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:o Huh?! You cannot use the changes clause at FAR 52.243-1 to order hours! Read the clause. It says what a CO can do with a change order. Where does it say anything about being able to issue a change order to order hours?

Really, contractor100, read the clauses. :angry:

Sorry I wasn't clear. What I am saying is the the CO is constructively issuing a change order, or possible a partial termination, and I would like to issue a claim on either theory.

COs: Yes, your LOE in your cost proposal was 20800 hours. But, we don't need that many hours. Bill us and pay for 15000. [numbers illustrative only]

C100: But, it is FPLOE, you have to order the whole amount unless you issue a change order.

CO's: We suppose if we issue a change order, though, you may make a claim.

C100: I might.

CO's: Well you can't unless we issue a change order.

C100: I say you have issued a change order if you won't pay my invoice for the full 20800 hours &tc, &tc

mrsbadexample,

If you bid and win, please make sure the LOE is in the contract or that your cost proposal is incorporated into the contract...

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Sorry I wasn't clear. What I am saying is the the CO is constructively issuing a change order, or possible a partial termination, and I would like to issue a claim on either theory.

COs: Yes, your LOE in your cost proposal was 20800 hours. But, we don't need that many hours. Bill us and pay for 15000. [numbers illustrative only]

C100: But, it is FPLOE, you have to order the whole amount unless you issue a change order.

CO's: We suppose if we issue a change order, though, you may make a claim.

C100: I might.

CO's: Well you can't unless we issue a change order.

C100: I say you have issued a change order if you won't pay my invoice for the full 20800 hours &tc, &tc

Well, you can't invoice them for the full 20800 hours unless you deliver the full 20800 hours. My question is, without a change order, contract modification, can you just keep providing the hours even if they don't want them? I suppose if you are working at a government facility, or if you have no work that you could be doing, that might be difficult... That's a problem with using this contract type as a substitute for T&M rather than for it's real purpose as Vern has stated.

mrsbadexample,

If you bid and win, please make sure the LOE is in the contract or that your cost proposal is incorporated into the contract...

Absolutely.
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Well, you can't invoice them for the full 20800 hours unless you deliver the full 20800 hours. My question is, without a change order, can you just keep providing the hours even if they don't want them? I suppose if you are working at a government facility, or if you have no work that you could be doing, that might be difficult... That's a problem with using this contract type as a substitute for T&M rather than for it's real purpose as Vern has stated.

Absolutely.

Yes, exactly.

If they lock you out, maybe it is interference with contractor's performance?

These FFP (Fake Fix Price) contracts really are a mess.

All the ones I've seen (15 maybe?) have a CR line item for ODCs, BTW, but none was commercial.

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Guest Vern Edwards

contractor100:

You have written very confusingly. It is not clear to me what you have been saying. But if your contract requires delivery of a specified level of effort for a firm-fixed-price and the CO is now telling you that the agency no longer wants that level of effort, but wants less, then the CO must partially terminate the contract for convenience and give you a chance to submit a termination settlement proposal. The CO cannot reduce the level of effort by change order pursuant to FAR 52.243-1.

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Yes, exactly.

If they lock you out, maybe it is interference with contractor's performance?

These FFP (Fake Fix Price) contracts really are a mess.

All the ones I've seen (15 maybe?) have a CR line item for ODCs, BTW, but none was commercial.

I would think that they would have to issue a bilateral mod to the contract to change the LOE, or else terminate the contract for convenience. I'm not sure why your CO would be reluctant to do that.

By the way, I edited my earlier post. I meant to say contract mod, not change order (per 52.243-1).

We've asked the question about non-labor costs. I'll be curious to see the response.

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I have issued FFP LOE type contracts that contain CLINs for individual labor categories with hourly rates. These contracts differ from Labor hour type contracts because the contractor is providing a Firm level of effort, as opposed to under a Labor hour type where the contractor is providing labor at fixed rates up to the specified ceiling. Back when WIFCON first started, there was a raging debate regarding the difference between Labor Hour and FFP LOE type contracts. I still maintain that a FFP LOE contains a set (FIRM) number of hours and Fixed rates; while, conversely, a labor hour type contains an estimated # of hours and a ceiling amount - under the Labor Hour, you can "rob Peter to pay Paul" meaning that you can work more or less hours in any labor category up to the ceiling amount. Subsequently, pricing a FFP LOE type contract on a per category/per hour basis is ideal if your LOE is budget-driven and you have on-site surveillance type efforts.

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Guest Vern Edwards

A "true" FFP LOE contract is not priced by the hour. It is priced on a lump sum basis. However, the LOE is sometimes broken down by labor category. So you have a total LOE of 20,000 hours broken down as follows:

5,000 scientist

7,000 sr. engineer

10,000 engineer

3,000 engineer technician

Administrative and clerical work would not be included in the LOE, but would be included in the fixed price.

The parties might agree on labor rates for each category to facilitate adjustments in the future, if any. However, the contractor is obligated to deliver those levels of effort in order to earn the FFP. The contractor is either paid upon completion or given progress payments based on cost or performance-based payment. Monthly payments are a possibility, but in a "true" LOE contract the work is not segregable by month and the level of effort is not expended at a constant rate month by month.

