here_2_help

br549, I haven't devoted tremendous time or research to your question, so I guess I'm risking the Wrath of Vern (WoV)TM in answering from TDY. But my reading of the clause supports the position that the two certifications you mention are NOT in conflict. The certification at I©(3) says that the contractor is not required to submit its Disclosure Statement concurrently with the proposal because it did not receive $50 million in CAS-covered awards in the preceding cost accounting period (fiscal year). The certification at II, the contractor is electing Modified CAS coverage and certifies it is eligible to do so because it received less than $50 million in CAS-covered awards in the preceding cost accounting period. I don't see those two statements as being in conflict with one another. Hope this helps.

https://www.dss.mil/GW/ShowBinary/DSS/isp/f...c_sec_prox.html

Vern is as usual absolutely correct in his answer. But your initial question raised two or three potential issues that I would have DCAA explore if I were the KO. 1. You wrote, "their were rumors of the company restructuring, but no changes prior to finalizing negotiations" That doesn't really provide much information, but company structure "changes" don't have to take place before negotiations are finalized in order to constitute cost or pricing data that should have been disclosed. In fact, knowing about a potential restructuring that might, in the future (during time of post-award contract performance) reduce contract costs, and not disclosing it would be the classic defective pricing scenario. Also, if company executives knew about the upcoming restructure then the contractor knew about it, even if the individual negotiators did not. I would have DCAA follow-up on this in a post-award (i.e., "defective pricing" audit). 2. Corporate restructurings come in different flavors. There is the ongoing management reorganization, the internal restructuring, and the external restructuring. Each of these is a term of art and has its own section the DCAA Contract Audit Manual. In either of the two restructuring scenarios, the contractor is supposed to forecast the cost savings into its forward pricing rates. Another area for potential DCAA follow-up, in my view. 3. Did the contractor change any cost accounting practices along with the restructure, and was the CPFF contract CAS-covered, and does the contractor owe the ACO a cost impact proposal pursuant to the CAS administration clause? If indirect rates go down on this contract, where are they going up? Hope this helps.

Hi Marc, After reviewing the CAS requirements you believe your award will be subject to CAS coverage, right? There is no applicable exemption to be found based on your reading of the regulatory requirements. Your only question is what flavor of CAS will you be subject to? Will your contract be subject to Full or Modified CAS coverage? As part of your proposal submission, I expect your prime will require you to submit representations and certifications. Among those reps and certs will be one or more CAS certifications, with wording identical or very similar to the FAR solicitation provision 52.230-1. Go look at that provision now. You will see that your contract will be subject to Full CAS coverage unless you qualify for, and elect to be subject to, Modified CAS coverage Your company must make an affirmative election and certify that it qualifies for Modified coverage; otherwise, the default is Full coverage. To qualify for Modified CAS coverage, your company must have received less than $50 million dollars in CAS-covered awards during its most recently completed fiscal year. NOTE that contract award value is not the same thing as revenue recognized. A more interesting question might be whether your company needs to submit a Form CASB DS-1 Disclosure Statement concurrently with its proposal. If you look at that provision, you will see that a company might be subject to Full CAS Coverage, yet still qualify for an "interim exemption" from the requirements to concurrently submit a DS-1. If your company does not qualify for an interim exemption, my advice is to get to work on writing the Disclosure Statement now--and remember that cost accounting practices used to estimate costs in your proposal must be consistent with those practices used to accumulate costs after award. CAS 401 applies whether you contract is subject to Full or Modified CAS coverage. CAS administration--fun times! Hope this helps -- and good luck!

Looks like the Court of Federal Claims agrees with you, Don. And Mission Critical Systems wins again. "The court has examined the statutory language of the Small Business Act and concluded that the mandatory language of the HUBZone statute requires that a contracting officer first determine whether the specified criteria are met before awarding a contract under another small business program or on a sole-source basis."

