Completion tasks OBE

[CyndiG]

Looking for advice on 2 scenarios. 1. a completion contract where the tasks become obsolete by new technologies and/or the same scenario where the new technologies are being executed on the follow-on contract that is being performed concurrently. What is the best way to close out the prior contract when you didn't (and can't in the term of the contract) achieve the technical milestones because the technology is no longer relevant. We don't want to extend the prior contract with a cost no fee proposal, when the work can be done on the follow on.

[joel hoffman]

Are you asking:

1. if an original cost reimbursement contract task can be modified to use the “new technology?

or as an alternative,

2. Can the task can be transferred from the original contract (by deletion change? or a partial termination for convenience?) and added to an existing “follow on” contract that is using the new technology ? 

[CyndiG]

32 minutes ago, joel hoffman said:

Are you asking:

1. if an original cost reimbursement contract task can be modified to use the “new technology?

or as an alternative,

2. Can the task can be transferred from the original contract (by deletion change? or a partial termination for convenience?) and added to an existing “follow on” contract that is using the new technology ? 

Neither. I want to know how we can close out the first contract with the least amount of cost impact or penalty to the contractor. We need the first contract to be over, but have not achieved the milestone to terms of the contract, although we have in spirt and the technical landscape has changed. It would take a modification to the old contract to achieve the goal (again, cost no fee), but we would rather pursue the goals on the new contract. Our options seem slim but I want to hear about anything I may not have considered.

[Retreadfed]

CyndiG, you said the contract is a "completion contract" but did not say how it is priced.  Is it a cost reimbursement or a fixed price contract?  Also, why would ending the contract now, impose a "penalty" on the contractor?  What termination clause(s) is in the contract?

[Vern Edwards]

19 hours ago, CyndiG said:

Looking for advice on 2 scenarios. 1. a completion contract where the tasks become obsolete by new technologies and/or the same scenario where the new technologies are being executed on the follow-on contract that is being performed concurrently. What is the best way to close out the prior contract when you didn't (and can't in the term of the contract) achieve the technical milestones because the technology is no longer relevant. We don't want to extend the prior contract with a cost no fee proposal, when the work can be done on the follow on.

@CyndiG Your inquiry is unclear. You haven't provided enough information.

What do you mean by "close out"? Are you talking about FAR 4.804 or do you mean something else? Terminate?

What is the contract pricing arrangement? CPFF, FFP, T&M, something else?

[CyndiG]

The Contract officially ends this year. We would like to not have to do an extension proposal. It is CP/FF contract. Please let me know what other info might be helpful.

[Retreadfed]

1 hour ago, CyndiG said:

We would like to not have to do an extension proposal.

Why would you have to extend the contract if you have another contract in place?  If your question really is about contract closeout, the guidance in FAR 4.804-4 concerning physical completion is somewhat misleading concerning cost reimbursement contracts.  Being cynical, all a contractor has to do under a cost reimbursement contract is spend the government's money.  Because of the Limitation of Cost clause, once a contractor has incurred allowable costs equal to the estimated cost of the contract, the contractor can stop work.  If the work under the contract has not been completed, the government will have to add more money to have the contract completed.  If the government decides against adding more money, the contract is over without the contractor being obligated to continue to complete the work.

I'm not sure if this answers your question because I am not sure what your facts are and what your real question is.  In this regard, have you already awarded the so called follow on contract?

[Vern Edwards]

2 hours ago, CyndiG said:

The Contract officially ends this year. We would like to not have to do an extension proposal. It is CP/FF contract.

Then let it end as scheduled.

Reimburse the contractor's allowable costs.

Pay the contractor a fee equal to the percentage completion of the work.

Annotate the file to indicate that the uncompleted task will continue to be pursued under what you call the "follow-on contract". Then close out the contract file in accordance with the FAR and your agency's procedures.

That's it.

P.S. You said, "Being cynical, all a contractor has to do under a cost reimbursement contract is spend the government's money."

That's utter nonsense. Don't say things about things you obviously know nothing about. You undermine yourself that way.

[joel hoffman]

On 10/10/2024 at 3:56 PM, Vern Edwards said:

P.S. You said, "Being cynical, all a contractor has to do under a cost reimbursement contract is spend the government's money."

Someone else said that, not the original poster. 

[Vern Edwards]

12 hours ago, joel hoffman said:

Someone else said that, not the original poster. 

Thanks, Joel. Sorry CyndiG.

Retread, I can't believe you said that.

[CyndiG]

On 10/10/2024 at 4:56 PM, Vern Edwards said:

Then let it end as scheduled.

Reimburse the contractor's allowable costs.

Pay the contractor a fee equal to the percentage completion of the work.

Annotate the file to indicate that the uncompleted task will continue to be pursued under what you call the "follow-on contract". Then close out the contract file in accordance with the FAR and your agency's procedures.

