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Time & Material Order on GSA Schedule 70
By Puzzled on Friday, January 31, 2003 - 06:49 pm:

I don't understand how GSA gets away with being able to allow the use of the T&M contract type on their Schedule 70, which is supposed to be a schedule for the acquisition of commercial items. FAR Part 12 requires the use of FFP or FFP w/EPA contract types, and other types are prohibited. The Schedule contract doesn't include the appropriate Changes Clause for this contract type, it doesn't include the appropriate Cost Accounting Standards clauses that may be applicable, and it doesn't include the clause that allows the requirement for cost and pricing data. I know there are multi-million dollar T&M orders being issued on the Schedule. It's no wonder there are tons of contractors on the Schedule. They get the least preferred contract type with none of the hassles of accounting for their costs. There are so many things wrong with this picture on so many levels. Did GSA get a FAR deviation/waiver?


By John Ford on Saturday, February 01, 2003 - 03:44 pm:

A couple of observations, first, contracts for commercial items are exempt from the CAS and TINA. Second, FASA does not prohibit the use of T&M contracts to acquire commercial items. FASA encourages the use of FFP or FP-EPA contracts to the extent practicable but does not prohibit the use of other types of contracts to acquire commercial items. The only type of contract that is prohibited is a cost type contract.


By Puzzled on Saturday, February 01, 2003 - 07:22 pm:

John,

Regardless of what FASA allows or prohibits, FAR 12.207 states:

"12.207 -- Contract Type.
Agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items. Indefinite-delivery contracts (see Subpart 16.5) may be used where the prices are established based on a firm-fixed-price or fixed-price with economic price adjustment. Use of any other contract type to acquire commercial items is prohibited."

If the FAR Council incorrectly implemented FASA, we (including GSA) are still required to comply with the FAR as it is currently written. My question was: Did GSA obtain a FAR deviation or waiver?


By Vern Edwards on Saturday, February 01, 2003 - 07:30 pm:

The GAO has just asked the OFPP Administrator to look into the matter of GSA's use of T&M contracts in its schedule program. See: http://www.gao.gov/new.items/d03399r.pdf.


By Anonymous on Saturday, February 01, 2003 - 08:00 pm:

I looked at that thing and they did no work except read IG reports. OFPP can read too. Finally, they really did not care about the T&M issue. That had something else on their minds.


By Anonymous on Sunday, February 02, 2003 - 11:42 pm:

The big problem with T&M on schedules is that usually only one firm has the exact person the program office wants. Any other offeror has their candidate's resume rejected as less qualified. Many of the chosen candidates are retired government employees from the same office or old friends of the hiring official.

They say they know this candidate and his capabilities and they are not going to take a chance on someone they don't know. They see nothing wrong with this because that is exactly how political appointees are chosen for their jobs.

However, we now have a corp of personnel who are basically govt employees who were never hired throught the civil service system. Thier wages were set by their employer and we pay whatever the employer asked for on his GSA schedule for professional personnel. Many times you can barely link the GSA position description to the job being filled. The offeror just says that based on what they have to pay the employee, they must designate him a certain labor category. So you may have a functional analyst working as contract specialist.

The GSA FSS system is quick and it is the only way we could ever keep up with our workload. And because we are so busy we cannot challenge every irregularity in the labor categories. Is the taxpayer getting a good deal? I doubt it and I am not comfortable with using schedules. There is far too much hanky panky going on behind the scenes.

Would I be happy if GAO/OFPP puts a stop to the use of labor categories on GSA schedules? Darn right I would be. But they better be ready to fund more 1102s because half our work is processed against schedules these days. If it can't be procured on GSA FSS we will have a lot of contracts to cut.

Gosh, what am I thinking, we can always award sole source to 8a contractors who have their own ways to twist the system to overcharge the government. The same employee hires on with an 8a instead of a GSA vendor and we hire them sole source anyway.

What we really need is a serious IG to really clean house and stop all the fun and games. I am appalled at the lack of oversight anymore.


By Vern Edwards on Monday, February 03, 2003 - 08:40 am:

Anonymous:

Your complaints don't have anything to do with the use of T&M pricing. All they amount to is that agencies are improperly contracting for personal services. They could do the same thing even if GSA required them to price all orders on a firm-fixed-price basis.


By Anonymous on Monday, February 03, 2003 - 12:12 pm:

Vern,

If you don’t agree that the use of a T&M contract type might contribute to the problems noted by anonymous, would you at least concede that the use of schedules of labor categories and rates with only a tenuous relationship to the work might be a problem.


By formerfed on Monday, February 03, 2003 - 01:49 pm:

Anonymous,

I don't see this as a problem if agencies do what GAO says is required - follow FFS ordering procedures that require seeking competitive quotes.

Agencies seek quotes based on a statement of work. Offerors propose labor to perform the work. It's not that difficult.

If agencies abuse the process, responsible individuals need dealt with.


By John Ford on Monday, February 03, 2003 - 08:53 pm:

Formerfed, agencies have figured out how to game the so called "competitive" quotes procedure. Awards do not have to be made to the low quoter. Further, agencies check the labor rates offered by various schedule holders then seek quotes from the favored vendor and two others who have higher labor rates. While the use of schedules and multiple award contracts is a quicki way to satisfy agency needs, the way they are being corrupted is another $400 hammer and $600 toilet cover scandle in the making.


By formerfed on Tuesday, February 04, 2003 - 07:54 am:

John,

The practices you describe aren't much better, if not the same, as issuing sole source orders.

It's a shame that agencies don't use the Schedules properly. It's not going to take much in terms of a few widely publicized scandals to either curtail use of or end the program.


By Vern Edwards on Tuesday, February 04, 2003 - 09:06 am:

Anonymous of Feb 3 at 12:12:

It's not a matter of me conceding anything. The other Anonymous complained about personal services contracting. I simply pointed out that the pricing of the contract does not have anything to do with the problem that he was complaining about. As to your comments, it is obvious that ordering services from a GSA schedule contract based on labor categories that are not related to the work is a dubious practice, but that is not caused by the use of T&M pricing either.

formerfed:

I agree with John Ford on this. Agencies are badly and deliberately abusing the GSA schedule contracts for services and agency task order contracts. Steve Schooner was right to say that we have "a culture of lawlessness" in this regard. This deliberate misuse (and incompetent use) has brought these contracts and the contracting workforce into disrepute. It's got to stop, and if agency contracting officials don't stop it, then Congress will eventually step in and things will get really screwed up. I think that IDIQ service contracts are very useful tools and I would hate to see excessive restrictions placed on their legitimate use.