Casius, DCAA obtains a listing of all pricing actions subject to defective pricing (i.e., subject to TINA) which is the "universe of activity". The entity is given a PASS rating which is the overall risk assessment of the likelihood of defective pricing based on DCAA's experience. PASS = Post-Award Something Something (I forget.) The PASS is essentially a co-efficient that drives sample selection; the higher the PASS rating the larger the sample size selected from the universe of activity. Hope this helps.

I completely agree with Vern's post in every respect. I would add that, as missgamecock noted in passing, contractors' travel costs are subject to a number of allowability limitations. (See 31.205-46.) For many if not most contractors, travel is the number one source of unallowable costs. For example, many times it is impossible for a contractor on travel to find lodging within the FTR locality limits, which causes unallowable costs to be incurred. Those unallowable costs come out of contractor profit. If a CO says "no profit on travel" then the government is essentially asking the contractor to take a loss on its travel costs. Moreover, complying with the FAR cost principle related to travel is hard to do, and expensive as well. The recent change in air fare allowability rules, for example, has significantly impacted companies' ability to determine allowable air fares. Policies and procedures are being rewritten, employee training is being rolled out, and travel agency reporting is being revised. My point being that to treat travel costs as some kind of unworthy "pass through" cost, for which the contractor adds no real value, betrays ignorance of the true situation (as Vern correctly pointed out). But it also does the contractor, and its administrative/compliance staff, a real disservice.

Whynot, Consider the FAR policy at 32.10, the solicitation clause at 52.232-32, and DoD's User's Guide to Performance-Based Payments. You may be able to get the contracting officer to move from cost-based progess payments to PBPs, which are the Government's "preferred" method of contract financing. Hope this helps.

smallbus, yes, you can. But before you do so, I recommend you familiarize yourself with 31.205-4 "Determining Allocability" and 31.202 "Direct Costs" and 31.203 "Indirect Costs". Notice the part that says, "No final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose in like circumstances have been included in any indirect cost pool to be allocated to that or any other final cost objective." CAS 402 says much the same thing, but I'm going to assume you're exempt from CAS based on your User Name. If you decide to treat this "high tech engineering software" as a direct cost, then you need to treat the cost of all such similar software as a direct cost as well. You need to be consistent in how you account for "high tech engineering software" across your portfolio of contracts. In addition, you need to ensure that you have priced those costs into your contract prices, to the extent that FAR Part 31 applies to them. So go ahead, but make sure you've thought your decision through carefully, and are prepared to be consistent across all contracts and keep similar software costs out of your overhead/G&A pools. It will be difficult to undo your decision once made. Hope this helps.

Hi Mark, FAR 31.205-26(e) requires that (unless certain exceptions exist) costs transferred between divisions under common control must be made on the basis of "actual costs" (which include all applicable burdens from the performer). Whether the recipient applies indirect burdens depends on its disclosed/established practices. Generally, the answer is yes. In particular, current DCAA audit guidance is biased heavily towards the receiver applying G&A to the performer's fully burdened costs. Hope this helps.

My understanding is that the contractor has "voluntarily" agreed to stop imprinting the ACOGs with the biblical references. Moreover, it is offering its end-users kits to remove the markings from already-accepted ACOGs. I found it interesting that end-users include foreign governments (FMS perhaps?). http://abcnews.go.com/Blotter/jesus-rifles...8791&page=2

Cheskieb, I believe there could be. If the teaming partners agreed to create a joint venture or similar stand-alone entity, and infuse it with employees and its own cost structure, and then subcontract to that entity for additional services, then you could have such a distinction. Certain costs would be incurred by the teaming partner in its role as, say, accounting or program management function, while other costs would be incurred in its role as performing entity. I experienced this type of arrangement a decade ago. Pretty dang complicated in terms of direct and indirect costs. On the other hand, that is a pretty specific situation. If you are making a general inquiry, then I would answer that a teaming partner is an entity that was a party to a teaming agreement, while a subcontractor has actually entered into a subcontract. Many times (but not always), a teaming agreement is an agreement to agree -- i.e., not a fully executed contract. Hope this helps.

