By Anonymous on Friday, May 11, 2001 - 09:23 am:

I am attempting to write a provision in a T&M contract stating that if the part has value in the remanufacturing process the refund shall be shown on the invoice. I want the refund to returned to the City.
Will someone help me write this provision, thank you so much.

By Anon2 on Wednesday, May 16, 2001 - 12:48 am:

I do not understand your problem. What prevents you from stating exactly how you want the core value treated in the contract?

The only problem I see here is knowing exactly what IS done and what you WANT done. The price to the city may already be discounted for the core value for a particular part. If not, the city should certainly get some benefit.

Remember, if I were the contractor I might also charge you a fee for the processing. There is paperwork, storage and such involved. The city should at least get the core value any other customer does and that includes deductions for those costs from the acutal residual value of the part.

After determining what you must do the writing seems to be a simple matter of putting it into words in the contract. For the first part a good approach might to be to contact some of the city's contractors for advice on how this is handled in the industry. I'm sure other large customers have an approach.

By Kennedy How on Wednesday, May 16, 2001 - 12:22 pm:

I've been mulling this over, and I can see one problem is deciding just how the refund will be treated, as well as ensuring that the City gets full value (or some value thereof) of the credit.

Contractors are loath to cough up refunds. Governments hate to obligate more than necessary. Sometimes, this gets in the way of squaring up the accounts. Having a clear, concise clause covering the entire issue is key, and it should also cover whatever elements are needed to cover contractor costs. It's more difficult if your core charge is on an "it depends" case-by-case basis.

For example, say you want them to do something to something; you are paying $300 per occurrance. The credit back to the City is $100 per occurrance. Sometimes, a contractor would rather be paid only $200 because it looks better on their financial statements; getting paid $300 and turning around and writing a check for $100 doesn't look as good (accounting-wise). But, the application of the credit is done afterwards, so this doesn't really work unless there is a credit in every case. If not, then you have to figure out how often you want this credit to be repaid; each occurrance, or on some fixed schedule (monthly?). And, you have to make sure they keep good records so you can spot-check, if you so desire.

Kennedy

By C MERCY on Thursday, May 17, 2001 - 10:50 am:

I think it would be a whole lot easier if the residual value of the item were simply deducted from the total invoice price. Let the vendor handle the disposition of the item,show the credit on the invoice and the agency pays the invoice minus the credit.

By Kennedy How on Thursday, May 17, 2001 - 12:35 pm:

That is the easiest way, but what ends up happening, at least in my DoD world, is that you get pile of unliquidated obligations, which needs to be taken care of at the end of the contract.

It's not a real big issue, it's part of contract closeout, but it does leave you with a contract modification to deobligate that money. And there needs to be ongoing documentation to account for that amount.

Kennedy

By C MERCY on Thursday, May 17, 2001 - 03:46 pm:

I WAS PRESUMING THE ORIGINAL POSER WAS NOT A FED.ALSO IF THE CONTRACT WAS A T&M THE ADJUSTMENT TO THE NTE WOULD TAKE CARE OF THIS PROBLEM..WOULD"NT IT?