Jump to content

FAR 52.232-5 Payments for Preparatory Work


bodenlok

Recommended Posts

We are presently in Contract with a new USACE District.  Our experience with multiple (>3) other USACE Districts is that when preparing our schedule of values for payment we can assign cost to to preparatory work, such as scaffolding or containment.  We believe this is supported by FAR 52.252-5 para b2.  

However, this new district is saying that the cost of the scaffolding or other preparatory work needs to be included with the activities that the scaffolding is being put in place for and that it will be paid as a percentage as the other activities are completed.  

Our objection is that we will spend considerable money up front to pay for the erection of the scaffolding, but will only be fully compensated when the other activities are completed. 

Has anyone ran into this before?  Is there any reference material that I could use to educate the project delivery team? 

 

 

Link to comment
Share on other sites

Para. (b)(2) of FAR 52.232-5 does not promise immediate reimbursement of preparatory work costs you might incur.  Rather, it merely allows for preparatory work to be taken into consideration in preparing the estimate of work accomplished.  This is a matter for you to persuade the officials in the new district.  You can use the practices of the other three districts to show the possibilities.  I do not think it is universally agreed that scaffolding is preparatory work (rather, it may be reasonable to see scaffolding as part of the actual construction rather than as preparatory work).  If you are unable to convince them that (1) scaffolding is preparatory work and (2) you're entitled to immediate payment for preparatory work costs, you will want to follow the guidance in the Disputes clause of the contract.

Link to comment
Share on other sites

Some thoughts.....

ji's comments spin off of the "may" in 52.232.-5 however consideration also needs to be given to other references....

Just do not look to the payment clause.   Look to the contract as a whole especially the specifications as they may address what and how on preparatory work.

Ask the new district for the specific contract reference that provides that payments needs to be included with the activities that the scaffolding is being put in place for and that it will be paid as a percentage as the other activities are completed.  

In the wisdom of the USACE there might be differences.   By example here is what one USACE district states in their contract administration direction -

4.5 Payment for Preparatory Work and Mobilization. Contract Clause,

Payments Under Fixed-Price Construction Contracts , states, in part: "In the

preparation of estimates the Contracting Officer may authorize . . . preparatory

work done to be taken into consideration." Preparatory work includes such

items as cost of erection of batch plants, construction of haul roads, erecting

fences, shops, etc. (less acquisition costs of equipment and materials not to be

incorporated into the work, or mobilization costs).

(Reference - https://www.sam.usace.army.mil/Portals/46/docs/military/construction/docs/SADDM 1110-1-1 June 2012.pdf)

 

Link to comment
Share on other sites

I may have written that In an update to the Mobile District Contract Admin Manual about 28 years ago but don’t remember for sure or remember the source. Not home this weekend but have some of the old source materials in a “sacred binder” entrusted to me many years ago upon the retirement of some of my employees.

Scaffolding is often erected by primes for use by numerous trades.  It might be spread over several line items or one lump sum depending upon how the line items are set up.  Depends upon where the cost is allocated and what it will be used for. 

Link to comment
Share on other sites

Joel, if you have a moment to look into your archives it would be appreciated.  The remaining of the Contract has no specific language pertaining to preparatory work.  Scaffolding will be used erected by prime and used by several subcontractors for access to the work locations.  

 

Thank you

Link to comment
Share on other sites

5 hours ago, bodenlok said:

Joel, if you have a moment to look into your archives it would be appreciated.  The remaining of the Contract has no specific language pertaining to preparatory work.  Scaffolding will be used erected by prime and used by several subcontractors for access to the work locations.  

 

Thank you

Bodenlok,  it is important to know where the Contract cost of this prep work is included. Is it in one line item, is it  in several line items; is it a spread cost?  
 

Link to comment
Share on other sites

I searched my old files and found discussion on mobilization and Prepatory work. It led me to DFARS clauses that do cover mobilization and /or Mobilization and Prepatory Work.  The current prescription for Mob and Prep work DFARS Clauses are:.

 

Quote

 

236.570  Additional provisions and clauses.

            ...(b)  Use the following provisions and clauses in fixed-price construction contracts and solicitations as applicable—

              ... (2)  When the head of the contracting activity has approved use of a separate bid item for mobilization and preparatory work, use either—

                     (i)  252.236-7003, Payment for Mobilization and Preparatory Work.  Use this clause for major construction contracts that require—

                             (A)  Major or special items of plant and equipment; or

                             (B)  Large stockpiles of material which are in excess of the type, kind, and quantity which would be normal for a contractor qualified to undertake                                 the work; or:

                     (ii)  252.236-7004, Payment for Mobilization and Demobilization.  Use this clause for contracts involving major mobilization expense, or plant                                              equipment and material (other than the situations covered in paragraph (b)(2)(i) of this section) made necessary by the location or nature of the                                  work.

