How to structure for a phase-in period for KTR clearances at PoP start, but still pay the contractor?

[jesshere]

Hi - the agency I work for has a long onboarding process for contractors. As a COR Team, we're pretty frustrated with paying out as soon as the contract is awarded (FFP) given that it takes 2-4 months for the contractor personnel to be cleared and start. Given such the time it takes, it lends its hands to high turnover as the contractors often take other positions.

We are starting a pet project on a new requirement to see how we can structure the contract or tailor phase-in/transition-in verbiage to where we require the contractor personnel to be cleared and fully onboarded prior to them charging us, One option is to reduce the FTE for the Base Year, but that seems to be a half-baked answer and would require a mod to be fully staffed. Another option could be structuring it as a Labor Hour contract.

I thought I had was to have a 4-6 month Labor-Hour CLIN as the Phase-In/Transition-In Period where, at minimum, the PM would go ahead and start in hopes that during this timeframe all personnel would be on board, then the Contracting Officer could issue a Notice to Proceed and we roll right into the start of Base Year services once everyone is on board and ready to go. The rest of the contract would be the 12mo Base + 4 as FFP OR a shortened base period (offset by the number of months for the phase in) + 4 Option Years.

Any advice here? I can't seem to find the right combination of key words to search the forum on this topic.

[C Culham]

58 minutes ago, jesshere said:

paying out as soon as the contract is awarded (FFP)

How so if current contracts that lead to your concern have FAR payment clause 52.232-1 in them?  The clause provides for payment of services delivered and accepted.

With this said it is my way of saying you have not provided enough detail as to what the real issue is as it could be a contract administration problem or maybe the current contracts are not really FFP.

 

[ji20874]

Is your contract structured to pay for staffing, or to pay for performance?

What are you paying for during the phase-in period?  Staffing or performance?

Please do not muddle the answer -- pick one: staffing or performance?

If staffing, is the contractor providing the contract-stipulated staffing?  YES: pay the FFP.  NO: pay nothing.

If performance, well, is the contractor meeting its performance obligations?  YES: pay the FFP.  NO: pay nothing.

Your next contract could establish a phase-in period of four months, for example, during which the old contractor still has performance responsibility and the new contractor performs some meaningful performance (and receives some small payment) and also fills out its staffing, with full performance (and regular full payment) starting after the fourth month.  

Or, if you can't handle two contractors in the space for a transition, you can award the new contract with a phase-in period of four months, for example, during which the new contractor fills out its staffing (and receives no payment), will full performance (and regular payment) starting after the fourth month.  You can even declare that the base year starts after the fourth month, so the base year includes four months unpaid for contractor readiness and then 12 months of paid performance.

[formerfed]

Ji20874 gives solid advice.

This issue comes up often across the government.  One approach some use is allow contractors to start partial, if not full performance immediately using “interim” clearances.  That involves fingerprinting and a quick background check which generally takes just a few days.  Having a security clearance or an active check from another agency helps too.

I’m adding to share my experience as a contractor.  Companies, and particularly small ones, need revenue to cover their labor costs.  Having workers that aren’t being billed hurts financially.  Sure, there are tasks in-house those employees might work on.  They can also perhaps be assigned to other projects but that often upsets customers to have contractor staff rotate out shortly after they become used to the job.  All that being said, don’t expect contractors to provide their very best labor rates when they have idle employees for part of the effort.

 

[Don Mansfield]

If the contract required the contractor's personnel to be cleared--and the contractor's employees weren't cleared--how did the contracting officer determine that the contractor was responsible?

[Vern Edwards]

12 hours ago, jesshere said:

Hi - the agency I work for has a long onboarding process for contractors. As a COR Team, we're pretty frustrated with paying out as soon as the contract is awarded (FFP) given that it takes 2-4 months for the contractor personnel to be cleared and start. Given such the time it takes, it lends its hands to high turnover as the contractors often take other positions.

