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here_2_help

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Posts posted by here_2_help

  1. 1 hour ago, joel hoffman said:

    If the government will suffer damages for late delivery - which is your apparent concern, you could alternatively study FAR subpart 11.5 and consider liquidated damages for a commercial item or supply contract.

    One has to be careful in how they implement such an approach.

    For a positive incentive, do you want to pay more (is there any benefit) for early performance?

    If so, then a delivery performance incentive (16.402-3) (plus and minus) could be the answer.

    Do you want to pay a performance bonus for on-time performance?

    Joel, I thought about liquidated damages when I saw this question. All I can say is that when my company saw a liquidated damages clause in a proposed contract, we always proposed an incentive clause as well. Our thinking was that the door needed to swing both ways.

    Also, it is okay to structure a contract to pay a bonus (other than award fee) for completing the work on-time? Isn't that the parties' expectation?

    Early delivery bonus/incentive? Yes, I can see that. But on-time? I don't see what the government gains for incentivizing a contractor to comply with the delivery terms of the contract.

  2. 3 hours ago, Vern Edwards said:

    Some questions:

    1. Do you think those Congressional objectives have been met?
    2. What does FAR say about OFPP's role in the making of Federal procurement policy?
    3. How much do you know about OFPP? If a new contract specialist asked you about it, what would you say?
    4. How many OFPP administrators could you name without doing any research?
    5. Without doing any research, what is the name of the current administrator?
    6. What's was the last announcement or pronouncement you read from OFPP?
    7. Do you think OFPP has played a large or important role in the conduct of "procurement"?
    8. If OFPP went away tomorrow, would its disappearance have an significant effect on procurement policy? Procurement operations?
    9. Would its disappearance make a difference in the way you think or act on the job?
    10. Should Congress continue to fund OFPP or should it let OFPP die a quiet death?

    My answers, from someone who is not a government contracting officer:

    1. No. Not even close.
    2. The FAR seems to envision OFPP as the originator of multiple "policy letters" that establish parameters for acceptable contract actions. My sense is that many/most/all of those Policy Letters are quite old.
    3. I know a bit about the theory of what it should do. I know where it fits in the Executive Branch org structure.
    4. Without doing any research, I could name three.
    5. Ain't none.
    6. Mythbusting
    7. Yes, back in the 90's. Not since then.
    8. Policy? No. Operations? Yes. Because of the CAS Board.
    9. Yes, because of the CAS Board.
    10. Congress can kill OFPP but then we need to restore the CAS Board to its previous independent status.
  3. Chris,

    Before you propose a new FAR Case, I think you have to be very specific about what you want to see changed. It is not clear to me from your post exactly what your concerns are.

    As to General Liability insurance, that is a cost accounting matter, in my view, and not a contract clause issue. 

    Hope this helps.

  4. 18 hours ago, Atlas STS said:

    @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.

    The DoD has several tools/aides available to contracting officers. I don't know how much access a contractor has to them. Start with the Defense Acquisition University (DAU) site and go from there.

    Ultimately -- and this is why some parties are reluctant to use PBPs -- it is a matter of negotiation. Here are my thoughts but please do your own research.

    1. Develop a spend plan (time-phased budget). Layer proposed profit on top of the spend plan. Note that you need to reach 90% of the estimated contract price but not more.

    2. Identify key programmatic milestones. Ideally, at least one per month but you can have more than that. Some events may be stand-alone; others may be dependent on others (i.e., cumulative events).

    3. Value the milestones/events based on your spend plan.

    4. Present to contracting officer. Show your work. Show how you are not front-loading cash to the extent you are actually asking the government for advance payments yourself.

    5. Negotiate.

    6. Incorporate the final, negotiated, events into the contract.

  5. First, PBPs are the "preferred" form of contract financing payments. Seems to me that your PCO just doesn't want to put in the work to establish event values.

    PBPs are superior in all respects to Progress Payments based on (adjusted) costs incurred. You should fight for them, especially if you don't have a DCAA-audited and DCMA-approved accounting system.

    To your other question, if you are paying suppliers at the time of PO placement, as opposed to the time of receipt of materials or finished goods, then those are "advance payments" and are not eligible for inclusion in progress payment requests. I would advise -- if possible -- avoiding advance payments to your suppliers.

