FAR 52.232-5 Payments for Preparatory Work

Para. (b)(2) of FAR 52.232-5 does not promise immediate reimbursement of preparatory work costs you might incur.  Rather, it merely allows for preparatory work to be taken into consideration in preparing the estimate of work accomplished.  This is a matter for you to persuade the officials in the new district.  You can use the practices of the other three districts to show the possibilities.  I do not think it is universally agreed that scaffolding is preparatory work (rather, it may be reasonable to see scaffolding as part of the actual construction rather than as preparatory work).  If you are unable to convince them that (1) scaffolding is preparatory work and (2) you're entitled to immediate payment for preparatory work costs, you will want to follow the guidance in the Disputes clause of the contract.

Some thoughts.....

ji's comments spin off of the "may" in 52.232.-5 however consideration also needs to be given to other references....

Just do not look to the payment clause.   Look to the contract as a whole especially the specifications as they may address what and how on preparatory work.

Ask the new district for the specific contract reference that provides that payments needs to be included with the activities that the scaffolding is being put in place for and that it will be paid as a percentage as the other activities are completed.  

In the wisdom of the USACE there might be differences.   By example here is what one USACE district states in their contract administration direction -

4.5 Payment for Preparatory Work and Mobilization. Contract Clause,

Payments Under Fixed-Price Construction Contracts , states, in part: "In the

preparation of estimates the Contracting Officer may authorize . . . preparatory

work done to be taken into consideration." Preparatory work includes such

items as cost of erection of batch plants, construction of haul roads, erecting

fences, shops, etc. (less acquisition costs of equipment and materials not to be

incorporated into the work, or mobilization costs).

(Reference - https://www.sam.usace.army.mil/Portals/46/docs/military/construction/docs/SADDM 1110-1-1 June 2012.pdf)

I may have written that In an update to the Mobile District Contract Admin Manual about 28 years ago but don’t remember for sure or remember the source. Not home this weekend but have some of the old source materials in a “sacred binder” entrusted to me many years ago upon the retirement of some of my employees.

Scaffolding is often erected by primes for use by numerous trades.  It might be spread over several line items or one lump sum depending upon how the line items are set up.  Depends upon where the cost is allocated and what it will be used for.

Joel, if you have a moment to look into your archives it would be appreciated.  The remaining of the Contract has no specific language pertaining to preparatory work.  Scaffolding will be used erected by prime and used by several subcontractors for access to the work locations.  

Thank you

bodenlok said:

Joel, if you have a moment to look into your archives it would be appreciated.  The remaining of the Contract has no specific language pertaining to preparatory work.  Scaffolding will be used erected by prime and used by several subcontractors for access to the work locations.  

Thank you

Bodenlok,  it is important to know where the Contract cost of this prep work is included. Is it in one line item, is it  in several line items; is it a spread cost?

I searched my old files and found discussion on mobilization and Prepatory work. It led me to DFARS clauses that do cover mobilization and /or Mobilization and Prepatory Work.  The current prescription for Mob and Prep work DFARS Clauses are:.

Quote

236.570  Additional provisions and clauses.

            ...(b)  Use the following provisions and clauses in fixed-price construction contracts and solicitations as applicable—

              ... (2)  When the head of the contracting activity has approved use of a separate bid item for mobilization and preparatory work, use either—

                     (i)  252.236-7003, Payment for Mobilization and Preparatory Work.  Use this clause for major construction contracts that require—

                             (A)  Major or special items of plant and equipment; or

                             (B)  Large stockpiles of material which are in excess of the type, kind, and quantity which would be normal for a contractor qualified to undertake                                 the work; or:

                     (ii)  252.236-7004, Payment for Mobilization and Demobilization.  Use this clause for contracts involving major mobilization expense, or plant                                              equipment and material (other than the situations covered in paragraph (b)(2)(i) of this section) made necessary by the location or nature of the                                  work.