That's it.

P.S. You said, "Being cynical, all a contractor has to do under a cost reimbursement contract is spend the government's money."

That's utter nonsense. Don't say things about things you obviously know nothing about. You undermine yourself that way.

Doesn't the nature of the completion contract entitle the customer to compel the contractor to complete the milestone tasks with a cost no fee proposal. They are not best efforts.

[Retreadfed]

4 minutes ago, CyndiG said:

Doesn't the nature of the completion contract entitle the customer to compel the contractor to complete the milestone tasks with a cost no fee proposal.

What do you mean by a "cost no fee proposal"?  Does the contract contain the Limitation of Cost clause, FAR 52.232-20?  If so, has the contractor incurred costs equal to the estimated cost of the contract?  Is this question a quest for general information or is it specific to your current situation?  Earlier you said you want the current contract to be over without having to modify it.  If that is the case, why would you be interested in extending the contract?

[Vern Edwards]

@CyndiG 

Just now, CyndiG said:

Doesn't the nature of the completion contract entitle the customer to compel the contractor to complete the milestone tasks with a cost no fee proposal.

What do you mean by "completion contract"? The FAR mentions "completion contract" only once, in FAR 35.005(c). Is that what you are talking about?

FAR 16.306(d) talks about completion and term "forms". Is that what you're talking about?

If you're talking about the "completion form" cost-reimbursement contract, then surely you know that all cost-reimbursement contracts are "best efforts" contracts. See FAR 16.306(d)(1):

Quote

(1) The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g., a final report of research accomplishing the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee. However, in the event the work cannot be completed within the estimated cost, the Government may require more effort without increase in fee, provided the Government increases the estimated cost.

 

[Retreadfed]

22 hours ago, Vern Edwards said:

Retread, I can't believe you said that.

As background, I read CyndiG's posts as indicating a belief that a cost reimbursement contract could not be closed unless it was considered physically complete as described in FAR 8.404-4.  What I was trying to convey is that that is not necessarily the case.  For example, if the contract contains the LOC clause at FAR 52.232-20, once the contractor incurs allowable costs equal to the estimated cost of the contract, the contractor is not obligated to continue performance of the contract unless the government adds more money to the contract.  If the government decides that it doesn't want to add more money to the contract, the contract is at an end although the contractor has not delivered the supplies or performed the services described in the contract.  A caveat needs to be made here.  In accordance with the LOC clause "The Contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within the estimated cost" of the contract.  Thus the ability of the contractor to stop work is dependent on the contractor using its best efforts to stay within the estimated cost of the contract.  This can affect the reasonableness of the costs claimed by the contractor thus impacting the total allowable costs incurred by the contractor.

If the contractor is permitted to stop work under the LOC clause, pursuant to the Allowable Cost clause, the contractor is permitted to be paid its allowable costs up to the estimated cost of the contract without delivering the required supplies or performing the services called for by the contract.  However, this ability to receive reimbursement of its incurred cost may be limited by a clause in the contract requiring the contractor to use its best efforts to perform the contract such as the best efforts language in the LOC clause.

This brings us to the question of whether a contract can be considered physically complete so that it can be closed if the contractor has stopped work under the LOC clause and the government has decided not to add funds to the contract.  I believe it can by the contracting officer notifying the contractor that the government considers the contract to be complete and directing the contractor to submit a final voucher in accordance with 52.216-7(d)(5) and the release and assignment called for by 52.216-7(d).  It is then up to the government to close its contract file in accordance with 8.404-5.  In this regard, I notice that you have offered a path to closeout of the contract although it would not be physically complete as defined in 8.404-4.  I have no problem with that suggestion based on the facts that we have.

 

 

[Vern Edwards]

45 minutes ago, Retreadfed said:

I read CyndiG's posts as indicating a belief that a cost reimbursement contract could not be closed unless it was considered physically complete as described in FAR 8.404-4. 

I think you meant 4.804-4.

48 minutes ago, Retreadfed said:

This brings us to the question of whether a contract can be considered physically complete so that it can be closed if the contractor has stopped work under the LOC clause and the government has decided not to add funds to the contract.  I believe it can by the contracting officer notifying the contractor that the government considers the contract to be complete and directing the contractor to submit a final voucher in accordance with 52.216-7(d)(5) and the release and assignment called for by 52.216-7(d).  It is then up to the government to close its contract file in accordance with 8.404-5.  In this regard, I notice that you have offered a path to closeout of the contract although it would not be physically complete as defined in 8.404-4.  I have no problem with that suggestion based on the facts that we have.

The FAR 4.804-4 concept and definition of "physically complete" is confusing when it comes to costs-reimbursement contracts. The FAR applies the term "physically complete" to the contract, not to deliverable items. It is a contract that is physically complete.