By Puzzled on Tuesday, February 04, 2003 - 10:34 am:

See the editorial by Joe Petrilllo from GCN:

Federal Contract Law: Contracting without competition is out of control:

http://www.gcn.com/22_2/manager/20954-1.html

I think he's on to something. I wouldn't be surprised if Congress decides to require the presolicitation synopsis of orders over $25K on a multiple award contract and to follow it up with a synopsis of the award (of the orders).


By Vern Edwards on Tuesday, February 04, 2003 - 11:22 am:

Let's keep in mind that all of this has come about because government contracting officials have not been very imaginative about finding ways to get on contract expeditiously using the procedures in FAR Part 15. Fundamentally, IDIQ service contracts are devices for bypassing full and open competition under FAR Part 15 in order to get on contract quickly. Agencies resort to them because source selection under FAR Part 15 is too resource intensive and time-consuming. It wouldn't be necessary to use task order contracts so extensively if contracting officials would learn how to design streamlined source selection processes under FAR Part 15.

Contracting officers have too often based the design of their source selection processes on the model developed by the DOD weapons acquisition offices in the 1960s and 1970s, a model which entails asking for extensive technical and management proposals; demanding cost or pricing data, getting DCAA audits, and performing cost analyses despite adequate price competition; using multi-person source selection evaluation panels; preparing voluminous documentation (often of poor quality), etc. Such processes are resource intensive and time-consuming for both government and industry. Technical personnel demanded "reform" and they got it -- overuse and abuse of task order contracts and the GSA schedules for services. Now we're seeing poorly-priced orders for services in amounts exceeding $100 million.

It would not be necessary for Congress to legislate or for the FAR Council to change the rules if government contracting officials would learn to design more effective and efficient competitive processes.


By formerfed on Tuesday, February 04, 2003 - 11:31 am:

I think we all agree there are problems. Here's some more information and what GAO found:

http://www.washingtontechnology.com/news/1_1/daily_news/19972-1.html

However I don't think Joe Petrillo has a valid solution either. I particularly like this quote: "The deeper problem is that both approaches are mired in obsolete ways of thinking." "Obsolete ways of thinking!" His approach advocates complete publicizing of all opportunities including notification of all contractors. Overwhelming the contracting office with a hundred responses to an RFQ for $50,000 worth of services isn't a sound approach. If there's any doubt on whether something involves "obsolete ways of thinking," look and see if that practice is followed by leading commercial sector entities in the way they conduct their own busibness. In other words, the reasonability test needs invoked.

What should be done is have FFS clearly make the rules known. Then violators are punished with removal of their CO warrants and a reduction of a grade level. That is based on not having signatory authority involves less complex work so the higher grade isn't warranted.

As Vern mentioned, IDIQ contracts are very useful tools. So the tool doesn't get taken away because some people choose to abuse the process. Rather punish the abusers.


By Eric Ottinger on Tuesday, February 04, 2003 - 01:23 pm:

All,

I am reminded that it wasn’t all that long ago that I was arguing in this forum that it seemed self-evident that if we were using GSA’s contracts, we should follow GSA’s rules. Others were equally convinced that we shouldn’t follow any rules other than what was written down in the FAR and DFARS.

http://www.radix.net/~ambrose/forum16.htm

Formerfed,

I think you are being a bit naïve. A few contracting officers will be punished for doing things which are egregiously stupid. The ones, who document the file carefully while they push these vehicles into grey areas to satisfy their agency’s pressing needs, will get promoted.

Eric


By Anon2U on Tuesday, February 04, 2003 - 08:02 pm:

I agree that we should not publicize simplified acquisitions (under $100K). Those should just follow GSA and FAR rules. However, I believe all orders over $100K should be posted for all to see. This includes the test program for commercial items.

My agency already has a good system set up for products. They are posted on FEDBIZOPPS for a few days with the notice that a reverse auction will be held by a firm we have on contract (we pay them $1 a year but they get 1% of the sale from the winning vendor). We can limit them to small business or to GSA schedule holders. Products are easily competed and the quotes lined up by price when the CO gets it back from the auction.

All services over 100K should be posted but may be limited to GSA Schedule holders. I have done some procurements this way already. There was a sucessful protest posted a while back because a vendor from an unknown schedule could do work that was sole sourced. This will not happen if you post the requirement, all GSA FSS holders can compete if they have the item/service on their schedule.


By formerfed on Wednesday, February 05, 2003 - 10:08 am:

Eric,

I don't think I'm naive - maybe a little too harsh though. Don't you think strict punishment of blatant offenders will be a deterrent to the slick ones that play games with file documentation? If the rules say seek competitive quotes, the mind wonders what creative ways a file gets documented to show how a certain source gets selected.

I get annoyed with people in our profession that don't follow the rules, either through stupidity or through gaming the process. GAO cites two studies that show agencies claim ignorance of the process. There's no excuse for that, but GOA wants OFPP to do something about that. For those that know and consciously don't follow the process or are slick in their documentation, they should be punished. Not competing when it should wastes money. Most every noncompetitive order that's priced on a labor hour basis costs too much. By not adhering to the rules, it's wasting money just like stealing.

Anon2U,

The down side of your approach is agencies are overwhelmed when a "vanilla type" requirement arises. RFQs for IT services can generate more than 100 responses. These usually require evaluation of factors other than price in order to make a selection. When this occurs, the administrative time and expense for evaluation defeats any potential cost savings from added competition.

The thing that bothers me about this entire subject is GSA Schedules/IDIQ contracts have the potential to benefit everyone in so many ways. By most standards, 1102's in the government are paid good money. They also are expected to think and act like business experts and deliver results for the taxpayer. So following the rules of a process that is beneficial and saves time and money is the smart thing to do - you get the needed products and services delivered promptly, what you buy is of high quality and satisfies its intended purpose, and you get a good deal. If someone does a purchase for some other purpose and wastes money, why should they get by without negative consequences


By Vern Edwards on Wednesday, February 05, 2003 - 10:40 am:

formerfed:

I think agencies should follow rules because they're rules, whether they're beneficial and save time and money or not. I think the CICA requirement for "full and open" competition is a dumb rule. It is not especially beneficial to the taxpayer and it certainly does not save time or money. However, it's a rule, and there it is.


