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Kathleen Hoosier

FAR rulings for Certified SBE for stored material

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Under my sub contract, I was required to be approved by the awarding General Contractor of my SBE status.  Our contract provided a schedule which required me to order material that was job specific and a specialty to meet the project schedule.  To ensure I met this requirement, I purchase the material and the schedule for my installation has been extended.  The GC has informed me under FARR  52.232-5(b) “The first and hardest to overcome is that the contract must specifically authorize the consideration of the materials in question to be delivered off-site. This authorized consideration does not exist in this contract”. 

We have completed all required paper work for Bill of sale, but we are getting grief from the Awarding party.  It was my understanding that under the prompt pay agreement, if you provided all necessary required documents, an SBE would paid for Stored material.  

Can some one elaborate on this subject?

farr.docx WOSB.pdf

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Where are you reading that a small business enterprise subcontractor is entitled to payment for ordered material under a federal fixed-price construction contract?

Are you seeking payment from the prime contractor or from the Government?

Here’s my understanding...

The contract clause at FAR 52.232-5 governs progress payments to the prime contractor.  The clause allows for the Government to make progress payments to the prime contractor based on estimates of work accomplished, and further allows for material delivered to the site to be considered in the estimates of work accomplished under certain conditions.  But we’re not talking about material delivered to the site.

Your situation:  The clause we’re discussing provides that other material not delivered to the site but delivered to the prime contractor may be considered in the estimates of work accomplished ONLY if (1) this is specifically addressed in the contract; and (2) the prime contractor has title.  According to your posting, neither of these conditions exist.  Therefore, the prime contractor has no basis of entitlement for payment from the Government for the material that you (a subcontractor) have ordered and placed in storage.

Your entitlement to payment from the prime contractor will be described in your subcontract with the prime contractor, and we don’t know what your subcontract says.  But regardless of your subcontract’s terms, and based on your posting, it seems your prime contractor has no entitlement to payment from the Government.

I hope this is helpful.

 

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ji is correct concerning the prime contractor’s entitlement to a progress payment for the materials. Don’t know what the materials are.

1) Is there a reason why you or the prime contractor can’t deliver the material to the site and store it with other on-site materials?

2) Is it that you would have to store it on-site as the installation trade?

Storing the material on-site would allow payment to the prime and the prime would then have to pay you promptly from those proceeds. If you want to know the specific details, please advise. They are detailed in the above stated clause and the Prompt Payment clause . 

3) Does your subcontract have a “Pay when paid” provision? 

thanks for your clarifications.

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The answers to our questions would be helpful.

Im surmising that the extended schedule is a delay to your being able to bring the materials on-site and get paid. Which might provide another avenue for redress.

Although impact cost for interest is generally not an allowable cost to the government, additional storage costs might be, depending upon who is liable for impacts of delay and whether the delay has already been resolved.

That is one reason why I’m asking.

But if you are satisfied with the first response, never mind.

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The GC sent with the contract the process for payment for stored material off site.  We followed the instructions and the Gov. came back to the GC that under Farr agreement, they do no pay for stored material. 

The material is 24'-30' stock lengths that we cut and fabricate for Curtain walls and glazing on the exterior of the building.  Presently, the schedule has fallen so far behind we cannot field verify the openings.  We requested to fabricated the elevations from the contract documents, but the GC could not guarantee to hold openings per the contract documents.  We cannot fabricated the material on site if we have it delivered. 

 

 

 

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2 hours ago, Kathleen Hoosier said:

The GC sent with the contract the process for payment for stored material off site.  We followed the instructions and the Gov. came back to the GC that under Farr agreement, they do no pay for stored material. 

The material is 24'-30' stock lengths that we cut and fabricate for Curtain walls and glazing on the exterior of the building.  Presently, the schedule has fallen so far behind we cannot field verify the openings.  We requested to fabricated the elevations from the contract documents, but the GC could not guarantee to hold openings per the contract documents.  We cannot fabricated the material on site if we have it delivered. 

