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Convert Contract Types after Award?

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I have a really odd question, and I think the answer is no. But I wanted to run it by the experts to see what people here thought.

I have a requirement for construction (dredging, etc) that we want to award as a firm fixed price task order. The problem is that the final drawings haven't been completed yet, and the contractor won't have enough information to make a good proposal. The money I have expires this year, so waiting isn't an option. So here is what I'm wondering. The IDIQ that I would use to issue the task order is primarily set up for time and materials orders. Can I issue a T&M now, and then convert the task order into firm fixed price later once/if the final design is complete and allows for it? There is plenty of work to get the KTR going for the moment, including ordering long lead items, subcontractors, permits, and also assisting with the final design.

We could certainly issue this order now as a T&M and have no problem. But my agency has counted this contract as one of the less risky types of awards to OMB as part of our reducing risky contracts inititive. I know it seems convoluted, but for matters of political expediency, my management wants to do one thing, while I just want to make the award before our money expires.

Any suggestions or criticisms are appreciated.

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Guest Vern Edwards
Can I issue a T&M now, and then convert the task order into firm fixed price later once/if the final design is complete and allows for it?

I am going to answer the question asked. I am not going to get into the wisdom of doing it or the possible alternatives to doing it. I'll leave those issues to the others who will surely have something to say.

The answer is yes, if the contractor agrees. There is nothing in the FAR which would forbid such a thing and nothing that I know of in case law.

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I have a really odd question, and I think the answer is no. But I wanted to run it by the experts to see what people here thought.

I have a requirement for construction (dredging, etc) that we want to award as a firm fixed price task order. The problem is that the final drawings haven't been completed yet, and the contractor won't have enough information to make a good proposal. The money I have expires this year, so waiting isn't an option. So here is what I'm wondering. The IDIQ that I would use to issue the task order is primarily set up for time and materials orders. Can I issue a T&M now, and then convert the task order into firm fixed price later once/if the final design is complete and allows for it? There is plenty of work to get the KTR going for the moment, including ordering long lead items, subcontractors, permits, and also assisting with the final design.

We could certainly issue this order now as a T&M and have no problem. But my agency has counted this contract as one of the less risky types of awards to OMB as part of our reducing risky contracts inititive. I know it seems convoluted, but for matters of political expediency, my management wants to do one thing, while I just want to make the award before our money expires.

Any suggestions or criticisms are appreciated.

I am also not going to get into the wisdom of doing it or the possible alternatives to doing it. I have seen it done on a large scale.

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Any time we write a D&F to support a new T&M contract that contains options, we are required to provide our plan for reviewing the requirement each year to see if we have enough historical data, requirements have stabilized enough, etc to allow the KO to negotiate to convert all or part of the order to FFP. Part of that plan is structuring the CLINs to allow conversion on a task area by task area basis instead of having one big labor CLIN. Post-award reality is that it often happens at the CLIN level and there's usually something in one of the tasks that remains variable enough to make continuing T&M for that task area a better option for us.

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Your situation seems covered by the FAR. Take a look at 16.103 and particulary ©

16.103 Negotiating contract type.

(a) Selecting the contract type is generally a matter for negotiation and requires the exercise of sound judgment. Negotiating the contract type and negotiating prices are closely related and should be considered together. The objective is to negotiate a contract type and price (or estimated cost and fee) that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance.

(B) A firm-fixed-price contract, which best utilizes the basic profit motive of business enterprise, shall be used when the risk involved is minimal or can be predicted with an acceptable degree of certainty. However, when a reasonable basis for firm pricing does not exist, other contract types should be considered, and negotiations should be directed toward selecting a contract type (or combination of types) that will appropriately tie profit to contractor performance.

© In the course of an acquisition program, a series of contracts, or a single long-term contract, changing circumstances may make a different contract type appropriate in later periods than that used at the outset. In particular, contracting officers should avoid protracted use of a cost-reimbursement or time-and-materials contract after experience provides a basis for firmer pricing.

So if you have a contract situation where the parties gains knowledege and expertise about the requirements as performance progresses and you want to shift the risk to the contractor without paying an extraordinary amount, changing to a fixed price type might be a good midea.

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Your situation seems covered by the FAR. Take a look at 16.103 and particulary ?

So if you have a contract situation where the parties gains knowledege and expertise about the requirements as performance progresses and you want to shift the risk to the contractor without paying an extraordinary amount, changing to a fixed price type might be a good midea.

Is there any problem with regard to scope of the competition?

http://www.wifcon.com/discussion/lofiversi...x.php?t477.html.

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If I'm reading the facts right, the basic for this ID/IQ already contains FFP and T&M CLINs, and leaves it to the parties to decide which is appropriate. If so, I don't see a scope of the competition issue.

If the contract also already permits Fixed-Price Incentive (Firm Target) CLINs, this may protect the government more than simply issuing this as a T&M and then hoping the contractor will later agree to a bilateral modification to convert to FFP.

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If I'm reading the facts right, the basic for this ID/IQ already contains FFP and T&M CLINs, and leaves it to the parties to decide which is appropriate. If so, I don't see a scope of the competition issue.

If the contract also already permits Fixed-Price Incentive (Firm Target) CLINs, this may protect the government more than simply issuing this as a T&M and then hoping the contractor will later agree to a bilateral modification to convert to FFP.

First of all, thank you to everyone that answered. I'm actually happy to see that I was wrong, and we are going to move ahead with a T&M with the hope that it can be converted in the future.

Jacques, there aren't any incentives in this contract, other than do a good job and get another task order :) We have very strong systems in place to monitor T&M orders, and the experience to do it right. For us a conversion isn't about minimizing risk as much as it is meeting an arbitrary goal of OMB to reduce contract risk. I think in the long run a T&M might be better at this site.

Basically the work is dredging. The problem is that there is about 6 inches of hazmat, and we aren't completely sure if it goes deeper than that. The first part will be to get the bad stuff out, and if all goes as planned it's basically navigational dredging which is pretty straightforward. But if it goes deeper, well you see the problem.

I don't think there will be an issue convincing the contractor to go FFP. They've been hinting on many of our projects they'd like to give it a shot. I think they honestly see FFP and change orders as more lucrative, and probably also cheaper in some respects because they won't have to maintain the infrastructure on site for a T&M.

Thanks again to everyone for the advice. FormerFed - Thanks so much! Goes to show I should read that FAR thing once in a while myself.

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