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Hello,

We have a subcontract agreement where the PoP expired. It is FFP LOE and we did not need the entire amount to complete the work. Can we invoice the remaining amount since it is FFP? Or do we treat it more like a T&M and forfeit the unused hours/funding since it is LOE?

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That's between you and the prime contractor.

FAR 16.207 discusses FFP-LOE for a prime contract.  If you were a prime contractor who did not provide the specified level of effort within the stated period of time, and your prime contract was FFP-LOE, your contract could (should?) be terminated for your default (your failure to provide the specified level of effort within the stated period of time).  That's the nature of the FFP-LOE contract.  On the other hand, if you did provide the specified level of effort within the stated period of time, the Government would pay you the agreed-upon fixed dollar amount.

It sounds to me like your alleged FFP-LOE subcontract is being treated as a T&M subcontract. 

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8 hours ago, CMVA2019 said:

Can we invoice the remaining amount...?

What is the language in the payment clause of your contract? How is the contract language for the LOE work worded i.e., total hours or broken down by labor category? What % of hours/dollars were "unused"? What facts are motivating you to questioning what to do?

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15 hours ago, Neil Roberts said:

What is the language in the payment clause of your contract? How is the contract language for the LOE work worded i.e., total hours or broken down by labor category? What % of hours/dollars were "unused"? What facts are motivating you to questioning what to do?

It was signed before I started working with the company so it's pretty vague. Payment clause is basically just NET30 and "Work will be performed on an FFP LOE basis." Hours are broken down by labor category. Only about 45% of the funding has been billed to date. The facts motivating me to question is that it is a sizable amount of money that we would be billing for if we billed for the remainder, and while we completed everything in the SOW, we did not provide the specified number of hours by category because we completed the work without needing that many hours.

 

19 hours ago, ji20874 said:

That's between you and the prime contractor.

FAR 16.207 discusses FFP-LOE for a prime contract.  If you were a prime contractor who did not provide the specified level of effort within the stated period of time, and your prime contract was FFP-LOE, your contract could (should?) be terminated for your default (your failure to provide the specified level of effort within the stated period of time).  That's the nature of the FFP-LOE contract.  On the other hand, if you did provide the specified level of effort within the stated period of time, the Government would pay you the agreed-upon fixed dollar amount.

It sounds to me like your alleged FFP-LOE subcontract is being treated as a T&M subcontract. 

It iis definitely being treated more like a T&M, I'm not sure why the prime originally chose FFP LOE to begin with as T&M would have been more appropriate than any type of FFP.

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I have seen at least one similar situation where a testing firm only billed for the hours/tests expended on a construction project where there was a great underrun - and then offered to let the government use the remaining hours for additional (testing) services. 

We were naturally happy and willing to use that firm in the future. 

In your case, it might be advantageous in the long run -assuming that there are opportunities for continuing association/work - to forego the remainder, consider that you got paid for what you provided, and get on the contractor's sought after sub list. Good customer relationships are often worth more in the long run. 

Don't  know who estimated the level of effort - you or the prime but if it was you, the prime might think highly of you for not taking advantage of the situation or might resent the high estimate if you bill for the large amount of unexpended effort.

If you didn't provide the LEVEL of effort and still got done, the contractor may well have a legitimate gripe, which could discourage it from future offers to you. 

Since you asked if you should just forego the additional billing, you might already have had some thoughts.   These are just some things to think about...

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23 hours ago, CMVA2019 said:

It is definitely being treated more like a T&M, I'm not sure why the prime originally chose FFP LOE to begin with as T&M would have been more appropriate than any type of FFP.

Maybe the prime contractor can't tell the difference between FFP-LOE and T&M?  If so, that contractor isn't alone -- that lack of understanding is common.  If more people would actually read FAR 16.207, well, I'm told that few people like to read anymore.  Someone needs to make an app that (for FFP-LOE)!

But if both parties (the prime's old management and your old management) really in their minds at the time envisioned a T&M approach (even though they erringly styled it as FFP-LOE), maybe it is best for you to continue to treat it as T&M.

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We once had a large contract for a phase of civil works program. The LB contractor's site manager was a very cantankerous individual who seemed to have a big distrust for the government.

We had a fairly small change order to build a site restroom that I negotiated with him fairly early on in the contract.

 After analyzing the proposal, I saw some items, amounting to couple of hundred dollars, that I could have negotiated over. But I also saw that he had completely left out all of the interior painting as well as painting the exterior trim, doors, etc. 

I asked, my boss, the ACO,  if I could accept the proposal but also explain to the PM that they had overlooked painting for the sake of building some trust and my boss agreed.  

The PM came in with his usual curt attitude and demeanor. He likely expected us to nitpick his proposal.

I told him that I had analyzed his proposal and overall, it was reasonable.

Then I explained that he had omitted all the painting and told him my estimate for that cost. He was totally disarmed.

He called his office engineer at their trailer and got a quick confirmation and agreed. From that point on, we built a better, more trusting relationship. I had never seen other than frowns on his face before that meeting. 

It may have cost the government a couple hundred extra dollars for that mod but the change in attitude and building of trust was priceless for the project.

Look for long range benefits...

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You may wish to consider the first step being a discussion with your management and then your customer's management if that is your company's business judgement. The degree to which your customer may be flexible as to your potential profit, could be driven by its contract, if any, with its customer. You can still take a position that the solution is negotiable with your customer. On the other hand I don't think you would be the first company to bill it and see what happens. This might depend to a degree on whether this is a commercial deal or under a government contract.

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Thanks all! All great suggestions. I believe a conversation between managements is definitely in order, I just wanted to figure out our rights first, regardless of whether we end up exercising them or not.

Thanks!

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