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Deobligation of cost reimbursable travel costs-not contract closeout


Milcon

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1 minute ago, Vern Edwards said:

@ji20874 If the contractor reports a significant underrun, and you deobligate funds to use them elsewhere but do not change estimated cost, what happens to future applications of 52.232-20, under which notifications and limitations on governmenb liability are tied to estimated costs?

In this thread, we're talking about actions after the performance period is over.  If the period of performance is over, as stipulated in the original posting, I see no need to establish a new estimated cost to match a lower actual expended amount.  I am okay with the estimated amount differing from the final obligated amount.

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1 hour ago, ji20874 said:

In this thread, we're talking about actions after the performance period is over.  If the period of performance is over, as stipulated in the original posting, I see no need to establish a new estimated cost to match a lower actual expended amount.  I am okay with the estimated amount differing from the final obligated amount.

So you agree that there are cases in which a cost underrun requires a reduction in the estimated cost. Thanks.

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Now, Vern, let's be professional...  You know full well that I didn't say that.

I am not aware of any requirement to modify a contract to establish a new estimated cost in the event of an anticipated or actual underrun on a cost-reimbursement contract.  I am okay with the estimated amount differing from the final obligated amount after the end of a performance period.

If there is a requirement to modify a contract to establish a new estimated cost in the event of an anticipated or actual underrun on a cost-reimbursement contract, please point to it.

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51 minutes ago, ji20874 said:

If there is a requirement to modify a contract to establish a new estimated cost in the event of an anticipated or actual underrun on a cost-reimbursement contract, please point to it.

@ji20874I didn't think I had been unprofessional.

And I didn't think you were one of those professionals who believe that there must be an express rule in FAR requiring that a CO do what is obviously necessary in order to protect the government's interests under either FAR 52.232-20 or 52.232-22.

Having signed and worked more than my share of cost-reimbursement contracts, in more than one agency, the notion of deobligating funds on a fully or incrementally funded cost-reimbursement contract while the work is still ongoing without also reducing the associated estimated cost or total funds allotted strikes me as not just unprofessional, but professionally incompetent.

Do we really need a rule for everything?

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From a Contractor standpoint in cost reimbursement contracts, I would question any unilateral change in contract estimated cost by the Government whether it is due to an apparent overrun or underrun, at any time. It could affect the fee payable where there are contract incentives on cost. Also, a downward adjustment in estimated cost where the negotiated contract fee was fixed, could make it look like the effective contractor fee rate was more than negotiated, which might raise concerns that are unwarranted.      

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@Neil Roberts 

16 hours ago, Neil Roberts said:

From a Contractor standpoint in cost reimbursement contracts, I would question any unilateral change in contract estimated cost by the Government whether it is due to an apparent overrun or underrun, at any time. It could affect the fee payable where there are contract incentives on cost. Also, a downward adjustment in estimated cost where the negotiated contract fee was fixed, could make it look like the effective contractor fee rate was more than negotiated, which might raise concerns that are unwarranted.      

Why have you made that point? It seems to come out of nowhere.

Have you read something here that suggests that the CO should unilaterally reduce the estimated cost in response to the contractor's revised cost estimate? Why would a CO do that? Why would it be  necessary to do so if the contractor has notified the contracting officer that its estimate has changed? Why wouldn't the contractor readily agree to a change by supplemental agreement?

A revised estimated cost based on an anticipated cost underrun would not entitle the government to a fee reduction unless the revised estimate is based on a contract change. And who but someone who does not understand cost-reimbursement contracting would worry because a reduction in the cost estimate would result in an arithmetical increase in the rate of fee? Are we supposed to refrain from doing the right thing in order to avoid worrying the clueless?

 

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In the context of this thread, once travel is completed and the contractor agrees or advises that all travel was invoiced against the line item, the government is deobligating excess funding, reconciling the line item quantity with actual invoiced travel costs and adjusting the task order price accordingly. That’s my interpretation based upon the provided scenario. The remaining work is Fixed Price.

I’ve seen that or similar type cost reimbursement line item reconciliations on FFP construction contracts from a contract admin oversight perspective numerous times and have processed similar actions myself over the years. While mods might sometimes be unilateral, there was agreement on the invoiced quantities first. We didn’t invite trouble by unilaterally establishing quantities without contractor involvement. Contrary to popular opinion, contractor and government employees often work well together.

We routinely handled them as admin mods for years, until we were informed that the new “tail wagging the dog” DoD contracting software system rejected any admin mod that changed the contract price, even when the price adjustment was provided for by self-operation of the contract terms and conditions.

Other examples of such line items included utility relocations or extensions for a construction project by one or more utility companies and work on railroad rights of way that the railroads would perform or have performed rather than allowing the construction contractor to perform it on live rail lines. 

Utilities and railroads are notorious for refusing to commit to pre-price their work. The line items included a plug estimated amount and the contractor would invoice for the actual utility company or railroad project or work order costs.

I don’t ever recall a problem with this type reimbursement arrangement. 

