commercial item CPFF subcontract?

Fara Fasat said:

We all know that CPFF contracts are prohibited for commercial product/services contracts with the government. What about subcontracts? Not looking for wisdom, recommendations, advice, etc. Just need to know whether there is a prohibition like there is for prime contracts. For background or context, all work will meet the definition of commercial services, but the effort required is too uncertain to price as FP. Both prime and sub agree to use a CPFF contract.

The impact is this: if the prime can treat the subcontract as a commercial services subcontract even though it is CPFF, then it will only need to include the clauses applicable to commercial subcontracts. Flowdown requirements are generally stated as "when acquiring commercial products or commercial services ...", which says nothing about the contract type being used. I know some of you are already asking - why not just use a T&M contract, which is specifically allowed? I don't know why the businesses decided this; I was pulled in on the clause question. 

My thinking is that FP and CPFF are contract types, and have nothing to do with whether the things being acquired meet the definitions of commercial products/services. Using a CPFF contract does not change the services to non-commercial. The prohibition is against the contract type that can be used even if what is being acquired is commercial. Does that prohibition extend to subcontracts?

I have checked the CPSR Guide and it says nothing about this. Same for the Commercial Item Guide. Nothing in the PGIs either.

How convenient for the prime and sub…

If all the work being done by the sub and all all the sub’s costs are billed as cost reimbursement to the government through the prime looks like a combination of of FP and CR prime contract type to me.

EDIT: Or - is the prime going to bill the work by the sub at a fixed price under its prime contract to the government?

Fara Fasat said:

What about subcontracts?

Not that I know of.

Don Mansfield said:

Not that I know of.

If a subcontract is billed to the government as cost reimbursement, that makes the prime contract partially cost reimbursement. Thus, I don’t think that it would be allowable for a contract for commercial services.

However, if the cost reimbursement arrangement is strictly between the prime and sub and the price to the government is fixed, then it would seem to be acceptable.——————————————-

joel hoffman said:

If a subcontract is billed to the government as cost reimbursement,

Joel, maybe I am slow, but what do you mean by this?  Are you saying that the subcontractor may submit invoices directly to the government?

joel hoffman said:

If a subcontract is billed to the government as cost reimbursement, that makes the prime contract partially cost reimbursement. Thus, I don’t think that it would be allowable for a contract for commercial services.

However, if the cost reimbursement arrangement is strictly between the prime and sub and the price to the government is fixed, then it would seem to be acceptable.——————————————-

What rule or contract clause prohibits it?

Retreadfed said:

Joel, maybe I am slow, but what do you mean by this?  Are you saying that the subcontractor may submit invoices directly to the government?

No. It’s not clear to me if the prime contract amount or payment can vary based upon the actual reimbursed subcontract costs.

if the cost reimbursement pricing arrangement is strictly between the prime and its sub, independent of a FFP prime contract amount, it might be acceptable

Don Mansfield said:

What rule or contract clause prohibits it?

Prohibits what? 
Please see my above response to Retreadfed.

If the prime contract is truly FFP - that is the amount billed to and paid by the government is independent of the amount reimbursed to the sub - the prime isn’t necessarily prohibited from issuing a cost reimbursement subcontract.

I wasn’t sure but probably should have read the original post in that context.

The OP discussed T&M and Labor Hour subcontract pricing arrangements, which I assume would be reflected in the prime contract price, since it is allowable.

But then the OP discussed cost reimbursement as an alternative subcontract pricing arrangement to T&M or Labor Hour. 

Here is the prohibition concerning prime contract types.

“12.207 Contract Types

a) Except as provided in paragraph (b) of this section, agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial products or commercial services.

…(e) Use of any [prime] contract type other than those authorized by this subpart to acquire commercial products or commercial services is prohibited.”

The prime contract is FP. I didn't mention it because it didn't seem relevant to the question and I didn't want the discussion veering off into other issues (as it inevitably did). Sure it's probably a bad arrangement for the prime, but I'm presenting it as it came to me.

So far, I've heard that there doesn't appear to be any prohibition against a subcontract for commercial services using a CPFF contract type, and following the commercial item rules for all other flowdowns and clauses.

