Vern Edwards

This thread illustrates the value of top-notch expertise among COs and contract specialists. The Availability of Funds clause was not designed with IDIQ contracts specifically in mind. (I made a quick search for a case "on point," but did not find one.) I have traced the current clause to a 1963 Air Force regulation, but it probably originated before then. The clause anticipate one contract, not many, as is the case under IDIQ contracts, with each order being a "contract." I suspect that the clause applies not only to the basic contract, but to each order, as well. But I do not KNOW that a board or the COFC has or would rule that way. In these days of massive use of IDIQ contracts, a top notch CO might have anticipated this question—and others like it arising from other clauses—when writing the solicitation for the contract and written a Section H or commercial item clause that addressed the matter. Problem solved. We work in an IDIQ world these days, and apparently will for the foreseeable future. But the FAR councils have not made appropriate adjustments to the FAR that take into consideration the many new questions that have arisen since FASA was enacted in 1994 and changed almost everything. Since they are not thinking, COs must, because nobody else will. I think that ji20874 and C Culham gave good advice. (Stalking you again, Carl.)

Organizations engaged in R&D might pursue government work as a way to fund their enterprise. Profit may not be a primary concern. I started out in R&D, and many firms large and small were happy for a chance to pursue a line of investigation at government expense.

If you say so.

@Patrick MathernPatrick, is DOD short of firms wanting its contracts? Anyway, my understanding is that firms that do not want to do business with the government are put off primarily for other reasons, like government intrusiveness and data rights policy. @here_2_helpI have posited no theory in that regard, and I have not said thatprofit is not an incentive. Do you need to be taught what a theory is? I can recommend some explanatory text books. I said I have never thought that the WGL were an incentive. I still don't. And I have explained what I think an incentive is and how it is supposed to work. I can recommend some theoretical explanations of them. You have not explained the mechanism by which a higher pre-negotiation profit objective affects post-award performance. As for your anecdote, my thought is that the subcontractor either underestimated its costs or accepted a below-cost price, not that the price did not include enough profit. You're welcome to believe what you like. I know that studies of incentive contracts by Dr. Fisher of Rand, Prof. Kennedy of Notre Dame, and the GAO have concluded that there is no proof that post-award profit incentives work as advertised. Some people, like you and Patrick, think that profits on government contracts are too low, and that all would be better if they were higher. Well, you two are industry advocates. Some think that profits are too high. They are industry critics. Profits on defense contracts have been studied and debated for decades. I think I have a copy of every single study and congressional hearing in which defense profits were discussed, and I don't know whether they are too high, too low, or just right. But I know that you are not going to persuade anyone to set a policy calling for higher profits on government contracts with ridiculous anecdotes like the one you related in your last post.

@here_2_helpH2H, you quoted me and say you disagree. In the quote I make five assertions. I'm trying to pinpoint your disagreement. I have never thought of them as an incentive. I think that is the core of your disagreement. You think they are meant to be and should be but are not. I think of an incentive as a contingent reward offered in return for something. The idea is to give someone a reason to do something they otherwise would not do. If so, then how do weighted guidelines motivate? They are used to develop a pre-negotiation profit objective when cost analysis must be performed. By what mechanism do they work as an incentive during contract performance? Or do you think that, as a general proposition, setting high(er) contract prices or fixed-fees during contract negotiation will motivate contractors to do better during contract performance than they otherwise would? If that's what you think, then I say you can't prove it. But I am open to any evidence you can produce. I said evidence, not theory. I've read plenty of theory about the role of profit in our kind of economy and in contracting. I will weigh evidence, but I won't debate theory. That's for the young and idealistic. After almost 50 years of reading about profit policy, I won't even discuss theory.

I don't think there is a mark to miss. The WGL are just a "structured" analytical device. They are "guidelines." They are only as useful as the user is thoughtful. I've never thought of them as incentivizes.

@RetreadfedYou're quite right, and upon reflection my expression of agreement was enthusiastic, but not thoughtful. Good question. OK, everyone: what do we want to know and manage? I think we want to know and manage how long it takes for the acquisition system to satisfy requirements. That being said, I think acquisition, as defined in FAR 2.101, takes place in the following three acquisition administrative phases and lead times, each with the following outcomes: From submission of a need by a user to a program office until completion of a procurement package (including a specification or statement of work and other necessary documentation) by the program office. Let's call it procurement package lead time. From submission of the procurement package by the program office to a contracting office until issuance of a solicitation by the contracting office. Let's call it proposal solicitation lead time. From issuance of the solicitation by the contracting office to award of a contract by the contracting office and the program office. Let's call it contract formation lead time. After contract award, the time required to deliver supplies, complete the performance of a task, or commence performance of an on-going service, would be considered production or performance lead time. What do you think?

I can't.

