Assuming a cost reimbursable service contract with performance on-site at a Government facility. If the Government facility is closed due to inclement weather, lack of electricity, lack of water, etc, could the labor cost for that day be legitimately charged to the contract as a direct cost? Or put another way, can the Government directly reimburse a contractor for work not performed?

I have noticed that some agencies (NASA & HUD, for example) address this in their Acquisition Reg Supplements in a manner that seems to allow the contractor to be paid as a direct cost for work not performed. HUD explicitly states that the contractor can bill such hours direct for staff who are normally charged direct. NASA's language simply states that the cost is allowable but that reimbursement shall be in accordance with the company's established accounting policy. My Agency has no such regulations or guidance.

My thinking is that a company should treat such unproductive hours similarly to the way they treat holidays, vacation time and other unproductive time. Maybe that is the intent of the NASA language. For sake of discussion you can assume that productive telework is not possible. In order for the Government to receive value, the contractor staff must be on-site.

Thanks in advance for your thoughts and insight on this matter.

If the Government facility is closed due to inclement weather, lack of electricity, lack of water, etc, could the labor cost for that day be legitimately charged to the contract as a direct cost? Or put another way, can the Government directly reimburse a contractor for work not performed?

First, under a cost-reimbursement contract and the Allowable Cost and Payment clause, FAR 52.216-7, the government does not reimburse the contractor for work performed, but for allowable costs incurred. The words "as work progresses" in the clause simply mean during the course of performance. Thus, the answer is that if the contractor incurred labor cost during the closure, and if the labor cost is allocable to the contract, then the contractor must so allocate it and the government must reimburse the contractor for the cost unless it is otherwise unallowable.

Assuming that the contractor has incurred labor cost during the closure, the parties must determine whether the cost is properly allocable to the contract. See FAR 31.201-4. If it is, then they must decide if the cost is reasonable. See FAR 31.201-3. If it is, then they must determine whether CAS apply and whether the cost is consistent with CAS. See 48 CFR Ch. 99. Then, they must determine if the cost is allowable pursuant to FAR Subpart 31.2, especially 31.204 and 31.205-6. Finally, they must determine if the cost is allowable pursuant to the terms of the contract. See the contract. (The determinations need not be made in that order.)

There is no one right answer to your question. The answer must be determined on a case-by-case basis, and depends on the facts of each case.

Thanks much for the clear explanation. But I have a follow up question.

If the contract was a T & M contract instead of CPFF, it would seem that things would get a bit more complicated. The T & M payment clause does prescribe payment for work performed and would seem to preclude a contractor for billing the Government for unproductive hours.

What are some examples of ways the contractor could avoid the incurrance of unbillable costs. I presume the company could require employees to use a vacation day or could treat the unproductuive and unbilled hours as indirect costs. Is there any other way such events are commonly handled from the company standpoint with a T & M contract?

Or similarly with a FFP contract. Is there any mechanism for a company to obtain an equitable adjustment if the Government facility closing creates adiditional costs? I would presume not. I presume this would just be a cost of doing business and a risk that the contractor takes when they sign the contract. Is there something I am overlooking?

Thanks

If the contract was a T & M contract instead of CPFF, it would seem that things would get a bit more complicated. The T & M payment clause does prescribe payment for work performed and would seem to preclude a contractor for billing the Government for unproductive hours. What are some examples of ways the contractor could avoid the incurrance of unbillable costs[?]

I don't know of any examples. You could pay your employees only when they work billable hours. I realize that might be problematical, but...

Is there any other way such events are commonly handled from the company standpoint with a T & M contract?

I don't know of any common practices.

Or similarly with a FFP contract. Is there any mechanism for a company to obtain an equitable adjustment if the Government facility closing creates adiditional costs?

I suppose that the closure could constitute a change, suspension of work, or government-caused delay. In that case the contractor might be entitled to an equitable adjustment.