Realignment of Funds on CPFF Task Order

tranceaddict said:

Hi All,

I am fairly new to the contracting world, so excuse my ignorance.  I manage 6 CPFF task orders under a Base IDIQ.  If we have to realign funds from one task order to another, is there anything else besides severability and ceiling constraints that I have to be aware of?

Thanks for the assistance!

If you deobligate funds from a task order, those funds may not be available for obligation on another task order because the period for obligation expired.

Don Mansfield said:

If you deobligate funds from a task order, those funds may not be available for obligation on another task order because the period for obligation expired.

Thank you so much!

Hi, I wanted to follow up on this.  If there is a need to realign funds from cost to fee, without increasing the overall ceiling of a particular CPFF task order, does the period of obligation matter or is there anything precluding me from doing so?

thanks!

There is no such thing as a ceiling on a CPFF task order.

Rather, there should be an agreed-upon and contractually-stipulated estimated cost and an agreed-upon and contractually-stipulated fixed fee.  These two combined become the contract price.

• Are the estimated cost and fixed fee amounts obligated to the same CLIN?  That would make things easier.
• If they are obligated to separate CLINs, your automated system might treat the modification action as a deobligation from one CLIN and a new obligation on the other CLIN.  If so, the new obligation has to follow the rules for new obligations.  Your agency comptroller can probably do this by manual journal voucher, but may not want to.

I wonder, if you are lowering the estimated cost, why are you raising the fixed fee?  Are you sure you have a CPFF arrangement?

ji20874 said:

Rather, there should be an agreed-upon and contractually-stipulated estimated cost and an agreed-upon and contractually-stipulated fixed fee.  These two combined become the contract price.

No, that's incorrect. CPFF contracts do not have "prices". They have estimated costs and fixed fees. Contrast the required data elements FAR 4.1005-1(a)(5)(i) and (ii):

Quote

(i) For fixed-price line items:

                     (A) Unit of measure.

                     (B) Quantity.

                     (C) Unit price.

                     (D) Total price.

                (ii) For cost-reimbursement line items:

                     (A) Unit of measure.

                     (B) Quantity.

                     (C) Estimated cost.

                     (D) Fee (if any).

                     (E) Total estimated cost plus any fee.

FAR 15.401 contains a definition of price that applies in FAR subpart 15.4 only:

Quote

Price means cost plus any fee or profit applicable to the contract type.

People commonly misinterpret that to mean that all contracts have a "price". The definition is merely a convention that obviates the need to write something like "Contracting officers shall award contracts at a fair and reasonable prices (or estimated costs and fees)." When that convention is not used outside of FAR subpart 15.4, we get sentences like the following at FAR 16.103(a):

Quote

The objective is to negotiate a contract type and price (or estimated cost and fee) that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance.

Also, many standard FAR clauses have fixed-price and cost-reimbursement versions. The cost-reimbursement versions typically don't refer to a "contract price". Contrast FAR 52.243-1(b) for fixed-price:

Quote

If any such change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, the Contracting Officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract.

and FAR 52.243-2(b) for cost-reimbursement:

Quote

If any such change causes an increase or decrease in the estimated cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, or otherwise affects any other terms and conditions of this contract, the Contracting Officer shall make an equitable adjustment in the-

           (1) Estimated cost, delivery or completion schedule, or both;

           (2) Amount of any fixed fee; and

           (3) Other affected terms and shall modify the contract accordingly.

Don,

That's entirely too many words for an irrelevant point.  As I said, CPFF contracts have estimated costs and fixed fees, which should be agreed-upon and contractually-stipulated.  And when combined, they are prices as mentioned in FAR 15.401.  So your assertion that cost-reimbursement contracts do not have prices is error -- see FAR 15.401.  That said, I generally agree that it is preferable to clearly speak of estimated cost and fixed fee in a CPFF arrangement, and that is why I offered what I did to the previous poster -- if one wants to speak of those combined, as is commonly convenient, the term price is better than the term ceiling.

