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General.Zhukov

FFP Equitable Adjustment Examples?

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On 11/8/2019 at 3:52 PM, joel hoffman said:

 Unless you own a Maserati, Corvette or the  like , a brake job should not cost $800 to begin with, 

Off topic: Companies will charge as much as they think customers will pay.  Last year I found myself getting a tour of a McLaren 570GT by its super-enthusiastic owner.  Brakes had recently been replaced, at cost north of $2,000.  It may well have been $2,000 just for labor and testing.  In any event, it was insanely expensive.

 

On topic: Inspection & Acceptance in the contract is mostly covered by 52.212-4, with a few additional caveats.  The AoA was done in very close coordination with the COR & PM,  and the COR took the AoA, modified it, and presented to higher-up.  This took somewhere between 1 and 5 weeks.  I consider that government acceptance.

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1 hour ago, here_2_help said:

Joel,

Perhaps you missed the point of my post, which was not about brake jobs or the type of car one drove. It was about commercial item contracting. In my experience it is often overlooked that the government is required to acquire commercial items IAW the terms of the marketplace. I extended that requirement to post-award administration requirements.

H, I didn’t miss the point . Commercial services are “supposed to” be related to services and pricing charged in the market place. And if there is an “extra”, The merchant still has to justify what it is for and for how much.  If you ask them to explain how many hours that is for they should be able to tell you. And anytime I ask what a shop rate or hourly rate is with a merchant, they tell me. 

As for a service, there has to some standard for acceptability. For review times, there must be some basis for what is reasonable. 

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On 11/6/2019 at 4:24 PM, ji20874 said:

What clause(s) in your contract will serve as the basis for the equitable adjustment(s)?

Ignoring the language "equitable adjustment," assuming the contract doesn't have any delay-related clauses (like the ones in Part 42), everyone who has been mentioning the Disputes clause [incorporated by reference via paragraph (d) of the clause at FAR 52.212-4] is right on the money IMHO.  

On 11/6/2019 at 4:10 PM, General.Zhukov said:

1) Performance started late due to on-boarding and security clearance issues.  Probably not our fault? ~ 1 Month.

2)  GVT shutdown.  Our fault. 1 Month.

3) Requirements gathering 'more complicated' than anticipated.  Probably not our fault? 1 Month. 

4) The Analysis of Alternatives was kicked back by the GVT at least twice for very questionable reasons and not within a reasonable time-period.  Our fault.   3 Months.

The Contractor may believe the delay associated with 2 & 4 above represent compensable delays.  Again, assuming the only language in the contract related to delay is the standard language at paragraph (f) of FAR 52.212-4 (relating to excusable delay), then the contractor's theory will likely involve an allegation of Government breach of an implied duty not to hinder or interfere with the contractor's performance or Government breach of its implied duty to cooperate with the contractor.  See Cibinic, Nash, & Nagle, Administration of Government Contracts (4th Ed. 2006), at 577.  Near as I can tell based on my understanding of the Contract Disputes Act, each theory is one "relating to" the contract--rather than "arising under" the contract--as each is based on an implied duty.

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See my earlier definition of “damages”, as distinguished from an “equitable adjustment”. 

Damages are defined as “ [p]ecuniary compensation or indemnity, which may be recovered in a judicial or quasi judicial forum [examples cited are the U.S. Court of Federal Claims and Boards of Contract Appeals] by one who suffers loss, detriment or injury through BREACH OF CONTRACT by the act, omission or negligence of another. Compensatory damages compensate the injured party for  the injury sustained and for nothing more.”  It also discusses Consequential damages and says that “[p]unitive (or exemplary) damages are generally not included in contract damages.”

IMHO, an entitlement to compensation for damages doesn’t  include a markup for profit,  in contrast with an equitable adjustment. An equitable adjustment , would be specifically authorized by an applicable clause or other contract provision.

However, if the contract terms of acceptability for the deliverable were changed, then both parties must agree.. It would seem to me that commercial practices for commerce -trade practice - UCC, etc. would apply and reasonable profit/credit for profit on the increased/decreased cost due to a change would be applicable. But - I’m not a lawyer. Of course, if  legal costs aren’t reimbursable, they might outweigh any additional profit.

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16 hours ago, Jacques said:

Disputes clause [incorporated by reference via paragraph (d) of the clause at FAR 52.212-4] is right on the money IMHO.

