Increase of Ceiling on CPFF Task Order

This is an easy one. If the Government is requesting new work to be added to an existing CPFF task order, then ask the Government customer for a revised PWS (preferably with track changes), an IGCE for the new work, funding evidence and other information that your organization requires for the package to provide to you as the contracting professional. If you have everything that you need to make a determination that it is within scope and it should not be competed, then create an RFP for this Contractor and let them know exactly what is expected of them for a Cost Proposal submission. Do not forget that task orders are subject to TINA (review FAR Part 15.403-1 for exceptions) if applicable. The cost proposal will be a sole source action; therefore, a cost analysis will be required. If TINA is applicable, follow Table 15-2 under FAR 15.408 and include this information in your request to the Contractor. Then you will need to perform a cost analysis (FAR 15.404-1© once you receive the Contractor's proposal submission). Remember under the scenario of New Work, the fixed fee is to be re-negoatiated based on the level of risk of the New Work. If this work is an overrun, no fee will be considered. If the customer tells you the Contractor just did not finish work that is already in your PWS, and you have validated this, then it is an overrun. If the Government has the funds, and is willing to increase the ceiling through modification, then document that it is an overrun and be very clear that no additional fee will be included in the ceiling increase.

The cost proposal will be a sole source action; therefore, a cost analysis will be required.

Incorrect. The fact that an action is sole source does not dictate whether cost analysis is required. Cost analysis is required when certified cost or pricing data are required (FAR 15.404-1(a)(3)).

Mere symantics my friend since I am referring to this gentleman's specific question and scenario. It is under a CPFF contract, and he is in a sole source environemnt, and I am not aware of other circumstances to make assumptions. A cost analysis may be used to evaluate data other than certified cost or pricing data... (4). Let's help the professional out by offering useful information.

My customer is requesting an increase of ceiling of work within the PWS.

What ceiling? Ceiling on what? What do you mean by ceiling "of work"? How is it expressed -- Hours? Some other unit of time? Dollars? Number of workers? What?

Mere symantics my friend since I am referring to this gentleman's specific question and scenario. It is under a CPFF contract, and he is in a sole source environemnt, and I am not aware of other circumstances to make assumptions. A cost analysis may be used to evaluate data other than certified cost or pricing data... (4). Let's help the professional out by offering useful information.

Did you mean "semantics"? In any case, what you wrote was incorrect and not useful. If you want to help people, give them accurate information. If you want to be professional, admit when you make a mistake.

While Don may be technically right concerning when cost analysis is "required", it might be "necessary" for the government to perform cost analysis even when certified cost or pricing data are not required. See FAR 15.404-1(a)(4) for example:

"(4) Cost analysis may also be used to evaluate data other than certified cost or pricing data to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone for commercial or non-commercial items."

In addition, for DOD, there is an open DFARS Case 2011-D013 "Only One Offer", which is still winding its way through. It is referenced on the WIFCON Rules and Tools page. It mentions the possible need to perform cost analysis on non-competitive offers below the TINA thresholds. I dont know if it would specifically apply to modifications.

Regardless, if one is modifying a cost type contract, I think that it would often be prudent to perform cost analysis techniques on such proposals regardless of the TINA thresholds.

Do any of you know what JandA100811 was talking about when s/he asked: "My customer is requesting an increase of ceiling of work within the PWS"? If so, will you please explain it to the rest of us and tell us how you know? If not, why are you pontificating about something you don't understand?

What "ceiling" is s/he talking about? "Ceiling" isn't standard CPFF terminology, and the poster said s/he was new to contracting and to CPFF contracts. People often use the wrong terminology. The increase in the ceiling of work could be a request for a change in scope, e.g., an increase of a level of effort, but it might be a reference to the estimated cost in the context of the Limitation of Cost clause or the funds allotted in the context of the Limitation of Funds clause. If s/he meant one of those latter things, then what happens to your talk of cost analysis and TINA? We haven't heard from JandA100811 for a week now. S/he is probably visiting Cluelesstan. What question are you answering?

"Ceiling" was not the right term, sorry I am used to T&M. The increase the customer is requesting is in level of effort for work within scope of the task order.

You first post on March 20 and we don't hear from you again until June 1? Really? Were you deployed?

I have not awarded or administered cost-reimbursement contracts in my career. However, I read this thread for a learning opportunity and reviewed the FAR text on cost-reimbursement contracts to try and follow the discussion. I am puzzled over why "ceiling" is not a term normally used with CPFF contracts after reading FAR Subparts 16.301-1 and 16.306. Perhaps you can explain to JandA100811 and me why "ceiling" isn't standard CPFF terminology in light of the FAR cites below.

