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Required Elements of T&M/LH Contract or Order


Rachel_CO

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16 hours ago, Vern Edwards said:

The Time-and-Materials contract and the Labor-Hour contract are the two most misunderstood and misused contract types. 

As a contractor now, I often see a strange instance I never envisioned.  That is each labor category and/or type of work ends up as a not-to-exceed or ceiling amount.  I suspect automated finance and contract writing systems are the cause where each labor category or sub task ends up on the contract or order is a separate CLIN.  

I’ve been told not to go over the monetary CLIN amount without the CO doing a mod first.  Twice this year I had to write justifications for change in scope because we need more money for one labor category even though we are under the full contract ceiling. 

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@formerfed: Interesting.

Here is how I think T&M contract and order line items should be structured in accordance with FAR Subpart 4.10:

CONTRACT LINE ITEM:

0001 Performance in accordance with Section C, Statement of Work

  • QTY: 1
  • UNIT: Job (JO)
  • CEILING PRICE: $XXX,XXX.XX

INFORMATIONAL SUBLINE ITEMS: (See FAR 4.1004, Establishing subline items, paragraph (b), Informational subline items)

000101 Supervisory Mechanic

  • EST. QTY: XX
  • UNIT: Hour
  • HOURLY RATE: $XXX.XX
  • EST. TOTAL AMOUNT: $XXX.XX

000102 Journeyman Mechanic

  • EST. QTY: XXX
  • UNIT: Hour
  • HOURLY RATE: $XXX.XX
  • EST. TOTAL AMOUNT: $XXXXX.XX

000103 Apprentice Mechanic

  • EST QTY: XXX
  • UNIT: Hour
  • HOURLY RATE: $XX.XX
  • EST. TOTAL AMOUNT: $XXXX.XX

000104 Inspector

  • EST QTY: X
  • UNIT: Hour
  • HOURLY RATE: $XXX.XX
  • EST. TOTAL AMT: $XXX.XX

000104 Materials

  • EST. TOTAL COST: $XXXX.XX

The informational subline items are not "deliverables". They are merely information. See FAR 4.1004(b). They show the labor categories and hourly rates referred to in the payment clause and the bases for the ceiling price. Note that all quantities and totals are estimates.

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I was taught contract line item structuring in the 1970s by the late Mary Ann Scott of the Contract Writing Office at the Air Force Space and Missile Systems Organization. She was one of the smartest (maybe the smartest), most knowledgable, most witty, and generally most delightful people I have ever known, and unbeatable at cards. Those of us who went through the training program there owe her a debt of knowledge that we cannot now repay. She comes up in conversation among us occasionally, when someone asks, "What did Mary Ann teach us." I can still see and hear her laughing (kindly) at some of my dumb ideas.

Goodness. I feel myself tearing up. At my age!

You can never repay your best teachers. And when they're gone you think of all your debts.

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7 hours ago, Retreadfed said:

The government is acquiring supplies or services under a T&M contract. 

Nope...hours.   The government might get half the supplies, half the service, none of each or everything they wanted as the government bought hours.

I have read the unfolding thread beyond how Vern says it should work and I would agree, it adds clarify and makes the acquisition different than say if the main line item was not present and all the sub-line items are.   Or in other words it depends on the contract.   Noting Vern's previous reference to a document that was posted in 2004 points this out clearly.  Bottom line the contract terms and conditions count as to what is being bought.  

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On 2/8/2022 at 1:34 PM, Vern Edwards said:

@formerfed: Interesting.

Here is how I think T&M contract and order line items should be structured in accordance with FAR Subpart 4.10:

CONTRACT LINE ITEM:

0001 Performance in accordance with Section C, Statement of Work

  • QTY: 1
  • UNIT: Job (JO)
  • CEILING PRICE: $XXX,XXX.XX

INFORMATIONAL SUBLINE ITEMS: (See FAR 4.1004, Establishing subline items, paragraph (b), Informational subline items)

000101 Supervisory Mechanic

  • EST. QTY: XX
  • UNIT: Hour
  • HOURLY RATE: $XXX.XX
  • EST. TOTAL AMOUNT: $XXX.XX

000102 Journeyman Mechanic

  • EST. QTY: XXX
  • UNIT: Hour
  • HOURLY RATE: $XXX.XX
  • EST. TOTAL AMOUNT: $XXXXX.XX

000103 Apprentice Mechanic

  • EST QTY: XXX
  • UNIT: Hour
  • HOURLY RATE: $XX.XX
  • EST. TOTAL AMOUNT: $XXXX.XX

000104 Inspector

  • EST QTY: X
  • UNIT: Hour
  • HOURLY RATE: $XXX.XX
  • EST. TOTAL AMT: $XXX.XX

000104 Materials

  • EST. TOTAL COST: $XXXX.XX

The informational subline items are not "deliverables". They are merely information. See FAR 4.1004(b). They show the labor categories and hourly rates referred to in the payment clause and the bases for the ceiling price. Note that all quantities and totals are estimates.

