Limitation of Funds and Contract Price Adjustment

[roybalm]

Background:A CPFF contract awarded at $3.6M - money obligated to date $300K will not be further funded. $3.3M is left on the contract. Under the "Limitation of Funds" the PCO has informed the contractor to stop work and no further funding will be available. The PCO does not want to obtain a cost proposal to delete the remaining effort (because of cost associated with proposal) but wants to let the contract die once funding is expended. The PCO wants to adjust the contract price down to available funding ($300K) and adjust fee to % of work performed.

Question: The difference in contract value is $3.3M - the requirement for Cost and Pricing data is $650K. Does the contract price need to be changed or can we just mod the contract to adjust for the revised fee amount. If the contract price is adjusted should not a descope proposal be obtained to satisfy the requirement for Certified Cost and Pricing Data IAW 15.403-4 (a)(1)(iii)?

[Guest Vern Edwards]

If the contract was funded only to $300K, then $3.3M is not "left on contract." The only amount "on" the contract was $300K.

According to the Limitation of Funds clause, FAR 52.232-22 (APR 1984), paragraph (e), the CO will terminate the contract in accordance with the termination clause if additional funds are not allotted. You simply follow the procedures in the Termination clause, FAR 52.249-6, and the Allowable Cost and Payment clause, FAR 52.216-7. You need not adjust the estimated cost. You should not need cost or pricing data.

[ji20874]

And paragraph ( l ) of the clause at FAR 52.232-22 provides for the fixed fee settlement.

I wouldn't use the words "stop work" in the context of a Government decision not to allot sufficient funds to allow completion of the work. Those words make me think of invoking the clause at FAR 52.242-15 Stop-Work Order (with Alt. 1) as the operative clause instead of the clause at FAR 52.232-22 Limitation of Funds. Indeed, in a Limitation of Funds situation, the contracting officer doesn't have to say anything at all, and if he or she does, it should probably be phrased as sharing with the contractor the likelihood (or definite decision, as the facts may be) that additional funds will not be allotted to the incrementally-funded cost-reimbursement contract.

In otherwise identical situations under an incrementally-funded cost-reimbursement contract, a stop work order and a notice that no further funds will be allotted may properly spark two entirely different responses by the contractor.

[roybalm]

Thank you for your insight.

I do have another question along the same line regarding Limitation of funds. If the CO adjusts the contract price down to the funding available (in this case 300K) are they then required to get a proposal (which adjust the price from $3M to 300K) which then would require Certified Cost and Pricing data?

[Guest Vern Edwards]

Thank you for your insight.

I do have another question along the same line regarding Limitation of funds. If the CO adjusts the contract price down to the funding available (in this case 300K) are they then required to get a proposal (which adjust the price from $3M to 300K) which then would require Certified Cost and Pricing data?

Stop using the term "contract price." You said that the contract is CPFF. There is no "contract price"; there is an estimated cost and fee. There should be no reason to adjust the estimated cost and fee upon termination. You are not changing the cost estimate. You are agreeing upon allowable cost up to the time of termination and in association with the termination, and the total amount of fee to be paid. The costs will be (mostly) already incurred. All you need is a termination settlement modification documenting the agreement on the termination settlement amount and the final sum allotted to the contract under the Limitation of Funds clause. Why would you need cost or pricing data for a determination of incurred costs and fee and to adjust the total sum allotted?

[Navy_Contracting_4]

Stop using the term "contract price." You said that the contract is CPFF. There is no "contract price"; there is an estimated cost and fee. There should be no reason to adjust the estimated cost and fee upon termination. You are not changing the cost estimate. You are agreeing upon allowable cost up to the time of termination and in association with the termination, and the total amount of fee to be paid. The costs will be (mostly) already incurred. All you need is a termination settlement modification documenting the agreement on the termination settlement amount and the final sum allotted to the contract under the Limitation of Funds clause. Why would you need cost or pricing data for a determination of incurred costs and fee and to adjust the total sum allotted?

Why should roybalm stop using the term "contract price"? Perhaps his CPFF contract was awarded under FAR Part 15, and priced using FAR Subpart 15.4, in which case, the definition at FAR 15.401 would apply:

"Price" means cost plus any fee or profit applicable to the contract type.

Your first three sentences, besides being unnecessary, dismissive and condescending, are of no help in understanding the situation. The balance of your post speaks for itself, is clear and concise, and doesn't rely on whether there is a "contract price" or not. What's your point with making an issue over the usage of the term?

[Guest Vern Edwards]

Why should roybalm stop using the term "contract price"? Perhaps his CPFF contract was awarded under FAR Part 15, and priced using FAR Subpart 15.4, in which case, the definition at FAR 15.401 would apply:

"Price" means cost plus any fee or profit applicable to the contract type.

Your first three sentences, besides being unnecessary, dismissive and condescending, are of no help in understanding the situation. The balance of your post speaks for itself, is clear and concise, and doesn't rely on whether there is a "contract price" or not. What's your point with making an issue over the usage of the term?

Navy:

roybalm should stop using it because it's wrong. The phrase "contract price" does not appear in the standard terms of a CPFF contract, and use of the term in the context of a discussion of the limitation clauses suggests that the writer does not understand. The definition in FAR 15.401 merely indicates that when Subpart 15.4 uses the term "price," as, for instance, in the phrase in the first sentence of FAR 15.402(a), "fair and reasonable prices," that term should be understood to also refer to cost and fee. Thus, "fair and reasonable prices" should be understood to also mean "fair and reasonable costs and fees." The definition in FAR 15.401 otherwise has no bearing on CPFF contracts and the interpretation of FAR 52.232-22, which is prescribed in FAR Part 32, to which the definition of price in 15.401 does not apply, and does not justify the use of "contract price" when referring to a CPFF contract. See FAR 2.101( and 52.202-1.

Proper use of acquisition terminology matters. THAT is my point, and it is a crucially important one. If I had wanted to be dismissive and condescending I would not have bothered with the rest of my post.