                             (A)  Generally, allocate 60 percent of the lump sum price in paragraph (a) of the clause to the cost of mobilization.

                             (B)  Vary this percentage to reflect the circumstances of the particular contract, but in no event should mobilization exceed 80 percent of the                                          payment item.

 The old guidance that I found for Mobile District from the 1980's (DFARS) was issued after the Payments for Fixed-Price Construction Contracts Clause was updated to allow for payments for Prepatory work, regardless of whether there was a separate bid (line) item for mobilization and prepatory work.  The Mobile District policy was to apply the coverage for Prepatory work that is discussed in the clause, if the Contractor identifies prepatory work as an activity in the construction schedule breakdown..

DISCLAIMER: I dont know what the current internal USACE or relevant District  policy is regarding definition or or payment for prepatory work.

Here is the current working in the relevant DFARS clause, which probably isn't in your contract:

Quote

252.236-7003 Payment for mobilization and preparatory work.

As prescribed in 236.570(b)(2), use the following clause:

Payment for Mobilization and Preparatory Work (JAN 1997)

(a) The Government will make payment to the Contractor under the procedures in this clause for mobilization and preparatory work under item no. _____.

(b) Payments will be made for actual payments by the Contractor on work preparatory to commencing actual work on the construction items for which payment is provided under the terms of this contract, as follows -

(1) For construction plant and equipment exceeding $25,000 in value per unit (as appraised by the Contracting Officer at the work site) acquired for the execution of the work;

(2) Transportation of all plant and equipment to the site;

(3) Material purchased for the prosecution of the contract, but not to be incorporated in the work;

(4) Construction of access roads or railroads, camps, trailer courts, mess halls, dormitories or living quarters, field headquarters facilities, and construction yards;

(5) Personal services; and

(6) Hire of plant.

(c) Requests for payment must include -

(1) An account of the Contractor's actual expenditures;

(2) Supporting documentation, including receipted bills or copies of payrolls and freight bills; and

(3) The Contractor's documentation -

(i) Showing that it has acquired the construction plant, equipment, and material free from all encumbrances;

(ii) Agreeing that the construction plant, equipment, and material will not be removed from the site without the written permission of the Contracting Officer; and

(iii) Agreeing that structures and facilities prepared or erected for the prosecution of the contract work will be maintained and not dismantled prior to the completion and acceptance of the entire work, without the written permission of the Contracting Officer.

(d) Upon receiving a request for payment, the Government will make payment, less any prescribed retained percentage, if -

(1) The Contracting Officer finds the -

(i) Construction plant, material, equipment, and the mobilization and preparatory work performed are suitable and necessary to the efficient prosecution of the contract; and

(ii) Preparatory work has been done with proper economy and efficiency.

(2) Payments for construction plant, equipment, material, and structures and facilities prepared or erected for prosecution of the contract work do not exceed -

(i) The Contractor's cost for the work performed less the estimated value upon completion of the contract; and

(ii) 100 percent of the cost to the contractor of any items having no appreciable salvage value; and

(iii) 75 percent of the cost to the contractor of items which do have an appreciable salvage value.

(e) (1) Payments will continue to be made for item no. ____, and all payments will be deducted from the contract price for this item, until the total deductions reduce this item to zero, after which no further payments will be made under this item.

(2) If the total of payments so made does not reduce this item to zero, the balance will be paid to the Contractor in the final payment under the contract.

(3) The retained percentage will be paid in accordance with the Payments to Contractor clause of this contract.

(f) The Contracting Officer shall determine the value and suitability of the construction plant, equipment, materials, structures and facilities. The Contracting Officer's determinations are not subject to appeal.

(End of clause)

[56 FR 36479, July 31, 1991, as amended at 62 FR 2614, Jan. 17, 1997]

Bodenlok,  I will repeat and clarify - it is important to know where the Contract cost of this scaffolding work is included. Is it in one line item, is it  in several line items; is it a spread cost? 

