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I apologize because I know this question has been answered before, but I looked all over WIFCON and cannot find the thread.

We are the Prime, we were awarded a task order on our IDIQ, the award was over 20M, the award was competitive, certified cost and pricing data was not required, our award was based on adequate price competition.  In our award winning proposal, was a subcontract valued under the TINA threshold.  When the subcontract is Modified to a dollar threshold exceeding TINA, will certified cost and pricing data be required from the subcontractor?  The subcontract award is sole source, and all the FAR 52.215 clauses are in the prime and subcontract agreements.

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Whether or not certified cost or pricing data is required for a subcontract modification is driven by the clause at FAR 52.215-13, Subcontractor Certified Cost or Pricing Data--Modifications.  The clause only kicks into effect if one passes the gate established by para. (a)(1) and (2) of the clause.  

general, pay close attention to (a)(2).

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It isn't about passing a test -- it is about reading and applying contract text -- text, not test.  One letter makes a difference.

Here, (a)(1) and (a)(2) must both be true to forestall the further operation of the clause.  Your original question was whether the total subcontract amount played, but (a)(2) seems to answer your question.

You are now thinking the way that I am.  We might both be right or we might both be wrong, but we're thinking the same way.

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7 hours ago, general_correspondence said:

all the FAR 52.215 clauses are in the prime and subcontract agreements.

The posting appears to indicate that the prime flowed 52.215-12 and 52.215-13 to the subcontractor, which is contrary to the instructions in 52.215-12 (c). The prime may flow one or the other, but not both.  Also, it is not indicated by the posting what alterations were made to parties or terms in the flowdown. This is important in analyzing the situation. For example, the word "contract" in -13 clause in the prime contract can be considered to mean the prime contract, not the subcontract and if it means prime contract, per (a) it is only operative when there is a prime contract modification driving the subcontract change. The poster did not indicate there was a prime contract modification. Is the subcontract called "contract" in the subcontract document? Were both -12 and -13 included in the prime?

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Neil

both clauses 52.215-12, and 52.215-13, are in the Prime, and in the Subcontract.  The government is not going to change the SOW.  The government is apparently going to accept our recommendations into the SOW, but will not ask nor will they send RFP.  The contract action is going to be the option period the government will exercise in next couple weeks, that carries our "recommendations" and cost/price for another XX months. The government intends to give us the money for the option period, but no scope change, and no RFP.  The original option period had funding of ~100K.  Our recommendation increased this.  All this aside, I want correct myself on my original post, the subcontractor as not a sole source, it was competitive under the old rules of receiving only one Bid, 5 potential Offerors were solicited, only one returned an offer.  certified cost and pricing data from our subcontractor, is probably not required, do you agree?

the 35% jump in Fee is going up against a lot scrutiny. I already put together an incentive for the fee they want, very reasonable, but defective pricing creeps in when radical changes to what the firm typically offers, so it will help to know if certifying their costs are required.   thanks

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4 minutes ago, general_correspondence said:

the 35% jump in Fee is going up against a lot scrutiny. I already put together an incentive for the fee they want, very reasonable, but defective pricing creeps in when radical changes to what the firm typically offers, so it will help to know if certifying their costs are required.

I'm utterly confused by the quoted sentence above. What in the world does a proposed fee rate have to do with disclosure cost or pricing data (certified or otherwise)?

Can somebody explain to me what the concern is?

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16 minutes ago, general_correspondence said:

so it will help to know if certifying their costs are required.

General

In your situation where the subcontract modification proposed price adjustment does not exceed the given $2M threshold, certified cost or pricing data is generally not required. I believe you may be concerned with weighted guidelines re proposed profit or fee.

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1 hour ago, general_correspondence said:

defective pricing is a concern to the prime due to what can be described as erratic Fee proposed. 

Does the government have to consent to your cost reimbursement subcontract per FAR 52.244-2?

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4 hours ago, general_correspondence said:

Here 2 Help

their are 2 issues, agreed, but they are related in that defective pricing is a concern to the prime due to what can be described as erratic Fee proposed. 

read the last bullet on page 21 of 28

https://www.acq.osd.mil/dpap/cpf/docs/contract_pricing_finance_guide/vol4_ch5.pdf

 

Bottom of Page 21 of 28: “Remember that the Government's right to a price adjustment is not affected by any of the following circumstances:
...• The prime contractor or subcontractor did not submit a Certificate of Current Cost or Pricing Data relating to the contract.”

That  bullet means that if the contractor and/or subcontractor IS REQUIRED to submit a CCCP but didn’t,  then that is not a defense against a defective pricing claim.

Not submitting a CCCP isn’t grounds in and of itself for the government to be able to establish a right to a defective pricing recovery.

And the sub can propose any fee or profit percentage. The prime doesn’t have to accept an excessive proposed fee. 

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In reading between the lines, it may be that the prime already accepted the sub’s proposal and it is now drawing some attention upon closer examination.  

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not accepted yet, but in case you haven't figured this out yet, it's my management that coached the subcontractor to change their fee.  This is why I want to protect the subcontractor as well as our company during any audit. read the first paragraph of the document I put in the link . If the subcontractor is increasing fee erratically, not in conformance to its accounting principles, the definition and description of defective pricing is an issue. 

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General,

This is how I see the post to date.

