Single-award IDIQ contract for IT services. Task orders are issued as FFP. Separate labor category rates for the prime and each subcontractor were required in the cost proposal, and labor categories with rates are required in the individual proposals for each task order issued.

On one of the awarded task orders we'd like to fill a vacant position using a different subcontractor. The subcontractor's hourly rate for the labor category is $5/hr. lower than the hourly rate that was in the task order proposal. Am I correct that we are free to do that without modifying our price since it's FFP, or could we run into a problem when DCAA audits the task order and finds that we executed the task order with a lower-cost subcontractor than was proposed?

Single-award IDIQ contract for IT services. Task orders are issued as FFP. Separate labor category rates for the prime and each subcontractor were required in the cost proposal, and labor categories with rates are required in the individual proposals for each task order issued.

On one of the awarded task orders we'd like to fill a vacant position using a different subcontractor. The subcontractor's hourly rate for the labor category is $5/hr. lower than the hourly rate that was in the task order proposal. Am I correct that we are free to do that without modifying our price since it's FFP, or could we run into a problem when DCAA audits the task order and finds that we executed the task order with a lower-cost subcontractor than was proposed?

What is the purpose of the labor rates? I presume that they are to be used to estimate labor costs in the development of firm-fixed-prices for orders. Once a FFP for a task has been established, the rates should have no significance, unless the contract provides otherwise. If you can perform the order at lower cost, you should get to keep the savings.

Keep in mind that I have not seen the contract and am speaking in general terms about FFP contracts/orders. Everything depends on what the contract says.

What is the purpose of the labor rates? I presume that they are to be used to estimate labor costs in the development of firm-fixed-prices for orders. Once a FFP for a task has been established, the rates should have no significance, unless the contract provides otherwise. If you can perform the order at lower cost, you should get to keep the savings.

Keep in mind that I have not seen the contract and am speaking in general terms about FFP contracts/orders. Everything depends on what the contract says.

Thanks for the response. The basic contract does include a CLIN for T&M labor which hasn't been used to this point - I believe the rates are there primarily to support that. There is an Ordering Procedures clause in the contract which specifies that task order proposals will include hours against the labor categories and rates in the contract, but the language clearly is intended towards T&M. We haven't found anything else in the contract that would seem to apply.

On a similar topic, I thought it was a tried and true principal in FAR 52.232-7 that you could charge the labor rate in the prime contract for the services of your subcontractor provided they met the labor descriptions (strict interpretation) of the prime contract. I recently came across the Serco v. PBGC descision (CBCA 1695) and was trying to determine if it changes that rule? Was there something I missed in that decision like that contract had labor rates for both prime and sub and they used the wrong ones or something?

Single-award IDIQ contract for IT services. Task orders are issued as FFP. Separate labor category rates for the prime and each subcontractor were required in the cost proposal, and labor categories with rates are required in the individual proposals for each task order issued.

On one of the awarded task orders we'd like to fill a vacant position using a different subcontractor. The subcontractor's hourly rate for the labor category is $5/hr. lower than the hourly rate that was in the task order proposal. Am I correct that we are free to do that without modifying our price since it's FFP, or could we run into a problem when DCAA audits the task order and finds that we executed the task order with a lower-cost subcontractor than was proposed?

Why do you think DCAA would or could audit an FFP order?

On a similar topic, I thought it was a tried and true principal in FAR 52.232-7 that you could charge the labor rate in the prime contract for the services of your subcontractor provided they met the labor descriptions (strict interpretation) of the prime contract. I recently came across the Serco v. PBGC descision (CBCA 1695) and was trying to determine if it changes that rule? Was there something I missed in that decision like that contract had labor rates for both prime and sub and they used the wrong ones or something?

You have to read the clause and contract to see what is permitted. The Serco decision involved the 2002 version of the clause. It was quite different from the 2007 version.

As you stated, you can put in anyone you want as long as they have the minimum qualifications.

What is happening is DoD has to do what Shay Assad (Head of DoD policy) is saying which is "T&M are dangerous and DoD should refrain from using them." In reality, T&Ms are the best contracts on the planet. So you have a hybrid going in that DoD wants T&M type work, but that cannot ask for a T&M. So they call it all kind of different things (IDIQ, FFP-LOE, bunch of other make believe stuff).

I could go on, but DCAA has access to T&M contracts, not FFP. So this is your chance to make sense.., use whatever person is qualified and you are done.

Once again, always use common sense. You can do this by disregarding the FAR. Nothing in the FAR says "stop using your brain."

Thanks for the comments. I wondered about the clause version so that confirms my suspicions.

I agree with you about the comment on FFP. I currently have several ID/IQs which are "FFP contracts" where the only thing FFP appears to be the fixed labor rate. The KOs use this to justify the FFP designation while we work on a T&M basis.

I currently have several ID/IQs which are "FFP contracts" where the only thing FFP appears to be the fixed labor rate.

Are prices locked down at the time orders are issued?

One of my federal customers uses "fixed rate" terminology for what the FAR calls T&M or LH.

When I was overseas there were a lot of FMS contracts paid by the man-month, with deducts based on absences documented on time sheets, and the contracts were called FFP.

Looks like people love the word "fixed" and will stretch a point to (ab)use it.