FFP contracts required to bill as T&M type

It appears to be a unit priced contract line item where the rates are FFP.  The notes in the schedule are generally part of the contract terms and conditions.  Was the note in the solicitation that you used to propose and price the contract?

No there is nothing in the terms and conditions.  If they are saying the rates are fixed then wouldn't that be a labor hour contract and not a FFP?

Are you sure you haven't got a firm-fixed-price level-of-effort (FFP LOE) contract?

See FAR 16.207.

Yes.  I checked that first.

I have seen this several times where an agency will write an FFP contract, but administer it as a T&M/LH contract.  This way of administering the contract is usually not disclosed to the contractor until after award.  In most cases, this is done with small business concerns who are usually reluctant or have a diminished capacity to push back against the agency.  I suspect this is done to avoid having to do a D&F justifying the use of a T&M contract.

That's what I was afraid of and we have quite a few small businesses with this situation on several contracts.  I have contacted the ACO but I'm hearing crickets:)).  Do you know what language I could start with to push back?  Thanks so much

What does your payment clause say?

Note sure I know how to answer.  It is a small business set aside so the accelerated payment to small businesses is there along with the DFAR electronic submission clause.  That's all I see.

Is FAR 52.232-1 in the contract?

pat said:

That's what I was afraid of and we have quite a few small businesses with this situation on several contracts.  I have contacted the ACO but I'm hearing crickets:)).  Do you know what language I could start with to push back?  Thanks so much

Pat, I don't understand what you meant by the statement "...we have quite a few small businesses with this situation on several contracts. "  Please clarify.  Are you referring to subcontractor's to you as the prime contractor? Are you with the government or are you the contractor? 

Pat, you indicated that this was a competitive small business set-aside. You said that there was no indication in the solicitation prior to award that hours were estimated and payment will only be made for actual hours worked.  Please clarify when the statement below for the Line Item first appeared in the language of your contract:

pat said:

but the CLIN states that hours are estimated and payment will only be made for actual hours worked.

Retreadfed said:

I suspect this is done to avoid having to do a D&F justifying the use of a T&M contract

Has this D&F become harder to write over the years?  I don't remember it being too much of an obstacle, there was copious parroting of FAR 16.601.c.  I know the Obama Administration wanted less T&M.

I don't think writing the D&F is the issue--it's getting the approval.

A lot of COs like to think of a fixed unit price labor hour contract as being "fixed price"   They like the fixed price clauses.   Many of these contracts do not have any deliverables except for the hours worked.  Therefore, every hour not worked is an hour not delivered and it can be deducted from the "fixed price". 

D&F not an issue for us, under 3 years only needs Branch Chief (level above CO) and over 3 years takes HCA but approval time for HCA is only a day or two.

Is that an acceptable way to treat these FFP contracts then, using the hours worked as the deliverable?

Pat wants to know how how to "push back" to the government but doesn't seem to want to clarify when or how the statement in the CLIN was included that says "hours are estimated and payment will only be made for actual hours worked" .  Was it BEFORE or AFTER Pat's company submitted their proposal?

 I know that Pat has been viewing this thread within the past 7 hours, including a post just now.

Yes.  I think I blew sending the last response.  FAR 52.232-1 is not in the contract.

We are a contractor with several small businesses.  We have prime contracts.  The line item language was in the award of contract only.  Think I covered all the questions.  Thanks so much.

OK, thanks, Pat.  Then it looks like the government changed the terms of the contract. There was no meeting of the minds. Submit a claim.

Occam's Razor: the contracting agency doesn't know what they are doing.  

I've seen this more times than I can count:

1. CO determines that FFP is appropriate
2. IGCE uses labor hours and rates as the BOE
3. CO issues FFP RFQ
4. Award is made at an FFP, yet Section B retains the hours/rates pricing used in the IGCE and evaluation
5. Micromanaging COR who only knows how to count butts in seats takes over administration of contract
6. 1 FTE goes to Disneyland for a week
7. COR decrements invoice for "40 hours not worked"
8. Repeat until PoP expires

Lesson: it's much easier to award a LH contract when you call it FFP.  

(But the real fun comes when you try to close a physically complete FFP vehicle and there's a bunch of unexpended funds still on it, which, of course, should be impossible.)

This is a BS argument, but it's worked for me in the past: Explain to the government that the contract labor price was based on an 1880 hour year, which is 5 weeks short of the total number of workdays in a typical year; therefore, until the government can show that each FTE has  taken more than 5 weeks off , you can't decrement the  invoice. (one other tactic I have used is to price the deliverables individually.  At least that keeps the attention where it should be, which is on DELIVERIES) . 

On 4/12/2017 at 4:59 PM, napolik said:

Are you sure you haven't got a firm-fixed-price level-of-effort (FFP LOE) contract?

See FAR 16.207.

FFP LOE is narrowly applicable, and generally a terrible idea, so I suggest  you purge that bit of info from your data banks.  It will save you needless heartbreak and embarrassment in the future.

REA'n, the FAR limitations on the use of FP LOE contracts are frequently ignored by the government.  I have seen more such contracts that do not comply with those limitations than those that do and that is quite a few. 

Pat may have left the building, but if (s)he is still around, maybe we can find out what payment clause is in the contract.  If it is an FFP contract, 52.232-1 should be the payment clause.

Could be worse.

For example, I'm dealing right now with a client's (non-Federal) T&M contract that is being administered as a CPPC, with preliminary audit findings pertaining to the indirect costs used to build up the fixed-price hourly billing rates that were then escalated in accordance with written direction from the customer and written contract mod documenting the bilateral agreement as to escalated the hourly billing rates.

This is an excellent topic.

I just awarded a FFP contract for our Accounting service (large business, GSA OASIS Program).  Our agency does not allow to do T&M contract.  My CLIN Unit was Monthly, the CLIN was included that says "hours are estimated and listed detailed labor categories and hours as below...."  I did not put "payment will only be made for actual hours worked".  My question is Can I ask contractor to bill the government based on actual hours worked?  How shall COR monitor this contract?  If the contractor proposed 10 personnel monthly for certain hours, but they only provide 9 people and less hours than they proposed, Are we (government) still pay the proposed monthly price?  Since the CLIN has detailed all estimated labor categories; hours; and price, the contractor should bill the government with a detailed breakdown invoice based on the actual hours worked.  Am I correct?  if so, how shall I provide my explanation?  Thank you.

tj,

Your agency doesn't allow T&M contracts -- so why are you trying to do a T&M contract?

From the little you wrote, it seems your contractor should invoice for the agreed-upon firm-fixed-price each month.  The hours are estimated, and may fluctuate each month, but the invoice amount will be the same each month.

tj2015 said:

I just awarded a FFP contract for our Accounting service (large business, GSA OASIS Program)... My CLIN Unit was Monthly, the CLIN was included that says "hours are estimated and listed detailed labor categories and hours as below...."  If the contractor proposed 10 personnel monthly for certain hours, but they only provide 9 people and less hours than they proposed, Are we (government) still pay the proposed monthly price?

The contractor is bound by the terms of the contract. Two questions for tj2015:

1. You say that the CLIN description said hours are "estimated," but does the contract say that the "estimated" hours must be provided?

2. You say that the contractor proposed 10 persons per month, but does the contract say that the contractor must provide 10 persons per month?