Vern, given DoD's wave of adjustments in the past 10 years or so in pursuit of audit readiness and what Dr. Carter called  "CLIN Integrity",  is this informational subclin format still available to DoD? 

DFARS 204.7104 seems to me to allow informational sublines as long as doing so has no effect upon delivery, performance or amounts that have contractual significance...

DFARS 204.7104 quoted below (Sorry, I won't be able to highlight pertinent portions from my phone):;

"Contract subline items.

204.7104-1  Criteria for establishing.

Contract subline items provide flexibility to further identify elements within a contract line item for tracking performance or simplifying administration.  There are only two kinds of subline items:  those which are informational in nature and those which consist of more than one item that requires separate identification.

      (a)  Informational subline items.

              (1)  This type of subline item identifies information that relates directly to the contract line item and is an integral part of it (e.g., parts of an assembly or parts of a kit).  These subline items shall not be scheduled separately for delivery, identified separately for shipment or performance, or priced separately for payment purposes.

              (2)  The informational subline item may include quantities, prices, or amounts, if necessary to satisfy management requirements.  However, these elements shall be included within the item description in the supplies/services column and enclosed in parentheses to prevent confusing them with quantities, prices, or amounts that have contractual significance.  Do not enter these elements in the quantity and price columns.

              (3)  Informational subline items shall be used to identify each accounting classification citation assigned to a single contract line item number when use of multiple citations is authorized (see 204.7103-1(a)(4)(ii))."

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@FAR-flung 1102I am aware of DFARS 204.7104 and was aware of it and consulted it when I wrote my post. I don't interpret it to prevent the use of informational SUBCLINS as I described. You say:

8 hours ago, FAR-flung 1102 said:

DFARS 204.7104 seems to me to allow informational sublines as long as doing so has no effect upon delivery, performance or amounts that have contractual significance...

It does not seem so to me. The SUBCLINS provide information about the CLIN.

My description of CLIN structure is consistent with the DFARS passages that you quoted. Did you see my comment at the end of my post?

Quote

The informational subline items are not "deliverables". They are merely information. See FAR 4.1004(b). They show the labor categories and hourly rates referred to in the payment clause and the bases for the ceiling price. Note that all quantities and totals are estimates.

Unfortunately, the format permissible here did not readily allow me to show the SUBCLIN descriptions in parentheses within the CLIN, which has been DOD's prescribed method for many years. Had I been able to display them in table format (as once we could) compliance with DFARS 204.7104-1(a)(2) would have been clearer.

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@FAR-flung 1102I thought you might be interested in seeing how SUBCLINs were described in the Armed Services Procurement Regulation (ASPR) of 1976: 32 CFR Ch. 1, Subchapter A, Section 20, Administrative Matters:

Quote

20-304 Contract Subline Items.

20-304.1 General. Contract subline items provide a further subdivision of the basic contract line item when it is necessary for contract performance or administration purposes to separately identify subordinate requirements. There are only two categories of contract sublines.

(a) The first category comprises those subline items that are included in the procurement instrument for information purposes only and are identified by a numeric suffix. These subline items are an integral part of the associated contract line item but shall not be scheduled separately for delivery, separately identified for shipment or performance or separately priced for payment purposes.

(b) The second category comprises those subline items that have a separate delivery schedule, require separate identification at the time of shipment or performance and/or are separately priced for payment purposes. These subline itemsare identified by an alpha suffix.

20-304.2 Criteria for Establishing.

(a) Subline items included in procurement instruments for informational purposes only (numeric suffix) shall be established at the discretion of the contracting officer. This type of subline item identifies information that relates directly to and is an integral part of the contract line item; e.g., parts of an assembly or parts of a kit. Such subline items shall not have a separate delivery schedule, a separate price for payment purposes or require separate identification at the time of shipment or performance. Informational quantities, prices or amounts determined by the contracting officer as necessary to satisfy management requirements may be identified to such subline items provided that such quantities, prices or amounts are set forth in parentheses within the Supplies/Services (item description) column of the contractual document (i.e., not within the quantity and price columns).

(b) Subline items that have a separate delivery schedule, require separate identification at the time of shipment and/or are separately priced for payment purposes (alpha suffix) shall be established in lieu of line items at the discretion of the contracting officer. This category subline item shall be established whenever a capability must be provided to accumulate separately identified price and/or quantity data at the contract line item level.

