Jump to content
The Wifcon Forums and Blogs

Recommended Posts

I  recently started working in  IDIQ Service Task Order environment with primarily SOW. That being said, as a starting point the maximum number of hours for a given position is 1820 and the duties and tasks are not open ended with the type of work expected clearly laid out. For the SOW's the number of hours for the respective positions are stated for the base period and out years - ie "Position 1- 960 hours," for a 6 month base period.

Some of the TO's are LOE, LH, or FFP (right or wrongly). 

My team recently awarded a TO and it was my position that it would be FFP. The SOW stipulated that hours and positions may be trimmed/increased based on conditions related to workload, but the tasks of the contractor is clearly defined.  The SOW established expected hours for the respective positions. 

The TO has a 9 month base, a 3, 6 month options, with fixed labor rates (fully burdened)  based on the rates negotiated at IDIQ level. 

Further, the duties are defined and not ambiguous and are more administrative than anything.  

The Contractor said it should be LOE, vice FFP. I disagree.

For FFP LOE per FAR 16.207-1(b), with respect to FFP LOE, it reads that the government pays the contractor a fixed amount, which I read is to basically guarantee a fixed amount of money, regardless of whether services of equal value were provided.  Further the work is not "for investigation or study in a specific research and development area."

For LH: The application of LH reads FAR 16.601(2)(b) "Application. A time-and-materials contract may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. See 12.207(b) for the use of time-and-material contracts for certain commercial services."

We set the contract up with a 9 month base and the option periods based on our expectation of how long the services may be needed and the option periods to serve as a contingency if you will. So I don''t think the above, allows for use of LH in this situation.

Thus, I think FFP, whereby the contractor invoices based o the number of actual hours worked is the most sensical approach. In simplistic terms, if 10 contractor's work 5 hours a day for 7 days" then they'd invoice for 350 hours for that period.

I did some research and there seemed to be different philosophical views on whether a particular service contract should be FFP LOE/FFP/LH and it almost seemed like people prefer one over the other, not because its right, but because its just how they've always done it. 

My previous experience was in commercial FFP EPA IDIQ supply contracts, so I don't have as much familiarity with service contracts, so I appreciate anyone's thoughts/perspectives. 

 

Link to comment
Share on other sites

  • Replies 59
  • Created
  • Last Reply

Top Posters In This Topic

46 minutes ago, DCDOD2020 said:

Thus, I think FFP, whereby the contractor invoices based on the number of actual hours worked is the most sensical approach. In simplistic terms, if 10 contractor's work 5 hours a day for 7 days" then they'd invoice for 350 hours for that period.

What you describe here is, in effect, Labor Hour.  If it were actually FFP, the number of actual hours worked would be irrelevant. FFP = Do job, get paid agreed to sum in full,  whether it takes 5 hours or 20 hours.

My understanding is FFP LOE is only for R&D, so no.

Most of the contractors I have dealt with love Level of Effort and Labor Hour because it has minimal risk for them.   Government pays for the input, not the output.  Easy to plan and/or max out revenue.  If you ever have a conference call with a contractor, and like 5 extra contractors are on the phone contributing nothing, they've got quotas to meet for their billable hours.   That said, I have used LH a lot, and opinions of competent and honest people will differ on what, exactly, is a " reasonable degree of confidence."  Comes down to trust, relationships, and negotiating prowess.  

From what you've written, it reads like a pretty clear-cut case for FFP.

 

Link to comment
Share on other sites

Thanks for the reply. I concur with your position that LOE is intended for R&D which this is not. It's to staff a "Covid call center" of sorts with contractors, vice government employees. 

In the SOW we established what we anticipate the hours will be for all positions, and noted actual hours may vary. So while we have folks as FTE's ( 40 hours a week), we stated it could be more or less demanding on call volume and we would provide a week or so notice of any fluctuations in staffing hours. 

When you say that for FFP the actual hours would be irrelevant, then FFP wouldn't be proper here then, if our intent  is to pay out based on actual hours worked at fixed fully burdened labor rates? Continuing my example, if week 2 the 10 contractor's worked 4 hours a day for 7 days, that comes out to 280 hours and they would then invoice for 280 hours. But under FFP, if I understand you correctly, it wouldn't matter how many hours per se, because they will get the FFP value of the contract based, assuming they perform to the terms of the contract. 