PALT is Procurement Administrative Lead Time. It does not include production lead time. When measuring PALT, lead time ends with contract award. If you measure to delivery of the product you're measuring Procurement Lead Time, which includes administrative and production lead time—Procurement Administrative Lead Time.

The first official version of the Weighted Guides Method was published in the Federal Register on Nov. 23, 1963, Defense Procurement Circular (DPC) 5, 28 Fed. Reg. 12555 - 12561, which amended 32 CFR 3.808-2.

I'm sure it has been! Every solicitation and contract includes involves unique provisions and terms that someone must develop and write. I don't think we're close to automating the preparation of such material. I have long believed that contract specialists can provide value added by writing or helping to write statements of work. Someone must assist program offices in the development and description of evaluation factors, and write proposal preparation instructions. And there is much more to contracting than document preparation. But there are many micro-purchases and simplified acquisitions, tens of thousands, that could and should be automated.

@formerfedThe link is to a paper about automated contract writing, i.e., document preparation. But contract specialists do more than that. Don't they?

They are the ones who don't understand. I'm not sure that T&M is the right kind of contract for your purposes, but here is a suggested T&M line item structure. One possibility among several. 0001 - Migration Support IAW the Statement of Work - 1 - Job - Ceiling Price $... 000101 Labor Category A - (Est. Qty. ____, Unit: HR, Hourly Rate $___, Est. Cost $____) 000102 Labor Category B - (Est. Qty. ____, Unit: HR, Hourly Rate $___, Est. Cost $____) 000103 Materials (Est. Cost. $ _____) Or something like that. I presume that you are familiar with FAR Subpart 4.10 and, ideally, with DFARS 204.71 and DFARS PGI 204.71. All the estimates should add up to the ceiling price. You could use two contract line items with exhibits for labor and materials instead of informational subline items.

@Witty_Username Thanks for a very insightful post! I agree with you about time from identification of need to delivery. Another complicating factor in that concept of PALT is changes in the conditions that give rise to the need (for example, opponent strategy, tactics, and weaponry) and changes in technology.

@FreyrIs the contract for just one job or for various work to be performed from time to time within a period of performance?

@Don MansfieldWhen I post, I do not do so to please you. I don't really care what your question was. I posted what I wanted to say. But now I will answer your question. I do not know of any statute or regulation that expressly requires a small business prime to get small business representations from its subcontractors. However, not every contractual obligation is express, and I think I could make a persuasive argument in court that such a requirement could be inferred from other clauses in the contract, including FAR 52.219-8 and FAR 52.219-14. Among other things, I think failure to require subs to make representations could be an indication of bad faith.

@ji20874I don't agree with Carl's "danced around" statement. I haven't danced around anything. I certainly didn't dance around in my post this morning. I said exactly what I would do and why. As for absolute criteria for judging compliance, ideal practice would be for the contracting parties to discuss interpretation and compliance before contract award to find out how each party interprets the clause, how they would apply it, and whether they can reach a meeting of the minds. Why ignore an elephant in the room? Ideally, the parties should be able to develop a formula for determining compliance based on the language of the clause and 13 CFR 125.6, and ideally they would document their understanding. The words in the clause should be the basis for a story problem solution. But given the press of time and work and the shortage of skills in the contracting community, I doubt that ideal practice can be achieved in most cases. So, as a practical matter, it's probably best to set the matter aside for resolution at a later time, if necessary.

@C CulhamI don't get what point you are trying to make. I don't question a CO's authority to determine a contractor's compliance with 52.219-14. I question when and how it is to be done and how much work it will entail. Although your comments were addressed to me, I think your issues are with Don. I don't think we've danced around it, but I do think that some have not discussed it as intelligently as they might. I think the policy is overboard; I think the clause is poorly written; I think it's more difficult to enforce than some in this thread are giving it credit for; and I don't think that busy COs should devote any time to enforcement during performance unless they have good information about failure to comply. I have said what I would do.

