Ceiling Rates for CPFF

[Jcordeiro]

We have a Multiple Award Task Order contract that allows for FFP, T&M and Cost Plus type contracts. 

In a recent CPFF task order response request, the Government published that "The offeror may not exceed the labor rates specified in its respective contract’s T&M Price Matrix.
However, the offeror is permitted to propose CPFF labor rates that are lower than those established in the Labor Rate Table.

If we have lower direct costs the Government receives the benefit of CPFF and if we have higher direct costs we have to take the loss?

Is this allowed?

 

[Neil Roberts]

That is the way it sounds (you take the potential loss). However, to me it looks like over reaching to call it a cost type contract. Also, it seems unfair to spring this limit on contractors if the Multiple Award terms and conditions were already established, such as  FAR 52.216-7 Allowable Cost and Payment Clause.  After all, contractors may not have bid at all on the Award had they known that it is not really a CPFF contract since it limits reimbursements in a way not provided for by 52.216-7. It is not clear to me if the T&M labor rate is fully burdened with all costs and profit or if it just direct labor. In any event, it sounds financially risky especially if the period of performance is lengthy. And, the risk seems higher than any potential fee in a CPFF contract. Perhaps you should not bid on it. I am wondering whether the government Task Order publication can be appealed (as a GAO protest) or to the Armed Services Board of Contract Appeals as a post-award dispute. You may be entitled to reimbursement for all bidding costs associated with the Multiple Award. I think others who respond here may have a better idea about that than I do at this moment.   

[ji20874]

I don't see a problem.

Shouldn't a T&M hourly rate ALWAYS be higher than a CPFF direct labor rate?  Or, inversely, shouldn't a CPFF direct labor rate ALWAYS be lower than a T&M hourly rate?

Remember, the CFPP direct labor rates are just not burdened with (increased by) indirect costs, G&A, profit, and so forth. 

And even if your talking about proposed CPFF labor rates as a combined wrap rate inclusive of indirect costs, G&A, profit, and so forth, they are just proposed rates, and they might serve as the basis for billing rates -- but the Government is on the hook to eventually pay actual costs incurred.

[Don Mansfield]

3 hours ago, Jcordeiro said:

Is this allowed?

There's no rule against it. You don't have to agree.

[Neil Roberts]

On 12/4/2020 at 3:34 PM, Don Mansfield said:

There's no rule against it. You don't have to agree.

There are FAR rules requiring the government to be fair/open. It is possible, depending on all the facts in this post, that the government breached this rule(s) by imposing a condition of bidding in direct contradiction to FAR 52.216-7, if it was already included in the existing contract and applicable to the Task Order. Also, intentional breach of contract is a legal cause of action "rule." While you don't have to agree, you can sue for breach of the contract. I don't know all the facts, but I am "just saying."

Edited December 6, 2020 by Neil Roberts
punctuation

[C Culham]

On 12/4/2020 at 3:34 PM, Don Mansfield said:

There's no rule against it. You don't have to agree.

Are you sure?

  The OP has stated that they have a IDIQ that allows for FFP,TM and CP Task Orders.   Now the OP has stated that pursuant to a specific TO response request the Government wants the OP and others to provide pricing based on a structure that is otherwise not stipulated ( CP matrix) in the parent IDIQ.  Rather to use a pricing matrix for CP and adjust it to that this is lower (only by my read) than a TM.  The OP has noted the risk of this after the fact requirement of the parent IDIQ contract.

While the concept of FP, TM and CP for an IDIQ may be okay pursuant to the FAR would it not depend on specific wording of the parent IDIQ with regard to the matrix and possibly even the CLINS as to whether there is a "rule" against it?  My thought follows that of @Neil Roberts in that you could not in my view require the contractor to invent new wage rates for a Task Order that is not consistent with the parent IDIQ wording.  

My response to the OP is what does the parent IDIQ say about the government being allowed to structure pricing for CP type TO's in the manner they are stipulating for the TO.  Silent or say its ok?  If silent I think there is a concern that there is a "rule" against it as doing so is not so stated in the IDIQ.

[Don Mansfield]

3 hours ago, Neil Roberts said:

It is possible, depending on all the facts in this post, that the government breached this rule(s) by imposing a condition of bidding in direct contradiction to FAR 52.216-7, if it was already included in the existing contract and applicable to the Task Order.

