Cost Overrun = UCA?

[Banana Pudding]

I'll first say I think this is more about semantics...but it has also driven which approval chain to use.

Givens:

1. Cost Reimbursement contract. 
2. Cost overrun is imminent. 
3. Pretend you're just looking at the FAR.  Not DoD or DFARS....which has a LOT of SOPs for Undefinitized Contract Actions (UCAs).  

When I pair the last few words of FAR 16.301-1 "...ceiling that the contractor may not exceed without approval of the contracting officer" with the language in FAR 52.232-20 (Limitation of Cost), it sure seems that the Government has the option to modify existing cost ceiling after negotiation.

Now, if the modification remains within the scope and under the terms of the original contract, I would not call this a "contract action", and thereby not associate the "UCA" term with it.  I'm pulling that logic straight from FAR 52.232-16, which does a solid job defining what a contract action is.  Problem is that clause would never apply, given FAR subpart 32.5 (where it is prescribed) does not apply to Cost Reimbursement contracts.

I have not found success in GAO discerning any difference...they call everything not defined a UCA. 

Any thoughts?

[C Culham]

On 4/28/2023 at 2:51 PM, Banana Pudding said:

ny thoughts?

You are trying to relate to different principles of the FAR.   For UCA with regards to FAR think Letter Contract and read the discussion there.   You say you have a contract, therefore you have contract terms, statement of work or other specifications, and agreement on price.   Adjusting the ceiling is a contract modification with regard to funding the existing definitized contract not creating a undefinitized element to that contract.

[here_2_help]

I would add to C Culham's comment that IAW 52.232-20(c), the contractor should have provided the CO with the amount of additional funds necessary to complete the work. The CO can accept that amount or not, but there should be no reason to have the contractor continue to work without providing additional funding. To do so effectively defeats the purpose of the clause's advance notification requirement, which is to provide the customer with sufficient time to find the finds or to decide to tell the contractor no further funds will be forthcoming.

[Retreadfed]

2 hours ago, here_2_help said:

The CO can accept that amount or not, but there should be no reason to have the contractor continue to work without providing additional funding.

Under what authority could the government require the contractor to continue to work once the estimated cost of the contract has been reached?

[here_2_help]

8 minutes ago, Retreadfed said:

Under what authority could the government require the contractor to continue to work once the estimated cost of the contract has been reached?

By issuing a UCA for the requested funding. At least, that was my impression as to what the OP was thinking about.

[Retreadfed]

On 4/28/2023 at 5:51 PM, Banana Pudding said:

Any thoughts?

What is your specific question?

[C Culham]

23 hours ago, here_2_help said:

By issuing a UCA for the requested funding

I think UCA is not the appropriate term.

"To expedite work on pressing government projects, the government can issue what are called “letter contracts” or “Undefinitized Contract Actions” (“UCAs”). UCAs allow contractors to begin work before the parties have reached a final agreement on contract terms, like price. The price is expected to be converted into a firm price—or “definitized”—in a timely manner."   https://cafc.uscourts.gov/opinions-orders/22-1035.OPINION.4-25-2023_2116161.pdf

"When a requirement needs to be met quickly and there is insufficient time to use normal contracting vehicles, federal regulations permit the use of a UCA. UCAs are binding commitments used when the government needs the contractor to start work immediately and there is insufficient time to negotiate all of the terms and conditions for a contract. UCAs can be entered into via different contract vehicles, such as a letter contract (a stand-alone contract), a task or delivery order issued against a preestablished umbrella contract, or a modification to an already established contract." https://www.gao.gov/assets/gao-07-559.pdf 

If the modification to adjust funding/ceiling remains within the scope and under the terms of the original contract, it can be a  "contract action", but I have trouble calling it a UCA.   

[Retreadfed]

18 minutes ago, C Culham said:

If the modification to adjust funding/ceiling remains within the scope and under the terms of the original contract, it can be a  "contract action",

Carl, what is your definition of "contract action" in this context and what is the source of that definition?

[C Culham]

Just now, Retreadfed said:

Carl, what is your definition of "contract action" in this context and what is the source of that definition?

FAR 4.601

[Vern Edwards]

On 5/1/2023 at 10:48 AM, here_2_help said:

By issuing a UCA for the requested funding.

If we are talking about a modification the sole purpose of which is to increase the estimated cost (not "ceiling") of, and the obligation of, a fully-funded cost-reimbursement contract. The same goes  for a mod to increase the total amount allotted (not "ceiling") to an incrementally-funded cost-reimbursement contract, and the funds obligated, then the mod cannot be an undefinitized (incomplete) contract action.

An undefinitized contract action is an incomplete contractual agreement under which something remains to be settled after the contractor has commenced work, usually the price. The classic examples are letter contracts and change orders.

A mod that does nothing more than increases numbers and funding is not incomplete. It is not undefinitized.

Think about it.