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Letter Contract Cost Plus Fixed Fee


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I am administering a Letter Contract that is Cost Plus Fixed Fee.  It was awarded under urgent and compelling.  It is an indefinite delivery contract but the initial Task Order was for only a 6 month period of performance (POP).  The contractor submitted Cost or Pricing data for the 6 month POP.  By the time I received all the audit reports and analyses to negotiate and definitize, the initial POP has completed.  The contractor has been submitting monthly interim billing and the majority has been billed.  I believe that I am to avoid any appearance of Cost Plus Percentage in negotiations.  

  1. Am I to negotiate based on the analysis and a fee based on this analysis & not consider the actuals that may have occurred? 
  2. How does the contractor certify the cost or pricing data given that actuals have occurred?

       

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FAR 16.603-2(c) tells the contracting officer what to do when the parties are unable to definitive (agree on price or fee) within the 180-day or 40% deadline:  unilaterally determine a reasonable price or fee in accordance with FAR subpart 15.4 and FAR part 31, subject to appeal as provided in the Disputes clause.

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Ah - thank you. I understand - your pointing to the "unilaterally determine a reasonable price or fee in accordance with FAR 15.4 and FAR part 31" section.  I suppose I could apply that to my current predicament of being past all the performance.  We have to use weighted guidelines. Thinking back at 180 days/40%, I would not have had anything to apply the weighted guidelines to but their offered Cost Subtotal as none of the audit reports or analyses were available.  I am not sure about that piece of it or if I would have gotten it approved mind you.  Now I guess I can apply weighted guidelines to the recommended price based on the analysis (versus the actuals) if I feel that is a reasonable price and fee.    

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2 hours ago, DearPrudence105 said:

Thinking back at 180 days/40%, I would not have had anything to apply the weighted guidelines to but their offered Cost Subtotal as none of the audit reports or analyses were available. 

If any KO would care to respond, I'm interested in the quote above. Is it common to wait to negotiate pending audit reports and other analyses, even if you have a regulation or statute telling you to definitize?

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19 hours ago, DearPrudence105 said:

I believe that I am to avoid any appearance of Cost Plus Percentage in negotiations.  

  1. Am I to negotiate based on the analysis and a fee based on this analysis & not consider the actuals that may have occurred? 
  2. How does the contractor certify the cost or pricing data given that actuals have occurred?

       

In my view, cost plus a percentage of cost situation is inapplicable here because there were no contract terms under which contractor had ability to control and manipulate incurrence of performance costs and where fee payment terms were included in the contract as a % of said incurred costs. Also, it seems like the government may have been partially responsible for why there were not timely negotiations. Therefore, I think you should negotiate based on the analysis of proposed costs and weighted guideline fee. It seems better to have bilateral agreement in this case, than not. If the contractor was 50% at fault for the failure to enter into negotiations: I would argue that you may consider a decrement in your fee position if the incurred cost was lower. If the incurred cost was higher, I would argue that you may consider there should be no increase in fee.

Actuals is considered cost or pricing data and certified just like any other such data.

Edited by Neil Roberts
answer question 2.
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1 hour ago, here_2_help said:

If any KO would care to respond, I'm interested in the quote above. Is it common to wait to negotiate pending audit reports and other analyses, even if you have a regulation or statute telling you to definitize?

Unfortunately, it seems very common, even the prevailing pattern, to fail to meet definitization schedules.  I fear most contracting officers and most HCAs are blissfully unaware of FAR 1.603-2(c).  

33 minutes ago, Neil Roberts said:

In my view, cost plus a percentage of cost situation is inapplicable here because there were no contract terms under which contractor had ability to control and manipulate incurrence of performance costs and where fee payment terms were included in the contract as a % of said incurred costs.

I agree.  Since actual costs exist, you should use those -- proposed costs are irrelevant now -- and proposed fee is irrelevant now.  Since the work is complete, the contractor is facing no risk, so the fee should be on the low side.  Determine (or negotiate) a reasonable fee, and stay within the ceiling or maximum that was established up front.

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5 hours ago, here_2_help said:

If any KO would care to respond, I'm interested in the quote above. Is it common to wait to negotiate pending audit reports and other analyses, even if you have a regulation or statute telling you to definitize?

In many cases, acquisitions are just not planned and there’s no orderly process for KOs and their management to track progress.  Audits generally don’t come as a surprise.  So scheduling audits should be at the top of the planning list.

Many agencies now talk with auditors well in advance.  DCAA is the usual go to source but use of private sector accountants are usually much quicker.  This GSA reference talks about civilian agencies but DoD is increasingly using this and other sources including 8(a)s for quicker audit support.  
https://www.gsa.gov/cdnstatic/CCAS Ordering Guide December 2017.pdf

180 days is normally way more than sufficient to get an audit, develop a strategy, and negotiate.

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