joel hoffman

I agree Vern. An FPIF arrangement with a generous (or any) government share of cost growth doesn't insulate the government from an overrun due to a "buy in". If it was obvious that the contractor was going to "invest" in the development cost for the prototypes, then there should have been no government share and the target and ceiling costs should have been the same - in other words, a guaranteed maximum price arrangement . For the AF acquisition types to say that the overruns are Boeing's problem, when the contract appears to contain a 60/40 share ratio, begs the question - are they nuts or? Just my opinion.

So, why would one accept an offer for a Fixed-Price Incentive contract with a 60% Government cost share, for overruns above the target cost up to the ceiling price, if he knew that it involved a "buy-in", where the costs would exceed the target price???? Maybe because the Government would allegedly "save" 40% of the overrun amount?

According to an article I just read, there was apparently only 2 billion dollars difference between the EADS and Boeing proposals ($22.6 vs. $20.6). Had Boeing proposed "$5.5B" or even "5.2B" (the current estimate), would the Air Force have selected them over EADS? That is only for the first f-o-u-r planes. Hmm... see http://www.defensemedianetwork.com/stories...c-x-tanker-win/ Bob - Yes, I do assume that this was an obvious buy-in.

There has allegedly been a cost growth of 33% ($1.3 billion) within the first T-W-O months of the contract. That 's $3.9 Billion target cost plus $1.3 Billion growth = $5.2 Billion. That's a "B" for B-I-L-L-I-O-N. How on earth could Boeing have been that far off the target price for F-O-U-R airplanes????? They build planes every day for customers. They've been building B767 airframes for years. They've built almost every tanker that the Air Force has ever owned, including the KB-50's, KC-97's, KC-135's, KC-10 (they now own McDonald-Douglas). It's incredulous to ask somebody to believe that they cant get within 33% of the estimated price to build 4 tankers on an existing airframe in an existing plant, but can discover that HUGE amount of cost difference within 2 months of signing the contract.

To state it differently, the target cost to develop the first four planes is $3.9 million. Note that Boeing didn't have a fully developed 767 Tanker, while EADS has been producing and selling their version to other countries. Now, only two months or so later, Boeing announces a cost increase of $1.3 million or $0.3 million over the ceiling cost of $4.9 million! It will cost the taxpayers some $600 million or so and Boeing will supposedly absorb $700 million or so (40% of the first $1 million and all of the $300 million above the ceiling price). I would say that this was a pretty good investment on Boeing's part to prevent EADS from establishing a US airplane production factory in Mobile, AL. Probably amounts to the cost of ne or two B787 Dreamliners. It is a deliberate strategy, in my opinion, having followed the competition somewhat over the past three years. Yes, Boeing lowballed its proposed price to the Air Force. And you can't convince me that they didn't know EADS' pricing. The long term stakes were too high for Boeing to take the risk of losing this contract.

As far as I know, interorganizational transfers of labor aren't accounted for the same as contracted labor, plus that isn't the issue in the situation described in this thread.

In addition to Bob's point, this thread really belongs under the "Contract Pricing" Discussion Area, not under the "Contracting Workforce" Area. I do understand that cmoore is new to this Forum. However, to clarify - I believe that the Contracting Workforce Area is intended to cover discussion concerning government contracting personnel, not contractors' pricing practices for their "contractor personnel".

That's what I said in my only opinion post. I didn't mention firm fixed-price contracts but it may or may not be relevant to that type. If the FFP rates or costs were competitively bid or if they were competitively negotiated without detailed representation of the basis of pricing, then I'd generally agree that the issue isn't relevant However, if the FFP unit rates or costs are negotiated on the representation that the contractor would use the higher cost, in-house labor and if the contractor never intends to use the in-house labor or if the contractor intends to use a mixed labor force without disclosing it , then it might well be relevant. But it depends upon the circumstances.

I forgot to add - I'll pray for your health.

Bob, I want to say that I really appreciate you and your efforts over the years. You seem to be uniquely qualified and dedicated to develop and maintain this outstanding site. As I have told many folks, if you are involved with federal contracting, this ought to be your Homepage. I know that I have complained to you several times over the years, but I applaud you and appreciate the high quality of the site! Happy Sails! Joel

While it might be acceptable for competitively bid labor hour or time and material contracts, I would be very skeptical of its propriety on a cost reimbursement type contract. It doesn't look right and would take more than hand waving to convince me that the subcontracted labor rate is exactly the same as that for in-house labor. But we don't seem to have all the information.

Is this a proposal? Existing contract? Cost reimbursement? T&M?

So you are discussing the effective contracted labor rate? Are you saying that the company charges the government the same rate for subcontracted labor as for in-house labor? And you say that the firm's rates haven't been accepted or "approved" yet...

You said that this is a defense contractor. Please clarify your terminology. Inasmuch as I could interpret "100 percent" labor burden as doubling the direct labor rate, are you saying that a 280% labor burden makes the effective labor rate 3.8 times the direct rate for in-house labor? Does the firm have recent DCAA audit reports to support the rates?

