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Deobligation after Contract Ended


Voxx

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17 hours ago, Voxx said:

Formerfed - under what authority would you use to accomplish your removal of funds?

Voxx, my prior comment was in response to your original posts and not necessarily to all the various scenarios throughout this thread.  So when you are satisfied a contract is complete and you cannot get the contractor to respond to a closeout request/modification for whatever reason, you can do an administrative modification - unilateral modification that doesn’t affect rights of the parties.  You simply are removing funding excess to contract performance.

Its not the best way to handle those actions, but it’s used when nothing else works.

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18 hours ago, Voxx said:

Many of the supply contracts contain language such as 'not to exceed' and 'the Govt will only pay for what has been ordered'.

If you will only pay for what has been ordered, why are you obligating funds for items that have not been ordered? 

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If the policy folks don’t agree wiith issuing an admin mod, I’d ask them how to release the funds and closeout the open contract. I’d stress to them that paragraph 52.212-4 (c) isn’t applicable because the contractor is not entitled to any more money than for the supplies ordered and delivered or for the services and hours provided*. 

I’d put the onus on them...
 

* depends also on how the service requirement is written.  Example: X number of hours are required to fulfill the required service (with whatever degree of tolerance for minor absences), as clarified later by Voxx).
 

 

 

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2 hours ago, formerfed said:

So when you are satisfied a contract is complete and you cannot get the contractor to respond to a closeout request/modification for whatever reason, you can do an administrative modification - unilateral modification that doesn’t affect rights of the parties.

My apologies @formerfed just using your most recent post to illustrate a point.   Such action is not by the book (FAR and I will extend to the DFAR as well.)   As much as I hate to say it the "policy" folks might just have it right.   Consider FAR 42.302(b)(4) and 243.171 and its related PGI.

 

 

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Carl,

I understand and agree with your comment.  But both of my posts deal with the original issue where the OP didn’t hear back from the contractor on a bilateral mod to deobligate funds.  This situation occasionally happens for a variety of reasons.  Often it’s because the agency is delinquent taking closeout actions.  The contractor may have gone out of business,  companies are acquired and get lost in a big corporation, contractor employees leave and no one remembers the contract, etc.  I mentioned earlier when the government takes steps to properly closeout and deobligate funding but can’t, the only alternative I’ve discovered is an admin mod to remove the excess money.  

I spent a lot of time researching and talking with lots of people and never found anything else.  I do know a CFO who directed his finance office to remove unliquidated obligations after a certain droid of time lapsed.  That includes travel orders, interagency agreements, training, utilities as well as contracts.  The HCA didn’t argue figuring he could blame Finance if someone criticized him.  

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Formerfed - you are hitting the nail on the head. IF the company responded, is no issue. It is when companies do not respond for whatever reason. HQ would like to have the money back to either spend on current year stuff (if current year funds) or to help resolve prior year shortages (versus using current year money). And then of course to eventually lead to closing out the contract. 

I am of the opinion that we try to contact the company and if there is no response within a certain period of time and several attempts, that some sort of unilateral mod can be done to remove the funds. The mod is not taking away the right of the vendor to seek compensation for something in the future but merely removes the unspent funds so the can be used. 

And yes, because of the volume of the work on our desks and the emphasis on getting awards done and not enough people, closeouts are a low priority. My organization works with hospitals so the emphasis is to get contracts awarded as they affect people/patients directly and not having things can jeopardize patient care. So we do know when things should be closed out it just doesn't always happen due to workload for new actions and mods to current actions. 

Just trying to see how other organizations have handled that situation.

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1 hour ago, Voxx said:

I am of the opinion that we try to contact the company and if there is no response within a certain period of time and several attempts, that some sort of unilateral mod can be done to remove the funds

Have you thought about issuing a decision under the Disputes clause to do this?  This creates a definite time frame within which the contractor must object.

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24 minutes ago, Retreadfed said:

Have you thought about issuing a decision under the Disputes clause to do this?  This creates a definite time frame within which the contractor must object.

Aren't all contracting officer final decisions subject to appeal under the CDA? Am I missing something?

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23 hours ago, here_2_help said:

Aren't all contracting officer final decisions subject to appeal under the CDA? Am I missing something?

Yes, within specified time limits.  However, if the government unilaterally deobligates funds on a contract or takes other administrative action to determine the parties' rights, that decision is also subject to the contractor filing a claim if it objects or disputes the government's action.  Contractor claims can be filed at any time up to six years after the claim accrued.  Issuing a decision under the Disputes clause, limits the contractor's ability to object to government action for only one year as contrasted to the six year SOL otherwise available to file a claim.  Further, there should be no question as to the contracting officer's ability to issue a decision under the CDA.

