Neurotic Posted September 26, 2024 Report Share Posted September 26, 2024 My agency has a contract with a combination of types. One of the CLINs is for Program Management and is FFP. The agency requested, and the vendor proposed named Key Personnel for various labor categories within this CLIN, to include a full time "Test Manager" (for Quality Assurance). The Key Person's names were incorporated into the contract. The contract also includes a CPFF CLIN for work that has some labor categories for quality assurance but not for the scope of work of a Test Manager. However, the contractor billed for some labor hours under the CPFF CLIN that and the CO and COR believe were performed by the same person (Key Personnel in FFP CLIN). Payment is being withheld for those hours under the CPFF CLIN. The agency's leadership is asking whether the gov essentially paying for a full time Key Person under an FFP but then having the contractor bill for labor hours for the same person under a CPFF.... would be a Cost Principles, GAAP, or a potentially a Cost Accounting Standards issue (the contract is not CAS covered anyway)? Also, if confirmed, would it be considered a "Mischarging'' ? Quote Link to comment Share on other sites More sharing options...
Vern Edwards Posted September 26, 2024 Report Share Posted September 26, 2024 GAAP have nothing to do with your issue. Neither do CAS if CAS do not apply to the contract. Look instead to the contract cost principles in FAR Part 31, especially 31.201-4, Allocability. FAR does not define mischarging, but it would likely include charging test manager work allocable to the FFP CLIN to the CPFF CLIN. Deliberate mischarging is considered contract fraud. You might need an audit to prove cost mischarging. I don't think the mere fact that the FFP test manager performed and billed for also doing other work and charged it to the CPFF CLIN would necessarily constitute cost mischarging. If the other work was not test manager work and if it did not prevent the test manager from putting in "full time" as test manager, then it's probably okay. Does the contract clearly specify what constitutes test manager work? Does the contract define "full time"? Quote Link to comment Share on other sites More sharing options...
Neurotic Posted September 26, 2024 Author Report Share Posted September 26, 2024 2 hours ago, Vern Edwards said: Does the contract clearly specify what constitutes test manager work? Does the contract define "full time"? The contract does not define "full time". Not only that, just found out there is no actual requirement in the contract for Key Personnel to be full-time. The contractor may have "promised" full time in their proposal but if it's not in the contract I would say is meaningless now. So what I see is a contractor performing on an FFP, which includes a Key Person, whose effort is not clearly defined, and that is also working and charging a CPFF CLIN. We would have to have the time records audited or reviewed to see whether there's actually a double charge. If they are double charging it would be an allocability issue and like you say , if deliberate, mischarging. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted September 26, 2024 Report Share Posted September 26, 2024 2 hours ago, Vern Edwards said: Deliberate mischarging is considered contract fraud. Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted September 26, 2024 Report Share Posted September 26, 2024 1 hour ago, Neurotic said: We would have to have the time records audited or reviewed to see whether there's actually a double charge. Why would you have a double charge? For the FFP work, you are paying a specified price that is not based on the costs the contractor incurs. The government's concern is whether the work is being accomplished whether it takes the contractor one hour or one hundred hours to do it you will pay the contract price. On the other hand, if the same employee did work under a CPFF CLIN why couldn't the contractor charge the government for the employee's time for that work? Take this example, the employee works 30 hours a week on a FFP CLIN and 10 hours on a CPFF CLIN. If the FFP CLIN is performed satisfactorily, under your scenario where there is no requirement for "full-time" effort under that CLIN, the contractor can charge the full CLIN price for that week regardless of the costs allocated to that CLIN. At the same time, the contractor actually incurred a cost under the CPFF CLIN that it is entitled to be reimbursed for. If the employee is FLSA exempt and the contractor does not have a policy of paying exempt employees for each hour they work, you may have an issue of uncompensated overtime and whether the CPFF work should be charged at an abated rate. For example, if the employee is paid $100 a week and the normal work week is 40 hours, that is an effective hourly rate of $2.50. However, if the employee works 50 hours a week and is paid the same $100 that is an effective rate of $2 an hour. Looking at you situation, if the employee worked 40 hours on the FFP CLIN and 10 hours on the CPFF CLIN, the contractor probably should have charged the government the 10 hours at the $2 rate instead of the $2.50 rate. Quote Link to comment Share on other sites More sharing options...
