Zag2009

Compliance with small business plan. Your response supports my interpretation, that each release would be assigned a unique NAICS. Thank you.

The scenario is we are the prime contractor awarding a BOA to a subcontractor for construction work. Site training is required for the subcontractor to perform the work under the BOA. Typically, training is a minor part of the scope of each release. However, in one case, they issued a separate release for training, not tied to a specific release. The question is can that training release fall under the same NAICs code of the overall BOA even though there is not physical construction work. The BOA has zero funding and just a generic scope definition, with each release having individual funding and scope. If you consider from that perspective, I would think each release would have a separate NAICS code. Hopefully this explanation is clear.

Good point. That is helpful. Thanks.

My company issued a BOA to a subcontractor under NAICS 236210, Industrial Building Construction. Since then, several releases have been issued under the BOA under the same NAICS code. One of the releases, however, involves no physical construction work and is only for training. FAR 19.303 provides guidance and selecting the appropriate NAICS code, stating the NAICS code should be selected that describes the principal purpose of the product or service being acquired. My question is do we select the NAICS code based on the principal purpose of the BOA itself or each individual release?

I agree that is the reasonable approach and interpretation of the clause. Thank you for your response. As a follow up to my original question related to records, our prime contract was recently updated to include the clause DEAR 970.5204-3 (Oct 2014), Access to and Ownership of Records. As required, we incorporated this clause into all subcontracts that contain the clause DEAR 952.223-71 (which is on our prime). My interpretation of the clause is that it imposes an obligation on the subcontractor to hold all government and contractor owned records generated in performance of the subcontract in accordance with 36 CFR Ch 12, Subpart B Records Management and the NARA approved disposition schedules. The NARA approved disposition schedules are significantly longer than the 3 year requirement. It seems to me to be completely unreasonable, for say a small business subcontractor, to have to follow a records retention requirement of 56 years for payroll records. Note the deviation has not been incorporated into our prime contract, which would allow the prime to take on the record retention requirements in lieu of the subcontractor. Thoughts? Am I interpreting this requirement correctly in terms of records retention?

Our prime contract contains the clause DEAR 970.5232-3 (June 2007) Alt 1 (Dec 2000), which in short requires the prime contractor to retain records for 3 years after final payment on the prime contract or as otherwise agreed to with the government. The flow down provision requires a "similar" clause be inserted into all subcontracts where costs incurred are a factor in determining the amount payable to the subcontractor. My question is should the flow down to subcontracts match the retention period of the prime? In other words, does this clause mandate subcontractors to retain records for 3 years after final payment on the prime contract or is 3 years after final payment on their subcontract compliant with the flow down requirement?

A coworker of mine vaguely recalled the same, but I haven't been able to dig up that case. I will keep digging and update if I find that case.

I'm here....just stuck in meetings all morning. The contract is cost-reimbursement (thankfully...now I can sleep at night). The dollar figure associated with the fee proposed and the fee countered by the government is in the millions. Therefore, as you can imagine, we don't want to concede without a fight. We asked for what we believed was a reasonable fee based on risk, in line with previous modifications for similarly scoped work. The government's argument isn't that the fee is too high for the work being performed, just that since the work is complete, the risk no longer exists. In other words, had this been negotiated prior to completion of the work, I presume the fee rate proposed and that countered by the government would be much closer. I was hoping for past precedence that would support our argument that the fee should be based on the risk of the originally proposed work, but it appears we will just have use our best negotiation skills to justify the higher fee. As always, thank you for your input.

We are a government contractor in negotiations for a change to our contract. We originally proposed a set fee at X%. Negotiations have taken well over a year. Now the agency wants to reduce the fee to Y% claiming that since the work is complete, the risk is now lower than originally proposed, therefore justifying a lower few percentage. Has anyone have any experience with a similar situation and if so, what counter arguments have you proposed against reduced fee?

Yes thank you. Exactly what I was looking to confirm. Saw your response after I responded to a previous post clarifying my question.

All - thank you for your input. Yes my question has been answered, and additional insight provided by multiple responses will be taken into consideration, specifically related to False Claims.

I know that the government would ultimately look to the prime contractor for any price reduction or repayments. My question really relates to whether there are any FAR clauses that mandate the prime contractor perform a defective price audit in accordance with certain requirements (e.g. full scope vs. limited scope audit of suspected defective piece) if the prime suspects defective pricing exists after award. I understand that doing so would mitigate risk of the government performing their own audit if we were to ensure all issues were remediated, but just wondering if there are any FAR clauses that mandate the prime (not just CO) to perform this type of audit.

If a prime contractor suspects subcontractor has defective pricing after award of the subcontract, is the prime responsible for performing a post-award (or defective price) audit of the subcontractor? If the prime is responsible for performing the audit, can they limit the scope of the audit to the allegedly defective piece? Relevant facts: subcontractor submitted Certified Cost or Pricing.

