joel hoffman

Formerfed are you certain about what you just said? Getting paid via VISA costs the vendor, contractor, whatever, from 2-5% in VISA fees per transaction, which are often figured into the price charged the Government. I contracted with an agency to teach some classes after I retired (before coming back as a rehired annuitant). They insisted on payment via the VISA. I was paid within a couple of days, in exchange for my additional cost for accepting VISA for the individual transactions. This agency uses an electronic payment voucher and accounting system. As soon as the government input the receiving report (terminology?) with the credit card information, I received payment from VISA very shortly thereafter. There is no benefit other than faster payment for a firm to accept Government VISA transactions for providing services, due to the higher costs and the administrative BS that goes along with having a VISA merchants account.

A possible free resource is the law library at a Federal Courthouse. I don't know if they still purchase hard copies but back in the 1990's, I used to occasionally use the law library in the Federal Courthouse, next door to our Federal Building in Mobile. We also had a good one at our Corps Office in Huntsville. If you are a government employee, you should be able to get access to the law library at the Courthouse. You may also ask your attorney advisor to download and send it to you. I don't know if one can create a file from LEXIS, etc. But I would think so.

Bob, please review and fix, if necessary, my 21 July post, in which I quoted part of Kathleen's earlier post. Thanks.

K-Law, I don't disagree with you. I have a feeling that I know what agency and what legal office is involved. I think that someone took the Chief Counsel's remarks out of context, which is exactly what my attornies alway hated. In a discussion concerning how to advertise, someone assumed that the discussion referred to an exemption that allows restricting competition to local firms. Upon re-reading that advice. I can see how easily it can be read several ways. Ah, the danger of taking legal advice and trying to put it into broad context.

Vern, we didn't look at the differences in mods between the ANC projects and the competitive RFP projects within the bottomline cost comparison. They were all design-build. I am assuming that mods were very minor in overall scope or cost impact. Nobody mentioned any particular cost growth problems with the projects.

Vern, the direct square foot comparison was based upon cost at completion. It was data submitted to help evaluate lessons learned and effectiveness of a large program.

dwergard, I don't know what type of product or catalog price you were dealing with. I don't put much stock in a lot of catalog prices for parts, equipment, materials, furniture furniture systems, etc. I've seen discounts of 60-80% offered in some cases, so I don't know whether "26%" is a good deal or not. I do agree with your second statement. We have some direct comparisons for standardized facility types at the same location in near same time periods between ANC sole source and competed acquisitions. And in the competed acquisitions, we stated that cost was the least important factor, as long as it was within the stated cost cost limitation. The square foot cost for the same facility was lower through competition. Sitework CLIN's were separately tracked and differed in scope, so no direct comparisons were made. In addition, when I was responsible for sole source and negotiated construction acquisitions in a Corps District, we occasionally couldn't reach agreement on a sole-source set-aside, then opened it up to competition. We almost always were able to award within budget using competition, below the best attempts of the sole source contractor to get its costs down and its subcontractors' and suppliers' prices down. Our customers all have the data to back up their long time complaints that the USACE's and NAVFAC's sole sourced construction set-asides cost more than full and open competition. I don't dispute the assertion that competition will guarantee lower pricing, either.

That is interesting. Then the agency lawyers ought to cite that as the justification for local set-asides, not cite Part 5 as the justification. However, it is entirely possible that someone has taken the Chief Counsel's email advice out of context. The Counsel may have been responding to a question about publicizing, assuming that the acquisitions were excepted from full and open competition. This is not uncommon. Kathleen said in an earlier post: [The following was taken from a recent Chief Counsel e-mail. "?The Contracting Officer need not submit the notice required by 5.201 when ? only local sources will be solicited.? "FAR Part 5.202 and 5.202(a)(12)) This means that we are permitted to directly send the solicitations, without making announcements of the requirement, to the local contractors working in the area that we have previously identified."] Reading closely, I could see where this email was in the context of advising how to publicize locally, not in justifying why the acquisition(s) is exempt from full and open competition. I haven't read the above cited Section 886, but if it is applicable, it would seem that that is what would be cited as the exception to full and open competition, under the appropriate Part 6 exception category.