There's another point of view that says all risk analyses and/or contingency analyses must be disclosed if the pricing action is subject to TINA. I don't agree with that point of view. But I can tell you that the Department of Justice does. I believe SAIC paid at least $2.5 million to settle the False Claims suit. Here's one link to the story. http://legacy.signonsandiego.com/uniontrib...s_1b11saic.html

Whynot, if the contractor received an increased fixed fee as a result of the government imposing limits on the amount of direct labor escalation, I doubt I would have ever posted on this thread. My impression, rightly or wrongly, is that the contractor received no compensation for its increased cost containment risk.

Vern, I'm not obligated to defend a strawman position that you create for me. I see that cg1 has left the scene and is, I hope, dealing with the situation. I don't see any need to continue to reiterate--or, if you prefer, to defend--my prior posts.

FYI, DefenseAlert is reporting a sustained bid protest by both BAE Systems and Navistar in the award to Oshkosh of the recompete of the FMTV contract. According to the GAO press statement (actual decision is currently under seal), the Army misevaluated Oshkosh's capability and also misevaluated Navistar's past performance. The GAO recommends a new evaluation of the offerors with respect to those to items. The other allegations of errors were not sustained. Maybe this is not such a big deal, but the award was worth billions -- reportedly at least $3 billion. Given the stakes, and perhaps the complexity of the requirements, I can see making a mistake in an evaluation criteria. But past performance? In any case, now it's back to the drawing board for the Army evaluators.

Vern, your point ignores the timing of the negotiation. As I noted in a previous post, we apparently have different impressions of that timing.

br549, In this scenario the indirect caps are being applied to labor escalation -- i.e., limiting the amount of raises the contractor can give its employees with respect to this contract. If the contractor gives its employees raises that result in labor costs that are in excess of the negotiated labor escalation factor(s), then the amount over the cap would result in unallowable direct labor costs plus unallowable indirect costs allocated to that direct labor.

Vern, we have a different impression/interpretation of the situation. I read the original post as saying that price negotiations had concluded and then the government slipped in the bit about escalation caps as the contract language was being finalized. In my mind, if the contractor had known that the government had wanted to impose caps on labor escalation (not caps on indirect cost rates) then the contractor would have wanted more fee to compenate for the increased risks. The rest of your points strike me as perhaps my points struck you. Of course the government can tell the contractor how to spend the money. That wasn't my point at all. My point is that the government does so through regulations and contract language and through a COTR and through DCAA audits. (And we still get many delay/disruption claims...) The caps on labor escalation veers dangerously close to something much more, something that smells like interference in the contractor's business. Given that they are unnecessary (for the foregoing reasons as well as others made in my prior posts) they should be avoided if at all possible.