Thanks!

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As always I have appreciated the dialog, dialog which drives me to dig deeper.  In my dive with regard to this thread I have come up with some conclusions regarding a request of equitable adjustment (REA).

The OP initiated the discussion with the term REA which ignited a discussion on clauses and the term REA itself.  In its request to the OP the contractor or may or may not of used the term REA but I wonder if it really matters.   To this point a contractor could ask for price adjustment of a contract absent any clause especially when in this specific case it is acknowledged in part that it is "our fault".   To this my reference is a blog by Ralph Nash that I sometimes retreat to and is found here -

 Call it what you may, if it is fair an adjustment makes sense.

To the term REA itself it seems that most that is written on the Federal side connects the term to  a "changes clause" or a clause that provides for a remedy via equitable adjustment. To this I pose, in new world of commercial item contracting why can't a equitable adjustment in price/time to a contract be made under the authority of FAR 52.212-4(c)?  Just because the term equitable adjustment is missing seems counter to the discussion by Mr. Nash in my view.  Equitable is fair allafter isn't it!

The thread has now turned to an extent, in my view, as to what is being requested in the way of price adjustment (and possibly time) to reach the definition of equitable adjustment versus say damages.  To this point, while I understand the approach, I am left with the conclusion that digging into such details is bigger than one might imagine and has me recall this valuable reference that is not often noted in our discussions.  I even forgot about it until I read further in this thread.  To this I simply offer the links -

This specifically on equitable adjustments - https://www.acq.osd.mil/dpap/cpf/docs/contract_pricing_finance_guide/vol4_ch6.pdf

And this on the entirety of the reference - https://www.dau.edu/tools/Pages/Guidebook-Viewer.aspx?source=https%3a//www.dau.edu/guidebooks/Shared%20Documents%20HTML/CPRG_Vol4.aspx

Finally while I understand folks may not find this final reference authoritative in the world today it is a useful tool to give a person reference for further research and from where to borrow thoughts.  https://en.wikipedia.org/wiki/Equitable_adjustment

My  hope is that in the end the OP found the discussion to be helpful to ensure the contractor received impartial, fair, and equitable treatment on the matter of the REA (FAR 1.602-2(b)) and found a fair and reasonable conclusion for all parties to the matter.

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This issue seems to come up a lot lately with small IT and technology companies and no government experience.  The government is starting to learn the value these companies provide and encouraging their involvement.  At least two offices are finding ways to help.  Both designated an individuals as liaisons.  One I’ve personally seem in action.  She tells companies to logically explain how the existing contract is priced such as x hours of one labor category, y hours of another, and so on.  Then she says to explain in simple terms how the change affected that, cautioning not to use the change to get well if performance is a loss.  Then she brings the CO in.  The CO goes over it all and uses the information as file documentation.  In most cases, it’s simple enough for a lay person to understand.  It’s been very successful and a supplemental agreement gets signed.  

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In all this, let’s not be too eager to change this into a cost-reimbursement contract or one where we indemnify the poor contractor against any risk or loss.  All delays are not money compensable delays.  Let the contractor use the Disputes process to prove its injury and the Government harm that caused it, as well as the legal case for money damages.

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1 hour ago, ji20874 said:

In all this, let’s not be too eager to change this into a cost-reimbursement contract or one where we indemnify the poor contractor against any risk or loss.  All delays are not money compensable delays.  Let the contractor use the Disputes process to prove its injury and the Government harm that caused it, as well as the legal case for money damages.

I agree except for having to use a “disputes process” to press it’s request for relief or damages.

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5 hours ago, formerfed said:

This issue seems to come up a lot lately with small IT and technology companies and no government experience.  The government is starting to learn the value these companies provide and encouraging their involvement.  At least two offices are finding ways to help.  Both designated an individuals as liaisons.  One I’ve personally seem in action.  She tells companies to logically explain how the existing contract is priced such as x hours of one labor category, y hours of another, and so on.  Then she says to explain in simple terms how the change affected that, cautioning not to use the change to get well if performance is a loss.  Then she brings the CO in.  The CO goes over it all and uses the information as file documentation.  In most cases, it’s simple enough for a lay person to understand.  It’s been very successful and a supplemental agreement gets signed.  

Right on!  

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