Zag2009

14 minutes ago, Retreadfed said:

Are you asking this in regard to developing or complying with a small business subcontracting plan or for some other purpose?  If it is the latter, what clause in your contract requires you to assign a NAICS code to subcontracts?  If it is the former, because each "release" under a  BOA is treated as a separate contract, you would assign a unique NAICS code to each "release" using the guidance in 19.303. 

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

2 minutes ago, Retreadfed said:

I presume you have a prime contract with the government that relates to the BOA.  If that is the case, are the training services being acquired as a result of a government requirement?  If so, is the training within the scope of the prime contract?

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.   

5 minutes ago, here_2_help said:

The BOA is not a contract. Your "individual releases" are the contracts.

Does that help?

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?     

48 minutes ago, Vern Edwards said:

The prime contract clause doesn't answer your question, does it? That clause says "similar," not identical. So what makes sense?

It seems to me that it makes sense to require the sub to retain records until three years after final payment on the subcontract. If you can't buy that, then ask the DOE contracting officer.

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? 

2 hours ago, Retreadfed said:

I recall a case before the Federal Circuit in the 1990's where the Court held that the proper time to assess risk is when a change is made to contract work, not when the amount of the adjustment is negotiated.  With my limited research capabilities, I have not been able to find that case, but I believe it involved Texas Instruments.

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.

4 hours ago, Vern Edwards said:

@here_2_help

This is another case in which an OP did not provide all of the information we need to respond effectively. I said in my first post that since he/she used the word "fee,' I would presume that the contract is cost-reimbursement. We have heard nothing back from Zag2009. If the contract is cost-reimbursement, then the above counterargument won't hold water.

If Zag2009 comes back after a couple of days and says that the contract is fixed-price, then I'm going to put out a contract on him/her. This is the Contract Administration Forum, not the Beginner's Forum. No mercy.

Omar lives!

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? 

On ‎3‎/‎6‎/‎2018 at 1:15 PM, Vern Edwards said:

The standard FAR clauses place no such express responsibility upon the prime.

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.   

23 hours ago, here_2_help said:

Let's ask the question this way: If the government believes that the subcontractor defectively priced its proposal, who will the government go after with respect to the required price reduction and any repayments?

Does that help answer your question?

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.

1 minute ago, ji20874 said:

Zag,

I'm curious -- I found and read the 1996 version of the Walsh-Healey -- it says nothing about flow-down, to 8(a) subcontractors or anyone else. Where are you finding the requirement to flow-down the FAR 52.222-20 clause to 8(a) subcontractors?

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.

17 hours ago, ji20874 said:

Zag,

The clause at FAR 52.222-20 now has the title "Contracts for Materials, Supplies, Articles, and Equipment Exceeding $15,000" and a date of May 2014.  This is still the same subject matter as Walks-Healy.  Anyway, your contract has an old version of the clause, and the old version is applicable for the life of your contract (see FAR 1.108(d)), but one would have to know what FAR revision was in effect at the time of your contract to give you a definitive answer.

But I wonder if FAR Subpart 22.6 has really changed all that much, other than the title?  Nothing in the current clause or the current 22.6 requires a flow-down, to 8(a) contractors or anyone else.  The prime contractor must ensure that subcontractors comply with the clause, but it can achieve that end by ways other than a flow-down.  What are you looking at that requires a flow-down?

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.   

4 minutes ago, Matthew Fleharty said:

Did you read the clause I referred you to?  You may have consent to subcontract requirements in which case the CO would certainly have such authority.

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.

9 minutes ago, Retreadfed said:

H2H, I think you are confused concerning the nature of a CPPC contract.  Such a contract arises not only when the fee or profit is expressed as a percent of cost, but also when indirect costs are expressed as a fixed percent of costs.  Therefore, in order to avoid a CPPC contract, as a general rule, indirect costs cannot be stated as a fixed percent of base costs, but must be adjusted to actual costs.  The exception to this rule concerning adjustment is the situation described in 52.212-4 alt I where indirect costs are permitted as a lump sum.  This was done to avoid having to contractors who provide commercial items establish final rates and to avoid a CPPC situation. 

If Zag wants to issue a T&M subcontract for non-commercial items, I see no reason why (s)he could not write the subcontract so that indirect costs are stated as a lump sum.  What (s)he would have to do if consent to subcontract is required is convince the contracting officer that the amount agreed to was reasonable so that the amount paid the sub would be considered reasonable and allowable.  FAR 52.232-7 is not required to be incorporated in T&M subcontracts.  Therefore, prime contractors have great latitude in how they devise payment provisions for such subcontracts.

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?

1 hour ago, Matthew Fleharty said:

That's quite possible if the prime contract was not a T&M contract.  Is clause 52.244-2 "Subcontracts" in the prime contract?

Yes, 52.244-2 is in my prime contract.

On ‎11‎/‎16‎/‎2016 at 2:24 PM, here_2_help said:

Yes there is an issue. Several, in fact.

1. 52.212-4 Alt 1 applies to acquisitions of commercial items using Part 12 procedures. You are not acquiring a commercial item using Part 12 procedures.

2. You are subcontracting. You have to create your subcontract using the appropriate set of clauses, regardless of whether they are in your prime contract. In other words, your subcontract is not 100% made up only of prime contract flow-downs. Further, of course the 52.232-7 clause wouldn't be in your prime contract, because that's not the proper payment clause for the type of contract you have been awarded.

3. If you want to avoid all the hassle of rate true-ups, just award a FFP or FFP-LOE subcontract. If you insist on awarding a T&M subcontract then you have to take the baggage that comes with it.

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. 

3 hours ago, Don Mansfield said:

Zag,

What type of contract is the prime contract?

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?