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Hi all, I am a new poster but have been using this forum for information for quite some time now. I am looking for some insight into an issue I am facing when Subcontracting with Universities under Time & Materials prime contracts, such as a GSA professional services schedule.  Learning from past audits, it is my understanding that labor charges from Subcontractors for which there is an applicable labor category in your Time & Materials prime must be mapped and billed through the prime rate schedule.  However, those hours must be supported by “individual daily job timekeeping records” (FAR 52.232-7(a)(5)(i)) aka time cards.  Most Universities do not maintain time cards for professional salaried personnel. They are not required to under OMB A-21/ FAR 31.3 cost principles.  They budget, report, and bill for their labor using an effort certification system, as a percentage of the direct salary paid in the accounting period.  Universities fluent in federal contracts are generally aware of this and refuse to enter into Time & Materials contracts as their accounting system simply cannot bill for labor by way of hours. Most much prefer to work in the world of cost-based / grants.

In the past, I have seen projects back into estimated hours for mapping and billing using that percentage of effort multiplied by standard hours for the period (e.g. 50% effort for a week x 40 hours a week = 20 hours), however they were dinged on an audit when the hours were not supportable by time cards (individual daily job timekeeping records), as there was no auditable trail of actual hours worked.  As GSA rates are capped by the schedule, when projects require considerable materials (ODCS, travel, and subcontracts that cannot be mapped through the rates), effective fee suffers and project financial management becomes difficult.  Further, you cannot propose fee on materials under FAR T&M contracts.  We could try to push for FFP and/or Cost based agreements in these scenarios, but doubt a contracting agency will change it's acquisition plan to accommodate one potential offeror with a nuanced/complex question - which can be hard to effectively communicate during solicitation Q&A.

Is my thinking/understanding here accurate?  Are there any other strategies to accommodate this labor accounting/mapping issue? 

Thank you for any insight you may have - I appreciate your time and thought.

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"Individual daily job timekeeping records" need not be interpreted to mean that the employee's pay is driven by those records -- it could be seen as simply a tracking of hours devoted to the contract work versus devoted to other matters.  In a T&M contract, the Government pays the prime contractor based on the number of hours worked, but the prime contractor's pay to its employees and to its subcontractors can be on a different basis.  For example, you could do a FFP subcontract with the university as long as you keep track of the labor categories and hours to satisfy the T&M prime contract's need for substantiation and payment. 

But if you (the prime contractor) have a T&M prime contract with the Government, you need to find some way to force your employees and your subcontractors to keep track of hours -- otherwise, you fail to satisfy FAR 16.104(i): 

  • "Adequacy of the contractor's accounting system.  Before agreeing on a contract type other than firm-fixed-price, the contracting officer shall ensure that the contractor’s accounting system will permit timely development of all necessary cost data in the form required by the proposed contract type."

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Thank you for your insight. That is reassuring if we can convince University partners to adopt time cards specifically for the staff working on an upcoming project, it could satisfy both parties. Their accounting system is still not able to allocate costs or bill us on an hourly basis using a fixed hourly rate, but believe there is sound logic to compliantly bill the hours through the prime rate schedule.  (All primes in this scenario are T&M).  The fee calculations on that labor will fluctuate as they will be working on a cost reimbursement basis and do not operate on standard hours (similar to total time reporting hourly cost basis), but it should be manageable, and should certainly result in some fee recovery.  

Again, thank you for your time and insight - FAR 16.104 was not among my reference points for this.

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18 hours ago, Sean Fitzpatrick said:

it is my understanding that labor charges from Subcontractors, for which there is an applicable labor category in your Time & Materials prime, must be mapped and billed through the prime rate schedule.

Can you explain what you mean by this.  When you submit a proposal with a University sub, what provision is applicable to the solicitation i.e., FAR 52.216-29,30 or 31?  Also, if you are performing under a GSA schedule contract, is FAR 52.212-4 Alt I the clause that is being applied to the T&M work?

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Absolutely.  Apologies, I am dealing with similar scenarios under both GSA and Non-GSA T&M primes. Our T&M GSA orders are imposing FAR 52.212-4 Alt 1. Under (e)(iii)(D) they are writing in that "No subcontracts for services shall be excluded from the hourly rates", complicating things further as the Universities are providing services.  To accommodate, we have been obtaining consent to bill them as Materials when we lack the hourly detail to bill them through the prime rates.   Specifically, and for reference:

Alt I changes to (e) definitions

"(ii) “Hourly rate” means the rate(s) prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that are-
   (A) Performed by the contractor;
   (B) Performed by the subcontractors; or
   (C) Transferred between divisions, subsidiaries, or affiliates of the contractor under a common control.
(iii) “Materials” means-
   (A) Direct materials, including supplies transferred between divisions, subsidiaries, or affiliates of the contractor under a common control;
   (B) Subcontracts for supplies and incidental services for which there is not a labor category specified in the contract;
   (C) Other direct costs (e.g., incidental services for which there is not a labor category specified in the contract, travel, computer usage charges, etc.);
   (D) The following subcontracts for services which are specifically excluded from the hourly rate: No subcontracts for services to be excluded from the hourly rates prescribed in the schedule; and
   (E) Indirect costs specifically provided for in this clause."

Alt 1 changes to (i) payment:

"(i) Hourly rate.
   (A) The amounts shall be computed by multiplying the appropriate hourly rates prescribed in the contract by the number of direct labor hours performed. Fractional parts of an hour shall be payable on a prorated basis.
   (B) The rates shall be paid for all labor performed on the contract that meets the labor qualifications specified in the contract. Labor hours incurred to perform tasks for which labor qualifications were specified in the contract will not be paid to the extent the work is performed by individuals that do not meet the qualifications specified in the contract, unless specifically authorized by the Contracting Officer.
   (C) Invoices may be submitted once each month (or at more frequent intervals, if approved by the Contracting Officer) to the Contracting Officer or the authorized representative.
   (D) When requested by the Contracting Officer or the authorized representative, the Contractor shall substantiate invoices (including any subcontractor hours reimbursed at the hourly rate in the schedule) by evidence of actual payment, individual daily job timecards, records that verify the employees meet the qualifications for the labor categories specified in the contract, or other substantiation specified in the contract.

 

In our Non-GSA primes, we are looking at FAR 52.232-7 Payment under Time & Materials, which is substantively similar in this regard. Specifically:

"(a) Hourly rate-
(1) Hourly rate means the rate(s) prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that are-
                (i) Performed by the Contractor;
                (ii) Performed by the subcontractors; or
                (iii) Transferred between divisions, subsidiaries, or affiliates of the Contractor under a common control.
           (2) The amounts shall be computed by multiplying the appropriate hourly rates prescribed in the Schedule by the number of direct labor hours performed.
           (3) The hourly rates shall be paid for all labor performed on the contract that meets the labor qualifications specified in the contract."

 

 

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