Boof Posted November 15, 2011 Report Share Posted November 15, 2011 We have a CPFF service contract that is being performed in Iraq and Afghanistan. The contractor has millions in what it calls "incurred but not invoiced" costs from as long as 4 years ago. All these costs spread over several years is causing us (and the contractor) to not have a clue how much funds is left on the CLINS or how much the overrun of the orginal cost estimates might be. Plus we need to close out certain fund citations in order to return unused funds to other agencies and don't have a clue as to how much is actually excess. The contractor says the costs were incurred but they can't invoice because they are still hunting for the supporting documentation. How long does a contractor have to invoice these costs? How has other COs dealt with not being able to ascertain the incurred costs versus the cost estimates and amounts incrementally funded. I am new to cost contracts with huge corporations doing work in hostile environments with subs that are years behind in submitting thier invoices to the prime. Any advice in how I can better control, manage and cope with this problem would be appreciated. Link to comment Share on other sites More sharing options...
poisonivvy Posted November 16, 2011 Report Share Posted November 16, 2011 Would be curious to know if your contract has any 52.232-XX clauses in them. Link to comment Share on other sites More sharing options...
Boof Posted November 16, 2011 Author Report Share Posted November 16, 2011 Would be curious to know if your contract has any 52.232-XX clauses in them. Only 52.232-22 Limitation of Funds. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted November 16, 2011 Report Share Posted November 16, 2011 The Limitation of Cost and Limitation of Funds clauses do not set deadlines for invoicing. Neither does the allowable cost and payment clause. My thought is that under the Contract Disputes Act of 1978 the contractor has six years to invoice from the date it incurred the costs. Link to comment Share on other sites More sharing options...
here_2_help Posted November 16, 2011 Report Share Posted November 16, 2011 The Limitation of Cost and Limitation of Funds clauses do not set deadlines for invoicing. Neither does the allowable cost and payment clause. My thought is that under the Contract Disputes Act of 1978 the contractor has six years to invoice from the date it incurred the costs. I don't agree with Vern's assertion. In my view, the CDA provides statutory limits governing when a contractor can assert a claim -- i.e., a non-routine request for payment -- to the Government. I think my position is supported by the definition of "accrual of a claim" found at 33.201. It says (in part), "For liability to be fixed, some injury must have occurred." A routine payment request, either interim or delivery, is not an injury. I can think of several reasons for the contractor to delay invoicing indirect costs (e.g., awaiting DCAA audit). This would be an issue if the interim billing rates were significantly lower than estimated final indirect cost rates (see 52.216-7(e)). However, I can think of only a few reasons to delay invoicing direct costs. The only one that comes to mind on the direct side would be related to a subcontractor invoice or claim to which entitlement was disputed. (That would be treated as an incurred cost for purposes of complying with the LoF Clause, per the Federal Circuit.) Anyway, many contractors cannot invoice 100% of incurred costs for various reasons. There is no time limit, except the one found at 52.216-7(d)(5), which deals with submission of completion vouchers on physically complete contracts after settlement of final indirect cost rates. Hope this helps. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted November 16, 2011 Report Share Posted November 16, 2011 help: You disagree with me, but you have not answered the question: "How long does a contractor have to invoice these costs?" Just to be clear, is your answer that there is no time limit. Can a contractor submit an invoice ten years after the completion of performance? Twenty years? Thirty years? Link to comment Share on other sites More sharing options...
here_2_help Posted November 16, 2011 Report Share Posted November 16, 2011 help:You disagree with me, but you have not answered the question: "How long does a contractor have to invoice these costs?" Just to be clear, is your answer that there is no time limit. Can a contractor submit an invoice ten years after the completion of performance? Twenty years? Thirty years? Vern, I posted: There is no time limit, except the one found at 52.216-7(d)(5), which deals with submission of completion vouchers on physically complete contracts after settlement of final indirect cost rates. H2H Link to comment Share on other sites More sharing options...
poisonivvy Posted November 16, 2011 Report Share Posted November 16, 2011 My thought process was that they have bigger problems than just invoicing and invoicing timelines if the contractor isn't able to provide spend letters and accurate CLIN amounts if they have a Limitation of Cost report duty. Link to comment Share on other sites More sharing options...
woops85 Posted November 16, 2011 Report Share Posted November 16, 2011 What reason does the contractor give for the costs not being invoiced - especially if they are talking about direct costs? If the answer is that their subs haven't invoiced the prime for the sub's direct costs, the prime needs to be asking the sub the same question - why not? I know of at least one large business that is 8 years behind on getting final audited indirect rates from DCAA but that's indirects and they've got no (or very little) control over the process with DCAA. But a direct cost lagging for 4 years seems like poor business practice to me. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted November 16, 2011 Report Share Posted November 16, 2011 Well, I can't think of any clause that sets a deadline and H2H is clearly right about the accrual of a claim, so maybe he's right that there is no deadline. I don't know. Link to comment Share on other sites More sharing options...
