CPFF (Term / LOE) - Fee Per Hour

[Guest108830]

[Deleted]

[here_2_help]

Interesting approach. It's not clear to me from the post whether the contractor is entitled to the full fixed fee or it it is entitled to only the portion of the fixed fee that it has billed, based on hours performed. Also not clear whether the contractor can earn more than the fixed fee pool by performing more hours than budgeted. If the fixed fee is fixed and doesn't vary based on costs incurred or hours performed, then I'm thinking not a CPPC contract.

On the other hand, say that it IS a CPPC contract. What would you do about it?

[Vern Edwards]

In order for a contract to be CPPC, the fee (or some other pricing component) must be stated as a percentage in the contract. If the fee is stated as a dollar amount, then it is not a CPPC.

[Retreadfed]

Guest, how is factor (2) satisfied in the scenario you described?

[Guest108830]

Retreadfed = factor (2) does not appear to be present. There is no percentage being billed, just the $2.02 per hour.  

[Guest108830]

here_2_help. What would I do about it? Nothing. The fact that I and or others may believe it may be a CPPC is to no avail. Need a board or court to ultimately make a determination.  

[Guest108830]

Vern. Nope, no percentage stated. Just hours and dollars. 

[Guest108830]

What I'm gathering is that there's really nothing wrong with the FPH approach (that I've laid out). Whether the Contractor receives 100% of its fee (per year) early under a FPH approach, is not really relevant.

[Don Mansfield]

1 hour ago, Guest108830 said:

What I'm gathering is that there's really nothing wrong with the FPH approach (that I've laid out). Whether the Contractor receives 100% of its fee (per year) early under a FPH approach, is not really relevant.

I believe that is the default approach for SeaPort CPFF LOE task orders. The only problem I see in that situation is the fee per hour is the same regardless of the labor category. This creates an incentive to propose high labor rates and use personnel with lower labor rates during performance.

[Vern Edwards]

Such pricing as described in Guest103830's now deleted opening post reflect agencies's amateur attempts to use variations of the standard contract "types" described in FAR Part 16 to contract for government employees. Contracting for employees is one of the worst kept secrets in American government.

The government has long been contracting for employees, and is doing so now more than ever, but has not yet faced up to it and been open about it from an acquisition policy standpoint. So contracting offices are making it up as they go along. That's how you get situations like what happened in Pacific Coast Community Services, Inc. v. U.S., 144 Fed. Cl. 687 (2019); 147 Fed. Cl. 811 (2020); aff'd --- Fed. Appx. ---, No. 2020-1815, 2021 WL 1712270 (Fed. Cir., April 30, 2021).

Whether they know it are not, many COs are now in the human resources business. This has been going on for a long time. See also the thread that started today about certifications. Congress and the Executive Branch are lying to the public about the size of government.

But all of us know that, or should.

[Don Mansfield]

4 hours ago, Vern Edwards said:

Whether they know it are not, many COs are now in the human resources business.

So true. I think there are a lot of contracts that are called "service contracts" that are better described as staffing contracts.

[WifWaf]

7 hours ago, Don Mansfield said:

So true. I think there are a lot of contracts that are called "service contracts" that are better described as staffing contracts.

As a CO, if you think in terms of “FTEs” instead of Direct Productive Labor Hours and of Performance Measures, then you have been listening to your support service requirement owner too much.  They are not acquisition professionals.  It is up to you to write their contract Performance-Based.  FAR 1.602-1(b).

[Vern Edwards]

@WifWaf: Are you suggesting that hours (or "productive" hours) are a good units of delivery for service contracts (as opposed to staff augmentation contracts)?

An FTE is just a number of hours.

[WifWaf]

@Vern EdwardsNo not that.  Understanding DPLH build-up is important to the pricer in you before award.  Post-award, it is certainly important to understand how hours are applied to your chosen contract type so you don’t end up getting in trouble like the CO in the cited case above, but otherwise you can forget it.  Focus instead on what you solicited as the Performance Measures in Section C.

I realize Performance-Based is not the only way to do services and it’s not relational contracting, but it’s what is in FAR Part 37 and in applicable procedures right now.  Guess I’m speaking to beginners here, since they usually get assigned these support services busy work contracts and may not realize “Move my FTEs to a follow-on” is not an adequate procurement request.  Work with the requirement owner to determine what acceptable support services look like, and then contract out for that.