Can you offer anything helpful to the conversation?

tranceaddict said:

If there is a need to realign funds from cost to fee, without increasing the overall ceiling of a particular CPFF task order, does the period of obligation matter or is there anything precluding me from doing so?

If your action is also in regard to the contract amount for cost and fee, then yes, you need to negotiate that with the contractor.

ji20874 said:

Don,

That's entirely too many words for an irrelevant point.  As I said, CPFF contracts have estimated costs and fixed fees, which should be agreed-upon and contractually-stipulated.  And when combined, they are prices as mentioned in FAR 15.401.  So your assertion that cost-reimbursement contracts do not have prices is error -- see FAR 15.401.  That said, I generally agree that it is preferable to clearly speak of estimated cost and fixed fee in a CPFF arrangement, and that is why I offered what I did to the previous poster -- if one wants to speak of those combined, as is commonly convenient, the term price is better than the term ceiling.

You err in thinking I was writing for your benefit.

ji20874 said:

Can you offer anything helpful to the conversation?

Yes. The OP should disregard baseless assertions like this:

ji20874 said:

Rather, there should be an agreed-upon and contractually-stipulated estimated cost and an agreed-upon and contractually-stipulated fixed fee.  These two combined become the contract price.

Ji is hanging his hat on FAR 15.401 to claim that "price" is a term of a cost-reimbursement contract. However, FAR 15.401 begins with "As used in this subpart--" That definition merely clarifies the use of "price" as used in FAR subpart 15.4. One cannot conclude from that definition that "price" is a term of a cost-reimbursement contract.

Why am I not surprised ji is trying to make me the bad guy?

On 7/7/2020 at 8:59 AM, tranceaddict said:

Hi All,

I am fairly new to the contracting world, so excuse my ignorance.  I manage 6 CPFF task orders under a Base IDIQ.  If we have to realign funds from one task order to another, is there anything else besides severability and ceiling constraints that I have to be aware of?

Thanks for the assistance!

Let's explore why you have to realign funds. Was there an overrun (cost growth) on one or more Task Order? If so, did the contractor comply with the required notification under the Limitation of Cost/Limitation of Funds clause in the contract? 

If you are looking to adjust the Task Order fixed fee, I'm assuming that it's a reduction, likely to cover cost growth on the Task Order. If so, do you really need to? It may be that you are adding funds to the Task Order's estimated cost value, but I would assert that (absent a change) those funds should not be fee-bearing, nor should the existing fixed fee value be adjusted because additional funds are being added to the estimated cost value. I believe the government should get its funds elsewhere, and if no funds are available, the contractor should be told that so that it can stop work within the existing funds.

Having said all that based on speculation about the situation, I look forward to being sniped at ....

Don,

Please tell us what to call the combined estimated fee plus estimated cost -- I averred that ceiling is the wrong term, and said price is the right term.  You aver that price is the wrong term (even though FAR 15.401 says what it says) but have not told us the right term -- so what is the right term to use?

ji20874 said:

Don,

Please tell us what to call the combined estimated fee plus estimated cost -- I averred that ceiling is the wrong term, and said price is the right term.  You aver that price is the wrong term (even though FAR 15.401 says what it says) but have not told us the right term -- so what is the right term to use?

ji,

Look, you got on @tranceaddict's case about using precise terminology when you wrote:

ji20874 said:

There is no such thing as a ceiling on a CPFF task order.

Rather, there should be an agreed-upon and contractually-stipulated estimated cost and an agreed-upon and contractually-stipulated fixed fee.  These two combined become the contract price.

I agree that a typical CPFF contract does not technically have a term called a "ceiling", at least in the context of the regulations, even though it's common practice for people to call the estimated cost and fee the "ceiling" informally. Even the FAR uses "ceiling" to refer to estimated costs in a cost-reimbursement contract at FAR 16.301-1:

Quote

Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

But a typical CPFF contract does not technically have a term called a "price", either, even though it's common practice for people to call the sum of the estimated cost and fixed fee in a CPFF contract the "price" informally. 