I'm going to have to agree with both Brian and Vern, here. I have observed that the Gov't contracts with ANC's for convenience. We have statistics which "indicate" that the same or similar facility, when contracted with an ANC, is costing more per square foot under similar design criteria and general market conditions than one contracted through "free and open competition.". Our Districts have information about recent acquisitions for standardized facility types at the same location. You can tell that the ANC costs are higher than for unrestricted competitions. This trend isn't limited to ANC's. From 1989 to 1997, the section that I supervised was responsible for all negotiated sole source and competitive construction acquisitions for a USACE District. We knew that competitive acquisitions acheived better pricing than non-competitive ones. Look, subcontractors and material suppliers provide better pricing to firms that are in competition and such prime contractors are more aggressive at "buying out" their subcontracts than smaller firms or firms that obtaine a sole source contract. There are a myriad of reasons but this is the way it is in the construction business. .

Vern, you are correct. Sloppy math work, my error. When using the DFARS alternate approach, one subtracts the cost of money from the computed fee, not from the cost base. From your post above: "DFARS provides that the profit objective applies to the entire cost, including FCCOM, but that FCCOM is then subtracted from the profit objective. Thus, if the total cost is $1,010,000 and we assume a fee objective of 15 percent, the calculation should be: (0.15 x $1,010,000) = $151,500 (not $1,515,000); $151,500 - $10,000 = $141,500 (not $1,415,000); $1,010,000 + $141,500 = $1,151,500 total estimated cost and fee." Don referred to the FAR discussion of FCCM, but not to the DoD coverage, which is different and is associated with the Alternate Structured Approach for fee or profit objective. Using that approach would yield a different result for a negotiation objective.

Yes, I understand that the audience here is broader than DOD.

Vern, I don't disagree. However, as part of the exercise, a DAU instructor illustrated developmemnt of a profit objective and how to handle FCCM within the ob jective. We were taught the DFARS method as an alternative to the FAR method. I knew that something didn't look familiar to me and was wondering what DAU is currently teaching.

I read the DFARS coverage below, because I didn't remember the FCCM being handled the way that the example illustrated. The DoD coverage refers to the DoD Alternate Structured Approach to the FAR Fee approach. For DOD profit objectives, when using the DOD alternate structured approach method, rather than reduce the base for computing the fee percentage, there is an offset to reduce the fee by the amount of the FCCM. Thus, the fee objective would be calculated as (.15) X $1,010,000) - $10,000 = $1,515,000 - $10,000 = $1,415,000 Here is what DFARS says about FCCM and development of the Fee objective, when using the DOD alternate structured approach method: 215.404-73 Alternate structured approaches. (a) The contracting officer may use an alternate structured approach under 215.404-4©. ( The contracting officer may design the structure of the alternate, but it shall include? (1) Consideration of the three basic components of profit--performance risk, contract type risk (including working capital), and facilities capital employed. However, the contracting officer is not required to complete Blocks 21 through 30 of the DD Form 1547. (2) Offset for facilities capital cost of money. (i) The contracting officer shall reduce the overall prenegotiation profit objective by the amount of facilities capital cost of money under Cost Accounting Standard (CAS) 414, Cost of Money as an Element of the Cost of Facilities Capital (48 CFR 9904.414). Cost of money under CAS 417, Cost of Money as an Element of the Cost of Capital Assets Under Construction (48 CFR 9904.417), should not be used to reduce the overall prenegotiation profit objective. The profit amount in the negotiation summary of the DD Form 1547 must be net of the offset. (ii) This adjustment is needed for the following reason: The values of the profit factors used in the weighted guidelines method were adjusted to recognize the shift in facilities capital cost of money from an element of profit to an element of contract cost (see FAR 31.205-10) and reductions were made directly to the profit factors for performance risk. In order to ensure that this policy is applied to all DoD contracts that allow facilities capital cost of money, similar adjustments shall be made to contracts that use alternate structured approaches. The offset is also to be applied for CPAF contract pre-negotiations objectives. 215.404-74 Fee requirements for cost-plus-award-fee contracts. In developing a fee objective for cost-plus-award-fee contracts, the contracting officer shall? (a) Follow the guidance in FAR 16.405-2 and 216.405-2; ( Not use the weighted guidelines method or alternate structured approach; © Apply the offset policy in 215.404-73((2) for facilities capital cost of money, i.e., reduce the base fee by the amount of facilities capital cost of money; and (d) Not complete a DD Form 1547. Don, are you teaching the Alternate Structured approach to fee objective for DoD?