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An administrative modification that deobligates unneeded funds does not change the rights or obligations of either party, and may be done unilaterally by the contracting officer (block 13.B. of the SF-30).  As has been shared earlier, you can note on the modification that this is done for internal government purposes only and does not change the rights or obligations of the parties -- do it and stick it in the file, and proceed with your contract file closeout.

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While I understand the intent of some of the folks in this thread to solve the OP’s situation with a unilateral modification as a “administrative change” (administrative modification) I disagree.  My view is different.

The facts pursuant to both the OP’s posts and the regulations -

·         Commercial Contract Firm Fixed Price – Clause 52.212.4 not tailored and in contract.

·         The government intends to de-obligate of funds under the contract as a certain amount of something which had money obligated against it by virtue of the contract has not been ordered nor delivered.  

·         Bilateral modification sent to contractor to de-obligate the money (and remove the item?)

·         The contract is not physically complete – FAR 4.804-4.

·         FAR 42.302(b)(4) while not in the contract is a regulation that requires the imperative of a supplemental agreement by either a CO if not delegated or the CAO if delegated that a supplemental agreement is required to close out the contract.

·         FAR 43.103 is explicit that a unilateral modification is not a supplemental agreement.

·         Supplemental agreement has been sent to the contractor and the contractor has not (may not, never will even when called, etc.)  signed.

·          

Conclusions –

In disagreement with the “policy people” the contract is not physically complete – the contractor has not completed all work pursuant to the contract as one item has not been ordered or delivered – therefore the contract can and must be terminated to proceed to closeout (Ref. 4.805(a)(15)).  I conclude that the policy people are in conflict with their own direction.   The policy people believe that a bilateral modification can be issued and must be signed but then turn around and say that when such a modification is not signed that a unilateral modification cannot be issued because the contract is not “expired”.  This premise on their part is not consistent with the actions they allow and then turn around and disallow and with the FAR for that matter.

The appropriate action is to convert the bilateral modification to that of a unilateral termination for convenience or cause.  If the contractor does not reply to the termination notice and request for settlement agreement the government would then proceed to a settlement by determination.

PS – I completely understand that this is an administrative nightmare and taking an easier route as has been suggested may not result in any fall out (claim from the contract at a later date for item not ordered).  However, I contend that the above is the right way to do it pursuant to the FAR and the contract as explained by the OP.  

 

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20 hours ago, Retreadfed said:

 However, if the government unilaterally deobligates funds on a contract or takes other administrative action to determine the parties' rights, that decision is also subject to the contractor filing a claim if it objects or disputes the governmentI's action. 

I agree with you in general, but not fully. In a recent ASBCA case, the contractor's appeal was denied. Among the reasons cited for the denial was the contractor's failure to file the appeal within the required CDA time frame. The late filing occurred because the contractor thought it had to submit a formal claim to the contracting officer to receive a COFD that it could then appeal. The Board explained that such was not required when the contracting officer unilaterally established the contractor's final indirect cost rates.

Quote

It is well settled that a unilateral rate determination is a government claim. See FAR 52.216-7(d) (4) ('Failure by the parties to agree on a final annual indirect cost rate shall be a dispute within the meaning of the Disputes clause.'). Upon receipt of the unilateral rate determination, Parsons could either accept the determined indirect cost rate as the final rate, or appeal the unilateral rate to this Board or the Court of Federal Claims within the time permitted by the CDA.

(Citations omitted.)

I'm not trying to nitpick, but I believe readers need to understand that not all contracting officer administrative actions to determine the parties' rights require a separate claim for COFD in order to appeal. In this case, the contractor's belief that it was so cost it millions of dollars.

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Let me add a final comment for me.  Contracting and Procurement often has a low regard at most agencies and this discussion is a prime example.  Senior agency management looks to us to make sound business decisions for their agency.  Many comments here reflect very conservative and bureaucratic responses.  An example is the policy people haven’t come up with a solution after several weeks.

I have seen many, many similar situations get to the top levels within government, although not the identical.  Conversations might go like this:

Program office - “we need money deobligated to cover a new action”

Senior management - “why isn’t this done?”

Contracting - “we think the contract is complete but we need the contractor to sign a modification to deobligate excess money and the contractor hasn’t responded”

Senior management - “did you call, email, look at their website to see if they are in business.”

Contracting - “uh, we need official documentation like a signed bilateral modification.  Then we need to wait 60 days after sending a certified letter, and legal review before we do a termination (we haven’t decided on the type yet) and then the excess money can be deobligated by December provided the contractor hasn’t appealed to the COFC.”

