ODCs

First, I think you meant that the prime is asking, not the sub. You said you are the sub. What do you mean?

Second, I think you may have asked the wrong question. Is the question whether they can do the things they have done, or is the question whether you have to do the things they have asked you to do?

Sorry,  I meant to type "Prime" is asking, not sub. 

Yes, my question is if what they are asking is allowed and whether we can push back as this seems unusual.

Contractor500, is your company subject to CAS? Is the subcontract subject to CAS?

Hi! We're a small business and we have an IDIQ with 5 Task Orders currently. It's Cost plus award fee. We have been funded less than 750K and since we are small business, does that mean we are not subject to CAS? I didn't find anything in the subcontract regarding CAS. 

Thank you for your help!

If you are a small business then no, you are not subject to CAS. So your prime is asking you to (a) request less reimbursement than actual costs incurred, and (b) to treat the additional labor as an ODC? (And burden the labor as an ODC instead of as labor, I assume.)

Is that correct?

Back to Vern's question then. What do you want to know?

Yes, that's correct. My question is whether the Prime can actually pay us less for an hour of on-call duty which should be labor. They want us to bill this as an ODC, but since this is labor, can I say that we must bill this to labor and not as an ODC? Is there something in the FAR that backs this up? Not sure if something like this is allowed. So, would like your thoughts on this. Thanks.

Does any of this sound like a red flag on the part of the Prime?

Even if you bill it as labor, the prime can bill it as ODC when it invoices the government, right?

Contractor500 said:

...our employee has a rate of $102.31...

Is that a loaded or billing rate (such as would be used for T&M)?  Or, is that the rate actually earned by and paid to the employee?

It's the rate we bill the customer

Well, for a cost-reimbursement contract (you said it is CPAF), shouldn't you bill actual incurred costs (actually paid to the employee) as the direct labor charge?  And other overhead or G&A costs as indirects?  Under your cost-reimbursement subcontract, maybe you are not entitled to $102.31 per hour for on-call work, especially if the on-call work doesn't materialize, and if/when it does, your actual direct labor incurred cost is not $102.31 per hour.

Contractor500 said:

...we have an IDIQ with 5 Task Orders currently. It's Cost plus award fee...

Do you mean that (A) you have an IDIQ subcontract and 5 task orders from the prime contractor; or (B) the prime contractor has an IDIQ contract and 5 task orders with the government?  If (B), what is your subcontract arrangement with the prime?  Is it CPAF or something else?  The prime's arrangement with the government is irrelevant to you -- what matters is your arrangement with the prime.

Contractor500 said:

...It's the rate we bill the customer...

Is it the rate (C) you bill the prime contractor, or (D) the prime contractor bills the government?  The only thing that matters is (C), right?

Contractor500 said:

My question is whether the Prime can actually pay us less for an hour of on-call duty which should be labor. They want us to bill this as an ODC, but since this is labor, can I say that we must bill this to labor and not as an ODC? Is there something in the FAR that backs this up? Not sure if something like this is allowed. So, would like your thoughts on this. Thanks.

First of all, yes. The prime can ask you to bill less than you actually incur. (This assumes that you actually incur $102.31/hour for your employee's labor. See ji20874's post.) You don't have to agree, but the prime can ask.

Second, if you were CAS-covered I would say that you have to be consistent in your cost accounting practices. Labor over there must be treated as labor everywhere. But you're not CAS-covered. Are there burdening differences between labor & ODC? I don't know your accounting system so I couldn't say. But if the transformation from labor to ODC changes the burdening, and your are required by 52.216-7 to submit a final billing rate proposal at the end of the year, then you may have an argument as to why that's a bad idea.

I would suggest you get a consultant in to assist you with these types of questions ...