Jump to content
The Wifcon Forums and Blogs

Recommended Posts

Question: Under a CPFF Term / LOE, when the fixed fee is set at inception, but the Contractor performs an underrun, is the Contractor still entitled to 100% of the Fixed Fee set at inception or is the fixed fee prorated consistent with the LOE executed?  No changes, mods, etc. Just underran the hours and dollars (i.e., 10,000 hours on contract for $600k (in labor); but delivered 9,800 hours for $588k (in labor). Fixed fee set at inception at 5% or $30k).

Is the Contractor entitled to the entire fixed fee of $30k even though the Contractor did not deliver the full 10k hours?

I'm aware of FAR 16.306(a) and (d)(2).  (a) indicates that the fixed fee does not change with actual costs and (d) (2) would suggest that in order to receive 100% of the fixed fee, the stated LOE (hours) specified must have been provided. In an underrun, the LOE specified would not have been provided. Thus, the questions.

Link to post
Share on other sites
1 hour ago, Guest108830 said:

Is the Contractor entitled to the entire fixed fee of $30k even though the Contractor did not deliver the full 10k hours?

In a typical CPFF LOE, no. You are mischaracterizing your situation as an "underrun". If you provided the full LOE and the actual cost came in at less than the estimated cost, that would be an underrun--and you'd be entitled to all of your fixed fee.

Link to post
Share on other sites

Good point on the mischaracterization.

The full LOE contracted for was not provided and thus the actual costs came in less than the estimated costs. I think I have the answer. In order to receive 100% of the Fixed Fee the LOE specified in the contract must have been provided. Anything short (absent change, etc.) of providing the full LOE, then the Fixed Fee would be commensurate with that lower effort and the Contractor not entitled to 100% of the Fixed Fee.

And if not entitled because Contractor did not provide the full LOE, may the Contractor ask for (and receive from the KO) the remaining fee? I've always understood this to be a choice by the KO, though cannot find support in the FAR/DFAR.

Link to post
Share on other sites
16 minutes ago, Guest108830 said:

And if not entitled because Contractor did not provide the full LOE, may the Contractor ask for (and receive from the KO) the remaining fee? I've always understood this to be a choice by the KO, though cannot find support in the FAR/DFAR.

Guest, what are the written provisions of your contract relative to this? For example, below you will find a provision from one government agency. You will see that it would answer your question, if your contract included such a provision.

Level of Effort - Cost-Reimbursement Contract (MAY 2016)

(a) The Contractor shall perform all work and provide all required reports within the level of effort specified below. The Contractor shall provide up to ____ direct labor hours for the base period. The Government's best estimate of the level of effort to fulfill these requirements is provided for advisory and estimating purposes. The Government is only obligated to pay for direct labor hours ordered and corresponding fixed fee for labor hours completed.

(b) Direct labor includes personnel such as engineers, scientists, draftsmen, technicians, statisticians, and programmers, and not support personnel such as company management or data entry/word processing/accounting personnel even though such support personnel are normally treated as direct labor by the Contractor. The level of effort specified in paragraph (a) of this section includes Contractor, subcontractor, and consultant non-support labor hours.

(c) If the Contractor provides less than 90 percent of the level of effort specified for the base period or any optional period exercised, an equitable downward adjustment of the fixed fee, if any, for that period will be made. The downward adjustment will reduce the fixed fee by the percentage by which the total expended level of effort is less than 100% of that specified in paragraph (a). (For instance, if a hypothetical base-period LOE of 100,000 hours is being reduced to 70,000, the fixed fee shall also be reduced by the same 30%. Using a corresponding hypothetical base-period fixed fee pool of $300,000, the reduced fixed-fee amount is calculated as: $300,000 × (70,000 hours/100,000 hours) = $210,000.)

Link to post
Share on other sites
24 minutes ago, Guest108830 said:

Good point on the mischaracterization.

The full LOE contracted for was not provided and thus the actual costs came in less than the estimated costs. I think I have the answer. In order to receive 100% of the Fixed Fee the LOE specified in the contract must have been provided. Anything short (absent change, etc.) of providing the full LOE, then the Fixed Fee would be commensurate with that lower effort and the Contractor not entitled to 100% of the Fixed Fee.

That's how it typically works. But you should verify how it's supposed to work in your contract.

 

26 minutes ago, Guest108830 said:

And if not entitled because Contractor did not provide the full LOE, may the Contractor ask for (and receive from the KO) the remaining fee? I've always understood this to be a choice by the KO, though cannot find support in the FAR/DFAR.

You can ask. I would hope the KO wouldn't pay what you're not entitled to, but I acknowledge it's the season of giving.

Link to post
Share on other sites

Neil - I wish it was as straightforward as those terms make it. Unfortunately, it is not. The level of effort clause(s) from the Navy contract / task order indicate payment of fee on a per hour basis and is silent as to what happens for providing less than the specified LOE. Please see below:

HQ B-2-0015 PAYMENTS OF FEE(S) (LEVEL OF EFFORT - ALTERNATE 1) (NAVSEA) (MAY 2010)

(a) For purposes of this contract, "fee" means "target fee" in cost-plus-incentive-fee type contracts, "base fee" in cost-plus award-
fee type contracts, or "fixed fee" in cost-plus-fixed-fee type contracts for level of effort type contracts.

(b) The Government shall make payments to the Contractor, subject to and in accordance with the clause in this contract
entitled "FIXED FEE" (FAR 52.216-8) or "INCENTIVE FEE", (FAR 52.216-10), as applicable. Such payments shall be
submitted by and payable to the Contractor pursuant to the clause of this contract entitled "ALLOWABLE COST AND
PAYMENT" (FAR 52.216-7), subject to the withholding terms and conditions of the "FIXED FEE" or "INCENTIVE FEE"
clause, as applicable, and shall be paid fee at the hourly rate(s) specified above per man-hour performed and invoiced. Total
fee(s) paid to the Contractor shall not exceed the fee amount(s) set forth in this contract. In no event shall the Government be
required to pay the Contractor any amount in excess of the funds obligated under this contract.

I think I have the answer. Appreciate the quick responses from everyone. 

Link to post
Share on other sites

If it really is CPFF Term, then the contractor failed.  Please consider a T4D.  Or, accept the work and pay a reduced fee.

But maybe it really is CPFF Completion?  And you erred when calling it term?  No, you clearly have a term (LOE) clause.  Okay, the contractor failed.  T4D or accept with reduced fee.

If it was a completion contract, then yes, the contractor would be entitled to full fee if it fully delivered or performed.

I offer this based on what the original poster provided.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

×
×
  • Create New...