                             (A)  Generally, allocate 60 percent of the lump sum price in paragraph (a) of the clause to the cost of mobilization.

                             (B)  Vary this percentage to reflect the circumstances of the particular contract, but in no event should mobilization exceed 80 percent of the                                          payment item.

 

 The old guidance that I found for Mobile District from the 1980's (DFARS) was issued after the Payments for Fixed-Price Construction Contracts Clause was updated to allow for payments for Prepatory work, regardless of whether there was a separate bid (line) item for mobilization and prepatory work.  The Mobile District policy was to apply the coverage for Prepatory work that is discussed in the clause, if the Contractor identifies prepatory work as an activity in the construction schedule breakdown..

DISCLAIMER: I dont know what the current internal USACE or relevant District  policy is regarding definition or or payment for prepatory work.

Here is the current working in the relevant DFARS clause, which probably isn't in your contract:

 

Quote

252.236-7003 Payment for mobilization and preparatory work.

As prescribed in 236.570(b)(2), use the following clause:

Payment for Mobilization and Preparatory Work (JAN 1997)

(a) The Government will make payment to the Contractor under the procedures in this clause for mobilization and preparatory work under item no. _____.

(b) Payments will be made for actual payments by the Contractor on work preparatory to commencing actual work on the construction items for which payment is provided under the terms of this contract, as follows -

(1) For construction plant and equipment exceeding $25,000 in value per unit (as appraised by the Contracting Officer at the work site) acquired for the execution of the work;

(2) Transportation of all plant and equipment to the site;

(3) Material purchased for the prosecution of the contract, but not to be incorporated in the work;

(4) Construction of access roads or railroads, camps, trailer courts, mess halls, dormitories or living quarters, field headquarters facilities, and construction yards;

(5) Personal services; and

(6) Hire of plant.

(c) Requests for payment must include -

(1) An account of the Contractor's actual expenditures;

(2) Supporting documentation, including receipted bills or copies of payrolls and freight bills; and

(3) The Contractor's documentation -

(i) Showing that it has acquired the construction plant, equipment, and material free from all encumbrances;

(ii) Agreeing that the construction plant, equipment, and material will not be removed from the site without the written permission of the Contracting Officer; and

(iii) Agreeing that structures and facilities prepared or erected for the prosecution of the contract work will be maintained and not dismantled prior to the completion and acceptance of the entire work, without the written permission of the Contracting Officer.

(d) Upon receiving a request for payment, the Government will make payment, less any prescribed retained percentage, if -

(1) The Contracting Officer finds the -

(i) Construction plant, material, equipment, and the mobilization and preparatory work performed are suitable and necessary to the efficient prosecution of the contract; and

(ii) Preparatory work has been done with proper economy and efficiency.

(2) Payments for construction plant, equipment, material, and structures and facilities prepared or erected for prosecution of the contract work do not exceed -

(i) The Contractor's cost for the work performed less the estimated value upon completion of the contract; and

(ii) 100 percent of the cost to the contractor of any items having no appreciable salvage value; and

(iii) 75 percent of the cost to the contractor of items which do have an appreciable salvage value.

(e) (1) Payments will continue to be made for item no. ____, and all payments will be deducted from the contract price for this item, until the total deductions reduce this item to zero, after which no further payments will be made under this item.

(2) If the total of payments so made does not reduce this item to zero, the balance will be paid to the Contractor in the final payment under the contract.

(3) The retained percentage will be paid in accordance with the Payments to Contractor clause of this contract.

(f) The Contracting Officer shall determine the value and suitability of the construction plant, equipment, materials, structures and facilities. The Contracting Officer's determinations are not subject to appeal.

(End of clause)

[56 FR 36479, July 31, 1991, as amended at 62 FR 2614, Jan. 17, 1997]

 

Bodenlok,  I will repeat and clarify - it is important to know where the Contract cost of this scaffolding work is included. Is it in one line item, is it  in several line items; is it a spread cost? 

It should be a separately identifiable activity or activities, I would think.

