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  2. Negotiated cost savings may not be real cost savings because of the Limitation of Cost/Limitation of Funds clauses. At the end of the contract, a contractor may recover more costs than it originally proposed with the so called "cost savings" being illusory.
  3. Just a point of information regarding reducing proposed rates and quantifying proposed cost savings. Proposed contractor rates are included in overall estimated costs, which is used as a basis for establishing fixed fee, which in a cost plus fixed fee contract can not exceed 10% or 15% of estimated costs per FAR 15.404-4, depending. The contractor is reimbursed actual costs, not estimated costs. So, if you "save" $100,000 in proposed (estimated) costs through negotiation, the actual "savings" may be no more than $10,000 or $15,000 in fixed fee not $100,000, and the contractor's actual cost reimbursement may eat up $10,000 or $15,000 or maybe $100,000 anyhow.
  4. Today
  5. FL, have the subs' rates been audited by DCAA? If so, what was the result? Are these 3 subs also CPFF term subcontracts? On what basis do you base your conclusion that their rates are "extremely high"? Do you believe that the estimated cost you have been able to negotiate with the prime is fair and reasonable?
  6. Zhukov, you said you include 52.212-4 ALT I in the contract. In regard to travel, ALT I says "The Government will reimburse the Contractor on the basis of actual cost for the following, provided such costs comply with the requirements in paragraph (i)(1)(ii)(B) of this clause." That should answer your question as it states what requirements the travel cost must meet in order for it to be reimbursable. In accordance with ALT I, travel costs are not governed by the cost principles or any of the travel regs.
  7. In other words, if the technician travels business class--and assuming the contractor's policies permit that--then that would be a reimbursable expense, since there is no applicable limitation.
  8. @FLContracts, Did the prime do a price or cost analysis of the subcontractors' proposals? Does the prime have an approved purchasing system?
  9. I prepared a response yesterday but got sidetracked before sending. I see Carl already answered your question but I’ll just add the practice of reimbursing travel for technicians at actual cost is fairly common for scientific and lab equipment work. This is normally done without regard to FAR 31 principles. So unless your contract clause contains restrictive language, you are fine.
  10. Not mentioned in your post is FAR subpart 44.2 and its applicability to the procurement. If applicable have you considered the guiding principles in the subpart?
  11. Yes, on occasion, a key sub would be in the room while involved in negotiation of its non-competitive subcontract. And on at least one occasion, directly with a sub off-site. A few years ago I was assigned, as a rehired annuitant to lead the negotiations on a $42 million REA for a contract to construct a new, large auxiliary spillway and control structure at an existing flood control dam and reservoir. The REA was for time and schedule impacts of numerous mods that had been settled, with those aspects reserved. In addition, the government had directed acceleration due to the criticality of maintaining the schedule. There was a high risk of flooding overtopping the reservoir which would cause major flood damages. My cost engineer and I travelled to a major subcontractor in another state who was the fabricator, supplier and installer of the lift gates, tainter gates and gate machinery, to negotiate their subcontract acceleration and schedule impact issues. Over the course of the meetings, we mutually agreed to revised subcontractor impacts and costs. The prime agreed with that approach. This overall assignment was very complex and took almost 8 months to resolve. In the process, we devised some significant changes in the contractor’s technical approach to minimize impact delays at a significantly lower cost. We settled the REA for about $25 million and the contractor agreed that the project could be completed several months ahead of its proposed impacted/extended scheduled completion date. The contract required completion date was thus revised. In response to your question and your understanding of the privity of contract and management issues, the bottom line is still that the burden of proof is on the the contractor and its subs to establish that their costs are reasonable and necessary (see FAR 31.201, etc.)…
  12. I understand that. Doing research via DAU, it stated multiple times that our contract is with the prime, not the subs. While the government can leverage its buying power in negotiations, we don't have privity of contract with subs and need to be careful not to overstep. The prime is responsible for managing subs. This is my issue. You negotiated directly?
