here_2_help

Vern, I don't disagree with you -- in principle. However, in reality, I've never seen anybody do that level of analysis (at least from the contractor's perspective). How would that risk be evaluated? By whom? Where are the human resource compensation professionals who are qualified to perform that analysis located? Certainly not at DCAA...

Just to be clear about what I'm reading in the previous posts, everybody (most people?) would accept that the offeror's proposed rates, which are based on its actual current payroll costs, have been correctly found to be realistic. However, basing proposed rates on actual current payroll costs in an insufficient basis to determine that the proposed rates are fair and reasonable. Do I have that right? Because, if so, then I agree.

In the past I have seen a Level 3 CAR issued against the prime's Accounting System for failure to comply with 52.216-7. A drastic step, to be sure. But guaranteed to get the contractor's attention, I promise.

Interesting approach. It's not clear to me from the post whether the contractor is entitled to the full fixed fee or it it is entitled to only the portion of the fixed fee that it has billed, based on hours performed. Also not clear whether the contractor can earn more than the fixed fee pool by performing more hours than budgeted. If the fixed fee is fixed and doesn't vary based on costs incurred or hours performed, then I'm thinking not a CPPC contract. On the other hand, say that it IS a CPPC contract. What would you do about it?

Right. Because the protesters were required to submit proposals for the same procurement(s) they were challenging, in terms of scope and corrective action related to prior protests. This is insanity. But y'all already knew that.

For the others people who may be reading this thread, I quote from the Allowable Cost & Payment clause (52.216-7) at (d): Emphasis added. The prime contractor -- and not the government -- is responsible for settling its subcontractors' costs, including establishing final billing rates to be used in calculating the final invoice under the subcontract.

Neil, I could have asked you to elaborate on why you thought there was risk. But I'll indulge you. When the subcontract is closed-out between the prime and the subK, and the final invoice is paid, then the subcontract is dropped from the prime's audit universe. It is literally no longer subject to price adjustment.

No, you're wrong.

Contracts whose final price is determined based on final billing rates must contain the clause 52.216-7. That clause discusses finalization of rates at (d). The clause states, in pertinent part:

Back in the day I used to work on secret and above programs. Many, many aspects of those contracts were classified. But nobody ever worried about the DPAS rating. Which is to say, it was neither classified nor was it controlled. Short answer: I agree with Mr. Edwards' position on the matter.

Well. As the OFPP Administrator is, by statute, also the head of the CAS Board, I'm wondering just how much the Board is going to accomplish during his tenure. I'm not happy to say I have to agree with Mr. Edwards' comment, above.

I would ask the contractor to provide a policy, procedure, or other support for its practice of treating non-qualified personnel charges as billable direct labor charges on T&M contracts. The personnel are not qualified because they don't have clearances, and the contract specifies that only cleared personnel may charge billable time. (They could charge the time non-billable, but that's not what you asked about.) Asking them such a question is a nice thing to do. It's in the nature of a warning shot across the bow. If you're not feeling merciful, you can get the auditors involved. If you want to cut directly to the chase, you can issue a Notice of Disallowance. If you're feeling angry, you can turn it over to the appropriate investigating authorities to see if they want to charge the contractor under the False Claims Act. But why be mean? Give them a chance to think about the implications/consequences of what they've done. That's my advice.

Maybe FAR 31.205-6(f)(1) applies. You could also have cited to 31.201-3(b)(4). But in the instance where there is no history to look at, it's relatively easy to gin-up a bonus plan. It doesn't have to be especially detailed, and you could fill it with ambiguous weasel words to permit maximum flexibility. It could be a one-page memo and that would pass a lot of scrutiny. Similarly, one could implement a prospective change to a bonus plan. Say, about 5 minutes before bonus award time. That could work as well.