Thus: Under a cos-reimbursement contract, (1) if the contract is for supplies, and (2) if the contractor has made its best effort and (3) if it was unable to deliver the supplies within the estimated cost, and (4) if the government refuses to fund the overrun, then (5) there are no required deliveries (except, perhaps, for partially completed work in progress), and thus the contract is physically complete by FAR definition. The same reasoning applies to services.

Thus, the appropriate course of action is to closeout the contract and move on.

[Retreadfed]

Vern, you and I are in agreement although we have expressed the same concept in different words.

[Voyager]

Each of CyndiG's posts mention the fee.  She received the below guidance on fee:

On 10/10/2024 at 4:56 PM, Vern Edwards said:

Then let it end as scheduled.

Reimburse the contractor's allowable costs.

Pay the contractor a fee equal to the percentage completion of the work.

What if the government paid the full fee already, via something written into the schedule IAW FAR 52.216-8(b): "Payment of the fixed fee shall be made as specified in the Schedule...".  Can that full payment be factored into the fee negotiations on the next contract, or would that be prohibited by FAR 15.402 Pricing policy?

Quote

Contracting officers shall—

* * *

(b) Price each contract separately and independently and not—

(1) Use proposed price reductions under other contracts as an evaluation factor; or

(2) Consider losses or profits realized or anticipated under other contracts.

 

[Retreadfed]

1 hour ago, Voyager said:

What if the government paid the full fee already, via something written into the schedule IAW FAR 52.216-8(b): "Payment of the fixed fee shall be made as specified in the Schedule...".  Can that full payment be factored into the fee negotiations on the next contract, or would that be prohibited by FAR 15.402 Pricing policy?

If the contract has a term in it addressing the payment of fee, that term would have to be considered in determining what fee is payable in these circumstances.  Without seeing the specific language of such a clause, I don't think anyone can answer your question in this regard.  I don't think 15.402 is applicable in this case.  We are not talking about an evaluation factor and fee is not the same as profit.  However, why do you think it might be applicable?

[Don Mansfield]

2 hours ago, Voyager said:

What if the government paid the full fee already, via something written into the schedule IAW FAR 52.216-8(b): "Payment of the fixed fee shall be made as specified in the Schedule...".  Can that full payment be factored into the fee negotiations on the next contract, or would that be prohibited by FAR 15.402 Pricing policy?

Then the contracting officer should follow the procedures for contract debts at FAR subpart 32.6.

[Voyager]

14 hours ago, Don Mansfield said:

Then the contracting officer should follow the procedures for contract debts at FAR subpart 32.6.

Say the contractor refuses after reading FAR 32.601(a)(1) and seeing the Schedule appears to entitle payment of the full fee.  It simply listed the fee amount in dollars, so they invoiced a chunk of it each month (as opposed to billing an amount commensurate to costs).  For lack of terms and conditions on it, they helped themselves, and the CO and COR obliged.

Quote

32.601 General.

(a) Contract debts are amounts that—

(1) Have been paid to a contractor to which the contractor is not currently entitled under the terms and conditions of the contract

[Voyager]

15 hours ago, Retreadfed said:

and fee is not the same as profit.  However, why do you think it might be applicable?

Yes, because I don't know if "profit" here is used as a FAR Subpart 15.4 term of art.  Seems more like it's being used in the P/L business sense.

[Retreadfed]

3 hours ago, Voyager said:

Yes, because I don't know if "profit" here is used as a FAR Subpart 15.4 term of art. 

Does this excerpt from FAR 15.404-4 shed any light on this?  "Profit or fee prenegotiation objectives do not necessarily represent net income to contractors. Rather, they represent that element of the potential total remuneration that contractors may receive for contract performance over and above allowable costs."

[Don Mansfield]

3 hours ago, Voyager said:

Say the contractor refuses after reading FAR 32.601(a)(1) and seeing the Schedule appears to entitle payment of the full fee.  It simply listed the fee amount in dollars, so they invoiced a chunk of it each month (as opposed to billing an amount commensurate to costs).  For lack of terms and conditions on it, they helped themselves, and the CO and COR obliged.

Then, the parties may have a dispute. If the CO believes the contractor owes a contract debt, they could issue a demand for payment. A lot would depend on the language of the contract. If the contract were silent on the payment of the fee, I think the contractor would have a hard time proving that they are entitled to full payment of the fixed fee if they did not complete the work.

[Vern Edwards]

This thread shows what can happen when incompetent agency managers put incompetent workers in charge of a CPFF contract.

The CO must track contractor progress on a monthly basis to ensure that the contractor’s cumulative fee payment does not exceed the percentage of work completed at the time of invoicing.

The contractor should NEVER receive fee in excess of progress.

STUPID!!!!!