You said that it is prime contractor provided scaffolding for various trades to use.   I would think that you should be able to identify erection of scaffolding as a specific activity or series of activities in your Network Analysis System progress schedule. 

Payment for cost of the scaffolding material , if purchased (paid cost, less any residual value) for the specific contract might be considered as part of  "prepatory work"  under the Payments clause and the DFARS clause. Prep work includes “materials purchased for the prosecution of the contract but not to be incorporated into the work.”  

If scaffold erection is a schedule  activity or activities, the associated material, labor and equipment cost should also be payable as work, and as well as associated markups. In that case it wouldn't be "prep work", it would just be part of the work.

Dont use the term "prepatory work" in this instance.  You are erecting scaffolds for multiple trade activities - one time scaffold erection probably isnt separately identifiable under the individual trade work. But if you are moving it for different trades, then establish activities for that.

Link to comment
Share on other sites

As I discovered above,  actual erection and disassembly of scaffolding isnt "prepatory work", as DoD defines prepatory work - unless there is some further guidance somewhere.

The DoD coverage of "prepatory work" precedes the FAR clause language - The files I have also go back to the DAR/ASPR days.  They were just re-titled when FAR came out and prior to the allowable Prepatory work coverage in the current payments clause.

Thus - I would argue that erection of scaffolding, including materials,  is an activity.  If you want to be reimbursed for the cost of the actual scaffolding before erection - that would be payable as "prepatory" work and is included within the activity price, if just purchased for the project.  

I don't think that you differentiated or clarified what you want to be paid for as "prepatory work".

Edited by joel hoffman
Clarified that prep work for DoD only includes cost of materials purchased for the contract but not to be incorporated into the work.
Link to comment
Share on other sites

  • 2 weeks later...

Sorry, took me a several attempts to read your responses in full and have time to ponder without interruptions.  

 

Where this question stemmed is that I prepared a schedule and one of the activities was installation of scaffolding.  Then I cost loaded this activity so that I could be paid once it was progressed onsite.  I also had an activity for removing it and cost for that as well. 

 

The response I received is that it isn't work in place and therefore I wasn't entitled to be paid.  The justification was that if the contract was terminated then I would have received payment from something that USACE does not own or would have no rights to in this event.   They are requesting that I take the cost of the scaffold and spread it across all the activities it supports.  My objection is that I won't be paid in full for the scaffolding till all the work is complete, when the scaffold subcontractor will be billing for erection once in place. 

 

My approach was that this was preparatory work and that I should be paid.  But, it doesn't sound like it is truly preparatory work.

Link to comment
Share on other sites

I really don’t know. I think that erection  of it is a legitimate activity though. It is being erected up front in preparation for numerous trades work. It will be removed after work is complete. You shouldn’t have to prorate it across every trade installation. I would probably break it into installation and removal activities like you did. Does the scaffold sub own it?

My opinion is about as authoritarian as yours, I suppose. What would THEY consider to be “prepatory  work”? Materials for construction not to be incorporated into the work doesn’t become property of the government either.

EDIT: my last statement isn’t correct in the event of a TFD.  In that situation, the government can  use materials purchased for the project but not to be incorporated into the work. 

Edited by joel hoffman
Link to comment
Share on other sites

Upon further reflection and recollection, in the event of a termination, the surety would likely use the scaffolding plus the government can require it and other equipment to be made available for completion at the contractors expense. (52.249-10 (a)).

So the government’s argument isn’t valid. The surety wouldn’t allow you to demob the scaffolding if you default. And if the government knows what it is doing, it won’t, either. I’d keep discussing it with them.

Im guessing that whoever you spoke with has little experience with completion of construction after default. Or they are not knowledgeable of the government’s rights, the contractor’s liability/indemnification responsibilities  to the surety  or how a surety might arrange to complete the project.

Edited by joel hoffman
Added Termination clause reference and discussion
Link to comment
Share on other sites

15 hours ago, bodenlok said:

My approach was that this was preparatory work and that I should be paid.  But, it doesn't sound like it is truly preparatory work.

Don't guess, don't scratch your head, don't take the no answer unless the Government can provide specific reference as to why the payment is not allowed.  By example if the contract were to reference in the contract then this would be the appropriate reference they might quote you....

