Atlas STS

@ji20874 I am in agreement that we are subject to inspections as described in FAR 52.246-2. I may be wrong, but I don't see anything about full facility access at any point and statements like "to the extent practicable" and "in a manner that will not unduly delay the work" somewhat tempers "at all places and time". I took "at all places and times" to make it clear that it does not only include acceptance inspection (e.g. throughout the production process). To all who have responded, I am very appreciative. I wanted to make certain there wasn't a contract clause that I wasn't aware of that used the phrase "full access to your facilities at any time" as that seemed a level of access that I was not reading into the PBP clause or the Inspection clause. Now that I know what clauses this statement applies to, I am better able to understand their intent of that statement.

@Retreadfed after our handover/kickoff meeting with DCMA team assigned, we were provided a letter with a list of government POCs with that statement.

@here_2_help Thank you for your feedback and yes, I have read through all clauses in our contract in detail. I wish I could state that I know what each clause means, but if your reading of 52.232-32 (h) and (i) means "each of these government officials full access to your facility at any time to perform contract administration functions" then I do not. @C Culham 52.246-2 is present and I understood the requirement to perform periodic inspections as required by the government. Again, I do not read anything in there that says they have full run of the facility at any time (e.g. they have access to those areas necessary to inspect at a negotiated time). I do appreciate both of you pointing out these clauses. I was familiar with both (albeit perhaps not fully understanding the level of access they suggest), but was concerned there was another clause that made such blanket claims of access that I wasn't aware of.

We were just awarded a FFP production contract and had our kickoff meeting with our assigned DCMA team. We are a small business receiving performance based payments. Can you tell me which FAR/DFARS clause(s) to review that gives "each of these government officials full access to your facility at any time to perform contract administration functions"? I knew audits were a possibility and anticipate regular inspections, but I'd like to understand the full picture of that statement.

Thank you all!

@here_2_help I think you answered my question exactly, so thank you very much! Unfortunately, we haven't been able to negotiate payment upon receipt with all of our suppliers so it sounds like PBP is our only option if the CO wants to stick to customary contract financing. I suppose I could provide the alternative of PP with an upfront advance payment to us that we would flow down to our payment at order suppliers. Or a PBP to start with PP thereafter, but both of those sounds less appealing the straight PBP to me. I don't know how familiar our CO is with PP or PBP as initially suggested partial delivery invoice payments (e.g. no contract financing), but I explained there's no way I can capitalize a $10M order as a small business with a period of performance of 2 years. Do you know of any good, modern resources for developing PBP events and event values? I've read the 2014 DOD PBP Guide and as much FAR/DFARS on them as I can find. I did find a 2001 User's Guide to PBP which has a very similar example, but I can tell some of the info is incorrect/outdated.

Our company has been negotiating a FFP production contract and are nearing agreement on price. We proposed PBP as we are a small business without an accounting system that supports PP. The contracting officer said our contract doesn't qualify for PBP because it's not a service contract, despite both 52.232-16 Progress Payments and 52.232-32 Performance-Based Payments being included in the solicitation. We are prepared to update our accounting system and accept PP, if required. Our contract has significant material and subcontracting costs at the start of the contract with lead times between 4 and 6 months. We anticipate ~$2.5M of COTS material that must be paid upfront at time of purchase order and ~$2.2M of COTS material with NET30 terms. Further, our first delivery is not expected until approximately 9 months after award. I don't think there is an issue with requesting PP for the NET30 material upon delivery and invoice by supplier, but I am unsure whether I can submit a PP for those items that will be invoiced before delivery. Specifically, I am concerned about the language on computation of amounts in 52.232-16(a). (4) The Contractor shall not include the following in total costs for progress payment purposes in paragraph (a)(1) of this clause: (iv) Payments made or amounts payable to subcontractors or suppliers, except for- (A) Completed work, including partial deliveries, to which the Contractor has acquired title. Does this mean that purchase of COTS material where payment is required at time of order are not allowable costs for PP, until those items have been completed, delivered, and/or acquired title? If so, I think this means that we would have to convince the contracting officer that PBP are the better choice in this instance. However, perhaps I just don't understand the sections on contract financing to subcontracts and I merely need to call that upfront payment something else? Or perhaps asked another way, what are the most common methods of contract financing to small businesses with FFP production contracts that require a significant amount of COTS material to be ordered up front?

