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Can other than money be accepted for compensation?

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Scenario: The Government ordered a widget at a cost of $100,000. Due to issues with the Government's specifications, the Contractor needed to adjust some of the characteristics/specifications of the widget (size, color, etc.). The Government accepted the changes in order for an on-time delivery and the new widget will meet the Governments need but it is worth less. The CO believes there should be a cost savings of $10,000. The contractor has offered compensation in the form of accessories for that widget that would be to the benefit of the Government to accept. Question: Can the Government accept other than money for a change in cost of the requirement (i.e. can the Government accept $10,000 in accessories to cover the difference?) 

Note: I've tried to be as clear as I could, let me know if additional detail is necessary. 

 

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Contractor could also provide a better warranty, too.

I have a follow-up question: is it necessary to "dollarize" this exchange?  Questioner states the CO "believes" the amount is $10K, but does this number need to be known? 

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33 minutes ago, apsofacto said:

is it necessary to "dollarize" this exchange?  Questioner states the CO "believes" the amount is $10K, but does this number need to be known? 

The issue here is consideration for the change to the contract.  Consideration only needs to be adequate, i.e., more than nominal.  We don't have all the facts here, but the government may be getting the better of the deal here.  Note that nkd9 mentioned issues with government specs that required the contractor to revise those specs.  It is possible that the contractor incurred costs in doing so, may have incurred delay costs because of the "issues" and incurred other costs in trying to perform to the original government specs.  All those costs could be included in an REA plus additional time to perform.  However, the contractor is not requesting a time extension or additional money to perform the contract.  This also can be consideration for a contract modification.

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One party might want the exchange more than the other.  One party might have a stronger negotiating advantage.  That's all fair.  The exchange does not have to be "equal" in any sense.  Each party should negotiate for its own ends.  The contracting officer should negotiate for the government's ends.

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3 minutes ago, ji20874 said:

The exchange does not have to be "equal" in any sense.

 

16 minutes ago, Retreadfed said:

The issue here is consideration for the change to the contract.  Consideration only needs to be adequate, i.e., more than nominal.

I think these are the takeaways, then.  The dollarizing may just be a symptom of many of us not realizing this.  Thanks both. 

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But the contracting officer shouldn’t be a pushover — he or she should negotiate for the best deal possible under the circumstances. 

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On 8/28/2019 at 4:21 PM, nkd9 said:

Scenario: The Government ordered a widget at a cost of $100,000. Due to issues with the Government's specifications, the Contractor needed to adjust some of the characteristics/specifications of the widget (size, color, etc.). The Government accepted the changes in order for an on-time delivery and the new widget will meet the Governments need but it is worth less. The CO believes there should be a cost savings of $10,000. The contractor has offered compensation in the form of accessories for that widget that would be to the benefit of the Government to accept. Question: Can the Government accept other than money for a change in cost of the requirement (i.e. can the Government accept $10,000 in accessories to cover the difference?) 

Note: I've tried to be as clear as I could, let me know if additional detail is necessary. 

 

Yes, is the answer.  It is a change to the contract.

Depends to a certain extent whether or not this is a commercial contract.

If not a commercial item contract, there should be a Changes clause, right? 

If so, the KO should determine - per the changes clause, what the equitable adjustment should be for the decrease in the contractor’s cost (credit in an equitable adjustment also includes allowance for profit).

“...b) If any such change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, the Contracting Officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract.”

The change could then include additional accessories that would approximately equally offset the decrease. 

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If it is a commercial item contract, then any changes require bilateral agreement to implement.

The KO, as a steward of the Taxpayer, should negotiate a fair deal. Actually, since you would probably be looking at fair value pricing, it should be fairly easy to negotiate that way.  The contractor’s costs are probably comparable for the changed item and for the accessories as reflected in commercial pricing of the items. The government would be obtaining approximately the same market value.

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Of course, there should be a real value (a valid need) for the government to acquire and use the accessories in lieu of obtaining a price reduction. 

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