The question is not one of budget or funding availability, the question is whether the contractor, in similar circumstances and for the same purpose, treated the bonuses as being direct or indirect expenses. If the contractor had never, ever, awarded such performance bonuses before, then it has the choice to elect treatment as either a direct or indirect expense. If the contractor had awarded such bonuses before, then in similar circumstances the treatment must be consistent with prior treatment. (As Don originally posted. I was fine with that response.) But if the contractor can identify different circumstances, then it is free to treat the bonuses differently than it did in the past, for the new circumstances. I will add that, if the contractor has elected to treat the bonuses as direct expenses, it would be stupid not to have cleared that decision with the CO prior to implementing it.

Sigh. I know I shouldn't do this. I should just let your post go because you're expressing an opinion. I know I'm going to regret this ... Recognizing that when a cost is disallowed by the contracting officer, the burden is on the contracting officer to provide a basis for that disallowance (see FAR 42.801 and the clause 52.242-1) -- what would your regulatory basis be for asserting that the costs in question were unallowable? What would be your Part 31 citation?

You are asking if the US government needs to pay the US government? If you're a defense contractor, you might want to check out DFARS Part 229.

Oh, yes. Very much so, Joel. Often, direct labor dollars are used as the allocation base for one or more indirect cost pools.

If the question is directed at me, then I think Don answered it along the lines I would have. I would have quoted the same FAR citation and I would have emphasized the same phrase as Don emphasized. The only difference would have been that I would have posted that the contractor must be consistent in direct vs. indirect cost determinations unless the cost is incurred in different circumstances. The answer to your question is "it depends."

ji20874, I believe Mr. Frog is asking about contractor payment of incentive compensation -- bonuses -- to its employees that are not otherwise expressly required by contract terms. He called it a "performance bonus" which strongly implies the employee received the bonus not because the contractor or employer-employee agreement required that it be paid, but because the employee's performance merited it. Had the employee's performance not be of sufficient quality, the bonus presumably would not have been paid.

TNT1, The subcontract has already been awarded (via letter) based on the initial proposal. Now you are definitizing. You say that the supplier has submitted a definitization proposal that is 40% lower than the initial award value, which I assume was found to be F&R at that time. That certainly does not sound like a CPPC contract to me. You don't tell us what the dollar value is but, since certified CoP data is not being provided, I assume it's less than $2 million. I assume you are performing some type of cost analysis, given the lack of competition. I further assume you need a profit breakout in order to evaluate that component of the price. Make the supplier provide the cost information separately from the profit factor. And, as with all cost analyses, you need to evaluate each component of cost separately for reasonableness. The supplier is going to tell you that they don't need to disclose profit information in a FFP contract. And to some extent, that's true! If the original price was determined to be F&R based on competition, they have a valid point. But the counter-point is that since the definitization proposal is being evaluated without the benefit of competition, a full cost analysis must be performed, including an evaluation of profit. Without disclosure of profit, you can reasonably tell the supplier that the definitization proposal is inadequate and send it back for a do-over.

Thanks. That makes sense.

That makes some sense because the primes would want to be confident that their subK settlements would be reimbursed by the customer. Having said that, I hadn't believed that privity of contract worked that way. I had assumed that the prime's decision to settle a subK REA or claim was separate from the government's decision to settle the prime's REA or claim. (Obviously, that's not the case in terminations, where the government's rights with respect to subcontractor termination settlements are expressly established. But that's not what this thread is about.) It's interesting to me that your situation didn't work that way. Do you think the prime getting a governmental green-light to settle with its subKs was unique to your particular contractual situation, or was that the consistent approach you experienced throughout your career?

Your statement confuses me. If a Suspension of Work notice was issued to the prime contractor, wouldn't you expect the prime to flow that notice down to its subcontractors? What's the alternative -- to let the subKs keep working (and charging) while the prime sits on its hands? I don't think that's how it is intended to work. I believe what Vern was getting at is that the prime is responsible for assessing any requests for equitable adjustment from its subcontractors. Those subcontract price increases become part of the prime's cost impact to the government. At least, that's what I think should happen. Vern is welcome to correct me if I've misinterpreted his thoughts.

I thought competition was binary. Either you have achieved it or your have not. I'm not a member of the school that says more competitors is better than sufficient competitors. Just my opinion.

Here's a link to a form used by MIT. It took me less than 3 seconds to find this form via Google.