@Retreadfed I just realized that 215.404-3 states that "Contracting officers shall use a structured approach for developing a prenegotiation profit or fee objective on any negotiated contract action when cost or pricing data is obtained" (and later specifying the Weighted Guidelines Method is required) doesn't specify only when Certified Cost and Pricing Data is obtained. So weighted guidelines method is a requirement of negotiated contracts and not a TINA requirement. Thank you for the correction!

Thank you all. I think I'm tracking your recommendations. My main confusion was where to put the contingency. I think I have come up with a plan that should work, assuming it's approved. On a side note, I was told in a previous forum topic that it wasn't that big a deal to submit Certified Cost and Pricing Data if you're complete and honest. With some help from a spreadsheet Raytheon provided online for subcontractors and learning the concept of judgmental data from you smart folks, I think I did an ok job at capturing our expected costs in the format required. However, learning that TINA also mandates the weighted guidelines method and limits profit to 10-15% at the end of this process was not a fun surprise!

@Atlas STS is a very small business that is in negotiations with the government to produce a product. The contract is FFP over $10M and subject to TINA and Certified Cost and Pricing Data. We were the only bidder and only source of supply for this product and it is not COTS. We have supplied this data to the best of our ability, but are receiving pushback on our requested profit rate as being too high. Our buyer has said that anything near 20% is unprecedented and likely a non-starter. They proposed a 9% rate. This seems very low to me for a FFP contract. However, when I attempted to fill out the DAU Weighted Guidelines spreadsheet, I see that it is nearly impossible to get to 15% profit without exceeding "allowed" ranges in the spreadsheet. I mentioned that we are very confident in our price, but we are unfamiliar with providing cost data in this manner and may have put some of our risk mitigation costs into profit that should be allocated elsewhere. They seemed receptive to having us move costs from profit into overhead or G&A pools. All that being said, I have a few questions: 1) Am I being unrealistic to expect over 10-15% profit on a FFP contract? This seems very low to me. Is the Weighted Guidelines Method required for contracts with Certified Cost and Pricing Data? Are their any alternatives to this method? The contracting officer said they have to take our contract before a board and they will not approve anything near our profit request. 2) Is it typical to put technical/schedule/execution risk contingencies or mitigations elsewhere in the proposal? What are those costs called? What pool do they fall in (overhead or G&A)? I bid a reasonable "best case" proposal, but I know that issues will spring up based on the nature of our product and past performance. How do I correctly capture those risks in my proposal if not in the profit? Any insight or guidance would be greatly appreciated.

@joel hoffman We have so little data that is not judgmental that I guess I'm erring on the side of caution. I was reading all these post audit findings and it seems like auditors and contracting officers can expect even outdated information that wasn't used to develop the price if the government feels it SHOULD have been used to develop the price. Hence my whole terror at the concept of "complete".

My takeaway from @Retreadfed and @joel hoffman is that you're not in dispute, but slightly different definitions of data maybe? When I submitted my cost and pricing data, in the format of Table 15-2, it added up to my proposal total. The spreadsheet included actually certifiable cost and pricing data, my judgmental data, and all of my other assumptions for cost and pricing (including profit). It showed clearly how I arrived at our price which I think was ultimately Joel's point. I think retreadfed is saying that not all data is treated equal and while all certifiable data should be submitted, it doesn't have to be used. I think his examples mimic my situation. I did a relatively small order three years ago for the same product so I have to provide that data. But it would be inaccurate to use that data in my cost and pricing calculations for the current order being proposed.

