Jacques

I agree. FAR 16.505(b)(3) states, "If the contract did not establish the price for the supply or service, the contracting officer must establish prices for each order using the policies and methods in subpart 15.4." If a basic IDIQ contract has to be pre-priced to qualify as a contract, the language at FAR 16.505(b)(3) does not make a lot of sense.

You don't have to be absolutist about it. Certainly, there are times when the Government can insert itself into this process, FAR Subpart 44.2 being the most obvious example. However, there is no reason to believe on the facts in the OP that the contract includes a requirement the Government consent to any of the subcontracts, given that the prime contract is for a commercial product. See FAR 12.301(d). Maybe others would disagree, but when consent is required, it does not seem like Government overreaching when, e.g., FAR 44.203(b)(2) calls for the PCO to withhold consent to CPPC subcontracts (even though it may be a little paternalistic when the only one directly harmed on a FFP prime is the prime). The additional requirement for consent doesn't change the fact the subcontract is grounded on an understanding between prime and sub.

@C Culham has it exactly right. I assume we're talking about the "Payrolls and Basic Records" clause at FAR 52.222-8. If so, the definition of "laborer or mechanic" at 29 CFR 5.2(m) (and repeated at FAR 22.401) is the place to look.

Why was it OK before FAC 2005-15?

Perhaps another data point would be helpful. In 70 Fed. Reg. 56318 (Sept. 26, 2005), when the Councils posted the proposed rule implementing the statutory change to expressly recognize the ability of the Government to use T&M and LH contract types for commercial items, they included the following: (emphasis added). If FAR 12.207 constrains the behavior of contractors, why, prior to the change in the rules, could a contractor use a T&M contract? The answer is easy: FAR 12.207 does not constrain the behavior of contractors because it only applies to the Government.

One looks solely to the definition of “commercial service” incorporated into the prime contract to decide how to interpret the requirements in the contract where the phrase “commercial service” is used. My earlier comment about CICA was merely another example in an entirely different context where the FAR restricts what the Government can do but doesn’t apply to a prime. Why do you think FAR 12.207 applies outside the Government? Is there some clause upon which you’re relying?

Joel, no one is ignoring 12.207. It simply doesn’t apply outside the Government. Using your logic, a prime would have to compete its subcontracts or prepare justifications for other than full and open competition. No one would claim that pointing out that CICA only applies to the Government amounts to “ignoring” FAR Part 6.

Nick Sanders is the editor now. Judging from his LinkedIn biography, he was or is a FAR Bootcamp instructor, so that certainly puts him in good company. (Sorry if I'm ruining an inside joke.)

The following is another data point. The more I try to understand this stuff, the more confused I get. 58 Fed. Reg. 58798, 58800 (Nov. 4, 1993). The "certain CAS thresholds" discussed here may be for purposes of a disclosure statement rather than generic CAS coverage, so this quote may be completely irrelevant. I share it anyway. EDIT: I think I'm tracking a little better now. 48 CFR 9903.301 defines "net awards" but then Chapter 99 uses the phrase "net CAS-covered awards" at 48 CFR 9903.201-2(a)(2) (full coverage), 48 CFR 9903.201-2(b)(1) (modified coverage), & 48 CFR 9903.201-2(d) (subcontracts). Net awards are relevant to full or modified coverage, step 2 in DAU's decision tree linked earlier.

@C Culham Your post doesn't rebut that the pricing arrangement is incongruous. If there are established rates, then the subcontractor is in the best position to control costs. In which case, it is in a better position than the prime to bear the cost risks embedded within the established rates. Now, there are all sorts of circumstances that may have led to the subcontractor having a negotiation advantage over the prime here that might explain the result, but @joel hoffman's comment seems self-evident.

Got it. I agree. Valid point. That said, I don't think the OP would recommend doing what the prime and sub did here. I think the OP inherited it and is trying to make the best out of a bad situation.

First, we don't know that paragraph (1) of the definition of "commercial service" in FAR Part 2 is off the table. Under paragraph (1), "other services" can be a commercial service is they are "procured for support of a commercial product." I don't know what the prime contract is for, but if it is a commercial product, you might not have to go to paragraph (2). In any case, as Don already pointed out, paragraph (2) begins "services of a type," so just because this subcontractor wanted a CPFF pricing arrangement doesn't mean the service being furnished by the subcontractor doesn't qualify under paragraph (2). Maybe this is just a long-winded way of saying I agree with the statement in the OP, "Using a CPFF contract does not change the services to non-commercial." If they were commercial already, then the subcontract is "of a type."

Consider the DAU's CAS decision tree.

Strictly speaking, FAR 1.108(c) isn't relevant. With only one exception, the prescriptions at FAR 30.201-3 & -4 point the reader to 48 CFR 9903. The CAS regulations don't have a convention like FAR 1.108(c). In my opinion, this isn't terribly surprising, since CAS is about consistency in the treatment of costs. Once a business unit has a CAS-covered contract (what is sometimes called the "trigger contract"), more and more of its subsequent contracts are CAS-covered. EDIT: While it isn't obvious to me that "net awards" as defined at 48 CFR 9903.301 is used in determining CAS applicability, if it is, then mMy comment above, "The CAS regulations don't have a convention like FAR 1.108(c)," may not be entirely on is entirely off the mark.

Perhaps it is useful to make explicit what has been implicit in this thread. It may be entirely obvious to all involved, but might not be obvious to a "newbie." First, generally, the Federal Acquisition Regulation doesn't govern the conduct of the contractor, the contract does. See, e.g., Nash & Cibinic, Legal Status of Government Manuals and Instructions: Putting the Fox in Charge of the Chickens, 1 Nash & Cibinic Report ¶ 77 (Oct. 1987); Nash & Cibinic, Formation of Government Contracts (4th Ed. 2011), at 59 (contrasting housekeeping rules from substantive ones). Thus, when portions of the FAR like FAR 16.201(a) make statements like, "The contracting officer shall use firm-fixed-price or fixed-price with economic price adjustment contracts when acquiring commercial products and commercial services, except as provided in 12.207(b)," hopefully it is obvious that this has no impact on how a prime contracts with its subcontractor. That said, the contract between the Government and the prime does say a lot. For instance, it tells the prime what clauses must be flowed down to a subcontractor. Those contractual requirements for flow down may differ depending on whether the subcontract is for commercial products or services or not. Therefore, the "Definitions" clause at FAR 52.202-1 matters. If, embedded in the definition of a commercial item was how it was priced, then that would have an impact on the analysis. I hope that provides some context for some "newbies" that might happen upon this thread. Break..Break For what it is worth, I don't think the definition of a commercial product or service includes anything about how it is priced that would prevent the arrangement described in the OP. I also think Congress knew that the FAR was a housekeeping rule when it wrote Pub. L. 103-355, FASA, § 8002(d). I also think the Councils' implementation of the statute in the FAR (phrased as it is in terms of what the Government can and cannot do) is reasonable.