If the contract does require 10 persons per month, does it say how many hours each person must perform?

tj2015 said:

Since the CLIN has detailed all estimated labor categories; hours; and price, the contractor should bill the government with a detailed breakdown invoice based on the actual hours worked. Am I correct?

Does the contract say that the contractor's invoice shall (not should) include a detailed breakdown of the actual hours worked?

Thank you ji20874.  firm-fixed-price is fixed unit price.  If the contractor did not provide the estimated hours and personnel, Government is still obligate to pay the estimated monthly fixed price?  So how shall we monitor this FFP service contract?

Vern Edwards said:

The contractor is bound by the terms of the contract. Two questions for tj2015:

1. You say that the CLIN description said hours are "estimated," but does the contract say that the "estimated" hours must be provided?

2. You say that the contractor proposed 10 persons per month, but does the contract say that the contractor must provide 10 persons per month?

If the contract does require 10 persons per month, does it say how many hours each person must perform?

Does the contract say that the contractor's invoice shall (not should) include a detailed breakdown of the actual hours worked?

1. Based on our Performance Work Statement (PWS), the contractor proposed the estimated labors and hours and the CLIN description was built based on contractor's proposal.

2. No.  The contract does not say that the contract must provide 10 persons per month.

3.  In PWS, it required invoice shall include: Labor Categories / Hours Billed/ Rate

So, is your contract line item set up something like this?

(a) 0001 - (b) Accounting Services IAW PWS – (c) 12 – (d) MO - (e) $10,000 - (f) $120,000

(a) = Item

(b) = Supplies/Services

(c) = Quantity

(d) = Unit

(e) = Unit Price

(f) = Amount

tj:

Your answer to my Question 1 does not tell me whether the contract states that the contractor must deliver the estimated hours. The CLIN description says "estimated," right? Not required? If it's only an estimate, then I would think the hours are not required. But a sound response to your inquiry would require a legal analysis of the entire contract, not just the CLIN descriptions.

Your answer to my Question 2 suggests that you cannot deny payment of the monthly rate because the contractor did not provide 10 persons per month, because you said the contract does not say that the contractor must provide 10 persons per month.

Your answer to my last question indicates that the contractor must provide the information that the PWS says it must provide. But, again, a sound response to your inquiry would have to be based on a legal analysis of the entire contract, not just the PWS.

ji20874 said:

So, is your contract line item set up something like this?

(a) 0001 - (b) Accounting Services IAW PWS – (c) 12 – (d) MO - (e) $10,000 - (f) $120,000

(a) = Item

(b) = Supplies/Services

(c) = Quantity

(d) = Unit

(e) = Unit Price

(f) = Amount

Yes.

in Supplies/Services, the description as follows:

0001 Accounting & Financial Operations Support Services

One (1) Base Year (Award Effective Date to 12 months), included Transit In (6 days). Detailed Personnel Position Titles; Hourly Rate; and Estimated

Labor hours are Included the following:

Base Year

SME Accountant II: $145.74/hrs. 90 hrs per mon. sub-total: $13,116.60

Sr. Accountant II: $121.13/hrs. 1,760 hrs per mon. sub-total: $213,188.80

Sr. Accountant I: $118.03/hrs. 1,760 per mon. Sub-total: $207,732.80

Accountant III: $109.62/hrs. 1,760 per mon. Sub-total: $192,931.20

Accountant II: $104.77/hrs. 1,760 per mon. Sub-total: $184,395.20

Accountant I: $93.29/hrs. 1,760 per mon. Sub-total: $164,190.40

Jr. Accountant II: $89.61/hrs. 1,760 per mon. Sub-total: $157,713.60

Total: $1,133,268.60

Any additional hours have to be approved by COR prior to work.

So I divided this total price by 12 (mon) as Unit Price (e) and amount (f) = $1,133.268.60.  Can I ask contractor to invoice government with a detailed breakdown as PWS required?

I'm struggling to understand why a FFP contract with a  PWS would require a detailed invoice breakout as suggested by tj.

Either the contractor accomplishes the PWS objectives, or it does not. If it does accomplish the objectives, it should get paid whatever price the parties agreed upon--which appears to be a fixed price per month. If it does not, a cure notice should be sent. I'm struggling to understand why the quantity of hours the contractor incurred would matter.

deleted -- let me re-work it...

here_2_help said:

I'm struggling to understand why a FFP contract with a  PWS would require a detailed invoice breakout as suggested by tj.

@H2H:

The PWS concept is defunct. People call work statements "performance work statements" because they're told they must. Maybe some people think their SOWs  really are performance work statements. But in the entire history of government contracting there have been very few "real" performance work statements. PWS is a meaningless label.

tj2015 said:

Can I ask contractor to invoice government with a detailed breakdown as PWS required?

If the PWS in fact requires it, then yes. You can demand it.

tj,

So, using my format, is this what your order provides?

(a) 0001 - (b) Accounting & Financial Operations Support Services – (c) 12 – (d) MO - (e) $1,133,268.60 - (f) $13,599,223.00

(a) = Item

(b) = Supplies/Services

(c) = Quantity

(d) = Unit

(e) = Unit Price

(f) = Amount

Regarding the invoice, I agree with Vern -- if the order requires the data, the contractor has to provide it.  However, the actual hours data will be for your information only, and will not serve as a basis for payment -- the basis for payment is the FFP of $1,133,268.60 per month (provided the contractor rendered promised services and the Government accepted them).  It will not be necessary for the hours data to add up to $1,133,268.60 for any month.

Vern Edwards said:

@H2H:

The PWS concept is defunct. People call work statements "performance work statements" because they're told they must. Maybe some people think their SOWs  really are performance work statements. But in the entire history of government contracting there have been very few "real" performance work statements. PWS is a meaningless label.

Can we say that the Performance-Based Logistics (PBL) concept is similarly defunct? Please?

Vern Edwards said:

tj:

Your answer to my Question 1 does not tell me whether the contract states that the contractor must deliver the estimated hours. The CLIN description says "estimated," right? Not required? If it's only an estimate, then I would think the hours are not required. But a sound response to your inquiry would require a legal analysis of the entire contract, not just the CLIN descriptions.

Your answer to my Question 2 suggests that you cannot deny payment of the monthly rate because the contractor did not provide 10 persons per month, because you said the contract does not say that the contractor must provide 10 persons per month.

Your answer to my last question indicates that the contractor must provide the information that the PWS says it must provide. But, again, a sound response to your inquiry would have to be based on a legal analysis of the entire contract, not just the PWS.

Vern,  Sorry I did not clearly answer your Q1.  No, this contract does not states that the contractor must deliver the estimated hours. =(

Thank you for all.  Bottom line... how can government really monitor contractor's work performance? Based on an honest system?

tj, instead of worrying how you are going to monitor the contractor's performance, I would be more concerned with whether you have someone who is capable of monitoring that performance.

tj2015 said:

how can government really monitor contractor's work performance?

Which do you want to monitor:  the outputs (outcomes, results, deliverables) or the inputs (labor hours)?

ji20874 said:

Which do you want to monitor:  the outputs (outcomes, results, deliverables) or the inputs (labor hours)?

We will monitor the outputs as long as they reach the objective per PWS.

Retreadfed said:

tj, instead of worrying how you are going to monitor the contractor's performance, I would be more concerned with whether you have someone who is capable of monitoring that performance.

Thx. I doubt we will have....

For a FFP contract, the output should be your primary concern (I can't comment on whether your contract allows for others).

