joel hoffman

Good question - why dont you ask the White House?

Hope this isnt a duplicate. I pushed the wrong button earlier. I do understand the problem of setting precedents if one accepts what they feel is an unreasonable profit rate. However, it is not wise to try to establish a flat rate for every future negotiation. Often, a firm might try to divert the negotiator's attention away from inflated direct cost pricing with an obvious and visible proposed profit rate, then most of the negotiation centers upon the profit rate, ignoring the direct costs. Those take more time and knowledge to effectively analyze and negotiate and can easily exceed the high profit rate. In this instance, it appears that you are talking about a new task order for manufacturing automobiles or OEM parts or something. I truly don't know what the customary and reasonable industry OEM profit rate is for parts or for new vehicles. I do know that parts are a profitable share of the business at vehicle and farm machinery dealerships. My dad was parts foremen at an IH dealership and parts made up a big share of the profit there. My friend's family has one of the original Ford Dealerships in Montana. Once a year, they can purchase one vehicle from Ford at a really great price. My friend bought a new 1997 or 1998 Ford F150 with extended cab, fully loaded with leather seats, etc. for about $12,900. The list price through a dealer was about $24,000 at that time. Now, was Ford making money , breaking even or offering it at a loss for good will and long term relationship? I have no idea but always suspected that it was probably about what it cost to build it... If this isn't for manufacturing but simply for buying parts for a vehicle, I'd try going somewhere else to keep them honest, if at all possible. You also didn't ever explain why this was a separate task order. I'm now guessing that it is a new buy, not a change to another task order.

How about BETTER management of risk by REDUCING risk. Do their homework up front; make commitments and stick to them; treat the taxpayers' money like it is their own.

Does it have to b e a separate task or can it be a change to the task order?

I think I missed something. Seems like the question was both asked and answered in the same email, but its hard to tell on a Blackberry I feel that N&C's "Cost Reimbursement Contracting" is good but is more legal and theory than dealing with many day to day management issues and techniques. Look for references on "earned value" (efficiency), "project controls" (cost and schedule management), "earned value management systems" (EVMS) and work breakdown structures (WBS).

Single award task order contract? This probably is not a requirements contract or is it? Is this the only contractor who can meet your requirements? Are the tasks so integrally related that you have to use only them? If not, you can opt to compete the work, if the incumbent isn't wlling to meet a reasonable overall price for the proposal.

Can't read your mind. What kind of contract is this (service, supply, construction, etc.) and is it FFP or something else? What payment and prompt payment clauses are in the contract?

What type of a contract is this- services, construction, etc.?

Maybe the employee is charging to an indirect/overhead pool. That is common.

Maybe the employee is charging to an indirect/overhead pool. That is common.

If you are an 1102 and will be handling administration of construction contracts or claims, you really need to understand all of the construction contract clauses as well as contract interpretation issues, special situations like the suspension of work clause and Eichleay, defaults clause, etc. If you are with DoD, the DAU has a construction contracting course. I don't know how good it is. If you do any military or civil works construction, the Army Corps of Engineers has several very good training classes for contract administration purposes, among many, these are "must attends": Construction Contract Administration, Estimating for Modifications and Claims (teaches pricing principles for changes, claims, various clauses, etc.) Design-Build Construction and others. I personally feel that "Administration of Government Contracts" (4th Edition is now available) by Cibinic, Nash, and Nagle was the best book that I ever bought to learn the overall rules of construction contract administration, including contract interpretation rules. My latest edition is the 3rd Edition, before Prof. Cibinic passed in 2005. You can purchase the latest edition for about $105. I've seen that price for both hardcover and paperback editions via a GOOGLE search. I bought one once from our local college bookstore but they are available on-line. It is part of the George Washington University Government Contracts Program series. "Formation of Government Contracts" by is also a must have. I also subscribed to "Construction Contract Claims Monthly" for 25 years. Business Publishers, Inc. publishes this periodical. A subscription is about $327 on-line. If you cant afford that, you can read court and board case decisions at various websites. The ASBCA Decisions are available on-line for free, as I imagine are the civilian board's decisions. I also get daily notices from the GAO concerning GAO Protest decisions. Fed Claims Court and others may also be found on-line.

