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Tzarina of Compliance

Pricing Subcontracts under CPFF Completion or CPAF After Award

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The agency issues a CPFF Completion type contract and a Contractor submits a cost proposal which does not include any subcontractors.   The Contractor wins the contract, the fee is fixed and a fee schedule is completed for the payment of fixed fee allocated to  each of the required completion targets.  After the award, the Contractor decides to bring on 3 subcontractors.   It competes the subcontracts and wants to awards 3 fixed price subcontracts to provide services in the performance of the prime contract.   The Contractor requests consent and is granted consent to subcontract. Should the fixed price subcontracts then be charged as pass-through "cost" even though they include a profit/fee?   Should the fixed price subcontracts be competed and awarded with a fee as a separate element and should that fee be then taken out of the Prime Contractor's Fixed Fee attributable to the completion target performed in full or part by such fixed price subcontractor?

How about if the Prime Contract was CPAF would the AF be applied to such subs?   Assume that no cost or pricing data had to be provided due to exceptions.    Thank you in advance

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Why would the amount of the subcontracts be considered pass through costs?  You haven't said anything that would indicate that they should.  Maybe there is more to the story?

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My response to your first two questions is no and no. As to your 3rd question, AF criteria could include prime contract management of subcontract performance, but that would have nothing to do with the subcontract profit. Subcontractor profit (fixed price contracts have profit, not fee) is usually treated as part of the prime contractor's cost. I assume that your company has submitted a cost accounting disclosure statement or has a consistent common practice with respect to treatment of subcontract profit/price. You should comply with that. I would find it hard to believe that your company "passes through" subcontractor profit to reduce its own fee. As an aside, consent per FAR 52.244-2 is not relevant here.

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What is the relative magnitude of the three subcontracts in relation to the overall target cost of the prime contract (or about how much of the overall contract effort)?

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Joel, on the context of this discussion, does it matter whether the subcontracting represents 3% or 30% of the work?

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ji, let’s let Tzarina explain to what extent the subcontracting is of the overall effort. 

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On 7/23/2020 at 8:42 PM, Tzarina of Compliance said:

Should the fixed price subcontracts then be charged as pass-through "cost"...

Is FAR 52.215-23 Limitations on Pass-Through Charges included in the prime contract?

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7 hours ago, Neil Roberts said:

Is FAR 52.215-23 Limitations on Pass-Through Charges included in the prime contract?

It is supposed to be. That’s why I asked how much of the overall work is being subcontracted.

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