  13. So what? Ask for “data other than cost or pricing data”. See 15.402 and 15.403-3. You can make them justify the reasonableness of their rates and price, including asking for cost information if necessary. We don’t know the nature of their pricing but you mentioned “rates”. What is the makeup of their rates? You said this is cost plus fixed fee??? Are the subcontracts FFP or CPFF?? Rates appear to refer to some type of fixed pricing. Edit-Add: By the way, I used to negotiate some subcontract prices with the subs present at negotiations. On occasion, directly negotiated subcontract pricing and schedule impacts with the sub with the concurrence of the prime, particularly for impact REA’s. And yes, we got price breakdowns.
  14. As a young contract specialist, I recently had the opportunity to take the lead on negotiating my first major contract. With my contracting officer (CO) on extended leave, I knew this was my chance to really make an impression. The contract was a FAR Part 15 cost-plus-fixed-fee term contract to continue services a contractor had been providing to our agency for over 15 years. In hopes of encouraging competition, my tech code loosened some of the requirements. Despite this, we still only received one bid from the incumbent contractor. I dove into negotiations with the prime contractor and was able to get them to reduce some of their proposed rates, which will result in decent cost savings. We also had about 10 proposed subcontractors to review. The prime contractor was receptive and negotiated most of the subs down as well. However, there were still 3 subcontractors proposing extremely high fully burdened rates that I couldn't confidently determine fair and reasonable. My tech code agreed the rates seemed excessive. Despite pushing back, the prime contractor insisted the subs would not negotiate down further. To complicate matters, the subs fell under the cost and pricing data threshold. When I requested invoices to support the high rates, the subs had no relevant invoices to provide. I'm now facing a dilemma on how to proceed. Should the government try to negotiate directly with the subs even though the prime was unsuccessful? Or do I just move forward since the overall contract price came down considerably?
  15. @formerfed And understand and apply it in practice? I wonder why? Read this from FAR 12.213, Other commercial practices: Now suppose that a contracting officer, in accordance with FAR 12.102(b), decides to conduct a competition for a commercial service pursuant to FAR Part 15. How should that CO pursue that "common practice" under FAR 15.206(d) and 15.306(d) and the GAO and COFC case law about discussions with offerors in the competitive range? I am not saying that it cannot be done. I could do it. What I am saying is that it would take a lot of thought and background knowledge to sell that idea to management and legal and then work it out successfully. And I say that some special training in that regard would be very helpful, even essential. To say that (1) the regulations about commercial items are not complex and that (2) they can be read, understood and applied in a couple of hours are, in my opinion, remarkable assertions. I will have worked in this business for 50 years come this August, and I would not make that claim for myself. But I will not argue the matter further. We disagree.
  16. Yesterday
  17. Are you therefore saying they are adequate with regard to commercial product or service? If yes my view differs and is supported by the lack of a specific training regarding FAR part 12. To reinforce, yours and FormerFed's position seems to suggest everything is fine and dandy and those that have been trained are not applying professional study, intiative, experience, etc. But it has not by specific examples offered and as such leads to my conclusion regarding training Remember my comment and continued comments are aimed at the "Team" not just the 1102 yet inclusive of the 1102, along with the 1105, 1101.
  18. Using your limited facts does this FAR reference apply as the facts of the procurement are peeled away? FAR 31.102. Think price analysis. I will take a swing. If what I will call no exception of FAR 31.102 applies to the specific instance (no cost analysis) and noting that the "Payments" paragraph of 52.212-4 inclusive of the Alt 1 can not be tailored here is my view. By a literal read the travel as a Other Direct Cost shall be paid to the contractor at "actual cost" paragraph (i)(1)(ii)(B) and paragraph and (i)(1)(ii)(D)(1). I see nothing that says such cost shall be in accord with FAR part 31, the JTR's etc. My view is limited to the FAR and does not consider what an agency might supplement the FAR with. Conclusion - The applicatioin of FAR part 31 contract cost principles depends on the facts of a fixed price commercial service instant procurement.