See 22.603 Applicability. "The requirements in 22.602 apply to contracts (including for this purpose, indefinite-delivery contracts, basic ordering agreements, and blanket purchase agreements) and subcontracts under Section 8(a) of the Small Business Act..." My use of the word "flow-down" was misleading when I was referring to the Act's applicability.

Thank you for your response. FAR 52.222-20, W-H Public Contracts Act (Dec 1996) is incorporated into my prime contract. There isn't any language that implies to me that the Act is a required flow-down, unless the prime contractor is acting as a government agent (which we are not) or if the subcontractor is 8(a). I am seeking confirmation that we are not required to include FAR 52.222-20 in our subcontracts, understanding that the basic principles (min wage, working conditions, etc..) are covered by other labor laws applicable to all our subcontracts.

Our prime contracts contains FAR 52.222-20, Walsh-Healey Contracts Act. In researching the applicability of the Act to subcontracts, it appears the flow-down requirement is limited to 8(a) subcontractors (see FAR 22.602). Is this interpretation accurate? Or does the Act need to be incorporated into ALL subcontracts for manufacture or furnishing of supplies?

Are there any issues/implications that could arise if prime contractor provides proposal details, including cost breakdowns details, to its Contracting Officer at their request to be used in development of the IGCE? The timing of this request is prior to submittal of the proposal by the contractor.

Thank you, Vern. Don't you only have to flow down this clause to subcontracts for advisory assistance work (which in my case it is not)? If it is not for this type of work, does the clause still apply to a prime contractor awarding a subcontract to an affiliate?

My prime contract contains DEAR 952.209-72, Organizational Conflicts of Interest Alt 1 (1997). If my company (prime contractor) issued a subcontract for design work to its affiliate, under this clause, is the affiliate then barred from being awarded the follow-on construction subcontract? In other words, should this clause be applied at the subcontract level when an affiliate holds a subcontract under the prime contractor. Alternatively, is this clause intended to only apply to contractors (defined as including affiliates) submitting bids on government acquisitions at the prime level? For example, if my company were to submit a solicitation to a DOE acquisition, and my affiliate contributed to development of the SOW for that acquisition, I think it is clear my company is conflicted out from being awarded that contract, but want to ensure the DEAR clause should be applied to limit affiliates from being awarded at the lower-tier subcontractor level under an existing prime contract (as described above). Note my question is specific to application of this specific clause only, not how other FAR/DEAR clauses would apply.

Yes, I did. We have an approved purchasing system and only require consent at certain thresholds. In the majority of subcontracts issued, we aren't required to go for consent. My main concern is therefore not related to CO approval, but audits.

Retreadfed, your explanation of CPPC contracts matches my understanding. In response to H2H's comment on applicability of FAR clauses to a prime contractor, I've always taken the position that prime contractor's are required to follow what is in their prime contract. Therefore, if my proposed method of allowing for G&A to be reimbursed based on a fixed dollar amount for noncommercial subcontracts doesn't violate our prime contract or any statutory prohibition, what would grant the CO authority to demand that we follow the FAR sections related to T&M contracting? Taken a step further, what would be the purpose of prescribing solicitation provisions and contract clauses if contractors had to follow it in its entirety?

Yes, 52.244-2 is in my prime contract.

Ok I think I have my CPPC question answered. FAR 52.212-4 allows for a fixed dollar amount of G&A to be reimbursed on a pro rata basis under commercial subcontracts. Therefore, this type of arrangement would not violate the statutory prohibition against CPPC arrangements. However, this brings up a second question/clarification. Since our prime contract is Cost Plus Award Fee, neither FAR 52.232-7 nor 52.212-4 are required to be included in our prime since our prime is not T&M or LH. However, you are saying that regardless of what is in our prime contract, we have to follow all FAR clauses? My understanding is that the FAR applies to government personnel, not contractors, and generally contractors are bound by the terms that are in their contracts. As a prime contractor, I don't believe we are required to create a subcontract using the appropriate set of clauses unless our prime contract requires us to do so as mandatory flow-downs. That being said, if a CO leaves out a required clause, a board or court might impose the requirements under the Christian Doctrine.

Cost plus award fee

That is exactly what I mean: fixed dollar amount that does not vary based on actual costs incurred. From the FAR clause you cited, I see that for commercial T&M subcontracts, G&A applied to materials can be a reimbursed on a pro-rata basis based on a fixed amount. However, for non-commercial T&M subcontracts, governed by FAR 52.232-7, indirect rates must be retroactively adjusted after final rates are established, correct? Here's the thing: neither of the T&M FAR clauses referenced are included in our prime contract. Therefore, is there an issue with applying the practices established in FAR 52.212-4 Alt 1 to both commercial and non-commercial subcontracts since neither appear to be a CPPC situation?