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Govt Customer Internal Spending Caps vs. Contract Funding


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I'm on the industry side working on a fairly large (~$700M) production contract that includes engineering services and Other Direct Costs (ODC) work, which the Govt customer routinely uses to issue Tasking Orders to investigate issues with the hardware. However, the customer recently notified us they now have an internal cap ($15K) on how much ODC on a given TI, which is far below what's been obligated on the latest exercised ODC CLINs. In the past, the customer had no issue issuing us more than $15K for ODCs to buy components, material, travel, etc. But because many of these items have exceeded that threshold in the past, and will presumably continue to do so in the future, the customer has hinted we may need to look at a PIO buy for purchasing these tasking-related components going forward. 

Are there any other methods for troubleshooting the issue? My concern is going the PIO route would require negotiation, which would obviously create a greater delay as opposed to a straight purchase using ODC funds. There's nothing in the contract that mentions the $15K limit per TI. 

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Is your concern maerial

6 hours ago, Mike Twardoski said:

In the past, the customer had no issue issuing us more than $15K for ODCs to buy components, material, travel, etc

Mike, is your focus components, material or travel or all three? Was the $15K an amount for all three or each? Didn't you negotiate with the government with regard to the ODC amount? You seem to indicate that negotiating will slow things down. You indicate the PIO route would involve negotiations that would slow things down. If you are thinking about negotiation for your company's purchase of material or components from a supplier, your company should have streamlined processes for fast procurement of items $10K and below. If you are focused on negotiation with the government of a PIO, how is that significantly different than negotiating with the government for ODC line item amounts?   

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25 minutes ago, Neil Roberts said:

Is your concern maerial

Mike, is your focus components, material or travel or all three? Was the $15K an amount for all three or each? Didn't you negotiate with the government with regard to the ODC amount? You seem to indicate that negotiating will slow things down. You indicate the PIO route would involve negotiations that would slow things down. If you are thinking about negotiation for your company's purchase of material or components from a supplier, your company should have streamlined processes for fast procurement of items $10K and below. If you are focused on negotiation with the government of a PIO, how is that significantly different than negotiating with the government for ODC line item amounts?   

Neil, the short answer is yes, the ODCs are for materials/components.  

I can't speak for how the contract was negotiated, but this $10K internal cap is new to me (and apparently the customer, too, after years of putting funding >$10K for years, no questions asked). Traditionally, our company would work up a draft task order, or simply send over a written request for more ODC funding, a brief justification for the funds, and the customer would put those funds on the task order with minimal delay. The funds would be drawn from ODC CLINs that regularly contained obligated funds well over $10K. 

In other words, there wasn't any negotiating involved for ODCs. We asked, and we received. 

The customer is hinting that the only viable path for ODCs >$10K is the PIO CLIN route, which is decidedly NOT as streamlined as the "ask and ye shall receive" route. Granted, that route is probably now closed forever, but I'm trying to look for a similar path.

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The structure of your contract eludes me, Mike. Is there a line item for ODC? Is there a fixed price or estimated cost for this line item? If the answer is no, is this line item only for funding of ODC? If so, where in the contract is the price or estimated cost of the ODC located? Is this a firm fixed price contract/Task Order or a cost type?

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Thanks for the follow up questions, Neil. The contract structure is primarily FFP (hardware), with some CPFF (engineering tasks) and Cost-only (ODC) line items. The customer routinely issues task orders for engineering tasks & ODCs off this contract using the CPFF & Cost line items to fund them. The contract contains multiple options, so new line items for each of these types have been rolled into the contract every year.

The odd thing is we're approaching the final option year, so the timing of this internal cap of $10K is curious to say the least.  

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Perhaps you can negotiate a FFP PIO for ODC related material and components to include all allowable costs and profit vs the current deal where it appears ODC reimbursement amounts are limited to "Cost-only." The PIO process shouldn't delay your technical performance with DoD, for example, because  DFARS 217.76 Provisioning indicates that initial contract go ahead is undefinitized.

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3 hours ago, Neil Roberts said:

Perhaps you can negotiate a FFP PIO for ODC related material and components to include all allowable costs and profit vs the current deal where it appears ODC reimbursement amounts are limited to "Cost-only." The PIO process shouldn't delay your technical performance with DoD, for example, because  DFARS 217.76 Provisioning indicates that initial contract go ahead is undefinitized.

Thanks, Neil. I was thinking about the undefinitized path, but hadn't thought about making it an FFP CLIN. Not a bad idea at all :) I appreciate the insights! 

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