.1 Total Bid Price: $__________________

B.2 Subtract Design Cost: ($ )

B.3 Subtract G&A, home office overhead, prime contractor's

markups for profit, bond, state use tax, etc. ($ )

B.4 Remainder is "Total amount of work to be performed

under the Contract" = $________________

B.5 "Work to be self-performed": = $________________

(Includes mobilization and utilization of owned or rented plant

and equipment to be operated by the prime contractor's own

employees; only those materials, which will be both purchased

and installed by the prime's own forces; labor associated with

those aforementioned materials or equipment; only those

supplies to directly support work performed by the contractor's

own employees; and the contractor's own job overhead costs.)

B.6 % Self-performed Work = Line B.5/ Line B.4 X 100% = %

________________________________________________________________________________

__

B.4 Remainder is "Total Cost of the Contract" = $______________

B.5 "Work to be self-performed": = $______________ (only cost for mobilization and utilization of owned or rented plant and equipment to be operated by the contractor's own employees, labor for equipment operated by contractor's own employees; contractor's own labor to fabricate or to install materials into the finished construction; (NON Design/Build Only: performance by the contractor's own employees of design work, land surveys and other engineering or technical specialist services required by the contract); supplies to directly support the aforementioned work to be accomplished by the contractor's own employees; and the contractor's own job overhead costs. NO MATERIALS!

B.6 % Self-performed Work = Line B.5/ Line B.4 X 100% = _____________

Share this post


Link to post
Share on other sites
A few of us have been researching the performance of work requirements for a construction contract which was awarded to an 8(a) mentor-protege JV. We know that 15% of the cost of the contract must be performed by the JV, 13 CFR 125.6(a)(3) & (i), 124.510. We also know that the 8(a) partners to the JV must perform a "significant portion" of the work the JV performs, 13 CFR 124.513(d). We also know that the SBA's proposed rules aim to define significant portion as 40% of what the JV performs. What we do not know is what exactly cost of the contract means. We have read the definitions in 13 CFR 125.6(e), but have trouble practically understanding how they apply to a construction contract.

Also, we know that the performance of work requirements go toward responsibility and compliance is determined at bid time (though the proposed rules impose add'l reporting requirements.)

Further, most if not all of our jobs are firm fixed price contracts. As such, we do not deal much with the concepts of direct and indirect costs. We know that the cost of the contract does not include profit, fees, materials, and equipment. However, when you take these things out, what is left? Also, it is difficult to discern what materials means. The definition in e(4) is not very illuminating. Does this include materials used by the subs too?

Also, we believe there are misconceptions that the 8(a) partner must perform 15% of the labor. When you read the regulation, that is not what it requires of the 8(a) partner on a construction contract.

For example, how would you calculate out how much the 8(a) partner must complete on a $10 million job? Fill in whatever numbers you'd like for subcontracted $$, materials, equipment, profit, fees, etc . . .

Any practical experience or insight here would be greatly appreciated.

Note, that pursuant to revisions to the SBA's 8(a) rules effective 14 March 2011, the 8(a) member of an M/P JV must perform 40% of the work performed by the JV.

Share this post


Link to post
Share on other sites
I found the following template calculation guide online. I think it was on the national guard's website. I think this may be only for 8(a) jobs though. I think I saw a different calculation for non-small biz jobs which may not have included the line to take out materials, but I am having a hard time re-finding it. Actually, I just relocated it and it is below the 8(a) calculation.

A. Clearly describe the work to be self-performed:

_______________________________________________________________________

_______________________________________________________________________

_______________________________________________________________________

B. Show Calculation of Self-Performed Work:

B.1 Total Proposed Price: $_______________

B.2 Subtract all G&A, home office overhead, prime ($______________) contractor's markups for profit, bond, state use tax, etc. on self- performed and subcontracted work

B.3 Subtract identifiable cost of materials to be incorporated ($______________) into the work

B.4 Remainder is "Total Cost of the Contract" = $______________

B.5 "Work to be self-performed": = $______________ (only cost for mobilization and utilization of owned or rented plant and equipment to be operated by the contractor's own employees, labor for equipment operated by contractor's own employees; contractor's own labor to fabricate or to install materials into the finished construction; (NON Design/Build Only: performance by the contractor's own employees of design work, land surveys and other engineering or technical specialist services required by the contract); supplies to directly support the aforementioned work to be accomplished by the contractor's own employees; and the contractor's own job overhead costs. NO MATERIALS!

