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Deobligation of cost reimbursable travel costs-not contract closeout


Milcon

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6 hours ago, Milcon said:

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. 

@Milcon Why do you call that cost reimbursement? It sounds to me like you effectively negotiate a  pre-approved travel cost before each trip and agree to pay the lesser of the pre-approved amount or the actual cost of the trip. I wouldn't consider that a cost-reimbursement line item in the FAR sense. I must be missing something. What is it?

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15 hours ago, Vern Edwards said:

@Milcon Why do you call that cost reimbursement? It sounds to me like you effectively negotiate a  pre-approved travel cost before each trip and agree to pay the lesser of the pre-approved amount or the actual cost of the trip. I wouldn't consider that a cost-reimbursement line item in the FAR sense. I must be missing something. What is it?

I used a similar CLIN structure to add $400,000 Lump Sum line items to the roughly $400 million FFP Construction Phases of two similar Systems Contracts for Chemical Demilitarization Plants around 2000.  One plant was at Umatilla, Oregon and the other was at Anniston, AL. Essentially the same design at both Sites.

The Plant industrial process included chopping up chemical agent filled rockets, disassembling and draining agent from various chemical weapons such as artillery shells, mortars, land mines as well as draining ton containers of liquid nerve agents and semi-solid mustard agent.

The liquid nerve agents and mustard were incinerated in large furnaces. The contaminated metal parts and propellants went through a metal parts furnace. The wood pallets went through a dunnage furnace, if contaminated by leakers.

The Plants and their Pollution Abatement Systems (PAS) for the furnaces and exhaust building air were huge and very complex. The plants and process lines were designed around government furnished process equipment that hadn’t been built at the time the plants were designed.

The contractors at each site were encountering numerous small field conditions and interferences in the complex PAS structural framing,  piping systems and PAS equipment.

We established the large lump sum line items to facilitate quick solutions to avoid delays, disruptions and other impacts had we been required to stop and issue hundreds of small field changes and definitize each one.

There were close to 600 trade craftsmen working on the plant, in close proximity. The delay impacts to the construction schedule by having to formally develop and issue change orders with all the design configuration management and RCRA procedures would have impacted a Chemical Weapons Treaty deadline with Russia to mutually destroy each nation’s Chemical Weapons Stockpiles.

I devised a job order system within the LS CLIN to use when a field interference or other small condition was encountered in the PAS.

The Systems Contractor’s foremen would  engage field engineering staff to identify the problem and recommend a fix, e.g., re-routing piping systems, and provide sketches and rough order magnitude cost estimates of time and materials on forms developed for job orders against the LS line item. Note that all labor and overheads, G&A,  etc. used audited rates.

Our Resident Engineers were ACOs for construction. After reviewing the job order request, if they agreed with or adjusted the proposed job order cost, the ACO signed off, authorizing the job order on a not to exceed basis, under the LS line item.

The contractors tracked their actual costs and submitted the completed job orders with copies of the actual time sheets and material invoices as backup  with their regular monthly progress payment requests.

The Resident Engineer staff and the contractors managed the job orders and line items. The teams mutually developed the detailed procedures for the job orders.

It worked out well.

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So I am going to attempt to go 360.

Milcon has a FFP TO for training of new hires.   The work entails travel.  The contract provides that travel will be pre-approved by the government and payment for the travel will be its actual cost plus what sounds to be a fixed G&A rate that both the contractor and government have assented to.  No fee has been stated as being included.

A LOT CLIN is established in the contract from which the travel is paid.  This CLIN is funded based on anticipated needs at the beginning of an option year.  If actual need exceeds anticipated needed additional money is added to the TO via a different CLIN.   For the original CLIN if needs are less than anticipated and money is left over in the CLIN that money is deobligated at the end of an option year. In this later case when the money is deobligated the total amount or value of the task order reflects this deobligation/decrease in funds and shows a lesser value than when the TO was originally awarded.

