Source: http://www.wifcon.com/discussion/index.php?/profile/35124-vipinowl/content/&type=forums_topic_post&change_section=1
Timestamp: 2020-01-22 21:14:14
Document Index: 111248329

Matched Legal Cases: ['art 15', 'art 15', 'art 15', 'art 15', 'art 44', 'art 44', 'art 15']

Posts posted by VipinOwl
I have a question regarding a seeming FAR discrepancy that I've been unable to resolve. Under a cost-reimbursement contract which contains a limitation-of-funds clause, can the CO affect a change through a contract modification which he/she knows will result in an increase in funds, without increasing the contract ceiling at the time of the modification?
The exact scenario is thus: Cost-reimbursement, completion type, non-severable contract. The CO will need to make a SOW revision, which the contractor has indicated may result in additional funds. However, currently the contract has not been billed against and there is in essence 100% of the funds remaining under the contract. The CO indicates that the issue of increasing the contract ceiling can be addressed when the limitation of cost ceiling is being reached (75%) and additional funds may be added at that time, to allow for any cost savings between now and then.
FAR 43.105 suggests given the inclusion of the limitation of cost clause, a CO may execute a modification that will cause an increase in funds without immediately increasing the ceiling or requiring funds availability certification:
a) The contracting officer shall not execute a contract modification that causes or will cause an increase in funds without having first obtained a certification of fund availability, except for modifications to contracts that --
Furthermore FAR 32.704(b) states that "Under a cost-reimbursement contract, the contracting officer may issue a change order, a direction to replace or repair defective items or work, or a termination notice without immediately increasing the funds available." Which again suggests that the presence of the limitation of cost clause gives the government the ability to modify the contract without increasing funds at the time of the modification. However, the next sentence in that FAR section goes on to state, "Since a contractor is not obligated to incur costs in excess of the estimated cost in the contract, the contracting officer shall ensure availability of funds for directed actions."
Again, the changes clause 52.243-2, paragraph e., states, "e) Notwithstanding the terms and conditions of paragraphs (a) and (b) above, the estimated cost of this contract and, if this contract is incrementally funded, the funds allotted for the performance of this contract, shall not be increased or considered to be increased except by specific written modification of the contract indicating the new contract estimated cost and, if this contract is incrementally funded, the new amount allotted to the contract. Until this modification is made, the Contractor shall not be obligated to continue performance or incur costs beyond the point established in the Limitation of Cost or Limitation of Funds clause of this contract." This seems to provide support for the ability to not address an increase in funds until a later date. However, paragraph b., under the same clause states, "If any such change causes an increase or decrease in the estimated cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, or otherwise affects any other terms and conditions of this contract, the Contracting Officer shall make an equitable adjustment...".
So does the fact that limitation of cost clause gives the contractor the right to halt work when the limitation of cost limit is reached and the Government the right to not fund the contract above its existing ceiling, allow the CO to increase contract ceilings at a later date than the mod itself? Can the equitable adjustment be negotiated once the contractor approaches and gives the government notice per the limitation of cost clause?
No, consent does not require the CO's independent determination of a fair and reasonable subcontract price.﻿ FAR 44.203(a):
Thank you kindly for your help Don. Just so I'm clear, does the CO ever need to independently analyze a subcontractor's proposal (cost/cost realism/price analysis)? FAR part 15.404-3 states, "The contracting officer is responsible for the determination of a fair and reasonable price for the prime contract, including subcontracting costs." Should this be read as the CO shall determine if only the prime contract's price (to include subcontract costs) is fair and reasonable or that the CO shall determine that both the prime contract's and subcontract's prices are fair and reasonable? FAR 15.404-3(b)1 goes on to say that the "prime or subcontractor shall conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices", seeming to put the burden of the subcontract price reasonableness determination on prime contractors.
If that is the case, pre-award cost realism and or cost analysis of prime contract offerors need not include a CO's cost/price analysis of contemplated subcontract awards, is that correct? Instead a CO may rely on the prime contractor's certification that it has performed cost/price analysis of subcontracts or has negotiated subcontract prices per FAR 15.404-3.
Have you read the clause at FAR 52.244-2, Subcontracts?
Is consent to subcontract (under the clause at FAR 52.244-2) required for the subcontract you are asking about?
Yes, the subcontract is subject to consent requirements.
44.203 consent does not support a contractor relying on it as the government seal of approval or agreement to any other matter, such as allowable costs, approval of special test equipment, whether the transaction was now considered audited, etc. It is merely permission to enter into a contract.
Yes, when consent is required, the contractor is required to furnish information about the transaction per FAR 52.244-2.
Not sure what you mean by your last sentence, VipinOwl. Is it about consent?﻿
Yes, its about consent. Does the CO's consent involve a CO's independent determination of a fair and reasonable price for the subcontract or can he/she rely on the prime's certification?
14 hours ago, Patrick Mathern said:
The contracting officer wouldn’t be required to do a cost analysis unless the competition is somehow determined inadequate.
I was wondering if a cost realism analysis, in line with FAR part 15 was required of a CPFF subcontract, even if there is adequate competition and price analysis indicates that prices are fair and reasonable.
@VipinOwl,
Are you pricing a contract modification?
Don, this is not part of a contract modification. It is for a subcontract consent decision, within the ceiling of the contract. From my reading of FAR part 15, subcontract pricing, the review and analysis of subcontracts is specifically required when pricing a prime contract award or modification. I'm trying to ascertain if a subcontract needs to be subjected to price/cost analysis after contract award and not for a contract modification. It appears from both FAR part 15 and FAR part 44 that the onus is on the prime contractor to make a determination of fair and reasonable prices for a subcontractor.
During performance of an R&D contract (roughly 2 years after award), does the CO need to perform price/cost analysis for a proposed subcontract award when providing consent?
CPFF prime contract for R&D Services (non-commercial, competitive acquisition)
Subcontract award also CPFF from a competitive RFP (above the SAT). 3 proposals were received and prime made its selection
Prime provides advance notification to CO for the anticipated subcontract award, including prospective subcontractor cost/price information such as budget and the non-winning proposal cost information
Prime provides a negotiation memo and states the technical reasons for the selection, the fact that the prices have been determined to be fair and reasonable and the offeror's past performance.
Does the CO need to independently review the cost/price information and perform a price analysis and cost realism analysis? Intuitively, this seems imperative to ensure that services are acquired at a fair and reasonable price. However, FAR part 44.202, does not state that at a minimum the CO shall determine that prices are fair and reasonable, under its considerations. Instead item 8. states, "(8) Has the contractor performed adequate cost or price analysis or price comparisons and obtained certified cost or pricing data and data other than certified cost or pricing data?" To make matters more convoluted (at least to me) FAR 44.203 states, "(a) The contracting officer’s consent to a subcontract or approval of the contractor’s purchasing system does not constitute a determination of the acceptability of the subcontract terms or price..."
Is the subcontractor's determination sufficient for this analysis? FAR part 15 states that "The contracting officer is responsible for the determination of a fair and reasonable price for the prime contract, including subcontracting costs." Then again a paragraph further down it states, that "The prime contractor or subcontractor shall -- (1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices".
Is the onus on the prime contractor to determine fair and reasonable prices for its intended subcontract, if at a minimum the CO's determination is not required, under considerations, and further that a CO's consent is not an indication of acceptable subcontract prices? Can a CO's evaluation of the prices submitted in response to a competitive requirement be sufficient, for a CPFF subcontract?