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Ok- so more clarifications: the deobligation happens after the POP for that option year is over, the contractor agrees that they have completed invoicing and have been paid for all travel for that option period and they also sign the modification (sometimes) I have seen it done both ways as we do have them agreeing in writing before the mod is issued (what a CO has told me).  The travel money is always an estimate when the task order is awarded.  I have seen modification to add another CLIN for travel when more money is needed as well as the deobligations. 

The CLIN is always for 1 LOT and is not by quantity- so it is a "pot" of money that is available to reimburse the contractor for travel that is preapproved.

The total contract value is tracked on the modification because it can change based on increases due to REAs ect.. or deobligations and it is not necessarily an internal number as the same number is on FPDS that is tracked and reported to congress.  Additionally the contractor can tract this number too as at time of award they would know the total task order value/amount (inclusive of all the unfunded options)

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It makes perfect sense to finalize the task order amount after completion of the task order. The “value” or total cost of the task order won’t exceed the funding of the task order or the actual final cost. When closing out a task order, “professional “ contract administration would be to reconcile the task order amount, price, value. If not already done, de-obligate excess funding and adjust the task order amount, value, price. The final amount of the task order should be tracked for the life of the ID/IQ in management systems.

There is no good reason not to adjust the final task order value, price, amount. Expired appropriations legally remain available for Paying for meritorious   REA’s and claims.

This is in addition to keeping the contract amount current during performance period if de-obligation is appropriate then. 

Its good, “professional” contract administration.

In my opinion, the official “value” of a task order stated in any contractual document shouldn’t document  a “value” or amount of pending claims,  pending REAs or estimated final value of undefinitized mods/contract actions except for any “not to exceed amount(s)” noted in undefinitized mod(s) for change orders, etc.

The contract file should contain the necessary information concerning pending options and the contractor should be responsible to know what the pending options are. But if the basic task order has options, I wouldn’t object to an attachment to the task order listing them. Why would each mod have to track and repeat those? 

The F&A and project management systems should acknowledge and track pending actions, including reservation of any additional funds necessary to finalize those pending actions.

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If anyone here has ever had to take over contract admin during performance, due to retirement, re-assignment, illness or death, etc. of previous personnel, you’d know how important it is to have up to date contract documents, data and documentation.

Anyone assigned to closeout completed contracts or task orders, especially those long held open, should understand and appreciate the importance of “professional” administration and documentation. Documentation isn’t just for those assigned to administer contracts with intimate personal knowledge. It’s critical for anyone else reviewing for oversight purposes or picking up administration or closeout.

There is an art to good ‘, “professional” contract administration, regardless of “where it is written “ what the minimum requirements, if any, are.

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25 minutes ago, joel hoffman said:

finalize the task order amount after completion of the task order.

Now @Milconcan correct me but in following the thread it seems that it was provided and not changed that the adjustment as proposed originally and restated in a recent post is at end of option year.   Milcon has added POP to that end of option year.   I take that to mean at end of option year of the TO and not necessarily of performance for the TO as performance might stretch into another option year.    Also at all times option has been used and not the parent contract option year.

6 minutes ago, Vern Edwards said:

Question

 

Considering my above read of the matter I would like to add a question myself.   Is the funding for the TO one year or more than year year funds?  Additionally is 52.232-22 in the parent IDIQ or TO?

 

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45 minutes ago, Vern Edwards said:

@MilconQuestion: Does the contract include, applicable to the cost-reimbursement travel CLIN, the clause at FAR 52.216-7, Allowable Cost and Payment, and the clause at 52.232-20, Limitation of Cost?

Vern, interesting question.

However,  I question whether either clause would be necessary or appropriate for a FFP contract with a  travel cost CLIN, if the appropriate instructions and conditions can be described in the line item description and the statement of work, etc.

The clauses are prescribed for cost reimbursement contracts, not for single CR line items in FFP contracts/task orders, correct?

Is there a need to separately invoice and/or pay for one line item with an estimated cost? In my opinion, it could be paid with normal invoicing for the FFP performance items.

It’s more difficult to implement different, possibly conflicting terms, conditions, payment intervals, etc. for one line item. 

Edited by joel hoffman
Added reference to prescription of the clauses for cost reimbursement contract types.
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1 hour ago, C Culham said:

Now @Milconcan correct me but in following the thread it seems that it was provided and not changed that the adjustment as proposed originally and restated in a recent post is at end of option year.   Milcon has added POP to that end of option year.   I take that to mean at end of option year of the TO and not necessarily of performance for the TO as performance might stretch into another option year.    Also at all times option has been used and not the parent contract option year.

 

Considering my above read of the matter I would like to add a question myself.   Is the funding for the TO one year or more than year year funds?  Additionally is 52.232-22 in the parent IDIQ or TO?

 

Good point, Carl. However, why would one not reconcile the task order amount regarding the previous period of performance as soon as possible after awarding an option for the next period of performance, with  separate funding for performance and travel? Keep the total value, amount, price current.