Let's assume the parent IDIQ contained FAR 52.216-7 and contained no advance agreements on costs. What would prohibit the parties from negotiating an advance agreement on certain costs that only applied to a specific task order?

[Don Mansfield]

1 hour ago, C Culham said:

If silent I think there is a concern that there is a "rule" against it as doing so is not so stated in the IDIQ.

I think it would be sufficient if the parent IDIQ stated that the parties would negotiate pricing for each task order. Assuming the parent IDIQ contained such a statement, why can't the Government's opening position be that it would limit reimbursement for a specific cost? If the contractor(s) didn't want to agree, they could either counter or decline to submit a proposal. 

[ji20874]

The original poster said the parent IDIQ contract has a "T&M Price Matrix" --maybe the parent contract does not have a cost-reimbursement matrix.

2 hours ago, Don Mansfield said:

...why can't the Government's opening position be that it would limit reimbursement for a specific cost?

That's entirely possible.

[Neil Roberts]

13 hours ago, Don Mansfield said:

Let's assume the parent IDIQ contained FAR 52.216-7 and contained no advance agreements on costs. What would prohibit the parties from negotiating an advance agreement on certain costs that only applied to a specific task order?

The facts are not entirely clear. It appears to me that the government's action in question is in regard to a solicitation of offers from multiple competitors with respect to a potential Task Order. If so, negotiations would not be taking place at this time. Additionally, in a cost type contracts, concern about cost would normally be handled by limiting the funding under the contract. That is not something the government needs to negotiate with a contractor. Perhaps the contracting officer, having to deal with multiple contract types, was unfamiliar with that.

 

 

[Retreadfed]

13 hours ago, Don Mansfield said:

why can't the Government's opening position be that it would limit reimbursement for a specific cost?

Is it an opening position or a requirement that must be met in order for a proposal to be considered acceptable?

[C Culham]

14 hours ago, Don Mansfield said:

I think it would be sufficient if the parent IDIQ stated that the parties would negotiate pricing for each task order. Assuming the parent IDIQ contained such a statement, why can't the Government's opening position be that it would limit reimbursement for a specific cost? If the contractor(s) didn't want to agree, they could either counter or decline to submit a proposal. 

No disagreement "assuming the parent IDIQ contained such a statement".   As I read your comment if such a statement was not in the parent then you would question the approach?

 

11 hours ago, ji20874 said:

The original poster said the parent IDIQ contract has a "T&M Price Matrix" --maybe the parent contract does not have a cost-reimbursement matrix.

Yep and from the narrow view of the facts I am with a contractor who would contend that they would be put at significant risk to then have to align, so to speak, their rates with the T&M rates.   After all in my own narrow view a T&M rate is much different that a Cost Plus rate by the very guidance of the FAR.

 

[Don Mansfield]

3 hours ago, Neil Roberts said:

If so, negotiations would not be taking place at this time.

I disagree. I think that would be competitive negotiation.

 

3 hours ago, Neil Roberts said:

Additionally, in a cost type contracts, concern about cost would normally be handled by limiting the funding under the contract. That is not something the government needs to negotiate with a contractor. Perhaps the contracting officer, having to deal with multiple contract types, was unfamiliar with that.

Maybe. It's also possible that the contracting officer knows what they're doing and wants to negotiate a cap on direct labor rates for the task order.

[Don Mansfield]

3 hours ago, Retreadfed said:

Is it an opening position or a requirement that must be met in order for a proposal to be considered acceptable?

The Government's opening position can be that it will not consider offers that provide for reimbursement of direct labor above certain prescribed rates. The contractors competing for the task order can accept that term, counter it, or decline to compete. It's a competitive negotiation.

A proposed price must be reasonable for a proposal to be considered acceptable. What's wrong with the Government stating up front what it considers to be reasonable for reimbursement of direct labor rates?

[Don Mansfield]

2 hours ago, C Culham said:

No disagreement "assuming the parent IDIQ contained such a statement".   As I read your comment if such a statement was not in the parent then you would question the approach?

If the parent IDIQ did not contain prices or certain elements of pricing were left undefined, then I think that there would be an implicit agreement to negotiate prices for the orders. So, I wouldn't question it.

I certainly don't think there's an implied promise not to negotiate limitations on reimbursement that would apply to a specific pricing action.