joel hoffman

Sorry that I missed this post yesterday and further that I am not at my office where I have access to Nash and Cibinic's "Administration of Government Contracts". I remember some discussion of case law where government QA testing that exceeded the contract requirements was determined to be a change to the contract requirements. There may well be some discussion of voiding the warranty in that reference. I don't think that the FAR discusses this topic. However there must be plenty of case law covering "voiding of the warranty". I'm at a car dealer or I'd do a GOOGLE search under "case law" "void" "warranty" . But a lawyer ought to be able to easily help you.

H2H said that "this issue is related to some ongoing litigation, " then indicated that he can't go into more explanation. Yes, it seems like a teaser to originally offer an opinion that one can't discuss. H2H did offer a Mea Culpa for saying anything about it. I think we probably ought to allow him (or her) to leave it at that for now.

If this is a construction contract see clause 52.236-5 Material and Workmanship - in particular see paragraph ( c). The KO can require removal and replacement of an objectionable employee. Therefore, in addition to any other contract requirement (construction contract) I'd say that the KO can decide whether or not the person is acceptable for a key personnel assignment. If the person is a subcontractor, the contractor would have to show that the person has the authority under its subcontract to fulfill his/her responsibilities. "52.236-5 Material and Workmanship (Apr 1984) ...( c) All work under this contract shall be performed in a skillful and workmanlike manner. The Contracting Officer may require, in writing, that the Contractor remove from the work any employee the Contracting Officer deems incompetent, careless, or otherwise objectionable."

Teri, with all the acronyms - I just couldn't resist. I asked if the M&S Pool has a diving board.

WDYMB "M&S Pool"? Does it have a DB?

From the information that you provided, this does not appear to be a "severable bid item" comparable to the discussion in Nash and Cibinics' "Administration of Government Contracts, 4th ed. under exceptions to the "would have cost rule" on pages 666-667. In addition, the contractor already indicated that there are distributed fixed and sunk type costs included in the unit price for each valve, which could not be recouped if the item is simply deleted at its unit price. Yes, you can delete one valve in a unit priced quantity and it is a "deductive change", if it is to be considered a change under the changes clause. It doesn't appear to be an underrun, if the scope of work specifically required replacement of two valves. No, it is not a partial termination. It is apparently a mistake in the bid schedule or lack of coordination with the final scope of work. Or perhaps might the bid schedule have included 3 valves in the event that another might have to be replaced, upon commencement of the actual work? Since you work with the organization, you should be able to find out why they included three valves but the drawings only required 2 to be replaced. You need to verify the cost plus profit and bond, had the contractor installed one valve, which the contractor said is $40k. Make sure that that includes all of its costs, including G&A plus bond and a reasonable profit. If the contractor did not save any of the distributed costs for site overhead or other like costs by not installing the valve, then those costs would not be included in the price of the deleted work. As a deductive change, assuming that the total cost plus profit and bond expense (had the valve been bought and installed) would have been $40,000 as claimed, the equitable adjustment would be a credit of $40k. Then you pay the contractor any difference between that credit and the contract unit price for the valve replacement and the agreed credit for not installing it. Note that handling this under the Changes clause will likely result in more cost to the government than handling it as an underrun under the VEQ clause. As ji20874 indicated, in handling a request for equitable adjustment under the the VEQ clause, you would pay for installation of 2 each, valves . Then the contractor would have to show how its costs increased to install the 2 valves vs. the 3 - or it might be able to show what sunk and fixed costs were included in the unit price that it couldn't recover by only installing 2 valves. The normal underrun philosophy is that the contractor would only be entitled to recover up to 85% of the fixed and one time costs that are related to the bid item due to an underrun. We don't guarantee recovery of 100% of the costs that would have been spread over 100% of the estimated quantity. - but that is impossible because it could not install 85% of the estimated quantity. It was either 100% (3 valves) or 67% (2 valves). So, here - I think that it could recover the full 33% remaining of those costs - assuming that it is an underrun. I'm still not sure that it is an underrun. However, if this contract follows the UCF, then the Order of Precedence clause at 52.215-18 indicates that the Schedule overrules the other documents and specifications in the case of inconsistencies - another reason I don't like the UCF for construction type contracts. It would seem that the Schedule indicates three while nothing in the rest of the contract required three valves to be replaced! So - is it an "underrun" or a change? I wish we knew why the discrepancy is there. Good Luck. Again - these are musings. I don't know all the facts.