I agree with Vern. My opinion would be this. Why would one unilaterally award a cost contract at a price that you determined to be more realistic than that proposed without first conducting some meangingful discssions with the offeror? There would be no mutual agreement or even understanding of what is required or expected of the contractor let alone any mutual agreement on fee. Criminy, if you don't agree that the proposed cost or price is realistic, conduct discussions, verify that the cost is truely unrealistic, and I'd go with Vern's suggested approach of either a counteroffer or insist on a proposal revision to reflect a realistic price.

Are you or is your office willing to spend some money on reference books? Periodicals?

Yes, sorry I can't help. I had some textbooks and yearly supplements by Wiley or some other publisher on designer liability but left them with the taxpayers when I retired.

There must be a lot more to this than the seemingly simple sceanario that you provided. If you are specifically wondering whether government inspection of foundation construction would relieve the designer of professional negligence for a foundation failure, I don't see how it would unless the government actively engaged in the decision that the subgrade was adequate. Now, in order to hold the designer liable, the standard of care in design is that of the standards of the industry under the same conditions and for the location - thus, you must establish that the design or designer's actions are negligent with respect to the standard of care. Perfection is not the expected standard of care.

I hear you, Dave.

I think all the arguing and such takes more effort than submitting a brief plan that states you aren't going to subcontract anything and why you aren't or can't. What about materials and equipment purchases or this this strictly for services?

Section b with respect to what aspect? Section b is broad. When I retired from full-time duty, I left all my yearly books on A-E Liability and disputes in Huntsville. Are you thinking about the effect of government design reviews, in-depth calculation reviews, etc.? Approvals of furnished designs? Are you referring to the effect of payment for designs furnished? Are you trying to recover impact costs due to errors or omissions or just make the designer fix the design? If you are going to pursue A-E liability, you need the assistance of an attorney. This is in effect a government claim against a design professional.

Not knowing the circumstances or period of delay, I can't be too specific. The cost impacts are granted under the Suspension of Work clause and the time extension is granted under the Defaults Clause. Sometimes, delays may cause price escalation. I wouldn't include profit or fee on a constructive suspension of work. Pursuant to the Suspension of Work clause, we allow increased costs but no profit or fee.

I see two decisions and 16 protests.

Too "muddy" (= too cryptic) To let something go 5 years smacks me as incompetence and an insult to the US taxpayers. Somehow a contractor was allowed to change a production item from some contract requirement since FY 03 - perhaps on an earlier contract. We don't know. We don't know how. This is a matter for agency counsel to aide the present administrator, not a forum. If you don't have access to counsel, I suggest hiring a lawyer.

Sorry, apparently too complex a situation that you don't want or don't intend to fully explain how you accepted the VECP (the wording of the acceptance). Must be some type of annually funded production contract. Too many unknowns to help. Suggest you hire a lawyer then provide all the facts to him/her..

Please be clear. Did you accept the VE and tell the contractor to implement it with the price adjustment to follow on later? If you did, then a price adjustment is part of the deal and is necessary. It would be for all units produced after you directed implementation of the VECP, assuming that there isnt more to this story. Why do you need to rely on case law to understand that?

Price cannot be a factor or a selection criterion in a MATOC task order or base ID/IQ contract competition. FAR 16.500 (d) : (d) The statutory multiple award preference implemented by this subpart does not apply to architect-engineer contracts subject to the procedures in Subpart 36.6. However, agencies are not precluded from making multiple awards for architect-engineer services using the procedures in this subpart, provided the selection of contractors and placement of orders are consistent with Subpart 36.6. This means that, for a an A-E multiple award ID/IQ task order, the Brooks Act procedures in FAR 36.6 must be used to select the most qualified firm and price is then negotiated, where possible. If you can't settle on a fair and reasonable price, you move on to another firm. If the agencies are violating the Brooks Act requirements on a new contract competition, my opinion is that you may protest the terms of the solicitation. If you are a task order contract holder, you may also object to the terms of the task order solicitation. Engage a lawyer for details.

I really didn't want to get involved in this discussion. I don't think that Query has identified what clause is in the contract and what, if any, alternate paragraphs are included. The whole scenario is somewhat cryptic, because he/she hasn't explained how the VECP was accepted or directed by the government and if or how the action has been definitized, if the contractor has only proposed an adjustment to future units. Why would profit or fee be adjusted? The adjustment to current contract units or future contract units is based upon cost savings. I see no mention of fee or profit adjustment in 52.248-1 (I am assuming that some form of this clause is in the contract but I may be wrong).