@joel hoffman I'm really sorry for the confusion. When I said a DCAA inspection, I meant a DCMA inspection of our last order before delivery. I only mentioned it to show how difficult these types of audits/inspections can be for those inexperienced in dealing with them. I have NO IDEA where I am in negotiations for this order. I submitted an original response to the RFP and was notified since I was the sole offeror, I had to submit certified cost and pricing data. I asked for exception to certify as a NTDC. There were also some requests to use alternate parts for a couple that were obsolete. They said they'd research and get back to me. In the interim, I revised our proposal to include other than certified cost and pricing data in the same format as certified (Table 15-2) in the hopes that in going to the greatest level of detail possible, it would expedite the process once the obsolete part replacements were approved. At that point, they still hadn't resolved the obsolete part request. However, this week they have approved our part replacements and I am updating my proposal again to respond to the amendment. They've asked me to certify in that proposal, but i have continued to ask to be treated as commercial and not certify my data. I am in no way concerned with truthfulness of our data. I am only concerned with "completeness" and more specifically, if audited, how do I prove that it was complete? What information SHOULD I have that I might not that will cause me to fail an audit? Either way, I will definitely make it crystal clear what parts of my data are judgmental, but then "completeness" means I have to have data showing how I arrived at those judgements and I don't know that I have that adequate to respond to an audit. That's my only concern with certifying the data. I keep going back to the fact that there is a reason someone made NTDC able to get an exception from this data and thinking I am definitely the type of company it was designed for...despite having no idea what the actual risk is! So, I don't know if the government approves our price, I don't know if I should be sweeping our data or what that means. I don't know if we've been in negotiation or if negotiations have started or if negotiations are complete. The only response is "please certify your data". I'll try to ask these questions Monday when I have my second telcon in four months with them. I think the assumption is that we know how to navigate this process when we clearly don't. @Retreadfed I definitely appreciate the help from you all! I'm going to be honest, I really don't understand what you're saying in regards to separating our proposal from our data and it sounds important! Isn't the FAR Table 15-2 how we submit our certified data and that leads directly to our proposal price? I don't see how to separate those two things.

@joel hoffman My apologies, yes I meant DCMA inspection. I just mentioned it to show how inspections have greatly impacted us in the past, predominately because I wasn't expecting something so thorough. Also, when you're small and inexperienced, you don't know when you can tell the inspector enough is enough. You are correct that our product likely cannot be considered commercial, but the NTDC is allowed to be treated AS IF our products and services were commercial without a determination that they are. After @Retreadfed got me straight, that is the path we are asking the buyer to take, but it is at the contracting officer's discretion. @formerfed They seem pleased with our uncertified data as sufficient for pricing analysis. They just want us to certify it. With what I know now, when they first reached out for market research, I should have stated that we can supply the product, but only if we were treated as if our product was commercial and referenced 252.215-7013. This would have made everyone's life much easier. As it is now, the buyer has done all the work for Part 15 purchase, I've done all the work of generating certified cost and pricing data, and now I'm trying to get them to go Part 12 instead which maybe means they start all over? They see that I've done all the work for certified data, have accepted the data, and can't understand why I won't just certify it so we can close this out. I'm hesitant because all of the legal blogs designed to help people respond to audit say "the best way to not lose an audit, is to not be auditable". My plan is discuss one final time with the buyer to at least consider our request to implement NTDC supplied product to be treated as commercial and explain why it's not trivial for us to certify the data. If they say no, we'll have to decide if certifying is in our best interests and either retract our proposal or certify our data. The folks on the forum have me convinced it's not the end of the world to certify, but the internet horror stories have an alternate view. If the audit process didn't sound so subjective, I think I'd be just fine, but I read one case where a pre-award audit stated defective data was unlikely, post-award audit found it to be defective, but then the ASBCA sided with the vendor. To me, that shows that you can do it right from start to finish and still be drug through a long audit, likely have significant legal fees to appeal to the ASBCA, etc. For a small business, just the process not the penalties if we lose, could shut us down for weeks!

@Neil Roberts I did engage a CPA to help me categorize our costs so it was somewhat helpful. I don't think I did a good job explaining how small we are or how much our business operations will change AFTER this award. @Retreadfed Ok, I think you convinced me by going back to the legal code. It sounds like my only hope of not certifying is getting treated as if commercial on various clauses, but that the exception request is only an instruction of how to request that, not a separate exception outside of the commercial one. I'm struggling with it being so easy to comply with the other stuff I'm reading online of some very aggressive auditors finding fault that is later overturned if a company fights it, but I really hope you're right. @joel hoffman this was a post award / predelivery inspection. It was of our quality management system which was thankfully done via email, but then three onsite visits at various stages of construction. I thought it was overkill and it kept forcing us to stop production right near the end of our work so it was very disruptive. Very nice guy though! On a related note, I read online that in 2022 they really increased the random DCAA post award audits from prior years. I think DCAA is really trying to do more audits overall. Thank you all again, I guess at least now I can clearly ask the buyer without getting caught up in the exception and/or more confidently certify our data assuming I give them everything.