So should it then be LH, since hours may fluctuate? It's all shift work. 

Rates are based on the IDIQ rates and are fully burdened. 

Now, we can T4C, if need be, if we no longer need the services ( but that's another discussion). 

Link to comment
Share on other sites

1 hour ago, DCDOD2020 said:

Continuing my example, if week 2 the 10 contractor's worked 4 hours a day for 7 days, that comes out to 280 hours and they would then invoice for 280 hours. But under FFP, if I understand you correctly, it wouldn't matter how many hours per se, because they will get the FFP value of the contract based, assuming they perform to the terms of the contract. 

True.  With a few caveats 

For a new call center, my guess is straight FFP is not appropriate,  I'd guess there is unknown and/or unpredictable call volume, or whatever, aka you cannot accurately estimate anticipated costs with any degree of confidence.

A call center is very much a 'commercial item,' so I would suggest follow commercial pricing practices to the extent possible.   Which, I would guess from what you wrote, is LH. If it is, and all is well with FAR 12.207, and you get approval to do it that way, by all means, do it that way. 

If its Call Centers As a Service (PSC DC10 & DC01) it probably uses typical 'As A Service' pricing - which is pay-for-usage.  Which is often T&M.  Or if-necessary to comply with some mandate to used firm fixed price,  some complicated pricing monster that is legally FFP, but sorta works for cloud services, and makes everyone unhappy (one of my specialties).

The real experts may weigh-in here, and I pre-emptively defer to them.

Link to comment
Share on other sites

13 minutes ago, General.Zhukov said:

True.  With a few caveats 

For a new call center, my guess is straight FFP is not appropriate,  I'd guess there is unknown and/or unpredictable call volume, or whatever, aka you cannot accurately estimate anticipated costs with any degree of confidence.

A call center is very much a 'commercial item,' so I would suggest follow commercial pricing practices to the extent possible.   Which, I would guess from what you wrote, is LH. If it is, and all is well with FAR 12.207, and you get approval to do it that way, by all means, do it that way. 

If its Call Centers As a Service (PSC DC10 & DC01) it probably uses typical 'As A Service' pricing - which is pay-for-usage.  Which is often T&M.  Or if-necessary to comply with some mandate to used firm fixed price,  some complicated pricing monster that is legally FFP, but sorta works for cloud services, and makes everyone unhappy (one of my specialties).

The real experts may weigh-in here, and I pre-emptively defer to them.

The IDIQ has labor categories and we selected the LC that is basically for admin related work. Then we created the SOW with the duties. And as I previously stated the rates are based on the IDIQ with a slight discount. So it’s a bit like a call center, but with lipstick if you will.  

With straight FFP for services, is it correct to say that you basically “guarantee” the hours, even if you break it out by positions? But, you in theory can always de-scope to reduce hours from what’s in the SOW. 
 

The CLIN has a value that’s based on the current hours expected to be working by the dozen or so positions referenced in the SOW.  
 

And it’s fully funded. 
 

The threads on wifcon and NCMa are all over the place on the topic. 
 

My takeaway has been basically that call it FFP/loe/lh, but what matters is how you tell them to invoice lol-but I’d rather get it right and know why, rather than relying on the “oh, it’s just because that’s how we always have done it!”

Link to comment
Share on other sites

@DCDOD2020

14 hours ago, DCDOD2020 said:

I did some research and there seemed to be different philosophical views on whether a particular service contract should be FFP LOE/FFP/LH and it almost seemed like people prefer one over the other, not because its right, but because its just how they've always done it. 

My previous experience was in commercial FFP EPA IDIQ supply contracts, so I don't have as much familiarity with service contracts, so I appreciate anyone's thoughts/perspectives. 

Firm-fixed-price. You should use a firm-fixed-price contract when you can specify the work you want done and you and the contractor can agree on a fair and reasonable price. The government pays the stipulated price when the work is completed acceptably.

Firm-fixed-price level-of-effort term. You should use a firm-fixed-price level-of-effort term contract when you want something done, but there is no natural beginning and end to the job. You might want a contractor to observe some natural or man-made phenomenon for some period of time and report its observations. Such a study might entail the work of one or more persons and go on for years. The purpose of the combined level of effort and term is to set the scope of the project, which otherwise would have no inherent boundaries.