    Those are my thoughts.

  6. Yeah, that's a good catch. Now look at the dollar threshold at 49.108-4 and compare it to the threshold in FAC 2005-098 (May, 2018), implementing FAR Case 2015-039.

    Quote

    This final rule amends the FAR to raise the dollar threshold requirement for the audit of prime contract settlement proposals and subcontract settlements from $100,000 to $750,000 to align with the threshold in FAR 15.403–4(a)(1) for obtaining certified cost or pricing data.

     

  7. 1 hour ago, Fara Fasat said:

    Here's the wording from the statute (the 2016 NDAA, section 857): "‘‘Notwithstanding section 2376(1) of this title, items and services provided by nontraditional defense contractors (as that term is defined in section 2302(9) of this title) may be treated by the head of an agency as commercial items for purposes of this chapter.’’ Note - "by the head of an agency." That was implemented by DoD at 212.102(a)(iv), which gave COs that authority. It did not further delegate it to contractors. 

    I think a contractor would have a hard time arguing against the clear words of the law and the implementing rule. The DPC memo is not a rule; it did not go through the rulemaking process; it is not a deviation; it is not in the contract. 

    Look, my company is a sub in most cases. I would love to take advantage of this and not have to do commercial item justifications for every contract. Even better, not have to submit certified C or P data for non-commercial products. But for now I'm taking a wait and see approach.

    Nobody could criticize you for waiting to see if DPC withdraws the guidance memo. But if it is not withdrawn, I will be recommending that subcontractors and prime contractors go for it.

  8. 18 hours ago, Fara Fasat said:

    I think you are trying too hard to make 252.215-7010 fit your theory. Sure it has a flowdown requirement, but nowhere in the provision does it say that the CO (and when flowed down, the prime) may treat the supplies provided by an NDC as commercial products. That authority is in 212.102(a)(iv), which states: “contracting officers -- (A) … may treat supplies and services provided by nontraditional defense contractors as commercial products or commercial services.” 212.102(a)(iv) is DFARS text. As such, it is an instruction to the government, and is not a clause and does not get flowed down. Moreover, no clause or provision in the DFARS says the CO has this authority. It only shows up in 212.102. Therefore that authority cannot be flowed down.

    Yes, 252.215-7010(E) does say that as part of the information an offeror must submit when claiming the commercial item exception, an NDC must submit a statement that it meets the criteria, i.e. no CAS contracts in the prior year. But again, nothing in that provision says that the CO, let alone a prime, may treat the products of an NDC as commercial. (E) is an empty statement between a prime and a sub. If a sub submits the required documentation, it accomplishes nothing.

    So – can a prime treat a sub’s products as commercial? No. The statute does not authorize it; the explanation in the rule specifically says no, and 252.215-7010 does not authorize it. What more do you need?

    Oh, and unless someone comes up with other evidence, the DPC memo is wrong.

    I think the DPC memo would make an excellent exhibit if, in some wild circumstance, a CO should decide in a Final Decision that a prime contractor may not designate a supplier as being a NDC when the supplier meets the statutory criteria, and the contractor decides to appeal.

  9. 6 minutes ago, Marcus Williams said:

    We don't think the Contractor was at "fault"; it's generally accepted that an unknown third party and not the Contractor did the damage. Contractually I'm thinking that at the end of the day, the Contractor owned the site, so he is responsible, but that part of the clause concerned me. 

    I beg to disagree. The contractor could have hired a night watchman or security guard to watch over the sod. If the contractor had considered the risks (and most rarely do), it would have concluded that the cost of security while the fence was down was a trivial expense to mitigate its risks. The probability of occurrence may have been low, but the consequences were high. Thus, the risk should have been identified and mitigated.

    It was not.

    That is negligence in my book.

  10. "And some things that should not have been forgotten were lost. History became legend. Legend became myth."

    -- Galadriel, from The Fellowship of the Ring

  11. 3 hours ago, Voyager said:

    Okay, you're right.  Questions: Are these some accepted and common ways that a savvy contractor could increase profit while at the same time satisfying the customer's WGL requirements?  Must a contractor attempting these ways beware of any pitfalls in the Truthful Cost or Pricing Data statute or in FAR 31.201-2 "Determining allowability"?