 

 

 

1) Did you purchase and receive the materials already? 

2) If you need to be paid for the materials, can you or the prime store it at the site of the work? 

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We did purchase the material, I need to get paid for the material.  But to store on site would be difficult.  The material would take up a 40' x 25' space on site and because it is aluminum, it is highly desirable for theft.  The project is located approx 85 miles from my facility.  I would have to move the material back to my shop to fabricate after delivery to the site then bring back to the site for install.

The GC has not reissued a new construction schedule either.  We were to be installing this material  October 2018.  We pushed off the manufacture delivery to January, but they could not hold our material any longer than this.  

I could let them know I will be bringing the material onsite and that they would need to make room for me to put it in a fenced area and let them tell me they cannot accomodate my request.  

 

  

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Kathleen, I will try to provide a short answer later this afternoon. Or you can PM me and we could have a longer discussion. Looks like you may have an impact issue with the prime. 

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Kathleen, I will try to provide a short answer later this afternoon. Or you can PM me and we could have a longer discussion.

ADDED:

Kathleen, from the limited information that you provided, it appears that some party has caused a delay to the schedule that is impacting your ability to fabricate your products.

Secondly if you brought the materials to the site and were reimbursed, you would normally not be allowed, at least by the Corps of Engineers, to remove said materials back to your facility for fabrication.

Having said all of that, this appears to be a situation where it would be appropriate to provide payment for offsite stored materials after the prime reimburses you during the delays to fabrication.

Depending upon the circumstances and responsibilities for the delays, it might be possible that the government could modify the contract to provide authorization for offsite storage materials. Possible consideration could be agreements on your part related to impacts of delays  to your fabrication schedule.

you did not clarify whether your subcontract has a pay when paid provision or clause in it

if the prime is the party responsible for the delay, then you might have some possible recourse with the prime. Maybe you could negotiate with the prime to reimburse you for the materials during the delay period  

Of course, my opinion is just hypothetical because we don’t have all of the facts. I don’t know whether you can afford legal assistance, for this matter.

I am just simply suggesting a possible, mutually agreeable solution. It’s a pretty basic negotiation technique in order to find a win-win solution. 

 

Edited by joel hoffman

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54 minutes ago, joel hoffman said:

...this appears to be a situation where it would be appropriate to provide payment for offsite stored materials...

This is not evident to me.  But, Joel, are you trying to find a way to justify a payment (A) by the Government to the prime contractor, or (B) by the prime contractor to the subcontractor?

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Thank you, I would appreciate speaking further on this matter. 

You are correct in your assumption, there are several trades that are behind on the schedule, which is impacting my ability to perform.  I am a Glass and Glazing Sub Contractor and we are the first of the finish trades, which means until an opening is ready for framing and glass needs to be complete.  (Ie floors, framing, dense glass, water proofing, J molding for stucco, flashing, rough in plumbing, electrical etc)  Presently the project is approximately 4 months at a minimum before I can verify openings to cut and fabricate the aluminum, let alone install on site.  

K

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45 minutes ago, Kathleen Hoosier said:

Also, we have gone to the GC and spoke with the Gov. The Gov is taking the stance they will not pay for any stored material.  I have asked for special consideration, but at this time it has been denied. 

I agree with the Government position, based on the information in this thread.  But good luck — if Joel can help you, more power to you.

Isn’t this a prime-sub problem?  If the prime contractor has breached its subcontract with the subcontractor (not shown here), the subcontractor can seek relief in the civil courts of the state under which the subcontract is controlled.  After all this discussion, we still don’t know the payment terms of the subcontract — so we don’t know what amount, if any, the prime contractor owes to the subcontractor.  I have to suppose that the subcontract’s payment terms were acceptable to the subcontractor; otherwise, it would have negotiated different terms when the subcontract was awarded.  