By AL on Wednesday, February 05, 2003 - 11:54 am:

Vern--I'm curious. On what basis do you say that the CICA requirement for full & open competition is not beneficial to the taxpayer? Is that just a personal opinion, or based on something else? Not that there's anything wrong with having a personal opinion, and, in this field at least, I would tend to trust yours more that most.

I'm not trying to argue with you. I also tend to think that the value/benefits of competition are probably overrated. However, at least based on rhetoric, our political leaders seem to think competition is something of a cure-all.


By formerfed on Wednesday, February 05, 2003 - 01:09 pm:

AL.

Here's one perspective:

http://www.gcn.com/21_32/opinion/20359-1.html

I especially like this quote:

"Contracting officers seemed to assume that if receipt of three proposals was good, 300 proposals would be better."


By AL on Wednesday, February 05, 2003 - 02:21 pm:

Interesting perspective, but I don't think any contracting officers were really happy to get 300 proposals. They were (and are), however, supposed to follow the law and policy, which can be summarized as maximizing competition unless some exception applies. I think the substantial delays and transactions costs associated with competition and the desire to avoid those are a significant part of the reason we have issues such as that described in this thread. However, the delays and transaction costs are a different (though admittedly related) issue from the issue of whether competition holds down costs or is generally good for the taxpayers and/or nation.


By Anon2U on Wednesday, February 05, 2003 - 02:51 pm:

The government has to also balance a "fairness" doctrine that commercial business does not. Companies demand the right to compete for the public purse and politicians tend to listen to them because they are in their districts. Being fair to all may be more expensive than not being fair and just offering the opportunity to a few favored contractors.

That is why so many contractors are complaining about GSA Schedules. The agency selects 3 to 5 firms of their choice and the firm complaining is not in the selected group. They question how this can be fair and congress seems to agree. This is true when done properly as above and even more so when improper sole sources are thrown in.


By AL on Wednesday, February 05, 2003 - 03:31 pm:

You're right, of course, Anon2U. Our Federal procurement system is deliberately designed to do more than get the right, quality goods and services at good prices. It is also designed to promote fairness, help small businesses, HUBZone businesses, etc. All those things complicate the process and add to the transaction costs, and also probably increase the bottom line paid by the taxpayers. Arguably, the political (i.e., policy) decisions were made based on a conclusion that whatever was gained through those policies is worth the cost. But the complications sorely tempt people to find ways around them, rightly or not-so-rightly.


By Vern Edwards on Friday, February 07, 2003 - 02:38 pm:

If you don't like the use of T&M pricing under GSA FSS contracts, you'll love this decision of the General Services Administration Board of Contract Appeals:

http://www.gsbca.gsa.gov/appeals/w1558813.txt


By Anonymous on Saturday, March 08, 2003 - 11:04 pm:

I don't think anyone answered the original question: did GSA get a FAR deviation/waiver?


By anomymous 42 on Sunday, March 09, 2003 - 01:32 pm:

The posts by "Puzzled" are right on track. We have a lot of acquisition folks out there that totally ignore acquisition regulations. It's full steam ahead, forget the regulations. Man I can do what I want, no body is going to touch me. The oversight people, IG's and all are being ignored. I guess it's a product of the last administration. In one of the posts on this thread, the writer asserts that FASA doesn't prohibit the use of T&M for commercial items. Maybe he doesn't care much about the implementing regulations or the directions they provide.


By Anonymous on Sunday, March 09, 2003 - 06:20 pm:

It starts at the top - GSA's acquisition executive doesn't wory about being constrained by "rules".


By Anonymous on Sunday, March 09, 2003 - 08:20 pm:

We have had the debate about T&M contracts in this forum several times now and while it is clearly written in the FAR that a T&M is not a fixed price contract, many will say it is anyway. I was in a commercial item class a year ago and once the instructor pointed out that T&M was not an allowable commercial item contract type, the debate was on for two hours.

It is clear to me that T&M is not a fixed price contract, but if the management of my agency says that it is, who am I to disagree. They have much more experience than I have. I have discussed this with both my supervisor and Division Chief and they maintain they are fixed price. So, I will salute sharply and carry on.

We call them "labor hour with firm, fixed unit prices". They want to get those words "firm, fixed" in the title and we use the fixed price clauses.


By Puzzled Too on Monday, March 10, 2003 - 09:44 am:

The terms "price" and "rate" are not synonymous. T&M and LH contracts have fixed hourly rates, not prices. You calculate the ceiling price (not firm fixed price, mind you) by multiplying the proposed hourly rates by the estimated hours. You reimburse the contractor on a T&M or LH contract based on their actual cost experience.

You reimburse the contractor on a FFP contract based on the firm-fixed price regardless of the actual cost experience. This is all basic stuff.

A T&M or LH contract type is prohibited by FAR Part 12. So unless GSA obtained a FAR deviation or waiver, they're most certainly in violation of the FAR. And if GSA did get a FAR deviation/waiver, I'd like to know what their justification was to convince the FAR Council to grant it.


By Anonymous on Monday, March 17, 2003 - 12:00 pm:

Somebody has been reading this thread.

http://www.fcw.com/fcw/articles/2003/0317/pol-aronie-03-17-03.asp

Per Aronie, “The FAR also makes clear that services sold at hourly rates "without an established catalog or market price for a specific service performed" are excluded from the definition. Consequently, services sold at hourly rates with an established catalog or market price are included in the definition of a commercial item.”

I don’t think so. The catolog price is the price of the task, not the price of the labor hour.


By Vern Edwards on Monday, March 17, 2003 - 01:27 pm:

Puzzled wrote:

"Regardless of what FASA allows or prohibits, FAR 12.207 states:

"12.207 -- Contract Type.

Agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items. Indefinite-delivery contracts (see Subpart 16.5) may be used where the prices are established based on a firm-fixed-price or fixed-price with economic price adjustment. Use of any other contract type to acquire commercial items is prohibited.

"If the FAR Council incorrectly implemented FASA, we (including GSA) are still required to comply with the FAR as it is currently written. My question was: Did GSA obtain a FAR deviation or waiver?"

GSA doesn't have to "obtain" a deviation in order to use T&M contracts to buy commercial items. See FAR § 1.404, which says that agency heads may authorize class deviations. The GSAM delegates that authority to HCAs. The FAR prohibition on the use of T&M contracts to buy commercial items is not based on statute, so GSA can deviate from that prohibition as GSA sees fit.


