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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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