DPAS Rating Impacts to Contractors and their "Remedies" if Any

[Don Mansfield]

17 hours ago, Fara Fasat said:

I will just add that some of those other impacted contracts could be non-government commercial contracts. It seems that Don is saying that the excess costs  incurred on commercial contracts could be recovered on the DX contract. Not only would that catch an auditor's attention, I think that runs afoul of the 700.13 prohibition: "A person shall not discriminate against rated orders in any manner such as by charging higher prices...." That goes well beyond just adding the costs of expediting the DX 

If the contractor prices the DX-rated order consistent with comparable unrated orders, how does that violate the DPAS regulation?

[Fara Fasat]

Let's try an example: Because of giving priority to a DX order, the contractor will incur additional costs on a commercial contract in order to meet its delivery obligations. Are you saying that those costs can be added to the price of the DX order?

[Don Mansfield]

54 minutes ago, Fara Fasat said:

Let's try an example: Because of giving priority to a DX order, the contractor will incur additional costs on a commercial contract in order to meet its delivery obligations. Are you saying that those costs can be added to the price of the DX order?

Answer my question, then I'll answer your question.

[Fara Fasat]

*sigh*, OK, although it's still not clear what you mean by "prices the DX-rated order consistent with comparable unrated orders."

IF, and I repeat, IF, this is what you are saying, then I think it does violate DPAS: contractor gets a DX order for a widget; widget is normally priced at $2500; contractor can meet delivery date but only by rescheduling and shifting resources from other commercial orders (as it is required to do by 700.14); BUT, the shifting of resources will cause $700 increased costs on the commercial orders; contractor prices DX widget at $3200 to recover those costs. In effect contractor is saying "I'll accept the DX order but it will cost you more."

Not only does this violate 700.13(a)(2), but you're now charging the government for costs incurred on commercial contracts. 

[Don Mansfield]

That is not what I'm saying. Using your example, let's say the widget is priced at $2,500 for delivery in 90 days. A customer issues an unrated order requiring delivery in 30 days. Contractor says it will be an additional $700 to expedite. Parties agree to price $3,200.

Contractor receives DX-rated order for widget requiring 30 day delivery. Contractor charges $3,200.

Where's the DPAS violation in this scenario?

[Fara Fasat]

Maybe not, but you changed the scenario I was asking.

[Don Mansfield]

For any scenario you come up with, I will only need to know two things:

1. The price charged for the rated order; and 

2. The prices charged for comparable unrated orders.

Nothing else is relevant in determining whether the contractor is compliant with 15 CFR 700.13(a)(2).

 

[Fara Fasat]

Those "only two things" miss the whole point of the OP's scenario, and the example I've been trying to drag out of you. In the OP's situation, he didn't have a price for a comparable "expedited" unrated order. He didn't have to expedite it because he accepted it before the DX order. Then the DX order came and he incurred costs on those unrated orders, for which he had a contract at a normal, unexpedited price. He wanted to know how he could recover those increased costs on the unrated orders, which he had to reschedule in order to perform the DX order. 

All along, it sure sounded like you were saying that he could just stick those extra costs on the DX price. That's what we've been saying you can't do, because they are costs incurred on, and allocable to, totally separate contracts from the DX contract. 

Frankly, the DPAS regs only talk about scheduling and priorities, not extra costs. I don't believe they say what to do if you can't meet a required delivery date with your normal production run (for just that product and assuming no other conflicting orders), but you could meet it if you incur extra costs. The grounds for mandatory rejection simply say if you are unable to fill the order by that date. What does "unable" mean? Does it mean "unable" if you use your normal production processes? Does it mean you must expedite if you are "able" to do so?

Nevertheless this departs from the OP's problem. He wants to know if he can recover the costs he has incurred, for unrated orders he had already priced normally, but that he had to reschedule for the DX order. 

[Retreadfed]

JKRAU, in your scenario, how is each contract priced, (FFP, CR, T&M)?

[Don Mansfield]

1 hour ago, Fara Fasat said:

That's what we've been saying you can't do, because they are costs incurred on, and allocable to, totally separate contracts from the DX contract. 

The DPAS regulations do not prohibit the contractor from doing this.

1 hour ago, Fara Fasat said:

Frankly, the DPAS regs only talk about scheduling and priorities, not extra costs.

Exactly. So you can't rely on DPAS regulations to say which costs a contractor can or cannot consider.

The OP's question was asked and answered a long time ago. I'm reacting to your assertion that the DPAS regulations prohibit a contractor from considering anticipated cost increases on other contracts when pricing a rated order. When I asked why a contractor could not do this, you wrote:

Quote

"That's probably prohibited. See 700.13(a)(2): "A person shall not discriminate against rated orders in any manner such as by charging higher prices
or by imposing different terms and conditions than for comparable unrated orders." Besides, those costs would be incurred on other contracts, not the rated order. I wouldn't want to get into that mess.