By Eric Ottinger on Monday, March 17, 2003 - 10:16 pm:

As one of our anonymous old timers wrote recently, “It is obvious from looking at working level writing, some contract documents and even examples in this forum that an old skill needs to be redeveloped. Those who cannot master it need to be sent back to learn or for assignment far from contracting.

What is this old skill? An ability to communicate clearly in writing and to accurately comprehend what is clearly written.”

To my mind this issue is a question of giving plain language a plain reading.

Take a look at Title 41, Sec. 403. Definitions

"(12) The term ''commercial item'' means any of the following:

(F) Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions."

I read this as a straightforward statement that the established price must be the price for a task, not the price for a labor hour.

Evidently, some of us give it a different reading, something like the following:

“Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices [for the labor hour] [,] for [a contract] for specific tasks [to be] performed [,] and under standard commercial terms and conditions.”

A more subtle, but ultimately more potent argument, is the well understood legal principle that, “Statutes should not be construed so as to make mere surplusage of any of the provisions included therein.”

If Congress had meant to say, “Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices, under standard commercial terms and conditions” Congress would have said exactly that.

Unless you honestly want to argue that Congress wished to prohibit absurdities like unspecific tasks or to merely prohibit contracting for tasks never performed, you must conclude that it is the price which must be for the “task,” not for the labor hour. Otherwise, the phrase “for specific tasks performed” is mere surplusage.

Eric


By Hugh M on Tuesday, March 18, 2003 - 03:25 pm:

I work for a Government contractor. The following text is copied from a solicitation we responded to last summer to receive a new GSA schedule: "Offerors must indicate what geographic areas they propose to service. Ordering activities will solicit requests for quotes (RFQ) from vendors on the schedule. Vendors will respond based on terms and conditions awarded by GSA. The Government may evaluate offers and award a contract without discussions with offerors. Therefore, the offeror’s initial offer should contain the offeror’s best terms from a price and technical standpoint.

(1) The services and prices proposed in this section will be in effect for the full term of the contract, except as modified by one or more sections of this RFP, i.e., the following clauses: Price Reductions, Economic Price Adjustment, and Modifications.

(2) Commercial Pricing: Commercial pricing shall be in accordance with Commercial Sales Practices Format (Section D), and 552.212-73, Evaluation – Commercial items (Multiple Award Schedules) (AUG 1997). Pricing may be per task, unit of issue, i.e, price per page, per labor category or combinations thereof. Commercial Pricing will be requested and evaluated, however, all service pricing will be evaluated to ensure they at least meet the minimum wage determinations as determined by the Department of Labor.

(3) Offerors shall specify the Labor categories proposed and the rates for each. The categories and rates are to be based on those used to price orders commercially. The total price for services will be established at the time the order is placed and will be based on the prices awarded. The number of hours will be negotiated by the ordering agency, and shown on the resultant order. Contract orders will be firm fixed price."

I think this is as clear as they can make it that orders are to be FFP.


By Vern Edwards on Tuesday, March 18, 2003 - 04:07 pm:

Eric and Hugh:

"Price" and "firm-fixed price" can mean either "lump sum price" or "unit price." See, e.g., FAR § 36.207.

I think that "well-drilling" is a specific task, and I don't see why "$150 per foot" cannot be a catalog or market price for that task. Do you want the task to be more specific? Okay, then specify "well-drilling at Barton Lake Ranch, Diamond, Oregon, 50 feet north of the guest house." Want it more specific than that? Okay, then specify latitude and longitude.

I think that "text editing" is a specific task, and I don't see why "$50 per page" cannot be a catalog or market price for that task. Want it more specific? Okay, then specify the working title of the text to be edited.

I think that "expert witness service" is a specific task, and that $250 per hour" can be a catalog or market price. Want it more specific than that? Okay, then "expert witness service, U.S. District Court, District of Columbia, Docket No. 2003-XXXXXX."

Now, Eric, back to statutory interpretation, and in a variation on your own theme -- if Congress had meant 41 U.S.C. § 403(12) to say:

"Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market [firm-fixed lump sum] prices for specific tasks performed and under standard commercial terms and conditions,"

they would have said exactly that.


By Vern Edwards on Wednesday, March 19, 2003 - 10:36 am:

Eric:

An additional thought: 41 U.S.C. § 403(12) merely defines what is a commercial item; it does not establish any rule about how a government contract for commercial items may or must be priced. That statutory definition simply says that a service is a commercial item only if it is priced by task and if the price per task appears in a catalog or is established in the marketplace. The definition does not say that tasks must be priced on a lump sum basis.

The word "task" is ambiguous. It can refer to either a project, i.e., a job with a definite beginning and ending, or an on-going operation, e.g.: "Your task is to inspect items as they come off the production line."

The language in the definition at FAR § 2.101, paragraph (6): "This does not include services that are sold based on hourly rates without an established catalog or market price for a specific service performed," was added by the FAR Council; it does not appear in the statutory definition, although it is mentioned in the Joint Explanatory Statement issued by the House-Senate conference committee. This language is ambiguous. Does it mean: (1) that no service priced on an hourly rate basis is a commercial item, ever, or does it mean (2) a service priced on an hourly rate basis is not a commercial item unless the hourly rates are in a catalog or can be verified in the marketplace and are for a specific service? I vote for the latter. Perhaps if the FAR Council had meant: "This does not include any service that is sold based on hourly rates," they would have said exactly that; however, they added the qualifying phrase: "without an established catalog or market price for a specific service performed," which must mean something and which I take to mean that the hourly rates must be catalog or market prices. A price can be a rate, i.e., unit price. I don't think that anyone can prove me wrong through any textual exegesis or on the basis of the language in the Joint Explanatory Statement.

The statutory rule on the pricing of government contracts for commercial items is in FASA § 8002(d) and reads as follows:

"(d) Use of Firm, Fixed Price Contracts. The Federal Acquisition Regulation shall include, for acquisitions of commercial items --

(1) a requirement that firm, fixed price contracts or fixed price with economic price adjustment contracts be used to the maximum extent practicable; and

(2) a prohibition on the use of cost type contracts."