It should be a separately identifiable activity or activities, I would think.

You said that it is prime contractor provided scaffolding for various trades to use.   I would think that you should be able to identify erection of scaffolding as a specific activity or series of activities in your Network Analysis System progress schedule. 

Payment for cost of the scaffolding material , if purchased (paid cost, less any residual value) for the specific contract might be considered as part of  "prepatory work"  under the Payments clause and the DFARS clause. Prep work includes “materials purchased for the prosecution of the contract but not to be incorporated into the work.”  

If scaffold erection is a schedule  activity or activities, the associated material, labor and equipment cost should also be payable as work, and as well as associated markups. In that case it wouldn't be "prep work", it would just be part of the work.

Dont use the term "prepatory work" in this instance.  You are erecting scaffolds for multiple trade activities - one time scaffold erection probably isnt separately identifiable under the individual trade work. But if you are moving it for different trades, then establish activities for that.

As I discovered above,  actual erection and disassembly of scaffolding isnt "prepatory work", as DoD defines prepatory work - unless there is some further guidance somewhere.

The DoD coverage of "prepatory work" precedes the FAR clause language - The files I have also go back to the DAR/ASPR days.  They were just re-titled when FAR came out and prior to the allowable Prepatory work coverage in the current payments clause.

Thus - I would argue that erection of scaffolding, including materials,  is an activity.  If you want to be reimbursed for the cost of the actual scaffolding before erection - that would be payable as "prepatory" work and is included within the activity price, if just purchased for the project.  

I don't think that you differentiated or clarified what you want to be paid for as "prepatory work".

Sorry, took me a several attempts to read your responses in full and have time to ponder without interruptions.  

Where this question stemmed is that I prepared a schedule and one of the activities was installation of scaffolding.  Then I cost loaded this activity so that I could be paid once it was progressed onsite.  I also had an activity for removing it and cost for that as well. 

The response I received is that it isn't work in place and therefore I wasn't entitled to be paid.  The justification was that if the contract was terminated then I would have received payment from something that USACE does not own or would have no rights to in this event.   They are requesting that I take the cost of the scaffold and spread it across all the activities it supports.  My objection is that I won't be paid in full for the scaffolding till all the work is complete, when the scaffold subcontractor will be billing for erection once in place. 

My approach was that this was preparatory work and that I should be paid.  But, it doesn't sound like it is truly preparatory work.

I really don’t know. I think that erection  of it is a legitimate activity though. It is being erected up front in preparation for numerous trades work. It will be removed after work is complete. You shouldn’t have to prorate it across every trade installation. I would probably break it into installation and removal activities like you did. Does the scaffold sub own it?

My opinion is about as authoritarian as yours, I suppose. What would THEY consider to be “prepatory  work”? Materials for construction not to be incorporated into the work doesn’t become property of the government either.

EDIT: my last statement isn’t correct in the event of a TFD.  In that situation, the government can  use materials purchased for the project but not to be incorporated into the work.

Upon further reflection and recollection, in the event of a termination, the surety would likely use the scaffolding plus the government can require it and other equipment to be made available for completion at the contractors expense. (52.249-10 (a)).

So the government’s argument isn’t valid. The surety wouldn’t allow you to demob the scaffolding if you default. And if the government knows what it is doing, it won’t, either. I’d keep discussing it with them.

Im guessing that whoever you spoke with has little experience with completion of construction after default. Or they are not knowledgeable of the government’s rights, the contractor’s liability/indemnification responsibilities  to the surety  or how a surety might arrange to complete the project.

bodenlok said:

My approach was that this was preparatory work and that I should be paid.  But, it doesn't sound like it is truly preparatory work.

Don't guess, don't scratch your head, don't take the no answer unless the Government can provide specific reference as to why the payment is not allowed.  By example if the contract were to reference in the contract then this would be the appropriate reference they might quote you....