Subpart 16.3—Cost-Reimbursement Contracts

16.301 General.

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.

16.306 Cost-plus-fixed-fee contracts.

(a) Description. A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract.

Given that FAR 16.306 describes CPFF contracts as a cost-reimbursement contract while FAR 16.201 describes cost-reimbursement contracts as those that 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, why is "ceiling" not standard terminology for CPFF contracts? If I were venturing into Cost-reimbursement and CPFF contracts for the first time I would, hopefully, read the FAR application for these types of contracts as a first step and would reasonably interpret that the estimated cost on my CPFF contract would be a "ceiling" that the contractor could not exceed (except at his own risk) without my approval as CO.

What other policy reference should JandA100811 and I be aware of in order to know that "ceiling" is not terminology normally associated with CPFF contracts.

She may have not been precise in explaining what her question truly was, but for her sake, and mine, please share with us why we should not use the terminology "ceiling" when dealing with a CPFF contract.

It is not a policy reference that you should be aware of, it's contract language. The language in FAR 16.301-1 is merely explanatory. Note that it says that the estimate of total cost establishes a ceiling. But the language in a cost-reimbursement contract that is used to refer to such a ceiling is not ceiling. The contractual terms, which appear in FAR 52.232-20, Limitation of Cost, and FAR 52.232-22, Limitation of Funds, are "estimated cost" and "funds... allotted." The word ceiling does not appear in those clauses.

The word ceiling is used in FAR 52.216-7, Allowable Cost and Payment, but only to refer to agreements that the parties might negotiate to limit indirect cost rates, etc. See, e.g., paragraphs (d)(2)(iii)(O), (iv)(O), and (3). Such cost ceilings may be stated in contracts, but they are not standard terms of such contracts. They are special terms negotiated as desired by the contracting parties. That is why I said:

What "ceiling" is s/he talking about? "Ceiling" isn't standard CPFF terminology, and the poster said s/he was new to contracting and to CPFF contracts. People often use the wrong terminology. The increase in the ceiling of work could be a request for a change in scope, e.g., an increase of a level of effort, but it might be a reference to the estimated cost in the context of the Limitation of Cost clause or the funds allotted in the context of the Limitation of Funds clause.

Indeed, she was not precise, but we in contracting must always be precise in our use of terminology if we are to understand each other correctly, and if the people who answer questions here are to know what answers to give. She now says that she was referring to a level of effort, the proper term for which is level of effort, not ceiling. We still don't know the answers to the questions I asked in Post #5.

I read the 52.216-7 clause as well and interpreted the use of ceiling to refer to the estimate of total contract cost in this manner.

The actual language of 52.216-7(d)(3) which does discuss executing agreements to establish final indirect cost rates is:

(3) The Contractor and the appropriate Government representative shall execute a written understanding setting forth the final indirect cost rates. The understanding shall specify (i) the agreed-upon final annual indirect cost rates, (ii) the bases to which the rates apply, (iii) the periods for which the rates apply, (iv) any specific indirect cost items treated as direct costs in the settlement, and (v) the affected contract and/or subcontract, identifying any with advance agreements or special terms and the applicable rates. The understanding shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. The understanding is incorporated into this contract upon execution.

So, the clause essentially says that the understanding on agreed final indirect cost rates shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. And I take that to mean that if the understanding establishes an indirect cost rate above the original estimated indirect cost rate, that I as a CO am not changing the monetary ceiling of estimated total cost of contract performance, or the obligation amount of the US Government, or any other specific cost allowance or disallowance, including any ceiling on indirect cost rates set as a term of the contract. I am only agreeing what the final rate should be based on the audit of the contractor's accounting system.

As example, if the estimated total cost (ceiling as FAR otherwise calls it) of the CPFF contract is $3 million and the final indirect cost rate as recognized in our written understanding is double the original estimated indirect cost rate, applying the final indirect cost rate to actual direct costs shall not send the total cost to be reimbursed above the $3 million estimated total cost (ceiling) established at award, despite our written understanding on the final indirect cost rates. That understanding is just a recognition of the actual indirect rate based on the contractors operation and if it would send the total costs to $3.1 million when it is applied to the total direct costs, the $100 k overage would be a disallowed cost because it exceeds the ceiling, or total estimated cost, which the contractor was not to exceed without approval of the contracting officer.

In that context, could the contract language conceivably make use of both terminologies (estimated costs, and ceiling)? Could it not be possible that the terminology total costs in the clauses you referenced and the terminology of ceiling in 52.216-7 are one and the same? These clauses were likely drafted by different folks who each may have preferred one terminology over the other but were both referring to the same thing.