Fara Fasat said:

The prime contract is FP. I didn't mention it because it didn't seem relevant to the question and I didn't want the discussion veering off into other issues (as it inevitably did). Sure it's probably a bad arrangement for the prime, but I'm presenting it as it came to me.

So far, I've heard that there doesn't appear to be any prohibition against a subcontract for commercial services using a CPFF contract type, and following the commercial item rules for all other flowdowns and clauses.

Correct. Sorry that I read too much into your OP.

DELETED

I've seen it done before.

There is little argument that the prime contractor is responsible for its subcontracting, including choosing the appropriate subcontract type and flowing down all applicable prime contract clauses. FAR 44.303 identifies 11 things the government looks for when it assesses a contractor's purchasing system. In addition FAR 44.202-2(a) lists 13 things the contracting officer should evaluate with considering whether or not to give consent to a subcontract. Unless award of a commercial item subcontract violates one of those 24 items, there is no prohibition on awarding it, regardless of prime contract type.

On 5/25/2023 at 9:54 AM, Fara Fasat said:

So far, I've heard that there doesn't appear to be any prohibition against a subcontract for commercial services using a CPFF contract type, and following the commercial item rules for all other flowdowns and clauses.

...If you want to call it a commercial service when it does not appear to meet the pricing requirement for commercial services per 2.101. I think the request made of you to search for a specific "prohibition" generally regarding commercial services and contract type, is too narrow.

The services meet the definition, including the pricing requirements. I don't know where you got the "does not appear to meet..." from. The problem here is that the amount of effort required cannot be reasonably estimated, and the parties have agreed to use CPFF. I can provide no information on why the prime contract is FP. Wise or not, this is the situation as it stands.

I said "does not appear to meet" because of the definition of commercial services as follows:

"(2) Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions." I did not see anything in the definition that lead me to think that non competitive commercial services that have no established market or catalog price, and can not even be estimated, are commercial services.

I was trying to keep it simple and avoid debates that were not relevant to the question. The services being performed are performed for commercial customers, and are priced at standard rates. My statement of the facts did not imply that these services were noncompetitive or had no established price. The only uncertainty was how much of the services would be required. Think of it as 'we don't know if we need to perform 3 tests or 15 tests.' I was hoping readers would just accept the statement that the services met the definition of commercial, and focus on the actual question. 

Are you saying that being unable to estimate the amount or extent required disqualifies the services from being commercial? If that is what you are saying, I would be interested in hearing how uncertainty as to the amount takes those services out of the definition of commercial. I don't see that the definition requires certainty of the amount as being a necessary element of the definition.

Neil Roberts said:

I did not see anything in the definition that lead me to think that non competitive commercial services that have no established market or catalog price, and can not even be estimated, are commercial services.

The services don't have to meet those criteria. They just have to be "of a type" of services that do.

I do not agree with either of you (Don/Fara). I think the words of the definition speak for themselves, whatever that means to you and whatever case law or intellectual discussion reveals. Yes, Fara, I did understand that you wanted to know only whether a commercial service can be a cost type contract. I couldn't  divorce myself from examining what a commercial service is in trying to answer the question. I understand it came to you that way but I don't know your role and whether your silence would be understood by others as agreement as to whether it is a commercial service and the extent to which it matters to you, so I veered from your specific request.

Fara Fasat said:

Are you saying that being unable to estimate the amount or extent required disqualifies the services from being commercial? If that is what you are saying, I would be interested in hearing how uncertainty as to the amount takes those services out of the definition of commercial. I don't see that the definition requires certainty of the amount as being a necessary element of the definition.

Amount of services can vary but that’s why unit prices of various types of services are available for that reason, instead of simply reverting to cost plus pricing .

If the prime contract is fixed price, then the price to the owner per unit of an indeterminate quantity should be fixed, right?

From the definition of "commercial service":

Quote

Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions

It's entirely possible for a service to meet that definition and be priced on a cost-reimbursement basis. 

The cost or pricing arrangement for a given subcontract is dependent on the circumstances. The same service that is priced on a FFP basis under normal circumstances, may, under different circumstances, be more appropriately priced on a T&M or cost-reimbursement basis. This has nothing to do with whether the service is commercial or not.

