100% of anticipated results received per government evaluators under FAR 16.207 FFP/LOE, post delivery, CO thinks it did not take the LOE and contractor owes government back.

Thoughts....

What is the payment clause in the contract?

In most systems the CO approves payments.

What does the COR appointment letter say about the COR's inspection, acceptance and payment authority?

Most likely, this matter cannot be resolved without seeing the contract's text and understanding the context of its formation and administration.

If this really is a FFP-LOE contract, isn't the contractor's obligation to provide the stipulated level of effort?  Is the LOE a ceiling, or a requirement?

It is possible that the contract is sloppy, and that either or both the contracting officer and contractor don't understand correct principles.  If there is a claim, this sloppiness will come to light -- and I cannot predict the outcome yet.

I guess my question is whether the contract is really a FFP-LOE contract, both by its own text as well as the manner of administration, or is it some sloppy mish-mash?

Cyber TJ said:

After performance of LOE, government CO makes claims, "there was not enough work for one of the lcats in order to justify the LOE billed for this lcat during some of the contract term". Therefore, the CO's opinion is the contractor inflated the billing in an lcat and now the government requires repayment of 80-90% of the LOE paid for by the government

@Cyber TJ 

Is the CO accusing the contractor of falsely recording and invoicing for hours that were not, in fact, worked? Or is the CO accusing the contractor of working inefficiently?

Cyber TJ said:

The contractor was not required to keep a log of efforts performed by each lcat.

Does your timekeeping system require this?  Does your timekeeping system show that the required level of effort was provided?  There is a timekeeping maxim that contractor employees should record what they do and do what they record. 

Under an LOE contract, you are paid for effort expended, not results achieved, thus, your reliance on results achieved may be misplaced if the "results achieved" were something other than providing the required LOE.

C Culham: FAR 52.232-01 Payments (Apr 1984) 

     The Government shall pay the Contractor, upon the submission of proper invoices or vouchers, the prices stipulated in this contract for supplies delivered and accepted or services rendered and accepted, less any deductions provided in this contract. Unless otherwise specified in this contract, payment shall be made on partial deliveries accepted by the Government if-

(a) The amount due on the deliveries warrants it; or

(b) The Contractor requests it and the amount due on the deliveries is at least $1,000 or 50 percent of the total contract price.

COR Letter:

3 Performing inspections acceptance and quality assurance functions.

B. A COR shall be knowledgeable of the types of contract as defined in FAR part 16, that are to be administered. The COR shall also ensure that authorities and limitations of contract provisions about changes, inspection, rework and the provisions of the Prompt Payment Act are understood.

Perform inspection and acceptance as designated by the CO. Ensure notification is provided promptly to the CO and DF2211 of any deficiencies or discrepancies in the supplies/services provided.

And several other instructions pertaining to the CORs obligations for inspection prior to acceptance. There was also a surveillance plan which had inspection and acceptance criteria for the COR.

jjj said:

Most likely, this matter cannot be resolved without seeing the contract's text and understanding the context of its formation and administration.

If this really is a FFP-LOE contract, isn't the contractor's obligation to provide the stipulated level of effort?  Is the LOE a ceiling, or a requirement?

It is possible that the contract is sloppy, and that either or both the contracting officer and contractor don't understand correct principles.  If there is a claim, this sloppiness will come to light -- and I cannot predict the outcome yet.

I guess my question is whether the contract is really a FFP-LOE contract, both by its own text as well as the manner of administration, or is it some sloppy mish-mash?

See response to C. Culham. This was 100% an FFP/LOE contract and up until the final 19 months of performance, the government adhered to the strict limitations of FAR 16.207. The contract is void of ambiguity. Section B states specifically: the contractor is to supply the LOE below ....

Vern Edwards said:

@Cyber TJ 

Is the CO accusing the contractor of falsely recording and invoicing for hours that were not, in fact, worked? Or is the CO accusing the contractor of working inefficiently?

 Vern, the CO is accusing the contractor of falsely recording and invoicing for hours that WERE worked but claiming "the hours billed have to be false because there was "not enough work" to be performed. Going further in blaming the contractor for not informing the government CO/COR that they did not "have enough work for the hours awarded on the contract". The contractor does not waiver, there was more than sufficient amount of work for the hours billed. There is no accusation of working inefficiency. The CO has publicly acknowledged, the government received all requirements of the SOW and TTOs but that is not "proof" the contractor delivered the LOE stipulated in Section B of the contract. Further accusing the contractor that they knew the amount of work involved would not require the amount of LOE identified by the government as necessary to deliver the intended results. 