That's it. Nothing in that language or in FAR § 12.207 precludes the use of firm-fixed-unit-price contracts or the use of hours as units of delivery. Neither the statute nor the regulation requires lump sum pricing. Under FASA § 8002(d)(1) and FAR § 12.207, an agency can award a firm-fixed-unit-price contract with hours as units and with the total contract amount based on an estimated quantity of hours. The contract can provide for project completion as a condition of payment and for the contractor to be paid on the basis of the actual hours delivered in completing the task. The contract can include a clause which says that the contract will be equitably adjusted if actual hours are more or less than the estimated hours by some stipulated percentage. Alternatively, an agency can award a contract for the performance of an on-going service operation for some period of time at some unit-priced hourly rate, with payment conditioned upon satisfactory performance. I believe that as long as the contract does not require merely "best efforts," then it is neither "cost type" nor T&M or L-H.

I want to say that I do not make these arguments in order to challenge you personally. I am reading the regulation as liberally as I reasonably can in order to provide contracting officers with the the broadest possible freedom of action, which I think is consistent with the FAR guiding principles. I also think that is professionally supportable. If Congress or the FAR Council have some specific constraint in mind, then they must make it crystal clear. If they don't, then I am going to do what my reasonable interpretation permits.

Finally, I do not believe that T&M and L-H contracts are "cost type" contracts. I believe that they are T&M and L-H contracts -- a separate species -- and thus their use is not precluded by FASA § 8002(d), although such use is clearly precluded by FAR § 12.207. If I recall correctly, you disagree with me about that and believe that T&M and L-H contracts are "cost type." If I am correct, we don't need to re-argue it now, since neither of us is likely to change the other's mind.


By Eric Ottinger on Wednesday, March 19, 2003 - 09:03 pm:

Vern,

Since I view this as a plain language issue, I am not going to get into a long argument. Your position still has the effect of making the phrase “for specific tasks performed” surplusage. For the most part, you haven’t answered that concern, you are off on other tangents. Your last post still assumes that Congress is blathering in some pointless or incomprehensible fashion. Saying that only lump-sum priced commercial items are considered to meet the definition, but services that meet that definition may be priced any old way in government contracts, is a proposition that doesn’t pass the giggle test.

Eleanor Spector took the position that T&M is a cost type contract.

The courts view T&M as a contract type with aspects of both Fixed Price and Cost Type. For the purpose of determining the applicability of 52.222-43, T&M appears to be fixed-price. I have no problem with that.

Eric


By Vern Edwards on Wednesday, March 19, 2003 - 09:22 pm:

Eric:

I haven't ignored the Congressional language about "specific tasks." In fact, I addressed it quite directly in both of my last posts. Here is what I said on March 18:

"I think that 'well-drilling' is a specific task... Do you want the task to be more specific? Okay, then specify "well-drilling at Barton Lake Ranch, Diamond, Oregon, 50 feet north of the guest house." Want it more specific than that? Okay, then specify latitude and longitude.

"I think that 'text editing' is a specific task... Want it more specific? Okay, then specify the working title of the text to be edited.

"I think that 'expert witness service' is a specific task... Want it more specific than that? Okay, then 'expert witness service, U.S. District Court, District of Columbia, Docket No. 2003-XXXXXX.'"

Here is what I said this morning:

"The word 'task' is ambiguous. It can refer to either a project, i.e., a job with a definite beginning and ending, or an on-going operation, e.g.: 'Your task is to inspect items as they come off the production line.'"

My Webster's Third International Dictionary, unabridged, says that specific means "1 : constituting or falling into the category specified... 2 : having a real and fixed relationship to and usu. constituting a characteristic of... 3 : restricted by nature to a particular individual, situation, relation or effect... 4 : characterized by precise formulation or accurate restriction... ."

Supposing Congress to have meant specific in either or senses 3 or 4, I think that "well drilling," or certainly, "well drilling at Barton Lake Ranch... " or any of my other March 18 examples fits the bill.

Vern


By Anonymous on Thursday, March 20, 2003 - 12:34 am:

Vern, in the GSBCA case you cited in your Feb 7th post, the Board stated that, "In essence, the time and materials order falls within the broad genre of cost-reimbursement type contracts."

Is the GSBCA wrong in stating this?


By Vern Edwards on Thursday, March 20, 2003 - 01:02 am:

Anonymous:

Yes, I think the GSBCA was wrong. Under a T&M contract, the contractor's incurred costs have no bearing on its compensation, except for materials, which are typically a minor part of the whole.

T&M and L-H contracts are in a class all their own. They combine a feature of fixed pricing (the firm-fixed, profit-bearing labor rates) with a feature of cost reimbursement (the obligation to deliver only "best efforts"). It is this combination that makes T&M and L-H contracts uniquely disadvantageous, and riskier for the government than cost-reimbursement contracts.


By Eric Ottinger on Thursday, March 20, 2003 - 08:45 pm:

Vern,

I know that you understand the distinction between pricing the output (e.g. the task) and pricing the inputs (e.g. labor hours). I even know that you have included this distinction in your course materials.

If you want to say that one hour of expert testimony under hostile cross-examination is an output or a task (like the one hour rental of a backhoe) , I would probably be willing to agree with you. (For an expert consultant the rate per hour reflects many hours of preparation which are not billed.) However, this is not the same as the services of salaried contractor employees under T&M contracts. These hours are inputs, not outputs.

Labor hours are a cost measure just like dollars are a cost measure. Program managers often track their costs by tracking hours rather than tracking the dollars.

Eric


By Vern Edwards on Friday, March 21, 2003 - 10:31 am:

Eric:

Do you mean "output" or "outcome"?

Under the Government Performance and Results Act, § 2801, Defintions, the term output measure "refers to the tabulation, calculation, or recording of activity or effort and can be expressed in a qualitative or quantitative manner." Thus, output can be a number of hours. Outcome measure "refers to the assessment of the results of a program activity compared to its intended purpose."

I presume that by "output" you meant outcome in GPRA terms, i.e., results, and that you are trying to distinguish hours as outputs from the results that they produce. If so, FASA gives you no grounds for equating task with outcome or result. If Congress had intended to say:

"Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific [results] and under standard commercial terms and conditions,"

they would have said exactly that.

(Actually, I don't think Congress is that thoughtful, but I'm getting a kick out of using this locution of yours.)

Morevoer, my Webster's Third International Dictionary, unabridged, does not indicate that task is synonymous with result, or that it connotes result.


By Anon on Friday, March 21, 2003 - 10:49 am:

Such as a "fruitless task"?


By Vern Edwards on Friday, March 21, 2003 - 11:02 am:

Anon:

Defending Baghdad from the 3d Infantry and the 1st Marines is a task, notwithstanding the fact that it is hopeless, and certainly will be fruitless.