  19. Once you talk about training you introduce bureaucracy. I am trying to butt that out and emphasize personal initiative! Professional study! The road to where we are now was paved with training materials.
  20. Scenario: The common scenario in my agency is a fixed-price order for commercial services. Let's say it's for on-site installation and calibration of scientific equipment. This is a contract directly with an OEM, not using any acquisition vehicles which have their own procedures and rules about travel. We will have the new instrument installed in four labs around the country. OEM technicians must plug it in and get it working in person. The labs and the OEM both insist on using reimbursable travel to cover the travel costs. Time on site is unpredictable - could be a few days, maybe much longer if things go bad. The labs don't want to 'overpay' for fixed price travel. The OEM, after a bad experience with another agency during COVID, also insists on reimbursable travel. They are firm on this. Conservative estimated total travel cost is $80,000 on a multi-million-dollar contract, so not worth negotiation with a vendor who's already said they aren't negotiating on this. As the CO, I shake my head, insert FAR 52.212-4 Alt 1, follow the procedures, get all the approvals, etc. and now have travel as a reimbursable ODC on a T&M Line Item. Question What, if any, other regulations or laws must apply to travel in this scenario. As its commercial, I'm uncertain if 31.205-46 Travel costs applies "automatically." How about the Joint Travel Regulation? Let's say the tech always travels business class - and has the receipts from previous non-governmental customers to prove it - is that okay, as that's the 'commercial market practice?'
  21. Getting a little off topic here but I’ll add so many problems we have is due to lack of careful and objective thinking. We tend not to be creative in conducting acquisitions. One of the first things 1102s to with new assignments is look for examples to copy. Then we impose what we know best and comfortable with from past experience even when it really isn’t that applicable. That’s why so many simple things like Simplified Acquisitions, FAR 8.4 actions, and OTAs get fouled up. The regulations and policies for these aren’t complicated. But instead of reading them closely and just proceeding with the acquisition, 1102s get nervous. They want to be told what to do and shown what worked in the past. So we end up with FAR 15 principles injected with FAR 13 and 8.4 transactions. When OTAs were pushed more heavily, many agencies gave them to contracting officers to do. We ended up in many instances with FAR 15 lookalikes including terms and conditions which don’t apply. Going back to the topic on hand, I think commercial item contracting isn’t hard if it’s done properly. All that’s needed is someone reasonably intelligent, has an open mind, isn’t reluctant to do something outside their comfort zone, and skips over methods that don’t apply. There’s no need for searching for prior examples or detailed training because FAR 12 is straight-forward.
  22. Interesting that in a different discussion thread in Forum about the MITRE "Contract Protest Diagnostic Tool" sustained protests regarding "customary commercial practices" for FAR part 12 acquisitions is a identified risk area. The other side of the "avoid" coin!
  23. FAR part 12 is short in length. Someone can carefully read through it in a couple hours. Sure, it departs from many standard practices but so many of us are really stuck with tradition. We know only certain ways to process tasks. We are ingrained with cookbook approaches and must rigidly be adhered too. We try way too hard to avoid criticism from peers and superiors and even more so to avoid protests. i think someone without being burdened by all this baggage and a few years of serious contracting experience could successfully do a FAR contract and conclude it’s not complicated.
  24. Probably neither here nor there yet offered in support of Vern's comments. Not that he needs my support it is just my way of saying I agree!!!!!!!! After reading todays additions to this thread I pulled up SAM.gov and the very first combined synposis/solicitation of a commercial product/service I encountered. A professed simplified acquisition that I concluded was not in excess of the SAT (guess on my part but wording of the solicitation made it seem so). With intent FAR 52.212-1 was tailored to change "offer" to "quote" but FAR 52.212-4 was included by reference only no tailoring. Source selection process was stated as "low price technically acceptable" where a techinical proposal and a separate price proposal were requested. I left SAM.gov imagining what I would find if I kept looking.
