In an interesting decision by the Armed Services Board of Contract Appeals, IVA'AL Solutions, Inc. ASBCA 63430, February 12, 2025, the parties disputed the contractor's entitlement to payment. One question was whether the line items at issue were firm-fixed-price or something else. In Part I.A. of the decision, pages 11 -12, the board ruled that the line items at issue were firm-fixed-price level-of-effort.

Was the board right about the contract type of those CLINs??

https://www.asbca.mil/Portals/143/Decisions/2025/REDACTED%2063430%20IVA'AL%20Solutions%20(Final%20Decision).pdf?ver=ojJsTXHl_Vt7qeejJwCHNg%3d%3d

I don’t agree with the Board. It seems like they used some creative logic to support the Air Force position. It looks like the first and only mention of a fixed price level of effort CLIN type is in the Boards decision. The Air Force labeled the contract as firm fixed price but treated it as LH or T&M for billing purposes.

From what I could gather, it was FFP with a delivery unit of "hour." Assuming the measure of "effort" was time spent working, then I would say it was FFP LOE.

22 hours ago, Vern Edwards said:

Was the board right about the contract type of those CLINs??

I'll bet there aren't ten people in this Forum who can say and explain. Interesting.

2 hours ago, Vern Edwards said:

I'll bet there aren't ten people in this Forum who can say and explain. Interesting.

I bet there aren't 10 judges at the ASBCA, CBCA, or CoFC that would reach the same conclusion.

Snark aside, I was involved in a similar matter a few years ago. The small business subcontractor was audited by a civilian audit agency, who identified unallowable indirect costs. We (subcontractor and me) argued that the contract was a T&M contract so the unallowable costs didn't matter. The subcontract was silent as to contract type. The parties proposed, negotiated, managed, reported, and billed using T&M labor category rates. Unfortunately, because the subcontract said that FAR Part 31 was invoked and that unallowable costs must not be billed, the arbitrator ruled that the parties' course of dealing was irrelevant and that the contract type was cost-type. Bummer for the small business. But also bummer for the prime and the customer, because the next year the subcontractor submitted an invoice for cost growth in the indirect rates (for which there was adequate funding available). Though painful, the situation more or less washed for the subcontractor.

Point being, it's helpful for the contract to clearly identify the nature of the contract that the parties are forming.

Thanks for posting this thought exercise.

I do not agree with the Board (I'll send you my homework privately for feedback so I don't ruin the exercise for anyone else who wants to think through it independently).

Two thoughts:

• If the Board was incorrect, it's unfortunate that this decision validates these convoluted schemes in government contracts (at least temporarily). If the government wants to only pay for hours worked, we should use a labor hour contract (variant of T&M), plain and simple.

• The withholding of information portion of the decision was frightening - we (government) should be intentional about trying to get to the best possible outcome which requires us to be candid about current problems and ones we foresee. This reminded me of my concerns over how professional compensation evaluations often occur where the government creates a guessing game for offeror's to try and submit the right salaries...if we know what the right professional salary floors should be for contracts (which we should if we're going to evaluate them...), why aren't we open and frank with that up front? These "gotcha game" evaluations serve no one's best interest, certainly not the taxpayers'...

1 hour ago, here_2_help said:

I bet there aren't 10 judges at the ASBCA, CBCA, or CoFC that would reach the same conclusion.

So... If the contract was not FFP Level of Effort, what type was it?

6 minutes ago, Matthew Fleharty said:

I do not agree with the Board

So... If the contract was not FFP Level of Effort, what type was it?

1 hour ago, Vern Edwards said:

So... If the contract was not FFP Level of Effort, what type was it?

I sent you a note in private so I would not ruin the thought exercise for others by sharing my analysis. Happy to hear what you think.

Once others have had a chance to ponder/participate I'll post my position here.

I think that the Board of Contract Appeals was wrong.

Seems to me that this was treated after award as a labor hour contract as described in 16.601 and 16.602.

The question of whether this was appropriate in a Part 12 acquisition which defined the lines as FFP and did not include a D&F per 12.207(b)(1) is a different one.

After more thought, it’s firm-fixed-price CLIN structure with unit price reduction per hour when less than full time equivalent work is performed.

@formerfed

22 minutes ago, formerfed said:

After more thought, it’s firm-fixed-price CLIN structure with unit price reduction per hour when less than full time equivalent work is performed.

Do you mean a firm-fixed unit-price contract?

1 hour ago, Vern Edwards said:

@formerfed

Do you mean a firm-fixed unit-price contract?

No. I meant its firm-fixed-price. But the contract allows for deductions if less than full time equivalent (FTE) hours, or 1440 hours in this case are provided. The deduction is the rate for each hour short of the FTE amount. I confused the issue when I referred to the Boards discussion of “unit” being hours.

44 minutes ago, formerfed said:

No. I meant its firm-fixed-price. But the contract allows for deductions if less than full time equivalent (FTE) hours, or 1440 hours in this case are provided. The deduction is the rate for each hour short of the FTE amount. I confused the issue when I referred to the Boards discussion of “unit” being hours.

FFP contracts come in both lump sum and unit priced. The FFP LOE contracts described in FAR 16.207 are lump sum contracts, not unit priced. Failure to deliver the LOE is breach of contract, and the government is entitled to a remedy.

Firm-fixed unit-price (FPUP) is unit-priced. FPUP specify either a firm quantity and or an estimated quantity with a ceiling price. You pay the unit-price for every unit delivered. You pay only for what you get. No need for deductions. But if the quantity is firm and if the contractor fails to deliver the full quantity, then the contractor has breached and the government is entitled to a remedy. It's a well-recognized type of FFP contract going back decades. Used for both supplies and services.

In the words of Bob Dylan, the ASBCA judge's knowledge and experience was "limited and underfed".

I’m looking at it as a deduction when the contractor fails to meet a contract requirement. Page 8 of the decision quotes section 3.1.16 as saying the Government won’t pay for any positions when those positions are vacant.

@formerfed

57 minutes ago, formerfed said:

I’m looking at it as a deduction when the contractor fails to meet a contract requirement.

I don't mean to quibble, but it seems to me that there is a difference between refusing to pay and deducting.

I see what you mean.

I mentioned 3.1.16 of the PWS. I left out this part - “Contractor will not invoice for and the Government will not pay for any positions during that time those positions are vacant.” So that’s the context I meant deductions. The contractor omits hourly charges for vacant positions.