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Modify Contract Type from FFP to T&M

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The Contract Specialist awarded a firm-fixed price BPA, which consist of a base and four 12-month option periods. The BPA was put in place to allow the Agency to place individual call orders for toner and toner supplies needed throughout the Agency.  Under the previous BPA, the program office would obligate funds and purchase toner by drawing down against the funds obligated versus placing individual call orders. This drawing down allowed for a quicker delivery of toner for the program office. When the BPA was renewed (thru Ability One Program), the former CO informed the program office that they could no longer obligate funds and draw down against the funds, but instead place individual call orders on an as-needed-basis. The program office has been following this process; however, due to delays from processing the request to receiving the toner, the Branch Chief (CO) recommended that the Contract Specialist change the contract type from FFP to T&M. The Branch Chief CO's rationale for changing the contract type to T&M - it would expedite the toner process. How is this even possible for a commercial product??? I don't understand the Branch Chief COs rationale. Can someone provide an explanation? I would greatly appreciate it.

 

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T&M would not seem to be appropriate.

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On 7/19/2019 at 6:07 PM, here_2_help said:

T&M would not seem to be appropriate.

Im with you here. 

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Agree...not appropriate.  By all info so far it seems a straight supply or in other words no time?

Has a Government Ourchase Card been considered?

Edit - Has the Branch Chief CO this and explained his/her rationale as to how the application applies.  I think he/she should.

From FAR part 16 on application for use of a T&M contract.

"(c) Application. A time-and-materials contract may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. "

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C Culham,

I agree, there is no time or labor for a straight supply. I have recommended that a purchase card be considered for the purchase of the toner and I have requested that the CO (Branch Chief) provide a rationale for his recommendation. Thanks for your recommendation.

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HTL, because the orders under the BPA are for toner, it seems to me that you are acquiring a commercial item.  In that case, have you considered the mandate in FAR 12.207?  The way I read that section, a T&M contract is prohibited from being used to acquire supplies that are a commercial item.

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Agree with Retreadfed. I've set up Toner BPAs before - place the call and get the toners, as needed.  If the lead time is too long, consider setting up a BPA with a vendor with a shorter turn-around time.  Also, I only allowed high-yield toners on my BPA (if they existed for subject printers). 

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On 7/19/2019 at 5:11 PM, Here_To_Learn said:

drawing down against the funds obligated versus placing individual call orders.


My guess is that under the new BPA, the CO is using some severely restrictive interpretation of 'as-needed' (or perhaps what counts as a ''bona fide need'). 

  • The CO has decided that buying toner on a FFP basis isn't legit unless its needed right now - the toner in use today is running low.  Once this happens - and the program office needs the toner imminently - then the program gets the green light to buy more, but has to go through a lengthy contracting process to issue a call for that toner.
  • I speculate that toner's 'lengthy contracting process' probably has a very long lead time (likely 30 days or 60 days),  and there no expedited contracting process  due to agency policy or culture.  
  • I further speculate the CO thinks that other than the lower toner warning, it's not possible at the time of placing the order to accurately estimate anticipated need with any reasonable degree of confidence.  Therefore the only way to buy more than one toner at a time is via T&M.  (FAR 12.207).
  • An additional reason to switch to T&M is that a T&M order would effectively replicate the previous BPA's  'draw down' method in practice.   Program office no longer needs to buy toner only at the instant it is needed, but can issue a T&M order for its annual estimated usage of toner.  Once the order is awarded and money obligated, the program office then can directly get the toner from the vendor whenever needed without having to go through contracting (up to the T&M ceiling).

Disclosure: I am fully aware this is a wasteful and dumb way to do things, but it fits the facts and my intuitions about how some CO's think.

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I think it depends on how you intend to "obligate" funds against the BPA. In the original draw-down example, the Government bought the amount of toner they "obligated" against the BPA, and now they are just pending delivery when a call is placed. Otherwise it wouldn't actually be an "obligation." This works fine if you have a reasonable idea of how much you'll order in a year, and have already taken care of any competition requirements up front, i.e. when the original order was placed. If you didn't compete up front but are placing orders over the micro-purchase threshold and you want to maintain three BPA holders that you can place calls against it gets trickier to record obligations for all three BPAs in advance of placing calls, because once you obligate the funds you've made the purchase. In this case it might be better to hold a funding document with a specific amount committed against the contract, but don't obligate until the calls are placed.

With the competition requirements for calls over the MPT and the technical challenges in recording obligations when calls are placed I think the only real advantage of BPAs is to allow government commercial purchase card (GCPC) holders to place orders where they would otherwise be restricted by the vendor's terms and conditions.

In the example above, assuming the GCPC process is too slow to place orders, I think I would just place a single competitive annual order for no more than an estimated year's worth of toner to be delivered within 48 hours of notification (or whatever the required timeline is) by technical direction letter or something. Just know that once the order is placed the money is obligated and the government owns the toner. The contractor is just holding it for you as part of the contract until you ask for it.

