Level of Effort

The number of labor-hours to be performed by specified classes of employees over a given period of time.

The amount of effort expressed in a contract to be utilized by a contractor to accomplish the contract.  Effort level can be stated in minutes, hours, days, weeks, months or maybe even years.

So, effort is time spent working?

Nope.    Example - Work can not be clearly defined.  There is agreed to sideboards by the parties on the effort with it acknowledged that the effort will accomplish the intended result.  Contract is for 6 months yet the effort needed to accomplish the result in the stated 6 months is only 3 months because folks won't be "working" on weekends, holidays, inclement weather, fire prevention levels, birthdays, fish runs, etc. etc.

Within FAR, level of effort could be whatever the parties agree upon.

I used to work in manufacturing and we viewed it as the total amount of labor mix, time, and resources necessary to complete a task. This is my imperfect memory of something learned many years ago.

A level-of-effort contract should be distinguished from a labor-hour contract. If so, a level-of-effort contract is not simply:

Hourly rates prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that are- 

(1) Performed by the contractor;

(2) Performed by the subcontractors; or

(3) Transferred between divisions, subsidiaries, or affiliates of the contractor under a common control.

Well, there's this:  "A type of contract stating the work in terms of an amount of effort (usually labor-hours or labor-years) to be performed by specified classes of employees over a given period of time.  There are four types of level-of-effort contracts:  the FIXED-PRICE LEVEL-OF-EFFORT CONTRACT, the TIME-AND-MATERIALS CONTRACT, the LABOR-HOUR CONTRACT, and the TERM CONTRACT.  See Cibinic & Nash, Formation of Government Contracts 1173-80 (3d ed. 1998)."  - The Government Contracts Reference Book, 3d ed.

I'm a bit out of date in my copies of these, including my 4th ed. copy of Formation, but the level-of-effort contracts discussion is on pp. 1317-1330 of that ed.

But I doubt that's exactly what you're looking for, as you have those materials, too.

bosgood said:

A type of contract stating the work in terms of an amount of effort (usually labor-hours or labor-years) to be performed by specified classes of employees over a given period of time.  There are four types of level-of-effort contracts:  the FIXED-PRICE LEVEL-OF-EFFORT CONTRACT, the TIME-AND-MATERIALS CONTRACT, the LABOR-HOUR CONTRACT, and the TERM CONTRACT.

This seems to contradict the notion that the government does not buy hours under T&M/LH contracts.

Retreadfed said:

This seems to contradict the notion that the government does not buy hours under T&M/LH contracts.

But a T&M/LH contract does not buy hours -- the notion is error --  a T&M/LH contract buys a job where the number of hours needed is unknown, and the contractor agrees to provide its best effort to compete the job within the agreed-upon ceiling price.

My question was: What is a "level of effort", as in "level of effort contract"? The question was not what is a level of effort contract?

The phrase "level of effort" appears 21 times in FAR, but FAR does not define the term.

The answer to my question requires, first, a definition of "effort", then, a definition of "level", which is presumably some kind of measure. 

So, first, what is "effort", as in "level of effort contract"?

FAR does not define "effort".

There are four kinds of things we must learn in order to learn "contracting";

1. concepts,
2. principles,
3. rules,
4. processes,
5. procedures, and
6. techniques.

My question is about a concept.

We either know what we're talking about when we talk about "level of effort" or we don't.

Vern Edwards said:

Carl said it's not time spent working,

I did say this.  To clarify "effort" could mean more than time such as materials, equipment

Vern Edwards said:

because work cannot be defined.

But I did not say this.   My post may have implied it but my use of "work defined" was to set the parameters of why a level of effort type contract (per the FAR) is needed.  My apology for the confusion.

Vern Edwards said:

And are T&M and L-H contracts level of effort contracts?

Yes in a general view they are as they require level of effort.   But doesn't every contract?   It would seem the difference between any contract is with regard to how the cost or pricing of the the effort will be paid to the contractor.   

Vern Edwards said:

The phrase "level of effort" appears 21 times in FAR.

No biggy but I got 34 results back in my search.

Retreadfed said:

This seems to contradict the notion that the government does not buy hours under T&M/LH contracts.

I don't think Formation is right on this point. I would not consider T&M/LH contracts to be "level of effort" contracts. I agree with @ji20874's description.

But this is beside the point.

C Culham said:

No biggy but I got 34 results back in my search.