The cited regulation says nothing about what anticipated costs a contractor can or cannot consider when deciding what price to charge the Government for a rated order. It just says that the contractor can't charge a higher price than it does for comparable unrated orders. Period. If the contractor considers anticipated cost increases on other contracts when determining what prices to charge for comparable unrated orders, how would it violate DPAS if they did the same for rated orders? As long as they didn't charge higher prices, it wouldn't.

[Vern Edwards]

This lengthy debate has gotten muddled.

The OP asked:

On 1/22/2025 at 8:14 AM, JKRAU2003 said:

The question is, does the contractor have any entitlement if it were to submit an REA or claim for schedule relief and for cost impacts on the DO rated and unrated contracts?

Fara wrote:

On 1/24/2025 at 10:59 AM, Fara Fasat said:

There is protection against claims from the other affected customers at 700.90, but I don't know of anything that provides relief to the contractor for its own increased costs. 

Don wrote:

On 1/24/2025 at 11:17 AM, Don Mansfield said:

Why not price the DX contract so the contractor covers its increased costs?

Fara wrote:

On 1/24/2025 at 12:32 PM, Fara Fasat said:

That's probably prohibited. See 700.13(a)(2): "A person shall not discriminate against rated orders in any manner such as by charging higher prices or by imposing different terms and conditions than for comparable unrated orders."

Don wrote:

On 1/24/2025 at 6:46 PM, Don Mansfield said:

If you are interpreting 700.13(a)(2) to mean that a contractor is prohibited from considering the cost impact to the company of expediting, including the cost impact on other orders, when pricing a DX-rated order then I disagree. If the company considers these costs when pricing comparable unrated orders, there's no violation. 

That was a key post.

I think Don's only point is that a proposed price for the DX order that (1) includes the cost of expediting but that (2) does not exceed the prices of comparable unrated orders, would not violate 15 CFR 700.13(a)(2). In other words, 15 CFR 700.13(a)(2) does not prohibit the contractor from including any particular cost in its price as long as the price does not exceed the prices of comparable unrated orders. His point is based entirely on his interpretation of the DPAS regulations in Title 15 of the CFR. He does not address the FAR pricing policy in Title 48.

If I understand Don correctly, then I agree with him. DPAS 15.700.13(a)(2) does not say what a contractor can and cannot include in its proposed price. The points I made in my posts are not pertinent to Don's argument, because Don is not talking about FAR pricing policy. The debate between Don and Fara is confined to the interpretation of DPAS regulations.

So, Don, do I understand you correctly?

[Don Mansfield]

Yes. 

[Fara Fasat]

So we're agreed that the OP is stuck? He priced the DX order normally, and has no relief available under those other contracts to cover the increased costs that were incurred on those. The debate now is over what should be done to avoid this problem.

Here's what bothers me: In the OP's scenario, he didn't incur expediting costs on the DX order. He had priced it normally, and then simply shifted resources from other contracts, i.e. gave priority to the DX order. In other words, he bumped it ahead of the other contracts and used their resources. Then he had to incur costs to make up for those shifted resources to perform the other contracts. Once again (and the OP should correct me if I'm wrong), he did not incur expediting costs to perform the DX order; he just took resources from other contracts.

I have no problem with including expediting costs when pricing the DX order, if they are incurred to expedite that order, i.e., higher payments to suppliers, overtime costs, etc. The contractor is saying: "here's the cost to get this to you by the required delivery date." But what Don seems to be advocating, is that when pricing the DX order, the contractor should anticipate and estimate the increased costs to perform the other bumped contracts, and put those costs on the DX order. In that case the contractor is saying: "I'll give priority to this order, but it will cost you more because of the impact to my other business." 

The difference is costs directly incurred to expedite just the DX order, and costs incurred on the other contracts because their resources were taken. I think the former can be priced into the DX order and the latter cannot. 

[Don Mansfield]

1 hour ago, Fara Fasat said:

So we're agreed that the OP is stuck?

Yes.

 

1 hour ago, Fara Fasat said:

The difference is costs directly incurred to expedite just the DX order, and costs incurred on the other contracts because their resources were taken. I think the former can be priced into the DX order and the latter cannot.

What would prohibit the contractor from proposing that, assuming the price was not higher than prices for comparable unrated orders?

[Don Mansfield]

This thread suggests that there would be a market for "Sovereign Acts" insurance, which would cover losses on Government contracts caused by sovereign acts of the Government.