"4.5 Payment for Preparatory Work and Mobilization. Contract Clause,

Payments Under Fixed-Price Construction Contracts , states, in part: "In the

preparation of estimates the Contracting Officer may authorize . . . preparatory

work done to be taken into consideration." Preparatory work includes such

items as cost of erection of batch plants, construction of haul roads, erecting

fences, shops, etc. (less acquisition costs of equipment and materials not to be

incorporated into the work, or mobilization costs)."

Also it sounds like 252.236-7003 or 7004 are not in you contract but if they are then so much the better.

If there is absolutely nothing in your contract to define preparatory work ask the Government to provide a basis for why they believe "preparatory work" isn't work in place and then determine if you want to argue the matter further.  Things that come to my mind that support that preparatory work includes the scaffolding is the already referenced DFARS clauses of 252-236-7003/7004 and the approach of other Federal agencies that perform construction contracts such as the Federal Highway Administration where they state the following....Ref. https://fdotwww.blob.core.windows.net/sitefinity/docs/default-source/content/programmanagement/implemented/specbooks/july2015/files/101-715.pdf?sfvrsn=1d75ce9d_0

"101-1 Description.

Perform preparatory work and operations in mobilizing for beginning work on the

project, including, but not limited to, those operations necessary for the movement of personnel,

equipment, supplies, and incidentals to the project site and for the establishment of temporary

offices, buildings, safety equipment and first aid supplies, and sanitary and other facilities.

Include the costs of bonds and any required insurance and any other preconstruction

expense necessary for the start of the work, excluding the cost of construction materials."

Bottom line - If they have not make them provide specific reference as to why the preparatory work must be "work in place", "just because" is not a appropriate reference.

Link to comment
Share on other sites

3 hours ago, joel hoffman said:

...the government’s argument isn’t valid...

 

1 hour ago, C Culham said:

...don't take the no answer unless the Government can provide specific reference as to why the payment is not allowed...

It seems the agency has provided a reasonable explanation for its position.  I would recommend that the contractor be polite and persuasive, rather than obstinate and demanding.  I don't think the contractor can win the argument by being obstinate or demanding. 

But if the contractor really feels it is entitled, as a matter of right, to immediate payment for scaffolding costs, it needs to read and follow the instructions of the contract's Disputes clause.  If the matter is appealed to a board of contract appeals, it is very possible that the agency will win there because the agency position may be seen as "reasonable" and within the bounds of discretion. 

Based on what I have read here, I differ with Joel and Carl in that I think the agency's contracting officer may approve the immediate scaffolding payment but I am not convinced that he or she must approve it. 

For now, polite and persuasive is probably better.

Link to comment
Share on other sites

47 minutes ago, ji20874 said:

 

It seems the agency has provided a reasonable explanation for its position.  I would recommend that the contractor be polite and persuasive, rather than obstinate and demanding.  I don't think the contractor can win the argument by being obstinate or demanding. 

But if the contractor really feels it is entitled, as a matter of right, to immediate payment for scaffolding costs, it needs to read and follow the instructions of the contract's Disputes clause.  If the matter is appealed to a board of contract appeals, it is very possible that the agency will win there because the agency position may be seen as "reasonable" and within the bounds of discretion. 

Based on what I have read here, I differ with Joel and Carl in that I think the agency's contracting officer may approve the immediate scaffolding payment but I am not convinced that he or she must approve it. 

For now, polite and persuasive is probably better.

I advocate explaining to the USACE that their concern about scaffolding not being available in the event of a default is unfounded because both the government and the surety will want it to remain for completion purposes and the government has that right to use it along with other onsite resources that could be considered prepatory work under the -49 clause.

In addition, the erection of scaffolding is is an upfront activity that is paid for at the time of erection not as the vArious trades use it. It’s not reasonable to treat it as an indirect cost to be spread over the period of all trade activities. 

The USACE policy is to try to resolve matters of disagreement at the lowest level possible before resorting to litigation or formal disputes. I don’t advocate routinely submitting claims to resolve force resolution of matters that are not yet otherwise unresolvable.

The USACE policy is also to develop partnering relationships with their contractors.

Link to comment
Share on other sites

40 minutes ago, ji20874 said:

Joel,

Is anyone here advocating routine submission of claims to resolve or force resolution of matters that are not yet otherwise resolvable?

From my view no but no one is advocating for being "obstinate and demanding" either.  

 

1 hour ago, ji20874 said:

I think the agency's contracting officer may approve the immediate scaffolding payment but I am not convinced that he or she must approve it. 

No disagreement based on the limited information but I differ with your view in that absent something specific in the contract (your must versus your may) the position of the government is without merit.