here_2_help Posted November 16, 2011 Report Share Posted November 16, 2011 What reason does the contractor give for the costs not being invoiced - especially if they are talking about direct costs? If the answer is that their subs haven't invoiced the prime for the sub's direct costs, the prime needs to be asking the sub the same question - why not? I know of at least one large business that is 8 years behind on getting final audited indirect rates from DCAA but that's indirects and they've got no (or very little) control over the process with DCAA. But a direct cost lagging for 4 years seems like poor business practice to me. Yes. And eight years behind is not at all the worst horror story of which I've heard tell. It seems to me to be fundamentally unfair to assert a time limit on a contractor's ability to invoice, when the government (DCAA) refuses to self-impose a time limit on finalization of incurred costs and indirect rates. Testimony has shown that, not only is DCAA behind, it is falling behind at an increasingly accelerated rate. In other words, the more time that passes, the further behind they get. In the last GFY, DCAA actually cancelled more audits than it completed. (Per testimony before the Commission on Wartime Contracting.) Ponder that workforce productivity metric for a second or two. H2H Link to comment Share on other sites More sharing options...
Boof Posted November 16, 2011 Author Report Share Posted November 16, 2011 Thanks for the discussion on this. It confirms my other research that there is little we can do to get the invoices any faster than the company wants to bill it. I am only concerned with Direct Charges as I am aware that they can't do indirects until DCAA does thier audit. I think they do have some bad business practices and part of the reason for not invoicing is they can't find supporting documentation for the charges. On the other hand having contractors deploy to a hostile environment in time frames that are far too short to organize good procedures is a fact of war but not good Government planning. It just blew me away when one firm said that they were $160M behind in invoicing us at one point. How do you stay in business with that many receivables???? Link to comment Share on other sites More sharing options...
August Posted November 16, 2011 Report Share Posted November 16, 2011 Is there a deadline by which a contractor must invoice for a fixed price contract? Link to comment Share on other sites More sharing options...
here_2_help Posted November 16, 2011 Report Share Posted November 16, 2011 I think they do have some bad business practices and part of the reason for not invoicing is they can't find supporting documentation for the charges. On the other hand having contractors deploy to a hostile environment in time frames that are far too short to organize good procedures is a fact of war but not good Government planning. I draw your attention to ASBCA No. 55354, Oct. 2009, re: BearingPoint. The Court addressed the issue of "inadequate" supporting documentation in the war zone. The Judge wrote-- The contract clauses do not impose the stringent requirements of either 'nice neat little files' that Ms. Kolstrom sought or the contemporaneous records for which AID appears to be arguing. Thus, the Allowable Cost and Payment clause, which was incorporated in the contract, imposed no requirement that BearingPoint substantiate labor costs with time sheets, as Ms. Kolstrom insisted. The Audit and Records clause, which was also part of the contract, looks to ?all records and other evidence sufficient to reflect properly all costs claimed to have been incurred...in performance of this contract.? The clause prescribes no form that the ?records? or the ?other evidence? must take, and in fact we have read the clause more liberally than AID?s position suggests. ? And AID?s Documentation for Payment clause, which was incorporated, contemplates cost reporting ?prepared from the books and records of the Contractor,? without describing the requisite level of detail. These clauses are consistent with FAR 31.201-2(d), which speaks broadly of a contractor?s responsibility to maintain documentation ?adequate to demonstrate that costs claimed...are allocable to the contract.? Perhaps if the parties read the case and applied the findings to the contract at hand (keeping DCAA out of negotiations), a path forward might be found. Hope this helps. Link to comment Share on other sites More sharing options...
