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On ‎9‎/‎5‎/‎2020 at 6:26 PM, lotus said:

If 1000 hours were in the contract, and 1100 delivered, the last 1100 were outside the contract and hence not direct. 

Lotus, I am curious about this statement.  It seems to imply that a T&M contract is a form of level of effort contract.  Is that your understanding of a T&M contract?

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On 1/28/2020 at 6:43 PM, BAT said:

Is there anywhere in the FAR we can point to for payment?

 

This far, BAT, I have not seen any posted comments (including mine) helpful to your quest for a FAR solution. Posted comments to date seem to support that "not wanting to pay" is the right initial reaction of the contracting officer. However, we do not know what is happening at the Contracting Officer/Agency level other than "the contracting officer is not wanting to pay." Have you asked the Contracting Officer if there are steps being taken to determine whether additional funds will be provided, whether the contract is to be considered complete or will be terminated, and whether you will receive a communication in writing? 

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On 1/28/2020 at 6:43 PM, BAT said:

Our team over ran our T&M contract prior to alerting our CO.

Quote

(d) Total cost. It is estimated that the total cost to the Government for the performance of this contract shall not exceed the ceiling price set forth in the Schedule, and the Contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within such ceiling price. If at any time the Contractor has reason to believe that the hourly rate payments and material costs that will accrue in performing this contract in the next succeeding 30 days, if added to all other payments and costs previously accrued, will exceed 85 percent of the ceiling price in the Schedule, the Contractor shall notify the Contracting Officer giving a revised estimate of the total price to the Government for performing this contract with supporting reasons and documentation. If at any time during performing this contract, the Contractor has reason to believe that the total price to the Government for performing this contract will be substantially greater or less than the then stated ceiling price, the Contractor shall so notify the Contracting Officer, giving a revised estimate of the total price for performing this contract, with supporting reasons and documentation. If at any time during performing this contract, the Government has reason to believe that the work to be required in performing this contract will be substantially greater or less than the stated ceiling price, the Contracting Officer will so advise the Contractor, giving the then revised estimate of the total amount of effort to be required under the contract.

      (e) Ceiling price. The Government will not be obligated to pay the Contractor any amount in excess of the ceiling price in the Schedule, and the Contractor shall not be obligated to continue performance if to do so would exceed the ceiling price set forth in the Schedule, unless and until the Contracting Officer notifies the Contractor in writing that the ceiling price has been increased and specifies in the notice a revised ceiling that shall constitute the ceiling price for performance under this contract. When and to the extent that the ceiling price set forth in the Schedule has been increased, any hours expended and material costs incurred by the Contractor in excess of the ceiling price before the increase shall be allowable to the same extent as if the hours expended and material costs had been incurred after the increase in the ceiling price.

(52.232-7, emphasis added.)

 

Edited to add: contractor breached and now wants to be made whole for its breach.

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On ‎1‎/‎28‎/‎2020 at 9:43 PM, BAT said:

Our team over ran our T&M contract prior to alerting our CO. 

Why did this happen?  Was it due to your negligence or the fact that you do not have systems in place to tell you when you are approaching the ceiling amount?  On the other hand, was it because you could not have known of the overrun before it happened even if you had adequate systems in place?

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I know this is an old thread and likely the OP moved on.  But most of the posts (and resulting advice/opinions) say there’s nothing to be done.  Most imply it’s his companies fault.  And it probably is.  However the pertinent contract language says the contractor exceeds the ceiling at their own risk. That doesn’t mean nothing can be done for relief of the contractors situation.  It may be in the governments interest to reach settlement with the contractor depending upon special circumstances.

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9 hours ago, formerfed said:

It may be in the governments interest to reach settlement with the contractor depending upon special circumstances.

Maybe -- but it seems to me, more importantly, that it may be in the contractor's interest to establish a basis for its entitlement to after-the-fact payment beyond the ceiling price.

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1 hour ago, ji20874 said:

Maybe -- but it seems to me, more importantly, that it may be in the contractor's interest to establish a basis for its entitlement to after-the-fact payment beyond the ceiling price.

I agree. 

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31 USC 1342 prohibits the government from accepting voluntary services, which this action appears to be. The contractor either negligently overran the limitation or voluntarily overran it with the intention to be paid but certainly with no common understanding with the government that they would be paid. There is no indication here that the contracting officer was aware that the contractor was overrunning the limitation. 