Nash and Cibinic explain it pretty well. But generally, the credit would be based upon the direct and indirect cost to the sub to perform the work plus its markups; then add any direct or indirect costs that the prime would have incurred or would have charged to the sub's work plus a reasonable profit. If construction, any applicable bond premiums would be added to all that. There are exceptions, but that is a general outline of the expected credit due for the work not performed.

Advise him to check the FAR Matrix for the option clauses against the Time and Materials contract type. If he can't understand that , he wont understand rationale such as, 1. Part 17 "...prescribes policies and procedures for the acquisition of supplies and services through special contracting methods..."including options. 2. Part 16 describes various contract pricing types. If options aren't mentioned in Part 16, when can they be used with any of those contract types? 3. The answer is found at 17.202 -- Use of Options" (a) Subject to the limitations of paragraphs ( and ? of this section, for both sealed bidding and contracting by negotiation, the contracting officer may include options in contracts when it is in the Government’s interest. 4. The answer is also found in the Far Matrix. 5. Options aren't exclusive to any particular contract pricing method.

Thanks, Vern. I initially thought by "unilateral", "J and A" and Carl were discussing whether the Government could issue unilateral task orders (similar to issuing a an undefinitized change order), rather than the case where the KO simply signs and issues a task order, accepting a task order proposal from a firm that responded to a request for task order proposals. I feel that, unless the parties agree on all terms and conditions before issuing the order, a bilateral agreement is usually required. There are instances where proposals contain items can be segregated and issued separately or not accepted, but that apparently wasn't the case here. Here, the contractor seems to object to the lack of certain terms being included with the task order. It isn't clear whether the Contractor raised its objection prior to issuance of the order or whether it voiced its objections after issuance. It also isn't clear whether the omission changes the agreed terms.

I see now what Carl and the original poster mean by "issuing a task order unilaterally". You simply mean that the government accepts the task order proposal by issuance of the task order, without a legal requirement for a bilateral signature. I don't have a problem or question that, as long as the offer and acceptance are consistent. But if the proposer raises other issues prior to issuance of the task order, I don't think you have mutual agreement concerning the offer until the issues are resolved. That was my concern.

If the task order is consistent with the proposal and the terms of the contract then it appears to be an offer and acceptance. What is the Contractor's issue and when was it raised - before or after issuance of the task order?

During a recent discussion in a similar thread, I too looked for a cite that may indicate it is the Government unilateral right to issue a TO on a MATOC, especially if the contractor disagrees with the terms, scope or conditions. It appeared to me that the ordering procedures require mutual agreement.

Carl, just curious. Does the contract say that the government may issue a unilateral task order on a MATOC? The ordering procedures in FAR for MATOC's seem to indicate to me that there will be competition and that the firms submit a proposal, which means to me that the parties would have to agree to the scope and terms of the task order. Unless I misread the ID/IQ specific FAR clauses, I overlooked where the ordering procedures say that the government has the right to issue unilateral task orders. I might have missed it. Thanks.

Does your office have access to Counsel?? There appears to be no meeting of the minds on this terms and conditions of the task order. Is the Contractor's concern addressed anywhere in writing? Why does the KO want the Contractor's signature, if the task order is unilateral?

Are you asking whether each task order requires a new Wage Decision? Can you provide more detail, such as: What type of wage determination (DBA or SCA) applies to the contract? Are the individual task orders to be performed at the original location that the Decision covers for the original scope of work in the base contract and will the work be performed within the period of the base contract or specific option period in effect? Stated another way, is there anything in the task order that would extend performance beyond the period of the base contract award or current option year or does the place or work vary from the basis of the Decision or does the work vary from the basis of the Decision? If yes, then I think that you need a new Decision. If no, it would seem that you are covered by the Decision in the Base contract. Why reissue it with each task order? I may be wrong but I couldn't find anything specifically addressing task orders that mirror the conditions within a basic wage decision. Task orders are considered "contracts" per the definition in Part 2, but if you have a Decision that covers certain work for a certain period at a specific location, it would get quite messy mixing up wage rates for various concurrent task orders...

Carl, I'm not arguing with you. I am simply trying to say that for the present situation, it should not be a problem, even if the hardheads insist on requiring a 30 day proposal submission period. The utility says it is ready to submit its proposal now. The parties both know when the utility can submit its proposal. No use in arguing with those hardheads right now. Send the RFP out, even if they require a 30 day response period. If the utility is ready to submit their proposal, they can submit it "early". Then, simply evaluate and negotiate the proposal. What would be more stupid is if the government refuses to touch the submitted proposal until the full 30 day period passes. For the future, I agree by all means, try to educate them. The key is that the parties should be able to agree on a reasonable proposal submission period when sole source contracting. However, unless the parties agree that a period of less than 30 days is sufficient, we should normally allow the firm(s) at least 30 days to prepare a proposal for a construction contract.

I think that 2 of us offered a practical solution to the immediate situation, it assumes that the offeror will submit its proposal within a few days, even with a 30 day allowed proposal period. Then the government is hopefully smart enough to evaluate then negotiate it after receipt. Maybe I assume too much if someone can't function without a literal FAR prescription for every situation. Then argue about the period for next time. The FAR intent is to allow industry at least 30 days to prepare a proposal. If a sole source firm doesn't need 30 days, then evaluate and negotiate as soon as they send it in.