As a fellow contractor, my deep concerns are of having a CO come after my firm in such a manner. If the above allegations against the contractor become more than allegations and the contractor is held liable based upon the CO's post-performance opinions "there was not enough work to be completed" and "the contractor knew there was not enough work and failed to notify the government". 

Vern, does this answer your questions?

Retreadfed said:

Does your timekeeping system require this?  Does your timekeeping system show that the required level of effort was provided?  There is a timekeeping maxim that contractor employees should record what they do and do what they record. 

Under an LOE contract, you are paid for effort expended, not results achieved, thus, your reliance on results achieved may be misplaced if the "results achieved" were something other than providing the required LOE.

Retread, I could not agree more with your comments! The timekeeping system requires recording the accurate time billed against the accurate time code. There is not a requirement to supplement with specific tasking as the TTO and lcats are detailed in specifying the weighty requirements expected/hoped to be delivered by each lcat. 

Please see the response to Vern above. How can the contractor defend themselves if agency authorities are accepting the CO's opinion of "lack of work"? The Administrative COR and the technical CORs all claim their inspection and acceptance was solely based upon making sure the FHMR and invoice matched and did not exceed the "ceiling" of loe in section B. They were not verifying the actual delivery of the LOE by the contractor. I am perplexed as to how the leadership of the CO supports her conduct. Would love any input from all of you.

https://www.gao.gov/products/b-421525

This decision only increases my concerns as we are currently working to submit a bid for an ffp/loe opportunity. How do I protect myself and my firm from falling victim to this same fate.  We openly accept the risk of growing operating costs and no means to re-coup but fear being accused of wrong doing for performing to the terms of the contract. Do we just avoid FFP/LOE, FAR 16.207 RFPs?

Cyber TJ said:

Vern, does this answer your questions?

Yes.

Cyber TJ said:

... the CO is accusing the contractor of falsely recording and invoicing for hours that WERE worked but claiming "the hours billed have to be false because there was "not enough work" to be performed.

The CO appears to be accusing the contractor of making a false claim. That's serious. If I were the contractor I would seek advice from a government contracts attorney and would no longer engage the CO directly on that matter except as advised by the attorney.

Cyber TJ said:

C Culham

Thank you.  I am reserved to  not offer any further thoughts as  I strongly agree with Vern Edwards.

Let me say that whenever a contractor is working under a contract on which payment is associated with hours it may be good practice to have employees assigned to the contract keep time logs of their contractual activities, even if the contract does not call for them. But see FAR 52.215-2.

It might be smart to require the same of subcontractors whose payment is associated with hours.

Cyber TJ said:

How can the contractor defend themselves if agency authorities are accepting the CO's opinion of "lack of work"?

If the CO is demanding repayment of money paid to the contractor, that demand should be asserted in a decision under the Disputes clause of the contract.  That is a government claim and the government has the burden of showing that you do owe a debt to the government.  Also, as Vern has pointed out, the statement made by the CO indicates a belief that a false claim has been made.  Whether the CO has referred this matter to the appropriate investigative organization you have not stated and probably do not know.  In any event, Vern gave you good advice about contacting an attorney who has experience with false claims litigation.  Again, if the government goes forward with a false claims suit, it could be a criminal or civil action.  In either case, the government would have to prove that you submitted a false claim.

Vern Edwards said:

Let me say that whenever a contractor is working under a contract on which payment is associated with hours it may be good practice to have employees assigned to the contract keep time logs of their contractual activities, even if the contract does not call for them. But see FAR 52.215-2.

Yes.  Excellent suggestion.  A practice that seems to be increasing among CORs is requiring statements of accomplishments for individual tasks/subtasks on monthly contractor progress reports with special emphasis on supporting time billed. I wonder if this is from more CORs taking PM training?

Here is how the OP described the contract:

On 5/13/2024 at 9:09 AM, Cyber TJ said:

Contract awarded under FAR 16.207, FFP/LOE. Section B breaks out LOE by LCAT for each Period of Performance throughout 53 modifications during the term of the contract performance. No dispute, the intended results were received in full from the contractor to the government. Performance was evaluated annually as either "very good" or "satisfactory". Payments were made monthly based upon the LOE delivered each month. Contractor delivered all CDRLs on-time and to the satisfaction of the government.

I have to say that sounds like a flakey contract. An FFP/LOE contract specified "intended results"? Fifty-three modifications? FIFTY-THREE?! Probably to change staffing levels and assignments.