By Anon on Friday, March 21, 2003 - 11:17 am:

Hear, hear!


By Eric Ottinger on Friday, March 21, 2003 - 12:13 pm:

Vern,

Will you please go back to “The Nash & Cibinic Report” Vol. 9, No. 6.

“Input pricing based on hours seems to be the most commonly used approach.”

“The problem with input pricing is that the hourly labor rates do not necessarily reflect the value of the output that an hour of labor may produce.”

“The other approach to task order pricing entails the identification, specification, and firm pricing of standard work units or standard tasks.”

I was working from memory Vern, but my memory wasn’t that bad.

Eric


By Vern Edwards on Friday, March 21, 2003 - 01:57 pm:

Eric:

Yes, I wrote that, and it's true. But I was not writing then about the meaning of 41 U.S.C. § 403(12)(F) and FAR § 12.207. I was writing about the proposed rules for multiple-award task order contracts. I don't know what that 1995 analysis has to do with the interpretation of the FASA definition of commercial item and FAR Part 12. Why do you quote me out of context? What's up with that?

And besides, I wrote that in 1995. Even if I had been writing about commercial items, which I wasn't, I can change my mind, and all that the quote would prove is that I thought differently seven years ago. It would not prove that I'm wrong now.

Here is how you posited the issue on March 17:

"To my mind this issue is a question of giving plain language a plain reading."

You reiterated your "plain language" stance in your post of March 19. Here is the language that you were talking about, from 41 U.S.C. § 403(12)(F):

"Services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions."

Now where in the "plain language" of that text do you see anything about inputs, outputs, outcomes, or results? What "plain reading" technique converts "specific tasks" to specific results (or specific outputs or specific outcomes).

You have tried to make this issue a matter of "plain language" statutory interpretation and in doing so have hoisted yourself on your own petard (your words: "Congress would have said exactly that").

Neither the "plain language" of FASA nor of the FAR preclude pricing commercial items contracts on the basis of fixed unit-prices with hours as units. Neither says that "prices" means only lump-sum prices. In fact, FAR explicitly recognizes fixed unit-pricing as a subtype of firm-fixed-pricing. Your attempt to read output (or outcome) into the statutory meaning of "task" in order to require lump-sum pricing is inconsistent with your notion of giving "plain language" a "plain reading."

Now, if you want to say that you think that Congress intended "task" to mean result and to require lump-sum pricing, then I won't argue with you, because I frankly don't know what Congress intended. I can say only that if that was their intent they didn't say so in "plain language." (You don't know their intent, either, but you are entitled to think what you like.)

By the way -- I am not arguing that it is necessarily a good idea to price commercial services on the basis of fixed hourly rates for specific tasks (although it might be, depending on the circumstances); I am merely arguing that it is permitted under FASA and FAR Part 12. As long as such unit pricing is not combined with "best efforts" language, and the contract makes satisfactory performance a condition of payment, such pricing is firm-fixed pricing.


By Vern Edwards on Saturday, March 22, 2003 - 10:06 am:

Eric:

Another thought: Fixed unit-pricing is not incompatible with contracting for a specific outcome. Construction is perhaps the classic example of contracting for a specific outcome, yet unit-pricing in construction contracts is not at all uncommon in either commercial or government work.


By Anonymous on Saturday, March 22, 2003 - 03:04 pm:

Vern,

With the fixed-unit pricing that you say is permissible under FASA and FAR Part 12, would the contract type still result in a FFP or FFP w/EPA?


By Vern Edwards on Saturday, March 22, 2003 - 04:59 pm:

Anonymous:

Yes. A contract with fixed unit-prices and a total amount based on an estimated quantity of units, and which requires the contractor to perform satisfactorily as a condition of payment, is a firm-fixed-price contract. See, e.g., FAR § 36.207.

I do not know of any rule in FAR which says that a firm-fixed-price must be a lump-sum amount. I do not know of any definition or interpretation from any source which says that a "task" must be a project with a definite beginning and end. A task can be the on-going performance of some operation until the end of time. Thus, I do not think that FAR § 12.207 prohibits an agency from awarding a contract for the performance of a "specific task," such as: "Provide expert witness services in the matter of BCA Docket No. XXXXX," with payment to be made at a unit price of $X dollars per hour.

The difference between such a contract and a time-and-materials or labor-hour contract is that T&M and L-H contracts do not condition payment upon satisfactory performance. Instead of the T&M and L-H payment clause, FAR § 52.232-7, a fixed unit-price contract includes the payment clause at FAR § 52.232-1.


By Anonymous on Saturday, March 22, 2003 - 06:45 pm:

What you described, Vern, is what commercial companies call a T&M/LH contract. They do condition payment upon satisfactory performance. There are defined deliverables with acceptance criteria, and many times they do know the extent or duration of the performance. If this contract type is a FFP contract, then I don't see why GSA needs to include the T&M/LH payment clause and inspection clause in their GSA Schedules. Why would you need to include FAR 52.232-1; wouldn't FAR 52.212-4 paragraphs (g) and (i) be sufficient?


By Vern Edwards on Saturday, March 22, 2003 - 09:14 pm:

Anonymous:

Commercial companies can call it what they want; under the FAR, contract type is determined by the clauses in the contract. I agree that the clause at FAR § 52.212-4 is appropriate for a firm-fixed unit-price contract for commercial items. A contract which includes that clause and which provides for payment on the basis of firm-fixed unit-prices is a firm-fixed-price contract.

Under the FAR, a contract is not a time-and-materials or labor-hour contract unless it includes the clause at FAR § 52.232-7, and the other clauses prescribed for T&M and L-H contracts.


By Eric Ottinger on Sunday, March 23, 2003 - 05:18 pm:

Vern,

I guess I’m slow Vern. You get me educated, then you change your mind. In 1995 you equated “standard tasks” with “units of output.” Are you really sure that you have changed your mind?

Flour, baking soda, eggs are inputs. Pancakes are outputs. (I have a six year old who is learning about pancakes.)

I would note that neither “input” nor “output” was used in FASA or the FAR, but that doesn’t seem to have given you any discomfort in 1995.

I meant to demonstrate that the distinction between inputs and outputs is simple, clear, and intuitive. Hours are inputs. Tasks are outputs.

It is my opinion that Congress wants a price for a task. You are welcome to find some other equally credible interpretation for these words, but you aren’t allowed to assume that Congress was just babbling incoherently. In short, you really haven’t addressed the surplusage issue. You are off on tangents trying to equate units on construction contracts with labor hours on SETA contracts.