Equally important to keep the task order value reconciled for extended task orders with multiple performance periods and separately funded CR travel CLINs. I can easily envision multiple contract administrators over the course of an extended length task order. It’s not uncommon for a significant turnover of assigned contract administrators - especially if they are in the 1102 series or if the contracts are for OCONUS.  

Edited by joel hoffman
Changed “you” to “one” in second sentence.
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@joel hoffman

1 hour ago, joel hoffman said:

Vern, interesting question.

However,  I question whether either clause would be necessary or appropriate for a FFP contract with a  travel cost CLIN, if the appropriate instructions and conditions can be described in the line item description and the statement of work, etc.

You question? Why?

A contract with both an FFP CLIN and a CR CLIN is an example of a combination of types," FAR 16.102(b). If you put a CR CLIN in a contract, whether for travel or spacecraft development, you must apply the clauses applicable to that contract type to that CLIN. If you don't do that, you may find yourself being invoiced for unallowable costs, and you may not have established a limit to the government's cost liability, which could create Anti-deficiency Act issues. Think about it.

To me, that is Contracting 101. I was taught it more than 44 years ago, when I was a GS-05, and I have no reason to think it is not as valid now as it was then. It is the kind of knowledge that a professional must have in order to protect the government's interests, but for which there is no express statement in FAR. If FAR had to contain an express statement of every logical consequence of stated rules, it would be 10,000 pages long, instead of 1,990.  

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So, you’d have separate invoicing procedures for the FFP and one CR travel line item on one task or contract?  I’ve never seen that done with  DFAS  and with the automated contracting systems that we used for FFP but it might be possible.

One can establish the terms and conditions fir allowability and payment - depending upon how complex the travel line item is and whether we’re talking about labor and travel or just cost of travel.

At any rate, I’d be interested in how Milcon’s travel line item is used and whether or not they include the separate contract clauses for that item. 

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@joel hoffman 

13 minutes ago, joel hoffman said:

 I’ve never seen that done...

So what?

You are hiring a contractor to do work. In doing that work the contractor must travel. You could estimate the number and duration of trips and include the cost in the FFP. But you have chosen instead to reimburse the contractor for the cost of travel. Are you going to limit the government's cost liability? Are you going to limit the costs to those that are allowable under FAR 31.2? Are you going to require proof of cost incurrence?

I admit that the travel cost CLIN, which is wildly popular these days, raises questions about clause inclusion. But a CO's job is to protect the interests of their client, the government, and how do you implement the government's policies applicable to cost-reimbursement without using appropriate clauses? On a large enough project, travel costs could run into the hundreds of thousands of dollars, even a million or more.

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2 hours ago, Vern Edwards said:

@MilconQuestion: Does the contract include, applicable to the cost-reimbursement travel CLIN, the clause at FAR 52.216-7, Allowable Cost and Payment, and the clause at 52.232-20, Limitation of Cost?

In the Base IDIQ 52.216-7 was included in the award.  52.232-20 was not.

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29 minutes ago, Milcon said:

In the Base IDIQ 52.216-7 was included in the award.  52.232-20 was not.

Milcon is this essentially what the CLIN looks like?

CLIN#    Item -Travel    Quantity - 1   Unit - LOT   Unit Price - $$$$  Amount - $$$$

So what you are truing up is the Amount?    And is wording that implies its an estimate used on the CLIN such as EST or possibly stated in contract verbiage elsewhere that it is an estimate.   And by any chance is there an "Estimated Quantity" type clause in the TO/contract?   Usually such a clause is a 52.211-XXX  clause. 

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58 minutes ago, Milcon said:

In the Base IDIQ 52.216-7 was included in the award.  52.232-20 was not.

Thanks, Milcon. Interesting. If indirect costs are part of travel costs, some of those costs may not be known until months after completion of the task and the deobligation of funds. You could get a surprise bill for additional costs, unless the CO included some other term in the contract that limits the government's cost liability.

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3 hours ago, Vern Edwards said:

Thanks, Milcon. Interesting. If indirect costs are part of travel costs, some of those costs may not be known until months after completion of the task and the deobligation of funds. You could get a surprise bill for additional costs, unless the CO included some other term in the contract that limits the government's cost liability.

Vern, The travel costs are pre approved before travel is taken and then they submit invoices and we reimburse what they pay along with minimal G&A cost so there are no surprise costs. 

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3 hours ago, C Culham said:

Milcon is this essentially what the CLIN looks like?

CLIN#    Item -Travel    Quantity - 1   Unit - LOT   Unit Price - $$$$  Amount - $$$$

So what you are truing up is the Amount?    And is wording that implies its an estimate used on the CLIN such as EST or possibly stated in contract verbiage elsewhere that it is an estimate.   And by any chance is there an "Estimated Quantity" type clause in the TO/contract?   Usually such a clause is a 52.211-XXX  clause. 

Yes that is pretty much what the CLIN looks like.  I do not believe there is anything that states this is an estimate but there is language stating that travel is cost reimbursable so if we approve the travel cost we pay them for it.  If we need more money, we add a CLIN and then if they don't use all the money the remaining is deobligated after the end of the option period.  

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