here_2_help Posted September 27, 2024 Report Share Posted September 27, 2024 We don't know whether TINA applies, but if it does and the contractor bid the FFP CLIN assuming full-time key personnel charging while also knowing that they would not charge full-time, then you might have defective pricing. If I was the CO that's where I would focus the auditors. Full-time = 40 labor hours per week where I come from, though the amount might be reduced to "productive labor hours" for holidays and other paid time off. Quote Link to comment Share on other sites More sharing options...
Vern Edwards Posted September 27, 2024 Report Share Posted September 27, 2024 11 minutes ago, here_2_help said: We don't know whether TINA applies, but if it does and the contractor bid the FFP CLIN assuming full-time key personnel charging while also knowing that they would not charge full-time, then you might have defective pricing. If I was the CO that's where I would focus the auditors. Uh, it's not clear to me how that would be defective pricing. What's the defective data? Quote Link to comment Share on other sites More sharing options...
formerfed Posted September 27, 2024 Report Share Posted September 27, 2024 I’ve seen this 3 or 4 times. The only difference with this situation is the CLIN structure is Labor Hour instead of cost reimbursable. In one instance, the COR inquired. The contractor’s response was each time they are tasked for work under the LH CLIN, they decide who’s best to perform the work with staffing availability and knowledge of the job considered. So they decided to use the person designated as key under the fixed price task as the best choice. As Retrofed noted, as long as the fixed task is being performed properly, it shouldn’t be a concern. Quote The contract does not define "full time". Not only that, just found out there is no actual requirement in the contract for Key Personnel to be full-time. The contractor may have "promised" full time in their proposal but if it's not in the contract I would say is meaningless now. So what I see is a contractor performing on an FFP, which includes a Key Person, whose effort is not clearly defined, and that is also working and charging a CPFF CLIN In the absence of additional information, what is wrong with it? We don’t even know what the contractor said in the proposal. Quote Link to comment Share on other sites More sharing options...
here_2_help Posted September 27, 2024 Report Share Posted September 27, 2024 20 hours ago, Vern Edwards said: Uh, it's not clear to me how that would be defective pricing. What's the defective data? The defective data would be the labor plan that posited full-time charging when the contractor knew that would not be the case. I realize that cost data in support of a proposal is not necessarily cost & pricing data, but facts upon which an estimate is based would be. The fact is the labor plan that supports the proposed price. (Assuming there is one, of course.) Quote Link to comment Share on other sites More sharing options...
Vern Edwards Posted September 27, 2024 Report Share Posted September 27, 2024 1 hour ago, here_2_help said: The defective data would be the labor plan that posited full-time charging when the contractor knew that would not be the case. Assuming they were not stupid, and did not document their intention, how would you prove that at the time of price agreement they knew they would not be charging full time? What if they did not decide to take that path until after performance began, or say that they did? If they were unethical enough to make such a plan, why wouldn't they lie if accused? What if there were no whistleblower? We're talking peanuts, not millions. You'd spend more trying to make your case than you would recover through defective pricing. If they mischarged they mischarged, and the government gets its money back, with interest, defective pricing or no defective pricing, fraud or no fraud. I'd tell the auditors to look for misallocation and mischarging. If they find it, and if the money were large, then I might look for defective pricing, assuming they had to submit certified cost or pricing data. Quote Link to comment Share on other sites More sharing options...