Carl, I downloaded FAR as of FAC 2024-03 in pdf form from acquisition.gov. I did an Adobe Acrobat full search for "level of effort" (unhyphenated) and got 21 mentions. I searched for "level-of-effort" (hyphenated) and got nine mentions. 

I did the search several times. I cannot explain the discrepancy in our counts, and I'm not interested. The key point is that FAR does not define "level of effort".

Now, do you have or want to propose an answer to my question: What is a level of effort?

All, Let's not get distracted. I'm looking for an answer to my question.  If this thread becomes a typical Wifcon all-over-the-map free-for-all, then I'll leave the thread. It's not easy for me to type here, and I won't be bothered.

Focus, dammit. What is a level of effort?

What is an "effort" How is it measured?

It's okay to propose your own answer, but if you don't have an answer, don't post.

@Vern Edwards I can answer but I won't as it is my belief you have now taken the thread beyond intent of Beginners.  

As to count of references I am sorry you were offended.  As I said "no biggy".

@C CulhamI wasn't offended. I just explained how I got my number. It's not an issue with me, and the difference in our counts is not important to me.

C Culham said:

I can answer but I won't as it is my belief you have now taken the thread beyond intent of Beginners.

I'm the Beginner here. 

I have never seriously thought about the meaning of "effort" in "level of effort." But something has come up that has made me ask myself the question: What does "effort" mean? What is a unit of "effort"? It seems to me that those are questions that you must be able to answer if you are going to state a "level of effort". And I have spent several days trying to come up with a suitable answer.

Is an hour a legitimate unit of effort, even if the work of one hour is more difficult than the work of the next hour or the previous hour? In such a case, is the amount of effort in each hour the same? And, if not, then is an hour a true unit? Are we confusing a pricing technique with an appropriate term of specification?

I'm looking for answers and I'm trying to prompt thought. And you are going to refuse to answer because you think I posted my question in the wrong category?

@All:

Never mind. I should not have come to Wifcon for discussion of this matter.

Vern,

I scanned through an old physics textbook as well as some PM training material.  I combined two excerps to come up with this: 

Effort is the physical or mental energy exerted to achieve a purpose or result. It can be measured in various ways, depending on the context. In a physical sense, effort can be measured by the amount of force or energy expended to perform a task. In a mental sense, effort involves applying skills and knowledge and can be measured by the level of concentration, determination, or perseverance required to accomplish a goal. Effort can also be measured by the time and resources invested in a particular endeavor.

Vern Edwards said:

And you are going to refuse to answer because you think I posted my question in the wrong category?

That is not the reason.  It is because you digressed.  

Vern Edwards said:

Are we confusing a pricing technique with an appropriate term of specification

This exemplifies my concern.  I brought up the thought of pricing (and cost) by posting a rhetorical thought and was chastised for doing so.

Vern Edwards said:

@All:

Never mind. I should not have come to Wifcon for discussion of this matter.

You should and can.  Yet do you not have to accept the territory and the even the rules in doing so as frustrating as it may seem to you?

Level of effort is what one or many put into a task to accomplish it.  The measures of the effort comes in many forms like time and stuff and each of the forms has a level, dare I say quantity, that contributes to the effort to achieve success.

@formerfed

formerfed said:

Effort is the physical or mental energy exerted to achieve a purpose or result.

Thanks! So effort is expended energy𑁋exertion.

Government contracts typically, though not always, measure effort in units of hours. Let me pose a scenario and ask a question.

Three men are hired to dig up the stump of a gigantic tree. They have one axe and one shovel. The location and position of the stump are such that only one man can get at the stump at a time to dig earth away and cut roots. So one man at a time digs and cuts while the other two watch and wait for their turn. They change places once an hour. After nine hours of that process a tractor is able to pull out the stump. Each man spent a total of three hours digging and cutting and six hours watching.

Have the three men exerted nine hours of effort or 27 (3 x 9) hours?

Vern Edwards said:

Have the three men exerted nine hours of effort or 27 (3 x 9) hours?

They have exerted 27 hours of effort for which measurement for the purpose of payment will only be nine hours.

@C Culham

C Culham said:

They have exerted 27 hours of effort for which measurement for the purpose of payment will only be nine hours.

I did not state the basis for pricing and payment; I'm not interested in the basis for pricing and payment at this time; and I did not ask about pricing and payment.

I am only interested in and asking about the meaning of the term "effort".

Thanks for your response, but I asked formerfed and I'll wait for his. He defined effort as exerted energy.