The government obligates more funds for services than for anything else. Among all types of services it obligates more for professional services other than research and development than for anything else. And the government writes some of the most dumbass contract arrangements known to mankind just to hire "support" staff. What the OP described sounds like one of those dumbass arrangements.

Incompetence in contracting offices, agency headquarters, Congress, and the White House is going to bring this country to its knees if an emergency requires fast and sensible procurement.

When I was a contractor PM, much of my day was consumed by documenting and reporting the activities of my team.  Even though we were under an FFP arrangement, the fact Government CORs are apparently only able to count butts in seats compelled me to treat it like a cost-type effort (drove me nuts, but a topic for another day).

The Government is like the biggest elephant in the world: slow-moving and clumsy, but it never forgets.   I knew certain (incompetent) contractor PMs who would smugly believe they didn't have to report anything because they were so awesome and the client loved them and doesn't want a report anyway, only to have to retroactively document 2-year-old activities when they got caught in an audit.  No matter how often I told them the monthly report was actually for us (the contractor) they didn't believe it until they got burned firsthand.

Vern Edwards said:

I have to say that sounds like a flakey contract. An FFP/LOE contract...

I'm still wondering if OP has a real FFP-LOE contract.

jjj said:

I'm still wondering if OP has a real FFP-LOE contract.

Yep! 

I am still confused, unless the contractor has purposely submitted false hours expended, on what basis the Government is now questioning the hours/payment after inspection, acceptance and payment of the hours (LOE) via 52.232-1 especially in light of the whole of FAR 16.207?  

I mean really 53 modifications.   If over the SAT I sure would like to see the COCO's approval!

The whole thing sounds flakey indeed?

On 5/15/2024 at 4:11 PM, REA'n Maker said:

When I was a contractor PM, much of my day was consumed by documenting and reporting the activities of my team.  Even though we were under an FFP arrangement, the fact Government CORs are apparently only able to count butts in seats compelled me to treat it like a cost-type effort (drove me nuts, but a topic for another day).

The Government is like the biggest elephant in the world: slow-moving and clumsy, but it never forgets.   I knew certain (incompetent) contractor PMs who would smugly believe they didn't have to report anything because they were so awesome and the client loved them and doesn't want a report anyway, only to have to retroactively document 2-year-old activities when they got caught in an audit.  No matter how often I told them the monthly report was actually for us (the contractor) they didn't believe it until they got burned firsthand.

Correction, monthly CDRL of program management report was required and is not disputed, was received from the contractor. This report required the contractor to provide a summary of task performed, staffing, financial data, risks and any other items the contractor felt pertinent in performance of the contract. Unlike the incompetent PMs (I too have confronted my fair share), this PM did provide the monthly documenting work completed.

On 5/15/2024 at 9:24 AM, Vern Edwards said:

Yes.

The CO appears to be accusing the contractor of making a false claim. That's serious. If I were the contractor I would seek advice from a government contracts attorney and would no longer engage the CO directly on that matter except as advised by the attorney.

Vern, you hit the nail on the head! In contrast to the GAO decision in the link above and the black and white language of FAR 16.207, the CO, CO leadership up to and including the Senior Acquisition Executive of the agency and law enforcement all use creative license in implementing FAR 16.207 against the contractor involved. All of the government acquisition/contracts staff, under legally binding oath, stated FAR 16.207 LOE is just a "ceiling", "not to exceed", "estimate", "not required to be performed in full by contractor" and other statements as fact which do not comport to FAR 16.207 limits. As well, statements as contractual requirements which were not present in the contract and dismissing the CORs' responsibilities to inspect and accept contractor work as complete prior to approving invoices. Further, beyond the monthly Funds Man Hours Report, the contractor provided more than a dozen reports for extension of the PoP at no cost upon request of these same CORs. The government never recorded a deficiency against the contractor and in fact, further extended the contract an additional 6-months after the CO and CM accused contractor of labor mischarging. 

The contractor directly involved has been destroyed BUT my concern and reason for the discussion here, how this has been allowed to legally occur and its impact on all of us who remain as contractors to the federal government. How is a contractor to know if the LOE listed (w/o fluctuation clause) is to be performed or are they to determine some subset of the LOE to deliver? How do they avoid being called out for poor performance or breach if they elect to not deliver all the LOE awarded in the contract? How do we budget for a contract that is FFP but in reality, is not at all to be relied on? I am stunned the situation of my discussion was allowed to proceed without any audit or oversight from ANY authority of FAR. Does this alarm and strike fear into anyone else?