This is an old problem. Ancient. Easily managed by thoughtful and competent pros who can plan ahead. For example:

Quote

For the transition plan, offerors were to provide a detailed description of the transition process for assuming responsibility from the incumbent, if applicable, within 60 days of award. The plan was to address areas such as facility clearances, hiring personnel after award, and how personnel will be properly trained and skilled with adequate security clearances. Id. at 84. The RFP required that staffing actions be completed by no later than 60 days after award and that the transition plan be consistent with the technical approach and cost proposal. Id. Additionally, offerors were required to address the following seven elements: transition team responsibilities; work turnover; incumbent capture; security requirements; quality assurance; training; and archived material. Id. at 84–85.

B- 419371.3 (Comp.Gen.), 2021 CPD P 147, 2021 WL 1265134

As for Don's question:.

Quote

The ability to obtain a security clearance generally is a matter of responsibility, absent an express requirement in the solicitation to demonstrate the ability prior to award. Rohmann Servs., Inc., B-405171, B-405171.2, Sept. 8, 2011, 2011 CPD ¶ 177 at 8. Because the determination that an offeror is capable of performing a contract is largely committed to the contracting officer's discretion, GAO will generally not consider a protest challenging such a determination. 4 C.F.R. § 21.5(c). An exception to this rule exists where a protester alleges that definitive responsibility criteria in the solicitation were not met. Id. Definitive responsibility criteria are specific and objective standards designed to measure a prospective contractor's ability to perform the contract. Reyna-Capital Joint Venture, B-408541, Nov. 1, 2013, 2013 CPD ¶ 253 at 2. Such criteria, which must be met as a precondition to award, limit the class of contractors to those meeting specified qualitative and quantitative qualifications necessary for adequate performance. Id. Our Office will not consider a requirement to obtain a security clearance to be a definitive responsibility criterion where the solicitation does not require the clearance to be obtained prior to award. See e.g., Rohmann Servs., Inc., supra; Ktech Corp.; Physical Research, Inc., B-241808, B-241808.2, Mar. 1, 1991, 91-1 CPD ¶ 237 at 3.

B- 419049.3 (Comp.Gen.), B- 419049.4, 2021 CPD P 117, 2021 WL 1101449.

[formerfed]

In addition to what’s been said already, I’ve seen some other practices that might work.  One is have offerors submit employee background applications with their proposal response which should save time. Another is requiring offerors to identify transition milestones with proposed prices.  This should be negotiated and allows the contractor some revenue.  For example include a deliverable for project management and reporting.  Or a quality assurance plan. Or operational procedures.  A transition period as jessshire stated with the PM and limited staff start ahead of everyone else is feasible providing they don’t need full clearances to begin.  Using labor hour pricing makes sense too.

A very solid approach is requiring offerors to propose their transition.  Provide parameters and constraints in the solicition, especially the 2-4 month clearance expectation.  Evaluate individual plans with the rest of proposals.

 

[Vern Edwards]

3 hours ago, formerfed said:

Using labor hour pricing makes sense too.

What do you mean by "labor hour pricing"? How does that work? Please elaborate.

As you may suspect, I am setting you up, since you liked my article on services, especially my comment on effort.

😈

[formerfed]

1 hour ago, Vern Edwards said:

What do you mean by "labor hour pricing"? How does that work? Please elaborate.

As you may suspect, I am setting you up.

I just added a missing thought to my post above.  The reason I mentioned labor-hour especially for the PMs effort is a lot depends when other employees get cleared and evolving transition needs.   But I’ll add if the agency provides sufficient background information, a fixed price transition works.  The transition plan should be negotiated so the offeror understands expectations and the government agrees.

Edit:  so I understand - “Value lies in the change the contractor produces in the service object, not in the effort made to produce the change.”  The transition evaluation needs to reflect this.

[Vern Edwards]

@formerfed

Would "transition" be a separate contract line item (CLIN)?

"0001 Transition..."?

A service, I presume. If so, what would be the unit?

What belonging to the government would be the service object? How would "transition" change it? Transition from what to what?

[Vern Edwards]

@formerfed

19 hours ago, formerfed said:

I’ve seen some other practices that might work.  One is have offerors submit employee background applications with their proposal response which should save time.