On 5/25/2023 at 11:27 AM, joel hoffman said:

Here is the prohibition concerning prime contract types.

“12.207 Contract Types

a) Except as provided in paragraph (b) of this section, agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial products or commercial services.

…(e) Use of any [prime] contract type other than those authorized by this subpart to acquire commercial products or commercial services is prohibited.”

Don Mansfield said:

It's entirely possible for a service to meet that definition and be priced on a cost-reimbursement basis.

Not for a prime contract for a commercial product or a commercial service under FAR Part 12 or Subpart 13.5.

For DoD, see also DFARS 212.207 (b).

joel hoffman said:

Not for a prime contract for a commercial product or a commercial service under FAR Part 12 or Subpart 13.5.

For DoD, see also DFARS 212.207 (b).

Joel,

Wake up. We're discussing a subcontract.

Thanks Don. This has been frustrating. I tried to keep us in a narrow lane -- subcontract, the same services that are performed commercially, at established rates. The only unknown was the amount required -- as I said before, would it take 3 tests or 15 tests? That's why it is being done on a CR basis. I suppose it could be T&M too, but this is what the parties agreed to do.

Neil - I've said a couple times now that the services that will be performed are the same services that are sold commercially, at the same rates. I don't know why you think that doesn't meet the definition.

@Don Mansfield @Fara Fasat

I took a different approach to the question.  Did some research and came to this conclusion.   Nothing that I could find in the FAR requires the general application of the definitions of the FAR be applied to a subcontract unless specifically stated in a clause or provision.  Or from a different view the FAR does not apply to subcontracts unless specifically stated.

Perhaps it is useful to make explicit what has been implicit in this thread.  It may be entirely obvious to all involved, but might not be obvious to a "newbie."  First, generally, the Federal Acquisition Regulation doesn't govern the conduct of the contractor, the contract does.  See, e.g., Nash & Cibinic, Legal Status of Government Manuals and Instructions:  Putting the Fox in Charge of the Chickens, 1 Nash & Cibinic Report ¶ 77 (Oct. 1987); Nash & Cibinic, Formation of Government Contracts (4th Ed. 2011), at 59 (contrasting housekeeping rules from substantive ones).  Thus, when portions of the FAR like FAR 16.201(a) make statements like, "The contracting officer shall use firm-fixed-price or fixed-price with economic price adjustment contracts when acquiring commercial products and commercial services, except as provided in 12.207(b)," hopefully it is obvious that this has no impact on how a prime contracts with its subcontractor.

That said, the contract between the Government and the prime does say a lot.  For instance, it tells the prime what clauses must be flowed down to a subcontractor.  Those contractual requirements for flow down may differ depending on whether the subcontract is for commercial products or services or not.  Therefore, the "Definitions" clause at FAR 52.202-1 matters.  If, embedded in the definition of a commercial item was how it was priced, then that would have an impact on the analysis.

I hope that provides some context for some "newbies" that might happen upon this thread.

Break..Break

For what it is worth, I don't think the definition of a commercial product or service includes anything about how it is priced that would prevent the arrangement described in the OP.  I also think Congress knew that the FAR was a housekeeping rule when it wrote Pub. L. 103-355, FASA, § 8002(d).  I also think the Councils' implementation of the statute in the FAR (phrased as it is in terms of what the Government can and cannot do) is reasonable.

On 5/24/2023 at 6:43 PM, Fara Fasat said:

the effort required is too uncertain to price as FP

Fara, I am not comfortable leaving the impression and/or advising that a required commercial service effort that is too uncertain to price as fixed price, is a market or catalog price. If there were some facts provided to me that support a contrary conclusion, other than two parties said it is a market or catalog price, then maybe it is a commercial service.

I will always wonder what is sold that is not a commercial service when the "or" is play.   

 "Market prices means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors"

On 6/4/2023 at 11:05 PM, Fara Fasat said:

the same services that are performed commercially, at established rates. The only unknown was the amount required -- as I said before, would it take 3 tests or 15 tests?