A contract can be written that specifies expenditure of an LOE at a constant monthly rate for segregable services. These are sometimes used for support services.

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A "true" FFP LOE contract requires the contractor to deliver a level of effort in the performance of specified work. The contractor's obligation is fulfilled by doing the specified work and delivering the level of effort, which can be stated in terms of hours or other units of "effort," within the period of performance. (A level of effort can be stipulated in terms of FTEs.)

Here's another question: If the LOE is stipulated in terms of FTEs, is there a standard or generally accepted definition of an FTE? The number of hours each employee will actually perform direct work on the contract, even if they are full-time and only working on that contract, will vary based on how much sick/vacation time they take. If one of the employees is out on medical leave for a couple of weeks, and assuming the Government does not want the Contractor to replace him with another employee for that period, would that mean that the LOE had not been satisfied? Contractor100's example above used 2080 hours per year per employee, but I have to assume that those employees had some holiday/sick/vacation time. I have a feeling that I'm going to need a definition of an FTE in my contract as well...

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By the way, why can't one search for a three letter word on this forum? Off topic, I know, but I've been trying to search for FTE, FFP-LOE, etc. for the last two days. There should be a no-three-or-less-letter-acronym rule in the forum policies if they aren't searchable. (Nobody on here uses many acronyms, anyway, right? :))

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  • 1 year later...

When I was researching the viability of FFP-LOE on commercial contracts I got a very different answer from Ask A Professor:

https://dap.dau.mil/aap/pages/qdetails.aspx?cgiSubjectAreaID=21&cgiQuestionID=21407

Title - Can FFP-LOE be used for Commercial Contracts?

Question -

FAR 16.201 states that the PCO must use FFP (or fixed-price with economic price adjustment) contracts when acquiring commercial items. Is FFP-LOE considered a subset of FFP, and can it be used to acquire commercial services?

Scenario - A requirement for an investigational study in the R&D arena has been determined to be appropriate for the Firm-Fixed-Price, Level of Effort (FFP-LOE) type contract. The research services have also been determined to be commercial in nature.

Posted - 10/5/2007 12:00:00 AM

Subject Area - Contracting - Commercial

Updated 9/13/2012

Firm Fixed Price Level of Effort contracts are not allowed as a contract type for the acquisition of commercial items. According to FAR 12.207, the only contract types allowed are firm fixed price (FFP), Fixed Price with Economic Price Adjustment (FP-EPA), Time and Materials (T&M), Labor Hour (LH), IDIQ’s that are FFP, FP-EPA, T&M or LH. These contract types may have an award fee, performance incentive or delivery incentive as long as they are based solely on factors other than cost. You are specifically asking about Firm Fixed Price Level of Effort(FFPLOE) contracts. These types of contracts are not found on the list described in FAR 12.207. The confusion is whether or not FFPLOE contracts could fall under the category of FFP contracts. Although FFPLOE uses "firm fixed price" in its name, there are many differences between these two contract types.

A FFP contract specifies a contractor output of an acceptable product or service as a condition for payment by the Gov’t. A FFPLOE contract only specifies the type of work the contractor must do in a specified period of time. The contractor does not have to deliver an acceptable product or service to get paid. Many experts would say that the FFPLOE is more like a Cost Reimbursement or Time and Materials contract than a Fixed Price contract. Because these two contract types (FFP/FFPLOE) are so significantly different, it is incorrect to assume that the FFPLOE is a type of FFP contract covered under the FFP category described at FAR 12.207 (a). If it were to be used as a contract type for the procurement of commercial items under FAR 12, it would have been specifically listed.

In addition, I have talked to both the DFARS Council lawyer and the OSD Contracting Policy Office expert. They both feel certain that FFPLOE contracts were specifically not included in the FAR 12.207 list and thus are not eligible for the procurement of commercial items using FAR 12.

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The confusion goes all the way to the Pentagon!

The answer is a classic case of misunderstanding the different words and terms used to describe contracts. The terms "firm-fixed-price", "cost-plus-fixed-fee", etc., describe a contract's cost or pricing arrangement. The term "level-of-effort" and the words "term" and "completion" do not describe a contract's cost or pricing arrangement (one attribute of a contract)--they indicate the method used to describe the work in the contract (a different attribute of a contract). Knowing whether a contract is "completion" or "level-of-effort" tells you nothing about its cost or pricing arrangement and vice-versa. FAR 12.207 limits the types of pricing arrangements that may be used when acquiring commercial items. It does not limit the method used to describe the work required by the contract.

Let's say there was a rule that said the only types of vehicles permitted on the highway were:

1) cars;

2) trucks; and

3) motorcylces.

This rule describes vehicles in terms of their physical configuration.

Question: Am I allowed to drive a red truck on the highway? If we follow the logic of the DAR Council lawyer and the OSD Contracting Policy Office expert, the answer would be "no" because "red truck" is not specifically listed. Do you think that's correct?

Read this before you answer: http://www.wifcon.com/discussion/index.php?/blog/6/entry-1897-describing-contract-type-watch-what-you-say/

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  • 3 weeks later...
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