Increase of Ceiling on CPFF Task Order
Posted 09 March 2012 - 09:13 AM
My customer is requesting an increase of ceiling of work within the PWS.
We told the customer the contractor can exceed the ceiling at their own risk unless approved by the Contracting Officer and if increasing the ceiling is necessary adequate justification is necessary. I am not sure the steps to be taken or how to direct the customer in this situation. Any help is greatly appreciated, thanks.
Posted 15 March 2012 - 10:30 AM
Posted 15 March 2012 - 11:23 AM
The cost proposal will be a sole source action; therefore, a cost analysis will be required.
Incorrect. The fact that an action is sole source does not dictate whether cost analysis is required. Cost analysis is required when certified cost or pricing data are required (FAR 15.404-1(a)(3)).
Posted 15 March 2012 - 11:46 AM
Posted 15 March 2012 - 11:56 AM
What ceiling? Ceiling on what? What do you mean by ceiling "of work"? How is it expressed -- Hours? Some other unit of time? Dollars? Number of workers? What?
My customer is requesting an increase of ceiling of work within the PWS.
Posted 15 March 2012 - 12:10 PM
Did you mean "semantics"? In any case, what you wrote was incorrect and not useful. If you want to help people, give them accurate information. If you want to be professional, admit when you make a mistake.
Mere symantics my friend since I am referring to this gentleman's specific question and scenario. It is under a CPFF contract, and he is in a sole source environemnt, and I am not aware of other circumstances to make assumptions. A cost analysis may be used to evaluate data other than certified cost or pricing data... (4). Let's help the professional out by offering useful information.
Posted 15 March 2012 - 08:41 PM
"(4) Cost analysis may also be used to evaluate data other than certified cost or pricing data to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone for commercial or non-commercial items."
In addition, for DOD, there is an open DFARS Case 2011-D013 "Only One Offer", which is still winding its way through. It is referenced on the WIFCON Rules and Tools page. It mentions the possible need to perform cost analysis on non-competitive offers below the TINA thresholds. I dont know if it would specifically apply to modifications.
Regardless, if one is modifying a cost type contract, I think that it would often be prudent to perform cost analysis techniques on such proposals regardless of the TINA thresholds.
Posted 16 March 2012 - 03:49 AM
What "ceiling" is s/he talking about? "Ceiling" isn't standard CPFF terminology, and the poster said s/he was new to contracting and to CPFF contracts. People often use the wrong terminology. The increase in the ceiling of work could be a request for a change in scope, e.g., an increase of a level of effort, but it might be a reference to the estimated cost in the context of the Limitation of Cost clause or the funds allotted in the context of the Limitation of Funds clause. If s/he meant one of those latter things, then what happens to your talk of cost analysis and TINA? We haven't heard from JandA100811 for a week now. S/he is probably visiting Cluelesstan. What question are you answering?
Posted 01 June 2012 - 05:35 AM
Posted 01 June 2012 - 08:41 AM
Posted 01 June 2012 - 10:58 AM
Subpart 16.3—Cost-Reimbursement Contracts
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.
16.306 Cost-plus-fixed-fee contracts.
(a) Description. A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract.
Given that FAR 16.306 describes CPFF contracts as a cost-reimbursement contract while FAR 16.201 describes cost-reimbursement contracts as those that 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, why is "ceiling" not standard terminology for CPFF contracts? If I were venturing into Cost-reimbursement and CPFF contracts for the first time I would, hopefully, read the FAR application for these types of contracts as a first step and would reasonably interpret that the estimated cost on my CPFF contract would be a "ceiling" that the contractor could not exceed (except at his own risk) without my approval as CO.
What other policy reference should JandA100811 and I be aware of in order to know that "ceiling" is not terminology normally associated with CPFF contracts.
She may have not been precise in explaining what her question truly was, but for her sake, and mine, please share with us why we should not use the terminology "ceiling" when dealing with a CPFF contract.
Posted 01 June 2012 - 01:37 PM
The word ceiling is used in FAR 52.216-7, Allowable Cost and Payment, but only to refer to agreements that the parties might negotiate to limit indirect cost rates, etc. See, e.g., paragraphs (d)(2)(iii)(O), (iv)(O), and (3). Such cost ceilings may be stated in contracts, but they are not standard terms of such contracts. They are special terms negotiated as desired by the contracting parties. That is why I said:
What "ceiling" is s/he talking about? "Ceiling" isn't standard CPFF terminology, and the poster said s/he was new to contracting and to CPFF contracts. People often use the wrong terminology. The increase in the ceiling of work could be a request for a change in scope, e.g., an increase of a level of effort, but it might be a reference to the estimated cost in the context of the Limitation of Cost clause or the funds allotted in the context of the Limitation of Funds clause.