"4.5 Payment for Preparatory Work and Mobilization. Contract Clause,

Payments Under Fixed-Price Construction Contracts , states, in part: "In the

preparation of estimates the Contracting Officer may authorize . . . preparatory

work done to be taken into consideration." Preparatory work includes such

items as cost of erection of batch plants, construction of haul roads, erecting

fences, shops, etc. (less acquisition costs of equipment and materials not to be

incorporated into the work, or mobilization costs)."

Also it sounds like 252.236-7003 or 7004 are not in you contract but if they are then so much the better.

If there is absolutely nothing in your contract to define preparatory work ask the Government to provide a basis for why they believe "preparatory work" isn't work in place and then determine if you want to argue the matter further.  Things that come to my mind that support that preparatory work includes the scaffolding is the already referenced DFARS clauses of 252-236-7003/7004 and the approach of other Federal agencies that perform construction contracts such as the Federal Highway Administration where they state the following....Ref. https://fdotwww.blob.core.windows.net/sitefinity/docs/default-source/content/programmanagement/implemented/specbooks/july2015/files/101-715.pdf?sfvrsn=1d75ce9d_0

"101-1 Description.

Perform preparatory work and operations in mobilizing for beginning work on the

project, including, but not limited to, those operations necessary for the movement of personnel,

equipment, supplies, and incidentals to the project site and for the establishment of temporary

offices, buildings, safety equipment and first aid supplies, and sanitary and other facilities.

Include the costs of bonds and any required insurance and any other preconstruction

expense necessary for the start of the work, excluding the cost of construction materials."

Bottom line - If they have not make them provide specific reference as to why the preparatory work must be "work in place", "just because" is not a appropriate reference.

joel hoffman said:

...the government’s argument isn’t valid...

C Culham said:

...don't take the no answer unless the Government can provide specific reference as to why the payment is not allowed...

It seems the agency has provided a reasonable explanation for its position.  I would recommend that the contractor be polite and persuasive, rather than obstinate and demanding.  I don't think the contractor can win the argument by being obstinate or demanding. 

But if the contractor really feels it is entitled, as a matter of right, to immediate payment for scaffolding costs, it needs to read and follow the instructions of the contract's Disputes clause.  If the matter is appealed to a board of contract appeals, it is very possible that the agency will win there because the agency position may be seen as "reasonable" and within the bounds of discretion. 

Based on what I have read here, I differ with Joel and Carl in that I think the agency's contracting officer may approve the immediate scaffolding payment but I am not convinced that he or she must approve it. 

For now, polite and persuasive is probably better.

ji20874 said:

It seems the agency has provided a reasonable explanation for its position.  I would recommend that the contractor be polite and persuasive, rather than obstinate and demanding.  I don't think the contractor can win the argument by being obstinate or demanding. 

But if the contractor really feels it is entitled, as a matter of right, to immediate payment for scaffolding costs, it needs to read and follow the instructions of the contract's Disputes clause.  If the matter is appealed to a board of contract appeals, it is very possible that the agency will win there because the agency position may be seen as "reasonable" and within the bounds of discretion. 

Based on what I have read here, I differ with Joel and Carl in that I think the agency's contracting officer may approve the immediate scaffolding payment but I am not convinced that he or she must approve it. 

For now, polite and persuasive is probably better.

I advocate explaining to the USACE that their concern about scaffolding not being available in the event of a default is unfounded because both the government and the surety will want it to remain for completion purposes and the government has that right to use it along with other onsite resources that could be considered prepatory work under the -49 clause.

In addition, the erection of scaffolding is is an upfront activity that is paid for at the time of erection not as the vArious trades use it. It’s not reasonable to treat it as an indirect cost to be spread over the period of all trade activities. 

The USACE policy is to try to resolve matters of disagreement at the lowest level possible before resorting to litigation or formal disputes. I don’t advocate routinely submitting claims to resolve force resolution of matters that are not yet otherwise unresolvable.