  25. I disagree! It is complicated. There is an entire FAR part devoted to it. It prescribes significant departures from standard practice in specification, clause prescription, solicitation, and subcontracting. Many persons are ignorant and confused. "Is construction a commercial item?" "What clauses must be flowed down to subcontractors?" et cetera. Part 12 provides for some discretion with which many 1102s are not accustomed, and it still prescribes a number of policies with which the commercial market is unaccustomed: e.g., full and open competition, SAM, set-asides, etc. After 30 years since FASA, the FASA policy goals are still not fully understood by 1102s, and certainly not by functional personnel. Some of the functional organizations which 1102s must support have not been trained and adapted to those policies or trained in commercial product and (especially) service specification. Go back and look at the RFP I wrote about. Does is read like something written by persons who don't need specialized training?
  26. These are insightful quotes that truly get to the heart of the problem at low dollar thresholds (the two recent posts on this thread about bureaucracy are more applicable to high-dollar acquisitions). In my experience we must always take a grassroots approach to change in government. It will never begin at a level higher than a Chief of Contracting Office/ Procurement Director. Start with one acquisition in your office. Give the job to somebody that has been buying the stuff your office buys for half a career. Make sure no personality problems will get in the way (see above). Pay this person for the time it takes to study the Federal Register comments, the Section 809 Panel's report, as well as the Nash & Cibinic Reports on this subject matter. Then follow formerfed's advice: I will add that you should pick a contractor known by your office to cooperate, that will be willing to take the hits from SBA, DOL, or others along with the CO, and that will be willing to laugh off any beginner's mistakes by the CO. If enough COCO/PDs do this, things will change.
  27. Last week
  28. That’s a bureaucracy problem is so true. A program manger in charge of a military weapons program with a 350 page specification won’t be swayed by any contracting person. That person knows exactly what he wants and how they are getting there. Senator McCain’s report has some excellent thoughts on alternative approaches. If the Special Forces uses off the shelf weapons (or ones slightly modified), most soldiers could as well.
  29. Under 13 C.F.R. § 124.506, if an 8(a) contract price would exceed a certain threshold ($7 million for manufacturing contracts, $4.5 million for others), in most cases, the agency must compete the set-aside. 13 C.F.R. § 124.506(a)(5) is a provision meant to close up what otherwise would be a loophole in the rules. It states that “[a] proposed 8(a) requirement with an estimated value exceeding the applicable competitive threshold amount may not be divided into several separate procurement actions for lesser amounts in order to use 8(a) sole source procedures to award to a single contractor.” But this rule does not apply in all circumstances. In particular, it does not apply to bridge contracts. In Anika Systems, Inc., B-422187 (Feb. 1, 2024), the SEC (the federal one, not the football one), had a two-step acquisition plan for data management services. It would sole source the first part to 8(a) participant Peregrine Advisors Benefit, Inc. (Peregrine) and compete the second part, worth $43 million, for 8(a) participants to bid on. The first part in 2022 went through without issue. But the second part of the acquisition was protested by unsuccessful offerors, resulting in the SEC taking corrective action. The problem was that now, the 2022 contract to Peregrine was about to expire with no successor to take on the data management services. As such, the SEC offered a bridge contract worth $4.2 million to Peregrine to continue the work while the second part of the acquisition was carried out. Anika Systems, Inc. (Anika), one of the competitors for the second part of the acquisition protested this bridge contract. Anika had some good points to make on this. Most notably, Anika argued that this bridge contract was basically inseparable from the 2022 contract as both contracts involve provision of the exact same services, and that, combined, the requirements had a value that exceeded the 8(a) sole source dollar limit. The SEC countered that the bridge contract wasn’t an attempt to split its requirement into smaller procurements so it could sole source the work to Peregrine. It argued that the bridge contract was a different requirement since it was issued in light of the protests and corrective action for the second part of the acquisition. The SEC also stated that 13 C.F.R. § 