For example, you might want ornithologists to observe and report the social behavior of bald eagles in the Columbia River Gorge between the Wind River estuary and The Dalles Dam during the period 1 December 2020 through 28 February 2021. You agree with the ornithologists to a level of effort---a number of hours of observation---that is to be delivered during that period of time. You might also agree on the number of observers and the places, hours, methods, and standards of observation. The combination of the level of effort and the term establish the scope of the project. The government pays the stipulated price upon completion of the level of effort, performed acceptably throughout the term, and the delivery of a report.

While this type of contract is typically used for research, its use is not strictly limited to research, except, perhaps, by individual agency policy. And while the level of effort is commonly expressed in terms of hours, other measures and units of effort can be used

Labor-hour. You should use a labor-hour contract when you know the result you want the contractor to produce, but the two of you cannot estimate how long it will take and how much it will cost to achieve the result, because you are not sure what work the contractor will have to do to achieve it. An example might be the repair a malfunctioning item of complex equipment when you don't know what's wrong with it. You and the contractor agree to hourly labor rates, a ceiling price, and a period of performance. If the contractor reports that it cannot complete the repair within the ceiling, you can increase the ceiling and require the contractor to keep working at the agreed hourly rates until the period of performance expires. The government pays the stipulated labor rates up to the ceiling price for the actual hours of work used to complete the work acceptably.

Summary. Confusion and conflict about the appropriate use of those three contract types is not uncommon. It is generally the result of (1) poor training and (2) not thinking things through. Proper selection and use is part of the practitioner's art.

@General.ZhukovGeorgy, Do you know you were promoted to Marshal?

Link to comment
Share on other sites

12 hours ago, DCDOD2020 said:

My takeaway has been basically that call it FFP/loe/lh, but what matters is how you tell them to invoice lol-but I’d rather get it right and know why, rather than relying on the “oh, it’s just because that’s how we always have done it!”

I hope @Vern Edwardspost helped you on the difference.   I do have to say that the difference stretches to "how you tell them to invoice" as well.    Specifically I suggest a close read of the payment clauses.   As it does not appear that you have settled on commercial item or not (or least it is not stated in this thread) make sure you read the clauses that apply either out of FAR Part 32 or FAR Part 12.

Link to comment
Share on other sites

So then it sounds like we should have the task order as a LH, which would allow for the contractor to invoice based on actual hours  worked with hours NTE the maximum hours per each of the positions? Rate would be the negotiated FBLR based on the IDIQ and discounted for the TO by the contractor. 

Link to comment
Share on other sites

7 minutes ago, DCDOD2020 said:

So then it sounds like we should have the task order as a LH, which would allow for the contractor to invoice based on actual hours  worked with hours NTE the maximum hours per each of the positions? Rate would be the negotiated FBLR based on the IDIQ and discounted for the TO by the contractor. 

If you think so.

Link to comment
Share on other sites

None of them fit perfectly, but the LH sounds like it would be most appropriate, considering that we aren’t definitely sure how many hours may actually be needed at the end of the day, though as I stated previously we established positions with FTE and PT, but noted that hours may change as conditions warrant. 

Link to comment
Share on other sites

One of the things that I include when considering matters such as this is who determines the hours the contractor will work -- for example, if the contractor gets to manage the hours within the ceiling ("use its best efforts to perform the work specified in the Schedule and all obligations under this contract within such ceiling price"), then maybe LH is appropriate.  But if the Government is dictating the hours, well, that isn't a LH construct -- maybe each hour can be FFP and we can order however many hours we want.

Link to comment
Share on other sites

In the SOW we included our baseline hours expected hours. 12 positions, 40 hours a week M-F. But we stated in the SOW that that could be subject to change based on conditions and could change and sufficient lead time would be provided for contractor to adjust. 
 

Right, the government is dictating the hours. The labor rates are fully burdened. 
 

So I think going back to what I originally said is that “pick whichever, and just specifics how to invoice.”

 

The base IDIQ states contractors are to invoice actual hours. So that’s partially what drove me to think simplistically. The duties are clear as they have been performed by gov folks up till now.

All the other task orders from the IDIQ are LOE and invoice twice a month based on actual hours worked. The difference between those and this particular Task Order is that hours could change.  
 