Now an arm of the agency called “policy” has stated to Milcon that with the decrease the total amount or value of the TO should not reflect the decrease in the CLIN because doing so reflects a change/decrease in scope of the task order.  Does the decrease action really change the scope?

I would offer no it does not.   The scope of the work is dictated by the whole of the terms and conditions of the contract.  By the sounds of it the contract scope is to provide training for new hires and as such new hires fluctuate but contract scope is to provide the training.  The travel reimbursement is therefore a moving target based on need that is covered the under the contract and is simply adjusted via modification of an existing payment CLIN or by addition of CLIN(s) so that adequate money is available to pay for the travel.   The adjustment at end of option year to make the CLIN show actual funds used for the travel for that option year is not changing the contractual requirements under which the contractor is to perform training and travel but is an administrative change to reflect the total value/amount of the TO based on its original terms.   Therefore the adjustment that has the sole purpose of reducing the travel funding CLIN to show what was actually used/spent in the option year is not a change in scope.

My position on the matter of scope seems to be supported in part by this…..emphasis added.

16.301-1 Description.

Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

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49 minutes ago, C Culham said:

So I am going to attempt to go 360.

Milcon has a FFP TO for training of new hires.   The work entails travel.  The contract provides that travel will be pre-approved by the government and payment for the travel will be its actual cost plus what sounds to be a fixed G&A rate that both the contractor and government have assented to.  No fee has been stated as being included.

A LOT CLIN is established in the contract from which the travel is paid.  This CLIN is funded based on anticipated needs at the beginning of an option year.  If actual need exceeds anticipated needed additional money is added to the TO via a different CLIN.   For the original CLIN if needs are less than anticipated and money is left over in the CLIN that money is deobligated at the end of an option year. In this later case when the money is deobligated the total amount or value of the task order reflects this deobligation/decrease in funds and shows a lesser value than when the TO was originally awarded.

Now an arm of the agency called “policy” has stated to Milcon that with the decrease the total amount or value of the TO should not reflect the decrease in the CLIN because doing so reflects a change/decrease in scope of the task order.  Does the decrease action really change the scope?

I would offer no it does not.   The scope of the work is dictated by the whole of the terms and conditions of the contract.  By the sounds of it the contract scope is to provide training for new hires and as such new hires fluctuate but contract scope is to provide the training.  The travel reimbursement is therefore a moving target based on need that is covered the under the contract and is simply adjusted via modification of an existing payment CLIN or by addition of CLIN(s) so that adequate money is available to pay for the travel.   The adjustment at end of option year to make the CLIN show actual funds used for the travel for that option year is not changing the contractual requirements under which the contractor is to perform training and travel but is an administrative change to reflect the total value/amount of the TO based on its original terms.   Therefore the adjustment that has the sole purpose of reducing the travel funding CLIN to show what was actually used/spent in the option year is not a change in scope.

My position on the matter of scope seems to be supported in part by this…..emphasis added.

16.301-1 Description.

Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

Very good description!  So if as you say that it’s not a change in scope should the total contract value/amount be changed or not? 

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1 hour ago, Milcon said:
  1 hour ago, Milcon said:

So if as you say that it’s not a change in scope should the total contract value/amount be changed or not? 

and so begins my dilemma 

You certainly Can do it. It’s a good contract administration practice as at least two of us have advised with stated reasons. 

My question to you is “Why wouldn’t you do it?”

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1 hour ago, joel hoffman said:

You certainly Can do it. It’s a good contract administration practice as at least two of us have advised with stated reasons. 

My question to you is “Why wouldn’t you do it?”

Well- it is currently being done so....  

 

1 hour ago, Vern Edwards said:

@C Culham You tried, buckaroo. You tried.

Yes.  Great description of the issue at hand except the question of total task order value and how it should be handled was not answered.  Unless he is in agreement with my policy person who says that because we are not decreasing the scope then we shouldn't decrease the total task order value.  

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1 hour ago, Milcon said:

Well- it is currently being done so....  

 

Yes.  Great description of the issue at hand except the question of total task order value and how it should be handled was not answered.  Unless he is in agreement with my policy person who says that because we are not decreasing the scope then we shouldn't decrease the total task order value.  