For possibly more detailed explanation, please describe what the contract is for in general, but you do not have to identify it specifically. Hard to believe that there is no payment clause or prompt payment clause in the contract. This might have to be corrected.

Chase, the VEQ Clause is one of the more misunderstood clauses and one with little published guidance. Back in the 1990's, due to evolving case law on the clause and for my job in construction contract administration, I did some research and helped develop guidance for the Army Corps of Engineers on this topic. Most of the litigation at the time concerned overruns of estimated unit-priced quantities but the principles generally would apply to underruns as well. The basic concept of the Variations in Estimated Quantities Clause was described in "Victory Construction Co. v. United States", 510 F.2d 1379 (Ct. Cl. 1975). This case held that that the party seeking an adjustment under the VEQ clause must show that there are cost differentials between the estimated quantity and the overrun or underrun quantities, and that the adjustment “will be confined in amount to such cost differentials as are directly attributable to a volume deviation greater than 15 percent from stated contract quantities.” Id., at 1386. Victory held that, absent “exceptional circumstances,” agreed contract unit prices should not be displaced by a complete repricing based on actual costs plus a reasonable profit. From 1989 to 1992 there were conflicting and confusing decisions which essentially promoted the concept of re-pricing the work that was outside of the 85-115% boundaries in the VEQ Clause at 52.211-18. However, in 1992, the the Claims Court reaffirmed Victory in Foley Co. v. United States, 26 Cl.Ct. 936 (1992). The Foley court held that without a showing that there are cost differentials between the estimated quantity and the overrun or underrun quantities due solely to the volume deviation, no adjustment to the contract price may be made. In 1993, the Federal Circuit affirmed the Claims Court’s decision. Foley Co. v. United States, 11 F.3d 1032 (Fed. Cir. 1993). There are other nuances about whether or not the VEQ is really applicable or if some unusual circumstances could result in some other form of relief. Those are still unsettled. But I will ask you what actually caused the "underrun". An underrun under the VEQ clause assumes that there is no "Change" in the required work that caused the underrun or overrun. It is intended to cover situations where the quantities are hard to precisely estimate, requiring some type of reasonable estimation to quantify the actual effort required. You said that this variation was "due to an error in the specification. Ultimately, two were installed as actually required for construction." Thus, could this actually be a "Change" under the Changes clause, caused by some type of defect in the specifications? If such is the case, the equitable adjustment would seem to be based upon the Changes Clause (52.243-4, I assume), not the VEQ clause. Let's first look at an adjustment under the the VEQ clause. You didn't say whether one or both parties or if nobody requested an equitable adjustment under that clause. One would pay for two units installed. We don't pay for the third item but one should then look to see if there an equitable adjustment is due because of the underrun. One would try to compare the Contractor's unit cost (irrespective of the contract unit price) to install only the 2 units vs. the unit cost to install at least 85% of the units. Since 85% is an impossibility here, in this case we must compare the cost to install 2 units vs. 3 units. We don't re-price the 2 items installed based upon the actual cost plus a mark-up. In other words, we leave the parties in the same bargaining position as they agreed to in the original contract award. However - If three units would have been cheaper per unit to the contractor to purchase and/or install than two units, in addition to being paid the agreed unit price for installing the 2 items, the contractor could request an equitable adjustment based upon the increased unit cost to install 2 plus profit on that cost. The increased cost might also include costs that are spread over all work but unrecovered due to the UNDERRUN between actual and installing only 85% of the estimated quantity. Since that is impossible to install 85% of the items, then we'd look at ant unrecovered spread costs (e.g., share of G&A, share of overheads, mob, set-up costs to do the work, etc.) for the one item. A smart contractor might even throw in the "learning curve" efficiencies on installation costs for 3 versus 2 items. However, the contractor generally isn't specifically entitled to recover pre-contract proposal preparation costs, regardless of whether they are a G&A cost or a direct cost. And I would argue that if I have to pay for some unrecovered spread costs, I'm not going to pay for proposal prep costs for the change, since that is probably being performed by the people that you are paying the unrecovered site or other overhead and/or G&A cost for. In the event that 2 items are cheaper to install per unit than 3 items, the Government may be entitled to an equitable adjustment based upon the net unit cost savings plus markups - after also subtracting any unrecovered costs as discussed above. Now - if this is a CHANGE to delete one unit due to faulty specifications, we are looking for an equitable adjustment to delete one unit. In that case, the government would be entitled to a credit for the cost to install the deleted unit, had it been installed, plus credit on markups for G&A, profit and bond, etc. In addition, one must look at the impact on the unchanged work due to the change in accordance with the Changes clause. Again, did the Contractor's cost to install the other 2 items and/or anything else decrease or increase as a result of the change? Consider all impacts plus the applicable mark-ups on those credits or increased costs. There is an exception under the Changes clause to the above methodology, if the three units are all "severable" items. Basically, that may mean that deleting an item has no effect on the overall cost or time necessary to complete the project - that the unit price includes no distributed costs that aren't non-recoverable. That's a simplistic view which the Contractor has already argued against in your scenario. In the case of a Change under the Changes clause involving defective specifications for which the Government is responsible, the equitable adjustment shall include any increased cost reasonably incurred by the Contractor in attempting to comply with the defective specifications. Finally, we must look at the time component of an equitable adjustment under either clause, which might result in a time adjustment and possibly a price adjustment. So, you see that there are differences between the 2 clauses in entitlements and in how the equitable adjustment is determined. The above are my initial thoughts, based upon the limited information presented - just the general considerations involved. Those might change, depending upon the specific circumstances. I don't initially agree with the Contractor's numbers, either.