As a close reading will show, little has changed after more than 40 years.

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On 2/8/2022 at 2:42 PM, formerfed said:

As a contractor now, I often see a strange instance I never envisioned.  That is each labor category and/or type of work ends up as a not-to-exceed or ceiling amount.

As a current CO, this is a trend that drives me mad. I've not worked in an agency where this happened due to the contract or finance system as you mentioned - though I could see where that could be the case. I think it's been a lot of lemming syndrome - doing it the way the last one was done - or the flawed logic that we need to include the price build-up into the contract/order. I've had many actions transferred to me over the years that were set up this way and would usually take it upon myself to modify out the inapplicable information to alleviate the mods and such you speak of. 

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3 hours ago, Vern Edwards said:

@FAR-flung 1102I thought you might be interested in seeing how SUBCLINs were described in the Armed Services Procurement Regulation (ASPR) of 1976: 32 CFR Ch. 1, Subchapter A, Section 20, Administrative Matters:

As a close reading will show, little has changed after more than 40 years.

Thank you for providing that.  

Back when I worked utilities contracts at Ellsworth AFB I had a set ASPRs on my shelf because at least one of my contracts was created under them.  I  wish I'd looked it over the ASPR in my spare time then...if so, I'd have had at least a bit better ballast if not wind in my sails.

Do you know how I can find the ASPR now? I did a cursory search and didn't find anything.

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@FAR-flung 1102I access it through a subscription service called Heinonline. It gives me access to many government records going back to our national beginning. I can see every ASPR since the very first. But it's a business expense.

Depository libraries, such as those in some colleges and universities might have it. So might large public libraries.

Let me see if I can find it free online. Give me a couple of days.

If you are looking for something specific let me know. Leave me a message here at Wifcon.

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@FAR-flung 1102 Killing some time and in reading latest in this thread I had this recollection of a past thread where I think it was Don that mentioned the Library of Congress for such things.  Did a quick search and found the following.  More in-depth looking at LOC may help you.  

https://www.loc.gov/item/cfr1968065-T32CIP1/

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3 hours ago, C Culham said:

@FAR-flung 1102 Killing some time and in reading latest in this thread I had this recollection of a past thread where I think it was Don that mentioned the Library of Congress for such things.  Did a quick search and found the following.  More in-depth looking at LOC may help you.  

https://www.loc.gov/item/cfr1968065-T32CIP1/

That's really cool! Thank you!!

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I think this is where a lot of the current confusion regarding T&M stems from: Many contracting officers are using the T&M contract type to create an efficient vehicle for ordering of supplies or services after requirements materialize when an IDTC with ordering officers or BPA with authorized callers would be more appropriate, but won't work because it takes too long to get funds committed prior to placing an order or making a call and to record the obligation afterward (due in my opinion to the increasing interconnectedness of the financial systems used for approving and recording commitments and obligations in an "auditable" manner).

A T&M contract should have a fully-defined requirement/outcome (e.g. job) which will require an unknown quantity of labor and materials to achieve (otherwise the requirement is not sufficiently "firm and complete" to constitute a valid obligation, see B-196109, OCT 23, 1979). But many actual T&M CLINs seem to be mechanisms for bulk obligating funds in advance of specific known requirements, so they can then be "ordered" against by the COR or someone else without having to go through the entire funds approval process, which in many cases seems to take longer than the contracting process.

So, it isn't surprising that there is confusion or disagreement about the use of T&M, as different people really are talking about two entirely different things: 1) "Actual T&M" with defined requirement/outcome but unknown labor/materials; and 2) "IDTC via T&M" as an efficient (if fiscally dubious) way to bulk obligate funding for ordering later once requirements are known.

Edited by Witty_Username
a word
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47 minutes ago, Witty_Username said:

But many actual T&M CLINs seem to be mechanisms for bulk obligating funds in advance of specific known requirements, so they can then be "ordered" against by the COR or someone else without having to go through the entire funds approval process, which in many cases seems to take longer than the contracting process.

You cannot "bulk obligate" appropriated funds against an IDIQ contract in advance of requirements. That's because there is no legal obligation (other than the obligation to buy a minimum) until you issue an order. Citing funds on a contract without a legal obligation does not constitute an obligation of funds. It constitutes "overrecording" of an obligation. So if people are doing what you say they are doing, thinking that they can get around proper fiscal procedures, they are misinformed.

See GAO Red Book, 3d ed., Vol. II, Ch. 7, Subchapter B, Section 1.

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