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Interesting point. Our contract says "unless other wise provided in the contract documents, and if approved in advance by the owner, Applications for payment may included materials & equipment not incorporated in the Sub contractors work but delivered and suitably stored at the Project Site or at some other location agreed upon in writing.  Approval of payment application for such stored items on or off the project site shall be conditioned up the satisfaction of the terms of the section of the sub contract or such other procedures satisfactory to the Owner and Contractors interest....." We provide request and all documentation required, (ie Bill of Sale, UCC Finance Statement and release) 

But I don't know if the GC has billed for this material, as we provided them with all of this information and the invoices from our supplier.  

How do I find out what the GC has been paid on our scope of work?  

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3 hours ago, Kathleen Hoosier said:

Interesting point. Our contract says "unless other wise provided in the contract documents...

But apparently the prime contract specifically disallows payment for material stored offsite.  Fail.

3 hours ago, Kathleen Hoosier said:

...and if approved in advance by the owner...

But the owner (the Government) apparently has not given advance approval.  Fail.

3 hours ago, Kathleen Hoosier said:

...Applications for payment may included materials & equipment not incorporated in the Sub contractors work but delivered and suitably stored at the Project Site or at some other location agreed upon in writing...

But you haven’t delivered the material to the work site.  Fail.

And you don’t have an agreement in writing for another location.  Fail.

At least, this is what I have discerned from your earlier postings.  That’s why I understand and support the Government’s position, and think this is a prime-sub matter that you need to resolve with your prime contractor partner.  It seems you have no entitlement to payment from your prime contractor — so instead, you might think of changing your approach and asking for some cooperation and assistance from your prime contractor, not as a matter of entitlement but as a matter of good business — your success will be enhanced/strengthened by a cash infusion, and your prime contractor’s success will be enhanced/strengthened by keeping you available as a subcontractor and ready to perform.   This will be a private negotiation between you and your prime contractor.

 

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Kathleen, having been a subcontractor on a professional services contract , I can appreciate your concerns and frustrations.  I don’t know the terms of your subcontract or which party or parties are responsible for delays that have impacted you.

I am aware that primes tend to insulate themselves from the impacts to their subs due to delays by themselves or other subs.

Yes, ji, the government may have a valid defense for their reluctance/refusal to allow authorization for off-site stored materials. Or- they may be simply refusing to assume any responsibility for any delays.

EDIT: We don’t know who caused the delays but the delays are impacting Kathleen's ability to custom fabricate the glass and glazing/frames. That is not something done on-site.

And if it was, the fab would then be subject Davis-Bacon, etc., etc. Not so for other than installation if fabbed at their own facility.

We also don’t know if Kathleen was provided or had access to the prime contract solicition. Often, many subs and suppliers don’t.

When I was hired as a sub under a professional services contract with the USACE, I did not have any visibility of the prime contract. 

Edited by joel hoffman
Added four paragraphs.

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10 hours ago, Kathleen Hoosier said:

But I don't know if the GC has billed for this material, as we provided them with all of this information and the invoices from our supplier.  

How do I find out what the GC has been paid on our scope of work?  

Per the Payments contract clause,

”(1) The Contractor's request for progress payments shall include the following substantiation:

(i) An itemization of the amounts requested, related to the various elements of work required by the contract covered by the payment requested.

(ii) A listing of the amount included for work performed by each subcontractor under the contract.

(iii) A listing of the total amount of each subcontract under the contract.

(iv) A listing of the amounts previously paid to each such subcontractor under the contract.

(v) Additional supporting data in a form and detail required by the Contracting Officer.

(2) In the preparation of estimates, the Contracting Officer may authorize material delivered on the site and preparatory work done to be taken into consideration. Material delivered to the Contractor at locations other than the site also may be taken into consideration if—

(i) Consideration is specifically authorized by this contract; and

(ii) The Contractor furnishes satisfactory evidence that it has acquired title to such material and that the material will be used to perform this contract.