If there are established “rates”, then the services can be priced as unit priced services or perhaps as time and materials depending upon what Fara means by “rates”

Either unit priced tests or possibly T&M if applicable to the price of tests are suitable and allowable for commercial services with quantities that can be adjusted.

However, “standard rates” for tests  are incongruous for cost reimbursement services. Either there is an established rate or the subcontractor would charge actual costs.

joel hoffman said:

However, “standard rates” for tests  are incongruous for cost reimbursement services. Either there is an established rate or the subcontractor would charge actual costs.

First, we don't know that paragraph (1) of the definition of "commercial service" in FAR Part 2 is off the table.  Under paragraph (1), "other services" can be a commercial service is they are "procured for support of a commercial product."  I don't know what the prime contract is for, but if it is a commercial product, you might not have to go to paragraph (2).  In any case, as Don already pointed out, paragraph (2) begins "services of a type," so just because this subcontractor wanted a CPFF pricing arrangement doesn't mean the service being furnished by the subcontractor doesn't qualify under paragraph (2).

Maybe this is just a long-winded way of saying I agree with the statement in the OP, "Using a CPFF contract does not change the services to non-commercial."  If they were commercial already, then the subcontract is "of a type."

Jacques said:

First, we don't know that paragraph (1) of the definition of "commercial service" in FAR Part 2 is off the table.  Under paragraph (1), "other services" can be a commercial service is they are "procured for support of a commercial product."  I don't know what the prime contract is for, but if it is a commercial product, you might not have to go to paragraph (2).  In any case, as Don already pointed out, paragraph (2) begins "services of a type," so just because this subcontractor wanted a CPFF pricing arrangement doesn't mean the service being furnished by the subcontractor doesn't qualify under paragraph (2).

I’m not disagreeing that the type of services are commercially sold and provided and Fara said they are sold at established “rates”. If there are established rates for the service, then pricing them at actual cost is incongruous. There are appropriate alternatives to adjust quantities if that is the only unknown.

joel hoffman said:

I’m not disagreeing that the type of services are commercially sold and provided and Fara said they are sold at established “rates”. If there are established rates for the service, then pricing them at actual cost is incongruous. There are appropriate alternatives to adjust quantities if that is the only unknown.

Got it.  I agree.  Valid point.  That said, I don't think the OP would recommend doing what the prime and sub did here.  I think the OP inherited it and is trying to make the best out of a bad situation.

joel hoffman said:

then pricing them at actual cost is incongruous.

Why?  First, it is subcontract.   The Prime and sub can agree to use the type of contract they believe fits the situation.

@C Culham Your post doesn't rebut that the pricing arrangement is incongruous.  If there are established rates, then the subcontractor is in the best position to control costs.  In which case, it is in a better position than the prime to bear the cost risks embedded within the established rates.  Now, there are all sorts of circumstances that may have led to the subcontractor having a negotiation advantage over the prime here that might explain the result, but @joel hoffman's comment seems self-evident.

C Culham said:

Why?  First, it is subcontract.   The Prime and sub can agree to use the type of contract they believe fits the situation.

I don’t disagree that they can. But having established rates that can be charged by the unit, then charging actual costs is incompatible and contradictory. If the amount of the work is significant, the prime may be at some amount of risk.

In the instance that I was involved with on the government side, the cost plus electrical sub was 65% over budget and affected the productivity of most of the other fixed price trades and busted the schedule. The prime then tried to blame the government for the (huge) claimed losses. So, yes it affected the prime contract with the government.

Carl, If the problem is the amount of tests or other services that can be priced by established rates, there are appropriate methods to cover the actual quantities.

We don’t know the magnitude of the contract or the subcontract, the subcontract share of the total effort or if the unknowns are significant.

Ive already said that the contractor can use a cost reimbursement subcontract

Edit: However, that pricing method doesn’t fit the definition and circumstance for classifying the subcontract as a FAR commercial service and using the commercial services FAR clauses, etc. to avoid or manipulate required prime flow down clauses to its subcontracts.

joel hoffman said:

However, “standard rates” for tests  are incongruous for cost reimbursement services.