FAR 15.401 merely defines "price" as it is used in FAR subpart 15.4. So, whenever we come across the word "price" we are to interpret as including estimated cost and fee. It's most likely a drafting convention so the authors didn't have to write "price (or estimated cost and fee)" over and over. Your interpretation of FAR 15.401 as meaning that "price" is an actual term of a cost-reimbursement is not consistent with FAR 4.1005-1(a)(5), which tells us how to describe the line item in a contract:

Quote

(i) For fixed-price line items:

                     (A) Unit of measure.

                     (B) Quantity.

                     (C) Unit price.

                     (D) Total price.

                (ii) For cost-reimbursement line items:

                     (A) Unit of measure.

                     (B) Quantity.

                     (C) Estimated cost.

                     (D) Fee (if any).

                     (E) Total estimated cost plus any fee.

I'm all for being technically precise when using formal terms, which is why I don't use "ceiling" when referring to the estimated cost and fee in a CPFF contract. But, "price" isn't technically precise, either.

As far as what term you should use to formally refer to estimated cost plus fixed fee in a contract, how about "estimated cost and fee"? That's what the FAR uses in clauses written specifically for cost-reimbursement contracts. Such clauses make no reference to the contract price. Informally, call it whatever you want.

I am okay with what FAR 15.401 says.  But as I am learning that my referring to the combination of estimated cost and fixed fee as price, as is done in FAR 15.401, is so personally offensive to you (based on the multiplicity of words in remonstrance), I will try to avoid using that construction in your presence in the future.  My apologies.

ji20874 said:

I am okay with what FAR 15.401 says.  But as I am learning that my referring to the combination of estimated cost and fixed fee as price, as is done in FAR 15.401, is so personally offensive to you (based on the multiplicity of words in remonstrance), I will try to avoid using that construction in your presence in the future.  My apologies.

Personally offensive to me? No. Technically imprecise? Yes. Kind of like saying a CPFF contract has a ceiling.

I'm ok with what FAR 15.401 says, too. Are you ok with what FAR 4.1005-1(a)(5) says? Are you okay with FAR clauses specifically written for cost-reimbursement contracts not using the term "contract price"? 

But you're right, the issue is that I'm too sensitive--not that you're misinforming anyone.

It appears that at least one of you are discussing line item descriptions, not the overall contract or task order price. FAR 4.1005-1(a)(5),  refers to the the line item description in a contract.

At any rate, tranceaddict, it appears from the discussion here that, in order to answer to your question, can you please provide more information, along the lines of H2H’s post?

“15.401   Definitions.

As used in this subpart—

Price means cost plus any fee or profit applicable to the contract type.”

EDIT: It is true that the SF 33, for example, doesn’t mention the term “price”. It shows the “amount” of the contract.

duplicate, sorry.

ji20874 said:

There is no such thing as a ceiling on a CPFF task order.

Rather, there should be an agreed-upon and contractually-stipulated estimated cost and an agreed-upon and contractually-stipulated fixed fee.  These two combined become the contract price.

• Are the estimated cost and fixed fee amounts obligated to the same CLIN?  That would make things easier.
• If they are obligated to separate CLINs, your automated system might treat the modification action as a deobligation from one CLIN and a new obligation on the other CLIN.  If so, the new obligation has to follow the rules for new obligations.  Your agency comptroller can probably do this by manual journal voucher, but may not want to.

I wonder, if you are lowering the estimated cost, why are you raising the fixed fee?  Are you sure you have a CPFF arrangement?

It may be semantics but there is a ceiling in a cost reimbursement contract type , although the term might not appear in the contract..

“16.301-1   Description.

Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

32.706-2 (a) provides the prescription for a “cost limitation” , which would apparently be the “ceiling” referred to above.

It’s interesting how we refer to line item prices for FP contracts and overall prices when evaluating proposals for any contract type but the contract amount is what is shown on the contract award.

