joel hoffman

The guaranteed maximum price method basically works like this - The contractor guarantees to complete the scope of work within a maximum price ceiling. Payment is based upon actual, allowable costs plus a fixed fee, similar to a CPFF arrangement. If not definitized, there is usually a cost incentive arrangement whereby the parties share cost savings based upon a negotiated or owner established cost sharing ratio (e.g., 70/30 owner/contractor shares). If to be definitized to FFP, then the cost, possibly the fee arrangement, and possibly some incentive award fee arrangement are negotiated as the design progresses. This is different than an FPI arrangement, whereby there is a target cost, "fee sharing" ratios for overruns or underruns, but generally not "cost share" savings. I believe that the "successive targets" arrangement allows the parties to adjust the target or to establish a FFP. The GMP is a heck of a lot simpler arrangement and is familiar to design-builders.

Frog are you, as the Contractor, soliciting subcontract proposals to perform the work? If so, what is your contract and pricing arrangement with the government? Task order?, CPAF, FFP, etc.? I am assuming that the project manager wants you(?) to award a subcontract for the proposed amount plus cost to perform geotech studies and prepare a concept design, then negotiate a final price within the original price. I'm not sure about this, so I need Vern or someone else's input here. Can a prime contractor subcontract using what is referred to in commercial sector as a "guaranteed maximum price" (with an option to definitize to FFP if practicable)? Or is the prime limited to subcontracting using only FAR specifically authorized contract types? The closest comparable method in FAR to a GMP is the "fixed-price incentive, successive target" acquisition method. We are using this method on various complex medical and headquarter faciliities. Wre start with a target price, then attempt to definitize to FFP during contract design development and construction. It has similariteis to but not the same as GMP, which is a better system, in my opinion. The method that the government Project manager is referring to really should be done using FPI-ST if required to use a FAR method or better yet - as a GMP, with the intent to definitize to FFP, if the prime can subcontract using commercial pricing arrangement. As to whether or not the Government can require you to only negotiate with the lowest proposer, I will leave that to others to answer. It isn't practical to have three firms devrelop a concept design and do the geotech work, but they could all three revise their proposals to include those costs. However, I'm not sure that would help the other two firms or provide any benefit to the government, unless the revised proposal includes some type of ceiling cost.

I've been out a few days but I agree with the advice givers. A single award task order contract provides the vehicle for COMMUNICATION and streamlining T.O. issuance. For gosh sakes don't overcomplicate the damned process!!!!!!

You didn't provide enough detail to understand why or why not evaluation criteria would be necessary for a non-competitive negotiated acquisition. What will be submitted?

Yes, jtoli, you are correct. I quoted an article that I received in the mail, Saturday from my old Office of Counsel. The numbers in the article are transposed. I tried to find the subchapter, too and was unsuccessful. Thought it was my Internet skills. Thanks for the correction.

Vern, I'm with you on this. The FAR cost principles aren't "suggestions". They are "principles." However, I'd go a bit further. 31.201-6 says costs that are expressly unallowable shall be identified and excluded from any proposal applicable to a government contract. My assumption is that this is in regard to a negotiated proposal, when cost analysis is performed.

If you are with DoD, see DoD Manual 1400.25, subchapter 415. It states that it is DoD policy not to recognize private citizens or private entities that have a commercial or profit making relationship with the Department, unless the contribution is substantially beyond that specified or implied in the terms of the contract establishing the relationship, or the recognition is in the public interest.

Sorry - duplicate post.

Why not ask the proposer to provide a reference who can verify the person's experience or past performance? Whichever is the factor. You said "past performance", so let's assume that is the factor. I don't know if it would be considered discussions or a clarification. See 15.306 (a) and (bee). If references were required with the proposal, then it would probably have to be discussions, if they didn't provide a required reference to verify the experience or PP. Or, if they did but the reference isnt reachable, it could possibly be considered clarifications. Ask your lawyer, at any rate. If considered discussions, you could rate the person's experience or PP (whatever the factor is) as unverifiable and ask for some reference(s) during discussions. If clarification, ask for the info to verify during the evaluation.

