Renegotiating Cost and Fee

tranceaddict said:

Since the requirements have decreased by more than 10%, the Govt would like to get some fee back. Presumably, this will also affect Cost.

A certain amount of the under run may be due to lower cost incurred having nothing or little to do with a decrease in the requirements. How is this contemplated to be handled by the government and/or the contractor? Are such costs required to be segregated accounting wise? lt is not clear to me if it is understood that there is no rebate of costs actually incurred, just a change in the estimated cost. Did the contractor notify the government? Do you wish to do this now or are you facing spending time and energy with a contract of vacillating increase or decrease in requirements? How much fee dollars are really potentially at stake? Is it worth it?

Thanks for the reply! No, the contractor did not notify the Government.  It is the COR/technical wanting to get the fee back.  After doing the analysis, Overall costs are well under – around 30% - well outside the 10% threshold for the government to renegotiate.  Costed fee continues to run at 39% below the original negotiated amount

The questions you are posing are similar to what I plan on asking the COR in our meeting later today.  The potential fee saving is not much ($400k) on a very large multi million dollar contract.

tranceaddict said:

"If the estimated requirements decrease or increases more than 10%, the Government reserves the right to renegotiate the Cost-Plus-Fixed-Fee value."

What do you mean by "requirements"?  To me, that refers to the work the contractor is to do.  Therefore, a change in the work the contractor is required to do could be implemented by a deductive change order or a partial termination.

tranceaddict said:

"The Contractor shall notify the Contracting Officer in writing when the Contractor has reason to believe that the total cost for performance of this contract, or any individual task order, exclusive of any fee, will be either 10% greater or less than the total estimated cost stated in this contract or in the task order.

Does the contract contain FAR 52.232-20?  If so, how do you reconcile that clause with what is quoted above?  Is the quoted language from a deviation to the FAR?

Retreadfed said:

Does the contract contain FAR 52.232-20?  If so, how do you reconcile that clause with what is quoted above?  Is the quoted language from a deviation to the FAR?

Negative, the contract is not fully funded.  It is incrementally funded and includes 52.232-22, Limitation of Funds.  TBH, i am not sure where the language came from, it's just in the contract that I inherited.

Retreadfed said:

What do you mean by "requirements"?  To me, that refers to the work the contractor is to do.  Therefore, a change in the work the contractor is required to do could be implemented by a deductive change order or a partial termination.

Thank you - that is what i was thinking.  Yes requirements as in work the contractor has to do.

tranceaddict said:

Thank you - that is what i was thinking.  Yes requirements as in work the contractor has to do.

Note that if the work the contractor is to do is reduced either through a change order or partial convenience termination, an equitable adjustment may be in order.  Read the Changes clause and T4C clause that is in your contract.

tranceaddict said:

It is incrementally funded and includes 52.232-22, Limitation of Funds.

Compare the notice requirements in the language you quoted and those in 52.232-22.  The language you quoted seems more appropriate for a fully funded contract.  Also, in my opinion, 52.232-20 should be in the contract to cover the contract when it becomes fully funded.