DHSGUY Posted November 17, 2011 Report Share Posted November 17, 2011 I draw your attention to ASBCA No. 55354, Oct. 2009, re: BearingPoint. The Court addressed the issue of "inadequate" supporting documentation in the war zone. The Judge wrote--The contract clauses do not impose the stringent requirements of either 'nice neat little files' that Ms. Kolstrom sought or the contemporaneous records for which AID appears to be arguing. Thus, the Allowable Cost and Payment clause, which was incorporated in the contract, imposed no requirement that BearingPoint substantiate labor costs with time sheets, as Ms. Kolstrom insisted. The Audit and Records clause, which was also part of the contract, looks to ?all records and other evidence sufficient to reflect properly all costs claimed to have been incurred...in performance of this contract.? The clause prescribes no form that the ?records? or the ?other evidence? must take, and in fact we have read the clause more liberally than AID?s position suggests. ? And AID?s Documentation for Payment clause, which was incorporated, contemplates cost reporting ?prepared from the books and records of the Contractor,? without describing the requisite level of detail. These clauses are consistent with FAR 31.201-2(d), which speaks broadly of a contractor?s responsibility to maintain documentation ?adequate to demonstrate that costs claimed...are allocable to the contract.? Perhaps if the parties read the case and applied the findings to the contract at hand (keeping DCAA out of negotiations), a path forward might be found. Hope this helps. Another thing to consider, what is the color of this money and when does it cancel? I wouldn't be happy if I were the PCO and had to find current year funding to pay for something that was obligated 8-10+ years ago.. Link to comment Share on other sites More sharing options...
Boof Posted November 17, 2011 Author Report Share Posted November 17, 2011 DHSGUY You are singing to the choir about losing the funds and having to find new money, but the issue of how to force a contractor to invoice by a certain date remains. No one seems to have an answer to that. All, What if on future contracts/task orders we write in a clause that requires all incurred costs to be invoices in 120 days of incurrance. Can we make such a requirement or will we be sure to lose in a protest? If not protested pre-award, can we hold the contractor to the requirement? What do you all think? Link to comment Share on other sites More sharing options...
here_2_help Posted November 18, 2011 Report Share Posted November 18, 2011 DHSGUYYou are singing to the choir about losing the funds and having to find new money, but the issue of how to force a contractor to invoice by a certain date remains. No one seems to have an answer to that. In May 2011 a new set of DFARS clauses (and associated policy statements) were promulgated. I thought one or more of those "Business Systems" clauses might be helpful to COs. It turns out not to be the case. For example, 252.242-7006 (Accounting System Administration, May 2011) lists 18 criteria that comprise an "adequate" contractor accounting system. The closest one to this issue requires billings to be reconcilable to the contractor's cost accounts. That's it. There is nothing regarding timeliness of billings. (And, as I've mentioned, it would seem to be manifestly unfair....) Even if there was a criterion associated with timely submission of invoices, think how the oversight/enforcement would work. The CO would request a DCAA audit. That audit would take from 6 months to 60 years to complete. The CO would receive the report and make an initial determination that the contractor's accounting system was inadequate. The contractor would argue or, at best, concur and submit a corrective action plan. The CO would then make a determination that, notwithstanding the CAP, the accounting system was inadequate. Then, by DCMA policy, that decision would have to run through at least one and perhaps three Review Boards. If the Review Board(s) approved the determination, then the system would be determined to be inadequate and payment withholds would begin. By that point the average CO would have been rotated out/transferred to another assignment.... Or perhaps I'm just cynical? H2H Link to comment Share on other sites More sharing options...
Retreadfed Posted November 18, 2011 Report Share Posted November 18, 2011 DHSGUYYou are singing to the choir about losing the funds and having to find new money, but the issue of how to force a contractor to invoice by a certain date remains. No one seems to have an answer to that. All, What if on future contracts/task orders we write in a clause that requires all incurred costs to be invoices in 120 days of incurrance. Can we make such a requirement or will we be sure to lose in a protest? If not protested pre-award, can we hold the contractor to the requirement? What do you all think? Think this trhough a little bit. There are several reasons why a contractor may not bill for costs incurred in a warzone. You say one of the reasons why they have not billed is because they have not been able to locate adequate supporting data. Have you asiked why they cannot? Could it be that the data was destroyed through hostile action? I know of a contractor here that had its offices in World Trade Center 7 on 9-11. An engine from one of the planes went through its office destroying several records. As a side note, the New York City procurement office was in the World Trade Center. It, and all its records, were destroyed in the attack. Next, have you determined whether all events that permit the determination of the allowability of costs have occurred? For many costs, such as litigation costs covered by 31.205-47, third party liabilities that may be covered by insurance and environmental clean-up costs, allowability cannot be determined for several years after the cost has been incurred. Finally, as Help (I believe) indicated, amounts owed subcontractors would be direct costs of the contract. If the subcontractors have not had final indirect cost rates established, the prime generally cannot close those subcontracts and submit b illings that include those costs. I think you need to do some more fact finding to determine what the real problem is before you develop a solution in search of a problem. Link to comment Share on other sites More sharing options...