Hey, Mike. I think I understand you to say that the government team has determined that either the manufacturing specs or the product doesn't meet the contract requirements but that the contractor is asserting that the test standards applied exceed the contract QA standards , industry standards or something like that. So, you must do something to avoid having the contractor manufacture non-complying canisters. Is that correct? I remember reading in "Administration of Government Contracts" that there are cases where higher testing that exceeded the standards in the contract was considered a constructive change. However, if the government wont accept the canisters until they pass the test requirements, it might be more prudent to tell the contractor - rather than a stop order - to take corrective action and then get the canister(s) retested??

B-147615 December 14, 1961 was an issue with a 2% tax as a business privilege tax on the vendor or supplier to the Government. The Household goods shipper had to pay the tax and passed it on to the government. The other decision B211093, May 10, 1983, was where the electric utility had to pay a sales or gross receipts tax and passed it on to the US. You are correct to the extent that when a tax falls on a government vendor, not the government as the consumer, then it can pass that obligation onto the federal government.

Okay - if this is a directed change to my contract to seek proposals for upcoming funding, I believe that I would demand that it be in writing and that the Government fund my overhead and admin expenses for seeking proposals prior to funding being in place, if that is applicable to your situation. That way, if they cancel the projects, you can likely be at least reimbursed your admin or B&P costs.

Yes, but please define the "risk" to the contractor under the above scenario? What is it at risk for? It would seem to me that a supplier or subcontractor could choose to participate or not under the conditions expressed in the contractor's RFP/RFQ, right?

dwgerald, I'm not referring to purchases by or for employee expenses or for government contractors. Government employees or contractors generally are not inherently exempt from state or local taxes, unless there is some type of exemption from the state or local taxing authority. I'm referring to and inquiring about possible state or local taxes on direct government purchases for a service or supply. By the way, what basis do you have for saying : "Most state and local goverments do not" (tax federal travelers or contract vehicles)...?

If the contractor explains the funding situation in it's requests for proposals and states that it will not be liable for any costs incurred prior to a funded order, what is the risk being assumed by the contractor - its solicitation costs?

22, do you have some examples of state "taxes" that the federal government must pay on direct purchases by the government? I'm just curious, thanks.

Don, there's not a whole lot you can do if the acquisition method is an IFB... Non-responsibility is not as easy as one may think or desire.

I think you answered your own question. If it is a Contractor requirement under the contract, then you should enforce the contract. If it isn't a contract requirement, then the government doesnt need the qualification.

OOPS. I did misread your scenario. I will answer but not tonight. I just got home from TDY and leave again first thing in the morning. I want to see my wife. I will need to read up on it. I'll be home Friday night and will look after that. There is a difference though. In the original scenario, the contractor did what it proposed to do. In the second situation, it didn't do what it proposed to do. However, I need to read Nash and Cibinic and the files I have collected.

When I worked in Germany, construction contracts were in the German Mark and were paid with Marks. The US fixed the exchange rate for programming purposes and used a currency fluctuation account to pay or collect the difference between the number of dollars budgeted and needed to pay the contract. If the programmed exchange rate was 1.8 marks per dollar and the current rate was 1.5 Marks per dollar, the 0.3 marks came out of the currency fluctuation account. That was in the 1980's. We didn't generally contract in dollars.

In your scenario, the prime subbed the work when it said in its proposal that it was going to self perform it. In this case, the prime did exactly what it said it would do in its proposal. However, the sub failed to perform (according to the information provided) and had to be replaced. In your scenario, the change in strategy may have affected the price that the government should have paid. The government audit might be able to show that the contractor had possession of or had solicited a proposal from the sub before or during negotiations nut failed to disclose it. If such a proposal showed that it should have been less expensive to subcontract the work, but the prime priced it as though it were going to self perform at a higher cost, there might be defective pricing.