If you are satisfied with the end result, even when the contractor put forth measurably less effort, then consider that fact for any follow-on solicitations.

here_2_help said:

Can we say that the Performance-Based Logistics (PBL) concept is similarly defunct? Please?

I can't say that. Sorry.

kevlar51 said:

For a FFP contract, the output should be your primary concern (I can't comment on whether your contract allows for others).

If you are satisfied with the end result, even when the contractor put forth measurably less effort, then consider that fact for any follow-on solicitations.

Thank you.

kevlar51 said:

For a FFP contract, the output should be your primary concern (I can't comment on whether your contract allows for others).

Not necessarily. The contract could be FFP-LOE.

Look, what you "monitor" (i.e. contract quality assurance)  depends on what the contract requires from the contractor. There is no general principle that you "monitor" output vs input. You might well "monitor" input. You might "monitor" output. You might "monitor" both. It depends on what the contract says. The objective is to make sure you got what you were promised. as described by the contract, whatever it was.

On 5/16/2017 at 0:31 PM, REA'n Maker said:

Occam's Razor: the contracting agency doesn't know what they are doing.  

I've seen this more times than I can count:

1. CO determines that FFP is appropriate
2. IGCE uses labor hours and rates as the BOE
3. CO issues FFP RFQ
4. Award is made at an FFP, yet Section B retains the hours/rates pricing used in the IGCE and evaluation
5. Micromanaging COR who only knows how to count butts in seats takes over administration of contract
6. 1 FTE goes to Disneyland for a week
7. COR decrements invoice for "40 hours not worked"
8. Repeat until PoP expires

Lesson: it's much easier to award a LH contract when you call it FFP.  

(But the real fun comes when you try to close a physically complete FFP vehicle and there's a bunch of unexpended funds still on it, which, of course, should be impossible.)

This is a BS argument, but it's worked for me in the past: Explain to the government that the contract labor price was based on an 1880 hour year, which is 5 weeks short of the total number of workdays in a typical year; therefore, until the government can show that each FTE has  taken more than 5 weeks off , you can't decrement the  invoice. (one other tactic I have used is to price the deliverables individually.  At least that keeps the attention where it should be, which is on DELIVERIES) . 

You post describes incredibly well an issue that recently fell into my lap (at least up to item 6), in my case the COR is rejecting invoices for "incorrect labor rates"--a discrepancy that has arisen due to rate differences between the schedule, BPA, and orders. The BPA and orders are unambiguous--services are to be performed on a firm fixed price basis, with no mention of LOE. But it's being administered as a T&M contract, and I'm told "that's just how it's always been done."  Multiple CORs, COs, and Contractor PMs have been involved in this and I can't determine who initiated the process.

I'm hoping I can sit everyone down and explain how much easier, less time consuming, and contractually correct managing a FFP contract like a FFP contract will be.

But the Government recently sent the contractor a bilateral mod for a completed order to decrease the price by the unbilled value (the contractor has not signed it), so I'm not confident the discussion will go well.

The underlying problem is that too many government contracting personnel simply do not understand the concept of CONTRACT and the principles and fundamentals of contract law, and yet they are or want to be CONTRACTING officers. It appears that the concept, principles, and simply is not taught anymore, at least not in sufficient depth. Read enough questions at Wifcon and your experience will verify the truth of what I'm saying. The proper response to at least a third of all questions posted at Wifcon Forum is: Read your contract. What does it say?

On 8/30/2017 at 11:14 AM, kevlar51 said:

I'm hoping I can sit everyone down and explain how much easier, less time consuming, and contractually correct managing a FFP contract like a FFP contract will be.

You might try "the FFP contract is based on an 1,880 hour standard" shtick.  Despite the glaring logical fallacy, it has always worked for me (I don't know whether to be pleased or horrified).

On 10/12/2017 at 3:02 PM, REA'n Maker said:

You might try "the FFP contract is based on an 1,880 hour standard" shtick.  Despite the glaring logical fallacy, it has always worked for me (I don't know whether to be pleased or horrified).

Ha, I don't think that argument applies to my current scenario. But I'm absolutely guilty of making it when the need arises (and with equal success on my end).

On ‎10‎/‎12‎/‎2017 at 3:02 PM, REA'n Maker said:

You might try "the FFP contract is based on an 1,880 hour standard" shtick.  Despite the glaring logical fallacy, it has always worked for me (I don't know whether to be pleased or horrified).

REA'n, can you explain why this is a logical fallacy? Would the legitimacy of this argument not depend upon the nature of the services and what is stated in the contract?

PepeTheFrog thinks FrankJon knows the answer to this question, and FrankJon is just being coy, but PepeTheFrog will hop in.

The delivery, inspection, acceptance, and payment terms and clauses of FFP contracts are not designed with the intent of purchasing a set number of hours. You could do that, but it might be a stupid decision.

There are other types of contractual delivery, inspection, acceptance, and payment terms and clauses that are more appropriate for purchasing 1,880 hours of somebody's time.

FrankJon,  can you think of a more appropriate "type" of contract for purchasing 1,880 hours of someone's time?

Every time I read this discussion thread relating to tj’s questions I have talked myself out of posting except for this time.

These are the facts per the posts by tj.  - Order against a GSA OASIS contract (large business).  Not a T&M order.  Performance Based Work Statement.

These are tj’s questions along with my response–

Q. Can I ask contractor to bill the government based on actual hours worked? 

1. The payment clause of the parent OASIS contract must be considered.  Pursuant to the OASIS Contract at Clause 552.232-1 Payments (Deviation) Para. (a) it is stated that a contractor does not have to invoice, but that the Government must pay at the end of a service period.   Unless tj changed this requirement in the specific order tj could “ask” the contractor to “bill” tj with the mentioned detail but the contractor does not have to comply.  I agree if other terms and conditions in contract ask for the detail  on hour usage that it would need to be provided but not necessarily as an invoice/bill.

2. How shall COR monitor this contract? 

3. Monitoring should follow the metrics, measures, and/or plan (QASP) dictated in the PWS/SOW .   If none are stated I highly suggest that the Government determine what their quality control monitoring will include so that the contractor can fashion their quality control plan to, at a minimum,  monitor the same elements of work.   Measuring  the what of contract performance can be changed at any time.  I know some criticize Performance Based Acquisition but its concept is a fact of life as well as its use in any form even if by name only.  I suggest tj visit the following website to help on the monitoring aspect especially as discussed at Steps 5 and 7.  https://www.acquisition.gov/seven_steps/step5.html

Q.  If the contractor proposed 10 personnel monthly for certain hours, but they only provide 9 people and less hours than they proposed, Are we (government) still pay the proposed monthly price?

A.  Other responses have already addressed this and hopefully my above responses help add details for consideration.

PepeTheFrog said:

PepeTheFrog thinks FrankJon knows the answer to this question, and FrankJon is just being coy, but PepeTheFrog will hop in.

The delivery, inspection, acceptance, and payment terms and clauses of FFP contracts are not designed with the intent of purchasing a set number of hours. You could do that, but it might be a stupid decision.

There are other types of contractual delivery, inspection, acceptance, and payment terms and clauses that are more appropriate for purchasing 1,880 hours of somebody's time.

FrankJon,  can you think of a more appropriate "type" of contract for purchasing 1,880 hours of someone's time?