Indeed, she was not precise, but we in contracting must always be precise in our use of terminology if we are to understand each other correctly, and if the people who answer questions here are to know what answers to give. She now says that she was referring to a level of effort, the proper term for which is level of effort, not ceiling. We still don't know the answers to the questions I asked in Post #5.
Posted 01 June 2012 - 02:27 PM
The actual language of 52.216-7(d)(3) which does discuss executing agreements to establish final indirect cost rates is:
(3) The Contractor and the appropriate Government representative shall execute a written understanding setting forth the final indirect cost rates. The understanding shall specify (i) the agreed-upon final annual indirect cost rates, (ii) the bases to which the rates apply, (iii) the periods for which the rates apply, (iv) any specific indirect cost items treated as direct costs in the settlement, and (v) the affected contract and/or subcontract, identifying any with advance agreements or special terms and the applicable rates. The understanding shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. The understanding is incorporated into this contract upon execution.
So, the clause essentially says that the understanding on agreed final indirect cost rates shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. And I take that to mean that if the understanding establishes an indirect cost rate above the original estimated indirect cost rate, that I as a CO am not changing the monetary ceiling of estimated total cost of contract performance, or the obligation amount of the US Government, or any other specific cost allowance or disallowance, including any ceiling on indirect cost rates set as a term of the contract. I am only agreeing what the final rate should be based on the audit of the contractor's accounting system.
As example, if the estimated total cost (ceiling as FAR otherwise calls it) of the CPFF contract is $3 million and the final indirect cost rate as recognized in our written understanding is double the original estimated indirect cost rate, applying the final indirect cost rate to actual direct costs shall not send the total cost to be reimbursed above the $3 million estimated total cost (ceiling) established at award, despite our written understanding on the final indirect cost rates. That understanding is just a recognition of the actual indirect rate based on the contractors operation and if it would send the total costs to $3.1 million when it is applied to the total direct costs, the $100 k overage would be a disallowed cost because it exceeds the ceiling, or total estimated cost, which the contractor was not to exceed without approval of the contracting officer.
In that context, could the contract language conceivably make use of both terminologies (estimated costs, and ceiling)? Could it not be possible that the terminology total costs in the clauses you referenced and the terminology of ceiling in 52.216-7 are one and the same? These clauses were likely drafted by different folks who each may have preferred one terminology over the other but were both referring to the same thing.
It would seem odd that the regulation would establish a terminology considered interchangeable with another and that the so established terminology would not be recognized in addressing contract issues just because a contract clause makes use of the interchangeable terminology.
Posted 01 June 2012 - 03:33 PM
But you are free to read (d)(3) any way you like, and if you want to go around referring to the "ceiling" of a cost-reimbursement contract, you go right ahead. Don't be surprised if the person you are talking to asks you "What ceiling?"
References to "estimated cost" and "funds allotted" refer to specific contract terms in the words used by the contract and are clear in meaning. No one except a rookie is going to ask you what you're talking about if you use those terms. A reference to "ceiling" could refer to any of several things, and so is not clear, not precise, and thus should not be used without elaboration. "Ceiling of work" is obscure.
You wanted to know why I said that "ceiling" is not standard language for cost-reimbursement contracts. Now you know.
Posted 12 June 2012 - 07:57 AM
Posted 12 June 2012 - 09:22 AM
Any increase in the "ceiling" is a change in scope and will require justification and approval for other than full and open competition.
Posted 12 June 2012 - 09:51 AM
The increase in the level of effort is not due to a change in scope but more due to the unknowns of a cost type contract. The customer is requiring more hours due to additional work within scope of the PWS for this CPFF term effort. Please let me know if I am not being clear enough in explaining this.
Posted 12 June 2012 - 11:12 AM
If you awarded a CPFF completion contract, and the contractor has to expend more effort than planned in order to complete the work, then you have a cost overrun, not a change in scope. If the customer has the money and wants to spend it to keep the contractor working you're good to go and should mod the contract to increase the estimated cost (not fee) and, if the contract is incrementally funded and it is necessary, the funds allotted.
This thread should demonstrate to everyone why it is important to use proper terminology if you want to communicate clearly.
Posted 12 June 2012 - 11:36 AM
I am just having a tough time seeing how we would automatically rule my example out of scope. The reason this task order was solicited as CPFF is because there were many unknowns, the proposed level of effort and corresponding dollars seems like an estimate to me and if the level of effort were to increase and still in the realm of the scope of the PWS, how would this be in violation of CICA and require a J&A? The work being added is within the scope of what was intended when the PWS was written. To me this seems kind of grey. Thanks for your input.
Posted 12 June 2012 - 12:58 PM
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