And we establish a “ceiling” in cost reimbursement contracts but the term apparently isn’t mentioned in the clauses.

I looked through the FAR payment clauses. I think that the only payment clause that refers to a “contract price” is 52.232-5 for fixed price construction contracts. Some other payment clauses refer to “prices” or “amounts due” for services or items furnished. I suppose those align with line item prices.

So where is the “contract price” specifically stated, as referred to in 52.232-5?

When a FFP contract contains unit priced line items with estimated or otherwise variable quantities,  the final “contract price” to be paid is variable, based upon calculating the final line item quantities furnished and prices.

joel hoffman said:

So where is the “contract price” specifically stated, as referred to in 52.232-5?

In the line item.

Don Mansfield said:

In the line item.

Don, I don’t think so. Those are individual line item prices. Contract price refers to the overall price - which is expressed initially as contract amount, isn’t it? The final contract price (for FFP construction contract) depends upon quantities of the line items furnished .

Actually the “contract price” stated in 52.232-5 is determined by “as provided” by the mechanics of the contract terms and conditions, adding up the prices of all the final line item quantities provided.

“(a) Payment of price. The Government shall pay the Contractor the contract price as provided in this contract.”

So, I think that the final “contract price” doesn’t have to be specifically stated in the contract itself, unless there is some agency requirement to modify the contract amount to match the final contract price.

When we debate the semantics of terms such as “ceiling amounts” and “contract prices”, those are actual, identifiable or determinable “things” or “terms of speech” even though the contract might not specifically state them.

Joel, the "ceiling" referred to in FAR 16.301-1 is found in FAR 52.232-20 which states in part "The Contractor is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs in excess of the estimated cost specified in the Schedule, until the Contracting Officer (i) notifies the Contractor in writing that the estimated cost has been increased and (ii) provides a revised estimated total cost of performing this contract."

joel hoffman said:

Actually the “contract price” stated in 52.232-5 is determined by “as provided” by the mechanics of the contract terms and conditions, adding up the prices of all the final line item quantities provided.

“(a) Payment of price. The Government shall pay the Contractor the contract price as provided in this contract.”

So, I think that the final “contract price” doesn’t have to be specifically stated in the contract itself, unless there is some agency requirement to modify the contract amount to match the final contract price.

For contracts with more than one line item, I think you're right.

Retreadfed said:

Joel, the "ceiling" referred to in FAR 16.301-1 is found in FAR 52.232-20 which states in part "The Contractor is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs in excess of the estimated cost specified in the Schedule, until the Contracting Officer (i) notifies the Contractor in writing that the estimated cost has been increased and (ii) provides a revised estimated total cost of performing this contract."

Agreed. I was merely responding to this comment:

On 1/28/2021 at 7:33 AM, ji20874 said:

There is no such thing as a ceiling on a CPFF task order.

The point is that the term or word doesn’t necessarily have to be stated in the contract to exist. The FAR language isn’t always integrated throughout the Regulation.  Some terms preceded the FAR for different agencies and for different contract types/purposes.

Don Mansfield said:

For contracts with more than one line item, I think you're right.

I have no argument with that.

EDIT: Additionally, the proposal price analysis discussion in 15.404-1 and -3 refer to evaluating “prices” (this can apply to multiple offers or to line item prices) and, in the singular, the final price. It can apply to estimated costs for cost reimbursement contracts, to fixed prices or to time and material or labor hour prices.

See also, for example,  15.405 price negotiation for prenegotiation objectives and 15.406 for documentation. They refer to or mean both line items and overall price(s). In fact, the concept of prices, final prices, the price, even the term “award price” are evident throughout Part 15 and in other Parts, such as 12, 13, 14, 36, 43, etc. as well as in contract clauses that provide for price adjustments.

I don’t even know why this would be a debate. The concepts of a contract price (contract price of a line item or total contract price, depending upon the context of the conversation or application) or even cost or price ceiling require very little inferential reasoning skills.