FFP treated as Cost Reimbursable

What is the description for travel in the contract and how it will be paid? You said it was a plug number. Often, if a government plugged number is used, it is simply an estimated number for an “other direct cost” line item with reimbursement for travel if and when it occurs. A firm fixed price contract can include a reimbursable line item, like travel.

joel hoffman said:

A firm fixed price contract can include a reimbursable line item, like travel.

I wouldn't refer to such a contract as a firm-fixed-price contract. I would refer to it as a combination of FFP and cost.

LeighHar said:

Any ideas on language from the FAR or DOSAR that I can drop in an email to reinforce the idea that regardless of whether we travel these first few months or even year, that its Firm Fixed Price and we should be able to collect the entire amount under the travel CLIN?

There is no such language.  

As others are suggesting, it sounds like your contract might be predominantly FFP, but not entirely FFP.  Each CLIN stands on its own.

ji20874 said:

There is no such language.  

As others are suggesting, it sounds like your contract might be predominantly FFP, but not entirely FFP.  Each CLIN stands on its own.

Good, straight forward explanation.

A service contract doesn’t have to be lump sum priced to be considered firm-fixed-priced. For example, it could be unit-priced with estimated quantities for required services that might vary based upon conditions (e.g., number of mowings per month to maintain a lawn or acreages or price per each emptying of a dumpster, on an as required basis, etc. ); it could use lump sum items; it could include both unit-priced and lump sum items. See, for instance this thread:

/threads/3286-is-a-unit-priced-contract-an-indefinite-quantity-contract

The point is that the contract price paid can vary with the amount of fixed-priced work performed and still be considered an FFP contract.

Such type contract pricing arrangements have been around for much longer than the FAR.

LeighHar said:

Any ideas on language from the FAR or DOSAR that I can drop in an email to reinforce the idea that regardless of whether we travel these first few months or even year, that its Firm Fixed Price and we should be able to collect the entire amount under the travel CLIN?

"The Government shall pay the Contractor, upon the submission of proper invoices or vouchers, the prices stipulated in this contract for supplies delivered and accepted or services rendered and accepted."  FAR 52.232-1  Based on this language why do you think you are entitled to be paid anything under the travel CLIN?

LeighHar said:

I have a firm fixed price contract with the Dept of State with CLINs for Labor, Travel and ODCs.  The CO insisted that it be FFP with plug figures for travel.   ...  Any ideas on language from the FAR or DOSAR that I can drop in an email to reinforce the idea that regardless of whether we travel these first few months or even year, that its Firm Fixed Price and we should be able to collect the entire amount under the travel CLIN?

I disagree with other posters here who are suggesting that the contract type is not actually what the OP says it is. Let's take their statements at face value rather than reinterpret in a manner that suits our response.

Questions:

1. Does the contract contain 52.211-18 (Variations in Estimated Quantity) and, if so, did the parties reasonably interpret that clause to apply to the travel/ODC CLINs?

2. Is there a Section H clause or other language in the contract that speaks to travel?

3. The contractor proposed the "plug figures" for travel. What BOE did it provide? What language was included in the contractor's proposal?

4. Was this a competitive or single/sole source award? If not competitive, was cost analysis performed?

5. Was the proposal subject to TINA (Truthful Cost/Pricing Act)? If so, to what did the contractor certify?

I don't see how anybody can provide a meaningful answer without knowing (at least) the answers to the questions above. It may well be that the contractor and government agreed on a FFP and, absent a contract modification, the contractor is entitled to bill that CLIN to the amount funded. (I.e., the contractor accepted the risk of a cost overrun on that CLIN, and the government accepted the risk of a cost underrun.)

Or, it may be that the parties agreed to replace the "plug figures" after award via contract modification, based on travel frequency and costs that the contractor was actually experiencing, similar to how a variation in estimated quantity clause would be implemented.

We just do not know.

LeighHar said:

I have a firm fixed price contract with the Dept of State with CLINs for Labor, Travel and ODCs.  The CO insisted that it be FFP with plug figures for travel.   Due to COVID-19, the CO is not permitting spending under travel and the CLIN is currently "incrementally funded as funds become available."  Any ideas on language from the FAR or DOSAR that I can drop in an email to reinforce the idea that regardless of whether we travel these first few months or even year, that its Firm Fixed Price and we should be able to collect the entire amount under the travel CLIN?

The only language that counts is the language in your contract. Please review it in detail and see if you can come up with FAR or DOSAR language in your contract that supports your position. If not, I am doubtful about the applicability of any other FAR or DOSAR language to your situation.