Senior management - why not assume the company is out of business and just take the excess money off the contract.”

Contracting - “we are waiting on the policy people to make a decision”

A common sense and appropriate business decision is documenting actions taken showing that the contract is complete, the contractor is not responding, and there’s no further need for funds on the contract.  If the contractor responds showing that position is in error, put money back on.  All this talk about contractor claims is just far fetched.

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Look - if the contract provided for the government to order up to a certain amount of supplies during a performance period and the government doesn’t order the maximum quantity, the contractor has no right to expect any more orders now nor to collect any more money. The contractor was paid for what the government ordered under the contract terms and conditions for ordering and for invoicing and payment.

If you can’t get any response or communication out of the contractor, send a unilateral mod to the contractor and close out the contract. You didn’t change any terms and conditions, thus paragraph 52.212-4 (c) isn’t applicable - no bilateral mod is necessary.

If the contractor submits a claim, so what? There is no entitlement.

Also- depending upon how the contract is written for services, if the contractor was required to provide a specific number of hours ( with a certain tolerance as you stated ) and it didn’t provide  the required number of hours and it’s too late now to make up those hours, per the commercial contract terms and conditions for invoicing and for payment, it won’t be entitled to any more payment.

If you can’t get the contractor to communicate or respond to you, send a unilateral mod to the contractor deobligating the excess funds and close out the contract.

What is the contractor going to claim? That it unilaterally changed the number of manhours for the same amount of money? What is the entitlement? The entitlement is the number of hours provided and paid for under the commercial contract terms and conditions for payment. Paragraph 52.212-4 (c) isn’t applicable. No bilateral mod is necessary. 

In either case, the government isn’t required to TERMINATE anything for ITS convenience.

Deobligate the money and CLOSE the contract for gosh sakes. You don’t have to be held hostage by the other party if it won’t even communicate with you!! Let them claim. What is their entitlement?  Nothing, if the contract is written as you say it is. 

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Carl is right in regard to the contractor's failure to perform -- a termination (ideally for cause or no-cost, but I hope not for convenience) is needed to make the contract physically complete, preparatory to closeout.  

Joel is right in regard to unordered or estimated quantities.

The original poster needs to stop treating these different situations in the same thread -- they are different, and cannot be discussed together.

formerfed is right that these situations make contracting people look like fools to our government colleagues.  

Others have also made good points.

If any of us knew all the facts, we could give sound advice -- which the original poster's policy office would not like, but we've already established that they are a significant part of the problem.  Even the original poster might be unwilling to take sound advice, but I hope he or she is open to learning correct principles.  

But the original poster has not fully explained the pertinent facts, and seems unwilling to enforce the contract.  Plus, he or she has a low quality policy office.  There may be little we can do except to express correct principles for different circumstances, and let the original poster govern him- or herself.

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You aren’t going to prevail if there is an appeal of a TFD for services not rendered when the period of performance is over and the government, at this point, is only trying to de-obligate excess funds.

The contractor can’t make up the missing hours now or take any other corrective action. 

Send a unilateral mod and close out the doggone contract. Deal with a claim if and when the missing in action contractor disagrees.

Let us quit dwelling on paragraph (c) and fruitless terminations. Waste of time and effort. 

Next time, administer the contract in accordance with the terms and conditions.

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 @joel hoffman and @formerfed just want to remind you that my response is based on the facts as I provided in my post based on my full read of the thread.  You both want to skew the facts to meet your own responses.  The OP has specifically stated what I posted highlighted by "The contract is for 10 EA at $100/EA for a total price of $1,000, but the contractor only delivers 9 and invoices for $900."  Likewise it is not stated in the thread that “top level” wants the money the “End user” does.

Bottom line the contract CALLED FOR DELIVERY OF 10 EA AND THE CONTRACTOR ONLY DELIVERED 9.  You all can do an administrative modification if you want but the hygiene of the contract and its administration requires the imperative for the deletion of that one item from the contract.   If you want to advocate removal can be done without the contractors concurrence because upper management is going to be upset or because it is too much bureaucratic BS then have at it.   I mean after all government contracting has a whole bunch of BS that goes against the grain of common sense so please advocate reducing all contracts that order a specific quantity from here on out with administrative modifications.

Now if you want to play the game of estimated quantities, estimated services, and how the full contract terms and conditions can provide for same then I am all in but I am not all in based on the facts and FAR references I have provided.    

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On 6/10/2020 at 10:01 AM, Voxx said:

OK I feel this is going beyond what I was originally trying to find out which was how does your office remove funds off of a contract after the delivery or PoP has ended AND where the vendor does not respond after a deob mod has been sent to them? But if it helps I'll add details that others have asked about.

