Pricing for Type of Contract

As a general rule, the contractors that I have had experience with charge vacation time and sick leave to an indirect cost account.  These indirect costs are then allocated to contracts based on the direct labor (hours or dollars) charged to a contract.  It would be an extreme government overreach to state in an RFP that contractors cannot burden direct labor costs with properly allocable indirect costs.  Most contractors should run away from a contract that provides for this.  If a contractor is only permitted to charge actual worked hours as a direct cost of a contract, the direct cost of providing those hours should be burdened with properly allocable indirect costs which include vacation and sick leave costs.

eagertoshare said:

the government RFQ states that only actual worked hours will be paid by the government.

It is not clear what that means. If the contract is T&M or L-H, the government usually pays only for the hours worked, but as Retreadfed pointed out, the hourly rate includes indirect costs that include the cost of sick leave and vacation time.

Vern Edwards said:

It is not clear what that means. If the contract is T&M or L-H, the government usually pays only for the hours worked, but as Retreadfed pointed out, the hourly rate includes indirect costs that include the cost of sick leave and vacation time.

So contractor's hourly pricing should include those indirect costs.  That would make sense.  Add this to this scenario....what if the order was set up as FFP for individual to perform duties every day and contractors submitted FFP.  Contract went on to say failure to perform IAW the schedule may necessitate termination but then also went on to say that if full schedule isn't performed, monthly invoice shall deduct hourly rate (per table) for all hours not actually worked?  I personally think this is not good use of FFP and if government wants an approved person to perform the services.  There are a couple dilemmas:  stating performance schedule/scope then saying failure to perform may cause termination but knowing that the individual will have sick and vacation, adding the next language saying if performance schedule isn't met, contractor can just deduct from invoice.????

@eagertoshare

I am having some trouble following your last post. Let me see if I have it right:

The contract is firm-fixed-price. Your complaint is that the contract says that "if full schedule is not performed" the government will reduce payment by the number of hours not worked multiplied by a specified hourly rate.

Is that correct?

You think the contract should allow for vacation and sick leave without deduction.

Is that correct?

I wanted opinions on a contract that says one MUST provide 8 hours a day, 5 days a week or they are subject to termination.  And provide a FFP for this service.  THEN the contract goes on to say, however if you fail to perform the required service, just deduct hourly amount accordingly.  There's a table for hourly rate for the individual.  My opinion is that this should NOT be FFP and also that if a specified performance schedule is mandated and language is there for failure to provide such...then at the same time allow contractor to just deduct accordingly if individual is out sick or on vacation.   There certainly has to be a better contractual way.  I would never write a contract like this.  I just wanted others input on the way it's set up.

This sounds like a frequent government practice of writing a contract as an FFP, but administering it as if it were a labor hour contract.

The contract sounds like a kind of FFP-LOE. We have not been told what the requirement is, so no one can say that the contract type is inappropriate.

All we have in this thread is a barely coherent newcomer to the Forum who is complaining about a government procurement decision and wants sympathy. This topic is not worth our time.

If you don't like the contract, don't seek the job.

eager,

Your questions are really not all that difficult to answer. The problem is that you are seem to be looking for an education on the topic, and this forum isn't really a good place to get an education; it's a better place to get specific questions answered. Bottom-line (for me) is that nothing you posted shocks me or presents a challenge that cannot be overcome. Do you have access to a seasoned contracts professional who can give you the time necessary to educate you on the topic?

here_2_help said:

eager,

Your questions are really not all that difficult to answer. The problem is that you are seem to be looking for an education on the topic, and this forum isn't really a good place to get an education; it's a better place to get specific questions answered. Bottom-line (for me) is that nothing you posted shocks me or presents a challenge that cannot be overcome. Do you have access to a seasoned contracts professional who can give you the time necessary to educate you on the topic?

I probably did not come across clear. I am a seasoned contracts professional, very seasoned lol.  I am just in dismay sometimes the way I see contracts written by unseasoned individuals. You don’t specify a mandated performance schedule and immediately after thst tell the contractor but basically it’s ok not to perform IAW schedule. There’s better, much better ways to do it. I was just wondering what others thought of this.

Vern Edwards said:

The contract sounds like a kind of FFP-LOE. We have not been told what the requirement is, so no one can say that the contract type is inappropriate.

All we have in this thread is a barely coherent newcomer to the Forum who is complaining about a government procurement decision and wants sympathy. This topic is not worth our time.

