here_2_help

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!

Thanks Vern. I only wish our DCAA auditors had your discernment.

Vern, I find it interesting that you spend a lot of time quoting 31.205-1 but omit any discussion of the definition of "public relations" which I would assert covers a trademark which is used to protect the branding of an entity's products. Also "prosecuting a trademarK" is pretty self-evident, is it not? It is the effort of applying for and receiving a recognized and officially registered trademark. Prosecute as in "make an effort to attain". Of course you and the others are correct that there is nothing directly on point, which is why one needs to analogize to another principle. I chose 31.205-1 but others have made different analogies. Who's to say, outside of a court of law, who's made the best analogy? To loul, I'm confused by the notion that such costs would be allowable but not allocable to a specific cost objective. Are you saying, then, that they are allowable G&A expenses? Are you familiar with the various cases pertaining to allocability, including Boeing North American, FMC, and (more recently) Teknowledge and BearingPoint? Look, I'm not necessarily against that position. If you paid me I would make that argument with a straight face and mean it sincerely. I just think an auditor or IG could make a strong case that such costs are not in fact "necessary" as much as they are beneficial to the contractor. When Lockheed Martin registers "We never forget who we're working for" how does the Government benefit? Why does LM feel having such a catchphrase is desirable? Would the company get as many contracts if it didn't have such a catchphrase? Again, one could make the argument that such costs are those that would be incurred by a prudent businessperson in the conduct of a competitive business; however, I would be uncomfortable using that as a counter argument should DCAA or whomever assert that such costs were unreasonable, unallowable, and/or unallocable because there is no beneficial nexus between the cost and a Government contract. The recent court decisions in this area have been going against the contractors more often than not.... Maybe it's just me. H2H

Whynot, why would you group trademarks with patents? They are not at all the same thing. Patents, copyrights, and data rights concern limits on the use of intellectual property. A trademark is a sign or indicator used by an entity to identify certain products/services to consumers. The cost of trademarks is not specifically covered by the FAR Part 31 cost principles. That said, however, I would think that the cost of trademarks would be covered by 31.205-1. "(a) ?Public relations? means all functions and activities dedicated to? (1) Maintaining, protecting, and enhancing the image of a concern or its products; .... "(f) Unallowable public relations and advertising costs include the following: (1) All public relations and advertising costs, other than those specified in paragraphs (d) and (e) of this subsection, whose primary purpose is to promote the sale of products or services by stimulating interest in a product or product line (except for those costs made allowable under 31.205-38((5)), or by disseminating messages calling favorable attention to the contractor for purposes of enhancing the company image to sell the company?s products or services." Given the foregoing, I would classify such costs as unallowable. Hope this helps.

Acq_4_life, If I understand your situation correctly, your agency has awarded a cost-type contract to a contractor who has been determined to have an adequate accounting system. You say the contractor is performing a "commercial service" but you don't say whether the contract was awarded pursuant to Part 12 or if it contains any commercial item clauses. Putting this all together, you may have an illegal contract (cost-type commercial item procurement). Or not. But either it needs to be a full-on commercial item contract (convert to FFP or T&M, and lose any clauses inconsistent with commercial item acquisitions), OR it needs to be full-on cost-type (specify some invoicing requirements and lose any clauses that smack of commercial item acquisitions). One way or the other; not both. To help me decide which way to go, I would look at the original solicitation, contractor's proposal and bid evaluation. In the meantime, I would pay the contractor's invoice as submitted and ask your friendly audit agency to do a post-payment voucher review. (I think they might call it a booked-to-billed reconciliation.) I'm sure there's more to be said -- and others to say it. Hope this helps.

Can I just add in here that we seem to have some information missing? What we do know is that the contractor is billing the customer is exactly the same way its costs were negotiated and contracted-for, no more and no less. Now somebody is saying, after award, wait a minute, maybe we need some more detail. Do we know whether the contractor's system has any more detail? Do we know whether the system was found to be adequate for cost-type contracting? Do we know if the contractor has a Disclosure Statement and how it accounts for its costs? Nope. Seems to me we need the answers to those questions before we make any suggestions here. Sombody (me) might say, it's unfair to tell the contractor <i>after submission of the first invoice</i> the customer needs more detail. Somebody (me) might say, you didn't need that detail to find the offer fair & reasonable, and you didn't need that detail when you negotiated the price -- so what has changed here? The only thing that's changed is that you want to change the ground rules after the game has started, which will delay the contractor's payment and might cost it more in admin. costs. But I'm not saying that -- yet -- because I believe there's too much information missing. Hope this helps. NOTE: I see Vern just posted while I was reviewing this. I concur with him but will post this anyway. H2H