The funds or quantities that were not used/delivered are often remaining because either the Govt did not order all of the items or the vendor failed to work all of the required hours on the contract (open position, contractor employee missed work because of illness and there was no backfill). Joel -  many of the contracts for supplies are based upon Not to Exceed and the Govt will only pay for items ordered.  I'd say that the reasons for a contract to still have funds/quantities on it are about split between those two scenarios. For those that wonder why the Govt did not demand delivery of remaining supplies, it is simply because the Govt did not need any more of the item or it wouldn't make sense because there is a new contract in place to secure the items. 

 

Carl, I was responding based upon Voxx’s expanded, added details and examples.

I qualified my responses to parallel those reasons for funds remaining on the contract “after the delivery or period of performance has ended and the vendor has not responded after a deob mod has been sent to them.”

The Government is only interested in de-obligating the funds - although that action should (generally in my opinion)  be taken in conjunction with closing out orders or contracts where the contractor is missing in action, unless something else prevents prompt closeout.. 
 

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2 hours ago, C Culham said:

 @joel hoffman and @Retreadfed just want to remind you that my response is based on the facts as I provided in my post based on my full read of the thread.  You both want to skew the facts to meet your own responses.  The OP has specifically stated what I posted highlighted by "The contract is for 10 EA at $100/EA for a total price of $1,000, but the contractor only delivers 9 and invoices for $900."  Likewise it is not stated in the thread that “top level” wants the money the “End user” does.

Bottom line the contract CALLED FOR DELIVERY OF 10 EA AND THE CONTRACTOR ONLY DELIVERED 9.  You all can do an administrative modification if you want but the hygiene of the contract and its administration requires the imperative for the deletion of that one item from the contract.   If you want to advocate removal can be done without the contractors concurrence because upper management is going to be upset or because it is too much bureaucratic BS then have at it.   I mean after all government contracting has a whole bunch of BS that goes against the grain of common sense so please advocate reducing all contracts that order a specific quantity from here on out with administrative modifications.

Now if you want to play the game of estimated quantities, estimated services, and how the full contract terms and conditions can provide for same then I am all in but I am not all in based on the facts and FAR references I have provided.    

Carl, for the example that you cited, I don’t disagree. However, that was based upon choices that ji provided.

The OP must have sensed that the thread was going down a rabbit trail, like when my dog Rockne gets onto the scent of squirrel trails in our yard. 😁

Voxx later clarified what he/she was referring to, as I quoted above. The clarification was quite different than the original post and Voxx’s selection from ji’s three possibilities. 

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1 hour ago, C Culham said:

Likewise it is not stated in the thread that “top level” wants the money the “End user” does.

Carl, in my experience, it is the end users’ funds that are funding the still open contract. They are the clients and customers. It is obvious to me and hopefully to others that the customer wants the excess funds available ASAP for other needs. 

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On 6/9/2020 at 11:52 AM, Voxx said:

...(For this, let's not worry about why there is as I do not think the reason matters at this point.

Hopefully, Voxx now understands that “why there is” DOES matter and that it and providing as much information as possible in initial and follow up posts makes ALL the difference.

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3 hours ago, C Culham said:

@Retreadfed just want to remind you that my response is based on the facts as I provided in my post based on my full read of the thread.  You both want to skew the facts to meet your own responses. 

Carl, what facts have I tried to skew?  I don't know what you are talking about.

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17 hours ago, formerfed said:

All this talk about contractor claims is just far fetched.

Really?  We don't know what all the facts are here.  All we have is a partial recitation of one side of the story.  However, I have been able to help contractors recover on claims when the government has deobligated funds from a contract even when the contractor gave the government a release concerning the deobligation.  From a contractor's perspective, never underestimate the capacity of the government to screw something up.

Joel, we don't know that there is no entitlement to additional payment by the contractor until we have all the facts and some action that the government has taken.  If there is an entitlement, it will be based on the facts and what the government did or did not do.

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1 hour ago, Retreadfed said:

Really?  We don't know what all the facts are here.  All we have is a partial recitation of one side of the story.  However, I have been able to help contractors recover on claims when the government has deobligated funds from a contract even when the contractor gave the government a release concerning the deobligation.  From a contractor's perspective, never underestimate the capacity of the government to screw something up.

Joel, we don't know that there is no entitlement to additional payment by the contractor until we have all the facts and some action that the government has taken.  If there is an entitlement, it will be based on the facts and what the government did or did not do.

Agreed. And it depends upon the all the actual facts. I have my suspicions but based my opinion on the generalized information that Voxx provided as it “matured” through the thread. 

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