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  • Question

    Assuming the order called only for labor (i.e., no materials, travel, etc) and deliverables are not separately priced, is the contractor entitled to payment of the full order amount or a pro rata portion based on level of effort expended?


    Answer

    FAR 16.207-1 – Description, defines the FFP-LOE contract as follows:

    A firm-fixed-price, level-of-effort term contract requires --
    (a) The contractor to provide a specified level of effort, over a stated period of time, on work that can be stated only in general terms; and
    (b) The Government to pay the contractor a fixed dollar amount.

    And this contract type is generally is suitable for investigation or study in a specific research and development area.  Based on this you should have included the payment clause FAR 52.232-2 -Payments Under Fixed-Price Research and Development Contracts.  This clause states:

    The Government shall pay the Contractor, upon submission of proper invoices or vouchers, the prices stipulated in this contract for work delivered or rendered and accepted, less any deductions provided in this contract. Unless otherwise specified, payment shall be made upon acceptance of any portion of the work delivered or rendered for which a price is separately stated in the contract.

    In general, a government FFP Level of Effort contract is not a rates-based contract. It does not call for the contractor to be paid at an hourly rate. It stipulates a firm-fixed-price for the delivery of a specified quantity of labor (usually, but not necessarily, a number of hours) that are to be devoted to the performance of a certain task, usually involving research and development. The contract does not require the completion of a task, only delivery of the level of effort.  The contractor is entitled to payment of the firm-fixed-price upon completion of the level of effort. Only if your contract specifically included a provision for price adjustment in the event that the contractor actually completes a task prior to delivery of the entire level of effort would you be able to make an adjustment to the price of the contract. Otherwise, the contractor would be entitled to the entire firm-fixed-price including the cost of materials, labor, other direct costs, indirect costs, and profit even though he did not expend all the effort.

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