Hi marcfgov, The answer to your question is straightforward. It depends. Generally, you have a G&A rate where you have a business unit or segment of the organization. If you want multiple G&A rates, I would expect to see multiple segments (see CAS 403 and 410). You can have separate and unequal G&A rates for CONUS and OCONUS if you have a CONUS business unit/segment and an OCONUS business unit/segment, both reporting to a home office. (That will be three Disclosure Statements, for those who are counting-- though the Home Office won't likely have more than Parts I, VII and VIII. Hope this helps.

At the risk of coming in late to the party, I would say, contractor100, that the government likely did not get what it needed. You say "entirely made whole by the contractor's compensation" but that is not the entirety of the situation. Originally the government needed an item or service, and now receipt of that item or service will be delayed. Sure, the taxpayers aren't out of pocket any extra cash, but what about the fulfillment of the need? I concur that the final performance evaluation should take into account that the contractor didn't provide what had been contracted for -- perhaps for good and sufficient and efficient causes. But still. Just tryin' to help ....

Let me try this again. Yes, learningtheropes there are several "wrong ways" to bill the govt for COLA expenses. Here are a few of them, focused on the contractor's point of view: 1. Propose the costs one way and bill them in a different way. This is especially good in a competition where price is a significant evaluation factor, when it can be shown that your original proposed treatment resulted in a lower proposed price, but your actual billing treatment results in higher prices. If you are a CAS-covered contractor, you get bonus points for the CAS 401 noncompliance. 2. Account for costs as direct labor, and bill them as ODC. This is a great method if you are close to losing money on your hourly T&M billing rates and can shift the otherwise margin-eroding COLA costs to the Material part of the T&M billing. Highly recommended, especially if your company already has a Deferred Prosecution agreement with the DOJ and is itching to spend money on external attorneys. 3. Account for the costs as labor overhead, and bill them as ODC. This is a variant on #2, above. Has the added feature of potential allocability issues (see, e.g., CAS 418). 4. Account for the costs as ODC, and bill them as labor. This one is tricky and counter-intuitive. Assume that as an ODC, indirect burdens are minimal (maybe only G&A, perhaps a material handling burden). But as labor the costs will be absorbing fringe and labor overhead, drawing some costs away from your other fixed-price work, thus resulting in higher margins for other contracts. If the contract mix is right, you can make a lot of money using this method. Make sure to factor litigation defense costs into the business case. 5. Account for the costs as an unburdened uplift, and add indirect cost burden(s) to your billed amounts. This method involves adding a burden to the contract billings that you don't actually incur. Given the DCAA's current propensity for voucher reviews, should be considered high-risk. But hey, what the heck. No risk, no reward, right? 6. Have a CASB Disclosure Statement that tells the Government how you will be treating the costs, then treat then differently. CAS noncompliances are always good for a laugh. 7. Treat the costs one way for all your contacts but this one, which will be treated differently. Your trick will be to try to explain to the various investigators why the facts and circumstances of this particular contract merited the "special treatment." (Remember that phrase.) Again, bonus points if you are a CAS-covered contractor. 8. Have a policy that clearly tells people how the costs will be treated, but treat them differently for this contract. This of course is an internal control issue. Remember, April Stephenson testified that 69& of all LOGCAP contractors' business systems were inadequate! (Or did she say that 69% of all DCAA audit reports on LOGCAP contractors' systems were inadequate? I forget.) Anyway, that will be a good excuse for your attorneys to use in court. 9. Have the treatment expressly covered by a contract clause, but ignore it. According to the latest SIGIR report, nobody is looking hard at contractors' invoices anyway. You could get away with this one for maybe a year or two before anybody noticed. Then quickly process a credit voucher and enjoy the interest you earned on your overpayment. 10. Have a MOU or Advance Agreement with your CO regarding how the costs will be billed, but don't follow it. Your CO will likely rotate off the contract in six months anyway, to be replaced by somebody who doesn't know about the agreement. Eventually somebody will notice, but you might be retired by then. I'm sure there are plenty of other ways to bill COLA costs incorrectly. These are just the ones I came up with on the fly. I tried to provide relative comparisons to help you decide which one to use. I hope this helps. May I suggest, as Vern and others have, that you come back to this thread with some more details, more coherently articulated?