“Voluntary services have been defined as those which are not rendered pursuant to a prior contract, or under an advance agreement that they will lbe gratuitous. Therefore, voluntary services are likely to form the basis of future claims against the Government. In 7 Comp.Gen. 810 (1928), the Comptroller General discussed the distinction, stating: "The voluntary service referred to in r31 U.S.C. S665(b)) is not necessarily synonymous with gratuitous service, but contemplates service furnished on the initiative of the party rendering the same without request from, or agreement with, the United States.  Therefore, Services furnished pursuant to a formal contract are not voluntary within the meaning of said Section.”  See:  https://www.gao.gov/assets/450/441639.pdf
 

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1 hour ago, ji20874 said:

Maybe -- but it seems to me, more importantly, that it may be in the contractor's interest to establish a basis for its entitlement to after-the-fact payment beyond the ceiling price.

Exactly.  

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10 hours ago, formerfed said:

I know this is an old thread and likely the OP moved on.  But most of the posts (and resulting advice/opinions) say there’s nothing to be done.  Most imply it’s his companies fault.  And it probably is.  However the pertinent contract language says the contractor exceeds the ceiling at their own risk. That doesn’t mean nothing can be done for relief of the contractors situation.  It may be in the governments interest to reach settlement with the contractor depending upon special circumstances.

See above . 31 USC 1342. If these were voluntary services with the contractor expecting to be paid, there would (likely) be no entitlement. 

 

1 hour ago, ji20874 said:

Maybe -- but it seems to me, more importantly, that it may be in the contractor's interest to establish a basis for its entitlement to after-the-fact payment beyond the ceiling price.

There would not be a legal entitlement to payment 13 USC 1342. 

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2 hours ago, ji20874 said:

Maybe -- but it seems to me, more importantly, that it may be in the contractor's interest to establish a basis for its entitlement to after-the-fact payment beyond the ceiling price.

I also agree.

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2 hours ago, joel hoffman said:

31 USC 1342 prohibits the government from accepting voluntary services, which this action appears to be.

Joel, 31 U.S.C. 1342 prohibits the government from accepting voluntary services.  It does not prohibit a contractor from performing voluntary services.  Thus, if there is a statutory violation here, it was committed by the government.  I don't think you want to go there yet because of the criminal penalties that can be imposed on government personnel due to a violation of the statute.  We don't know all the facts so we cannot say there has been a statutory violation, that the contractor has no entitlement to payment or that the contractor is entitled to payment.  Right now, all I think we can say is that Bat has not provided sufficient information to allow any of us to offer an informed opinion. 

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2 hours ago, Retreadfed said:

Joel, 31 U.S.C. 1342 prohibits the government from accepting voluntary services.  It does not prohibit a contractor from performing voluntary services.  Thus, if there is a statutory violation here, it was committed by the government.  I don't think you want to go there yet because of the criminal penalties that can be imposed on government personnel due to a violation of the statute.  We don't know all the facts so we cannot say there has been a statutory violation, that the contractor has no entitlement to payment or that the contractor is entitled to payment.  Right now, all I think we can say is that Bat has not provided sufficient information to allow any of us to offer an informed opinion. 

I didn’t say that there was a violation of the statute. I did say that it doesn’t look like from the scenario presented that the government knew that the contractor was performing what appears to be either a negligent overrun or voluntary services. There would be no entitlement, either way (negligence or voluntary services without government knowledge). 

5 hours ago, joel hoffman said:

31 USC 1342 prohibits the government from accepting voluntary services, which this action appears to be. The contractor either negligently overran the limitation or voluntarily overran it with the intention to be paid but certainly with no common understanding with the government that they would be paid. There is no indication here that the contracting officer was aware that the contractor was overrunning the limitation. 

 

Edited by joel hoffman
Clarify that no entitlement where no government knowledge of voluntary services.
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I didn’t research examples where a KO knowingly accepted voluntary services with no advance agreement that they would be gratuitous.

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On 1/28/2020 at 8:43 PM, BAT said:

Our team over ran our T&M contract prior to alerting our CO. 

At face value, the government had no advance knowledge of the overrun. 

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On 9/5/2020 at 8:35 PM, here_2_help said:

This is a very dangerous line of reasoning not supported by (or in direct conflict with) applicable FAR and/or CAS regulations. Contractors that follow this line of reasoning should expect, as a minimum, questioned costs. I wouldn't be surprised to see a CAS 402 noncompliance thrown in for good measure. In extreme cases it could imperil the adequacy of the accounting system.

