Topic deleted

[TonyWanKenobi]

question deleted.

[Don Mansfield]

Let me see if I understand. The IDIQ contract contains labor rates. When you negotiate the estimated cost of a task order, you use the labor rates stated in the IDIQ contract. You then apply a predetermined % to the estimate to arrive at a fixed fee.

The contractor thinks that the labor rates in the IDIQ contract are too low (i.e., they estimate their actual labor rates are going to be higher).

Do I have it right?

[TonyWanKenobi]

Yes. The RFP also stated the established rates would be used to estimate future TO, which they took no exception.     

 

 

 

 

 

[Retreadfed]

Tony, how is this arrangement not a cost plus a percentage of cost contract?

2 hours ago, TonyWanKenobi said:

Additionally, my understanding is that any costs incurred in excess of WD or CBA increases, is covered if they are allowable.

Can you clarify this statement?  Are you talking about a cost reimbursement contract or some other type of contract?  Also is FAR 52.222-43 in the contract?

[Don Mansfield]

51 minutes ago, TonyWanKenobi said:

Yes. The RFP also stated the established rates would be used to estimate future TO, which they took no exception.

If the rates aren't maximums, I don't see what contractual significance they have. It seems like they are informational.

If I were negotiating the estimated cost of the task order, my goal would be to reach an agreement on what the actual cost is most likely to be. If the rates stated in the contract weren't what I thought the actual rates were going to be, then I wouldn't use them in developing my position.

Having said that, agreeing to a higher estimated cost does not necessarily mean you are agreeing to a higher fixed fee. These are two different points of negotiation.

[TonyWanKenobi]

19 minutes ago, Retreadfed said:

Tony, how is this arrangement not a cost plus a percentage of cost contract?

Can you clarify this statement?  Are you talking about a cost reimbursement contract or some other type of contract?  Also is FAR 52.222-43 in the contract?

I apologize, first time posting. For CPFF task orders, when the contract was established, the contractor's proposed rates served as the cost basis and method for establishing the fee for future task orders throughout the contract's duration. Even if the contractor experiences excess costs due to WD or CBA increases, the fee would still be calculated using the same methodology, labor categories, and rates established at the inception of the contract, not with actual costs.

21 minutes ago, Don Mansfield said:

If the rates aren't maximums, I don't see what contractual significance they have. It seems like they are informational.

If I were negotiating the estimated cost of the task order, my goal would be to reach an agreement on what the actual cost is most likely to be. If the rates stated in the contract weren't what I thought the actual rates were going to be, then I wouldn't use them in developing my position.

Having said that, agreeing to a higher estimated cost does not necessarily mean you are agreeing to a higher fixed fee. These are two different points of negotiation.

Yes, even if the actual cost/rates are higher, the fee would continue to be calculated using the methodology established at inception with no changes to the factors applied to determine fee. Got it. 

[here_2_help]

I have unfortunate experience with these types of contracts. From what I've seen, they are proposed, priced, budgeted, managed, billed, and paid as if they are T&M contracts. But then the auditors come in and it turns out they are cost-type contracts. Painful.

In this case, the parties seemed to have reached early agreement that the original labor rates would be used to price future Task Orders, and to establish the basis for the fixed fee in each new TO. Now the contractor is pointing out that the original labor rates are too low. The contractor wants to update the labor rates for more accurate pricing.

The contractor's position makes some sense to me, notwithstanding the prior agreement. Use of labor rates--rates that both parties know are too low--to price future work seems incorrect. The program is obligating insufficient funds and it knows that. Not good, in my view. At a minimum, additional contract mods will be required to bring the funding up to where it needs to be once performance starts.

With respect to the fixed fee, is there some reason that value can't be negotiated? From the government's point of view, the pre-negotiation objective would be based on the original labor rates. From the contractor's perspective, the fixed fee would be based on more current rates. This distance between the positions, it seems, could be negotiated.

 

[here_2_help]

My superpower is to kill conversations, I guess

[bob7947]

I will keep this topic open for a little time to see if the original poster comes back.  If not, I will delete the topic.