It would seem odd that the regulation would establish a terminology considered interchangeable with another and that the so established terminology would not be recognized in addressing contract issues just because a contract clause makes use of the interchangeable terminology.

I don't accept your reading of the clause. The only use of the term ceiling in 52.216-7 is in a paragraph about indirect costs. I read "any monetary ceiling" as referring to any ceiling on indirect costs. Even if you want to read it more broadly, the clauses that actually set the limits on the government's cost liability, 52.232-20 and 52.232-22, do not use the word.

But you are free to read (d)(3) any way you like, and if you want to go around referring to the "ceiling" of a cost-reimbursement contract, you go right ahead. Don't be surprised if the person you are talking to asks you "What ceiling?"

References to "estimated cost" and "funds allotted" refer to specific contract terms in the words used by the contract and are clear in meaning. No one except a rookie is going to ask you what you're talking about if you use those terms. A reference to "ceiling" could refer to any of several things, and so is not clear, not precise, and thus should not be used without elaboration. "Ceiling of work" is obscure.

You wanted to know why I said that "ceiling" is not standard language for cost-reimbursement contracts. Now you know.

The level of effort being increased is expressed as hours, it is a CPFF term effort so those hours are tied directly to cost.

So your "ceiling" is the level of effort? And your customer wants to increase it?

Any increase in the "ceiling" is a change in scope and will require justification and approval for other than full and open competition.

Correct, the "ceiling" is the level of effort.

The increase in the level of effort is not due to a change in scope but more due to the unknowns of a cost type contract. The customer is requiring more hours due to additional work within scope of the PWS for this CPFF term effort. Please let me know if I am not being clear enough in explaining this.

If you awarded a CPFF level-of-effort term contract, then the level of effort sets the scope of the contract. A modification to increase in the level of effort ("ceiling") would be a change in scope. (If the CO used a PWS in a level-of-effort term contract then your office does not know what it's doing.)

If you awarded a CPFF completion contract, and the contractor has to expend more effort than planned in order to complete the work, then you have a cost overrun, not a change in scope. If the customer has the money and wants to spend it to keep the contractor working you're good to go and should mod the contract to increase the estimated cost (not fee) and, if the contract is incrementally funded and it is necessary, the funds allotted.

This thread should demonstrate to everyone why it is important to use proper terminology if you want to communicate clearly.

Point taken in regards to the CPFF completion contract and I understand that.

I am just having a tough time seeing how we would automatically rule my example out of scope. The reason this task order was solicited as CPFF is because there were many unknowns, the proposed level of effort and corresponding dollars seems like an estimate to me and if the level of effort were to increase and still in the realm of the scope of the PWS, how would this be in violation of CICA and require a J&A? The work being added is within the scope of what was intended when the PWS was written. To me this seems kind of grey. Thanks for your input.

Is the contract a CPFF level of effort term contract as described in FAR 16.306(d)(2)? Does the contract expressly require the contractor to deliver a specified level of effort, or was the level of effort just something in the contractor's proposal that was not put in the contract document?

Yes, the contract is a CPFF level of effort terms as described in FAR 16.306(d)(2). The contract does not expressly require the contractor to deliver a specified level of effort, the level of effort was just something in the contractors proposal.

If the LOE is not in the contract, why do you think you have an LOE contract? Also, if the LOE is not in the contract, what "ceiling" are you wanting to increase?

Yes, the contract is a CPFF level of effort terms as described in FAR 16.306(d)(2). The contract does not expressly require the contractor to deliver a specified level of effort, the level of effort was just something in the contractors proposal.

JandA100811:

Are you new to contracting? Please let us know so we can respond to you appropriately.

JandA100811:

Disregard my last post. I saw in your first post that you said that you are new.

If a contract does not expressly require the contractor to provide a specified level of effort during a specified term, then it is not a level-of-effort term contract, no matter what was in the contractor's proposal and no matter what anybody calls it.

Since your contract does not specify a level of effort, it is not a level of effort contract. It sounds to me (but I'm not sure) that you are dealing with a cost overrun -- the contractor needs to apply more effort to finish the work than proposed and your customer wants you to increase the estimated cost and/or funds allotted. If that is the case, then you do not have a scope issue. Whether or not to increase the estimated cost or the funds allotted is pretty much up to the customer. If they've got the money and are willing to to make the increase then you should make it, unless the CO has reason to oppose doing so.