What's an employee background "application"?

How would submitting such applications save time?

Save time during what process? Proposal evaluation? Transition?

19 hours ago, formerfed said:

Another is requiring offerors to identify transition milestones with proposed prices.  

"Achieving a transition milestone" would be a deliverable CLIN? A service? What would be the unit?

What would be the service object? What belonging to the government would transition change?

What would be the bases for acceptance or rejection of a transition milestone?

19 hours ago, formerfed said:

For example include a deliverable for project management and reporting.

"Project management' would be a deliverable CLIN? What would be the unit?

"Reporting" would be a deliverable CLIN? What would be the unit?

19 hours ago, formerfed said:

Or a quality assurance plan. Or operational procedures.  

So, a plan or procedure𑁋which, I presume, would be documents𑁋would be deliverable CLINs? If so, they would be subject to inspection and acceptance.

If so, would the deliverable plan and procedures documents be supplies or services? (They would be property, right?) Which inspection clause would you apply to them? 52.246-2 or -4?

If you don't think they would be property, what do you think they would be?

I don't really expect you to answer my questions. My point is to show the kinds of questions an intelligent boss would ask if someone came to them and proposed the things you have proposed.

[formerfed]

1 hour ago, Vern Edwards said:

I don't really expect you to answer my questions. My point is to show the kinds of questions an intelligent boss would ask if someone came to them and proposed the things you have proposed.

I was throwing some ideas outs as they came to mind.  I don’t bother to provide details as if was a concept that would immediately be evaluated for acceptance.   It’s not professional quality but there’s no indication that the original poster is even reading responses.  I’m glad to provide a comprehensive answer if he requested and is considering it.

[Vern Edwards]

Maybe there are other readers who would like you to elaborate.

I would want to elaborate. But it's your call.

[formerfed]

One additional thought.  Some agencies like to consider offerors ability to recruit incumbent employees if they are successful when evaluating responses.   Claims are verified through past performance checks.  That may not help in this instant situation, but it’s something to think about.

[C Culham]

10 hours ago, formerfed said:

One additional thought.  Some agencies like to consider offerors ability to recruit incumbent employees if they are successful when evaluating responses.   Claims are verified through past performance checks.  That may not help in this instant situation, but it’s something to think about.

Just because I was reminded of this in following the thread ...................

FAR 52.222-41 - 

(n) Seniority list. Not less than 10 days prior to completion of any contract being performed at a Federal facility where service employees may be retained in the performance of the succeeding contract and subject to a wage determination which contains vacation or other benefit provisions based upon length of service with a Contractor (predecessor) or successor (29 CFR 4.173), the incumbent Prime Contractor shall furnish the Contracting Officer a certified list of the names of all service employees on the Contractor’s or subcontractor’s payroll during the last month of contract performance. Such list shall also contain anniversary dates of employment on the contract either with the current or predecessor Contractors of each such service employee. The Contracting Officer shall turn over such list to the successor Contractor at the commencement of the succeeding contract.

But then again I am really wondering why Rule 17 has not been applied to this thread a long time ago?!?!?!?!

[jesshere]

Wow - this is good information with so many thoughts and additional questions that I now have and will be taking back to the team to discuss today. I am truly sorry that I didn't have notifications on and I left work at my desk once the long weekend hit.

[jesshere]

On 5/24/2024 at 7:10 AM, C Culham said:

How so if current contracts that lead to your concern have FAR payment clause 52.232-1 in them?  The clause provides for payment of services delivered and accepted.

With this said it is my way of saying you have not provided enough detail as to what the real issue is as it could be a contract administration problem or maybe the current contracts are not really FFP.

 

I am very new to the agency and still learning how they do things. This will be my first new requirement as a COR, but I have a little contracting knowledge. Contracting doesn't help us with the packages and receiving the packages from the PMs is tough because we have to refine them and think of solutions to their problems with very little input from contracting. I am not sure how contract administration has been done (yet). I am still in fact-finding mode.

[C Culham]

@jesshere Welcome back.  Hope all comments help in solving your dilemma.

