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kathilou

Cat 5 Hurricane Michael--increase in pricing

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13 minutes ago, here_2_help said:

I fear to step into this discussion but this, to me, highlights an interesting difference between government and commercial contracting. During the great recession of 2008 - 2011 (which, if you recall, was global), Airbus was forced to renegotiate the fixed-price deals it had with some of its suppliers. The suppliers were struggling financially. Either Airbus stepped-in or it would lose its supply chain. So it did. The old contracts were torn up and new, more favorable, contracts were negotiated.

I'm not advocating a similar approach here; I'm just noting that, in the commercial marketplace, contract terms can be renegotiated when the need arises. The next time somebody says the government should operate more like the commercial marketplace, perhaps somebody should point out what that might mean.

Terms can be renegotiated under Government contracts, too. Remember when DoD gave a generous price increase and advance payments to the Anthrax vaccine contractor that was failing?

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50 minutes ago, Don Mansfield said:

Terms can be renegotiated under Government contracts, too. Remember when DoD gave a generous price increase and advance payments to the Anthrax vaccine contractor that was failing?

Actually, no. I didn't realize that happened.

So Uncle Sam can be Uncle Santa Claus!

:D

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1 hour ago, Don Mansfield said:

Terms can be renegotiated under Government contracts, too. Remember when DoD gave a generous price increase and advance payments to the Anthrax vaccine contractor that was failing?

Wasn't that a Pub.L. 85-804 situation?  In 1998, the Secretary of the Army granted the anthrax vaccine contractor indemnity (immunity from litigation) under Pub.L. 85-804.  I don't know remember all the details, such as price increase and advance payments, but those also would have been allowed under Pub.L. 85-804.

EDIT:  I found it -- Beyond the indemnity, the Army "provided a net $24.1 million in relief, including an $18.7 million interest free advance payment. The number of doses in the contract options was reduced from 7.9 million to 4.6 million. The price was increased from $4.36 to $10.64 per dose for Option Year I and from $2.26 to $10.64 per dose for Option Year II."  See Statement by Robert J. Lieberman, Assistant Inspector General for Auditing, Department of Defense, before the Senate Committee on Armed Services on Defense Anthrax Vaccine Contracting, July 12, 2000 at https://media.defense.gov/2017/Apr/18/2001734011/-1/-1/1/000712RL.PDF.

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Yes, I was relying on the small amount of the contract and REA and the statement that most of the REA is covered by justifications other than labor and material impacts. I don’t think I’ve ever been involved with a D-B contract that small and one that has taken 10 months to design before any construction begins. Can’t be very extensive original scope for that combined price for both design and construction. 

Its also why a FAR 50.1 relief effort won’t likely pass muster. Costs more to process than the relief. 

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5 hours ago, here_2_help said:

Actually, no. I didn't realize that happened.

So Uncle Sam can be Uncle Santa Claus!

:D

Yes, but the contracting officer doesn't have Santa Claus authority--that resides in the agency head. 🎅

COs are just elves. 🧝‍♂️🧝‍♂️🧝‍♂️ 

 

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Elves can still contribute towards a happy Christmas for a struggling contractor -- contracting officers don't want a default.  For example, in the situations like the original poster mentioned in a follow-up comment, when there are Government delays and change orders in the contract, the contractor can negotiate hard for equitable adjustments with the Government, and the contracting officer can give much of the benefit of any doubt in those negotiations to the contractor.  Additionally, the contracting officer can tend towards the generous end of the reasonable continuum with matters such as progress payments and/or liquidation rates, provisional billing rates, and so forth, if the contracting officer has some sense of assurance that the contractor intends to honor its contract commitment.  There are other ways the contracting officer can be patient and sometimes half close one eye.  But the contracting officer simply cannot increase the contract price because of an unusually severe weather event in a FFP contract using the standard FAR clauses.  It would be unfair to do so.

I wonder about the offeror who lost the contract because its price was just a little too high because it prudently included costs for risk (such as for a hurricane and hurricane aftermath in a hurricane area during hurricane season).  We have to be fair.  It would be unfair to make the winning contractor whole for its own decision not to obtain insurance, such as builder's risk insurance, especially considering the plain text and the litigation history of the standard construction clause at FAR 52.236-7.  But default is not the end of the matter -- there is always the surety and the performance bond to make sure the project gets completed.  It is fair to administer the contract's T&Cs as the parties bargained for.

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1 hour ago, Don Mansfield said:

Yes, but the contracting officer doesn't have Santa Claus authority--that resides in the agency head. 🎅

COs are just elves. 🧝‍♂️🧝‍♂️🧝‍♂️ 

 

True.  And the remedy doesn’t have to be agency head.  This seems like a decision made by other than a CO.  Situations like this require elevation to senior agency officials below agency heads since it doesn’t appear that significant.  A contractor suffering harm can lead to poor or delayed performance or even default.  Sure, the government is usually protected but faces delays and disruption and program harm.  The question is can the agency afford to just sit and let it run its course or is this something significant?  Let the decision get made with all affected parties.  Legal can provide advice.  And the solution must be justified, supported, and sound.

 

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14 hours ago, ji20874 said:

Elves can still contribute towards a happy Christmas for a struggling contractor -- contracting officers don't want a default.  For example, in the situations like the original poster mentioned in a follow-up comment, when there are Government delays and change orders in the contract, the contractor can negotiate hard for equitable adjustments with the Government, and the contracting officer can give much of the benefit of any doubt in those negotiations to the contractor.  Additionally, the contracting officer can tend towards the generous end of the reasonable continuum with matters such as progress payments and/or liquidation rates, provisional billing rates, and so forth, if the contracting officer has some sense of assurance that the contractor intends to honor its contract commitment.  There are other ways the contracting officer can be patient and sometimes half close one eye.  But the contracting officer simply cannot increase the contract price because of an unusually severe weather event in a FFP contract using the standard FAR clauses.  It would be unfair to do so.