Pepe, I think you're conflating issues. For the record, I am legitimately curious to hear REA'n's perspective on the situation he's described. Looking at his first post, it seems as though he's referring to a severable support service contract done on a FFP basis. He implies that it's disingenuous of him to request for the full invoice amount when personnel take leave. From my perspective, that depends on the annual level of effort specified (or "estimated") in the PWS and the annual level of effort the contractor proposed. I would guess that a small minority of Government support service contracts call for 2,080 labor hours annually. That means that we usually expect (indeed, desire) personnel to take leave, and we will agree to pay the full FFP until the allotted leave is exceeded.

Now, you're questioning the wisdom of doing severable support services on a FFP basis. Different issue, but I'll bite. No, I don't think FFP was necessarily intended for the "butts-in-seats, amorphous, recurring deliverables" support services we often purchase. But since most of these are thinly-veiled unauthorized personal service contracts (let's just say it), I don't think there is currently a great solution when contracting in a commercial environment. Sure, FFP-LOE or LH might make more sense in theory, but given their high administrative burden, I can't fault a CO for choosing FFP.

Is the decision to use FFP "stupid"? Personally, I don't see a great deal of risk associated with it. In my experience, contractor support personnel work the hours agreed to, and the Government pays a fair rate for it. Have you experienced otherwise?

FrankJon, PepeTheFrog understands your viewpoint now. Thank you for clarifying.

PepeTheFrog only thinks that it "might be" a stupid decision to use FFP to purchase a set number of hours, if the better solution is to use FFP to purchase a deliverable, result, or defined service or if the better solution is to use a different contract "type" to actually purchase a set number of hours.

PepeTheFrog agrees that often the government uses FFP to dust chairs using contractor personnel. PepeTheFrog wonders if these government employees are deeply comforted by seeing contractor personnel every day, in the same office. Maybe they are just lonely and want some company?

On 10/18/2017 at 9:28 AM, FrankJon said:

REA'n, can you explain why this is a logical fallacy?

It's akin to awarding an "FFP" contract whose SOW consists solely of the words "contractor must deliver 1880 hours".  1880 hours is a BOE, not a contract term.

On 10/18/2017 at 3:00 PM, FrankJon said:

He implies that it's disingenuous of him to request for the full invoice amount when personnel take leave.

I'm not sure "disingenuous" is the word you're looking for here...I'm saying I'm 100% within my contract rights to invoice for the full FFP amount whether a particular FTE was in the office on  a particular day or not; it's disingenuous of me to suggest that the 1880 hours used in the BOE have any bearing on that right, certainly.

Sure, FFP-LOE or LH might make more sense in theory

Remember: Per FAR 16.207-2, FFP-LOE is for R&D <$150K only.   

I would also maintain that the "FFP-LOE type" is redundant and unnecessary anyway: you're always measuring the suitability of the output in an FFP environment, based partially on your assessment of the inputs and achievements against goals, and on a common understanding regarding the LOE required.  An R&D SOW would merely define those desired goals more abstractly than (for example) a program support SOW.

REA'n Maker said:

I'm saying I'm 100% within my contract rights to invoice for the full FFP amount whether a particular FTE was in the office on  a particular day or not; it's disingenuous of me to suggest that the 1880 hours used in the BOE have any bearing on that right, certainly.

Thank you for clarifying. I'll stick with my original assertion that this is highly context sensitive. The amount you're entitled to bill for in that scenario depends upon the nature of the tasks, deliverables, and performance standards stated in the contract. Let's say the Government requires an Executive Assistant, and one of the duties stated in the PWS is to answer the phone. For every day the person is out of the office, no one is sent to replace him/her, and the phone rings, the contractor is not performing as required, agreed? But if the Government asked for 1880 hours of coverage, the contractor proposed 1880 hours of coverage, and the Government accepted 1880 hours of coverage, then the parties are in agreement that a certain amount of "tolerance" for non-performance has been built into the contract. There is a meeting of the minds on this point. However, if the personnel exceeds that tolerance level (i.e., works less than 1880 hours), then the Government should be within its rights to deny you a portion of the FFP based on partial non-performance. The hours may not be contractually obligated, but the work, quality of work, and deliverables are.

REA'n Maker said:

Remember: Per FAR 16.207-2, FFP-LOE is for R&D <$150K only.

I think you're right to be wary of over-usage of FFP-LOE, but I would suggest that your interpretation is overly-strict. By my reading, I can use FFP-LOE for any purpose and any dollar amount. "Suitable for investigation or study in a specific research and development area" does not restrict me from using it for other purposes. At best, this is a recommendation. And the $150k threshold is waivable.

PepeTheFrog said:

Maybe they are just lonely and want some company?

It's to get the smug satisfaction of looking at someone who is lower than us on the food chain (technically speaking).

On 10/20/2017 at 6:52 PM, FrankJon said:

the food chain

For the record, PepeTheFrog is a carnivorous, apex predator who eats members of the senior executive service for breakfast.

On 10/20/2017 at 6:35 PM, FrankJon said:

I think you're right to be wary of over-usage of FFP-LOE, but I would suggest that your interpretation is overly-strict. By my reading, I can use FFP-LOE for any purpose and any dollar amount.

PepeTheFrog has to agree with FrankJon in practice because the theory went totally out the window. FFP-LOE is the new labor hours-- meaning, the government often uses FFP-LOE when they want labor hours but can't get approval.

PepeTheFrog said:

FFP-LOE is the new labor hours-- meaning, the government often uses FFP-LOE when they want labor hours but can't get approval.

Emphasis added. Pepe, you are one of my favorites. But, I have to ask you: What is your evidence for the truth of that assertion?

Vern Edwards said:

Pepe, you are one of my favorites. But, I have to ask you: What is your evidence for the truth of that assertion?

Thanks, Vern. PepeTheFrog cannot prove that assertion with hard evidence or statistics.

It comes from personal experience, observations, and conversations with a wide range of 1102s and contractors. The federal government hates labor hours (LH) contracts because they're not willing to admit that they did a poor job of monitoring and administering LH contracts. LH contracts are common across the globe and throughout history. Sometimes you want to buy somebody's time. To avoid the hassle and scrutiny, 1102s "cheat" by using FFP-LOE, billed monthly, pro rata, based on hours. So, they have something similar to a LH contract but called FFP-LOE. (The contractor bills the government each month for X hours worked that month, which creates a sort of "hourly rate," instead of billing the government for a uniform monthly fraction of the FFP-LOE contract price.) Clueless, indifferent, or complicit 1102 management is fine with it.

PepeTheFrog isn't saying this is a good practice, just calling attention to it. In fact, PepeTheFrog remembers a few WIFCON threads and articles where Vern and others have described the important differences between the inspection, acceptance, and payment clauses for FFP-LOE vs. LH vs. other "types" of contracts, e.g. "Contract Pricing Arrangements: A Primer" from Briefing Papers circa 2009. PepeTheFrog thinks that many of these 1102s who "cheat" with this method do not know about the important differences.

On 10/20/2017 at 6:35 PM, FrankJon said:

but I would suggest that your interpretation is overly-strict.

I view it more as "respecting the intent", which is 100% clear, as further indicated by the "Limitations" section:

Quote

This contract type may be used only when --

(a) The work required cannot otherwise be clearly defined;  (b) The required level of effort is identified and agreed upon in advance; (c) There is reasonable assurance that the intended result cannot be achieved by expending less than the stipulated effort; and (d) The contract price is $150,000 or less, unless approved by the chief of the contracting office.