Eric


By Vern Edwards on Sunday, March 23, 2003 - 07:29 pm:

Eric:

I, too, think Congress wants a price for a task. And $20 per hour for a cook to make pancakes for a church breakfast on March 23 is a price for a task.

Vern


By Anonymous on Sunday, March 23, 2003 - 08:56 pm:

Note that FAR 36.207 is applicable to construction contracts.

And, a FFP contract that is priced on a unit-price basis has a specified quantity of work units. I interpret that a specified quantity of work units is a fixed amount, not an unknown or estimated amount. So if the unit price is fixed and the quantity of work units is fixed, yes, you have a FFP contract. But a contract is not FFP if the quantity of work units is not fixed.

Vern, you stated the following:
"Thus, I do not think that FAR § 12.207 prohibits an agency from awarding a contract for the performance of a "specific task," such as: "Provide expert witness services in the matter of BCA Docket No. XXXXX," with payment to be made at a unit price of $X dollars per hour."

So, if your example does not specify a quantity of work units, e.g., the number of hours to be performed, that is not a FFP contract. It may be, as you call it, a firm-fixed unit-price contract. However, Vern, I think this firm-fixed unit-price contract you're talking about is a contract type not described in the FAR.

FAR 16.102(b) states, "Contract types not described in this regulation shall not be used, except as a deviation under Subpart 1.4."

Therefore, unless a deviation has been granted, a firm-fixed unit-price contract is not permissible.


By Vern Edwards on Monday, March 24, 2003 - 01:31 am:

Anonymous:

You have ignored my comment of March 22:

"A contract with fixed unit-prices and a total amount based on an estimated quantity of units, and which requires the contractor to perform satisfactorily as a condition of payment, is a firm-fixed-price contract."

Underlining added. The quantity need only be estimated. You have misread FAR § 36.207(a)(2) if you take it to mean that a unit-priced contract must stipulate a fixed quantity of units. To do so would make FAR §§ 11.702 and 36.207(b) meaningless. The fact that those two FAR sections refer only to construction contracts does not mean that firm-fixed unit-pricing cannot be used in service contracts. See FAR §§ 1.102(d) and 1.102-4(e). (Are you one of those persons who thinks that you can't do something unless FAR explicitly authorizes you to do so?) Where in FAR Subpart 16.2 is it said that a firm-fixed-price contract must specify a fixed and unvarying quantity of units?

Your reference to FAR § 16.102(b) and the prohibition against contract types not mentioned in FAR presumes that "firm-fixed-price" means firm-fixed-lump-sum-price and does not include firm-fixed-unit-price, which is precisely the argument that I reject and for which you have made no case.

While you and Eric may be personally unfamiliar with firm-fixed unit-price contracts, they have been used in federal contracting for many, many years. A search of the Westlaw data base for the boards of contract appeals and the federal courts turns up 29 cases about "firm-fixed unit-price" contracts, decided between 1963 and 2002. A search for "fixed unit-price" turns up 207 cases. Such contracts are not new.

I wonder if you would react the same way to units such as days, weeks or months? Many service contracts are severably priced on the basis of such units. Hours, days weeks and months are just different units of time. And why can't they be units of time performing specific tasks at catalog or market prices?


By Vern Edwards on Monday, March 24, 2003 - 09:48 am:

Eric:

You have mentioned my 1995 article a couple of times now, and it has occurred to me that some readers may not be familiar with it or have access to it. So I have decided to quote pertinent parts to show why that article does not support your case that FASA and FAR prohibit the use of firm-fixed unit-price contracts with hours as units to buy commercial services.

The article is entitled, "The New Rules for Multiple Award Task Order Contracting," and it appeared in the June 1995 edition of The Nash and Cibinic Report, which is published by West. The discussion to which you have referred appeared under the heading, "The Pricing Problem," which reads, in its entirety, as follows:

--------------------
"The Pricing Problem

"FAR Part 6 requires that agencies provide for full and open competition when contracting for supplies and services. FAR Parts 13, 14, and 15 require that agencies evaluate proposed price or cost to the Government when selecting contractors. But how can an agency and its prospective contractors set prices or estimate the costs of specific work requirements that are unknown to them at the time of contract formation? This is a practical problem that agencies and their prospective contractors must solve when entering into task order contracts.

"Agencies and their prospective contractors usually solve this problem by resorting to one of two approaches. Under the first approach, the parties agree to prices for units of service input, i.e., labor hours. Under the second approach, the parties agree to prices for units of service output, i.e., work units or standard tasks. The unit prices are stipulated in the contract schedule and are used to price individual task orders.

"Input pricing based on labor hours seems to be the most commonly used approach. The parties agree to (a) a list and description of labor categories, (b) either a firm or estimated quantity of hours (i.e., a level of effort)-- overall or per labor category--that will be purchased during the contract period or to minimum and maximum quantities, and (c) a firm or ceiling hourly labor rate or set of rates for each labor category. (Firm hourly rates usually include direct and indirect costs and profit. Ceiling hourly rates used for cost-reimbursement contracts typically include only direct labor costs, with reimbursement of indirect costs based on separate interim billing rates; fee is usually separately stipulated.) It is not uncommon for the parties to include cost-reimbursement contract line items for materials and travel. The parties use the hourly rates to price individual task orders. They can price individual task orders in a number of ways. They may stipulate that a task order is firm- fixed-price, cost-reimbursement (with ceilings on hourly labor rates and indirect cost rates), time-and-materials or labor-hour (with a ceiling price), or some combination of these arrangements.

"The problem with input pricing is that the hourly labor rates do not necessarily reflect the value of the output that an hour of labor may produce. For example, suppose that a proposed contract would obligate a contractor to provide a maximum of 1,000 hours of labor by an electrical engineer with a master's degree and 10 years of experience in the design and development of weather satellites. Suppose further that one offeror proposes a fixed hourly rate of $100 and another offeror proposes a rate of $110, that the rates include direct and indirect costs and profit, and that the rates are for men and women with identical educations and backgrounds. Which proposal is the best bargain for the agency?

