joel hoffman

I assume that there is a FFP CLIN for out year four. Question: Is the Government wanting to convert to CPFF because they feel the price is too high (e.g., unreasonable or lack of available funding)?

It would be great simplicity for the clueless who just want an award with the least effort. As for the taxpayers, whose interests may concern how much stuff will cost, will their best interests be served? Of course a great many citizens (and aliens in the country) don’t seem to care that there has been almost $2 trillion dollar annual deficits for some years now.

I incorrectly attributed fotmerfed’s statement to Vern in my post when I said “Vern is correct. There was often (in my observation/experience) an aversion by many government contracting personnel to call references.” Thank you, FrankJon.

I wholeheartedly agree with Vern!

I reserved the right in solicitations to call references, when deemed necessary to confirm the quality of performance or an offeror’s role (specific experience) on claimed project experience. Those conversations could be very enlightening. Occasionally, a reference would disagree with a firm’s claimed performance or extent of involvement on a cited project. I also reserved the right of the government to contact or use other sources. Once, one member of my Source Selection Evaluation Board, an Air Force Captain, had less than satisfactory personal project experience with an offeror’s key personnel that were proposed for that source selection. Edit: [formerfed] is correct. There was often (in my observation/experience) an aversion by many government contracting personnel to call references. In fact, I’ve observed an aversion to telephone anyone, it seems. This isn't limited to contracting personnel.

I can think of an example in a simple commercial type contract for , say replacing an air conditioner. Charges resulting from a termination - could be those costs for returning and restocking materials delivered to the project but not used during the partial performance that the government has no need for after the termination. The charges occurred after the contract was terminated.

Looks to me that there is no indication of intent to examine or discuss anything, just look at the bottom line and say, ok it’s reasonable. The contractor has to demonstrate to the satisfaction of the government that these additional, pre-contract costs have resulted from the termination. How Would that happen? Pre-contract costs and associated case law are covered in Part 31, which is not applicable here. The language in the clause is applicable. “the Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate to the satisfaction of the Government using its standard record keeping system, have resulted from the termination....."

Vern already said that he doesn’t consider those costs to be a result of the termination and govt2310 seems to have agreed with that. Start up costs are a consideration in Part 31 and related case law, which isn’t applicable to this contract. So - the contractor apparently hasn’t demonstrated to govt2310 that they are as a result of the termination. So how can you be “satisfied” to add them to the portion of the contract price reflecting the percentage of the work performed prior to the cancellation???

The principle is really similar to not paying for dealer prep costs as part of the car price and the dealer adding it on as an additional, duplicate cost. It’s not rocket science or difficult. As applicable to the contract, FAR 52.214-4 at (l)states in part - "...Subject to the terms of this contract, the Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate to the satisfaction of the Government using its standard record keeping system, have resulted from the termination....." Paying for the percentage of the contract price reflecting work performed (which may presumably include overheads/G&A) plus CONSIDERING DEMONSTRABLE CHARGES…etc. is not very difficult. How hard is it to require the contractor to demonstrate to your satisfaction that those charges have resulted from the cancellation? And that, if they are accounted for as overhead or G&A, etc. “[USING the contractors] standard record keeping system”, they already have been considered in the payment reflecting the percentage of work performed. We don’t generally pay for G&A (or profit) on the unperformed/“unearned” portion of the contract price, except for markups on additional charges that have resulted from the cancellation. For Gosh sakes, the clause applicable to your contract termination clearly REQUIRES the contractor to “demonstrate to the satisfaction of the government using its standard record keeping system” that those charges “have resulted from the contract termination.” I interpret “to the satisfaction of the government” to mean that you have to consider the applicability and reasonableness of the submitted charges. According to your description, they were performed prior to award in case the contract was awarded to them… SHEESH!!!

Vern, I never said “allowable”., nor did I rely on Part 31. The question is whether the specifically identified cost is applicable to the termination as it appears to be part of the bid and proposal process in case they won a contract. I’m saying that I think it would normally be be accounted for as an indirect cost and probably considered in overhead that would be applied to payments for direct costs or a percentage of the contract price if that is the basis for a settlement. Thus, to include this as a direct settlement cost and then mark it up or otherwise pay for the portion of the contract performed prior to TFC would result in a duplication of payment for those costs. It’s simply a matter of not duplicating the requested cost as both direct and indirect costs. It’s not dependent upon application of FAR Part 31 to the contract settlement.

In addition to a representative portion of the contract price, the contractor is asking for specific pre-contract costs. govt2310 wants to determine if those costs are applicable, fair and reasonable, etc.

The contractor included specific pre-contract costs in addition to other price aspects, which may represent a representative percentage of the contract price.