Trying to shoehorn a non-R&D type effort into an FFP-LOE is just flat-out game playing and unprofessional, particularly if you are trying to extend the concept to a multi-million dollar effort not related to R&D/special studies.  If a contracting office makes it harder to award an FFP (the government's preferred contract type!) than to waive the restrictions on a FFP-LOE , they should be immediately disestablished, and their warrants ceremoniously burned.

I would also argue that "may be used only" is synonymous with "shall" in this context (think of the "may be used only on public roads" language in a rental car agreement.)

PepeTheFrog said:

To avoid the hassle and scrutiny, 1102s "cheat" by using FFP-LOE, billed monthly, pro rata,

Please don't tell me they also avoid the hassle and scrutiny of optioned FFP Supply contracts by awarding  Fixed-Ceiling-Price Contracts with Retroactive Price Redetermination!!

@REA'n Maker:

You wrote: "I view it more as 'respecting the intent', which is 100% clear...." Then you quoted FAR 16.207-3(a):

Quote

This contract type [FFP Level-of-Effort Term] may be used only when-- (a) The work required cannot otherwise be clearly defined....

That passage is not objectively clear.

What does it mean to say that "work" cannot be "defined"? What does the passage mean by "work"? Process or result? Presumably, "defined" means specified or d__escribed. If you cannot specify or describe the work you want done, how can you specify a level of effort doing that work? Effort doing what, exactly? That passage is utter nonsense. Of course, individuals can ascribe any meaning they want to a passage, whether the passage is objectively clear or obscure.

To me, LOE contracts are appropriate when you can specify a work process that has no inherently definite beginning or end and for which you cannot or do not want to specify a result. Observe wildlife from the highest point of Juniper Ridge in the Dark Divide of Skamania County, Washington, 24 hours a day for 14 calendar days, and report any sightings of Sasquatch.

You wrote:

On 10/23/2017 at 1:27 PM, REA'n Maker said:

Trying to shoehorn a non-R&D type effort into an FFP-LOE is just flat-out game playing and unprofessional...

Really? I don't agree. FFP-LOE is suitable for many kinds of services, such as wildlife observation, tracking, and control; wildland fire-fighting services; testing; non-R&D investigations; inspections and other QA tasks; observation services of various kinds; etc., etc.

Your statement is based on too rigid a doctrine of professional propriety.

On 10/23/2017 at 4:27 PM, REA'n Maker said:

....particularly if you are trying to extend the concept to a multi-million dollar effort not related to R&D/special studies

I would say "wildlife observation, tracking, and control; wildland fire-fighting services; testing; non-R&D investigations; inspections and other QA tasks; observation services of various kinds;" would fall into the Special Studies arena.

Well, if you think fire-fighting is a form of special studies, that's fine with me. I can fit all kinds of services into your conception. 

Vern Edwards said:

Well, if you think fire-fighting is a form of special studies, that's fine with me. I can fit all kinds of services into your conception

That was your scenario, not mine....I was willing to concede that rather questionable example in favor of the overall gist of your argument.  Henceforth,  I shall endeavor to couch my agreement with your arguments in a more pedantic manner to avoid future confusion and/or criticism.

On 10/24/2017 at 11:05 AM, Vern Edwards said:

To me, LOE contracts are appropriate when you can specify a work process that has no inherently definite beginning or end and for which you cannot or do not want to specify a result.

Beginning: there's a fire.   Middle: deploy to fire zone.  End: Put out fire.  Ergo, a terrible application of an FFP-LOE.  

To your point above, one potential outcome of an FFP-LOE  is "there is not enough available information to reach a conclusion/result at this time", and that places the government at a huge risk. Hence the $150K threshold.  There are sound business reasons for discouraging contracts that may produce little or nothing of value, and when it's an absolute necessity  to employ such a vehicle, placing strict limits on your exposure.  That's not "doctrinal"; that's ethical and professional. I don't need the FAR to tell me not to do stupid stuff.

REA'n Maker said:

To your point above, one potential outcome of an FFP-LOE  is "there is not enough available information to reach a conclusion/result at this time", and that places the government at a huge risk.

REA'n: Is it still a huge risk if I use FFP-LOE for severable support services? Might it be more appropriate than FFP for this type of contract? I would say "usually not" and "quite possibly," respectively.

Going back to my Executive Assistant example, the Government is seeking a body to perform miscellaneous tasks and turn in miscellaneous deliverables on a daily basis and between certain hours. In short, we're buying the contractor's time, not a defined outcome (let's put aside the personal services question for now).

On ‎10‎/‎20‎/‎2017 at 1:34 PM, REA'n Maker said:

it's disingenuous of me to suggest that the 1880 hours used in the BOE have any bearing on that right, certainly.

You've implied that FFP is not the best contract type to buy time, and I would tend to agree that defined deliverables work best for FFP. So then what is the best type for buying time in a commercial environment? T&M/LH is the other option, although that is so administratively burdensome many 1102s will avoid it like the plague. Plus, like FFP-LOE, there's no guarantee of what we get with T&M/LH.

But this brings me back to the risk question: In the situation I've described (or even a more complex situation involving support services), what is the risk of FFP-LOE? If the personnel are not performing, the Government will catch on pretty quickly and complain to the contractor. The contractor ought to react accordingly. In the highly unlikely event that the contractor were to make the claim that the Government isn't paying for results (i.e., "tough luck"), well then there's always T4C and the PPIRS threat. Plus, if the personnel were simply recalcitrant, I can't imagine it would be difficult to justify withholding payment for bad faith.

Like you, I agree with attempting to follow the spirit of the FAR, even when other alternatives might technically be available. This is just to show that the situation is not as clear-cut as you make it seem. In the case of commercial, severable services - which comprises a significant portion of the Government's annual spend - I do not think there is an ideal contract type available in the FAR. Returning to the issue I formerly put aside, I'll stick my neck out (make it quick and clean, Vern :)) and say that the reason for this is because the FAR doesn't contemplate personal services being commonplace, which they now are. How we get that genie back in the bottle, I do not know.

REA'n Maker said:

Beginning: there's a fire.   Middle: deploy to fire zone.  End: Put out fire.

The Forest Service never contracts for a contractor to put out a fire.  The Government retains complete control, and hires contractors almost as employees to work under Government direction.

FrankJon said:

You've implied that FFP is not the best contract type to buy time, and I would tend to agree that defined deliverables work best for FFP. So then what is the best type for buying time in a commercial environment? T&M/LH is the other option...

I think so many people have done things wrong for so long that it is hard to have a correct understanding.  In my contracting officer practice, I can easily see a requirement for a warm body to do assigned tasks for 1,880 hours over the course of a year as a firm-fixed-price requirement.  The requirement is 1,880 hours and that can be FFP on either a lump sum or per hour basis.

• CLIN:  001
  Supplies/Services:  Secretary IAW SOW
  Qty:  1,880
  Unit:  HR (hour)
  Unit Price:  $50.00
  Amount:  $94,000
  Period of Performance:  one year, maximum 8 hours per Government work day
  Contract Type:  FFP

The above is a FFP arrangement, not a T&M/LH arrangement.  The contractor is obligated to deliver 1,880 hours over the course of the year, and is in default if it only delivers 1,779.

If you want to buy hours, you can buy them FFP -- whether for a fixed quantity or an estimated quantity.