If you don't like the contract, don't seek the job.

Actually I didn't want sympathy.  And I am a government employee so it wasn't about seeking a job.  I just wanted to share a poorly written contract and wanted to see if others have seen that too.  Level of effort or labor hours would be the correct solution with the correct terminology.   Thanks for the kind words from some.

eagertoshare said:

I just wanted to share a poorly written contract and wanted to see if others have seen that too.  Level of effort or labor hours would be the correct solution with the correct terminology.   Thanks for the kind words from some.

Your posts complaining about a "poorly written contract" have been incoherent. You did not describe the contract clearly and did not respond to my request for clarification with clear answers. You don't deserve kind words. You deserved straight talk, which is what I gave you.

This discussion reminds me of this one:

@eagertoshare if you're talking about a "butts-in-seats" service contract, I recommend checking out pg. 3 from that discussion. There are good arguments there as to why neither FFP-LOE nor T&M would necessarily be appropriate for this kind of requirement, and a suggestion as to how FFP can be appropriately applied by using "hours" as the schedule unit type.

On 7/18/2018 at 2:00 PM, FrankJon said:

This discussion reminds me of this one:

@eagertoshare if you're talking about a "butts-in-seats" service contract, I recommend checking out pg. 3 from that discussion. There are good arguments there as to why neither FFP-LOE nor T&M would necessarily be appropriate for this kind of requirement, and a suggestion as to how FFP can be appropriately applied by using "hours" as the schedule unit type.

Thank you...great discussion!

On 7/17/2018 at 1:38 PM, eagertoshare said:

I wanted opinions on a contract that says one MUST provide 8 hours a day, 5 days a week or they are subject to termination.

You can't just write a contract that says "I own you for 40 hours a week".   Employment and Labor law comes into play regardless.

This is why people "love" the government so much: "do as we say; not as we do". 

Happens all the time - ever seen what happens when an onsite support contractor asks for a reasonable accommodation?  I've seen Feds get indignant to be even asked that question....as they sit at home with their government-provided telecommuting equipment while their office sits empty, because of their tinnitus, or hangnails, or foot fungus, or other innumerable imaginary maladies..

REA'n Maker said:

I wanted opinions on a contract that says one MUST provide 8 hours a day, 5 days a week or they are subject to termination.

A perfectly legitimate form of contract.

You must post a guard at the entrance to Bldg 205, from 0700 until 1500, Monday through Friday.

You must post a fire watchman outside Bldg 212, from 2200 until 0600, Monday through Friday.

Vern Edwards said:

A perfectly legitimate form of contract.

You must post a guard at the entrance to Bldg 205, from 0700 until 1500, Monday through Friday.

You must post a fire watchman outside Bldg 212, from 2200 until 0600, Monday through Friday.

I agree with Vern.  I didn’t see where anyone said that the same person or persons must provide the service during the entire contract period.

Vern Edwards said:

A perfectly legitimate form of contract.

You must post a guard at the entrance to Bldg 205, from 0700 until 1500, Monday through Friday.

You must post a fire watchman outside Bldg 212, from 2200 until 0600, Monday through Friday.

And, both of these can be firm-fixed-price.

Vern Edwards said:

A perfectly legitimate form of contract.

You must post a guard at the entrance to Bldg 205, from 0700 until 1500, Monday through Friday.

You must post a fire watchman outside Bldg 212, from 2200 until 0600, Monday through Friday.

ji20874 said:

And, both of these can be firm-fixed-price.

@ji20874   Yes. They can.

The issue in this thread is not the pricing arrangement. It never has been. The issue has been the billing arrangement and the remedy for nonperformance.It took eagertoshare several posts to get down to his issue, but it appears to have boiled down to this:

On 7/17/2018 at 10:38 AM, eagertoshare said:

I wanted opinions on a contract that says one MUST provide 8 hours a day, 5 days a week or they are subject to termination.  And provide a FFP for this service.  THEN the contract goes on to say, however if you fail to perform the required service, just deduct hourly amount accordingly.

In response to which, I said:

On 7/17/2018 at 12:27 PM, Vern Edwards said:

The contract sounds like a kind of FFP-LOE.

I can write an FFP LOE contract requiring performance of a service for a number of hours per day for a specified price and require billing and payment on the basis of the actual hours worked. That would simply be a way of saying that if the contractor does not provide the specified level of effort the remedy (resolution, if you prefer) is to pay the contractor for only the level of effort that it did provide. Alternatively, I could say that if the contractor doesn't provide the specified level of effort the remedy will be to pay nothing and T for D. The former arrangement is kinder and gentler.

