here_2_help

The contract language controls the duties/responsibilities/rights of the parties.

On today's WIFCON front page, there is a link to CAAC Letter 2023-04 (CAAC Consultation to Issue a Class Deviation From the Federal Acquisition Regulation (FAR) Regarding the Small Business Administration (SBA) Memorandum, “Impact of Recent Court Decision (Ultima Servs. Corp. v. Dep’t of Ag. (E.D. Tenn.)) on the use of the 8(a) Program”).

I don't know but it very much seems to me as if Judge Bonilla completely misread eSimplicity, even though he actually cites to it on Page 7 of the opinion.

Can you mod the follow-on contract to take accountabilty for the items? That, to me, seems like the correct approach, given the direction from both the government and the prime contractor. One you have established accountability, then you can begin the disposition process.

We have a rule where I work: if you use an acronym, you must be able to explain what it stands for if challenged.

It's my rule. And I challenge people all the time.

1 hour ago, LucyQ said:

Perhaps a better questions would be, how do you guys manage your suppliers in CPSR compliant procurement systems? 

All I can say is that my companies have had their buyers check the excluded parties website (manually), print out the results showing the date checked, and stick the printout in the purchase file. Okay, nowadays they do this electronically by attaching the screenshot to the electronic PO. But still, I have not worked with a company that outsourced this process. That's not to say that it couldn't be outsourced; however, my companies thought that making the excluded parties check was an essential function of being a buyer and they expected their buyers to do it.

Apologies for not being more helpful.

I'm a bit confused. 

How is the contractor currently complying with requirements related to responsibility determinations and excluded parties? Are the searches being done by hand, or are they not being done at all?

Also, I'm not sure how an Approved Supplier designation plays into CPSR compliance. I don't know all the (many) adequacy criteria off the top of my head, but I don't recall one associated with having an Approved Supplier list. Hopefully, you can enlighten me on that one.  If the issue is that being designated as an Approved Supplier means that future responsibility determinations and/or excluded party searches don't have to be performed, I don't think that's the case.

Let's note that the qui tam relator (whistleblower) received $69 million as part of the settlement. I don't know how much of that goes to the attorneys, but I imagine it was still a very nice payout.

Quote

9903.201-1 CAS applicability.

(a) This subsection describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. (See 9904 or 9905, as applicable.) Negotiated contracts not exempt in accordance with 9903.201-1(b) shall be subject to CAS. A CAS-covered contract may be subject to full, modified or other types of CAS coverage. The rules for determining the applicable type of CAS coverage are in 9903.201-2.

(b) The following categories of contracts and subcontracts are exempt from all CAS requirements:

(1) Sealed bid contracts.

(2) Negotiated contracts and subcontracts not in excess of the Truth in Negotiations Act (TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)). For purposes of this paragraph (b)(2), an order issued by one segment to another segment shall be treated as a subcontract.

(3) Contracts and subcontracts with small businesses.

(4) Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than 9904.401 and 9904.402 are concerned, any contract or subcontract awarded to a foreign concern.

(5) Contracts and subcontracts in which the price is set by law or regulation.

(6) Contracts and subcontracts authorized in 48 CFR 12.207 for the acquisition of commercial items.

(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater.

(8)-(12) [Reserved]

(13) Subcontractors under the NATO PHM Ship program to be performed outside the United States by a foreign concern.

(14) [Reserved]

(15) Firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of certified cost or pricing data.

Hi Jiggy,

Absent a request for extraordinary relief, I don't see how you obtain any such modification.

On 7/13/2023 at 5:29 AM, _KB_ said:

We are fearful of a situation where our final rates come back as higher than what we were billing at with our provisionals, and if the Total Estimated Cost has been deobligated down to current funded values, we would not be able to recover the extra actual costs since the Total Estimated Cost had been reduced, leaving no room to recover the costs. 

I'm confused.

Have you read the clause at 52.216-7 (Allowable Cost and Payment)?

By contract clause, you are supposed to adjust your provisional billing rates so as to match your estimated final billing rates. There is no reason for a large disparity in billing rates to exist. In fact, any such disparity is contrary to the clause's requirements.

Where are these "fears" coming from? Do you know that your final rates will be higher than your provisional billing rates? If you know, then you should do something about it now, IAW 52.216-7. If you don't know -- then why don't you know? Isn't somebody in Finance running variance analyses? If not, why aren't they?

I don't mean to be a jerk but this is all fairly fundamental cost-reimbursable contract stuff. In many contracts, indirect rates make up 50% of total costs billed. It is the responsibility of the contractor--not the government--to manage those rates.