Joel, FAR 31.201-1 states in part "The total cost, including standard costs properly adjusted for applicable variances, of a contract is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred."  Does this have any impact on this statement?

joel hoffman said:

However, “standard rates” for tests  are incongruous for cost reimbursement services. Either there is an established rate or the subcontractor would charge actual costs.

Retreadfed said:

Joel, FAR 31.201-1 states in part "The total cost, including standard costs properly adjusted for applicable variances, of a contract is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred."  Does this have any impact on this statement?

No.

The quoted part of FAR 31.201-1 refers to elements of total costs of a contract.

If I understand correctly what Fara refers to as “established rates”, those  are fixed prices charged for something such as products or services (e.g., the price of a test).

The problem Fara identified is that the number of tests are uncertain.

So, one can unit price the tests for an estimated quantity, including some type of provision for variation of estimated quantities in the subcontract.

Fixed price* contracts and subcontracts can include estimated quantities of unit priced line items.

* including FFP

Using or including unit priced line items for tests can be consistent with the description and pricing requirements of a FAR contract for commercial services. 

“[T]hen [the contractor] will only need to include the clauses applicable to commercial subcontracts.”

If it would make the discussion easier and allow us to focus on the original question, assume that the services meet (1) of the definition -- services in support of a commercial product. There is no mention of price or rates in (1).

Fara Fasat said:

If it would make the discussion easier and allow us to focus on the original question, assume that the services meet (1) of the definition -- services in support of a commercial product. There is no mention of price or rates in (1).

I think the discussion is easy.   My thoughts ......

Yes FAR clause 52.202-1 inserts the definition of "Contract" into the prime contract.  Yet that definition in FAR 2.201 states in part - "...It includes all types of commitments that obligate the Government to an expenditure of appropriated funds... "  A subcontract carries no such obligation as there is no privity of contract of a subcontract to the government.

Likewise Commercial item is defined yet the definition does not say a Commercial Item is only that that is fixed price. 

Subcontracts have no privity to government.  This general view can be construed otherwise if by example FAR part 44 is made applicable to the prime contract by contract clause.  Without detail I could see where, if CAS was applicable, the nexus to FAR guiding principles might be pulled in as well.

I find nothing in the statute that created commercial item acquisition for the Federal sector that says that subcontracts to a prime must be fixed price to be considered a commercial item contract.

My conclusion - It all depends on the prime contract and what it says.   I would like to say it is that easy but as this thread demonstrates it can become much more complicated in the eye of the beholder.  

PS - Sorry for this aside but the reason I keep providing my thoughts is consider this.   A prime wins a contract for a fixed priced construction project.  The prime issues a firm fixed priced subcontract for an element of the construction.  Is one to conclude that the subcontract can not be considered a commercial item subcontract by the prime?  After all only in Federal government "commercial item" for construction services is argued to be non-commercial item.

Fara is the one who said that the services are priced “at standard rates”,  and “[use] established rates”, which isn’t on a cost reimbursement basis.

Fara said the only problem is that the amount of this effort isn’t known.

One can’t simply pick and choose what paragraphs of Part 12 it wants to use to classify a subcontract as a commercial service, then ignore 12.207, which doesn’t provide for commercial service contracts priced other than FFP or other FP types or T&M or labor-hour.

Fara wants to classify the subcontract as one for commercial services in order to use commercial items clauses to justify avoiding inclusion of other required flow down clauses.

joel hoffman said:

One can’t simply pick and choose what paragraphs of Part 12 it wants to use to classify a subcontract as a commercial service, then ignore 12.207, which doesn’t provide for commercial service contracts priced other than FFP or other FP types or T&M or labor-hour.

Joel, no one is ignoring 12.207.  It simply doesn’t apply outside the Government.  Using your logic, a prime would have to compete its subcontracts or prepare justifications for other than full and open competition.  No one would claim that pointing out that CICA only applies to the Government amounts to “ignoring” FAR Part 6.

Jacques, the prime and sub can agree to price a subcontract as CO. But it can’t then declare it to be a FAR commercial service for the expressed purpose of avoiding required flow downs of the non commercial service contract clauses in the prime contract to its sub.  That’s what I’m saying.

It’s not a “commercial service” under the FAR unless it’s compliant with all the applicable Part 12 procedures and requirements, including pricing in 12.207. 

