Estimating travel in an FFP NTE CLIN

[Tim_H_]

I can't seem to find a good answer to my specific questions, so please bear with me if any of this is dumb.

My contract has 2 CLINS, both are FFP.  One is for labor and one is travel (it is FFP NTE).  My issue is that our KO insists that we not only bid on travel each year, but provide the methodology we use to bid on the travel.  Keep in mind that all travel can only be incurred after receiving express written approval from our COR.  I've tried explaining that since we don't know exactly where or when we're going to be expected to travel, and we don't know how much advance notice we will get for the travel, that the best method we can use to generate an estimate is to compare overall travel expectations for the upcoming year with previous years and make a best guess.  Our KO does not accept this methodology--he wants estimates of trips (with unspecified locations other than generalized areas of the world) built up to show our total estimated cost.

So my questions are:

1. Is there anything I can point him to that stipulates that the government has the authority to fund the CLIN without an estimate from us?  It's an NTE number anyway, the government approves each trip, and we can only bill cost, so I fail to see any risk to the government.  I understand that doesn't necessarily make this possible, but it's logical.

2. Is there some guideline for evaluating travel cost proposals so I can ensure our methodology aligns with requirements?

If no to both, does anybody have a suggestion for how to handle this situation?  

[C Culham]

On 12/7/2023 at 5:44 PM, Tim_H_ said:

If no to both, does anybody have a suggestion for how to handle this situation?

"If the government can't or won't tell offerors how often they'll have to travel, where they'll have to go, and how long they'll have to stay, then offerors cannot intelligently propose travel costs. Demanding that they do so and then trying to evaluate competitively proposed travel costs in such a case would be unfair and, frankly, stupid.

If you can't specify travel, don't make offerors propose travel costs. Instead, make travel a cost-reimbursement no-fee line item CLIN and specify the travel budget in the solicitation, so it will be the same for all offerors and won't have to be evaluated. Provide for the CO to increase the travel budget unilaterally at his or her discretion.

Alternatively, provide for travel to be fixed-priced on an ad hoc basis during the course of performance, as travel requirements become known. That would work sort of like IDIQ, except that it is not pre-priced. You'd have to write a clause for that. Don't evaluate travel costs during source selection.

Alternatively, if you don't want to do cost-reimbursement and feel that you absolutely have to evaluate travel costs, then (a) establish "standard trip" CLINs of one day, two days, etc., varied by destination, if necessary, ( specify estimated quantities for each CLIN, and ( c) tell offerors to propose standard trip fixed unit prices and total amounts. Then evaluate travel as part of the total fixed price. There is some risk in that for the offerors, but it would be manageable."

Quote by Vern Edwards.  Reference - which  you might want to read in full.

 

[Don Mansfield]

On 12/7/2023 at 5:44 PM, Tim_H_ said:

1. Is there anything I can point him to that stipulates that the government has the authority to fund the CLIN without an estimate from us?  It's an NTE number anyway, the government approves each trip, and we can only bill cost, so I fail to see any risk to the government.  I understand that doesn't necessarily make this possible, but it's logical.

2. Is there some guideline for evaluating travel cost proposals so I can ensure our methodology aligns with requirements?

If no to both, does anybody have a suggestion for how to handle this situation?  

1. No, nothing that precise that I know of.

2. Yes, see Volume 3, Chapter 8, Section 8.2.4, of the Contract Pricing Reference Guides.

[Jamaal Valentine]

On 12/7/2023 at 5:44 PM, Tim_H_ said:

My contract has 2 CLINS, both are FFP.  One is for labor and one is travel (it is FFP NTE).  My issue is that our KO insists that we not only bid on travel each year, but provide the methodology we use to bid on the travel. 

You have a contract. How are the base travel CLINs setup? How are the option travel CLINs setup? I presume they are priced and were evaluated at award. Maybe they are undefinitized or under an unpriced indefinite-delivery contract.

 Answers to these questions could help shape the situation and a way forward. Bidding on CLINs, including options, doesn’t make sense at first blush.

[C Culham]

2 hours ago, Don Mansfield said:

2. Yes, see Volume 3, Chapter 8, Section 8.2.4, of the Contract Pricing Reference Guides.

Based on a FFP contract would Volume 3 be applicable or would it be Volume 1?