(c) Contractor certification. Along with each request for progress payments, the Contractor shall furnish the following certification, or payment shall not be made: (However, if the Contractor elects to delete paragraph (c)(4) from the certification, the certification is still acceptable.)

I hereby certify, to the best of my knowledge and belief, that—

(1) The amounts requested are only for performance in accordance with the specifications, terms, and conditions of the contract;

(2) All payments due to subcontractors and suppliers from previous payments received under the contract have been made, and timely payments will be made from the proceeds of the payment covered by this certification, in accordance with subcontract agreements and the requirements of chapter 39 of Title 31, United States Code;

(3) This request for progress payments does not include any amounts which the prime contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of the subcontract; and

(4) This certification is not to be construed as final acceptance of a subcontractor's performance.”
 

You may ask the government for information that is related to amounts requested for your subcontract and also be sure to ask if the prime has requested payment for the materials - the government shouldn’t have allowed payment for the materials if they Say they refuse to pay for them.

The prime shouldn’t have reported the raw materials as “progress” either. 

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13 hours ago, joel hoffman said:

You may ask the government for information that is related to amounts requested for your subcontract and also be sure to ask if the prime has requested payment for the materials...

She may ask, indeed.  But the contracting officer has zero duty to answer her question (although she might be able to obtain the information under the Freedom of Information Act).  But some care is due — a subcontractor’s perceived meddling in the privity between the Government and the prime contractor might not be universally smiled upon.

I still think if the original poster thinks the prime contractor owes it money under the subcontract, that’s between the two of them — and if either party wants, the judge of the state civil court where they may sue for enforcement of the subcontract.

Joel and I are approaching this matter from different perspectives.  I hope the original poster benefits from this diversity.  

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11 hours ago, ji20874 said:

She may ask, indeed.  But the contracting officer has zero duty to answer her question (although she might be able to obtain the information under the Freedom of Information Act).  But some care is due — a subcontractor’s perceived meddling in the privity between the Government and the prime contractor might not be universally smiled upon.

I still think if the original poster thinks the prime contractor owes it money under the subcontract, that’s between the two of them — and if either party wants, the judge of the state civil court where they may sue for enforcement of the subcontract.

Joel and I are approaching this matter from different perspectives.  I hope the original poster benefits from this diversity.  

ji, I don’t know where you are getting your information. A subcontractor has the right to ask for information concerning what payments have been requested  by and made to the prime for its subcontract (not the markups on the subcontract).

Why do you think that the prime contractor has to provide the detailed substantiation that I quoted above in requests for progress payments?

Why do you think that the contractor has to certify that it will promptly pay its subs and suppliers for the applicable amounts requested and that it has to certify that it has paid the applicable amounts from its previous payments?

Furthermore, see, for instance: 

“32.112-2   Subcontractor requests for information.

(a) In accordance with Section 806(a)(1) of Pub. L. 102-190, as amended by Sections 2091 and 8105 of Pub. L. 103-355 (10 U.S.C. 2302 note), upon the request of a subcontractor or supplier under a Federal contract for a non-commercial item, the contracting officer shall promptly advise the subcontractor or supplier as to—

(1) Whether the prime contractor has submitted requests for progress payments or other payments to the Federal Government under the contract”

and:

“32.112-1   Subcontractor assertions of nonpayment.