here_2_help Posted September 30, 2024 Report Share Posted September 30, 2024 On 9/27/2024 at 2:47 PM, Vern Edwards said: Assuming they were not stupid, and did not document their intention, how would you prove that at the time of price agreement they knew they would not be charging full time? What if they did not decide to take that path until after performance began, or say that they did? If they were unethical enough to make such a plan, why wouldn't they lie if accused? What if there were no whistleblower? We're talking peanuts, not millions. You'd spend more trying to make your case than you would recover through defective pricing. If they mischarged they mischarged, and the government gets its money back, with interest, defective pricing or no defective pricing, fraud or no fraud. I'd tell the auditors to look for misallocation and mischarging. If they find it, and if the money were large, then I might look for defective pricing, assuming they had to submit certified cost or pricing data. All right. We get to the same place either way. Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted September 30, 2024 Report Share Posted September 30, 2024 On 9/26/2024 at 10:53 AM, Neurotic said: We would have to have the time records audited or reviewed to see whether there's actually a double charge. I What authority would the government have to audit the FFP CLIN? Quote Link to comment Share on other sites More sharing options...
Vern Edwards Posted September 30, 2024 Report Share Posted September 30, 2024 22 minutes ago, Retreadfed said: What authority would the government have to audit the FFP CLIN? If the contractor were required to submit certified cost or pricing data, then see FAR contract clause 52.215-2, Audit and Records - Negotiation, paragraph (c). Quote Link to comment Share on other sites More sharing options...
Neurotic Posted September 30, 2024 Author Report Share Posted September 30, 2024 7 minutes ago, Vern Edwards said: If the contractor were required to submit certified cost or pricing data, then see FAR contract clause 52.215-2, Audit and Records - Negotiation, paragraph (c).. Found this case while researching the topic. See HPM Corporation v. Department of Energy, CBCA 7559. The CBCA held that because the cost reimbursement portion of the contract required a year-end incurred cost audit (to establish indirect rates and verify claimed costs), the government may reasonably audit the FFP contract portion as well to ensure the contractor is not improperly claiming reimbursement for costs covered by FFP line items or trying to recoup FFP losses through indirect costs. However, I don't think the data needs to be certified to include 52.215-2 in the contract. See also the attached.20231114-nash--cibinic-report--can-government-auditors-do-that1749955851.pdf Quote Link to comment Share on other sites More sharing options...
Neurotic Posted September 30, 2024 Author Report Share Posted September 30, 2024 On 9/26/2024 at 8:02 PM, here_2_help said: We don't know whether TINA applies, but if it does and the contractor bid the FFP CLIN assuming full-time key personnel charging while also knowing that they would not charge full-time, then you might have defective pricing. If I was the CO that's where I would focus the auditors. Full-time = 40 labor hours per week where I come from, though the amount might be reduced to "productive labor hours" for holidays and other paid time off. TINA does not apply. Quote Link to comment Share on other sites More sharing options...
Neurotic Posted September 30, 2024 Author Report Share Posted September 30, 2024 On 9/26/2024 at 8:21 AM, Vern Edwards said: GAAP have nothing to do with your issue. Neither do CAS if CAS do not apply to the contract. Look instead to the contract cost principles in FAR Part 31, especially 31.201-4, Allocability. FAR does not define mischarging, but it would likely include charging test manager work allocable to the FFP CLIN to the CPFF CLIN. Deliberate mischarging is considered contract fraud. You might need an audit to prove cost mischarging. I don't think the mere fact that the FFP test manager performed and billed for also doing other work and charged it to the CPFF CLIN would necessarily constitute cost mischarging. If the other work was not test manager work and if it did not prevent the test manager from putting in "full time" as test manager, then it's probably okay. Does the contract clearly specify what constitutes test manager work? Does the contract define "full time"? If the contract was indeed CAS covered, would it be a 401 issue then? Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted September 30, 2024 Report Share Posted September 30, 2024 40 minutes ago, Neurotic said: Found this case while researching the topic. See HPM Corporation v. Department of Energy, CBCA 7559. I don't think that the HPM case does you much good. Note that it relates to an audit to establish final indirect cost rates. Look at FAR 52.216-7 for the description of what a contractor has to submit in order to establish final indirect cost rates. HPM does not stand for the general proposition that the government can audit costs for FFP CLINs under a mixed contract at any time where no certified cost or pricing data was required for the contract. Quote Link to comment Share on other sites More sharing options...