[joel hoffman]

Please clarify. You apparently said that you have a contract but that you have to “bid on travel each year” and that you must “provide the methodology [you] use to bid on the travel.”

On 12/7/2023 at 7:44 PM, Tim_H_ said:

My contract has 2 CLINS, both are FFP.  One is for labor and one is travel (it is FFP NTE).  My issue is that our KO insists that we not only bid on travel each year, but provide the methodology we use to bid on the travel.

 I don’t understand what you meant by the term “bid”. A bid or bidding are specific terms used for one type of competitive acquisition to win a new (usually single award contract) - with no negotiations involved. It is called “competitive bidding”.

Is this an existing single award contract, such as a Task Order ( e.g., Indefinite Delivery/Indefinite Quantity) contract with only pre-priced labor line items?

If so, you seem to be proposing and negotiating a line item for travel, right? When you say it is FFP NTE, you seem to indicate that there is a plugged NTE line item and the KO wants another number. If it is still going to be an NTE, what’s the reason for revising it??

Regardless, if you are NEGOTIATING the line item, you should be discussing it together in depth, until there is mutual understanding of how it works and come to an agreement on the method and the pricing. That’s my suggestion on how to handle the situation.

[Don Mansfield]

11 hours ago, C Culham said:

Based on a FFP contract would Volume 3 be applicable or would it be Volume 1?

His question #2 was specifically about travel costs.

[C Culham]

15 minutes ago, Don Mansfield said:

costs.

Got it.

 

[Voyager]

12 hours ago, C Culham said:

Based on a FFP contract would Volume 3 ["Cost Analysis"] be applicable or would it be Volume 1 ["Price Analysis"]?

Reminder: See FAR 15.404-1(a).

Quote

(3) Cost analysis shall be used to evaluate the reasonableness of individual cost elements when certified cost or pricing data are required. Price analysis should be used to verify that the overall price offered is fair and reasonable.

(4) Cost analysis may also be used to evaluate data other than certified cost or pricing data to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone.

Being "Based on a FFP contract" is irrelevant.  The award being based on the agency's obtainment of cost data, as required by TINA or as requested by the CO (if the proposal is excepted from TINA), is what drives the decision to use cost vs. price analysis.

[C Culham]

2 hours ago, Don Mansfield said:

costs.

Got it.

1 hour ago, Voyager said:

Reminder: See FAR 15.404-1(a).

Yep well aware of all.  Yet your exceprt leaves out important discussion within the FAR that suggests strongly that a FFP procurment is conducted when there is adequate competition to help determine price reasonableness.

 

1 hour ago, Voyager said:

when a fair and reasonable price cannot be determined through price analysis alone.

The questions raised by others might give way to a response by the OP that price analysis alone is not appropriate (no competition).   If competitive in truth I believe the quote by Vern that I posted is most important as I view the scenerio as stated to be one where the agency is demanding something that is as stated -

On 12/7/2023 at 5:44 PM, Tim_H_ said:

-he wants estimates of trips (with unspecified locations other than generalized areas of the world) built up to show our total estimated cost.

"stupid."   

The alternative - Let the OP use any methodolgy he/she wants to propose the NTE "price".  Let the CO use any methodology he/she wants to determine "price" reasonableness.   In this instant situation the CO in my view is being lazy and he/she could do exactly what is being demanded of the contractor via a independent government cost estimate.  

Reference - FAR 31.102.

[Tim_H]

On 12/12/2023 at 7:23 PM, Don Mansfield said:

2. Yes, see Volume 3, Chapter 8, Section 8.2.4, of the Contract Pricing Reference Guides.

This is what I was looking for; probably a well-known reference but, well...there's a reason I'm in the For Beginners Only area.  Thank you!

[Tim_H]

On 12/13/2023 at 7:54 AM, joel hoffman said:

Please clarify. You apparently said that you have a contract but that you have to “bid on travel each year” and that you must “provide the methodology [you] use to bid on the travel.”

 I don’t understand what you meant by the term “bid”. A bid or bidding are specific terms used for one type of competitive acquisition to win a new (usually single award contract) - with no negotiations involved. It is called “competitive bidding”.