(a) In accordance with Section 806(a)(4) of Pub. L. 102-190, as amended by Sections 2091 and 8105 of Pub. L. 103-355 (10 U.S.C. 2302 note), upon the assertion by a subcontractor or supplier of a Federal contractor that the subcontractor or supplier has not been paid in accordance with the payment terms of the subcontract, purchase order, or other agreement with the prime contractor, the contracting officer may determine—

(1) For a construction contract, whether the contractor has made—

(i) Progress payments to the subcontractor or supplier in compliance with Chapter 39 of Title 31, United States Code (Prompt Payment Act); or

(ii) Final payment to the subcontractor or supplier in compliance with the terms of the subcontract, purchase order, or other agreement with the prime contractor;

(2) For a contract other than construction, whether the contractor has made progress payments, final payments, or other payments to the subcontractor or supplier in compliance with the terms of the subcontract, purchase order, or other agreement with the prime contractor; or

(3) For any contract, whether the contractor's certification of payment of a subcontractor or supplier accompanying its payment request to the Government is accurate.

(b) If, in making the determination in paragraphs (a)(1) and (2) of this section, the contracting officer finds the prime contractor is not in compliance, the contracting officer may—

(1) Encourage the contractor to make timely payment to the subcontractor or supplier; or

(2) If authorized by the applicable payment clauses, reduce or suspend progress payments to the contractor.

(c) If the contracting officer determines that a certification referred to in paragraph (a)(3) of this section is inaccurate in any material respect, the contracting officer shall initiate administrative or other remedial action.”

I stand by the following statement I made above:

“You may ask the government for information that is related to amounts requested for your subcontract and also be sure to ask if the prime has requested payment for the materials..”.

Note that I am not even hinting that the prime has requested payment for Kathleen’s off-site stored materials. She simply asked:

“How do I find out what the GC has been paid on our scope of work? “

The contractor has told the government how much, if any progress payments are Being requested for Kathleens work and how much has been said to have been paid.

”(iii) A listing of the total amount of each subcontract under the contract.

(iv) A listing of the amounts previously paid to each such subcontractor under the contract.”

(Note that the government would only provide info concerning her subcontract)

I don’t think she is asking how much the contractor has included in the prime contract for that work (I.e., the marked up amount)  in a progress payment...

The substantiation describes what the subcontract amount is and what amounts, if any of the subcontract amount are included. The prime can’t request any money for the subcontract amount that it doesn’t intent to pay out of the proceeds (withholding or retain age from the proceeds). 

The prime would identify in the breakdown of the payment estimate what part of the subcontracted work it has asked payment for, e.g., percent complete, activities worked on and/or completed, etc.

The prime is free to charge whatever markups it wants to on the subcontract amount. That information isn’t what the government would provide 

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On ‎2‎/‎6‎/‎2020 at 3:46 PM, Kathleen Hoosier said:

Under my sub contract

Another avenue on the payment matter between prime and subcontractor is the payment bond required of the prime to the government.  If required and provided by the prime to the government a  first tier subcontractor has the ability to express non-payment to the bonding company.   The bonding company will take steps generally described in this thread to ascertain if there is a right to such payment and if so take steps to assure the payment is made.

If there is a payment bond and if you are a first tier subcontractor  ask for a copy of the bond from the government and utilize it to help solve the matter.  The facts of your prime/subcontract and the actions of both the GC and you will dictate whether you have a rightful claim or not.

Not familiar with the process of bond claims do an internet search on "Payment bond claims under the Miller Act" and you should find plenty of information to assist.

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Everything the original poster has written in this thread makes and re-affirms the case that she (the subcontractor) has no entitlement to payment from the prime contractor, and nothing she has written makes any suggestion that the prime contractor has fraudulently invoiced the Government for subcontractor work.  Nada.  Zilch.  I think advising her to go to the Government with hints of fraud (such as in requiring that the Government provide information on payments to the prime contractor for the subcontractor materials) or suggestions of non-payment (such as in requiring the payment bond information) is premature and ill-advised.

She hasn't even delivered the material to either the prime contractor or to the work site.

Kathleen, You came here looking for information that would justify payment for materials still in your possession and stored away from the work site.  No one can give you this information because it doesn't exist for your circumstances.  You thought that being a small business concern would provide such entitlement to payment -- it doesn't.  The prime contractor cannot get payment for its own materials stored offsite under the terms of the prime contract, much less your materials.  The prime contractor could have negotiated for such when the contract was formed, and still could now with an exchange of consideration, but that would only cover offsite material to which the prime contractor had title.

