Government negotiation of Fee AFTER award

I'm not sure I understand. If the change that the Government wants would increase the cost of performance, why wouldn't you want to negotiate a change in the amount of fixed fee?

My apologies. They wish to re-negotiate the Fee on our Firm Fixed Price portion of the contract.

Let me see if I understand. The Government wants to change line items in your contract that are priced on a FFP-basis and that change will increase the cost of performance. When it comes to negotiating the profit on the change, the Government wants to negotiate a profit rate that is different than the profit rate that was originally used to price the item. Is that what's happening?

I'm confused too as there is no fee in a firm fixed price. Are you saying the government wants to reduce the price and use tose funds to pay for changed work under other CLINs?

That is correct and I appreciate your response.

Our contract has existing CLINS which the Government wants to purchase upgrades for.

Example:

CLIN 1001- submersible widget $10,000.00

They issue a "BCR" to upgrade this widget.

Our company submits a FFP proposal to this BCR with a note indicating the "a 15% Fee has been applied in accordance with the previous FFP negotiated under the contract..

The Gov says now that the 15% on FFP is excessive. We are issuing a new CLIN (subclin10011) and the FEe is to be no more than 9%.

Our concern is they are using this method to reduce our FFP Fee on ALL clins going forward.

The BCR is a new negotiation and the government wants to negotiate a new fee (profit is the correct word). That's perfectly legal. And yes, you can expect them to do it again. The regulations don't address it, but a contracting officer is always free to try to negotiate a better price. You don't have to agree to it, in which case they may not agree to the BCR. It's up to you.

I can tell you this: Not many contracting officers would agree to a 15 percent profit, especially not these days. You may have included that much in your original bid, and congratulations. But good luck getting that much again.

Good thing you were not around for the Renegotiation Act. Going back to my administrative law days, the Renegotiation Act included a 6-percent limitation on profit that applied to both cost-type and fixed price contracts. Its purpose was to squelch what Congress considered rampant excessive wartime profits after World War II. The Renegotiation Act worked about as well as a swamp cooler in a Florida summer (not well, would not recommend it).

I think your first mistake was to divulge your profit on a firm-fixed price line item if you did not have to. The only instance where you would need to release that information is if the Government required you to submit cost or pricing information so that it could make a fair and reasonable price determination.

The Government people see that you are asking for a 15-percent profit, and are likely thinking that it is a little greedy. Why do Contractors need profit anyways when those profiteering mongrels should just give us everything free? Since I am not in the submersible widget business, I cannot speak to whether 15-percent is reasonable. What I would do if I had your contract was tell the Government that while you think your fee is reasonable, you really appreciate its business and your ability to meet the agency’s needs. As such, you would be willing to reduce your fee in this instance to 12-percent. Then, in the future, never indicate what your profit margin is on a firm-fixed price requirement unless required. By indicating your profit, though, you are just asking an area of contention.

That does not mean that the Government will not ask you for price reductions in the future. Government people have it pretty tough, you know? I had to throw Government Furnished Property at a low flying bird just to eat lunch.

Thanks to all of you for your responses! Big Help!