Is this an existing single award contract, such as a Task Order ( e.g., Indefinite Delivery/Indefinite Quantity) contract with only pre-priced labor line items?

If so, you seem to be proposing and negotiating a line item for travel, right? When you say it is FFP NTE, you seem to indicate that there is a plugged NTE line item and the KO wants another number. If it is still going to be an NTE, what’s the reason for revising it??

Regardless, if you are NEGOTIATING the line item, you should be discussing it together in depth, until there is mutual understanding of how it works and come to an agreement on the method and the pricing. That’s my suggestion on how to handle the situation.

Poor choice of words, I apologize.  This is an existing single award contract exactly as you hypothesized...Task Order IDIQ contract with pre-priced labor categories. The IDIQ award has an NTE amount for the travel CLIN, but there is no year-by-year travel amount set.  

I like your suggestion to discuss the topic in depth to reach a mutual understanding and agreement on method and pricing for travel.  It's a no-brainer, I was just too focused on the insane request to think it through.  Thanks for being a much more logical set of eyes on this, I appreciate it.

[Tim_H]

On 12/13/2023 at 12:11 PM, C Culham said:

In this instant situation the CO in my view is being lazy and he/she could do exactly what is being demanded of the contractor via a independent government cost estimate.  

I think the crux of it is that it's just not possible given the lack of data available to all, so as mentioned earlier, I'm going to try to discuss with him and work together to come up with an agreed-upon methodology. 

[C Culham]

14 minutes ago, Tim_H said:

I think the crux of it is that it's just not possible given the lack of data available to all, so as mentioned earlier, I'm going to try to discuss with him and work together to come up with an agreed-upon methodology. 

Now I will admit that I have not thought this through completely.  Yet this thought came to mind in reading current posts.  The parent IDIQ purchases nothing but the Task Orders do.  Now I have to go sit down, think about your concerns and my comments but I still think this..the demand for specifics in pricing the NTE seems out of sync.

[Voyager]

You have a SATOC, what use is it if you cannot freely negotiate using actual data, both before and after Task Order awards?  The principled CO will pay for what the government receives and that will be that.  This CO is not constrained by the scope of the competition.

[joel hoffman]

12 hours ago, Tim_H said:

Poor choice of words, I apologize.  This is an existing single award contract exactly as you hypothesized...Task Order IDIQ contract with pre-priced labor categories. The IDIQ award has an NTE amount for the travel CLIN, but there is no year-by-year travel amount set.  

I like your suggestion to discuss the topic in depth to reach a mutual understanding and agreement on method and pricing for travel.  It's a no-brainer, I was just too focused on the insane request to think it through.  Thanks for being a much more logical set of eyes on this, I appreciate it.

Thanks for your clarification, Tim. Two more  clarification questions.  Are you negotiating

1. travel costs (or pricing) at the contract level or at the task order level?  I’m guessing at the task order level and, if so:

2. Will task order level pricing be actual, allowable costs, not to exceed a capped limit? Looked that way per your original post. Or will it be strictly FFP?

My suggestion is still valid and I agree with Vogager, directly above.

You are entitled to full understanding of the government’s intent and concerns and both parties should be able to come to a mutually agreeable and acceptable approach. The government should consider your concerns about lack of clear scope and risk due to undefined travel times, frequency, length or destinations.

Remind the KO that the government appears to have sole control over ordering and authorizing any travel.

A FFP line item amount, then drawing from that amount based upon actual, allowable costs, with NTE ceiling costs, not subject to adjustment for an indeterminable travel nature and frequency, seems to an untenable risk - unless you add adequate risk to the negotiated price.

Risk that is priced as a contingency is generally unallowable for the contractor to include in a FFP line item.

Likewise, putting a non-adjustable cap (NTE) on unknown amount of government controlled and directed travel is equally unacceptable.

My suggestion is a line item with an estimated amount of costs for authorized travel to draw from,  that is adjustable,  if conditions necessitate. The government has reasonable control over the line item.

This is a sole source contract, so concerns over competition scope and conditions aren’t evident.

Negotiate with the purpose of  a “Win - Win or No Deal” outcome (per Stephen R. Covey’s “Seven Habits of Highly Successful People”). I always tried to do that.