I recommend you consider working with the prime contractor to see if there is any relief the prime contractor can offer to you.  You haven't explained why the prime contract is behind schedule, but if it is the Government's fault, the prime contractor might be able to seek an adjustment in contract terms to allow for payment for materials stored offsite or might be able to negotiate a price increase sufficient to pay for the storage shed and security at the work site that you would need.  But this is all between the prime contractor and the Government -- your payment problems are between you and the prime contractor.

At least, that's my thought.  Or, you may follow Joel's and Carl's lead and approach the Government if you think the prime contractor has committed malfeasance towards you.  

You haven't cited the text of the "prompt pay agreement" that entitles you to payment at this time.  Can you do that?

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Whoa - Whoa - Whoa, ji!  I never hinted any malfeasance, fraud or misconduct on the part of the prime!!!

Kathleen asked:

“But I don't know if the GC has billed for this material, as we provided them with all of this information and the invoices from our supplier.

How do I find out what the GC has been paid on our scope of work?  “

I answered that she can ask for information related to progress payments for the subcontract.

You responded that the government has zilch responsibility to answer her.

I responded how the subcontractor may ask and that the government should provide certain information in response to such requests. PERIOD.

The contract doesn’t authorize payment for off-site stored materials.

Kathleen maintains that the contract performance is significantly behind schedule, thus impacting her ability to determine the information to fabricate the curtain walls and glazing for the building. In the meantime she has purchased the raw materials.

Im guessing that she probably doesn’t know who is responsible for the delays and/or doesn’t have enough information, as a sub, to be able to pursue a delay Impact claim. Don’t know- don’t have all the facts. My suggestion was to try to negotiate with the prime to pay or get the prime to negotiate with the government to authorize payment for off-site materials, which are specifically bought for this work - - depends upon who is responsible for the delays.

Its unfortunate that her firm bought the materials to accommodate the original schedule (usually dictated by the prime), anticipating that they could move out. She was also led to believe that she would be timely paid for the materials - only for her to learn that the prime contract doesn’t authorize payment for off-site stored materials.

She may probably need professional advice to help get someone to alleviate the impacts of the delays.

Good luck, Kathleen. 

 

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2 hours ago, ji20874 said:

She hasn't even delivered the material to either the prime contractor or to the work site.

ji, you don’t seem to understand the situation. Kathleen has explained that the material is required for off-site fabrication, which can’t start until the progress reaches the point that her firm can determine the dimensions for fabrication. She can’t deliver raw materials to the site or to the prime.

She is STUCK with the raw materials until progress reaches the point where she can determine the dimensions to fabricate the curtain walls and windows.  She is at the mercy of the contractor’s schedule.

There is apparently nothing to discuss with the bonding company - based upon the limited information available. The prime is not required to reimburse Kathleen for off-site raw materials before fabrication.

There should be a way to provide a win-win solution to the predicament. 

Edited by joel hoffman

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I understand very well.  The subcontractor has no entitlement to payment for the offsite materials in its possession, based on the information in this thread.  

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36 minutes ago, ji20874 said:

I understand very well.  The subcontractor has no entitlement to payment for the offsite materials in its possession, based on the information in this thread.  

Yes, that is the situation. That was established fairly early in the thread.  And there is no reason to contact the bonding company, unless Kathleen discovers that the prime invoiced for and was paid for the materials (I don’t think that is likely).  The bonding company isn’t a detective agency either.

However, the sub may have some recourse available for any cost impacts due to the delayed schedule preventing her from starting fabrication of the curtain walls and glazing and delays in bringing those finished products to the site to install. She said that she ordered the materials per the contractor’s schedule, then the precursor schedule activities required to determine dimensions for fabrication slipped. 

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