For T&M/LH, we are not buying hours -- we are buying accomplishment of something where we are uncertain as to the actual number of hours that might be needed.  If I need my cuckoo clock repaired, and the clockmaker and I estimate about 10 hours of work and $100 in parts in a T&M/LH contract, I don't buy 10 hours -- I buy one repair job, as follows:

• CLIN:  002
  Supplies/Services:  Clock Repair IAW SOW
  Qty:  1
  Unit:  JB (job)
  Unit Price:  $600
  Amount:  $600
  Ceiling Price:  $600
  Labor Category:  Clockmaker III
  Fixed Hourly Rate:  $50
  Contract Type:  T&M

On ‎10‎/‎27‎/‎2017 at 4:13 PM, ji20874 said:

The requirement is 1,880 hours and that can be FFP on either a lump sum or per hour basis.

Thank you for sharing, ji. I've never encountered a FFP contract structured in this way, and I can't think of a reason as to why it would be a bad idea for support services.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

Beginning: there's a fire.   Middle: deploy to fire zone.  End: Put out fire.  Ergo, a terrible application of an FFP-LOE

Completely off base.

On 10/27/2017 at 1:13 PM, ji20874 said:

The Forest Service never contracts for a contractor to put out a fire.  The Government retains complete control, and hires contractors almost as employees to work under Government direction.

Thank you, ji20874.

The government contracts with firefighters to fight a wildfire in an effort to contain it, not to put it out. Not even heavy rain is certain to extinguish a wildfire. They will smoulder for weeks or months after containment. The contractor agrees to do certain work, not to be responsible for containing the fire. No contractor would promise to contain or put out a wildfire within a firm schedule and for a firm-fixed price, because containment depends on too many independent variables, such as terrain, weather (temperature, humidity, wind, likelihood of rain, likelihood of lightening, etc.), and aerial visibility.  Moreover, large wildfires are not fought by a single contractor.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

Henceforth,  I shall endeavor to couch my agreement with your arguments in a more pedantic manner to avoid future confusion and/or criticism.

Well, sometimes knowledge of facts matter, in which cases a little pedantry is helpful.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

To your point above, one potential outcome of an FFP-LOE  is "there is not enough available information to reach a conclusion/result at this time", and that places the government at a huge risk. Hence the $150K threshold.

FFP-LOE contracts do not require a "conclusion/result" other than the expenditure of the specified level of effort. There is very little risk to the Government from an FFP-LOE contract. There is certainly no "huge risk." The reason for the $150,000 limitation is not to avoid risk, but to limit the use of contracts that do not specify an end result. Requiring activities should be required to specify an end result whenever possible. A contracting officer should be able to think critically about arguments that specification of an end result is not feasible or desirable. Approval by a CCO is a very low level of control.

On 10/27/2017 at 1:13 PM, ji20874 said:

For T&M/LH, we are not buying hours -- we are buying accomplishment of something where we are uncertain as to the actual number of hours that might be needed.

Thank you, ji20874, for pointing out a basic fact about T&M that many practitioners have not learned. Let me add that I hope that nobody out there is buying just hours. What you buy, at minimum, is a specified effort that is to be measured in hours. Practitioners who talk seriously about buying hours under a government contract should be sent to a re-education camp.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

There are sound business reasons for discouraging contracts that may produce little or nothing of value, and when it's an absolute necessity  to employ such a vehicle, placing strict limits on your exposure.

The specification of a level of effort is no more likely to produce little or nothing of value than the specification of an end result. it is generally well known that some results are worthless. May we not not devote a level of effort to testing a promising cure for breast cancer just because we cannot be sure that the effort in question will produce one? That's a matter for critical thinking, not for doctrinaire applications of a single sentence in the FAR.

On 10/27/2017 at 11:13 AM, REA'n Maker said:

I don't need the FAR to tell me not to do stupid stuff.

And I don't need it to tell me not to say stupid stuff.

Vern Edwards said:

Practitioners who talk seriously about buying hours under a government contract should be sent to a re-education camp.

Vern, do you mean this specifically with regard to T&M, or as a broadly applicable statement?

Broadly applicable.

I can't think of a case in which the government would want to buy just hours. It would want to buy the performance of some kind of work. It would specify the work, and it might say how much of work the contractor is to do in terms of hours ( or days, weeks, months, or years), but it would not want only hours.

I wanted to come back to this  we are pushing back on  FFP contracts where the CO is requiring us to submit time sheets and actual hours worked  I have checked them thoroughly and they are neither LOE or EPA contracts  recently we bid a FFP and saw that the billing requirements included the requirement to bill actual hours only, once again  we got on a call with the CO and were told to bill it in that manner or they will award to someone else  These are services type contracts, not construction  The scope on a FFP LOE is fairly limited and wouldn't apply  so would we push back and say change it to a FFP with EPA?   Not sure what to do at this point except turn down contracts  We have dozens like this  Thanks

What is the contract for specifically?

Assembly and shipment of site kits

Can you post a quote of the actual language of the CLIN description?

CLIN FFP, CLIN description, unit=lots, labor cost will be reimbursed based on actual hours worked.

There is another one also.  It has the CLIN.  It is labeled FFP.  Description is program management.  It has no units or quantities and no language about actual hours.  We were  told to bill only actual hours worked verbally.

pat: I asked for a quote of the CLIN description in the contract. Is what you provided a quote, or your own description?

Pat - I'll take a crack at providing some thoughts based on the information you've given. You said:

On 1/20/2018 at 6:58 PM, pat said:

Assembly and shipment of site kits

On 1/22/2018 at 9:50 AM, pat said:

CLIN FFP, CLIN description, unit=lots, labor cost will be reimbursed based on actual hours worked.

First, if these are part of the same CLIN, this does not make logical sense to me. The deliverable is timely site kits. Why on earth would the Government care about how many hours you've spent working on them? 

Second, structuring a CLIN in this way seems like a clear misuse of the FFP contract type. There are legitimate situations in which the Government can have a firm-fixed-unit-price (FFUP) contract and allow for billing only up to the number of units actually provided by the contractor (i.e., not necessarily for the entire CLIN amount), but this does not appear to be the case here based on the information given.

Third, I don't understand this:

pat said:

There is another one also.  It has the CLIN.  It is labeled FFP.  Description is program management.  It has no units or quantities and no language about actual hours.  We were  told to bill only actual hours worked verbally.

Are you saying that the Government does not track the hours worked and your company does not submit invoices?

Based on the information provided, I agree there is likely cause for concern. Then again, your company was aware of these terms at the time the contract was signed.

Pat -

I am in the corner of like it or leave it as to whether you want to seek the contract anticipated under the solicitation(s).

My conclusion is based on the following thoughts and the limited information you have provided.–

First, I have this feeling that the CLINS as you have described are not that much of departure of how one might structure them and provide for what needs to be verified to make payment.   Using an example from the DFARS take a look at DFARS 204.71 and the PGI that support it.

Noting the DFARS raises the question for me as to how many CLINS are there in the solicitations you are talking about?  Many of the kit type solicitations I have seen carry both CLINS that have an actual quantity that are FFP and cost type CLINS.    It is okay to have a mix in what would be viewed in total as FFP contract and my guess is that for some reason someone or some dang contract writing system has just put the terminology of FFP on the CLINS in question.