Vern Edwards said:

I did not state the basis for pricing and payment; I'm not interested in the basis for pricing and payment at this time; and I did not ask about pricing and payment.

Vern Edwards said:

Government contracts typically, though not always, measure effort in units of hours.

I played off of your mention of "measure".   So in your scenerio if you are not worried about measure and as you say payment then why do you care about parsing the hours? 

 The effort was as noted, shovel, axe, tractor, and time digging, chopping, and watching, the level of each does not matter because you are not doing anything with the level of the effort exerted to accomplish the removal of the stump.

Please, Carl.

You have said that you think the three men exerted 27 hours of effort. Thank you for your response.

I am waiting for formerfed's response because he gave a coherent definition of effort as exerted energy, and I want to pursue that thought by engaging with him.

Agains, thanks for your response.

Vern Edwards said:

Each man spent a total of three hours digging and cutting and six hours watching.

Have the three men exerted nine hours of effort or 27 (3 x 9) hours?

I don’t believe it’s 27.   It seems like the three exerted a total of nine hours (3 x 3) hours.   The time watching isn’t expending energy or exerting for the stump removal.

@formerfed

Thanks!

Your response is entirely consistent with your definition of "effort" as exerted energy.

The reason I asked my OP question is that contracts like the FFP/LOE/Term (FAR 16.207) and the CPFF Term form (FAR 16.306(d)(2)) often, if not always, specify the level of effort in terms of hours. That's the only set of rules and guidance in FAR about LOE contracts. That's a convenient unit of measurement, easy to use, but it gives rise to issues. Is "hour", without additional definition, a true unit of effort? Any old contiguous 60 minutes counts?

The first contracts I negotiated as a GS-05 Copper Cap trainee in the mid-1970s were sole source ("selected source") FFP/LOE lump sum contracts under the old Armed Services Procurement Regulation (ASPR) for research (but not development). We specified LOE in terms of hours, but defined "hour" in the contract as an hour of "productive labor" (physical and mental) devoted to pursuit of the contract objective by persons with specified qualifications𑁋 sometimes by specific persons (Dr. So-and-so). But we did not explicitly define "effort". In any team endeavor, some people must wait for other people to complete their work before can do theirs. I was taught that we did not count "wait time" or "idle time" or "down time" towards fulfillment of the LOE. 

Our FFP/LOE lump sum contracts did not include hourly rates, and the contractor did not bill on the basis of hourly rates. The contractor was entitled to payment of the lump sum upon delivery of the LOE and an acceptable report. There was a clause providing for acceptance of the work and payment of full price, without adjustment, if the contractor's actual hours inadvertently fell short of or exceeded the LOE by no more than five percent, as long as the research report was acceptable.

Because the price was lump sum, there was no monthly billing. If the contract term was lengthy the contractor might receive progress payments based on costs. The work of administrative and support personnel ("ancillary" or "support") were expressly excluded from the hours that counted toward delivery of the LOE. Their costs, and the costs of materials, were negotiated and included in the lump sum price. Today I call such LOE contracts "project LOE contracts." The contractor is hired to perform a specific task with a specific scope to the LOE within a specific time.

But there are also what I call "support service staffing LOE contracts", under which the LOE specifies the amount of staff the contractor must provide to perform some support function during a certain period. Those contracts account for very large number of annual actions and percentages of contract obligations. Yer FAR says nothing about them and published guidance is minimal.

A recent article, Bodner and Midboe, "Speeding Up Services Procurements: Strategy and Tools to Award Quickly, Survive Protest, and Execute Efficiently," Public Contract Law Journal, Vol. 53, No. 1, Fall 2023, pp. 1-94, addresses those kinds of LOE contracts at length, and the authors say what I considered to be surprising things about the idea of "level of effort" and hours. See Section II.B., "Describing the Government's Contractor Workforce Needs," 16 - 49. See, especially, Section B.1., "Total Hours: An Essential Element of Any LOE Service Competition," pp. 17 - 21.

I have also read some RFPs posted to SAM.gov that seek to procure such services. They are often advertised as LOE contracts, but they do not conform to the descriptions in FAR 16.207 and 16.306(d)(2). I have also read several court, board, and GAO decisions that involve what are called LOE contracts. And I have read some old GAO reports congressional hearing transcripts. The article, the RFPs, the decisions, the reports, and the transcripts have led me to question whether I have always known what I was talking about when I have talked about LOE contracts. It also explained some of the questions and comments I have seen at Wifcon.