The USACE policy is also to develop partnering relationships with their contractors.

Joel,

Is anyone here advocating routine submission of claims to resolve or force resolution of matters that are not yet otherwise resolvable?

ji20874 said:

Joel,

Is anyone here advocating routine submission of claims to resolve or force resolution of matters that are not yet otherwise resolvable?

From my view no but no one is advocating for being "obstinate and demanding" either.  

ji20874 said:

I think the agency's contracting officer may approve the immediate scaffolding payment but I am not convinced that he or she must approve it.

No disagreement based on the limited information but I differ with your view in that absent something specific in the contract (your must versus your may) the position of the government is without merit.

bodenlok said:

The response I received is that it isn't work in place and therefore I wasn't entitled to be paid.  The justification was that if the contract was terminated then I would have received payment from something that USACE does not own or would have no rights to in this event.

Simply this position does not make any sense in the context of construction progress (invoice) payments.  It is work that has been completed that has a cost to the contractor associated with it call it what you want.  the contractors position is just he paid for it and he should be paid for it.

Work I might add that probably has some element of safety requirements associated with it to which the contractor uses his/her own devices to address.   Say scaffolding versus man lifts.   Just to take you down a rabbit hole one could argue that the government is directing the contractors work by not allowing payment for something the contractor decided was needed to complete the work.

C Culham said:

..the position of the government is without merit...

I'm not so sure.  Regardless, the burden of proof is on the contractor rather than the Government, right?

C Culham said:

...It is work that has been completed that has a cost to the contractor associated with it call it what you want.  the contractors position is just he paid for it and he should be paid for it...

That's not the standard for making progress payments in a construction contract.

C Culham said:

...one could argue that the government is directing the contractors work by not allowing payment for something the contractor decided was needed to complete the work...

This would not be a sensible argument. 

Under the clause at FAR 52.232-5, we don't make progress payments to contractors to reimburse actual incurred costs.  Rather, we make payments based on estimates of work complete (such as, 5% complete = 5% payment, and 50% complete = 50% payment, and so forth), less retainage as needed.  [The exception is for bond premiums, where we will reimburse the contractor for the amount of the premiums.]  In preparation of the estimate of completion or work, preparatory work may be considered -- but this does not call for full reimbursement of contractor's incurred costs for the preparatory work; rather, it merely allows preparatory work to be considered in calculating the estimate of completion of work.

The original poster might have an easier time with its contracting officer if it drops its request for reimbursement based on actual incurred costs and instead asks for a normal progress payment for the scaffolding, for example, suggesting that the erection of the scaffolding = 5% of completion.

As a cost loaded activity in the contractor’s progress schedule, the Scaffold erection activity represents physical work and it is work in progress or work accomplished. It is necessary work on the critical path for numerous subsequent trade activities to proceed. It is a precursor constraint activity. They can’t start until the activity is complete in the areas that they will use the scaffolding. It’s as simple as that.

But it is a separate activity, not one that is part of the follow on activities. Otherwise they would all have an activity start date associated with scaffold erection. No need to make it more complicated. And they would be starting those activities out of sequence.

Buying Or renting scaffold and delivering it to the site might be prepatory work. However, this is a subcontracted effort involving direct labor and equipment to install.

They are not being logical OR reasonable. When the government requires the contractor to use a cost loaded network analysis system as part of its project controls, then the work is required to be planned, controlled, executed, and reported in certain ways.

It is illogical to erect scaffold prior to successor activities but to report it as part of later progress , after that work starts. 

I doubt the the KO had anything to do with the decision or the response to the OP.  But if they did, then they as well as the ACO don’t understand what rights the government has in a default termination. They cited that as their justification.  Their worries are unfounded

Joel,

So, would you approve a payment to reimburse the contractor its actual costs for the erected scaffolding? Or would you approve a payment based on the percent of work complete represented by the erection of the scaffolding?

