Jump to content
The Wifcon Forums and Blogs

Sign in to follow this  
Jimmie

Valid/Invalid Requests for Unsanitized (sealed) Package

Recommended Posts

Hello,

Question:

Are there situations when the Government shouldn't be requesting sealed/unsanitized packages?

Situation:

-Cost or Pricing Data is required

-Four year CPFF / FFP LOE prime contract (depending on the delivery order)

-Four subcontractors included in the original sole source award and three added after award (total of 7). Despite what the FAR says, all 7 subs were put on FFP / LOE subcontracts with all of the contract values over $100K (actually over $650K). All subs have four years of fixed labor rates on contract and all subcontracts include a "downward adjustment" or re-opener clause due to the excessive request for sealed packages.

-The Four subs included during the original prime contract award included a sealed package (unsanitized labor rate build up) for Gov't eyes only and the Gov't performed a cost and price analysis against these four sealed packages. The Gov't decremented the subs' labor rates and accepted their rates based on the results of the findings and the subcontractors accepting the Gov't decrements.

-Months after the original prime contract award, an Engineering Change Proposal (ECP) was issued and three more subs were added (total of 7). This time sealed packages were not requested with the ECP.

-Months after the ECP was submitted and accepted, the Gov't has requested sealed packages for all seven subs.

Problem:

I have a problem with the Gov't requesting sealed packages from the original four subcontractors because they did not change their labor rates for the ECP. The Gov't has already seen their labor rate build up, performed a cost and price analysis, decremented their labor rates and actually called/negotiated with the subcontractors directly in some cases to make sure the subs accept the decrement. Now I fear that the subs will not be able to certify to their original fixed labor rates because it has been eight months since the original sealed package submission and I assume that factors such as G&A, indirect rates, fringe, etc. have changed. I'm desperately looking for a good explanation of this process.

Question:

Are there situations when the Government shouldn't be requesting sealed/unsanitized packages?

Share this post


Link to post
Share on other sites
Have you tried calling the CO?

I requested that a note be sent to the CO and will report back.

The Gov't Cost and Pricing Group maintains that the new sealed packages are required even though they already negotiatied with my subs directly to decrement all of the labor rates (based on the first sealed packages sent to them). Those rates are still on contract (fixed labor rates as part of their four year FFP LOE subcontract agreement). Thanks to all for reading this string and I look forward to reading anyone's opinion/comments.

Share this post


Link to post
Share on other sites
I requested that a note be sent to the CO and will report back.

It was explained to me that the CO had already discussed the issue with the Gov't Cost and Pricing group. My company argued that this process would increase costs and the Gov't replied that they are aware of the potential pitfalls which include re-opening negotiations of the labor rates. Bottom line is that the Gov't is not going to budge on this issue.

To me this seems excessive and wasteful. Any thoughts?

Share this post


Link to post
Share on other sites
To me this seems excessive and wasteful. Any thoughts?

So now I have two subs who refuse to complete another sealed package despite the Gov't request. I'm not sure how this will play out but I have heard that the Gov't may hold up our funding/any further contracting activities until they receive the last two unsanitized proposals (labor rate build up). I plan to ask the two companies to send me an official letter stating their denial and reasoning so that I can forward to the Gov't CO. Has anyone else been in this situation?

Share this post


Link to post
Share on other sites

Jimmie,

There is a difference between disclosure and use. In this case, it sounds like the customer is asking for your subKs to disclose information, even though it has no direct link to already negotiated labor prices.

If you and your subKs incur additional costs related to complying with the customer's request, or if compliance disrupts planned program execution, then you may be entitled to an equitable adjustment. Otherwise, I don't think you or your subKs have any basis to "refuse" the request.

Hope this helps.

Share this post


Link to post
Share on other sites
Jimmie,

There is a difference between disclosure and use. In this case, it sounds like the customer is asking for your subKs to disclose information, even though it has no direct link to already negotiated labor prices.

Hope this helps.

Hello Helper,

Your comments allow me to see things from a different point of view and I definitely appreciate that. It is my understanding that the Govt cost or pricing office will use these unsanitized labor rate build ups to perform an analysis and then decrement the contract labor rates (if they discover any "findings"). These labor rates were put on contract months ago and the Govt has been paying these contract rates since then. I can't think of a reason why they would want us to disclose updated information which doesn't pertain to the contract rates under the fixed price type subcontracts.

Update:

We sent the Govt the sealed packages for the new subcontractors and sent them a certification of cost or pricing (which was signed just prior to signing subcontracts many months ago) for the old subcontractors (old subs had already submitted their unsealed package and accepted decrements).

Share this post


Link to post
Share on other sites

Here is how this thread began:

Problem:

I have a problem with the Gov't requesting sealed packages from the original four subcontractors because they did not change their labor rates for the ECP. The Gov't has already seen their labor rate build up, performed a cost and price analysis, decremented their labor rates and actually called/negotiated with the subcontractors directly in some cases to make sure the subs accept the decrement. Now I fear that the subs will not be able to certify to their original fixed labor rates because it has been eight months since the original sealed package submission and I assume that factors such as G&A, indirect rates, fringe, etc. have changed. I'm desperately looking for a good explanation of this process.

Question:

Are there situations when the Government shouldn't be requesting sealed/unsanitized packages?