Ok, to further clarify the level of effort was written into the order just not where I was used to seeing it. So Vern going back to your post #18 a requested increase in this level of effort by the customer would be a change in scope? I guess I was not thinking about scope in terms of hours but in terms of the additional work being requested due to the unknowns that remains in scope of the PWS. It is not an overrun scenario by the contractor. Thanks again.

As you continue to gather and review the relevant facts, keep this in mind:

"An order in excess of the maximum quantity stated in the contract would be outside the scope of the contract. Such an order would result in a contract materially different from that for which the original competition was held and, absent a valid sole-source determination, would be subject to CICA requirements for competition." See Liebert Corp., B-232234.5, Apr. 29, 1991, 91-1 CPD.

An increase in the level of effort of a level-of-effort term contract or order is a change in the scope of the contract/competitoin. That is because when you increase the level of effort you are buying more services, which is a new procurement. See Government Contract Changes 3d by Nash and Feldman, Sec. 4.8:

n [b-191078, 78-1 CPD para. 377, May 17, 1978], the GAO distinguished permissible contract modifications extending the time of performance to permit completion of the work originally called for and impermissible contract changes adding time to enable the contractor to perform added work. The GAO viewed the latter type of time extension—buying more time as a means of buying more services—as being clearly outside the scope of the Changes clause. This same reasoning would preclude the use of the Changes clause to extend the time of performance of term-type contracts, which specify that the contractor will provide a specific number of hours of work in a specific period of time.

See also the discussion of CPFF completion and term form contracts in Allison Div., General Motors Corp., ASBCA No. 15528, 1972 WL 233768, in which the board said that an increase in the level of effort of a CPFF LOE Term contract entitled the contractor to additional fee because the increase in the level of effort was a "new procurement__." See__ also Program Resources, Inc., ASBCA No. 21656, 78-1 BCA para. 12867, Nov. 8, 1077:

In Allison Division, General Motors Corp., ASBCA No. 15528, 72–1 BCA ¶9343, the contract was a term form, cost-plus-fixed-fee contract similar to the one here considered. The level of effort was stated as ‘approximately’ 173,200 engineering hours. A contract modification added 31,864 hours to the required effort. The Board held that this was an increase in the scope of the work which entitled the contractor to an increase in the fee.

In light of your posts here I have no confidence that you have your facts right and know what you're talking about and that my answers are valid in your case, and I hesitated before making this post. You really need to talk to a competent person in your own organization about this.

Thanks for your patience on this one this pretty much directly answers my question.

You said "I guess I was not thinking about scope in terms of hours but in terms of the additional work being requested due to the unknowns that remains in scope of the PWS."

Notwithstanding your choice of terms, which is confusing, a basic question is "are you increasing the actual 'scope of work' that is described in the contract?"

I can see a possible scenario where the government described the scope of work that was/is(?) described in the "PWS" in the RFP, the contractor may have proposed a certain level of effort that it said it would provide to perform that scope of work and then the government included that level of effort into the contract as a requirement to assure that the contractor would actually provide it. Is your scenario similar to this?

Then a question would be was the final intent of the contract to perform a level of effort in order to tackle (pursue completion of ) the necessary work or is it to complete the work that is decribed in the contract?

I agree with Vern that you talk to a competent person in your own organization about this. I don't think that you described the actual scenario well enough for anyone to provide a definitive answer.

The very first words posted in response to the original question were: “This is an easy one.” That was an unwise response.

In Post # 17 JandA100811 said that the “ceiling” was a level of effort. Now look back at his original post. He said: “My customer is requesting an increase of ceiling of work within the PWS.”

In Post #21 he said: “Yes, the contract is a CPFF level of effort terms [sic] as described in FAR 16.306(d)(2).”

I was asleep at the switch, because I should have noticed and pointed out that you should not have a performance work statement (PWS), as defined in FAR 2.101, in a level of effort term contract, fixed-price or cost-reimbursement. A PWS specifies results in measurable terms. But the level of effort is supposed to be in the contract because you cannot specify the result that you want.

Confusion about contract types is widespread throughout the workforce. It’s gotten to the point where you cannot be certain what a person is talking about when they talk about a contract type.

This begs another question why should we not have a PWS in a level of effort term contract? I realize the definition of a PWS in FAR 2.101, however, this by all accounts is a Performance Based Acquisition under FAR 37.6. Furthermore FAR 37.602 ( describes what shall be included in the PWS to the maximum extent practicable, all of which I would think could be described in a Level of Effort PWS. For example we can ask in our solicitation for the contractor to propose a QASP which describes how their performance should be measured against the requirements of the PWS using metrics such as performance, schedule, cost control etc., and set measurable performance standards that way.