FAR does not explicitly address such LOE contracts, nor did the ASPR before it. I have not found any published comprehensive guidance. (What's the difference between a project statement of work and an LOE support services statement of work, if any?) The article I cited above is exclusively about support service LOE contracts, which are nowhere mentioned in FAR or in any agency FAR supplement. However, I have learned that NASA appears to have been a pioneer in their use.

It is what I read in that article and in those RFPs, decisions, reports, and hearings that prompted me to ask my OP question: What is a level of effort?

The government does not know how to properly administer (or award with administration in mind) anything.

Many COs are already familiar with the term "Direct Productive Labor Hour (DPLH)" in their contracts, but most contracts do not define it.

This type of cost is unregulated in FAR - the Cost Principle governing costs of idleness only seems to apply to supply purchases.  An Advance Agreement could tailor and extend its coverage to support services appropriately.

The implications of what you can do with this critical thought are astounding.  You can save your agency so much waste simply by writing into your level-of-effort RFPs a definition of "Productive".  Do it, I say!  And then administer your own award, so no one misinterprets your intent. 

Thanks for the idea, Vern!  Am I tracking with your reasoning here?

Voyager said:

Vern!  Am I tracking with your reasoning here?

Yes. If you are going to use "hour" as a unit of effort, I think you should specify what you mean by effort. Is it any activity done by anyone doing anything? Or is it activity in direct pursuit of the contract objective, excluding support activity? Or is it something else?

If you exclude support activity from the LOE you will still include it in the contract price or estimated cost, but you will not credit it against the LOE as service received.

There is more to this that I will write later.

Am I being too much of a literalist to respond with: "whatever is identified and agreed upon in advance" and then memorialized in the contract?

AlsoExDCAA said:

Am I being too much of a literalist to respond with: "whatever is identified and agreed upon in advance" and then memorialized in the contract?

The PCO should emphasize "productivity" during the meeting of the minds (e.g., Draft RFP, Industry One-on-Ones), but, if the contract crafts the DPLH definition well enough, the ACO always has its four corners including FAR 52.242-1:

Quote

Notice of Intent To Disallow Costs (APR 1984)

(a) Notwithstanding any other clause of this contract—

(1) The Contracting Officer may at any time issue to the Contractor a written notice of intent to disallow specified costs incurred or planned for incurrence under this contract that have been determined not to be allowable under the contract terms; and

(2) The Contractor may, after receiving a notice under subparagraph (1) above, submit a written response to the Contracting Officer, with justification for allowance of the costs. If the Contractor does respond within 60 days, the Contracting Officer shall, within 60 days of receiving the response, either make a written withdrawal of the notice or issue a written decision.

(b) Failure to issue a notice under this Notice of Intent to Disallow Costs clause shall not affect the Government's rights to take exception to incurred costs.

During each invoice review, see also:

Quote

FAR 31.201-2 Determining allowability.

(a) A cost is allowable only when the cost complies with all of the following requirements:

(1) Reasonableness.

(2) Allocability.

(3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances.

(4) Terms of the contract.

(5) Any limitations set forth in this subpart.

In conjunction with:

Quote

FAR 52.216-7 Allowable Cost and Payment (AUG 2018)

(a) Invoicing. (1) The Government will make payments to the Contractor when requested as work progresses, but (except for small business concerns) not more often than once every 2 weeks, in amounts determined to be allowable by the Contracting Officer in accordance with Federal Acquisition Regulation (FAR) subpart 31.2 in effect on the date of this contract and the terms of this contract...

Voyager said:

Many COs are already familiar with the term "Direct Productive Labor Hour (DPLH)" in their contracts, but most contracts do not define it.

What would be a productive hour?  One example of time expended in regard to performance of a contract is a contract requirement that the contractor will have employees attend a quarterly meeting with the government concerning performance of the contract.  The contractor sends appropriate people (3) to a meeting, however only 1 of the employees says anything at the meeting.  Would the time of the silent employees be a productive hour?  What about the travel time of the employees going to and from the meeting?

Here is one definition of "direct productive labor hour," quoted from Department of Commerce FAR Supp. 1352.216-71:

Quote

DPLH is defined as actual work hours exclusive of vacation, holidays, sick leave, and other absences.

And the following is from the EPA FAR Supp. clause, 1552.212-70, Level of Effort-Cost-Reimbursement Term Contract (APR 1984):

Quote

(b) Direct labor includes personnel such as engineers, scientists, draftsmen, technicians, statisticians, and programmers and not support personnel such as company management, typists, and key punch operators even though such support personnel are normal ly treated as direct labor by the Contractor. The level of effort specified in paragraph (a) includes Contractor, subcontractor, and consultant labor hours.