I’m pretty sure that Carl answered the question - reduce the total task order value when you reduce the excess funding. Did not appear to support the policy person’s position. Please reread Carl’s post:

“The adjustment at end of option year to make the CLIN show actual funds used for the travel for that option year is not changing the contractual requirements under which the contractor is to perform training and travel but is an administrative change to reflect the total value/amount of the TO based on its original terms.   Therefore the adjustment that has the sole purpose of reducing the travel funding CLIN to show what was actually used/spent in the option year is not a change in scope.”

...and - I intended to mention in my last post that your contracting office IS currently adjusting the contract “value”/amount/price.  Just forgot to say it.

What then is the “dilemma”??

Your contracting office should keep doing what they are doing - reducing the CLIN amount and the contract value/amount/price, accordingly.

The policy person is off-base. The policy person isn’t in Contracting are they? I certainly hope not.

If they aren’t and if you aren’t, it’s not the policy person’s call anyway. 

 

 

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I think you are saying that policy guy says do not change the value because the scope is not changed.

I think Carl said the scope isn’t changed but change the task order value. It’s an administrative change to reflect the decrease in the Travel CLIN unused funding.

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8 hours ago, Milcon said:

So if as you say that it’s not a change in scope should the total contract value/amount be changed or not? 

Others have reflected my position and as supported by the FAR quote I provided that the effort is related to issues of obligating/deobligating funds inclusive of total value/amount not changing scope.

That said I had this thought.  Does policy take the same stance when you add a new CLIN to add $$$ for the new option that the total value/amount should change?   If not then my question to policy would be why not?

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I think or at least hope that the policy team is outside of contracting. The contracting office is currently de-obligating excess funds and reconciling the line item and task order option year final prices. I say, Let ‘em do their job. They appear to be correct. 


 

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13 hours ago, C Culham said:

Others have reflected my position and as supported by the FAR quote I provided that the effort is related to issues of obligating/deobligating funds inclusive of total value/amount not changing scope.

That said I had this thought.  Does policy take the same stance when you add a new CLIN to add $$$ for the new option that the total value/amount should change?   If not then my question to policy would be why not?

That is a very good question and one I will ask them.  

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11 hours ago, joel hoffman said:

I think or at least hope that the policy team is outside of contracting. The contracting office is currently de-obligating excess funds and reconciling the line item and task order option year final prices. I say, Let ‘em do their job. They appear to be correct. 


 

This is the contracting policy team that this person is part of.  

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We seem to be beating a dead horse here.

I don’t understand the actual reason given not to adjust the line item amount in order to revise the original estimated travel cost to match the actual travel cost “because the scope” (of what??) did not change. So what? The payable amount of the task order changed.

The payable amount of the task order, as of the end of the period of performance has changed because payable travel costs were less than estimated.

So, the excess line item funding was reduced by de-obligation.

Therefore, no additional value beyond what was actually expended can be achieved from that line item. The period of performance is over. There is no more funding.

Yet, the line item amount is still estimated to exceed the value of the travel which occurred. No more travel can occur under that line item.

Okay, so the task order value/amount/price, which is the sum of the CLIN amounts,  still reflects a theoretical amount beyond the value achieved/payable/spent during the expired period. There will never be any additional value achievable to match that total task order price.

The inflated value/amount/price of the task order is then increased by award of the next option period of performance.

Yet, the revised task order value/amount/price exceeds any possible value/amount/price payable to the contractor or of value to the government.

For any reporting purpose, the task order amount is reported at an inflated value.

How screwy does that look?

Is any more effort required  to revise the CLIN and task order price when the deobligation mod is issued? I don’t think so. 

That seems like pretty goofy looking contract administration.  It doesn’t reflect the reality and appears that the task order could cost the government as much as the inflated price.

Noting in the task order mod that the total task order price/value/amount doesn’t match the total task order amount payable also looks goofy to me.

Please feel free to pass that on to “policy”. 

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