Vern, I didn't read 15.605 ((1) as being exclusive but mainly because of the overall context. The earlier WIFCON thread became confusing enough that I apparently got mixed up back then. Others have been and/or still apparently are reading it differently. As evidence, one can read this thread and the earlier WIFCON threads I referred to. At any rate, I wouldnt want mares or geldings - I'd want mares and geldings. But I'd prefer mares and stallions (I can sell the foals).

I think the questions have been answered. Look, it isn't that complicated. Failure to notify a firm under 15.503 (a)(1) should rarely be encountered. A contracting team would have to be...let's say...less than competent... as well as extremely rude - not to tell somebody who submitted a proposal that they are not in the competitive range - which means there is going to be discussions with somebody else. Once in discussions, the KO has to ask everyone STILL in that group for final proposal revisions at some point. If they drop someone, they won't ask for a final proposal revision and they need to be competent enough to let that firm(s) know that they are out of it. If somebody is actually left in the dark, waiting for that request for final proposal revisions that never comes - provide them a post award notice. Its kind a like those Japanese soldiers found hiding in a cave 20 or more years after WWII. Somebody forgot to tell them the war was over. Under a small business program, provide a pre-award notice to everybody under (a)(2), including the apparently successful firm and those offerors mentioned above that you dropped. If you don't do it or if you miss somebody, send them the post award notice. Send every unsuccessful firm still in the competitive range till that final request for final proposal revisions a post award notice. Oh yeah, send the winner a notice of award.

I think that Don confirmed that the "or" is misleading (denoting mutually exclusive choices) and appears to have been meant to express "and" or "and in addition", as discussed above.