B.6 % Self-performed Work = Line B.5/ Line B.4 X 100% = _____________

I found this second calculation template which lends credibility to the idea that materials may be included in the "cost of the contract" for non-8(a) jobs. Notice, it doesn't have line B.3 as the other does. On page 31 of 516 of the word doc found at the link below (hopefully it works), it gives some good information on this point. The document is from 2000, but I still believe it may be helpful.

http://www.google.com/url?sa=t&source=...PTg&cad=rja

Use a format similar to the following to identify and calculate cost of the work to be self-performed. Refer to the definitions pertaining to "Self-performance of work", "On the site" and "Total amount of work to be performed under the contract". Include this information in the envelope for Volume II (Pro Forma Requirements), if undetermined until the specified deadline for proposal submission. Otherwise include it in Volume I (Performance Capability) in TAB A:

A. Clearly describe the work to be self-performed: _______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

B. Show Calculation of Self-Performed Work:

B.1 Total Bid Price: $__________________

B.2 Subtract Design Cost: ($ )

B.3 Subtract G&A, home office overhead, prime contractor's

markups for profit, bond, state use tax, etc. ($ )

B.4 Remainder is "Total amount of work to be performed

under the Contract" = $________________

B.5 "Work to be self-performed": = $________________

(Includes mobilization and utilization of owned or rented plant

and equipment to be operated by the prime contractor's own

employees; only those materials, which will be both purchased

and installed by the prime's own forces; labor associated with

those aforementioned materials or equipment; only those

supplies to directly support work performed by the contractor's

own employees; and the contractor's own job overhead costs.)

B.6 % Self-performed Work = Line B.5/ Line B.4 X 100% = %

________________________________________________________________________________

__

B.4 Remainder is "Total Cost of the Contract" = $______________

B.5 "Work to be self-performed": = $______________ (only cost for mobilization and utilization of owned or rented plant and equipment to be operated by the contractor's own employees, labor for equipment operated by contractor's own employees; contractor's own labor to fabricate or to install materials into the finished construction; (NON Design/Build Only: performance by the contractor's own employees of design work, land surveys and other engineering or technical specialist services required by the contract); supplies to directly support the aforementioned work to be accomplished by the contractor's own employees; and the contractor's own job overhead costs. NO MATERIALS!

B.6 % Self-performed Work = Line B.5/ Line B.4 X 100% = _____________

I just noticed this form. It looks like one that I developed back in the mid-1990's for compliance with Clause 52.219-14, Limitations on Subcontracting on construction contracts. Was this from the Air National Guard website? By the way, I updated this form, circa 2005. Plus I developed separate forms for Hub-Zone (same clause) and unrestricted construction contracts, subject to clause 52.236-1 Performance of Work by the Contractor.

Share this post


Link to post
Share on other sites
I just noticed this form. It looks like one that I developed back in the mid-1990's for compliance with Clause 52.219-14, Limitations on Subcontracting on construction contracts. Was this from the Air National Guard website? By the way, I updated this form, circa 2005. Plus I developed separate forms for Hub-Zone (same clause) and unrestricted construction contracts, subject to clause 52.236-1 Performance of Work by the Contractor.

OOOh. That is an old design-build guidance document that I posted on my former office's website many years ago. No, it wasn't the Air Force National Guard website. It is the Huntsville Engineering and Support Center, US Army Corps of Engineers - Chemical Demilitarization Directorate. At the time, the Corps had no official design-build guidance and the design-build proponent at HDQTRS asked me to post stuff on our website. It was a pretty sorry state of affairs when an organization doing billions of dollars worth of construction - much of it by design-build - didn't have any "Official" design-build SOP's.

I don't know if the forms are current. I'll try to find the most current ones when I get time.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.
Sign in to follow this  

×