Scenario -- Contractor submits a cost proposal for a CPFF contract. Presumably, the cost proposal was based on forecasted costs, including future labor costs based on known or forecasted wage increases. Government objects to labor escalation values used by contractor and associated direct labor cost estimate. Contractor agrees to revise cost proposal commensurate with Government's desired labor escalation rate. Accordingly, a new estimated cost and associated fixed fee is agreed upon. Contractor does this because, regardless of what labor escalation rate is agreed-upon, at the end of the day it will be reimbursed for its allowable cost incurred. Profit erosion risk is manageable. After negotiations are concluded, Government attempts to impose "caps" on the amount of actual labor escalation--effectively limiting the amount of allowable pay raises the contractor can give to its employees for the instant contract. Contractor objects, because if it gives employees the raises it knows (e.g., collective bargaining agreement) or forecasts (based on plans & budgets), it will incur an unallowable cost with respect to this contract. If it limits pay raises to the Government's desired escalation factor, it affects staff morale and perhaps breaches collective bargaining agreements. Moreover, imposing contract-specific escalation rates signals to the contractor and its employees that this contract is to be treated differently from the contractor's other contracts (assuming it has other contracts). Remember that most (but not all) pay raises are applied to the employee population as a whole, or to salary bands, or to functions -- and not to individuals. Contractors do not, as a rule, identify a small group of employees working on one contract and say, "you guys get 100% raises while everybody else gets 3% raises." 1. Contractors run a competitive business, or try to. Please give them the benefit of the doubt. More to the point, the Government shouldn't assume the right to tell the contractor how to run its business, including what raises to give its employees. If the government wants to in-source the work, do it. Otherwise get out of the contractor's knickers and let it do its job as it proposed. 2. The Government doesn't need to impose contract-specific "caps" in order to control the salary/wage increases a contractor provides its employees. For example, DCAA has an audit program that addresses contractor compensation ceilings. FAR 31.205-6 addresses the allowability of compensation, and contractors with CPFF contracts have to comply. The FAR definition of reasonableness would cover the scenario above, where one set of employees gets a huge raise while other similar employees do not -- and the excessive raises could well be unreasonable and thus unallowable as a contract cost. Cq1 hints at facts and circumstances that have not been shared. Fine, if there is a bona fide reason that the government feels the need to control the contractor's contract-specific labor costs, then do it. In that case, the above comments should be read as a diatribe aimed at the general 1102 population and not at anyone in particular. Vern, I appreciate your comments made in addition to my own, augumenting but not contradicting my statements (as best I can tell).

Cg1, I do not agree with your assessment, based on the facts as you have presented them. The point of negotiating the estimated cost and associated fixed fee is to establish a target for various management purposes. The government's primary controls relative to price are on the funding, not the costs incurred. The reason (presumably) that the government chose a CPFF contract type is because the scope was unknown and therefore it was not prudent to hold the contractor to a strict price. If you now want to hold the contractor to a strict price, consider changing the contract type and making the contract a firm fixed-price type -- and be prepared to reopen negotiations. Otherwise, let the contract pricing and billing work as the FAR intends them to. I really don't know you and I certainly don't know all the facts and circumstances. But based on your posts I have to say that the interpretation of bad faith doesn't seem to be on the contractor's side in this discussion. You want CPFF, then execute it. H2H

I concur with Don's point(s). In a cost-type contract, the government agrees to reimburse the contractor for actual allowable costs incurred (subject to funding limitations). The estimated costs are simply that -- estimated. Not fixed. Apples and oranges. When the government imposes a cost ceiling or cap, it is essentially converting that portion of the contract from cost-type to fixed-price. The contractor accepts increased risk. If you want the contractor to accept that risk, you need to offer consideration--commonly increased fee. It's not really "fair" to expect the contractor to accept the increased risk while simultaneously reducing the estimated cost and fee, right? Hope this helps.

NPRM issued in August by Dept. of Labor. See http://www.regulations.gov/search/Regs/hom...9000064809fff38 Hope this helps.

It's not clear to me whether this new process replaces the current internal DCMA review process (i.e., one or two reviews of a CO's decision when the decision is to disagree with DCAA), or if the new process is an additional one. Looking at the process on its own, without context, it doesn't seem as onerous as some of the alternatives I've heard and read about. For example, one alternate approach was to have DCMA accept all DCAA recommendations, period. Another thought was to merge the two agencies and have the CO's report to the auditors. This new approach seems far better than it could have been.

Whynot, that speaks to the GAAP accounting treatment but not to the cost allowability. Also, it's interesting that LM would assert that the trademark has an "indefinite useful life" because I would have thought (perhaps naively) that one needed to establish a finite useful life in order to amortize a cost. In order to create an amortization expense, one divides the asset value by the number of periods of useful life to calculate a fixed amount per period. I would have thought that having an indefinite life in the denominator would be like dividing by zero. I guess that's why LM doesn't hire me to do their accounting!