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On ‎7‎/‎29‎/‎2019 at 12:34 PM, General.Zhukov said:

Therefore the only way to buy more than one toner at a time is via T&M.  (FAR 12.207).

General, do you read 12.207 as permitting the use of a T&M contract to acquire commercial items that are not services?

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19 hours ago, Retreadfed said:

General, do you read 12.207 as permitting the use of a T&M contract to acquire commercial items that are not services?

No, the plain language of the FAR excludes commercial supplies from T&M contracts.  In my personal opinion is that T&M  is of little use (or maybe entirely useless) for conventional supply procurements, but I don't see the harm.  

However, my intuition is that the original poster's contracting office probably doesn't know or doesn't care about this.  High volume contracting shops aren't concerned with the nuances of the FAR, particularly if it makes the customer happy, isn't obviously unethical or illegal, and isn't audited.

I think this type of thing is the norm.  My Department (HHS) has a departmental clause that, I am convinced, is universally ignored. 

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19 hours ago, Retreadfed said:

do you read 12.207 as permitting the use of a T&M contract to acquire commercial items that are not services?

We regularly use T&M for repair parts under maintenance contracts, so I'll admit this is a little concerning. I think the key is the difference between "commercial items" and "direct materials" which FAR 16.101 defines as "those materials that enter directly into the end product, or that are used or consumed directly in connection with the furnishing of the end product or service." So, while a toner cartridge is clearly not a service, I think you could try to make the case that in this case it is also not a "commercial item," but rather is a direct material consumed in furnishing the end product, a functioning copier. That argument is probably a stretch if this is a straight up supply contract, but if it were a copier lease, or a copier maintenance service contract, or even a 3PL copier supplies logistics management contract (I just made that one up) it might make sense. 

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1 hour ago, Witty_Username said:

We regularly use T&M for repair parts under maintenance contracts,

The classic use of a T&M contract is a maintenance contract.  Whenever we take our car in to a repair shop, we usually enter into a T&M contract for the repair or servicing required.  Further, FAR 37.101 lists maintenance contracts as a type of service contract.  So I have no problem with using a T&M contract for commercial services.  The issue is whether agencies may use a T&M contract to acquire supplies.

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Fun fact for those of you who like to get down into the FAR weeds.

  • GSA's Schedules are by definition commercial, at least Schedule 70. 
  • GSA recently added 'Order Level Materials' (OLM) as a feature. Order Level Materials procedures may be used to purchase OLM products or services to support delivery orders (products) or task orders (services) under authorized GSA Schedules.
  • OLM must be a separate Time & Material line item on the order.

I take this to mean GSA approves of me issuing a commercial Schedule 70 order for commercial supplies, with a T&M line for OLM which are commercial supplies.  Implying GSA is cool with use of T&M for commercial supplies.

 

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In following up on this threaded discussion, the Branch Chief forwarded his recommendation (of modifying the contract type from FFP to T&M) to the Legal Department; however, the Legal Department was not in agreement. Therefore, the contract type remains as FFP.

In reviewing the BPA, I noticed that the toner prices listed for each call order do not match the toner prices listed in the BPA. In speaking with the contractor, the contractor stated that due to market fluctuations that are beyond his control, his prices will either decrease or increase for each call order placed. Based on this information, the BPA needs to be modified to reflect a fixed price w/EPA contract type. In addition, the BPA needs to be modified to include all part numbers for toner so that each call order placed will reflect the part numbers for toner established in the BPA.

Please share your thoughts. 

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Okay, let's talk about BPAs.  Let's talk FAR part 13 BPAs.

  1. You can establish a BPA with as many prospective toner suppliers as you wish.  No competition is needed.  No synopsis is needed.  No purchase request is needed.  Just do it.
  2. Your BPAs may include (1) T&Cs only, or (2) T&Cs and prices.
  3. When someone needs toner, his or her action depends on the dollar value of the instant purchase--
  • Up to the micropurchase threshold, get one quote from any one of the BPA holders (or if the BPAs are priced, look at the BPAs) -- if it is reasonable, place the call.
  • Over the micropurchase threshold and up to the synopsis threshold ($25,000) -- get quotes from as many of the BPA holders as is needed to provide maximum practicable competition (or if the BPAs are priced, look at the BPAs) -- place the call with the lowest price quoter (assuming delivery and other terms are met).
  • Over the synopsis threshold and up to $7,000,000 -- synopsize the requirement and get quotes from all interested sources -- if the winner is a BPA holder, place the call -- if the winner is someone else, issue a purchase order.

At the end of each month, each BPA holder submits an invoice with delivery tickets and you make payment with one transaction (such as a single Government purchase card charge).

As an alternative to the above, you can allow each call issuer to make payment for his or her own call using his or her Government purchase card.

It's that simple.  You don't have to make it any harder than this.  I recommend unpriced BPAs since you talk about fluctuations.

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