joel hoffman

On 5/24/2023 at 8:43 PM, Fara Fasat said: “The impact is this: if the prime can treat the subcontract as a commercial services subcontract even though it is CPFF, then it will only need to include the clauses applicable to commercial subcontracts.” and: “I don't know why the businesses decided this; I was pulled in on the clause question. If the decision is already made, why are you trying to figure out the right thing to do? Concerning “what is right”? and the right thing “for whom”? Whether CPFF is the right thing for the prime? The established standard prices for the services are apparently known. There is a FFP unit priced option available. With either CPFF or unit priced with estimated quantity commercial service, the total quantity is unknown. There is less risk to the prime with a unit priced commercial item contract with the ability to simply adjust the quantities than one that is CPFF, where both price and total quantity are unknowns. Either way, you said you would use only clauses applicable to commercial services. Sorry for the font size. Can’t adjust it on my iPhone.

Clarification : Nope, it’s obviously exempt. I do agree with those who say that the KO should craft the solution

See below

And then applied consistently to all orders…

Hey, Fara is going to do what he is going to do anyway. It will be interesting what will happen if there is a change or REA involving the cost plus sub, claiming exemptions from any normal requirements pertaining to the sub, based upon commercial services exemption. Edit: I think that it is rare that a FFP prime contractor will issue CR subcontracts for anything other than minor requirements. I may be wrong. The one that I was involved with turned out to be a financial disaster for the major DoD prime and the associated delays also impacted government treaty schedule obligations. At least we were able to successfully assign most loss of productivity and delay REA back on the CR sub and also successfully documented how it impacted the productivity of the other trades. 🤠

Don’t know.

Yep T&M is okay.

How so? No, a prime contractor wouldn’t necessarily have to compete its subcontracts after being awarded a FFP contract.

Jacques, the prime and sub can agree to price a subcontract as CO. But it can’t then declare it to be a FAR commercial service for the expressed purpose of avoiding required flow downs of the non commercial service contract clauses in the prime contract to its sub. That’s what I’m saying. It’s not a “commercial service” under the FAR unless it’s compliant with all the applicable Part 12 procedures and requirements, including pricing in 12.207. And, of course it can’t negate the FFP contractual relationship between the government and the prime.

Fara is the one who said that the services are priced “at standard rates”, and “[use] established rates”, which isn’t on a cost reimbursement basis. Fara said the only problem is that the amount of this effort isn’t known. One can’t simply pick and choose what paragraphs of Part 12 it wants to use to classify a subcontract as a commercial service, then ignore 12.207, which doesn’t provide for commercial service contracts priced other than FFP or other FP types or T&M or labor-hour. Fara wants to classify the subcontract as one for commercial services in order to use commercial items clauses to justify avoiding inclusion of other required flow down clauses.

Using or including unit priced line items for tests can be consistent with the description and pricing requirements of a FAR contract for commercial services. “[T]hen [the contractor] will only need to include the clauses applicable to commercial subcontracts.”

No. The quoted part of FAR 31.201-1 refers to elements of total costs of a contract. If I understand correctly what Fara refers to as “established rates”, those are fixed prices charged for something such as products or services (e.g., the price of a test). The problem Fara identified is that the number of tests are uncertain. So, one can unit price the tests for an estimated quantity, including some type of provision for variation of estimated quantities in the subcontract. Fixed price* contracts and subcontracts can include estimated quantities of unit priced line items. * including FFP

Carl, If the problem is the amount of tests or other services that can be priced by established rates, there are appropriate methods to cover the actual quantities. We don’t know the magnitude of the contract or the subcontract, the subcontract share of the total effort or if the unknowns are significant. Ive already said that the contractor can use a cost reimbursement subcontract Edit: However, that pricing method doesn’t fit the definition and circumstance for classifying the subcontract as a FAR commercial service and using the commercial services FAR clauses, etc. to avoid or manipulate required prime flow down clauses to its subcontracts.

I don’t disagree that they can. But having established rates that can be charged by the unit, then charging actual costs is incompatible and contradictory. If the amount of the work is significant, the prime may be at some amount of risk. In the instance that I was involved with on the government side, the cost plus electrical sub was 65% over budget and affected the productivity of most of the other fixed price trades and busted the schedule. The prime then tried to blame the government for the (huge) claimed losses. So, yes it affected the prime contract with the government.

I’m not disagreeing that the type of services are commercially sold and provided and Fara said they are sold at established “rates”. If there are established rates for the service, then pricing them at actual cost is incongruous. There are appropriate alternatives to adjust quantities if that is the only unknown.

If there are established “rates”, then the services can be priced as unit priced services or perhaps as time and materials depending upon what Fara means by “rates” Either unit priced tests or possibly T&M if applicable to the price of tests are suitable and allowable for commercial services with quantities that can be adjusted. However, “standard rates” for tests are incongruous for cost reimbursement services. Either there is an established rate or the subcontractor would charge actual costs.