    1. TINA is a disclosure requirement, not a use requirement.

    2. When a proposal will be subject to cost analysis, then the contractor should expect the government negotiators to challenge any costs deemed to be unallowable.

    In my experience, when a contractor has developed proprietary technology at its own expense, it is often in a strong bargaining position vis-a-vis the Government with respect to profit/fee negotiations. As has been noted, the WGL is used to develop pre-negotiation profit objectives, which may or may not be realized at the negotiating table.

  12. 16 hours ago, Atlas STS said:

    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.

    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.

    Profit is not cost. Your cost estimate, whether for direct or indirect costs, should include your best guess as to the costs you will incur during contract performance. Nothing more; nothing less. Why did you bid a "best case" proposal instead of a "most probable case" proposal?

    Go back and review your estimated costs, both direct and indirect. Use a "best case" and a "worst case" scenario to develop a "most probable case" estimate. Be prepared to explain to the contracting officer how you arrived at your cost estimate.

    Once you have a solid cost estimate, add to it the profit you believe is reasonable. As others have noted, it is difficult to get a profit percentage greater than 15% of estimated costs, but it can be done with the right arguments.

  13. There are a few cases (e.g., Martin Marietta) that discuss this issue. Fundamentally, when calculating an indirect cost rate, unallowable costs are subtracted from the cost pool but remain in the cost allocation base, so that unallowable costs receive their fair share of indirect costs. Overhead costs are part of all G&A allocation bases except for single element bases; thus Overhead is part of the G&A base for both TCI and Value-Added bases. If there are unallowable costs in the overhead pool, they stay in that pool when calculating the correct G&A allocation base; however when calculating the allowable Overhead indirect cost rate, the unallowable Overhead costs are removed from the Overhead pool.

    Quote

    9904.405-40 Fundamental requirement.

    (a) Costs expressly unallowable or mutually agreed to be unallowable, including costs mutually agreed to be unallowable directly associated costs, shall be identified and excluded from any billing, claim, or proposal applicable to a Government contract.

    (b) Costs which specifically become designated as unallowable as a result of a written decision furnished by a contracting officer pursuant to contract disputes procedures shall be identified if included in or used in the computation of any billing, claim, or proposal applicable to a Government contract. This identification requirement applies also to any costs incurred for the same purpose under like circumstances as the costs specifically identified as unallowable under either this paragraph or paragraph (a) of this subsection.

    (c) Costs which, in a contracting officer's written decision furnished pursuant to contract disputes procedures, are designated as unallowable directly associated costs of unallowable costs covered by either paragraph (a) or (b) of this subsection shall be accorded the identification required by paragraph (b) of this subsection.

    (d) The costs of any work project not contractually authorized, whether or not related to performance of a proposed or existing contract, shall be accounted for, to the extent appropriate, in a manner which permits ready separation from the costs of authorized work projects.

    (e) All unallowable costs covered by paragraphs (a) through (d) of this subsection shall be subject to the same cost accounting principles governing cost allocability as allowable costs. In circumstances where these unallowable costs normally would be part of a regular indirect-cost allocation base or bases, they shall remain in such base or bases. Where a directly associated cost is part of a category of costs normally included in an indirect-cost pool that will be allocated over a base containing the unallowable cost with which it is associated, such a directly associated cost shall be retained in the indirect-cost pool and be allocated through the regular allocation process.

    Emphasis added.

  14. On 3/26/2024 at 5:41 PM, CuriousContractor_22 said:

    Hey everyone, new situation for me: a parent company and one of its various commercial subsidiaries are working together on a GSA MAS task order. The parent company is leading the task order but wants complement their bid with their commercial subsidiary's personnel. 

    I was wondering:

    1. Would the parent company map their subsidiary into their GSA LCATs/rates?
    2. If the parent company is mapping subsidiary personnel into their rates, would the subsidiary be able to include fee/profit in its rates to the parent company? Or would the subsidiary have to provide rates to the parent company without fee/profit?
    3. If both the parent company and the commercial subsidiary have GSA MAS contract, could they enter into a CTA so that both can earn their own fee/profit? 

    I feel like I'm overthinking this, so appreciate the help and guidance. Thanks all.

    I am not particularly knowledgeable about GSA Schedule contracting. There are others on this site with more experience/knowledge than I have. I've been waiting for somebody else to weigh in....

