Dominicke Ybarra

Changing the Liquidation Rate directly effects the earned profit element of the contract prices for completed items. Increasing the Liquidation Rate reduces the earned profit which is an increase to the cost of performance. Example: Upon delivery, inspection, and acceptance of an $1,000,000 item under 80% Liquidation Rate would result in a payment of $200,000; assuming the total Unliquidated Progress payments remaining against incomplete work at time of delivery were = to or > than $800,000. Upon delivery, inspection, and acceptance of an $1,000,000 item under 90% Liquidation Rate would result in a payment of $100,000; assuming the total Unliquidated Progress payments remaining against incomplete work at time of delivery were = to or > than $900,000. Changing the Liquidation Rate directly effects the earned profit of the item delivered. In the example above the 80% liquidation rate would have resulted in a payment of $200,000; at 90% the contractor would only receive a payment of $100,000. This is less than what the contractor agreed to at contract formation and directly affects the profit. Increasing the Liquidation Rate effects the earned profit negatively and is why 52.232-16 Paragraph (c) limits the Contracting Officer to only increasing the rate after finding on substantial evidence one or more of the six conditions exists. However, decreasing the Liquidation Rate effects the earned profit positively. FAR 32.503-9 discusses decreasing the Liquidation Rate and exclaims the decrease is subject to a bilateral modification (FAR 32.503-9 (a)(8)).

I had a similar thought and think the answer is there will soon be...because...(Assumption [reality], ACOs are unilaterally incorporating the deviated Progress Payments clause by modification) The deviation in the Progress Payments clause not only increases the Progress Payment rate it increases the O so important Liquidation Rate. The Progress Payments clause paragraph (c) only allows the Contracting Officer to unilaterally increase the Liquidation Rate when: "(c) The Contracting Officer may reduce or suspend progress payments, increase the rate of liquidation, or take a combination of these actions, after finding on substantial evidence any of the following conditions: (1) The Contractor failed to comply with any material requirement of this contract (which includes paragraphs (f) and (g) of this clause). (2) Performance of this contract is endangered by the Contractor’s— (i) Failure to make progress; or (ii) Unsatisfactory financial condition. (3) Inventory allocated to this contract substantially exceeds reasonable requirements. (4) The Contractor is delinquent in payment of the costs of performing this contract in the ordinary course of business. (5) The fair value of the undelivered work is less than the amount of unliquidated progress payments for that work. (6) The Contractor is realizing less profit than that reflected in the establishment of any alternate liquidation rate in paragraph (b) of this clause, and that rate is less than the progress payment rate stated in paragraph (a)(1) of this clause." So where is the Substantial Evidence one or all six conditions existed before the ACO unilaterally modified the Liquidation Rate? Without it there is no unilateral authority under the Progress Payments clause afforded the ACO or PCO to make the unilateral increase to the Liquidation Rate. I can hear the key boards clicking with the drafting of letters reserving the right to an equitable adjustment under 52.243-1. Better also start separate charges codes as indicated by 52.243-6 when a change occurs. The DCMA Manual 2101-02--9.2. PROGRESS PAYMENT DISBURSEMENT EXCEPTIONS--paragraph b. “Multiple Progress Payment Rates”, Page 36 of 78 of the PDF. It discusses this in-depth.

DoD 7000.14-R Financial Management Regulation Volume 11B, Chapter 1 paragraph 010204 covers the scenario . It is what is what happens when a DWCF activity’s operations are funded by the "reimbursements" it receives from its customers for the goods or services provided.

If you wanted to dive deeply into the matter I suggested reading DoD 7000.14-R Financial Management Regulation Volume 11B "REIMBURSABLE OPERATIONS POLICY - WORKING CAPITAL FUNDS (WCF)", Chapter 1 (August 2019 version)(https://comptroller.defense.gov/Portals/45/documents/fmr/Volume_11b.pdf) In particular paragraphs 010204 & 010210, I had to read them several times but I think the answer to your questions lies within them.

I left the Federal Government as a Warranted Contracting Officer 4 months ago (after 9 years of service). The title of my current position is "Contract Manager". I started my search for other jobs outside the federal government by searching the typical job posting sites for key words such as "FAR" & "DFARS". Using those terms I found a plethora of jobs seeking the exact qualifications I brought to the table. Within a month of searching and applying I had four interviews and three offers. Also, I used a resume writing service to produce my resume...cost about $250 but worth every penny. Good Luck, this is a great job market and companies are competing for the right people. Also, do not forget to ask for your exit letter from the Government Attorney's. You should be well aware of the one year, two year, and lifetime bands placed on Contracting Officer's. That last part might narrow "who" you can work for so make sure you get that started soon.

Point of clarification: 1) Does this scenario assume the incumbent is awarded some type of "Bridge" contract for continuity while the protest is being sorted out? 2) if 1) is true, then would that "Bridge" contract be awarded based on an approved J&A, citing 10 U.S.C. 2304(c)(1) as implemented by FAR 6.302-1 -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements? Or, possibly 10 U.S.C. 2304(c)(2) as implemented by FAR 6.302-2 Unusual and Compelling Urgency? Assuming Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements... I have long wondered how only one source could possibly be true? Wouldn't there be two sources...(1) the Incumbent and (2) the successful awardee of the contract under protest? On that point why would the Government have to award the "Bridge" contract to the incumbent? Couldn't the Government as easy conclude only the successful awardee of the contract under protest as the Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements? Surely the GAO automatic stay of performance doesn't extend to the "Bridge" contract. If it did we wouldn't have so many of those "Bridge" contracts awarded. Without the almost guaranteed "Bridge" contract the incumbent incentive to protest would be erased. Basically, there is no need for a new clause. Only a shift in thinking of how to approach the problem of incumbent incentive to protest. If the incumbent knows they will get a "Bridge" contract for protesting then they will protest. If the Government removed the incentive of awarding "Bridge" contracts to incumbents and instead awarded the "Bridge" contracts to the successful awardee of the contract under protest, then the incentive will have been successfully removed. Perhaps a step to far is stop awarding "Bridge" contracts altogether. However, it would be just as effective. Finally, I have seen this scenario in the real world and successfully deployed this tactic. It worked for our team once upon a time. The result was the incumbent dropped the protest and the rest is history as they say.

I came across this article the other day. It is written for a contract professional audience. This article appears to be peer reviewed, unbiased, and well documented in the form of citations it provides in asserting its premise: “Other Transactions Are Contracts with the Government”. Originally published by Public Contract Law Journal Author: Nathaniel Castellano http://www.mondaq.com/unitedstates/x/839220/Government+Contracts+Procurement+PPP/Other+Transactions+Are+Government+Contracts+And+Why+It+Matters Full Article: https://www.arnoldporter.com/-/media/files/perspectives/publications/2019/08/other-transactions-are-government-contracts-and-wh.pdf