I would strongly urge readers to ignore this reasoning.

To the contrary, it precisely relies recognizing the border between contract work and other than contract work.

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17 hours ago, lotus said:

To the contrary, it precisely relies recognizing the border between contract work and other than contract work.

In this forum, individuals making assertions such as this one are expected to support them with citations to regulations. I await the regulatory support for your assertion.

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Speaking only for myself:  I'm okay with different parties sharing their own perspectives, even without citing regulations, when offering assistance in a thread.  And I'm okay with differing opinions.  Citations are often helpful and may sometimes add credibility to a comment, but I wouldn't want the unavailability of a citation to stop someone from sharing.  The key is for readers (this is a forum for professionals) to be careful and discerning, and to use whatever they read here as a springboard for their own further dialogue, research, or decision-making.  And then, maybe they'll come back here and share their further insights.

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On 9/5/2020 at 5:26 PM, lotus said:

They were a type of business development or marketing costs.

https://www.gggcpas.com/accounting-for-marketing-expenses-in-overhead-rate-calculations/

http://www.wifcon.com/discussion/index.php?/topic/899-overhead-vs-business-development/

Continuing to perform work on a contract without authorization and with the contractor’s expectation that it is entitled to payment for the unauthorized effort/work is neither a “business development cost” or “marketing cost”.

See also this old WIFCON discussion: 

 

Edited by joel hoffman
Added thread URL.
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On ‎9‎/‎5‎/‎2020 at 6:26 PM, lotus said:

Is not a direct cost if it is for things outside of the contract.  If 1000 hours were in the contract, and 1100 delivered, the last 100 were outside the contract and hence not direct.  They were a type of business development or marketing costs.

I tend to agree with H2H in regard to his analysis of this reasoning.  There are several flaws with this statement.  First, this statement mischaracterizes what is a direct cost.  Simply put, in accordance with both the FAR and CAS, a direct cost is one that benefits only one cost objective.  Thus, if a cost benefits more than one cost objective, that cost generally cannot be allocated as a direct cost of a single contract but must be allocated to the benefited cost objectives based on the relative benefits received from the cost by those cost objectives.  Therefore, before overrun costs from a T&M contract could be accounted for as an indirect cost, a determination would have to be made that the overrun costs benefited the other contracts to which the costs would be allocated through some indirect cost pool.

Next, there is no cost principle that covers business development or marketing costs.  Instead, there are several distinct costs listed in FAR 31.2 that may fall within these cost categories.  Some of these FAR costs, such as advertising and public relations, are generally unallowable costs, while some others such as B&P are allowable provided they meet certain criteria.  Accordingly, in addition to being analyzed for allocability, any T&M overrun costs would have to be analyzed to determine if they would fall within any of the FAR cost categories that could be considered business development or marketing costs and whether those FAR 31.2 costs are allowable or unallowable.  If they are unallowable, per FAR 31.201-6 and CAS 405, they would have to be accumulated in a separate pool consisting of unallowable costs for allocation to contracts.  While such costs would be allocated to contracts, they would not be recoverable.

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3 hours ago, ji20874 said:

Speaking only for myself:  I'm okay with different parties sharing their own perspectives, even without citing regulations, when offering assistance in a thread.  And I'm okay with differing opinions.  Citations are often helpful and may sometimes add credibility to a comment, but I wouldn't want the unavailability of a citation to stop someone from sharing.  The key is for readers (this is a forum for professionals) to be careful and discerning, and to use whatever they read here as a springboard for their own further dialogue, research, or decision-making.  And then, maybe they'll come back here and share their further insights.

That's fine. But if the assertion is wildly wrong (as this particular one is) and the party making it is unable to cite to anything substantive that supports the assertion, then I would hope readers take that into account.

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1 hour ago, Retreadfed said:

I tend to agree with H2H in regard to his analysis of this reasoning. 

Don't forget to reference FAR 31.202 and 31.203, and 31.205-38 (Selling Expenses). Plus there's the whole CAS 402 direct vs. indirect consistency thing, as embodied in 31.202(a):

Quote

No final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose in like circumstances have been included in any indirect cost pool to be allocated to that or any other final cost objective. 

But other than those little nuances, sure.

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45 minutes ago, here_2_help said:

That's fine. But if the assertion is wildly wrong (as this particular one is) and the party making it is unable to cite to anything substantive that supports the assertion, then I would hope readers take that into account.

Me, too.  

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