I'm sorry it's taken me a while to respond.  I agree that the CLIN structure is different.  Yes, Vern that is what is on the CLIN, not my interpretation.  It is not a DOD contract so the CLIN structure is not as clear as my other DOD contracts.  It is with another government agency and as I'm sure you know they can be messy.  We have several contracts with mixed CLIN types.  The one that had the program management labor is FFP and is clearly written that way.  They still insist that the program management labor must have actual time sheets and they will only pay actual hours and not the FFP.  At this point, I believe I will just try to bill the remainder of the FFP at the end of the POP and file a claim if they won't pay it.  If I win the claim then I should receive a decision and language that will help me negotiate with more authority once I have the written decision in my hand.  Thanks for the input.

pat said:

The one that had the program management labor is FFP and is clearly written that way.  They still insist that the program management labor must have actual time sheets and they will only pay actual hours and not the FFP.

It should be possible to structure a CLIN in this way (see for example ji20874's post on the previous page), with each hour as a "unit." But here, it does not sound like the Government provided sufficient detail to do this.

On 1/22/2018 at 6:50 AM, pat said:

CLIN FFP, CLIN description, unit=lots, labor cost will be reimbursed based on actual hours worked.

I don't know what type of pricing arrangement that's supposed to be, but it seems clear that the contractor will be "reimbursed" for labor on the basis of actual hours worked. 

In your earlier post you said:

Quote

I wanted to come back to this  we are pushing back on  FFP contracts where the CO is requiring us to submit time sheets and actual hours worked  I have checked them thoroughly and they are neither LOE or EPA contracts  recently we bid a FFP and saw that the billing requirements included the requirement to bill actual hours only, once again  we got on a call with the CO and were told to bill it in that manner or they will award to someone else  These are services type contracts, not construction  The scope on a FFP LOE is fairly limited and wouldn't apply  so would we push back and say change it to a FFP with EPA?   Not sure what to do at this point except turn own contracts  We have dozens like this  Thanks

What you said suggests that you are thinking in terms of standard FAR contract types--FFP, LOE, EPA--but that is not how things always work these days. In a recent article in which I criticized a decision of the Civilian Board of Contract Appeals I said:

Quote

Over the course of the last 20 years, Government agencies and their contractors have developed contractual instruments that do not fit neatly into the standard, traditional categories described in the FAR. In Dream Management, the parties to the task order were lulled by traditional terminology and thought patterns, complacency, ignorance, and unimaginativeness, and so failed to think through and discuss the terms of the agreement that they actually developed. Ignorance of fundamentals also played a part, leading to the absurd positions that (a) the order was T&M just because it said so and because it contained the boilerplate T&M payment clause and that (b) since the order was T&M it could not be IDIQ.

As for the board, it fell into the same trap of ignorance, complacency, and unimaginativeness, and it ignored pertinent facts. Instead of interpreting DMI’s task order on the basis of traditional labels, categories, declarations, and a standard clause read in isolation, it should have looked at the actual terms of the order in context.

When looking at an RFP or RFQ these days you cannot allow yourself to think only in terms of the standard FAR contract "types." Agencies these days are coming up with all kinds of weird pricing schemes.

There may well be a need to update the FAR with regard to contract types to give latitude to request contracts that fit the requirement in a more efficient manner.  In the interim, however, isn't there a requirement to follow FAR 16 on selection of contract type?

Vern Edwards said:

When looking at an RFP or RFQ these days you cannot allow yourself to think only in terms of the standard FAR contract "types." Agencies these days are coming up with all kinds of weird pricing schemes.

Vern - Are you suggesting that this situation is analogous to Dream Management? In your article, you state: "We are not saying that [the contract type] was improper." In pat's case, what the Government did does appear to be improper based on the information available to us.

Here is another perfect example where we are not paid on anything but actual hours.   It is not LOE.  It's just providing positions. 

ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT

0001 7,680 Hours $181.90 $1,396,992.00

Hospitalists (4 FTE)

FFP

Base year: Personal service of four (4) Hospitalist Physicians for the Department of

Medicine, San Antonio Medical Center (SAMMC) (with the option to add one (1)

additional FTE) in accordance with the terms and conditions of the Performance

Work Statement. Period if performance: 1 October 2017 - 30 September 2018.

FOB: Destination

PURCHASE REQUEST NUMBER: 0011018728-0003

Stop thinking in terms of standard FAR Part 16 categories.

A firm-fixed-price contract does not have to be LOE in order to specify payment by the hour based on actual hours!!!!!

It can be a firm-fixed unit-price contract with total price based on an estimated number of hours. You appear not to have heard of that.

Some people erroneously think such a thing is illegal or a FAR deviation except for construction. It is not.

Ignorant people think that any contract under which the contractor is paid by the hour is a time-and-materials or labor-hour contract. That is not true.

FrankJon said:

In pat's case, what the Government did does appear to be improper based on the information available to us.

Improper how?

Well, ignorant is not usually how someone describes me but I will certainly give that some thought.  For now, my participation in this topic has ended.  Much to your relief I am sure:))

I don't think what Pat is describing above is al that uncommon.  Some people will debate whether this requirement should have been filled via T&M but there is nothing inherently wrong about going down this path. For instance, I had a requirement to staff a reception area and our requirement included having 3 people sit there, even if no one was coming in the door.  But, in busy times, we would be properly staffed.   With an emphasis on ridding offices of T&M, this is a path I see many take.

T&M and L-H are appropriate when you want a job completed but don't know how long the job will take. So you and the contractor agree:

• on an estimate that will serve as a cap on each party's obligations;
• that the contractor will go to work and do the best it can to finish the job within the estimate;
• that you will compensate the contractor for its work on the basis of the number of hours that it takes to finish;
• and that if the contractor cannot finish the job within the estimate you will have the right to decide whether to pay the contractor to keep working or amicably part ways.

Suppose on the other hand that you want someone to serve as a receptionist and provide certain services to guests at an event. You know that the event will last no more than eight hours, but you also know it might last only four. You and a contractor can agree:

• that the contractor will staff the event for a maximum of eight hours at a stipulated hourly rate;
• that you will pay the contractor for only the number of hours that the event actually continues;
• that the event may last as few as four hours;
• and that if, by chance, the event lasts fewer than four hours you will agree to upwardly adjust the payment rate in order to ensure that the contractor earns a stipulated minimum compensation.

What's the difference? Well, aside from the difference in payment terms, in the first scenario you use the T&M and L-H inspection clause, FAR 52.212-4, Alt. I(a); in the second you use the FFP inspection clause, FAR 52.212-4(a). Compare and contrast. Alternatively compare and contrast FAR 52.246-6 and 52.246-4. Moreover, in the first the contractor controls how many hours are spent, while in the second the customer controls.

Vern Edwards said:

FrankJon said:

In pat's case, what the Government did does appear to be improper based on the information available to us.

Improper how?

Vern - I was basing this statement on pat's earlier examples. I don't have a problem with this one:

pat said:

ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT

0001 7,680 Hours $181.90 $1,396,992.00

Hospitalists (4 FTE)

FFP

Base year: Personal service of four (4) Hospitalist Physicians for the Department of

Medicine, San Antonio Medical Center (SAMMC) (with the option to add one (1)

additional FTE) in accordance with the terms and conditions of the Performance

Work Statement. Period if performance: 1 October 2017 - 30 September 2018.