A prime that promises to comply with the limitations on subcontracting would be foolish not to require prospective subs to (1) certify their size status and (2) require their own subs to so certify. The prime should do that not because they're required to do so, but because it would be a prudent act of self-preservation. As for how the prime would know that the sub is being truthful about its status, as Carl has pointed out, the prime is entitled to rely on the sub's self-certification. That's old policy. (Stalking you with praise, Carl. This time.) Now back to CO enforcement: FAR 52.219-14 takes the wind out of a would-be proactive CO's sails, first, because it does not require a contractor to provide regular "progress" reports to the CO. SBA expressly rejected that idea when it implemented the new law and policy. See 84 FR 65647, Nov. 19, 2019, at 65652-53. (Does anything else in FAR or elsewhere require progress reports? I don't know. If there is some such requirement, I'm sure Carl will find it. (Praise again, C.) But even if a contractor must report progressive subcontracting limitation status, FAR 52.219-14 and 13 CFR 125.6 may prevent the CO from taking any kind of action prior to contract completion, because both expressly state the point in time at which the contractor must demonstrate compliance. I'll quote the clause: Thus, the contractor need not be within the limitation at all times during the course of performance. What should a CO do if, say, at the 25 percent completion point, the amount paid to other than similarly situated subs is more than the limit? In light of the clause language, what can the CO do? I think nothing, as long as there is still a chance that they can be within the limit by the end. The basis for determining compliance is the percentage of the "amount paid" to subs not similarly situated by the end of performance, less the stipulated deductions of other direct costs and materials costs. That amount might not be knowable until all matters at issue between and among the parties are resolved after the work is physically complete and everyone has signed off on final payment. A CO would need both first and second-tier subcontract information to determine compliance, and would to need to know the amounts of other direct costs and materials costs to be deducted from the amounts paid. (Think about verifying compliance under each order under an IDIQ contract.) Would COs need audit assistance, or should they just accept the amounts reported? How long will all this take, especially on large contracts with lots of subcontracting. Who bears the burden of proof? Does the contractor have to prove compliance or does the government have to prove noncompliance? How much time should COs and agency lawyers be prepared to devote to all this after contracts are physically complete? How much might all this cost a small business if a CO decides to go full compliance-monkey? In my opinion, small business policy is a political policy that was easy for our reliably dunderheaded Congress to enact and for the bureaucrats to implement in regulations. I can tell it was easy because it took only a little more than 100 pages in the Federal Register and three years and a few months. See Big Is Beautiful: Debunking the Myth of Small Business, by Atkinson and Lind (MIT Press, 2018). After reading what everyone has said, here is where I stand: If I were a CO administering a contract with subcontracting limitations I would do the following: I would include a clause in the contract requiring that (1) before final payment the contractor state in writing whether they complied with the limitations and (2) provide a summary statement of the amount paid to each non-similarly-situated subcontractor. I think I could ask for that information pursuant to 13 CFR 125.6(e)(4), but I'm pretty sure I'll hear from Don about such an information request. I would send a letter to the contractor at the performance midway point reminding them of the limitation and asking for written confirmation of receipt. Upon receipt of the contractor's final confirmation, and assuming that there were no issues, I would sign a memo to file stating that I knew of no reason to think that the contractor had not complied. That's as far as I would go absent reliable information about noncompliance or direction from above. @joel hoffmanJoel, about the photo you posted—How did you manage the selfie while in that position?

I doubt that anyone alive today could answer your question. But the files may still exist... somewhere.

What do you mean by that? What do you mean by "Service Contracting 101"? You have used that phrase several times now. I can say with confidence that I have read and written more about service contracting than you have ever read or thought about, and I don't know what you mean by that.

No it's not. Under 52.219-14 the standard is amount paid at the end of the job. Progress reports don't mean diddly squat if there are outstanding compensation issues to be settled or important work yet to do. And a few classes do not a rocket scientist make. I asked you: I and everyone else will be standing by.

And if you had thought about the clause and the turns things can take during performance, you'd know that the plan does not mean diddly squat once the contract has been awarded and performance has begun. Things don't always turn out as planned. The criterion is amount paid. Anyway, I think you're a civil engineer. If so, what do you know about rocket science?

@joel hoffmanAnd you're not being very thoughtful. If you were, you would realize that the clause is potentially very problematical for primes and contracting officers. Your many war stories about what you did when don't impress me. Try some analysis of the clause. What are the implications of the "amount paid" criterion for small subs relying on very big primes to do difficult work very close to the limitation? Try conjuring up some scenarios and working them through for us, instead of telling us another tale.

See 13 CFR § 125.6, which says in part: See also FAR 52.219-14(f). The limitation is based on the amount the government pays the contractor and the amount the contractor pays to subcontractors. It is not based on the contract price and subcontract prices. The amount paid will not be known until performance has been completed and all payment-related issues are resolved. Compliance may not be predictable or determinable on the basis of periodic reviews of invoices. Too much complaining, interrupting, and threatening by the CO on the basis of interim assessments might become the basis for a claim based on government interference. And what about line items? What if the line item structure renders the contract severable (divisible) as opposed to entire? Does the clause apply to the entire contract payment, even if the line item structure renders the contract severable? Both the SBA reg and the FAR are silent on that question. Under some contracts it may be very difficult to determine, during performance, how the contractor stands with reference to compliance. A determination may have to await resolution of contractor requests for equitable adjustment and subcontractor claims. Compliance might depend on things like unanticipated supply chain interruptions, shortages, materials cost increases (such a lumber late last year and earlier this year), and cost allowability. When all is said and done, noncompliance might come as a complete surprise to everyone. It might not be determinable until years after the contract is physically complete. The policy and its implementation are crummy.