If there is no separate line item for scaffold erection, the contractor breaks the applicable contract line item down into activities, which are “cost loaded” (assigned a value) within the overall CLIN.

Note that the contractor has to provide subcontract amounts as part of the support data for progress payments anyway. When the contractor submits it’s breakdown of activities, the Corps reviews the amounts to see if they look reasonable, etc. There is a process.

The contractor might or might not assign a value to the activity that would cover its costs plus markups.

Its more complex than we have time here to describe in full detail.

Hunting in a valley.  Weak signal reception.

Okay.  So, after all that happens, would you approve a payment to reimburse the contractor its actual costs for the erected scaffolding? Or would you approve a payment based on the percent of work complete represented by the erection of the scaffolding?

P3 and other project controls software convert % complete of activities to dollars, which may or may not directly translate to subcontract costs.

ji20874 said:

Okay.  So, after all that happens, would you approve a payment to reimburse the contractor its actual costs for the erected scaffolding? Or would you approve a payment based on the percent of work complete represented by the erection of the scaffolding?

Latter, if it is in an activity

Deleted. Duplicate.

ji20874 said:

I'm not so sure.  Regardless, the burden of proof is on the contractor rather than the Government, right?

No.  Proof is the contract that was mutually agreed to.  And if the contract is not definitive to matter then what then ?  I think you know with hope as has already been stated the conflict is settled at the level of the CO based on appropriate standards of contract interpretation inclusive of the standard of good faith and fair dealing.  The scaffolds up afterall.

C Culham said:

No.

In an invoicing situation, the burden of proof is generally on the contractor.  If the contracting officer can't find it, the contractor should point to something in the contract that specifies its entitlement to immediate reimbursement of its incurred costs for scaffolding erection.

C Culham said:

Proof is the contract that was mutually agreed to.

If the contract specified exactly how scaffolding costs would be paid, then there would be no discussion here.  But it seems the contract does not so specify.  The agency's position seems to be reasonable -- other practitioners might approach the situation differently, but that doesn't mean the agency's position is unreasonable.

C Culham said:

...settled at the level of the CO based on appropriate standards of contract interpretation inclusive of the standard of good faith and fair dealing.  The scaffolds up afterall...

Right.  Ideally, the contractor will point to something in the contract that clearly specifies its entitlement to immediate payment for its incurred costs for the scaffolding.  If not, it can still get a progress payment based on the estimate of work complete represented by the erection of the scaffolding (but not reimbursement for incurred costs) -- although, it will be serendipitous if the percent complete and incurred cost numbers coincide, right ;-).  At least, this applies if the clause at FAR 52.232-5 is the basis for the desired payment.

All this being said, if the contractor is unable to persuade the agency, it may (1) drop the matter; or (2) pursue remedy under the contract's Disputes clause.

ji20874 said:

In an invoicing situation, the burden of proof is generally on the contractor.  If the contracting officer can't find it, the contractor should point to something in the contract that specifies its entitlement to immediate reimbursement of its incurred costs for scaffolding erection.

If the contract specified exactly how scaffolding costs would be paid, then there would be no discussion here.  But it seems the contract does not so specify.  The agency's position seems to be reasonable -- other practitioners might approach the situation differently, but that doesn't mean the agency's position is unreasonable.

Right.  Ideally, the contractor will point to something in the contract that clearly specifies its entitlement to immediate payment for its incurred costs for the scaffolding.  If not, it can still get a progress payment based on the estimate of work complete represented by the erection of the scaffolding (but not reimbursement for incurred costs) -- although, it will be serendipitous if the percent complete and incurred cost numbers coincide, right ;-).  At least, this applies if the clause at FAR 52.232-5 is the basis for the desired payment.

All this being said, if the contractor is unable to persuade the agency, it may (1) drop the matter; or (2) pursue remedy under the contract's Disputes clause.

Scaffold erection is typically a work activity. It’s like forming for concrete. The forms aren’t part of the installed work either. Construction contracts don’t generally discuss such because they don’t need to. 