And, of course it can’t negate the FFP contractual relationship between the government and the prime.

Jacques said:

Using your logic, a prime would have to compete its subcontracts or prepare justifications for other than full and open competition.

How so?  No, a prime contractor wouldn’t necessarily have to compete its subcontracts after being awarded a FFP contract.

joel hoffman said:

It’s not a “commercial service” under the FAR unless it’s compliant with all the applicable Part 12 procedures and requirements, including pricing in 12.207.

One looks solely to the definition of “commercial service” incorporated into the prime contract to decide how to interpret the requirements in the contract where the phrase “commercial service” is used.

My earlier comment about CICA was merely another example in an entirely different context where the FAR restricts what the Government can do but doesn’t apply to a prime.

Why do you think FAR 12.207 applies outside the Government?  Is there some clause upon which you’re relying?

Perhaps another data point would be helpful.

In 70 Fed. Reg. 56318 (Sept. 26, 2005), when the Councils posted the proposed rule implementing the statutory change to expressly recognize the ability of the Government to use T&M and LH contract types for commercial items, they included the following:

Quote

w. One commenter at the public meeting said the rule should apply only at the prime contract level since the commercial sector does not compete awards at the subcontract level.

Response : The rule does not change how commercial contractors price subcontracts. As always, commercial contractors can use T&M contracts. However, the Councils believe commercial contractors often award subcontracts on a competitive basis.

(emphasis added).  If FAR 12.207 constrains the behavior of contractors, why, prior to the change in the rules, could a contractor use a T&M contract?  The answer is easy:  FAR 12.207 does not constrain the behavior of contractors because it only applies to the Government.

Yep T&M is okay.

Just now, joel hoffman said:

Yep T&M is okay.

Why was it OK before FAC 2005-15?

Jacques said:

Why was it OK before FAC 2005-15?

Don’t know.

Hey, Fara is going to do what he is going to do anyway. 

It will be interesting what will happen if there is a change or REA involving the cost plus sub, claiming exemptions from any normal requirements pertaining to the sub, based upon commercial services exemption.

Edit: I think that it is rare that a FFP prime contractor will issue CR subcontracts for anything other than minor requirements. I may be wrong.

The one that I was involved with turned out to be a financial disaster for the major DoD prime and the associated delays also impacted government treaty schedule obligations.

At least we were able to successfully assign most loss of productivity and delay REA back on the CR sub and also successfully documented how it impacted the productivity of the other trades. 🤠

joel hoffman said:

One can’t simply pick and choose what paragraphs of Part 12 it wants to use to classify a subcontract as a commercial service, then ignore 12.207, which doesn’t provide for commercial service contracts priced other than FFP or other FP types or T&M or labor-hour.

Why can't you ignore 12.207 which addresses contract types that can be used for prime contracts.  Is it your position that 12.207 applies to subcontracts as well?

Retreadfed said:

Why can't you ignore 12.207 which addresses contract types that can be used for prime contracts.  Is it your position that 12.207 applies to subcontracts as well?

Retreadfed,

While your question is spot-on, the reality is that CPSR teams apply FAR rules to contractors all the time.

Fara Fasat said:

If it would make the discussion easier and allow us to focus on the original question, assume that the services meet (1) of the definition -- services in support of a commercial product. There is no mention of price or rates in (1).

To my knowledge, I know of no applicable law or regulation that "contractor with a fixed price government prime contract shall not enter into a cost reimbursement contract with a subcontractor for a commercial item or service."..  If this is the language your people are looking for.

FAR 52.244-2 if included in the prime contract, may require consent for the contemplated cost reimbursement contract.

There may be other business risks for entering into such an arrangement including but not limited to CPSR  perception.

Omigosh, I thought pointing to (1) of the commercial service definition would get us away from the obsession over the rates, but look where it led! 

I'll say it again -- the services being performed are on commercial products, and are the same as those performed on similar products for commercial customers. That meets (1) of the definition. 'nuff said. 

Joel, Why do you insist that something can only be commercial if it complies with all of Part 12? Whether something is commercial or not is inherent in the product, not the contracting processes being followed. Furthermore, Part 12 does not apply to subcontractors; only those parts of it that direct a prime to do something, and that the prime subsequently puts in a subcontract.