Duplicate

My point was that there is evidently a problem within the wording of 15.503 ((1) that seems to be the root cause of confusion within at least two WIFCON threads as well as Don's DAU class and even with Don. It has resulted in numerous hours of people's time to discuss in these WIFCON threads. Apparently at least one contracting official uses an incorrect notification procedure as a result. Does this represent a sampling of a bigger universe of misunderstanding? Or is it a dead horse issue, "solved" in WIFCON? I don't know. I doubt it but if Amy Williams or anyone else on the FAR committees reads this thread (ha ha, RIGHT!), please include an editorial correction to 15.503 ( (1) by removing the "or" and reword to indicate that a post award notice goes to those unsuccessful offerors in the competitive range and to any other offeror who wasn't given all required pre-award notices under 15.503 (a). The use of "or" here is ambiguous. It can indicate mutually exclusive choices. If one was thinking along the lines of programming logic (from my 40 and 30 year old programming memory), similar logic is something like "IF 'A' OR 'B' is present, then DO 'C'." It is improper logic to say "DO 'A' to 'B' OR to 'C'.", if you want the action to apply to both B and C. Pie in the sky request, I know. But it could be easily included in a FAR case for editorial corrections and clarifications. Have a good day!

How about that "or" in the middle of 15.503 ( (1)? I think it is probably the source of most of the confusion. There ought to be a clearer way to tell KO's to send the post award notice to those unsuccessful offerors in the competitive range as well as any other offeror who wasn't provided any required pre-award notice under 15.503 (a).

Vern, to clarify, I never said that 15.503( "says" anything. I was responding to Don's original scenario, which I thought was some sort of test. Under Don's scenario, 15.503 (a)(1) wasn't applicable because the firm he was asking about was still in the competitive range. I told him that was my assumption in my first response and he did not say otherwise in his next response. I then explained what 15.503 ( (using the same wrong paragraph designation that Don had supplied in his original post before he edited it in response to your post) "required" with respect to his (assumed) scenario, without going into every possible combination of circumstances. He was still referring to a single firm that was properly notified of who the apparent successful offeror was and he said that the firm wasn't entitled to a post-award notification because of that. I thought Don was trying to make a point concerning the "OR" choice in 15.503 ((1) that might be read as requiring a post award notice be sent only to a unsuccessful offeror in the competitive range OR to a firm that wasn't given a pre-award notice but not both types of offerors. However, yes -yes-yes, I should have been clearer in my response that I was limiting my interpretation of the "requirement" to that firm's situation and I should have used the correct paragraph numbering. And yes, a notice under 15.503 (a) (1) is definitely also required when applicable. Again - sorry for my sloppiness.

You asked: "2. Does any regulation or policy prohibit leaving funding on a contract that is not (at the instant time) for an actual requirement, but which is left on the contract as a contingency in the event it is necessary?" "3. Is the Contracting Officer free to leave these funds on the contract so that they are available in-the-event the necessary repair category changes? " It is unclear from your post whether or not the contract performance is complete. The scope was repair for four widgets; you have three being repaired, so far. It appears that the contractor has begun performance but there is a possibility that it could find additional level of repairs necessary upon tear down and repair. You said that the contract or order (is this a task order/delivery order or a individual contract?) says: "Upon completion of the contract/order, the ACO is authorized to issue a modification reflecting any downward contract funding adjustment required based on the repair effort that was authorized and performed." if the scope of the contract or order isn't yet complete, I'd say that you don't have to and perhaps shouldn't de-obligate the funds per the above wording in the contract or order. And further performance requirements appear to be a possibility, either for a fourth widget or for additional level of performance required if discovered during performance.

ji20874, I'm not trying to gang up on you. However, I just explained that the FAR at 15.503 (a)(2)(i) does require the KO to provide pre-award notice of the apparently successful offeror under a small business program to "all" offerors. To me, "all" reads pretty clearly as ALL the offerors, including the apparently successful offeror. This is distinguished from the other notification requirements in 15.503, which identify certain offerors.

