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Unilateral T4C modification


gboyle

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Here's the scenario: Contracting Officer issues a unilateral modification that (1) notifies contractor of partial termination for convenience of a commercial FFP contract with 52.212-4, (2) reduces value of FFP CLINs (no opportunity to reduce quantity), (3) reduces the funding for the CLINs to match the revised values, and (4) invites the contractor to follow the procedures in 49.104 (including submission of a settlement proposal 🤯).

Aside from the obvious disregard for 49.109-7 in prematurely adjusting the contract value unilaterally, I wonder if this Contracting Officer has recklessly made an error of judgment in reducing the contract funding. 

While documenting a T4C notification in a unilateral modification seems fine, I can find no justification for unilaterally reducing the contract value and funding, especially when no attempt was made at following the procedure in 49.109-7. Thus, the although the contract funding was reduced, it does not seem that the Contracting Officer has actually (validly) reduced the Government's obligation. Is that right? And is there a resulting ADA violation here? I am trying to channel something I vaguely remember Vern saying at the FAR Bootcamp about a Contracting Officer being personally responsible for the difference when a deobligation was invalid or improper. 

TL;DR: The KO unilaterally notified the contractor of a partial T4C and simultaneously adjusted the contract value and funding without contractor input. Is the KO personally on the hook for the amount deobligated?

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7 hours ago, gboyle said:

I vaguely remember Vern saying at the FAR Bootcamp about a Contracting Officer being personally responsible for the difference when a deobligation was invalid or improper.

You are right. Your memory is vague. I don't remember saying that. But I've said a lot of things.

I do think that "reducing the funding" (whatever that means) before settling the termination sounds hasty. But your opening paragraph is not entirely clear, and I don't know all of the facts.

 

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Did you submit a termination settlement proposal?

Did the KO make a determination of the termination amount due or did (s)he simply reduce the amount of funding and adjust the contract amount? Since the KO invited the contractor to submit a termination settlement proposal, it doesn’t appear that any settlement determination has been made yet. 
 

“49.105-2   Release of excess funds.

(a) The TCO shall estimate the funds required to settle the termination, and within 30 days after the receipt of the termination notice, recommend the release of excess funds to the contracting officer. The initial deobligation of excess funds should be accomplished in a timely manner by the contracting officer, or the TCO, if delegated the responsibility. The TCO shall not recommend the release of amounts under $1,000, unless requested by the contracting officer.

(b) The TCO shall maintain continuous surveillance of required funds to permit timely release of any additional excess funds (a recommended format for release of excess funds is in 49.604). If previous releases of excess funds result in a shortage of the amount required for settlement, the TCO shall promptly inform the contracting officer, who shall reinstate the funds within 30 days.”

 

52.212-4(I):

“(l) Termination for the Government's convenience. The Government reserves the right to terminate this contract, or any part hereof, for its sole convenience. In the event of such termination, the Contractor shall immediately stop all work hereunder and shall immediately cause any and all of its suppliers and subcontractors to cease work. Subject to the terms of this contract, the Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate to the satisfaction of the Government using its standard record keeping system, have resulted from the termination. The Contractor shall not be required to comply with the cost accounting standards or contract cost principles for this purpose. This paragraph does not give the Government any right to audit the Contractor's records. The Contractor shall not be paid for any work performed or costs incurred which reasonably could have been avoided.”

 

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10 hours ago, gboyle said:

TL;DR: The KO unilaterally notified the contractor of a partial T4C and simultaneously adjusted the contract value and funding without contractor input. Is the KO personally on the hook for the amount deobligated?

Not, necessarily, if funds remain available to reinstate. It appears that this is not a final determination and the settlement procedure is ongoing, pending your submission of a settlement proposal. The sour smiley face, in the original post, appearing to blow your top off, doesn’t indicate that you won’t submit one, soon - or does it?

I suggest orally discussing the path forward as well as your concerns with the KO or the TCO, if there is one. You can send the KO/TCO your written record of what was discussed, for the mutual record.

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11 hours ago, gboyle said:

Here's the scenario: Contracting Officer issues a unilateral modification that (1) notifies contractor of partial termination for convenience of a commercial FFP contract with 52.212-4, (2) reduces value of FFP CLINs (no opportunity to reduce quantity), (3) reduces the funding for the CLINs to match the revised values, and (4) invites the contractor to follow the procedures in 49.104 (including submission of a settlement proposal 🤯).

Quote

(l) Termination for the Government’s convenience. The Government reserves the right to terminate this contract, or any part hereof, for its sole convenience. In the event of such termination, the Contractor shall immediately stop all work hereunder and shall immediately cause any and all of its suppliers and subcontractors to cease work. Subject to the terms of this contract, the Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate to the satisfaction of the Government using its standard record keeping system, have resulted from the termination. The Contractor shall not be required to comply with the cost accounting standards or contract cost principles for this purpose. This paragraph does not give the Government any right to audit the Contractor’s records. The Contractor shall not be paid for any work performed or costs incurred which reasonably could have been avoided.

Emphasis added.

Seems to me that by unilaterally reducing the CLIN values the contracting officer violated 52.212-4(l), as quoted above, because now the percentage of the contract price reflecting the percentage of the work performed has been distorted.

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The contracting officer should not deobligate funds following a commercial item T4C before receiving from a trustworthy source a documented estimate of the percentage of work performed and "reasonable charges" resulting from the termination, which might be considerable. Under some contracts that information might not be known or readily apparent.

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1 hour ago, Vern Edwards said:

The contracting officer should not deobligate funds following a commercial item T4C before receiving from a trustworthy source a documented estimate of the percentage of work performed and "reasonable charges" resulting from the termination, which might be considerable. Under some contracts that information might not be known or readily apparent.

True, indeed. 

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