Sad to hear the interaction is not as it should be with contracting.

Good luck.

[Voyager]

What if jesshere's CO were to design her RFP Section L to require a decrement - say a 25% reduction - to all labor rates in all proposals building up Section B's total price of a firm-fixed-unit-priced "Transition (Uncleared Personnel)" CLIN?  An alternate firm-fixed-unit-priced CLIN, for cleared personnel performance, would also be available at the normal build-up of rates.  The movement of heads from uncleared to cleared would, in theory, be naturally incented thusly by CLIN structure.  Proposals could be examined for compliance with the decrement as an element of responsiveness pre-award.  Base year would go on this way then all option CLINs would just be FFP, for cleared performance.

Anybody foresee a major issue with this in practice?  The variation in estimated quantity clause would of course need to be drafted and cleared through policy review.

[Vern Edwards]

4 minutes ago, Voyager said:

What if jesshere's CO were to design her RFP Section L to require a decrement - say a 25% reduction - to all labor rates in all proposals building up Section B's total price of a firm-fixed-unit-priced "Transition (Uncleared Personnel)" CLIN?  An alternate firm-fixed-unit-priced CLIN, for cleared personnel performance, would also be available at the normal build-up of rates.  The movement of heads from uncleared to cleared would, in theory, be naturally incented thusly by CLIN structure.  Proposals could be examined for compliance with the decrement as an element of responsiveness pre-award.  Base year would go on this way then all option CLINs would just be FFP, for cleared performance.

Are you pricing hours or a service?

[C Culham]

@jesshereI am going to step back, way back.  I wonder is the service commercial?  If so then what does the market research suggest is done with regard to on-boarding?  

While the payment paragraph of 52.212-4 cannot be tailored maybe the contract line items can be fashioned to replicate commercial practice.

On 5/24/2024 at 4:06 AM, jesshere said:

prior to them charging us,

On another note if the work is subject to the Fair Labor Standards Act the contractor is most likely required to pay for hours during on boarding.  So regardless of whether you are paying for hours or performance the contractor may have immediate costs to perform.  Something to keep in mind.

[RJ_Walther]

13 minutes ago, C Culham said:

If so then what does the market research suggest is done with regard to on-boarding? 

Great point, equally applicable whether the service is commercial or non-commercial. This sounds like a situation where sitting down, or at least getting on the phone, with a few different potential participants (separately) and explaining your thoughts to them and hearing their perspectives would be valuable. Maybe they'll point out that the majority of the delays in getting people cleared and onboarded are caused by the Government. Ask them for examples of successful, and unsuccessful, transition-in approaches other government customers have used.

[Vern Edwards]

1 hour ago, jesshere said:

I am very new to the agency and still learning how they do things. This will be my first new requirement as a COR, but I have a little contracting knowledge. Contracting doesn't help us with the packages and receiving the packages from the PMs is tough because we have to refine them and think of solutions to their problems with very little input from contracting. I am not sure how contract administration has been done (yet). I am still in fact-finding mode.

@jesshere What service will the contract be for? What will the contractor do for your agency?

[Voyager]

35 minutes ago, Vern Edwards said:

Are you pricing hours or a service?

For a quick, typical example in order to further our learning I am going to hypothetically call them IT help desk services (jesshere's CO may apply the example later).  These are professional services with a PWS that specifies a monthly deliverable report of "Number of Tickets Opened" and "Number of Tickets Resolved", plus details and statistics.  I am thinking unit rate is "month".  So, the number of months that these pros are uncleared may vary in the base year.  Once the last one is cleared the alternate CLIN may begin being invoiced.

[General.Zhukov]

As a CO who did much non-classified IT professional service contracts, I confirm that on-boarding & sec. clearance is a long process of uncertain duration, blocks full contract performance, and is (at the minimum) very common.   By very common, I mean, it's something you always have to think about.  Note things can be very different if FLSA applies, or contractor needs a TS, etc. 

One practical warning: Appropriated Funds + Severable Services + "Transition Period" for Onboarding = Danger.