I wonder about the offeror who lost the contract because its price was just a little too high because it prudently included costs for risk (such as for a hurricane and hurricane aftermath in a hurricane area during hurricane season).  We have to be fair.  It would be unfair to make the winning contractor whole for its own decision not to obtain insurance, such as builder's risk insurance, especially considering the plain text and the litigation history of the standard construction clause at FAR 52.236-7.  But default is not the end of the matter -- there is always the surety and the performance bond to make sure the project gets completed.  It is fair to administer the contract's T&Cs as the parties bargained for.

This is a task order against an 8(a) sole source contract.  There are multiple, similar-in-scope projects on separate CLINs.  The contractor has not threatened to stop work. When you kindly edited my text, you crossed out "hurricane" but left in the base closure language.  The closure was a direct result of the hurricane, obviously--we had no power or water for weeks. I lean towards telling the whole truth. Since we were still in the design phase prior to the storm, the contractor had not yet purchased materials.  The storm damage resulted in a need for more materials for a couple of the line items.  Prices on everything, especially construction materials are very high. Competition is fierce outside of the fence. The prime had to solicit new quotes from subs, since many of them are no longer available.  BR doesn't cover this scenario from what I know. Those are the facts.  Again, I do appreciate everyone's thoughts and opinions and suggestions.

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Sole source negotiated task order.  

there should be room for adjustment here.

1. Due to delays to performance there were cost increases...

yall should be able to fix this. 

Is this an installation IDIQ or a Mobile District IDIQ?

Years ago, I was the Chief of the USACE Mobile District office that negotiated all of the sole source construction contracts and source selections.  Based upon the specific circumstances here, I think we would have been able to resolve this, working with OC and the KO. There seem to be a lot of mitigating factors that contributed to delays, etc. 

It wasn’t competitive. That helps. Commercial impracticalbility should be investigated as a good justification. 

 

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For what is already on contract (such as labor and materials to design and build the building), you should not make any price increase -- the contractor guessed wrong, and didn't take any steps to lock in prices early, and agreed to bear those risks when the contract was formed.  That's fair.  But you can give a time extension.

But for the equitable adjustments resulting from change orders, Government stop-work orders, Government delays, and so forth, you can tend towards the generous side of the reasonable continuum.  For these, the contractor's proposed pricing will be based on today's labor and material realities.  That's fair.  There should be plenty of opportunity for your contractor to be successful.

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 I don’t want to be critical here, kathilou.  However it is often essential to know as much of the facts surrounding the situation as possible in order to provide better advice. Good luck with your  task order 

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All that’s been said is good.  My main reason for keep bringing up senior management and involvement by finance, program, legal, etc., is the finance office not providing funds. 

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28 minutes ago, joel hoffman said:

 I don’t want to be critical here, kathilou.  However it is often essential to know as much of the facts surrounding the situation as possible in order to provide better advice. Good luck with your  task order 

You are correct.  I did leave out some important information. So sorry, and I still appreciate everyone's input.

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If the contractor is still in the 8(a) Program, it's a sole source 8(a) K, and you can award a new under FAR section 19.808-1, Sole source, could you consider issuing a new K, and place a TO under the K?

Since the K and TO is sole source under the 8(a) Program, you have more flexibility.

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31 minutes ago, formerfed said:

All that’s been said is good.  My main reason for keep bringing up senior management and involvement by finance, program, legal, etc., is the finance office not providing funds. 

I am still here a little as well.   However the information provided may be helpful in convincing finance that funding the effort is appropriate.

1 hour ago, ji20874 said:

But for the equitable adjustments resulting from change orders, Government stop-work orders, Government delays, and so forth, you can tend towards the generous side of the reasonable continuum.

 

1 hour ago, joel hoffman said:

1. Due to delays to performance there were cost increases...

Coupled with the reasoned approach is as Joel implies is when a contractor is able to show that the governments action or in your case failed action of approvals etc. put the contractor in the position of having to experience performance issues that were caused by the hurricane that would have not otherwise been experienced.   In other words they would have been further along in the work than what they really are. 

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5 minutes ago, C Culham said:

I am still here a little as well.   However the information provided may be helpful in convincing finance that funding the effort is appropriate.

 

Coupled with the reasoned approach is as Joel implies is when a contractor is able to show that the governments action or in your case failed action of approvals etc. put the contractor in the position of having to experience performance issues that were caused by the hurricane that would have not otherwise been experienced.   In other words they would have been further along in the work than what they really are. 

I again apologize for not providing enough information up front; and, yes, they would have been much further along w/design and construction had it not been for our delays and the storm.

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1 hour ago, kathilou said:

they would have been much further along w/design and construction had it not been for our delays and the storm.

Do you have any idea as to what the possible impact of the storm may have been on work that was already done?  This was one of the big issues with the companies I engaged with after Katrina.  They had begun work and Katrina damaged or destroyed the work they had already done requiring them to start over.

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4 hours ago, Retreadfed said:

Do you have any idea as to what the possible impact of the storm may have been on work that was already done?  This was one of the big issues with the companies I engaged with after Katrina.  They had begun work and Katrina damaged or destroyed the work they had already done requiring them to start over.

For a construction contract, that is exactly the sort of risk that a contractor promises to bear when it bargains for a contract that includes the clause at FAR 52.236-7, Permits and Responsibilities.  See the last sentence of that clause.

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One has to have certain riders on the Builders Risk policy to cover hurricane damages to materials and the unfinished work.  For installations in states bordering the Gulf of Mexico and Atlantic Seaboard, that is important . 

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