"If the agency considers an hour of electrical engineer labor to be a unit of output--i.e., the agency merely wants to buy an hour of labor without any specific work objective--then $100 per hour is a better bargain than $110. But an hour of labor usually is only an input directed at the attainment of some objective, and, unless the agency can reliably predict each offeror's productivity at the time of price negotiations or the contract specifies a standard of productivity, the agency cannot know that $100 per hour is the better bargain because it does not know what output it can expect to receive. If the offeror proposing $110 per hour maintains a better working environment and employs inherently more productive engineers, then the $110 rate could be the better bargain.

"The other approach to task order contract pricing entails the identification, specification, and firm pricing of standard work units or standard tasks. Such units are units of output. For example, the painting of one square foot of a specified surface with a specified paint in a specified manner is a standard unit of output. A unit price of $1 per square foot (which includes direct and indirect costs and profit) is a better bargain than $1.50 per square foot. Similarly, replacing a specified circuit board in a specified electronic device is a standard unit of output, and a unit price of $50 is a better bargain than a unit price of $55.

"Unfortunately, it appears that agencies cannot price most task order contracts on the basis of standard work units or standard tasks. Most agencies usually want to contract for the capacity to perform a broadly defined function or set of activities, and specific task requirements and conditions are not known in advance in sufficient detail to permit the description of a standard work unit or standard task specifications. Thus, most task order contracts are input priced rather than output priced. And, when a Government agency awards such a contract it cannot be sure that the offeror selected will be as productive as another offeror might have been. Therefore, although the agency can make a source selection decision that satisfies the requirements of the FAR, it cannot be sure that the offeror it selects will, in fact, turn out to provide the best value."

"Unfortunately, it appears that agencies cannot price most task order contracts on the basis of standard work units or standard tasks. Most agencies usually want to contract for the capacity to perform a broadly defined function or set of activities, and specific task requirements and conditions are not known in advance in sufficient detail to permit the description of a standard work unit or standard task specifications. Thus, most task order contracts are input priced rather than output priced. And, when a Government agency awards such a contract it cannot be sure that the offeror selected will be as productive as another offeror might have been. Therefore, although the agency can make a source selection decision that satisfies the requirements of the FAR, it cannot be sure that the offeror it selects will, in fact, turn out to provide the best value."
--------------------

Have I left anything out that you consider pertinent?

A couple of things about my piece:

First, it's true. Input pricing, as I called it, does make it hard for agencies to compare competitive proposals and determine best value. I have not changed my mind about that. However, the Comptroller General has taken the position that this problem can be solved by pricing sample tasks and in other ways. Professors Nash and Cibinic don't like the Comp. Gen.'s solution and have proposed other ways. See "Evaluating Cost to the Government When Quantities Are Unknown: A Puzzlement," in The Nash & Cibinic Report, February 2000. I have, in turn, taken issue with their approach. See: Postscript: Evaluating Cost to the Government When Quantities are Unknown," in the April 2000 edition of that publication, in which I proposed an entirely different solution to the problem.

Second, I was talking about contracts in which the parties negotiate hourly rates for types of labor without reference to specific tasks. I was not talking about firm-fixed unit-price contracts, which specify the work in terms of the completion of specific projects or the performance of specific operations.

Third, nowhere in the piece do I say that such pricing is in any way prohibited by statute or the FAR, which is the issue that you, Anonymous and I have been debating since March 21, spurred by your "plain reading" of "plain language" analysis. Also, nowhere in the article did I mention "commercial items" or the pricing rules pertaining thereto.

Thus, it should be clear, that your references to my article are out of context and do not support your analysis of 41 U.S.C. § 403(12) or FAR §§ 2.101 and 12.207.

Vern


By Anonymous on Monday, March 24, 2003 - 01:17 pm:

Vern, yes, I missed that part of your message. So you are stating that the quantities cannot be left unknown, but must be estimated?

I don't have access to Westlaw, so please cite a case that discusses the nature of a firm-fixed unit price contract.

Also I would guess that the estimated quantity of units would need to be fairly firm, if not fixed, in order to be fair to the contractor. If the Government under-estimated incorrectly and significantly, I'm sure a contractor would be very unhappy on the basis that he would have negotiated a higher fixed unit price if the estimate had been more accurate. So as a contractor, I would want to have a clause that addresses the variation on the quantity (plus or minus the quantity estimated).

Anonymous of March 23, 2003 - 08:56 pm


By Vern Edwards on Monday, March 24, 2003 - 03:59 pm:

Anonymous:

Yes, quantities may be estimated, but they cannot be left entirely unknown. However, quantities may be indefinite and a commercial items contract for services can be firm-fixed unit-price with indefinite delivery terms. See FAR § 12.207.

I don't know of any of cases that provide a tutorial on the nature of firm-fixed unit-price contracts. However, several of them describe them in more or less detail.

The most recent decision is Schleicher Community Corrections Center, Inc., DOTCAB No. 3046, 02-2 BCA ¶ 32,004 (July 31, 2002). It describes a firm-fixed unit-price requirements contract (see Findings of Fact, paragraph 2) for "community residential services" for federal offenders awarded by the Bureau of Prisons.

See, too, The Answer Temps, Inc., a protest decision of the DC Contract Appeals Board, DCCAB No. P-564, 567 (Jan. 28, 1999), which describes a firm-fixed unit-price contract for bus drivers.

Spectrum Emergency Care, Inc., a decision of the Armed Services Board of Contract appeals, ASBCA No. 43979, 94-1 BCA ¶ 26,806 (March 17, 1994), describes a firm-fixed unit-price contract for the operation of an emergency room and ambulatory care clinic at Bremerton Naval Hospital.


By joel hoffman on Monday, March 24, 2003 - 05:22 pm:

Anonymous, the Corps of Engineers has used FFP unit-priced contracts for years, utilizing estimated quantities. The key is that the SCOPE OF WORK and unit-prices are defined and fixed. Estimated quantities are used when the exact quantity can't be precisely determined.

An example would be "A Contract for Dredging The Mississippi River Navigation Channel between mile marker 300 and 302" with an estimated quantity of 400,000 cubic yards, priced at $XX/ CYD. Thus, the scope is fixed, but the actual quantities may vary.

The technical requirements specify measurement and payment provisions and state that the Contractor will be paid for the actual quantity of material dredged at the contract unit price.

There is often a cost limitation clause of some sort, requiring the Contractor to notify the Government before exceeding the estimated quantity, so that the Government may provide additional funds.

If no additional funds are provided, the Contractor is not obligated to continue performance and the Government is not liable for additional payment. Thus, the clause is a self operating type of Termination for Convenience, in the event additional funds can't be secured for overruns. happy sails! joel hoffman

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