1.You have used the word "fee" throughout. In my world, this usually means the subcontractor has a cost type contract. I would be surprised if your company has a cost type contract with the government. Cost type subcontracts are high risk to fixed price primes. Do you have a fixed price subcontract that states there is a fee?  

2. There is already a limit to fee in cost type contracts. So, are we talking about the justification of approximately $90,000 on 900,000 in cost or is this a fixed price subcontract type with fee and if so, what type subcontract would you call it?

3. You have indicated you have incentive terms and conditions for the subcontract to address the fee being proposed. So, I don't see the concern.

4. I do understand that total price of the change notice needs to be justified. But, what accounting principles do you see as covering when a "fee" is reasonable?

5. I applaud the intent of your concern but I am not clear that any comments made so far satisfy that concern. Your comment? 

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8 minutes ago, Neil Roberts said:

2. There is already a limit to fee in cost type contracts. So, are we talking about the justification of approximately $90,000 on 900,000 in cost or is this a fixed price subcontract type with fee and if so, what type subcontract would you call it?

I agree FAR Part 15 implements statutory limits on fixed-fee amounts (in terms of percentages of estimated costs) for cost-plus-fixed-fee and other types of cost-reimbursement contracts awarded by the Government to prime contractors. Is it your position that the limitations in FAR Part 15 apply to CPFF contracts between a prime contractor and its subcontractors? If so, how would that work? Is there a contract clause that imposes those limitations?

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3 hours ago, general_correspondence said:

If the subcontractor is increasing fee erratically, not in conformance to its accounting principles, the definition and description of defective pricing is an issue. 

General, can you explain this sentence?  What is the connection you see between proposed fee, whether proposed erratically or otherwise, and defective pricing?  The fee a subcontractor proposes is not a cost to the subcontractor.

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13 minutes ago, here_2_help said:

I agree FAR Part 15 implements statutory limits on fixed-fee amounts (in terms of percentages of estimated costs) for cost-plus-fixed-fee and other types of cost-reimbursement contracts awarded by the Government to prime contractors. Is it your position that the limitations in FAR Part 15 apply to CPFF contracts between a prime contractor and its subcontractors? If so, how would that work? Is there a contract clause that imposes those limitations?

See FAR 52.244-2(g).

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51 minutes ago, Neil Roberts said:

General,

This is how I see the post to date.

1.You have used the word "fee" throughout. In my world, this usually means the subcontractor has a cost type contract. I would be surprised if your company has a cost type contract with the government. Cost type subcontracts are high risk to fixed price primes. Do you have a fixed price subcontract that states there is a fee?  

2. There is already a limit to fee in cost type contracts. So, are we talking about the justification of approximately $90,000 on 900,000 in cost or is this a fixed price subcontract type with fee and if so, what type subcontract would you call it?

3. You have indicated you have incentive terms and conditions for the subcontract to address the fee being proposed. So, I don't see the concern.

4. I do understand that total price of the change notice needs to be justified. But, what accounting principles do you see as covering when a "fee" is reasonable?

5. I applaud the intent of your concern but I am not clear that any comments made so far satisfy that concern. Your comment? 

Neil, refer to this other active thread, which appears to be the same prime and sub. Both prime and sub contract are CPFF.

 . I’m not sure where you all are heading by questioning whether The government can or should be concerned whether or not a fee is reasonable or unreasonable.

The government must determine that the amount of a modification is fair and reasonable. The prime is responsible to evaluate subcontract pricing. If the fee is identifiable in a subcontract proposal and it appears to be unreasonable or suspect, then both the contractor and the government should be concerned and question it if necessary. Hopefully, the contractor’s purchasing system will handle it initially l it’s up to the prime to justify fair and reasonableness of mod pricing, then including sub pricing. Part 15.402 policy and following paragraphs.

If Proposed costs are very reasonable but fee is unreasonable or ridiculous - it ought to be obvious that the overall price is unreasonable.  Fair cost plu s 80% fee on a CPFF  = unreasonable Price. It would look To me if I were the owner like the prime is looking the other way in order to maximize its fee on markups of a high subcontract(s).

When able to evaluate fee, the FAR and supplements provide the methodology to develop a fair and reasonable Negotiation objective.

Here, it appears that we are also looking at 1) CPFF low risk to contractor/high risk to owner and 2) a situation where the sub appears to want to re-price fee on original work and jack it up on the additional work (see other thread). 

 

Edited by joel hoffman
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35 minutes ago, Don Mansfield said:

FAR 52.244-2(g)

Yeah- Like he said. Thx, Don.🤠
See also 31.201-3   Determining reasonableness. A subcontract including fee is a “cost” to the prime and Is still a cost when passed on to the government. 

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31 minutes ago, joel hoffman said:

Neil, refer to this other active thread, which appears to be the same prime and sub. Both prime and sub contract are CPFF.

Joel, This is just a side issue. I have never heard of or believed the government would ever issue a "competitive" cost type contract. General's posting indicated the $20M Task Order award from the government was competitive and there was no certified cost or pricing data. I am not that familiar with IDIQ/Task Orders if that makes a difference. I have never viewed a cost contract as being capable of a competitive award, because the price is not fixed and in large scale cost contracts, frequently overrun. Buy-in is something to be concerned about there. In my career, I can only think of one person who ever suggested awarding a cost type subcontract as "competitive" without cost or pricing data and negotiations, which is what appears to have been the case of this posting. Sometime, I hope to learn more about that scenario.  

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