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Using Fee to Pay for Overrun? (CPFF)


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Many of you are asking yourselves why a company would do such a thing. I admit that it does sound very crazy and I think a contractor can go too far to please the Government customer. I would like to know whether a contractor is allowed to use their fee from their CPFF completion contract to pay for an overrun on the contract.

My gut tells me that this is not allowable because the contractor would be giving free services to the Government and think this can be linked to 52.203-3 Gratuities however the "free" services (services at no charge to the Gov't) would not be given to an individual (they would benefit the whole agency).

To say it a different way, the contractor wants to forego invoicing the government for a few months of services on a CPFF contract to alleviate an overrun at their own expense. The contractor would also be satisfied and would agree to having the CO move the amount on the fee CLIN to the labor CLIN.

Additional information about the overrun: The overrun is primarily caused by the Government adding NEW scope to the contract. I know that the Government is obligated to pay for the additional scope costs with fee.

Maybe I am thinking down the wrong path and there is a much simpler answer out there. I have done google/wifcon searches but have not seen anything out there on this specific topic. As usual, your help is very much appreciated.

52.203-3 Gratuities.

As prescribed in 3.202, insert the following clause:

Gratuities (Apr 1984)

(a) The right of the Contractor to proceed may be terminated by written notice if, after notice and hearing, the agency head or a designee determines that the Contractor, its agent, or another representative—

(1) Offered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and

(2) Intended, by the gratuity, to obtain a contract or favorable treatment under a contract.

(B) The facts supporting this determination may be reviewed by any court having lawful jurisdiction.

© If this contract is terminated under paragraph (a) of this clause, the Government is entitled—

(1) To pursue the same remedies as in a breach of the contract; and

(2) In addition to any other damages provided by law, to exemplary damages of not less than 3 nor more than 10 times the cost incurred by the Contractor in giving gratuities to the person concerned, as determined by the agency head or a designee. (This paragraph ©(2) is applicable only if this contract uses money appropriated to the Department of Defense.)

(d) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.

(End of clause)

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You are thinking down the wrong path. There is no gratuity here. Because of new work, you want to re-negotiate the estimated cost (to raise it) and the fixed fee (to lower it). I don't see a problem if that it what it is. I do see a problem with raising all sorts of poison pill questions.

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I think ji20874 has the correct answer. I would hope your company would be smart enough to comply with the Limitation of Cost/Limitation of Funds clause requirements, even though you (apparently) don't intend to stop work and (apparently) don't intend to ask your customer for more funds.

Hope this helps

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