Boof Posted May 15, 2012 Author Report Share Posted May 15, 2012 Hi all, I need to resurrect this topic for your thoughts on another angle. The contractor created a special operations unit just for our extremely large contract. This unit does no other work than our contract. This includes their accounting and invoicing departments. What is an indirect cost on some contracts ends up a direct cost for us. Since they are not supposed to invoice for any work done after the task order has expired, we have extended the POP just for the program office to close subs, find lost documents and invoice costs. They are almost at 2 years now charging us thier staff. It is time to extend again and our program office demands we let the task order expire and stop paying for the program office to do this work. They say they don't want to pay his inefficiencies any longer and he can file a certified claim with a final invoice if he chooses. What do you think of this? Is this a viable way to deal with this or is it just creating more trouble. I know it is my issue to solve but I am interested in hearing what everyone thinks. Link to comment Share on other sites More sharing options...
woops85 Posted May 15, 2012 Report Share Posted May 15, 2012 Initial instinct is to agree with the program office but I'd probably do a quick cost analysis on what you've spent on the special unit as direct costs over the last few months versus what you spent on OH and G&A charges during the last few months of actual performance. And then factor in what measurable progress has been made on getting the various incurred but not billed costs reduced. The numbers may tell you it is worth the money to extend again. Link to comment Share on other sites More sharing options...
Voxx Posted May 15, 2012 Report Share Posted May 15, 2012 Boof, How long will it take them to 'find' these lost documents. I wonder if they will keep needing additional time all the way up until you fund them no more, then poof they have found the missing documents. So part of it would be how much is it currently costing you and how much are you willing to keep paying this. Do you even have an idea of what their progress is on what they are doing to finish this contract off? Is there an end in sight? Link to comment Share on other sites More sharing options...
here_2_help Posted May 15, 2012 Report Share Posted May 15, 2012 I was going to suggest going for a FFP mod and then using "accord and satisfaction" to stop any future cost claims. But the problem is that I don't know what the contractor's issues are. Is everybody waiting for a DCAA audit of the subKs in order to finalize rates/costs? (If so, you will be waiting a long, long time.) Is the missing documentation likely to be found? Has the contractor shown you a project schedule that has some credibility to it? It's hard to recommend a good course of action when the circumstances aren't known. Wish I could help more. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted May 15, 2012 Report Share Posted May 15, 2012 The contractor created a special operations unit just for our extremely large contract. This unit does no other work than our contract... Since they are not supposed to invoice for any work done after the task order has expired, we have extended the POP just for the program office to close subs, find lost documents and invoice costs. They are almost at 2 years now charging us thier staff. It is time to extend again and our program office demands we let the task order expire and stop paying for the program office to do this work. They say they don't want to pay his inefficiencies any longer and he can file a certified claim with a final invoice if he chooses. I'm not sure that I understand. You say: "[O]ur program office demands we let the task order expire and stop paying for the program office to do this work." You use the term "program office" twice in that sentence, but seemingly refer to different entities. Here is what I do understand: The contractor has formed some kind of work unit and charges the cost of that unit directly to the task order. The unit's work includes "close subs, find lost documents and invoice costs." You keep extending the task order so that the unit can finish its work. (That sounds to me like a "do loop." As long as you extend the task, how can it ever finish its work?) For whom is that unit working? Who gets the benefit of its work? Link to comment Share on other sites More sharing options...
gittist Posted May 6, 2015 Report Share Posted May 6, 2015 DHSGUY You are singing to the choir about losing the funds and having to find new money, but the issue of how to force a contractor to invoice by a certain date remains. No one seems to have an answer to that. All, What if on future contracts/task orders we write in a clause that requires all incurred costs to be invoices in 120 days of incurrance. Can we make such a requirement or will we be sure to lose in a protest? If not protested pre-award, can we hold the contractor to the requirement? What do you all think? This was posted a few years ago and I'm wondering if there's any update? Is there anything requiring vendors to invoice within XX days of physical completion of a contract or any other happening (like the end of an option period). I work with some behemoth companies for which I'm trying to close contracts/award for fiscal year 2013, 2014 and sometimes before that. I'm having difficulty in fathoming why when you have a FFP award for 12 months at $X.XX , they can't submitt final invoices withot having to beg for 10 or 12 months? So much for meeting close out standards. Link to comment Share on other sites More sharing options...
Retreadfed Posted May 6, 2015 Report Share Posted May 6, 2015 gittist, look at FAR 52.216-7 which requires contractors to submit completion vouchers within 120 days after costs for all years covered by a contract have been settled. The big hang-up on this now is DCAA audits of proposed final indirect cost rates. Also, look at 52.232-7 which requires a contractor to submit a completion voucher on T&M/LH contracts within 120 days after the contract is complete. Link to comment Share on other sites More sharing options...
Recommended Posts