I'm out of office and away from a computer. There used to be coverage of FCCM in DFARS 215.4.I am unable to get to it on the Blackberry. Does it add anything here?

Deleted - wrong thread.

I know of a prime contractor that was successfully sued by a subcontractor which was specifically identified in the prime's subcontracting plan but not selected for the subcontract. I don't know the details. The prime told me about it but I didn't want to pry...

Vern asked: "...And now the actual cost for those "other" elements will be higher than the government-furnished estimate, which means that the total allowable cost of the contract will be higher than it otherwise would have been. Right?? Vern, NptAcq said: "The contractor has done a great job of managing costs and this increase will not require an increase to the Target Cost. The contractor will be able to perform within the target cost while absorbing this cost increase." here_to_help asked: "I'm interested in the timing. When did the Government first learn that it had provided a defective estimate to offerors in its RFP?" here, NptAcq said: "In contract year 5, the "other" costs are actually significantly higher than the estimate provided in the RFP. The contractor has requested that the Target Cost and Incentive fee amount be increased to address this increase. The contractor feels the increase is justified because the Govt. provided the amount in the RFP." Vern, also noted: "Which means that under the Incentive Fee clause, FAR 52.216-10 (MAR 1997), the contractor's fee payable will be lower than it otherwise would have been. Right? And the contractor is making noises about that. Right?" Of course NptAcq hasn't answered, but Vern has probably identified the possible motivation for requesting an adjustment to the target cost base. It appears that the contractor has been able to manage those costs over which it had control of and which it proposed in establish the contract target cost. The contractor may or may not have had control over the amount established for travel and "other" costs, we don't know. Contractor has apparently raised the issue 5 years after the contract started. It agreed to the target prices and line item prices when it signed the contract. However, we here don't know how long the Government or Contractor knew that the contract price for this line item was too low. How about some feedback to everyone's questions above, NptAcq? You want some advice and we are curious.

Water coolers aren't very expensive. I wonder how many months of rental charges would pay for the cooler.

Boof, I remember many years ago that the US construction industry was up in arms over restrictions on bidding State Department work overseas - they insisted that US firms be allowed to bid on US Embassy work anywhere, if it were US funded. Other countries were restricting bidding to their own national companies, even in the US... I am not surprised that anyone can bid on State Department work.

I won't specifically comment on the wisdom of treating both cost and fixed price tasks the same other than to say that FFP task orders carry a bigger risk for the A-E firm, so why treat them the same?

There are no "bidders" on A-E contract task orders. I assume that this is a multiple award A-E, ID/IQ base contract. You are required by law to use qualifications based criteria to select the A-E firm for the task order, without regard to price. Then, you are supposed to negotiate the task order price, whether it be CPAF or FPAF.. One can specify that the negotiated fee is limited to 3% and include an award fee. Will the award fee be negotiated? I think that the last chemical weapons demilitarization plant systems contract (about 2 billion dollars, CPAF), that I worked on, which included a design task order, contained some similar provision capping the base fee at 3% and allowing an award fee.

Kristine, please be clearer. Although it wasn't clear, I thought that you meant that the RFP would limit the allowable fee ("profit") during negotiations of the fixed price with the selected A-E firm to 3%. Then the government would also include some type of incentive or award fee arrangement. Is that correct? Or is Vern's take on this correct (determine allowable costs, then allow 3% fee)? That doesn't seem to be a firm fixed-price type pricing arrangement.

Vern, I didn't totally undersyand your comment about renegotition. The contract or task order price, including an allowance for normal profit, must be negotiated up front. Is Kristine referring to some provision limiting negotiated fee to 3%, then including an award fee provision of some sort? In my experience, negotiated normal fee rate (often referred to the "profit allowance") runs somewhere around 12-15 percent for our agency's FFP A-E contracts

My post #115 was in response to Larry Edwards' post #1, above

Agree, concerning country to country agreements. However, Kathleen's chief counsel isn't referring to any such agreement to justify using only local sources. Hence my conclusion that there isn't one. I agree that Part 5 is meant to refer to local solicitations under the presumption that the necessary exemption from full and open competition has been obtained