    I have read FAR 8.4 and visited the GSA website and reviewed the GSA Acquisition Supplement.

    It is not clear to me that GSA Schedule orders are subject to FAR Part 31 cost principles, or to CAS. Maybe they are, but I couldn't find it. Instead, everything I read pointed to GSA orders being for commercial products or services, to be ordered on a fixed-price or T&M basis.

    If I'm correct -- and I'm sure SOMEBODY will jump in if I'm wrong -- then 31.205-26 is not applicable and the affiliated parties are free to "subcontract" with each other on any reasonable basis.

    My answers:

    1.  The parent company and the subsidiary could map their rates together into an average that combines both. Or they could have separate LCATs, especially if the subsidiary has a particular expertise.

    2.  If 31.205-26 is not applicable, then yes, the subsidiary could map its fully burdened, with fee added, labor rates. Even if 31.205-26 did apply, the subsidiary could do so if it met the conditions of 31.205-26(e) and (f). If desired, the two entities could "split" a single earned profit in accordance with an internal budgetary agreement.

    3.  That's an interesting question to which I do not know the answer.

    Hope this helps.

  15. I treat subcontracts to government prime contractors as being government contracts, not commercial contracts. Yes, such contracts are generally subject to the UCC if there is a dispute between the parties; however, the government generally has audit rights as conferred by subcontract terms and conditions (particularly if the subcontract is other than FFP). Chances are your prime contractor has listed your subcontract in its own Schedule J so that the auditors can initiate assist audits if they elect to do so.

    Because the government generally has audit rights that it may exercise, I treat the subcontract as being governmental.

  16. 1 hour ago, Miranda Clad said:

    Thank you! That is what my PM wants me to do, modify the current agreement that is tied to the award and make it "indirect" where the staff will perform work under 2 (possibly more) FFP TOs that are under different prime contracts. His argument is that those TOs are FFP and we do not need to submit invoices for the subcontractor to the government and the sub is not directly billed to the government. I do not agree

    No, you cannot perform work -- or have subcontractors perform work -- in support of a FFP TO and charge that work to overhead. That is cost shifting and is frowned upon. If the work benefits a single TO then it needs to be charged to the TO.

  17. If I have a subcontractor who is able to charge multiple cost objectives -- i.e., different projects with different Ts&Cs -- I would want to have a separate agreement for each project. That is to make sure the various prime contract clauses flow down correctly. This is also to make sure costs get to the correct project.

    However, if the subcontractor can charge multiple projects, then maybe the agreement needs to be 100% indirect. (See the FAR discussion of "indirect costs"). If the agreement is charged solely to indirect cost objectives -- i.e., overhead or G&A -- then I agree that no prime contract terms will flow down. I disagree that "no FAR provisions will apply" because some of those FAR Ts & Cs apply to indirect costs not just direct costs. 

    Hope this helps.

  18. 20 hours ago, SFLO said:

    Suppose a subcontractor has an approved accounting system IAW FAR and submits an Incurred Cost Submission with subsequent cost audits to finalize a Negotiated Indirect Rate Agreement annually. ... What assurances (reps/certs) would the prime contractor need from the subcontractor to allow the use of the subcontractor's timekeeping system for T&M work performed by the subcontractor? 

    The only thing the prime should need is assurance that the subK's accounting system is approved. Typically a copy of the determination of adequacy is all that is necessary. If the prime wants more then the prime either knows something about the subK's timekeeping system that the government does not know ... or the prime is clueless.

  19. 26 minutes ago, Fara Fasat said:

    Not rhetorical at all. Most primes have their own standard subcontract terms that cover all the essentials -- delivery, invoicing, payment, etc. They all have purchasing departments, and they all a standard PO with their terms. Why include a FAR/DFARS clause for something that is already covered, and that may well be inconsistent? Of course, it takes some thought and effort to tailor the subcontract, so they don't bother. Or they resort to the "self-deleting" dodge.

    Most primes with USG prime contracts develop their "own" clauses by using FAR/DFARS clauses and replacing "contracting officer" with "buyer" and "Government" with "buyer" or "company". Most primes are not motivated to tailor clauses or to develop their own set of local clauses. Most primes do not train their buyers in the nuances of clause application.

    Note the considered use of the word "most" in the above generalization.

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