Vern, my position had nothing to do with the type scenario that you described. Suppose that the government has awarded a firm fixed price contract and that the contractor was required to submit and certify cost or pricing data. Suppose further that the contract includes the clause at FAR 52.215-10, Price Reduction for Defective Cost or Pricing Data (OCT 1997), and 52.215-12, Subcontractor Cost or Pricing Data (OCT 1997). Now suppose that the Contractor subcontracted a portion of the work to a firm, which submitted cost or pricing data per the clause. The subcontractor has been working, however has failed to meet its obligations; performance was unsatisfactory. In order to meet its contract obligation, the contractor terminates the non-performing subcontractor and replaces it with another subcontractor. I'm saying that the the new sub's proposal information is not cost or pricing data. Since it is not cost or pricing data, it need not be certified as such nor provided as such to the government. Now, regarding your scenario, it might be cost or pricing data. The Contractor has changed the circumstances of performance by subcontracting, in lieu of self-performing the work. I'd have to research my sources to determine whether or not the government could collect for defective pricing, but that is a separate issue. The government's track record hasn't been too good at recovery for contractor actions initiated after award of the contract. The government might have to show that the prime intended to subcontract the work at the time of negotiations or certification, but I'd have to research further.

My last post was in response to one earlier today from Retreadfed addressed to me which continued the debate that I had decided to quit arguing about. By the time that I finished my response and posted it using this accursed Blackberry, there were several posts in between.

Retreadfed, you know that we won't agree on this. I had decided to quit arguing aout it. I agree that it says what it says. Ok - in fact I never disagreed or denied that if data is cost or pricing data, then the contractor must obtain it from a sub. You keep repeating the same thing over and over again. I said that if it is "cost or pricing data", as intended by the statute to be used to support a specified negotiated contract action, then the contractor must obtain it. This effort costs the prime and the sub real money and resourcess. Seemingly stupid as much government requirements are, there is usually some specific purpose for them. "Cost or pricing data" were intended to have a purpose - in order to aid the government in its negotiations on larger contract negotiations or specific modifications for which TINA is applicable. It has to be certified to put some mark of "honesty" on it and to help hold the firms accountable for its content. The basic question then is this. Is a proposal from a replacement subcontractor, which is the contractor's responsibility in order meet its obligation to the government on the FFP contract "cost or pricing data"? If the proposal isn't related to the cost that the taxpayers are paying or "should have" paid for the contract or a specific applicable mod, then I think that wouldn't be defined as "cost or pricing data". Yes, it is still "data", but in this case, I would argue that it only bears a relation to the FFP contractor's actual cost to get out of the mess that its non-performing sub got it into. It bears no relation to the deal that the government and the contractor struck or to the accuracy or truthfulness of that negotiation. Your argument appears to be that this is automatically "cost or pricing data" because it is pricing information related to the agreement between the follow-on sub and the prime, regardless of whether or not it has any effect on what the government "should have paid" for the contract price. My argument is that this reasoning is a stretch. In trying to apply your reasoning to some possible negotiated FFP construction scenarios, I can't accept the automatic application of your definition of "cost or pricing" data. Say that something unforseen happens on the jobsite that is the risk responsibility of the FFP prime. This would be the same concept as the contractor being responsible to successfully complete the work that it hired the non-performing sub to perform for it . I can provide a real example from my experience in Saudi Arabia. We had a FFP contract for a large university campus building on one of our project sites. We contracted, via an out of scope supplemental agreement to add an additional similar building. There was cost or pricing data in involved in pricing the mod. One night a fire broke out in the new building and damaged a significant share of the in-progress work on the building. In replacing the damaged work, the prime hired some of the work done by another contractor due to time and resource limitations. The TINA threshold was then $100k, which this subcontract and the increases to its other subcontracts all exceeded. Using your argument, it would seem that the pricing of the new negotiated subcontract and perhaps the mods to the other subcontracts would constitute "cost or pricing data" that the prime must obtain from the subs and perhaps provide to the government, even though this work was strictlty the responsibility of the prime contractor and for the purpose of completing the contract work. I would say, that like the replacement subcontract in the example in this thread, the government wasn't concerned about didn't decide or really care how the contractor contracted to fix the damage, as long as it met the contract technical requirements. It was not concerned about prices the prime paid to the new sub or the other subs. Those were matters which did not affect the price we paid for the building and quite frankly, on a FFP contract, were internal contractor affairs and were none of the government's business.

Because, if such subcontract proposals on FFP contracts are really "cost or pricing data", as they are on cost reimbursable or cost rederminable type contracts, there should be guidance on what to do with it or what it can be used for. All I found is where DCAA says - as it said way back at the date of my Briefing Papers article - that it isn't going to audit it because there is no benefit to the government.