There is no one right form of FFP, and the billing/remedy/resolution arrangement does not change the contract type from FFP to something else. All FFP means is (a) that we agree to a specific amount for performance that conforms to the terms of the contract and (b) that the price does not change based on what it cost the contractor to perform.

Forty years ago I was writing FFP LOE contracts that said that if the contractor delivered within +/- 5 percent of the required LOE there would be no price adjustment, otherwise there would.

I hope that any beginners reading this thread will realize that FAR Part 16 does not describe pricing arrangements that are cast in iron or stone. FAR 16.202 leaves a lot of room for customizing in order to meet specific needs. A little study of actual practice will show that there have been many legitimate and sound varieties of firm-fixed-priced contracts.

eagertoshare thought that if the contract required the contractor to complete a job, then the contractor should be paid for performance, and not on the basis of labor input. He never described the nature of the job, so we don't know what he was talking about. In some cases, labor input might be a crucial factor and you would only want to pay the FFP if the contractor put in at least a certain amount of labor input.

Vern Edwards said:

I can write an FFP LOE contract requiring performance of a service for a number of hours per day for a specified price and require billing and payment on the basis of the actual hours worked. That would simply be a way of saying that if the contractor does not provide the specified level of effort the remedy (resolution, if you prefer) is to pay the contractor for only the level of effort that it did provide.

But you probably wouldn't, right?  I wouldn't write a contract for a guard or fire watchman in your examples where the contractor employee gets to decide if and when to show up at the worksite, with an understanding that we'll pay only for those hours where the contractor employee actually performs.  For other possibilities (not the guard or fire watchman), I'm okay with a FFP LOE with a +/- 5% for sake of administrative efficiency, but I wouldn't want to set up that CLIN with HR as the unit -- I would rather do it on a LOT or JOB basis (or maybe MONTH) with the specified level of effort in the text -- and I wouldn't want to make payments to the contractor based on the hour, but would prefer to make payment based on the LOT or JOB, or with milestone payments. 

Vern Edwards said:

There is no one right form of FFP, and the billing/remedy/resolution arrangement does not change the contract type from FFP to something else.

But sometimes, don't we see evidence in our work and read postings here on WIFCON of putative firm-fixed-price contracts (based on CLINs and clauses) where the manner of administration has effectively turned those contracts into T&M/LH contracts?

On 7/18/2018 at 7:55 AM, eagertoshare said:

I just wanted to share a poorly written contract and wanted to see if others have seen that too.

Yes, others have seen poorly-written contracts.  I suppose most of us have seen evidence of putative firm-fixed-price contracts (based on CLINs and clauses) where the manner of administration has effectively turned those contracts into T&M/LH contracts.

ji20874 said:

But you probably wouldn't, right?  I wouldn't write a contract for a guard or fire watchman in your examples where the contractor employee gets to decide if and when to show up at the worksite, with an understanding that we'll pay only for those hours where the contractor employee actually performs.  For other possibilities (not the guard or fire watchman), I'm okay with a FFP LOE with a +/- 5% for sake of administrative efficiency, but I wouldn't want to set up that CLIN with HR as the unit -- I would rather do it on a LOT or JOB basis (or maybe MONTH) with the specified level of effort in the text -- and I wouldn't want to make payments to the contractor based on the hour, but would prefer to make payment based on the LOT or JOB, or with milestone payments.

What I would or would not write would depend on the nature of the requirement for which the contract is to be written and my acquisition objectives.

ji20874 said:

But sometimes, don't we see evidence in our work and read postings here on WIFCON of putative firm-fixed-price contracts (based on CLINs and clauses) where the manner of administration has effectively turned those contracts into T&M/LH contracts?

What I see at Wifcon is people saying all kinds of things, much of it badly muddled.

I don't get your point.

On ‎7‎/‎17‎/‎2018 at 11:10 AM, eagertoshare said:

assuming this is under FAR 8 and bidders can't propose more than their awarded FSS pricing

On ‎7‎/‎31‎/‎2018 at 4:36 PM, joel hoffman said:

I agree with Vern.  I didn’t see where anyone said that the same person or persons must provide the service during the entire contract period.

For SCA-covered work, sure.  I was thinking of the professional services world (MOBIS, etc.), i.e., you can't just pull Engineer 2 from storage and have them bang out code without interruption when Engineer 1 is sick.