C Culham said:

Yep! 

I am still confused, unless the contractor has purposely submitted false hours expended, on what basis the Government is now questioning the hours/payment after inspection, acceptance and payment of the hours (LOE) via 52.232-1 especially in light of the whole of FAR 16.207?  

I mean really 53 modifications.   If over the SAT I sure would like to see the COCO's approval!

The whole thing sounds flakey indeed?

C Culham, not just flakey to me but arbitrary and capricious of the CO and undeniable Bad Faith! The basis of "proof" is the CO's opinion, "I do not think there was enough work to justify the hours billed by the contractor in delivery of the requirements". The CO does not identify any requirement that was not delivered. All CDRLs were delivered and accepted. 53 modifications, some which contain digital PKI signatures of staff that no longer worked as government employees when the documents were created, executed. The government deobligated over a million dollars off the contract against the concurrence of the contractor.

Cyber,

The contractor may protect its interests by following the contract's Disputes clause.  No one here can provide a remedy, and no one here knows the facts.  If the contractor is right, and if it makes a reasonable case, it will likely prevail.  Best wishes.

Cyber TJ said:

All of the government acquisition/contracts staff, under legally binding oath, stated FAR 16.207 LOE is just a "ceiling",

What do you mean by "legally binding oath"?

Retreadfed said:

What do you mean by "legally binding oath"?

Stop. Stop now. Who cares?

Cyber TJ has gone into the wilderness, and we should not follow him. Instead, we should think about his tale and what we can learn from it. And I think what we can learn is that our COs do not know how to design contracts.

FFP LOE (FAR 16.207-1) does not describe a contract. It is just a half-baked description of a particular type of contract pricing arrangement.

What Cyber TJ's opening story suggests to me is that the CO knew nothing about the art of contract design and contract design principles.

Rather than go on about this, I will refer you to the opening chapter of a book published in 2022, Research Handbook of Contract Design, Compagnucci et al., eds. The opening chapter is entitled, "The Many Layers and Dimensions of Contract Design," and it begins thusly:

Quote

Contracts are a core framework that organize and structure every aspect of social and economic life. Business success depends on contracts and almost all individual activities – whether they are related to work or leisure – involve contracts at some level. We may not always be cogni- zant of their central role, but contracts are a crucial infrastructure that define what we do and how we do it, across every aspect of our lives.

For a long time, bringing predictability to transactions and relationships and managing the various risks associated with them were among contract drafters’ primary goals. Precise text and correct legal interpretation were key, as if contracts were made for legal enforcement and winning legal battles only. This view no longer holds. Legal considerations are not the only stakeholder in the contracting process. Contracts have many purposes and functions, and to be fit for purpose and functional, today’s contracts must be designed, not just drafted. They must work in fostering and sustaining business and human relationships, and not just between legal professionals and in legal contexts only.

In a world where contracts were drafted, their drafters – typically lawyers – focused on content and precision. Their attention was primarily directed towards legal compliance and mitigating legal risk, rather than the needs of the people who used or relied on the resulting documents. However, there is a lot of evidence – both anecdotal and from research – sug- gesting that the users of contracts have not been well served by this practice.1 Due to this, implementation can fail, and various problems (legal and economic) can follow. Instead of minimizing legal risk, overly complex contracts can lead to new risks, such as unintentional non-compliance, delays and misunderstandings – let alone the missed opportunities and unhappy relationships between business partners or consumers and business. A creeping realization of the inadequacies in our traditional approach to contracting provides the basis and impetus for the emergence of contemporary discussion around contract design.

Emphasis added.

You can obtain the entire chapter at https://www.academia.edu/117378488/The_many_layers_and_dimensions_of_contract_design. If not, just search for it at Google Scholar.

There is more to preparing a solicitation and contract than following the scattered instructions in FAR.  But contracting officers are taught, learn, and know nothing about contract design, which is why they cut and paste together so many dumbass contracts.

Read it the chapter. Then, if you want, we can talk. (The book is $221.00 at Amazon.)

Signing off.

Vern Edwards said:

Stop. Stop now. Who cares?

The reason I posed my question is that the use of the phrase "legally binding oath" is an indication that this matter may be in litigation now.  If that is the case and the litigation goes to a decision, we all might learn more about this particular situation.  As for COs not knowing how to design  contracts, I agree with your conclusion.  I would also add that more and more COs today do not know how to administer contracts.