On 7/12/2023 at 1:35 PM, Fara Fasat said:

Thanks. I think we have covered my question. You can't invoice the government for more than the costs you incur, and there are various ways of handling that when there is uncompensated overtime.

Yes. Now I would like to add something in case it has not become obvious.

1. You pay salaried employees a salary. The salary is independent of the number of hours worked and recorded. In a perfect world, a salaried employee will record 2,080 hours per year. (52 weeks x 40 hours per week).

2. Salaried employees fill out time cards (or they should, as Raytheon learned at the Federal Circuit in January of this year). Let's assume those are weekly time cards. On each time card, the salaried employee records the hours spent on each assigned cost objective. (To make it easier, let's say those cost objectives are either contracts, overhead, or some paid-time-off account such as vacation or holiday.) In a perfect world, the perfect 40 hours per week will be spread across whatever cost objects were worked. Maybe it's 40 hours to only one contract; but more likely the 40 hours are being charged to multiple things each week.

3. Each cost object "thing" has a code associated with it -- traditionally called "the charge number". So, when the employee turns in the weekly time card, there are hours associated with each charge number. There are many employees, so there are many time cards. The labor system aggregates all the time card data by employee each pay period.

4. Separately, the employee gets paid. Let's assume the employee is paid weekly -- i.e., annual salary divided by 52 equals the weekly paycheck. The paycheck is reduced for taxes and the cost of benefits to generate the net takehome pay for the week. That's what Payroll does.

5. Separately, the gross payroll (before taxes/benefits) is distributed to cost objects in accordance with the time card data. Thus, the time card is the method for distributing the salary costs. To the extent the charge numbers reflect "contracts" the distributed payroll shows up as a contract cost -- i.e., as direct labor dollars.

6. Yes, the world is rarely perfect. Sometimes more than 40 hours are recorded in a work week - UCOT. Sometimes less than 40 hours are recorded (LWOP - Leave Without Pay). There are various accounting methods for dealing with those issues.

The bottom line answer to the OP is that the contractor bills for the direct labor dollars that were distributed by the labor accounting system to the cost-reimbursable contract, based on the time cards submitted by salaried (and hourly) employees during the billing period.

NOTE: An adequate accounting system provides for reconciliations between the payroll system and the labor distribution system.

Hope this helps.

18 minutes ago, Retreadfed said:

Is there a statute, regulation or contract clause that says this or is this based on DCAA's view of things?

Based on DCAA's view

52 minutes ago, REA'n Maker said:

AKA total IDIQ value/contract maximum.  It was intended to address stuff like the $7.5M CAS thresholds.  

I think it's a totally fair statement to say that CAS is applied at the task order level, but I also think that the determination to do so is in the IDIQ.  It's sort of like how you make a SB set-aside determination at the IDIQ level even though you are actually setting aside the TOs.

Assuming the maximum order value on a $100M IDIQ is over $7.5M, that would practically dictate CAS coverage. It's definitely not an exact science, or a science at all for that matter, but I've never heard of CAS coverage being a big deal to any vendor proposing on a $100M federal contract.  Aren't CAS basically GAAP anyway?*  That's not rhetorical; I honestly don't know for sure.

 

(* I believe this construction is bizarre yet grammatically correct however I am also a product of the American public school system)

31.201-2 Determining allowability.

To all,

I just got off the phone with Vern (his eye is improving a little bit each day, by the way). He wanted me to make the following points on his behalf. 

1. As I stated in an earlier post, this is a known issue. It's been around since ID/IQ awards started to be made to multiple offerors, especially those for services. Formerly (according to Vern), agencies awarded ID/IQ contracts to individual contractors, and those awards were for goods (not services). That has changed but the FAR Council and CAS Board haven't adapted to the changes. There is simply very little (if any) guidance on the issue.

2. Since FAR and CAS are silent, a contracting officer has the flexibility to craft their own solution (See FAR 1.102(d).) This would be a permissible exercise of authority and not a deviation.

3. Therefore, a contracting officer faced with this situation could craft one or two contract clauses, stating that (a) each order is divisible and separate from the others, and (b) CAS coverage and rules shall be applied at the individual order level. 

Again, I'm paraphrasing a conversation. Any errors in translation are mine.

2 hours ago, REA'n Maker said:

I second that opinion.

Isn't CAS coverage sort of like being pregnant, i.e., "partial" coverage makes no sense (per Don's comment above)?  Considering CAS coverage is based on an entity (corporation, business unit, office, branch, etc.) and the total estimated value of all orders I don't know why it wouldn't be included in the overarching legal agreement with that entity which states the total estimated value of all orders.