The original question was whether the prohibition against a CPFF contract at the prime level also applies to subcontracts. The answer from participants is no. Unless you can point to something that says a prime cannot do it, I think we have the answer.

By the way, I'm not going through this exercise to 'get out of' some clauses. I'm trying to figure out the right thing to do.

Fara Fasat said:

By the way, I'm not going through this exercise to 'get out of' some clauses. I'm trying to figure out the right thing to do.

On 5/24/2023 at 8:43 PM, Fara Fasat said:

“The impact is this: if the prime can treat the subcontract as a commercial services subcontract even though it is CPFF, then it will only need to include the clauses applicable to commercial subcontracts.”

and:

“I don't know why the businesses decided this; I was pulled in on the clause question.

If the decision is already made, why are you trying to figure out the right thing to do?

Concerning “what is right”? and the right thing “for whom”? Whether CPFF is the right thing for the prime? The established standard prices  for the services are apparently known. There is a FFP unit priced option available. With either CPFF or unit priced with estimated quantity commercial service, the total quantity is unknown. There is less risk to the prime with a unit priced commercial item contract with the ability to simply adjust the quantities than one that is CPFF, where both price and total quantity are unknowns.

Either way, you said you would use only clauses applicable to commercial services.

 Sorry for the font size. Can’t adjust it on my iPhone.

joel hoffman said:

Whether CPFF is the right thing for the prime?

This continues the departure from the original question.

And yet I have to ask..And why not the sub as well?  While there is the world of a Federal CO forcing a prime into something not necessarily supported in regulation, policy and/or law but implied as such my sincere hope is that a prime/sub relationship is based on mutual understanding and awareness and as such the type of contract would be a mutual decision would it not?

Heck let's apply the FAR further to a prime/subcontract via this principle FAR 1.102-4(d)!  Based on the lack of a specific citation saying otherwise a CPFF is okay under said principle.

C Culham said:

...[M]y sincere hope is that a prime/sub relationship is based on mutual understanding and awareness and as such the type of contract would be a mutual decision would it not?

You don't have to be absolutist about it.  Certainly, there are times when the Government can insert itself into this process, FAR Subpart 44.2 being the most obvious example.  However, there is no reason to believe on the facts in the OP that the contract includes a requirement the Government consent to any of the subcontracts, given that the prime contract is for a commercial product.  See FAR 12.301(d).  Maybe others would disagree, but when consent is required, it does not seem like Government overreaching when, e.g., FAR 44.203(b)(2) calls for the PCO to withhold consent to CPPC subcontracts (even though it may be a little paternalistic when the only one directly harmed on a FFP prime is the prime).  The additional requirement for consent doesn't change the fact the subcontract is grounded on an understanding between prime and sub.

Jacques said:

You don't have to be absolutist about it.

Sorry it reads that way. 

 I already acknowledged FAR 44.2 in a previous post. 

Because you have mentioned the prime contract do not forget that it is FP which may be further suggestion that 52.244-1 thru 6 might not be in the prime  contract.  In a re-read of the thread I can not find whether this is true or not.

Overall no disagreement.

The prime is an SBIR phase 3 contract. i don't know whether the government is treating it as commercial. I can only tell you that it is fixed price, and that the prime chose the CPFF over T&M for the subcontract. I don't think those things matter for the original question, but here they are.

Joel - yes, deciding what clauses belong will be the outcome of the decision. It doesn't mean I am trying to reach one outcome or the other. Please don't read any motives into this.

Fara Fasat said:

The prime is an SBIR phase 3 contract.

While this has the potential of unleashing a bunch more questions I am going out on a limb and say this.

If the Phase III is, as allowed and promoted to be by the SBIR program, a sole source I could easily argue with any auditor that the CPFF subcontract as a commercial item is reasonably a non-issue.   This thread includes many of those reasonings.

On 6/8/2023 at 1:48 PM, Fara Fasat said:

deciding what clauses belong will be the outcome of the decision

Fara, has the subcontract already been awarded?

It's under review and negotiation.