124.506(a)(5) is not meant to stop bridge contract as bridge contracts are a stop-gap measure to be used until an actual competition can take place. The SBA (invited to the party by GAO because the matter involved SBA regulations and GAO usually listens to SBA when interpreting SBA rules) filed a brief and agreed with the SEC’s interpretation, noting that the regulation was really meant to stop agencies from using indefinite-delivery, indefinite-quantity (IDIQ) contracts to get around the threshold. It “implemented this regulation to prevent an agency from dividing an IDIQ contract into separate smaller contract actions to make award to a single firm without competition.” Per SBA, it was not meant to stop agencies from using emergency measures like bridge contracts. GAO sided with SBA and the SEC. It noted that back in 2000, it in fact had addressed this question and agreed with the government’s view of the matter in Champion Bus. Servs., Inc., B-283927 (Jan. 24, 2000). GAO agreed that “the regulation does not apply to bridge contracts because bridge contracts do not pose any threat to the aims sought to be protected by a competitive procurement.” Going further, it noted its decision in New Tech. Mgmt., Inc., B-287714.2 (Dec. 4, 2001). There it “concluded that the regulation only applied to the award of concurrent contracts.” In other words, the regulation prohibits agencies from taking a single contract for, say, 10 services that would have a value above the threshold, and dividing it out into five separate contracts with covering two services each and each smaller contract being below the threshold. Anika also made an argument that the SEC failed to consider the effect the bridge contract would have on the equitable distribution of 8(a) contracts. Under 13 C.F.R. § 124.503(g), “[a] procuring activity contracting officer must submit a new offering letter to SBA where he or she intends to award a follow-on repetitive contract as an 8(a) award.” The SEC had not done this. However, GAO also rejected this argument. 13 C.F.R. § 124.3 notes: “The determination of whether a particular requirement or contract is a follow-on includes consideration of whether the scope has changed significantly, requiring meaningful different types of work or different capabilities; whether the magnitude or value of the requirement has changed by at least 25 percent for equivalent periods of performance; and whether the end user of the requirement has changed. As a general guide, if the procurement satisfies at least one of these three conditions, it may be considered a new requirement.” The bridge contract only had a base period of one month and was worth only $4.2 million compared to the $43 million original competitive acquisition. As such, it was a new requirement, not a follow-on requirement, so the new offering letter requirement did not apply. Thoughts GAO’s analysis seems very reasonable concerning bridge contracts, which really aren’t planned ahead of time. After all, how can you divide a requirement after the fact? But we think this protest raises some important questions. What happens when an agency decides that instead of competing a five-year contract to 8(a) companies, it will just sole source five one-year contracts at the sole source dollar threshold to an 8(a) company? Assuming they do this while complying with 13 C.F.R. § 124.503(g) and receiving SBA approval, there’s still an argument to be made that the agency is splitting up a five-year contract into five separate one-year contracts to stay under the threshold limit. 13 C.F.R. § 124.506(a)(5) doesn’t specify that it only applies for concurrent procurements, it says that “[a] proposed requirement may not be divided into several separate procurement actions for lesser amounts in order to use 8(a) sole source procedures to award a single contractor.” In fact, couldn’t this have maybe applied to the 2022 Peregrine contract itself? The agency basically split the procurement into two parts, one large and one small, and sole sourced the small part. It was too late for a GAO protest on the matter, but it is interesting to think about. It seems the implication is that the procedures in 13 C.F.R. § 124.503(g) on repetitive contracts will serve to prevent such a situation, and to SBA’s credit, we think that would do a good job of it. But it still opens a potential door, and we think it is something where some clarification in the regulation language itself could be helpful. Questions about this post? Email us. Needing legal assistance? Give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post A Bridge (Not) Too Far: Prohibition on Dividing up Contracts to get Under 8(a) Sole Source Dollar Limit Doesn’t Apply to Bridge Contracts first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
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