 

18 hours ago, bodenlok said:

The response I received is that it isn't work in place and therefore I wasn't entitled to be paid.  The justification was that if the contract was terminated then I would have received payment from something that USACE does not own or would have no rights to in this event. 

Simply this position does not make any sense in the context of construction progress (invoice) payments.  It is work that has been completed that has a cost to the contractor associated with it call it what you want.  the contractors position is just he paid for it and he should be paid for it.

Work I might add that probably has some element of safety requirements associated with it to which the contractor uses his/her own devices to address.   Say scaffolding versus man lifts.   Just to take you down a rabbit hole one could argue that the government is directing the contractors work by not allowing payment for something the contractor decided was needed to complete the work.

Link to comment
Share on other sites

30 minutes ago, C Culham said:

..the position of the government is without merit...

I'm not so sure.  Regardless, the burden of proof is on the contractor rather than the Government, right?

30 minutes ago, C Culham said:

...It is work that has been completed that has a cost to the contractor associated with it call it what you want.  the contractors position is just he paid for it and he should be paid for it...

That's not the standard for making progress payments in a construction contract.

30 minutes ago, C Culham said:

...one could argue that the government is directing the contractors work by not allowing payment for something the contractor decided was needed to complete the work...

This would not be a sensible argument. 

Under the clause at FAR 52.232-5, we don't make progress payments to contractors to reimburse actual incurred costs.  Rather, we make payments based on estimates of work complete (such as, 5% complete = 5% payment, and 50% complete = 50% payment, and so forth), less retainage as needed.  [The exception is for bond premiums, where we will reimburse the contractor for the amount of the premiums.]  In preparation of the estimate of completion or work, preparatory work may be considered -- but this does not call for full reimbursement of contractor's incurred costs for the preparatory work; rather, it merely allows preparatory work to be considered in calculating the estimate of completion of work.

The original poster might have an easier time with its contracting officer if it drops its request for reimbursement based on actual incurred costs and instead asks for a normal progress payment for the scaffolding, for example, suggesting that the erection of the scaffolding = 5% of completion.

Link to comment
Share on other sites

As a cost loaded activity in the contractor’s progress schedule, the Scaffold erection activity represents physical work and it is work in progress or work accomplished. It is necessary work on the critical path for numerous subsequent trade activities to proceed. It is a precursor constraint activity. They can’t start until the activity is complete in the areas that they will use the scaffolding. It’s as simple as that.

But it is a separate activity, not one that is part of the follow on activities. Otherwise they would all have an activity start date associated with scaffold erection. No need to make it more complicated. And they would be starting those activities out of sequence.

Buying Or renting scaffold and delivering it to the site might be prepatory work. However, this is a subcontracted effort involving direct labor and equipment to install.

They are not being logical OR reasonable. When the government requires the contractor to use a cost loaded network analysis system as part of its project controls, then the work is required to be planned, controlled, executed, and reported in certain ways.

It is illogical to erect scaffold prior to successor activities but to report it as part of later progress , after that work starts. 

I doubt the the KO had anything to do with the decision or the response to the OP.  But if they did, then they as well as the ACO don’t understand what rights the government has in a default termination. They cited that as their justification.  Their worries are unfounded

Link to comment
Share on other sites

If there is no separate line item for scaffold erection, the contractor breaks the applicable contract line item down into activities, which are “cost loaded” (assigned a value) within the overall CLIN.

Note that the contractor has to provide subcontract amounts as part of the support data for progress payments anyway. When the contractor submits it’s breakdown of activities, the Corps reviews the amounts to see if they look reasonable, etc. There is a process.

The contractor might or might not assign a value to the activity that would cover its costs plus markups.

Its more complex than we have time here to describe in full detail. 

Link to comment
Share on other sites

Okay.  So, after all that happens, would you approve a payment to reimburse the contractor its actual costs for the erected scaffolding? Or would you approve a payment based on the percent of work complete represented by the erection of the scaffolding?

Link to comment
Share on other sites

P3 and other project controls software convert % complete of activities to dollars, which may or may not directly translate to subcontract costs. 

Link to comment
Share on other sites

4 minutes ago, ji20874 said:

Okay.  So, after all that happens, would you approve a payment to reimburse the contractor its actual costs for the erected scaffolding? Or would you approve a payment based on the percent of work complete represented by the erection of the scaffolding?

Latter, if it is in an activity

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...