FOB: Destination

PURCHASE REQUEST NUMBER: 0011018728-0003

I have a problem with the following sentences in conjunction, assuming they are part of the same CLIN, as pat implied: 

On 1/20/2018 at 6:58 PM, pat said:

Assembly and shipment of site kits

On 1/22/2018 at 9:50 AM, pat said:

CLIN FFP, CLIN description, unit=lots, labor cost will be reimbursed based on actual hours worked.

This is improper because we would be buying kits at variable costs, depending on the amount of effort that went into them. Moreover, there is no incentive for the contractor to control labor costs. The amount of hours that go into a kit determines per-kit profit margin. These aspects run contrary to the meaning and intent of FFP.

Even if the comments are not linked, I take issue with the content of the CLIN description on its own. Apparently, the Government defines "Lot" in this case as a "lump of money" which it can draw down on a reimbursable basis. Maybe there is additional information in the CLIN detail section that we don't have here, such as as rate and a maximum quantity. If not, that's crucial information that's missing. If so, well then it might not be improper, but it's ugly.

I also think this is improper:

On 1/22/2018 at 10:17 AM, pat said:

There is another one also.  It has the CLIN.  It is labeled FFP.  Description is program management.  It has no units or quantities and no language about actual hours.

So what information does that leave us in the CLIN other than a title? Ostensibly a unit price and/or extended price. How much "program management" is the Government expecting in exchange for this money? We don't know that from the CLIN because the number of hours expected - a crucial specification - is missing. We also don't know if payment is based on hours, days, months, or years, or whether the contractor is entitled to the full CLIN amount or an amount based on work performed. Essentially, the thing the Government is pricing has no parameters that are evident from the CLIN. 

In reviewing 16.202-1 to respond here, I am reminded that there is actually very little required in a FFP contract, other than "a price that is not subject to any adjustment on the basis of the contractor's cost experience." And I agree that this can apply on a unit or extended price level, as appropriate. Also, the information presented to us is incomplete. So allow me to rephrase my "improper" statement. At best, I think this is sloppy Government work that shows a disregard for the spirit of the FAR, and would violate FAR 4.1005-1 if it were October 1, 2019 or later. At worst, depending on what actually is/is not in these contracts, they are inappropriate applications of FFP contract type because the prices are not firm and the amount of work needed is not defined.

FrankJon:

Understand.

pat's earlier posts are why I asked him to quote from the contract.

I had to laugh at your complaint about government misuse of "lot" as a unit of delivery. You see that all the time. I think half of all 1102s couldn't define "lot" without recourse to a dictionary. Some of them probably think its the name of some guy whose wife turned to salt for some reason.

As for the language in FAR 16.202-1 that an FFP contract price "is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract," it is one of the most misconstrued sentences in FAR. I can't tell you how many students have told me that it means that a contractor is not entitled to an equitable adjustment under an FFP contract, even after they have read the Changes clause. Ask Don Mansfield about that.

Finally, you said:

FrankJon said:

At worst, depending on what actually is/is not in these contracts, they are inappropriate applications of FFP contract type because the prices are not firm and the amount of work needed is not defined.

Where in FAR does it say that the price of an FFP contract must be firm or even fixed? Those are just adjectives in a name. Besides, what does firm mean? FAR uses the phrases "firm target cost" and "firm target profit." Nor does FAR Part 16 say that the amount of work need be "defined."

FAR says that the price is not to be changed on the basis of the contractor's cost experience. it does not say that the price cannot be changed for any other reason.

FrankJon said:

I think this is sloppy Government work that shows a disregard for the spirit of the FAR....

What on earth is the "spirit" of the FAR? FrankJon, please.

All _firm-fixed-pric_e means is that the parties agreed at the time of award that the government will pay a stipulated amount for performance of some kind, which is not to be changed except as otherwise provided.

FAR is not holy writ.We're supposed to be business people, not high priests.

Vern Edwards said:

FAR is not holy writ.We're supposed to be business people, not high priests.

The more I read this thread, the more depressed I get. We've had post after post, discussing the meaning of "firm, fixed-price" and whether the FAR means what it says, or if (instead) the FAR means whatever the contract drafter interprets it to mean.

1102's can't get it right. ASBCA Judges can't get it right. What hope does the average business person have?

Words have to have meaning, and the meaning has to be comprehensible using plain language and non-legal dictionary definitions, under rules of interpretation adopted by the Federal Circuit. The parties entering into a contract need to have a common understanding and, historically, that understanding has been provided by definitions found in the FAR.

This is part of the problem with the acquisition system. This is one of the reasons why companies will not sell to the DoD if they have other options.

We cannot fix things and train people until and unless there is a common understanding of what terms mean. This thread beautifully illustrates just how hard a task that is.

H2H:

You say that 1102s and judges can't get it right. Do you know the right interpretation? Will you tell us what it is?

Vern, I'm saying that posts in this thread have made those assertions. You wrote an article making those assertions.

H2H: I don't know what you're talking about, but I do know this: Firm-fixed-price is the name of a category of pricing arrangements, like "trout" is the name of a genus of fish, except that trout is scientifically defined. Just as there are different species of trout, there can be different species of firm-fixed-price. The real purpose of establishing different contract "types" is to establish a way to determine when to use various boilerplate contract clauses that support mass production contracting.

The language of FAR Part 16 is very old. It predates the FAR by decades. It is not scientific language. It was written in another time in view of older market arrangements. Business people invent new business arrangements all the time to meet changing market needs. FAR itself is not consistent in its use of the terms firm-fixed-price and fixed-price. It was not written by scientifically-minded people or by particularly good writers. If we are not flexible and willing to think things through and try things out, we are not serving the needs of the organizations we support or the public at large.

In short, I don't think that every word, term, phrase, clause. and sentence in FAR is holy writ, and I'm willing to take reasonable liberties when it makes sense to do so. What's more, I don't care what I thought in the past. I care only what I think now. If you think that's wrong, then we just disagree. There ain't no good guys. There ain't no bad guys.

Vern Edwards said:

If we are not flexible and willing to think things through and try things out, we are not serving the needs of the organizations we support or the public at large.

Vern Edwards said:

I'm willing to take reasonable liberties when it makes sense to do so.

Vern Edwards said:

FAR is not holy writ.We're supposed to be business people, not high priests.

Vern - Here, here. I am all for flexibility and sound business judgment following critical analysis of applicable regulation and policy. But let's remember the context here. This ain't Sevatec. You don't believe that what the Government did in Dream Management and in pat's original examples are products of intelligent design...do you? That is highly unlikely. Much more likely is that the COs were unwilling or unable to take a more conventional approach that would have resulted in better arrangements for all parties. If these contract types do not violate the FAR, that still does not mean that they are, or were based upon, good practices; to the contrary, they are almost certainly products of careless contracting that may have dodged the proverbial bullet by chance alone.

Your advice is good for those who have a reasonable grip on the FAR; it probably does not reflect what actually happened in the instances we've been discussing.

Vern Edwards said:

The language of FAR Part 16 is very old. It predates the FAR by decades. It is not scientific language. It was written in another time in view of older market arrangements. Business people invent new business arrangements all the time to meet changing market needs. FAR itself is not consistent in its use of the terms firm-fixed-price and fixed-price. It was not written by scientifically-minded people or by particularly good writers. If we are not flexible and willing to think things through and try things out, we are not serving the needs of the organizations we support or the public at large.

You are, quite literally, establishing that the FAR language is "arcane" and knowable only to a very few. I consider that to be a problem.