And no. Not WHS. 

Link to comment
Share on other sites

I don't think of FPLOE as a mechanism to allow a contractor to bill actual hours.  

If the contract requires a level of effort of 80 hours per week, for example, and the contractor performs 79, then the contractor is in default and is entitled to zero payment, not 79/80th payment.  And if the contractor performs 81, it gets only the price agreed for 80.  At least, that is how I see it.

Link to comment
Share on other sites

11 minutes ago, ji20874 said:

If the contract requires a level of effort of 80 hours per week, for example, and the contractor performs 79, then the contractor is in default and is entitled to zero payment, not 79/80th payment.  And if the contractor performs 81, it gets only the price agreed for 80.  At least, that is how I see it.

I have seen FFP-LOE contracts that included a provision which stated that if performance was otherwise acceptable, there would no default and no price adjustment if the actual LOE were within +/- x percent of the specified LOE. The allowable deviation was usually small. No more than 5 percent. In one place that I worked we had a standard local clause to that effect. But those were in the days before automated and real-time accounting systems.

Link to comment
Share on other sites

22 hours ago, DCDOD2020 said:

My team recently awarded a TO and it was my position that it would be FFP. The SOW stipulated that hours and positions may be trimmed/increased based on conditions related to workload, but the tasks of the contractor is clearly defined.  The SOW established expected hours for the respective positions. 

For what kind of work was that task order? What was the job?

Link to comment
Share on other sites

 

23 hours ago, ji20874 said:

But if the Government is dictating the hours, well, that isn't a LH construct -- maybe each hour can be FFP and we can order however many hours we want.

Interesting, never read this difference b/w FFP & LH, -  who determines the hours - but it makes sense.  

On 2/21/2021 at 11:04 PM, Vern Edwards said:

promoted to Marshal?

"Field Marshall of the Soviet Union Zhukov" seems a little pompous.  

Link to comment
Share on other sites

On 2/22/2021 at 12:33 PM, DCDOD2020 said:

In the SOW we included our baseline hours expected hours. 12 positions, 40 hours a week M-F. But we stated in the SOW that that could be subject to change based on conditions and could change and sufficient lead time would be provided for contractor to adjust. 
 

Right, the government is dictating the hours. The labor rates are fully burdened. 
 

So I think going back to what I originally said is that “pick whichever, and just specifics how to invoice.”

 

The base IDIQ states contractors are to invoice actual hours. So that’s partially what drove me to think simplistically. The duties are clear as they have been performed by gov folks up till now.

All the other task orders from the IDIQ are LOE and invoice twice a month based on actual hours worked. The difference between those and this particular Task Order is that hours could change.  

The problem appears to be that you cannot forecast your demand, and so you're paying by the hour at "fully" burdened labor rates.

Your agency is a gold mine. I'll bet your contractor is investing in Bitcoin.

Link to comment
Share on other sites

Ha. The powers that be have said we will go with FFP-LOE. The PMO is interpreting FAR 16.207-1(b) to mean the hourly labor rate not a “lump sum.” Further since we outlined specific hours that they must work while reserving the right to reduce them as conditions warrant. Further, the PMO is interpreting that FAR 16.207-1(a) “general terms” to mean general duties-answer phone, handle data collection, coordinate with xyz” which is what the SOW   vice “80 percent of calls need to be answered within 50 seconds” to meet the definition of “general terms.” “Fixed dollar amount” and “general terms” aren’t defined in the FAR and thus per the FAR unless it says otherwise you can do please within reason. I’m not sure I’m fully onboard with his opinion, but it’s above my pay grade. I intend to have conversations with the PM on the next generation of the IDIQ and the types of contracts that will be used for the subsequent TO’s. 

Link to comment
Share on other sites

In my opinion, LOE doesn’t fit your scenario. You anticipate a variable effort, not “level effort”. Unless you issue formal changes, you will pay the fixed amount even if you reduce the hours needed. If you increase the total hours or conditions you’d need a mod.

Lump sum FFP doesn’t fit.

A unit priced Contract seems to fit. Therefore  labor Hour pricing scheme appears to me to be the most appropriate choice amongst available choices.

Edited by joel hoffman
Changed “unit priced FFP” to “unit priced contract”.
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share


×
×
  • Create New...