Think about it. Here is the description of a CPFF LOE Term contact from FAR 16.306(d)(2):

The term form describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period.

I know you read that because you cited it earlier. And here is what FAR 37.602 says about performance work statements:

( Agencies shall, to the maximum extent practicable—(1) Describe the work in terms of the required results rather than either “how” the work is to be accomplished or the number of hours to be provided (see 11.002(a)(2) and 11.101; (2) Enable assessment of work performance against measurable performance standards; (3) Rely on the use of measurable performance standards and financial incentives in a competitive environment to encourage competitors to develop and institute innovative and cost-effective methods of performing the work.

If you can write that kind of work statement why on earth would you need a level of effort?

Because the required results is a level of effort, nothing is being delivered at the end of the period of performance, we are buying a level of effort (hours) ie. support services like FAR 16.306(d)(2) states.

I don't understand. A PWS must not specify a number of hours to be delivered. A number of hours cannot serve as a performance-based result.

I am confused as well, I am interested as to where you are coming to the conclusion a performance based acquisition cannot consist of a number of hours.

37.601 General.

( B ) Performance-based contracts for services shall include—

(1) A performance work statement (PWS);

(2) Measurable performance standards (i.e., in terms of quality, timeliness, quantity, etc.) and the method of assessing contractor performance against performance standards; and

(3) Performance incentives where appropriate. When used, the performance incentives shall correspond to the performance standards set forth in the contract (see 16.402-2)

As long as all of the above is included in our performance based contract and our PWS meets the definition in 37.602 that you outline in post #32, then what is the issue?

37.602( Agencies shall, to the maximum extent practicable—(1) Describe the work in terms of the required results rather than... the number of hours to be provided... .

16.306(d)(4) (4) The term form shall not be used unless the contractor is obligated by the contract to provide a specific level of effort within a definite time period.

If you don't get it by now, then I know of nothing more to say to you, and I wish you well in your work,

That does say to the maximum extent practicable right? I did not realize that means you shall not have a PWS in a level of effort scenario. I think some CO discretion can be used here as well.

When FAR says to the "maximum extent practicable" it means that you shall specify a measurable result when you can, without specifying hours. When you cannot specify a result you may specify a level of effort, in which case you do not have a performance-based contract or task.

Performance-based and level-of-effort don't work together. Performance-based contracts specify output. Level of effort contracts specify input. If you mix the two, and if the contractor cannot achieve the result within the level of effort, then you have given the contractor a basis for demanding payment of the full fee and demanding more fee for continued performance in order to achieve the result, even if it has not incurred the estimated cost. And are you going to require them to deliver the specified level of effort even if they could complete the work with less? Who but a dummy would do those things?

A knowledgable professional does not mix performance-based with level-of-effort in the specification of a given task.

A performance specification specifies a desired end result, without unnecessarily specifiying the means, methods or materials to achieve those results. Performance specifications also normally include means to verify or for the contractor to substantiate that the specified level of performance has been achieved. The CSI (Construction Specifications Institute) and other organizations provide like definitions of performanceformance specifying.

A level of effort specification "prescribes" the means and/or methods to be used to achieve or attempt to achieve some result. Thus, they are a form of prescriptive specifying.

I agree with Vern.

JandA100811,

Do you understand that some statements of work are performance-based and some are not? Those that are performance-based are called "performance work statements." I'm asking because I suspect you may be thinking that all statements of work are "performance work statements."

As always, well said Vern.

I've got the same problem CPFF though the requirement, maintenance and repair of real property does not fit into either the term or completion model (i.e. wrong contract type) and, of course, no mention of the LOE was included in the award document, etc., and now they want to increase the total estimated cost by 200% to accomplish additional work that they say is "within the scope" as they define the term. As a contractor, I'm looking for solutions but doesn't seem likely without being extremely creative.

Anywho, do you have any more recent cites, shepardized, etc. that I can review? I don't have access to Westlaw.

I can pay you, as consideration, by your acceptance of two (2) kittens I am fostering that will enrich your life beyond merely sentimental value if you could simply click on the Westlaw shepardize button and provide your analysis.

Also, I still maintain that the acquisition of a wife is no different than procuring services as your own Source Selection Authority and a BPA, clearly is not a contract, but I guess I'll be banned again for mentioning kittens, wife and George Washington as limited minds think these these things are not related to contracting or not appropriate items for discussion in this forum.

Tnx.

I'm not sure what kind of cases you want. Cases about what?

You say the government wants to increase the total estimated cost. Do they want to add tasks or extend the performance period? I would not expect a contractor to object to that unless the government is unwilling pay additional fee. Is that the problem?