[Vern Edwards]

@WifWaf What bothers me is the use of hours as units of delivery, because the concept of a unit is that every unit is like every other unit, but that is rarely the case in staff service contracts.

Using hours as units of service performance and payment when there is no uniform specification for what the government gets in an hour and the level of quality provided is convenient, but not logical. And it flies in the face of your emphasis on performance measures.

Do I make sense?

[WifWaf]

@Vern EdwardsYou do!  I have been experimenting in award and administration of some low-dollar GSA BPA calls at my office.  I leverage the position descriptions found in the GSA FSS by placing some of the position’s responsibilities in the descriptor box of each Measure in my BPA call, Section C Performance Requirements Summary.  At the bottom of the table I explicitly say CPARS are at stake.  In this way I require delivery of exactly the position I paid for.  The mere threat of a CPARS ”Marginal” and the fact it’s a commercial service usually means performance is acceptable.

What do you think of this method?  It works for me when my requirements owner does not know what good performance looks like.  I don’t know what I would do if the deliverables were not acceptable though, except maybe delay payment till they are better, and only in extreme cases.

 

[Vern Edwards]

I wrote a piece about 16 years ago about pricing service contracts. I made a distinction between input pricing and output pricing:

Quote

There are two ways to price a service contract: output pricing and input pricing. See The New Rules for Multiple Award Task Order Contracting, 9 N&CR ¶ 35. An output price is a price for completed work-i.e., accomplishment of a specified result. The price is paid after the specified result has been completed and has been found to be acceptable. There are many varieties of service output units, including job and each of items repaired. Some units of time are output units, such as minutes of telecommunications connectivity, and months of maintenance service when the required result has been specified. A quantity of specified service output units is a valid measure of the quality and quantity of service provided.

An input price is a price for a unit of service activity, the most common example being the “burdened” hourly labor rate. When pricing on the basis of hourly labor rates, the buyer usually defines an hour in terms of the kind of worker to be employed or the kind of activity to be performed-engineer, senior engineer, supervisory engineer, etc.-not the kind or amount of result that the hour must produce. When a service contract is input priced, the price is for a number of units of activity-hour, day, week, month or year-not the price for a result or set of results. Thus, a firm-fixed price for one year of maintenance services is an input (activity) price, not an output price, unless the contract specifies in clear and definite terms the maintenance results that the contractor must produce in that year. It also follows that a quantity of activity units is not a valid measure of the quality and quantity of service provided. To think otherwise is to confuse the contractor's activity with the actual service to be provided, which is the result to be produced by its activity. See T.P. Hill, On Goods and Services, 23 REV. INCOME & WEALTH 315, available at http://www.roiw.org/1977/315.pdf.

***

COs, functional managers, and program managers must understand the distinction between output pricing and input/proxy pricing. They must be aware that firm-fixed prices for the performance of specified kinds of activities during some period of time, whether an hour or a year, are not the same as firm-fixed-prices for specified results. And they should devise plans and procedures for specifying the results they want on an ad hoc basis during the course of performance and obtaining them from the contractor as needed. Second, to avoid input/proxy pricing, when practicable, COs must persuade their functional and program clients to openly address the prospects for specifying results, either before contract award, at various points during the course of contract performance, or in the case of task order contracts, before task order issuance. To do that, COs must be able to explain to their functional and program clients the meaning of “service result”; they must master service work breakdown analysis and the development and use of natural and constructed service measurement scales; and they must write contract or task order work statements based on technical input from their clients. (Yes, contracting personnel should write the work statements, because they are legal documents with technical content, not technical documents. See the definition of “contracting” at FAR 2.101. Besides, in most cases technical personnel do not write enough work statements to become proficient.) Third, trainers must explain the distinction between output pricing and input/proxy pricing in contract pricing classes. And fourth, policymakers should ask themselves what kind of “price competition” you can get when buyers cannot specify results before contract award.

"Pricing Service Contracts," The Nash & Cibinic Report (May 2005).

I'm going to have to think more about this.

[WifWaf]

I don't know how we got here (post is deleted), but I like it.