I don't understand the question. The question is phrased in terms of "sealed/unsanitized packages," whatever that means. But the question does not seem to follow from the statement of the problem, which seems to be that the government is asking for submission of cost or pricing data at a late stage in some process. What does "sealed/unsanitized" have to do with anything? Is the issue "sealed/unsanitized," or is it whether the government should be asking for submission and certification of cost or pricing data eight months into the ECP process after it has already negotiated something directly with subs?

If the issue is whether the government should be asking for additional cost data at this stage in the process, the answer is that the government can ask for any data it wants, whenever it wants. The only question is whether the contractor and/or its subcontractors have to provide it. The answer to that question depends on what clauses are in the prime and the subcontracts. If the issue has something to do with "sealed/unsanitized," then I don't know what Mister Jimmie is talking about.

Share this post


Link to post
Share on other sites
I don't understand the question. The question is phrased in terms of "sealed/unsanitized packages," whatever that means. But the question does not seem to follow from the statement of the problem, which seems to be that the government is asking for submission of cost or pricing data at a late stage in some process. What does "sealed/unsanitized" have to do with anything? Is the issue "sealed/unsanitized," or is it whether the government should be asking for submission and certification of cost or pricing data eight months into the ECP process after it has already negotiated something directly with subs?

If the issue is whether the government should be asking for additional cost data at this stage in the process, the answer is that the government can ask for any data it wants, whenever it wants. The only question is whether the contractor and/or its subcontractors have to provide it. The answer to that question depends on what clauses are in the prime and the subcontracts. If the issue has something to do with "sealed/unsanitized," then I don't know what Mister Jimmie is talking about.

Hi Vern,

Thanks for weighing in! To clarify, at my company we define "sealed packages / unsanitized proposals" to describe another company's labor rate build up which includes proprietary information to that company. For instance, this build up would disclose G&A, Fringe, Indirect labor rates, Overhead and any other adders a company might use to build the labor rate. This information is normally sent to us in a "sealed package" which reads "for the Government's eyes only" because of the proprietary information included. We would then deliver to the Government along with the prime proposal. Sometimes the subcontractor/other company will simply email this spreadsheet (labor rate build up) directly to the Government and we don't have to deal with it. So essentially this unsanitized proposal (labor rate build up) contains a lot of cost or pricing data.

I guess the core of my issue surrounds whether the Government can use today's subcontractor cost or pricing data to decrement the subcontractor's labor rates months after negotiations have already concluded. Today's labor rate build up can be much different than their build up from 6 months ago. This is because a company's overhead may have gone up/down or their indirect labor rates may have changed, or G&A, etc. So a company's rate could have gone up or down and I don't agree with the government using this current information to analyze whether a sub's contract rates are fair and reasonable. I hope this clears up the issue but I'm getting the picture that we all use slightly different terminology. Thanks again for following this story and helping me. This situation comes up often and it is great to get an outside perspective.

Share this post


Link to post
Share on other sites

Okay, so the issue is not "sealed/unsanitized" at all. Good. That clears up one source of my confusion. Now, help me fully understand the situation.

It appears that some time ago there was a change to the CPFF contract, that the government obtained cost information pertaining to that change directly from subs. It also appears that the government conducted negotiations with you and with the subs pertaining to the contract change and that some kinds of agreements were reached. It is not clear to me what kinds of agreements these were, but they have something to do with the subs' labor rates. Now, the government wants more information about the subs' rates and plans to use the information in deciding how to reimburse you. Is that right? Is the government thinking of paying lower rates than agreed to earlier and wants information for that purpose?

Share this post


Link to post
Share on other sites
It appears that some time ago there was a change to the CPFF contract, that the government obtained cost information pertaining to that change directly from subs. It also appears that the government conducted negotiations with you and with the subs pertaining to the contract change and that some kinds of agreements were reached. It is not clear to me what kinds of agreements these were, but they have something to do with the subs' labor rates. Now, the government wants more information about the subs' rates and plans to use the information in deciding how to reimburse you. Is that right? Is the government thinking of paying lower rates than agreed to earlier and wants information for that purpose?

I think you are on the right track. Prior to contract award the government requested and received cost information and used this information to perform their cost/price analysis. Their analysis resulted in decrements to the proposed subcontractor labor rates. These decremented fixed labor rates were negotiatied into the subcontract agreements due to the government's findings. So each fiscal year had fixed labor rates negotiated and accepted.

Now I believe that the government wants to ignore the fixed labor rates negotiatied with the subcontractors and re-evaluate the subcontractor labor rate build up as if the subs were proposing another set of rates today. I don't think the government will reimburse us for costs already incurred but I believe they are trying to evaluate now as an opportunity to change fixed/contract rates in the future. I believe this is their desired course of action because I have seen them do it on other programs at my company. They will state something like "going forward, the government will only pay $100.00/hr for Sr. Technician at subcontractor A." even though the contract rate is $115.00/hr.

Share this post


Link to post
Share on other sites

Well, it's a cost-reimbursement contract. The Government must reimburse only allowable costs and in order to be allowable a cost must be reasonable. See FAR 31.201-2 and 31.201-3. If the Government has data which indicates to it that the previously agreed upon rates are no longer reasonable it will reduce the amount by which it will reimburse the contractor for the subcontracts. In that case, all the contractor can do is submit a claim that contests the CO's determination of reasonableness. The burden of proof is on the contractor, not the Government. There is no presumption of reasonableness.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.
Sign in to follow this  

×