here_2_help Posted September 30, 2024 Report Share Posted September 30, 2024 TINA does not apply. Okay. There is no mischarging if the contractor personnel are charging the correct CLINs based on the work actually being performed. Thus, I keep going back to the contractor proposal. What did the contractor say that led to the FFP CLIN price being established? Why did the government believe that price was fair and reasonable? If the determination was made at the contract level, not the CLIN level, then what was the basis for the determination? In other words, did the contractor make a misstatement or otherwise mislead the government into setting a price that was reasonable only if personnel charged the CLIN on a full time basis? If not--or if there is no way to know--then I don't think there is much that can be done. Holding up payment is not the way to go, in my view, as that may be a different breach. Quote Link to comment Share on other sites More sharing options...
formerfed Posted September 30, 2024 Report Share Posted September 30, 2024 Lots of missing information here. @Neurotic why don’t you just ask the contractor why they think the billing is proper? Is there contractual language restricting the key person to the fixed price task. You mentioned you didn’t know what the proposal says in terms of price/costs and technical. How about looking and reporting out? This is the simplist way out rather than looking up legal decisions. Edit: I see I’m duplicating some of HTH’s questions Quote Link to comment Share on other sites More sharing options...
Vern Edwards Posted October 1, 2024 Report Share Posted October 1, 2024 🙄 Quote Link to comment Share on other sites More sharing options...
REA'n Maker Posted October 1, 2024 Report Share Posted October 1, 2024 12 hours ago, formerfed said: why don’t you just ask the contractor why they think the billing is proper? Stop making sense. Quote Link to comment Share on other sites More sharing options...
Neurotic Posted October 1, 2024 Author Report Share Posted October 1, 2024 17 hours ago, formerfed said: Lots of missing information here. @Neurotic why don’t you just ask the contractor why they think the billing is proper? Is there contractual language restricting the key person to the fixed price task. You mentioned you didn’t know what the proposal says in terms of price/costs and technical. How about looking and reporting out? This is the simplist way out rather than looking up legal decisions. Edit: I see I’m duplicating some of HTH’s questions Indeed, we advised the CO to ask the contractor and were waiting to hear back. The contractor stated: 1/the scope of the work performed under the FP and CPFF CLINs is different. 2/labor hours billed on the CPFF CLIN for individual identified as Key Personnel are for effort under the CPFF CLIN in connection with the scope of the work under such CLIN. Therefore, correctly billed. 3/The government is receiving the services it contracted and pays for under the FFP CLIN. The gov did not procure Key personnel as a deliverable. The contractor's proposal (Basis of Estimate) identified the Key Personnel by name under the FFP CLIN working 1,746 productive hours annually (each FTE). However, the proposal is not part of the contract and the contract does not specify a level of effort. The contract identifies Key Personnel by name but does not specify a CLIN either. So, they promised (proposed) something but the government did not make it a requirement. No way this individual is able to work full time under the FFP CLIN and also charge the hours billed under the CPFF. But I don't see how this is enforceable now if it's not a contract requirement. Quote Link to comment Share on other sites More sharing options...
Vern Edwards Posted October 1, 2024 Report Share Posted October 1, 2024 The contractor's explanation makes sense. This story sounds like some suspicious and/or disgruntled COR making a mountain out of a molehill. Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted October 1, 2024 Report Share Posted October 1, 2024 1 hour ago, Neurotic said: No way this individual is able to work full time under the FFP CLIN and also charge the hours billed under the CPFF. Why not? I agree with Vern's last post. Also, note you can always verify the hours worked under the CPFF CLIN. Quote Link to comment Share on other sites More sharing options...
Neurotic Posted October 1, 2024 Author Report Share Posted October 1, 2024 17 minutes ago, Vern Edwards said: The contractor's explanation makes sense. This story sounds like some suspicious and/or disgruntled COR making a mountain out of a molehill. It does. This is a nothinburger. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.