If you don’t have any idea what the contractor is asking for, you shouldn’t be negotiating these type settlements or new purchases. I worked successfully in the design and construction world for nine years before being exposed to FAR.Part 31. I estimated contract and mod prices and negotiated both during those nine years. When govt2310 said that the contractor incurred such costs in the hope of winning the contract, it appears that, if this is normal practice, they would account for such costs somewhere, including when they don’t win a contract. Unless they just eat such costs on unsuccessful bids, they would probably want to spread them over all their contracts in some indirect cost account. So, they would probably include a way to recover those costs in the contract price. Govt2310 said the contract was terminated during performance, so if the govt pays a portion of the contract price for actual work performed, etc. the payments will already include some of those costs. The TfC clause considers direct costs plus applicable indirect cost markups incurred due to the termination. These are not such direct costs. Govt2310 is on the right track.

In commercial contracting , the principle is the same. Don’t pay twice for the same costs. Thats pretty darned “simple”.

Thanks for your clarification, @govt2310 . Yes, I agree with you. The contractor can include a markup for overhead costs on appropriate direct termination costs incurred due to the Termination. Note too, that the overhead allocation is presumed to be in the contract price and in payments for portions of work performed in the termination settlement.

@govt2310 , When was the contract terminated for convenience? Before starting performance or sometime during performance?

So, think about this. How does the contractor account for such costs when they don’t win a contract? Where would they charge these type costs to? I’d think that it would be in some overhead account spread over its contracts… assuming that this wasn’t a specific effort only performed for this contract competition in hopes of winning it. Even if it was, where did they charge these type costs to?

Just trying to say, don’t pay twice, if those costs are part of any markup applied to direct costs incurred… Commercial or not, same business principle, as if one is privately buying something. Please- Don’t get hung up on “the cost principles” in FAR. It’s a question of duplication of costs. As an example, when I negotiated for a new car in the past, I always checked to see if the manufacturers sticker price, before dealer add-ons, included an allowance for “dealer prep” and/or “undercoating”. In that particular case, it did. Then the dealer added both of those costs to the price writeup. I called their hand and they agreed to remove it… .

If the firm typically performs these activities when competing for contract awards, it would seem appropriate to account for them as bid and proposal costs or a similar, indirect cost pool, not as a direct cost. To pay as a direct cost then apply indirect costs would be duplicative.

Does the firm normally perform these activities when competing for contracts, whether or not the firm wins the contract? If so, it would seem that these costs would appropriately be accounted for as bid and proposal costs and included in an overhead account, not as a direct cost… If so, charging as a direct cost for the settlement, then applying the applicable overhead to those direct costs would be duplicative, would it not?

What is a “PFR”?

Yes, he did have a heart for the Procurement List from the time that he fielded WIFCON .

Hurray! Those classic Contracting bibles are still being distributed and used for training! Personally received my first set back in 1980 or ‘81. I read them, studied them, used them and received training on them. Personally purchased the updated versions throughout the years, shared them with our contract admin employees and the principles in them. Wonderful resources for daily use!

Sending instructors to the students, in locations where most of attending students would not require travel expenses, would be a superior option to distance training, in my opinion. True, when students are homogeneous, there wouldn’t be the same amount of interaction and cross-talk between students from different organizations or localities. However, the in-class interactions and synergies are much more effective for both instructors and those students who are serious about the training topics than isolated, on-line learning, with all of the distractions and reduced student accountability. There should still be some opportunities made available for some students from out of town or different local organizations in Urban areas to fill the classes. But travel costs could be greatly reduced and still provide the advantages of in-person, face to face training. Of course, I’m a dinosaur who doesn’t believe that teleworking or “telelearning” improves organizational efficiency or promotes high performance. After I retired, I was a rehired annuitant for a decade, mostly working from home, on a highly important National and International Army program I had been on when I retired. I didn’t have a mandated, regular work schedule. I was only paid for the actual hours worked. I had to submit time sheets bi-weekly. Being conscientious, I kept detailed daily notes of those hours worked and what I worked on for my timesheets. I didn’t charge for breaks, distractions, other activities, etc. But I made myself available with in my waking hours to Corps of Engineers offices/persons across many time zones. Those are advantages of not having a prescribed telework schedule for an honest, experienced employee. However, I could easily have falsified my timesheets, if I had been on a mandated work schedule. There are many distractions to a work life from home. I also missed the synergies of in-person, face-to-face human contact.

This brought to mind a story of a group of persecuted Christians somewhere in the Middle East. Radicals had lined them up at gunpoint and said they could live if they denied their faith. The question was asked of each person, with a gun pointed at their head. All of the persons except the last one denied their faith. The last one refused, saying they were ready to die for their faith. Then the terrorists shot everyone except the last one. The stated reason was because he was the only honest one. Maybe this is a test to determine who is really competent by using their brains and good business judgement to reason, rather than those KO’s who would simply quote irrelevant background information in a letter to contractor(s), because they were told to.