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What happens to funding and unearned fixed fee between base and option periods?


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Scenario:  CPFF Completion Multiple Year Contract.  Base Period is 2 years.  Two Option Periods at one year each.   The awarded amounts:

Base Period:  Cost Ceiling $10MIl Fixed Fee $1MIL

Option Year 1: Cost Ceiling $5MIl Fixed Fee $500k

Option Year 2:  Cost Ceiling $5MIl Fixed Fee $500K

Base Period is fully funded with the Appropriation of the FY in which the original contract was awarded. 

Contractor finishes Base Period under the Cost Ceiling (Total Cost at $8MIl)  but does not complete all the Completion Targets, and only earns about half of the $1MIl Fixed Fee.

Can the agency "roll-over" unspent funding and fixed fee to Option Period One?  I know that the Option Period must be exercised as originally awarded, but can the Agency use the Base period funding as the initial obligation for Option Year funding? Also can they use the unspent base period funding to modify/change (bilaterally) the Option Period Contract by increasing completion targets and estimated cost and fixed fee?

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Is this three separate CLINs?  or a single CLIN where the option exercises raises the amounts on the single CLIN?

Is this for a supply or a service?

If services, are the services severable or nonseverable?

I'll answer one possibility of answers.  If these are three separate CLINs for services that are severable, then NO, you should not roll over the unused cost money from the base period CLIN to the option period CLIN, and NO, you should not roll over the unearned fee from the base period CLIN to the option period CLIN.

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59 minutes ago, ji20874 said:

Is this three separate CLINs?  or a single CLIN where the option exercises raises the amounts on the single CLIN?

Is this for a supply or a service?

If services, are the services severable or nonseverable?

I'll answer one possibility of answers.  If these are three separate CLINs for services that are severable, then NO, you should not roll over the unused cost money from the base period CLIN to the option period CLIN, and NO, you should not roll over the unearned fee from the base period CLIN to the option period CLIN.

One CLIN.   This is a contract for non-severable services.  It is funding technical assistance in a agricultural sector with completion targets in each year.  

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Okay.

The parties agreed on an estimated cost and fixed fee for each year's set of completion targets.  The contractor failed to meet the completion targets for the first year, and the first year is over.  The contractor did not earn the full fee because it did not achieve the completion targets.  The unearned fee is forfeited, based on the little I have read here. 

Now, for the second year -- do the uncompleted targets from the first year (1) roll into the second year? or (2) do they fall off the table, so to speak?  If (1), then you might roll over the unused cost dollars.  If the contractor achieves all of the completion targets for the second year PLUS all of those left over from the first year, then it can fully earn the second year fee.  If (2), no, you should not roll over the unused cost dollars. 

Does your contract text already address this situation?

Will you record the contractor's failure to achieve the first year's completion targets in CPARS?

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13 minutes ago, ji20874 said:

Okay.

The parties agreed on an estimated cost and fixed fee for each year's set of completion targets.  The contractor failed to meet the completion targets for the first year, and the first year is over.  The contractor did not earn the full fee because it did not achieve the completion targets.  The unearned fee is forfeited, based on the little I have read here. 

Now, for the second year -- do the uncompleted targets from the first year (1) roll into the second year? or (2) do they fall off the table, so to speak?  If (1), then you might roll over the unused cost dollars.  If the contractor achieves all of the completion targets for the second year PLUS all of those left over from the first year, then it can fully earn the second year fee.  If (2), no, you should not roll over the unused cost dollars. 

Does your contract text already address this situation?

Will you record the contractor's failure to achieve the first year's completion targets in CPARS?

This is a good point.  I think yes, the completion targets would be "rolling over" to the next year so to speak.   For illustration.  Base Year has a target of mobilizing $50MIl in private investments with an incentive paid in fixed fee for every $10MIL mobilized = $200K in fixed fee.  The contractor mobilized $30MIL and earned $600,000 in fixed fee.  The Option year of the contract wants to continue mobilizing private investment for an additional $25MIL and the next year an additional $25MIL.

So the question is if the contractor failed to mobilize $50MIL by $20MIl short in Base period, but manages to mobile this additional $20MIL in Option Period, so the total mobilization is $45MIl instead of $25MIL in the first option period- should I roll over the unused costs and unearned fixed fee?  Or does the base and options represent complete contracts in themselves?  The contract does not say anything about funding being available cumulatively for the option periods.

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Well, you said it is one CLIN.  You could roll over the unearned fee if achieving the completion targets a year later still has value to the Government.  But you would be letting your contractor dictate not only when it will do they work, but also the amount you will pay, and when.  You might be letting your contractor walk all over you.  But even so, you could do it.

Ideally, this possibility would have been envisioned when the contract was formed.  I think rolling over the undone work and the unused dollars is reasonable, and I think making the contractor forfeit the unearned fee is also reasonable.  I probably would not roll over the unearned fee UNLESS the contract text specifically allowed for that.

