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We are the prime on a CPFF contract.  We issued a FFP PO to a subcontractor.  The PO with the subcontractor has ended, all work and invoices paid however the close out process of identifying and dis-positioning property at the subcontractors site has not been resolved.  We have been going back and forth for over 3 months on this.  They did not document all the property first time.  Then, our program manager asked them for a unit to be returned to us.  They complied and shipped a unit to the PM.  We, in turn, asked the subcontractor to re-do the Form again based on the shipment request, and due to the discrepancy from the first report.  Bottom line is, I am done asking, emailing and pleading - would it be within our contractual right to issue a cure notice, under the threat of a TfD even though the purchase order is closed on the books? If not a cure letter that could invoke the TfD, -  any suggestions?

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1 hour ago, general_correspondence said:

We are the prime on a CPFF contract.  We issued a FFP PO to a subcontractor.  The PO with the subcontractor has ended, all work and invoices paid however the close out process of identifying and dis-positioning property at the subcontractors site has not been resolved.  We have been going back and forth for over 3 months on this.  They did not document all the property first time.  Then, our program manager asked them for a unit to be returned to us.  They complied and shipped a unit to the PM.  We, in turn, asked the subcontractor to re-do the Form again based on the shipment request, and due to the discrepancy from the first report.  Bottom line is, I am done asking, emailing and pleading - would it be within our contractual right to issue a cure notice, under the threat of a TfD even though the purchase order is closed on the books? If not a cure letter that could invoke the TfD, -  any suggestions?

From the facts provided, my opinion is that you, the prime, have been negligent in administering your property system. You didn't state that the property was contractor-acquired or government-furnished; however, your use of the term "the Form" makes me suspect it might be. If so, your contract clause 52.245-1 establishes your responsibilities, as prime contractor, in administering your property system. These responsibilities include managing and controlling government property held by your subcontractors.

So, instead of emailing and pleading and threatening something like a T4D (which is a ridiculous threat after completion of performance and payment of invoices), I suggest you mobilize a team of functional experts and fly them to your subcontractor. They should then take a final inventory and help the subK complete "the Form." Charge the cost to your prime contract as non-billable.

As a lesson learned, consider the following:

1. Don't pay the final invoice untill all certifications have been received, reviewed, and verified for accuracy.

2. You are responsibile for government property held by your subcontractors. If you will not or cannot live up to this responsibility, do not give your subcontractors any government property.

3. PMs have a lot to do. Managing and controlling government property is -- and should be -- very very far down their list of "to-do's". That's why most prime contractors have property people dedicated to sustaining their government property system.

Hope this helps.

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2 hours ago, general_correspondence said:

would it be within our contractual right to issue a cure notice, under the threat of a TfD even though the purchase order is closed on the books? If not a cure letter that could invoke the TfD, -  any suggestions?

No one here can answer that question without knowing what is in the contract.

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6 hours ago, general_correspondence said:

The PO with the subcontractor has ended, all work and invoices paid...the purchase order is closed on the books.

You indicate that all work has not ended. Inventory and disposition of property is "work." Therefore , your system should not permit "closing on the books" of any purchase order where your records indicate (hopefully yours do) that company or Government property is in a supplier's possession. If the property is the prime's property, any such lack of controls is harming its shareholders, who could bring a derivative lawsuit for wasting resources, and it could affect bottom line profits in re-procuring the same property for use in support of another prime. If the property is Government property,  there could be serious harm to the company's ability to obtain more work from the Government, especially if the Government audits the property system. You may have monetary liability to the Government for its value. It sounds like you have a system control deficiency. Your company should launch an internal review of all prime contracts to determine the extent to which there still may be Government property in the possession of a supplier under any prime contract, act accordingly to resolve it, and ensure that the property/accounts payable/supplier management systems interact with one another in such a way as to prevent a reocurrance.

You may wish to re-open the purchase order "on the books." You might consider issuing a change notice to delete inventory and disposition of all government and prime property and negotiate a credit change notice that includes the cost of the prime performing this work. Instruct the supplier to ship all property to you. The prime work seems like it could be reimbursed by the Government at least to the extent of the eventual credit change notice value. You may need to set up a separate charge number for this work. Any property not accounted for consistent with your company's records, should be valued in the change notice negotiation as well. Alternatively, you may explore whether you have the right/and or makes business sense to offset the eventual value of the credit change against money your company owes this supplier under other purchase orders.      

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Neil

The purchase order with the Sub was a straight FFP  - buy 10 widgets, and done.  However the prime contract we hold  is a CPFF and still active.  The unspoken and undocumented scope of work that exists, that was not documented in the FFP purchase order with the Sub - of the 10 pieces of the suppliers hardware - 2 came here, 2 went there, 2 remained with the supplier, and 2 are shipped to some other "client" site.  Not only that, they can move around even more, if the client wishes,  so keeping up with this is very difficult and burdensome. 

Based on this, would re-opening and adding a scope of work for the widget supplier be a loaner agreement with government property?  that sounds easy, but is adding a no cost line item to a FFP purchase order unilateral, or even wise?  Seems I would need to convert to a T&M, include how they need to DD1149 every move of equipment, report quarterly back to the prime on location and status.  or would a better idea be to close the FFP as we are on the road to doing, and maybe issuing a "loaner agreement" PO?  What contract type is best for loaner PO with a ceiling price, T&M?  any suggestions?   

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general_ , there seem to be a lot of details to understand about the transaction and your company systems and business risks to form potential solutions. You seem to be on to some concepts yourself.  Suggest you engage an off-line expert in contracts to assist. I don't believe this forum is appropriate to take further, but I could be wrong.      

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