Retreadfed said:

What would be a productive hour?  One example of time expended in regard to performance of a contract is a contract requirement that the contractor will have employees attend a quarterly meeting with the government concerning performance of the contract.  The contractor sends appropriate people (3) to a meeting, however only 1 of the employees says anything at the meeting.  Would the time of the silent employees be a productive hour?  What about the travel time of the employees going to and from the meeting?

This question seems to come from a T&M/LH perspective.  The T&M payments clause paragraph (a) applicable to labor (vice (b) applicable to materials) says we pay the labor hours multiplied by the hourly rates.  No reference to allowability is made in (a), and I therefore warn readers this LOE discussion does not apply to T&M/LH contracts.  Besides, the T&M/LH payments clause calls for "best efforts", not a "level of effort".  And as ji and Don allude to above, they are wholly different from LOE contracts.  Allowability, at least of labor rates, is assumed to have been determined pre-award.

Quote

FAR 52.232-7 Payments Under Time-and-Materials and Labor-Hour Contracts (NOV 2021)

(a) Hourly rate...(2) The amounts shall be computed by multiplying the appropriate hourly rates prescribed in the Schedule by the number of direct [Note: no word "productive" exists here in the T&M/LH clause - would need a deviation, and that would be ill-advised] labor hours performed.

* * *

(b) Materials...(4) Payment for materials is subject to the Allowable Cost and Payment clause of this contract. The Contracting Officer will determine allowable costs of materials in accordance with FAR subpart 31.2 in effect on the date of this contract.

* * *

(d) Total cost. It is estimated that the total cost to the Government for the performance of this contract shall not exceed the ceiling price set forth in the Schedule, and the Contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within such ceiling price...

@Retreadfed Each CR LOE contract's pre-award RFP development team should tailor the definition to its own program.

The term "level of effort" is not defined in the FAR. I searched to see if it was defined in either GAO decisions or a Court of Law decision. The only references I could find to this term were defined as "a number of hours or FTEs." The PMBOK defines "Level of Effort" as a specific project activity that does not yield a specific defined end product. Instead its a type of activity that represents discrete effort where time is the only way to measure the work/activity performed. 

In the context of a contract, a "level of effort" should be a defined unit of activity where a specific end product cannot be defined. The nature, duration, and who and how the activity should be performed should be part of the contract.

Voyager said:

This question seems to come from a T&M/LH perspective.

No my question was in response to your statement I quoted.  We are talking about "level of effort" as in level of effort contract.  I think most of us agree that a T&M/LH contract is not a level of effort contract.

Retreadfed said:

What would be a productive hour?

How about this?

Productive hour means an hour of physical or mental activity devoted to the achievement of the principal contract objective as described in the contract work statement, excluding all administrative and clerical support such as purchasing and document preparation.

Vern Edwards said:

Productive hour means an hour of physical or mental activity devoted to the achievement of the principal contract objective as described in the contract work statement, excluding all administrative and clerical support such as purchasing and document preparation.

That might work in some circumstances.  I suspect that the definition of "productive hour" would vary from contract to contract.  For example, I once worked with a contractor that had a contract to answer correspondence and prepare speeches for the Office of the Secretary of the Navy.  Document preparation would definitely be considered a productive hour under that contract.  A dispute arose under that contract concerning what the contractor was entitled to be paid and the Navy at first said the contract was a LOE contract but ultimately backed off that position and agreed with the contractor concerning payment.

Retreadfed said:

That might work in some circumstances.

Anything might work if the parties understand and agree to it.

The key is the ability to define terms and agreememt on definitions.

Thus, in order to conduct a transaction for the purchase of "effort" the parties should define it and agree to a method of measurement.

But in competitive procurements the government likes to enter into contracts without discussions.

Agreement without discussion is an interesting idea.

Socrates died in 399 B.C. The government doesn't seem to have learned much since then.

On 3/13/2024 at 7:46 AM, Vern Edwards said:

Have the three men exerted nine hours of effort or 27 (3 x 9) hours?

The level of effort for this scenario is 9 hours, because those are the productive hours.

But the price of this work will not be $250 per hour multiplied by 9 hours (assuming each productive hour costs $250 per hour), it will be $250 * 9 hours plus some other cost of having the workers be on site waiting their turn, the main cost driver will be $250 * 9 though.