On 8/7/2018 at 1:29 PM, REA'n Maker said:

For SCA-covered work, sure.  I was thinking of the professional services world (MOBIS, etc.), i.e., you can't just pull Engineer 2 from storage and have them bang out code without interruption when Engineer 1 is sick.

Then one can’t logically expect the same person to be available during every available business hour during a calendar year.

SCA is irrelevant.  

I can contract for a contractor to provide a physician (non-SCA) to staff a clinic 8 hours a day, every Monday-Friday (excluding federal holidays).  It doesn't have to be the same physician person every day -- but when the customarily-assigned physician is absent for any reason, the contractor must provide a substitute.

We should write each contract to get us what we need.

Quote

It doesn't have to be the same physician person every day -- but when the customarily-assigned physician is absent for any reason, the contractor must provide a substitute.

Let me know how that goes.  "Substitute Doctor" isn't really a professional designation I'm familiar with.  Who certifies on a moment's notice that Dr. Backup is qualified?  

Nothing says quality patient care like the words "Hello; you don't know me, and I've never seen you before in my life and am not familiar with your case, but you'll be putting your life in my hands until further notice".

REA'n Maker said:

Let me know how that goes.  "Substitute Doctor" isn't really a professional designation I'm familiar with.

ji20874 said "a physician." There is a difference between contracting for "a physician" and contracting for Dr. Ben Casey, M.D.

REA'n Maker said:

Who certifies on a moment's notice that Dr. Backup is qualified?

Whoever issues licenses to practice medicine in the jurisdiction in question.

Vern Edwards said:

REA'n Maker said:

Who certifies on a moment's notice that Dr. Backup is qualified?

Whoever issues licenses to practice medicine.

So you're saying that every position has to actually be filled by 2 people, who are certified in advance,  so that in case one is out, the other can parachute in at a moment's notice?

REA'n Maker said:

Nothing says quality patient care like the words "Hello; you don't know me, and I've never seen you before in my life, and I'm not familiar with your case, but you'll be putting your life in my hands until further notice".

When I was a cop in L.A. in the late 1960s, two officers were shot down in a confrontation with some criminals. My partner and I were the first on the scene. One had been shot in the head and the other had been shot in the groin. The cops were taken to L.A. Central Receiving Hospital. It's not likely they knew the receiving doctor or the surgeon. Both survived to tell the tale and work again.

When I was soldier in Vietnam in the mid-1960s, I knew several men who had been badly wounded and medevaced to a hospital at base camp and then on to another hospital, and then another. Most of them survived their wounds. I doubt that any of them knew any of the doctors who worked on them.

You're reaching, REA'n Maker, far beyond your grasp.

Just now, REA'n Maker said:

So you're saying that every position has to actually be filled by 2 people, who are certified in advance, so that in case one is out, the other can parachute in at a moment's notice?

I'm not saying any such thing. I'm saying that the contractor is obligated to perform in accordance with the terms of the contract and must make provision to do so. How they do that is generally up to them unless the contract provides otherwise.

Quote

There is a difference between contracting for "a physician" and contracting for Dr. Ben Casey, M.D.

Quote

When I was a cop in L.A.

Quote

When I was soldier in Vietnam

Nothing in your anecdotes has anything to do with the point of professional services not being readily transferable to a "backup". 

 I've actually written these types of contracts for physicians at the VA, and they are  comparable to personal services.  So no, I'm not grasping.

REA'n Maker said:

Nothing in your anecdotes has anything to do with the point of professional services not being readily transferable to a "backup".

And nothing about the term "professional services" says that it refers to a specific person. Maybe that's just the way your contracts were written. In order for a contract to be a personal services contract in the general sense of the law, i.e., a personal contract, as opposed to the sense in which the term is used in FAR Part 37, the contract must name a specific person.

Vern Edwards said:

I'm saying that the contractor is obligated to perform in accordance with the terms of the contract and must make provision to do so.

You could always include  "FAR 52.217-10  Vulcan Mind Meld (Sep 1966)" .

(I hereby declare this horse "dead").

REA'n Maker said:

I guess you could include  "FAR 52.217-10  Vulcan Mind Meld (Sep 1966)" .

I suppose you're making an attempt at wit. It makes no more sense than your earlier remarks.

What can and can't be done in terms of personnel substitution depends on the terms of the contract. Period. Agencies enter into contracts for professional services without requiring the performance of a particular professional. They do it all the time.