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Overpayment on FFP contract under GSA schedule?


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We recently had an assistance visit from GSA, during which time the auditor flagged one of our contracts for overpayment. It is a FFP contract, base + 3, under a GSA schedule. The contract has a 3% escalation for each option year - unfortunately our GSA schedule has no escalation. We typically discount off our published rate but in this instance did not.

Neither our contract nor our invoices contain any rate or hour information - we were simply funded a total FFP and invoice equal monthly installments. The only place that indicates any rate information is a cost buld-up found in the file (contract started 4 years ago and no one who worked on it is currently at the company), no indication that this was the final cost proposal submitted to the government. The contract CO or COR has never flagged and all invoices have been paid. A large portion of the work is being performed by a subcontractor.

Based on the above, do we have an argument against the overcharge claim? We would be looking at paying back several hundred thousand dollars as we are in the last year of the contract. We do have a clause in our subcontract that would allow us to recoup any money repaid to the government, but I would assume the sub will fight us on it.

A related question would be how difficult is it to mod our GSA schedule prior to any option period? Could we add a rate escalation clause and other labor categories in the middle of the contract? If so how long does that process typically take? And could any rate escalation be retroactively applied?

Thank you for your help in advance, sorry if any of these are basic questions as I am new to contracting

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Guest Vern Edwards

This is a complex matter. Everything depends upon exactly what the contract says, what the record shows, and the auditor's reasons for his or her conclusions.

I'm pretty sure that you're going to get some responses here, and that's fine. But I suggest that you have a knowledgeable person sit down and read the contract so that you can get a reliable answer. Receipt of overpayments is a very serious matter and could lead to very serious trouble, even a false claims charge. See FAR 9.406-2, "Causes for Debarment." Paragraph (B)(1)(vi) lists the following as grounds for debarment:

(vi) Knowing failure by a principal, until 3 years after final payment on any Government contract awarded to the contractor, to timely disclose to the Government, in connection with the award, performance, or closeout of the contract or a subcontract thereunder, credible evidence of--

(A) Violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code;

Violation of the civil False Claims Act (31 U.S.C. 3729-3733
); or

( c) Significant overpayment(s)
on the contract, other than overpayments
resulting from contract financing payments as defined in 32.001.

I know that you are eager for an answer, but you need to get professional help to find out what is going on and how best to respond. Don't waste time here responding to the inevitable questions from people who will want to help you. Seek professional help now. You don't know the people here, and you don't know their qualifications, if any.

As for your question about modifying your GSA contract, the best person to ask is the GSA contracting officer.

Good luck.

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As far as modifying your GSA Schedule contract, yes you can typically modify between option periods (except within the last 60 days prior to the end of the current contract period)

The applicable clauses are:

552.216-70, if pricing is based on a Commercial Price List (CPL).

I-FSS-969, if pricing is not based on a CPL and you wish to negotiate either a set escalation rate increase or a rate based on a market indicator of some sort.

Can it be retroactively applied? Well, normally the answer is no (although I have seen stranger things). I have seen rare cases where the current rate is established based on what increases "would have happened" over the previous years, but again, that is not the norm.

The best advice, as given by Vern, is to contact your GSA Contracting Officer .

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As a former GSA CO and someone who stays in touch with GSA, the advice from Vern and Desparado is sound. To add my advice, after getting help from a professional, set up a meeting the the CO. Go over everything. Propose a get well plan. Then have a nother meeting with teh CO and the COs management - you need to ensure the approach has GSA's management buyin because a single CO hanging out there with you won't help much at all.

Don't mention retroactive escalation unless GSA suggests it. And good luck!

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