Each CLIN if FFP, during the solicitation, it stated that all CLINS would be FFP.  At Q&A, we even asked for clarification and recommended that travel and ODCs be cost reimbursable and at Q&A, they stated Travel and ODCs would be cost reimbursable (and I don't know the entire story as this pre-dates my employment), but it seems like the actual solicitation was never updated and the contract came out as FFP with plug figures for travel and cost reimbursable (we should have asked for clarification at that point, but did not as the CO is quite difficult).  For the first obligation, they are giving us funds for labor and ODCs.  The contract has a base year and 4 option years.  Travel states the following, verbatim:

TRAVEL: As outlined in the Statement of Work. Base                      12.00 MO                     $0.00                           $0.00
Year Total @ $10,000.00 monthly = $120,000.00; to be
incrementally funded, as funds become available

Type of Contract Pricing: FFP

LeighHar said:

the contract came out as FFP with plug figures for travel and cost reimbursable...

Is there any language in the contract about cost reimbursable, like FAR 52.216-7, for example? Is travel, as outlined in the Statement of Work required to be performed at this time? Do you agree there is no contract funding available for travel at this time?

[ Travel CLIN is unfunded ]  +  [ Contractor has not performed any travel ]  =  [ No invoicing or payment under the Travel CLIN ].

ji20874 said:

[ Travel CLIN is unfunded ]  +  [ Contractor has not performed any travel ]  =  [ No invoicing or payment under the Travel CLIN ].

Yes. You can't invoice what hasn't been funded, even in a FFP situation

here_2_help said:

You can't invoice what hasn't been funded, even in a FFP situation

And you cannot invoice for supplies that have not been accepted or services that have not been performed and approved.

An older GAO report that includes Department of State issues with travel being fixed price or cost reimbursement is attached for information. https://www.gao.gov/assets/100/94499.pdf

@LeighHar   @Retreadfed nailed it.     I am still wondering about the contract language especially when relating to the CLIN where the language says "As Outlined in the Statement of Work"?  What in fact does the SOW say about travel?  Will it be ordered?  Is the contractor to just travel as necessary?  In other words the CLIN is for a deliverable.      No deliverable (travel as requested or necessary) no payment from the CLIN.    Funding in my view is not the issue it is what does the contract require for travel to be experienced and be paid for.

Let me use another example.   FFP CLIN for a copier.   No copier delivered no payment for the CLIN.  

In other words you can have all the FFP CLINs in a contract that you want but until something is delivered the CLIN is not paid.

On 8/6/2020 at 1:24 PM, Retreadfed said:

And you cannot invoice for supplies that have not been accepted or services that have not been performed and approved.

Not to keep beating that poor horse, but please explain to me how travel is inspected and accepted?

here_2_help said:

Not to keep beating that poor horse, but please explain to me how travel is inspected and accepted?

There are many ways that this can be done.  However, the primary method would be to ensure that the travel was accomplished in accordance with contract requirements.  For example, if the contract called for the contractor to send four people to two day quarterly meetings on specified dates, the travel would be reviewed to ensure that  these requirements were met.

LeighHar should by now understand that FFP with multiple line items doesn’t automatically signify that the stated total contract price is what a contractor will be paid. It depends upon the details. One must read the contract as a whole and the scope and terms of every line item.

Here, it appears from what LeighHar said in the initial post, the government KO has “prevented” the firm from traveling.  They aren’t going to be paid “the plug number” .

in my experience, when we used “plug numbers” for a line item for a construction contract, it was for something like a utility charge or relocation or for work that a railroad or other entity would perform and charge the contractor the actual cost. The plug number was simply an estimate that was equalized for each bidder or proposer for the contract price competition. We also occasionally used such plug numbers for service contracts for similar reasons. 

Here, even if LeighHar is correct that the travel line item is intended to be FFP, there would have been a constructive change if the KO “prevented” travel. I don’t think the government will simply pay the contract price for travel that was never performed.

I remember Vern Edwards saying that he would always try to negotiate travel  as a lump sum, fixed price for his contracts with the government to avoid the hassle of quibbling over allowable cost reimbursement.

Travel reimbursement hassles aren’t limited to contractors. Government employees faced the microscopic scrutiny of the voucher examiners, sometimes amounting to a few pennies of denial. It was a great  victory for the reviewers 😁.

joel hoffman said:

LeighHar should, by now, understand that FFP with multiple line items doesn’t automatically signify that the stated total contract price is what a contractor will be paid.