Vern, I'm not sure if you were referring to my post above. I said that ji20874's practice makes no sense to me. The language of the FAR at 15.503 (a)(2)(i) requires all offerors to be notified pre-award under a small business program. That would exclude anyone from a post-award notification under his "practice".

ji20874, nobody would get a post award notice under a small business program using your stated practice of giving a pre-award notice or a post-award notice "but not both". That doesn't make any sense at all to me. By the way, I think that ALL firms - not just the unsuccessful offerors - must be given a pre-award notice under a small business program at 15.503 (a)(2): "(2) Preaward notices for small business programs. (i) In addition to the notice in paragraph (a)(1) of this section, the contracting officer shall notify each offeror in writing prior to award..." There are several reasons why that I say ALL firms get the (a)(2) pre-award notifces for small business programs. 1) Everyone but the apparently successful offeror would know who that firm is if only the unsuccessful offerors were notified under (a)(2). 2) The language at (a)(2)(i) specifically says "the contracting officer shall notify each offeror..." 3) In distinction, the language at (a)(1) specifically calls out pre-award notification of "offerors promptly in writing when their proposals are excluded from the competitive range or otherwise eliminated from the competition". 4) In distinction, the language at ( specifically calls out post-award "notification to each offeror whose proposal was in the competitive range but was not selected for award (10 U.S.C. 2305((5) and 41 U.S.C. 253b?) or had not been previously notified under paragraph (a) of this section."

Disregard - I pushed the wrong button. Was still typing...

Sorry - I tried last night but couldn't determine the URL for the earlier WIFCON thread on the @$#@%#^& Blackberry. Might have saved a lot of trouble and a couple of hours of my time last night. Inasmuch as it has contributed greatly to my Carpal Tunnel Syndrome, I'm thinking of taking it for a one way sail on Mobile Bay.

I apologize for searching the FAR on a Blackberry and trying to go back and forth between the FORUM and the FAR websites, late at night. It doesn't work. I was responding to your scenario plus I neglected to include any instance where the government failed to notify a firm of its exclusion from the competitive range or that it was otherwise eliminated before award under 15.503 (a)(1). I was trying to say (very awkwardly) that even though a firm in the competitive range received a pre-award notice, it still gets the post award notice and that the post award notice contains different information than the pre-award notice. Vern's post is succinct.

Don, while waiting for Vern's response, he answered the question in this archived thread: Your interpretation is correct, according to the thread. http://www.wifcon.com/discus/messages/8520...html?1204312343

Don, the phrase at 15.503 ( b ) ( 1) requires post notification of 1) those firms in the competitive range (which refers only to those firms), OR 2) notification of those not previously notified under FAR 15.503( a )( 2). I am assuming that this refers to all firms that submitted offers. This in the event that the government didn't notify anyone before award because of an urgent requirement to award without pre-notification. In the 2nd case above, the FAR requires all firms to be notified before award. However, there is an exception at 15.503 (a )( 2) (iii) to the pre-award notification requirement that allows government not to notify anybody: "The notice is not required when the contracting officer determines in writing that the urgency of the requirement necessitates award without delay or when the contract is entered into under the 8(a) program (see?19.805-2)." I don't believe that there is any prescription for only notifying certain firms and not others before award. I suppose that it would be possible but I don't envision such a scenario, with today's communications technology. So one will likely either notify everyone who submitted offers or no one. To state it another way, I believe that the post award notice is for the firms remaining in the competitive range UNLESS the government didn't notify anyone before award under the small business programs. In that case, everyone gets the more detailed post award notice. In addition, the post award notice contains different information than the pre-award notice. It is intended for the firms that were still in the competitive range. But if nobody was notified before award, the government then has to notify all those firms- not just those still in the competitive range- after the contract award with the full complement of information included in that notice.

Yes. The pre-award notice allows other firms who submitted offerors an opportunity to challenge or raise an objection to the status of the apparent successful offeror, if warranted. The post award notice and associated information is intended for those firms in the competitive range, which is who I think you asked about. Plus any firms that normally should or would have been but were not previously notified prior to award would also be included in the post award notice. I guess an example is where exigency precludes the pre-award notice. There was a discussion thread related to this question several years ago on this forum. Unless something has changed, I believe that was the gist of the discussion.