Let's say you have an multiple award ID/IQ with a ceiling of $100 Million. Twenty formerly non-CAS-covered contractors receive an award. According to current DCAA thinking, each contractor has a $100 Million contract award, subject to Full CAS coverage and requiring submission (and audit) of a CASB Disclosure Statement.

The contracting officer and the contractors all know that the likely value of the awards to each is much less than $100 Million. But how much less? Should the $100 Million simply be divided by 20--so that each contractor expects only $5 million each? (Note that $5 Million is under the $7.5 Million CAS trigger threshold.) Nothing in the regulations or guidance suggests that is the right approach.

If each order is a separate contract (and there is much to support that notion) then CAS should be applied at the order level not the parent ID/IQ level. But that's not the current state of things. Instead, CAS coverage is determined based on the total value of the ID/IQ contract awarded.

15 hours ago, Don Mansfield said:

What?

The author is making a analogy. As with all analogies, it is imperfect.

13 minutes ago, Retreadfed said:

Why can't you ignore 12.207 which addresses contract types that can be used for prime contracts.  Is it your position that 12.207 applies to subcontracts as well?

Retreadfed,

While your question is spot-on, the reality is that CPSR teams apply FAR rules to contractors all the time.

23 minutes ago, Retreadfed said:

H2H, who is the author of the quote you provided above?

Nobody of any consequence

11 minutes ago, Jacques said:

Nick Sanders is the editor now.  Judging from his LinkedIn biography, he was or is a FAR Bootcamp instructor, so that certainly puts him in good company.  (Sorry if I'm ruining an inside joke.)

You kind of are, but it's an open secret so no big deal.

Thanks, Jamaal, for your comment. It was thought-provoking and led me to some additional research.

Quote

Technically, an IDIQ contract is only a contract to the extent that the work is completely priced and can be unilaterally ordered by the government. To the extent that the IDIQ contract contemplates newly priced offers to perform additional tasks, such work is not part of the originally awarded contract, but is more in the nature of a basic ordering agreement.

Source: Accounting for Government Contracts: The Cost Accounting Standards (LexisNexis) at 3.03[5][a].

Food for thought, huh?

On 6/1/2023 at 2:46 PM, Michelle Adams said:

I am having difficulty finding firm information around whether a CAS determination is applied at the IDIQ level (which is a $0 award) or at the individual Task Order level.  I've found a lot of opinions going both ways but does anyone have any regulatory information around this OR case support one way or the other?   Thank you

It's unclear to me what you mean by "CAS determination." Do you mean a determination regarding CAS coverage? I.e., are you asking whether CAS coverage is determined at the ID/IQ level or at the individual order level? I'm afraid there is very little in the way of regulatory language or case law to help you with this one. As Don pointed out, the FAR Council says CAS coverage is determined at the contract level but that is a silly position, since both TINA coverage and Limitation of Cost/Limitation of Funds requirements are applied at the order level. It's just silly to have a different approach for CAS coverage; but that's what the FAR Council asserted was the case.

I think your statement that an ID/IQ is a "$0 award" is not exactly correct. First of all, there's a guaranteed minimum, right? Second of all, there's a ceiling amount. Finally -- and in my view this is an important data point -- there is the Government estimate regarding how much $ will be awarded to the contractor or contractors. Maybe there's an IGE somewhere. Those might assist you.

But there's almost nothing firm you can rely on. This is has been a known issue for almost 30 years yet the CAS Board has declined to address it. So you are on your own, unfortunately.

I've seen it done before.

There is little argument that the prime contractor is responsible for its subcontracting, including choosing the appropriate subcontract type and flowing down all applicable prime contract clauses. FAR 44.303 identifies 11 things the government looks for when it assesses a contractor's purchasing system. In addition FAR 44.202-2(a) lists 13 things the contracting officer should evaluate with considering whether or not to give consent to a subcontract. Unless award of a commercial item subcontract violates one of those 24 items, there is no prohibition on awarding it, regardless of prime contract type.

I started my career in what is now called "EVMS" but which was then called "C/SCSC" (aka "Two-and-a-half Chicken Shits"). Using EVM and related tools to predict an at-completion variance is not a bad idea, though the at-completion value is never as precise as advocates want you to believe it is.

But all the variance analysis a formal EVM system requires is simply a big waste of time. As somebody once told me, it's like steering a boat by focusing on the wake.

I imagine that the contracting officer would like to establish confidence in the contractor's number. If the contractor is asking for more funds today, how does the contracting officer know the contractor won't be back next week, asking for even more funds to complete the work?