Right.  The FAR definition of firm-fixed-price contract is a good one -- see FAR 16.202-1.  It says the price "is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract." But a FFP can change for many other reasons.

ji20874 said:

Right.  The FAR definition of firm-fixed-price contract is a good one -- see FAR 16.202-1.  It says the price "is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract." But a FFP can change for many other reasons.

Actually, it says that “ (a) firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract.”

In the earlier thread that I cited, Vern Edwards said that they duly noted In the Nash and Cibinic Report that the definition in FAR 16.202-1 is poorly stated and is not precisely correct.

As ji said, the FFP can change for many “other” reasons, including those that I described. The point I want to emphasize is that the TOTAL FFP contract price is not necessarily what the contractor will be paid just because it is an FFP contract. 

However, It can also be adjusted on the basis of the contractor’s actual cost experience in some instances. Some examples are directed and constructive changes,  a differing site condition, a variation in estimated unit priced quantities beyond a certain range (if the unit cost of the work outside of the range varied from the contractors unit cost within the range), newly imposed excise taxes, labor escalation or reductions at time of award of options and other contract clauses that may provide for price adjustments.

joel hoffman said:

It [a FFP] can also be adjusted on the basis of the contractor’s actual cost experience in some instances. Some examples are...

No, I disagree -- a FFP cannot be changed based on the contractor's cost experience.  A change in price because of a differing site condition is not a change based on the contractor's cost experience -- it is a change based on the facts of a differing site condition.  Same for all the other reasons.

joel hoffman said:

Actually, it says that “ (a) firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract.”

I think it would be clearer if it said "solely on the basis of the contractor's cost experience." That sentence has confused many students. 

joel hoffman said:

However, It can also be adjusted on the basis of the contractor’s actual cost experience in some instances. Some examples are directed and constructive changes,  a differing site condition, a variation in estimated unit priced quantities beyond a certain range (if the unit cost of the work outside of the range varied from the contractors unit cost within the range), newly imposed excise taxes, labor escalation or reductions at time of award of options and other contract clauses that may provide for price adjustments.

Joel has it right. There is no right to a change in price due to a differing site condition unless it affects the contractor's cost experience.

Retreadfed said:

There are many ways that this can be done.  However, the primary method would be to ensure that the travel was accomplished in accordance with contract requirements.  For example, if the contract called for the contractor to send four people to two day quarterly meetings on specified dates, the travel would be reviewed to ensure that  these requirements were met.

I'm afraid we are talking past one another. Let me try again.

The method by which travel is inspected and accepted on an FFP basis is via the DD250. The contractor submit it after incurring the travel.

Don Mansfield said:

I think it would be clearer if it said "solely on the basis of the contractor's cost experience." That sentence has confused many students. 

Joel has it right. There is no right to a change in price due to a differing site condition unless it affects the contractor's cost experience.

First paragraph - I agree. 

Second paragraph- I agree.

For another example, assuming that the estimated quantities in a line item were not negligently, deliberately or arbitrarily established or were not the result of a differing site condition or , e.g., a change to the.work , the Variation in Estimated Quantities clause at 52.211-18 will not provide a right by either party to a change in unit price for the units outside the 85-115% range unless it affects the contractor's unit cost experience.

That's a generalization for simplicity - there are nuances.

here_2_help said:

travel is inspected and accepted on an FFP basis is via the DD250

Where is this required by the DFARS?

• 252.246-7000
• 252.232-7003
• DFARS Appendix F

I do not disagree with the most current thoughts but it seems to me the thread has digressed from the most general principles already stated...read the contract and you will only be paid for work allowed by the contract that is performed and accepted or for which a clause provides a remedy for.  Many have mentioned this and that but they only apply if in the contract.  

Now to "plug" numbers.  Same thing what does the contract say?  In the case of this thread the plug number will be paid for whatever travel is stated in SOW that conforms to the SOW and is "accepted".  And that FFP plug number will get adjusted as the SOW allows.

here_2_help said:

• 252.246-7000
• 252.232-7003
• DFARS Appendix F

252.246-7000 is reserved.  252.232-7003 and App F do not mention contractor travel.  Also, App F 101(b) says "The use of the DD Form 250 series documents is on an exception basis (see DFARS (a)) because use of the WAWF RR is now required by most DoD contracts."

Retreadfed said:

252.246-7000 is reserved.  252.232-7003 and App F do not mention contractor travel.  Also, App F 101(b) says "The use of the DD Form 250 series documents is on an exception basis (see DFARS (a)) because use of the WAWF RR is now required by most DoD contracts."

Clearly we continue to talk past each other. Have a pleasant day.