Not for a prime contract for a commercial product or a commercial service under FAR Part 12 or Subpart 13.5. For DoD, see also DFARS 212.207 (b).

Why don’t you ask the NRO, too? I just realized that my brother was assigned to an NRO installation, while in the Air Force back in late 60’s, early seventies timeframe.

Amount of services can vary but that’s why unit prices of various types of services are available for that reason, instead of simply reverting to cost plus pricing . If the prime contract is fixed price, then the price to the owner per unit of an indeterminate quantity should be fixed, right?

The “down select” procedure is the primary purpose of the FAR 36.3, 2 Phase D-B process, which was proposed by the industry and jointly developed for FAR with the USACE and other some DoD agencies in 1996-1997 timeframe. Phase 1 is very similar to the industry “request for qualifications” phase 1 and with no price or technical design proposals. Industry wants to short-list only the 3-5 most highly qualified firms to spend the time, cost and resources to develop phase 2 preliminary design and price proposals. This allows a firm a reasonable probability of award after expending the time, cost and resources in phase 2. In contrast, in the one-step D-B process, industry must submit a full price proposal and usually a preliminary design proposal, against an unknown number of competitors (unknown probability of award). FAR Part 15 rewrite of 1996 included the multi-step advisory process in . 15.202. This was a step down from the 2 phase D-B process in 36.3, but it is mostly for the benefit of the government, in my opinion.

The issue surfaced in the cited case because, upon a re-evaluation of phase 1 proposals due to a pre-award protest, the government disqualified a firm from qualifying for the phase 2 award competition because it hadn’t registered in the System for Award Management SAM before submitting “an offer” in Phase 1. The 2 phase acquisition method for other than Design-Build Construction acquisitions was, I think, not very common until recently. The 2 Phase D-B process was not even in the FAR until 1997 and wasn’t widely used until several years later. In addition, it may be fairly rare for a firm that qualifies for any phase 2 competition not to be registered in SAM.

Yes, they are convenient. And likely profitable for the contractors.

Just curious, what is the language, if any, in your subcontracts concerning the company requirement for certified cost or pricing data and what remedy action is available for “defective” or otherwise incorrect cost or pricing data?

Yes, thank you for your insights and connections with acquisition history I’m sorry about your eyesight limitations, Vern. You are a National treasure. Certainly, it’s not hard for me to see that the FAR is a patchwork of diverse yet interrelated acquisition methods and procedures. It’s very hard to fully integrate new and updated ideas or processes with legacy policy, guidance, processes and procedures. Yet there seems to be a big hole when it comes to “commercial products and services” or even non-commercial simplified acquisition procedures. The subject of RFQ’s and how to use them once you get quotes stands out to me. Our City purchasing agent, who I worked next to as City Engineer, was fun to listen to as he negotiated with everyone. To him a quote was just a suggestion. And - oh my - he USED the telephone of all things. He’d call up and make an offer and negotiate with vendors. Then send out a finalized city purchase order. So, if government acquisition personnel are supposed to make offers in response to quotes, why not teach them how to negotiate by phone or email or text or whatever, then send the purchase order clearly written as the offer to the vendor for acceptance. The FAR’s whole approach to “negotiated acquisition” is very weak on actual negotiation techniques and emphasis. If they want the government to adopt commercial business buying processes, then provide the right policy and procedures. The damned forms aren’t even clear.

The legal distinctions between informational/non-binding proposals, offers and quotations this past week has been interesting. The Court of Federal Claims rightly defined the distinction between offers and non-binding proposals for applying the requirements for certain registrations and certifications in phased procurements. The FAR is definitely inconsistent and contradictory in its coverage and in distinguishing between these different terms and procedures. The Standard Forms for RFP, RFQ, offers, acceptance, purchase orders, etc. are particularly confusing, misleading and inadequate. If a quotation isn’t an “offer” and the government’s response to a quote is supposed to be an “offer” that can be accepted or rejected or counter offered by either party, the forms and instructions for those processes are seriously lacking. To add to the confusion, in the commercial design-build industry, the Design-Build Institute of America is the flag bearer for promoting and standardizing D-B processes and procedures. The DBIA has adopted the widely used term “Request for Qualifications”, abbreviated as “RFQ” for Phase I of the Two Phase D-B acquisition process. ————————————————— As an aside, around 1990, I adopted the term “Performance Capability” for the category of evaluation factors/evaluation criteria that concerned “Organization, Management, Experience” and other non-technical criteria like past performance, key personnel, schedules, small business participation, etc. We had separate volumes for Technical, Performance Capability and Price proposals to provide to the separate evaluation teams. I didn’t see that term used before I adopted it. Now it seems to be commonly used.