The government’s position isn’t reasonable The OP said that the government justified its position based on an  assumption that in the event of a default the government wouldn’t be able to use it to complete the project.  WRONG!

The government should secure the job site and or have the surety secure the job site. The contractor must indemnify the surety for its costs in excess of remaining contract funds. If it removes the scaffolding, it will end up being liable for replacement scaffold anyway. But don’t let that happen. Secure the job site!

Joel,

Does forming for concrete fall under preparatory work for purposes of FAR 52.232-5?

ji20874 said:

Joel,

Does forming for concrete fall under preparatory work for purposes of FAR 52.232-5?

No. There are typically activities for concrete form work: E.g., .  Forming.   Stripping of forms.

Then, it seems that comparing scaffolding erection to concrete forms is inapt and irrelevant in a discussion on treating scaffolding erection as preparatory work, right?

ji20874 said:

Then, comparing scaffolding erection to concrete forms is inapt and irrelevant in a discussion on treating scaffolding erection as preparatory work, right?

It isn’t prepatory work. It’s a work activity or multiple activities, similar to concrete forming operations (the forms aren’t incorporated into the work either).

Unless specifically identified under a mobilization and prep work line item. In the instant case there isn’t one.

either way, contractor should be paid for the work when performed.

The ACO/staff is telling him not to cost load the activity but to spread it over all applicable trade activities. If that was a requirement, it should have been stated in the contract. That isn’t logical or standard practice for general/multiple use scaffolding, typically prime contractor provided. Single use scaffold is typically subcontractor provided.

joel hoffman said:

...contractor should be paid for the work when performed...

Really?  I didn't think we reimbursed contractors based on their incurred costs under the clause at FAR 52.232-5, which is the subject of this discussion back to the original posting.  FAR 52.232-5 says we'll make progress payments based on estimates of work complete.  

joel hoffman said:

It isn’t prepatory work...

If scaffolding erection is not preparatory work, then the answer to the original poster's question in the original posting is that it is not entitled to reimbursement of costs (or any payment at all) for scaffolding erection under para. (b)(2) of the clause at FAR 52.232-5.  It might be entitled to some payment under para. (b) and (b)(1), but not (b)(2).

ji20874 said:

the burden of proof is generally on the contractor

ji20874 said:

Ideally, the contractor will point to something in the contract that clearly specifies its entitlement to immediate payment for its incurred costs for the scaffolding.

You are conflicted.  It's the contract no matter who points to it.   Apply the contract and if the contract is not definitive then work it out.  Both the GOVERNMENT and the contractor have to do this.  Any other way is not good faith and fair dealing.  THE SCAFFOLD IS UP.

C Culham said:

It's the contract no matter who points to it.

I don't think the contract expressly addresses payment for scaffolding -- if it did, the original poster would not have started this discussion.

But it is okay -- the contract clause at FAR 52.232-5 still provides for progress payments (not reimbursement of incurred costs).  The contractor can make a payment request based on the estimate of work complete represented by the erection of the scaffolding (but not reimbursement for incurred costs for the erected scaffolding) -- although it will be serendipitous if the percent complete and incurred cost numbers coincide.  At least, this applies if the clause at FAR 52.232-5 is the basis for the desired payment, which I think is the case because that is what the original poster cited in starting this thread.  Yes, let's apply the contract by reading and following the contract clause at FAR 52.232-5.

And yes, work it out -- the contractor needs to persuade the agency (the agency does not need to persuade the contractor).  All this being said, if the contractor is unable to persuade the agency to make an immediate payment in the amount it seeks, it may (1) drop the matter; or (2) pursue remedy under the contract's Disputes clause.

ji20874 said:

But it is okay -- the contract clause at FAR 52.232-5 still provides for progress payments (not reimbursement of incurred costs).  The contractor can make a payment request based on the estimate of work complete represented by the erection of the scaffolding (but not reimbursement for incurred costs for the erected scaffolding) -- although it will be serendipitous if the percent complete and incurred cost numbers coincide.

