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rsmith

Penalties for not complying with Mandatory Sources of Supplies and Services

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I'm preparing an incurred cost for a client and when briefing the contract, noticed the following clause: 

Supplies and services identified on the AbilityOne Procurement List must be purchased from AbilityOne participating nonprofit agencies unless a written exemption is granted by the Contracting Officer.
The Procurement List may be accessed at: http://www.abilityone.gov/.

When I glanced through the material purchases, there were plenty that are available through AbilityOne. Does anyone know whether there are any penalties for not complying with this contract clause? Could DCAA question any material that should have been purchased through them? I have not seen this before. 

Of course I'm having the process fixed going forward but I'm not sure how much risk they have for the prior year and a couple of months of this year. 

 

Thank you. 

 

 

 

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Can you elaborate? Is the incurred cost going to be submitted to the Government? Why? What type of contract is involved with the incurred cost? Fixed Price? Cost type? Other? Were non-compliant contemplated purchases proposed? Was a certificate of current cost or pricing data submitted to the Government?

Generally speaking from the civil law side, the way you explain it, the non compliant incurred costs could result in questioning its allowability for reimbursement. Depending on what all the facts are, there could be potential criminal liability. For example, if the material from a non approved source was a critical item, failed and caused harm to people or property.

I don't think the alarm should go off until all the facts are known and analyzed.

 

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Thank you for your reply. 

It is a CPFF contract. A certificate was not submitted for the year I am preparing the incurred cost for because it was competitive. The proposal did not take into account the mandatory source of supply and materials were proposed based on quotes from other vendors. 

There are no critical parts involved, most of the items that should have been purchased from AbilityOne are office supplies, some office furniture such as chairs and mats, toner cartridges, and cleaning supplies. Yes, these are typically overhead but are direct on this contract. 

 

 

 

 

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On ‎4‎/‎26‎/‎2019 at 9:57 AM, rsmith said:

Does anyone know whether there are any penalties for not complying with this contract clause?

What contract clause?

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1 minute ago, Retreadfed said:

What contract clause?

What I pasted is the exact clause in the contract and was in the RFP. 

Supplies and services identified on the AbilityOne Procurement List must be purchased from AbilityOne participating nonprofit agencies unless a written exemption is granted by the Contracting Officer.
The Procurement List may be accessed at: http://www.abilityone.gov/.

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On 4/26/2019 at 8:57 AM, rsmith said:

Does anyone know whether there are any penalties for not complying with this contract clause? Could DCAA question any material that should have been purchased through them? I have not seen this before. 

The government could deny payment for non-compliance with the contract, I suppose. Yes, the DCAA could question such costs, if they are aware of non-compliance.. Are they significant costs?

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Just now, joel hoffman said:

The government could possibly deny payment for non-compliance with the contract, I suppose. Yes, the DCAA could question such costs, if they are aware of non-compliance.. Are they significant costs?

I am having someone go through all of the purchases to determine what the risk is. It's a tedious process because you have to search the AbilityOne catalog. I can't imagine it being over $50,000 though. 

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4 minutes ago, rsmith said:

I am having someone go through all of the purchases to determine what the risk is. It's a tedious process because you have to search the AbilityOne catalog. I can't imagine it being over $50,000 though. 

Were the materials and supplies directly furnished to the government or were they consumed during contract performance?

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2 minutes ago, joel hoffman said:

Were the materials and supplies directly furnished to the government or were they consumed during contract performance?

A mixture of both. The majority were consumed during contract performance, however some such as furniture(that was purchased for use at space  provided at a gov't site) would become property of the government once the contract ends or if another contractor is selected for future year. 

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The consumables might be of low visibility.  The stuff to become gov't property might be more prominent and could be returned and replaced if someone made a big deal out of it...It is helpful that you are addressing the issue for future purchases.

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1 hour ago, joel hoffman said:

The consumables might be of low visibility.  The stuff to become gov't property might be more prominent and could be returned and replaced if someone made a big deal out of it...It is helpful that you are addressing the issue for future purchases.

Thank you for the insight. It's going to be fixed going forward. For ICS purposes I think it can be claimed and we'll just have to see what happens if DCAA questions it. 

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1 hour ago, rsmith said:

Thank you for the insight. It's going to be fixed going forward. For ICS purposes I think it can be claimed and we'll just have to see what happens if DCAA questions it. 

If DCAA questions the cost, the "unallowable" portion would seem to be any difference between the actual cost paid and what would have been paid if the proper source had been used. Otherwise, any remedy would seem to be administrative (i.e., for DCMA not DCAA).

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Good points. 

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I agree that the government can determine that the cost is unallowable because the contractor failed to comply with the contract.  

What I don’t know is how closely the DCAA auditors review the incurred cost type invoices. They generally used broader  “sampling” techniques on proposals for new contracts much to my chagrin. Our USACE civil works contract auditors were generally more thorough on civil works projects. However, USACE eliminated the internal CW auditors in the early 2000’s. After DCAA  took on those audits, the quality of the audits decreased significantly. 

 

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For unallowable costs penalty examples, see FAR 52.242-3

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