Good luck. 

[General.Zhukov]

A little off-topic, apologies.

I am reading this thread here and don't understand how a FFP NTE Line Item (CLIN) for travel reimbursement is materially different from cost-reimbursement (no fee).  

1 hour ago, joel hoffman said:

A FFP line item amount, then drawing from that amount based upon actual, allowable costs, with NTE ceiling costs, not subject to adjustment for an indeterminable travel nature and frequency, seems to an untenable risk - unless you add adequate risk to the negotiated price.

This quote is hinting at the difference, but I don't quite get it.

[joel hoffman]

I understand - I’ve often seen a CLIN for travel or some other part of the works, like extensions of utilities by the utility companies or railroad crossings performed by the railroad for the contractor with a FFP plugged number for inclusion in a total obligated contract maximum price based upon an preliminary estimated amount . It can effectively serve as an NTE limitation.  Then the government would place conditions upon payment, such as paying the actual costs up to the plugged number.

But the scope or work and necessary amount of travel was generally defined and/or controllable. If more travel was necessary, the government would modify the line item amount.

I guess that it is the same as or similar to a Cost reimbursement line item.

 

[Voyager]

3 hours ago, General.Zhukov said:

I am reading this thread here and don't understand how a FFP NTE Line Item (CLIN) for travel reimbursement is materially different from cost-reimbursement (no fee).  

I don't know about the OP's negotiations, but you could set the unit price firm and only use an estimated quantity at award.  You'd have to write a clause then, of course.

@joel hoffman, I certainly wouldn't write the clause to carte-blanche pay actual costs, because the OP says, "My contract has 2 CLINS, both are FFP."  See FAR Subpart 16.2, "Fixed-Price Contracts":

Quote

16.201 General.

(a) Fixed-price types of contracts provide for a firm price or, in appropriate cases, an adjustable price. Fixed-price contracts providing for an adjustable price may include a ceiling price, a target price (including target cost), or both. Unless otherwise specified in the contract, the ceiling price or target price is subject to adjustment only by operation of contract clauses providing for equitable adjustment or other revision of the contract price under stated circumstances...

* * * *

16.202 Firm-fixed-price contracts.

16.202-1 Description.

A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract...

As you can see, the clause must be consistent with FAR 16.202-1.  That's why you write it to only allow the quantity to vary.  This is consistent with Vern's quoted guidance C Culham provided above.  For further reading, see also: 

 

[joel hoffman]

19 minutes ago, Voyager said:

As you can see, the clause must be consistent with FAR 16.202-1.  That's why you write it to only allow the quantity to vary.  This is consistent with Vern's quoted guidance C Culham provided above.

One can include a CR or other specially crafted CLIN for incidental type work or efforts that aren’t possible to reasonably estimate in a FFP contract. When a utility or railroad must perform some incidental work in a contract but refuses to be bound to a fixed price or fixed unit price for any extended period or otherwise can’t provide a final estimate/and or binding up front price, we would put our best estimate or the RR’s or Utility’s ROM in a plugged CLIN for every offeror to use.

In this thread, the government has control over purposes of, numbers of, destinations and lengths of each trip. The contractor doesn’t have that same control. 

[Voyager]

Ah but I suspect the agency's soliciting a FFP for undefined travel requirements was a function of FAR 16.504(c)(1)(ii)(D)(1)(ii) requirements under a SATOC.  CR is likely off the table.

Quote

(D)

(1) No task or delivery order contract in an amount estimated to exceed $100 million (including all options) may be awarded to a single source unless the head of the agency determines in writing that—

...

(ii) The contract provides only for firm-fixed price (see 16.202) task or delivery orders for—

(A) Products for which unit prices are established in the contract; or

(B) Services for which prices are established in the contract for the specific tasks to be performed;

Either that or it’s a commercial service.

[joel hoffman]

2 hours ago, Voyager said:

Ah but I suspect the agency's soliciting a FFP for undefined travel requirements was a function of FAR 16.504(c)(1)(ii)(D)(1)(ii) requirements under a SATOC.  CR is likely off the table.

 

I’m betting that if this task order contract exceeds $100 million, Tim H. wouldn't be soliciting advice on a website. 🤠