That’s what I have been saying. The method of making progress payments in a USACE construction contract is to establish “cost loaded* activity(ies) for scaffold erection in the progress schedule under the appropriate CLIN(s).

*cost loaded means that the activity is assigned a dollar value, which may or may not be based upon actual costs.

Subcontract costs are often the basis for activity costs, which then often include mark ups.

However, as an aside,  for DoD “prepatory work”, the DoD contract clause for a mobilization and prepatory work line item limits payment to not exceed actual incurred  costs in some cases. Thus , the -5 clause does, in effect, provide for reimbursement of incurred costs. It also provides for reimbursement of incurred cost for Prime contractor performance and payment bonds.

This isn’t “prepatory work” under DoD procedures.

This is essentially what the ACO office is telling our OP. (I’m assuming that it hasn’t been elevated to the KO. If it was, he or she would likely be depending upon the advice of the ACO office, because it involves technicalities relating to the USACE contract admin system requirements “Resident Management System” RMS and various Integrated project controls automation tools).

The ACO/COR office says: The scaffold activity should not be cost loaded. Instead spread the costs over all the subsequent applicable trade activities.

Note that the contractor must report all on-site subcontract scaffold labor in the periods which it occurs. However, the govt says that the contractor can’t show it as progress in its schedule or for payment until the trade activities occur.

The Contract UFGS specs for Progress Schedule do not allow successor activities to show a start or progress out of sequence (prior to completion of leading activities) on the critical path. As a standard practice you don’t load direct or subcontract labor costs in other activities than where and when the labor occurs. The UFGS also directs the contractor to cost load it’s activities. 

Is THAT interpretation of scaffolding as a spread cost “reasonable”?  No.  Is it ridiculous? Yes!

Is that interpretation stated in the contract that way? NO!

Is it standard industry practice for purposes of contract interpretation in the event that the government thinks its interpretation is also reasonable? No!  Plus, other USACE Districts treat it as a cost loaded activity, payable as progress. 

Is the contractor’s interpretation reasonable? YES!

I’ve already explained that the stated assumption that serves as the ACO office’s justification for its interpretation is incorrect. 

The Government’ case in defending a claim would be extremely weak in my opinion.

In my experience, this is an issue the contractor could immediately pursue in Partnering, if they are in the partnering process. This is early in the project if they are formulating the progress schedule now.

Good luck. (I might know the Chief of Construction for that District if the OP wants to privately share that info with me).

The prime contractor often erects scaffolding itself or by one subcontract for various reasons - chiefly because it’s to be used by multiple trades. Safety considerations and control of the integrated schedule are also factors.

If the scaffold was for a single trade, then the applicable trade subcontract might likely provide their own scaffold as part of its price. In that event, it would be reported as progress when it occurs - not spread over the entire subcontract effort. It would be paid as a percent of the subcontract (based upon its value or cost plus Sub and prime markups within the subcontract activities).

Other than who is providing the scaffolding, there is no difference in the fact that scaffold erection is a construction activity, not a spread cost.  If it is considered progress for subcontractor provided scaffolding, it is also progress for prime contractor provided scaffolding. There is no evident basis for inconsistent interpretation of the categorization of erecting scaffolding as progress in one case and a spread cost for the other case. 

And - the government is more directly protected in the event of a default if the prime has direct responsibility for scaffold on-site at the time of a termination. That is largely due to the prime contractor’s performance and payment bonds with the government as the obligee and the surety’s inherent interest in minimizing its cost to complete the project. Plus the government deals directly with the prime and its surety. Not so with subs.

Yet the government doesn’t bat an eyelid about paying for erection of scaffold as progress, if a trade sub provides it own scaffolding.

sheesh.

Bodenlok, I hope you have enough information to make a good case for resolving your dilemma.