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17 hours ago, ji20874 said:

Well, you said it is one CLIN.  You could roll over the unearned fee if achieving the completion targets a year later still has value to the Government.  But you would be letting your contractor dictate not only when it will do they work, but also the amount you will pay, and when.  You might be letting your contractor walk all over you.  But even so, you could do it.

Ideally, this possibility would have been envisioned when the contract was formed.  I think rolling over the undone work and the unused dollars is reasonable, and I think making the contractor forfeit the unearned fee is also reasonable.  I probably would not roll over the unearned fee UNLESS the contract text specifically allowed for that.

Many thanks.   I guess my question is more on the appropriations side.  If the base period is one year money which is allotted to the contract for the base year, would it be possible to roll it over to options and spend it in the option years.  Is it considered one contract for the availability of funds or separate contracts?

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3 hours ago, Tzarina of Compliance said:

Many thanks.   I guess my question is more on the appropriations side.  If the base period is one year money which is allotted to the contract for the base year, would it be possible to roll it over to options and spend it in the option years.  Is it considered one contract for the availability of funds or separate contracts?

Assuming the funds obligated for the base year are prior year funds, then you would not be able to use them for new obligations in subsequent fiscal years. That would violate the Bona Fide Need rule.

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2 hours ago, Don Mansfield said:

Assuming the funds obligated for the base year are prior year funds, then you would not be able to use them for new obligations in subsequent fiscal years. That would violate the Bona Fide Need rule.

Thanks, Don, so thats my question.  So the option periods are considered new needs for the purpose of obligation of funds?  So if the base period was funded with say multi year or no year funding) and the funds were still unexpired, they could be used for option years because you could re-obligate them until they expire. 

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2 minutes ago, Tzarina of Compliance said:

Thanks, Don, so thats my question.  So the option periods are considered new needs for the purpose of obligation of funds?  So if the base period was funded with say multi year or no year funding) and the funds were still unexpired, they could be used for option years because you could re-obligate them until they expire. 

Yes, provided the obligation also met the "purpose" and "amount" tests.

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@Tzarina of Compliance  I might be repeating something you are aware of yet just in case you have not I am offering as support to Don's responses.   The "GAO Redbook" as it is commonly known provides great discussion about appropriation stuff and related here the Bona Fide Needs Rule.   WIFCON actually has a link to the Redbook and the specifically the Bona Fide Needs Rule (see link below).   Perusing might help further understanding of what Don has provided in his responses.   

Here is the WIFCON link.....http://www.wifcon.com/bonafidecontents.htm 

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17 hours ago, Tzarina of Compliance said:

So if the base period was funded with say multi year or no year funding) and the funds were still unexpired, they could be used for option years

You would also have to look at the fiscal rules of your agency.  Some agencies have a policy of treating some multi-year funds as annual appropriations.

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3 hours ago, Retreadfed said:

You would also have to look at the fiscal rules of your agency.  Some agencies have a policy of treating some multi-year funds as annual appropriations.

As far as I know, this is just internal policies of the financial people to better manage funds.  When you get down to it, the funds have all the normal multi-year and no year flexibility.  

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18 minutes ago, formerfed said:

As far as I know, this is just internal policies of the financial people to better manage funds.  When you get down to it, the funds have all the normal multi-year and no year flexibility.  

I'm not quite sure what point you are trying to make.  However, funds have to be certified as to availability before they can be obligated.  In my experience, the funds certifying official for one agency will not certify multi-year funds as being available beyond the first year.  This really hamstrings agency operations, but that is how they choose to do things.

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4 hours ago, Retreadfed said:

I'm not quite sure what point you are trying to make.  However, funds have to be certified as to availability before they can be obligated.  In my experience, the funds certifying official for one agency will not certify multi-year funds as being available beyond the first year.  This really hamstrings agency operations, but that is how they choose to do things.

That’s a different subject than the post your responded to.  What Tzarina sought clarification on is whether unused or unexpired funds in the base year could be carried forward.  I know of no agency using multi year or no year money prohibiting that (exception is use of second year of two year funds for a third year as an example).

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On 11/20/2020 at 5:32 PM, formerfed said:

That’s a different subject than the post your responded to.  What Tzarina sought clarification on is whether unused or unexpired funds in the base year could be carried forward.  I know of no agency using multi year or no year money prohibiting that (exception is use of second year of two year funds for a third year as an example).

Thank you.  This is exactly what I was trying to figure out.  There are two issues really - one is whether we would modify the option year to add additional targets, funding and fee that the contractor could not achieve in the base year CPFF completion - that seems to be the question of bona fide requirement and the need to allow the contractor to try to get the additional targets and would probably require a J&A since the option would be modified (i.e changed).  The second part is whether the funding from base could be carried over and the answer seems to be yes, if the funding is multi or no year.  Thanks again. 

 

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