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  • Question

    IS IT PROPER/LEGAL TO REALIGN FUNDS FROM TIME AND LABOR TO MATERIALS IN ORDER TO BUY SPARE PARTS, CONEX BOXES, OFFICE CABINETS PHONES AND FAX MACHINES.


    Answer

    1. The FAR references quoted below in pertinent part are applicable to this response.

    FAR 16.301-2 -- Application
    (a) The contracting officer shall use cost-reimbursement contracts only when—
      (1) Circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract; or
      (2) Uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.

    FAR 16.306 -- Cost-Plus-Fixed-Fee Contracts
    (a) Description. This contract type permits contracting for efforts that might otherwise present too great a risk to contractors, but it provides the contractor only a minimum incentive to control costs.

    (b) Application. (1) A cost-plus-fixed-fee contract is suitable for use when the conditions of 16.301-2 are present and, for example --
      (i) The contract is for the performance of research or preliminary exploration or study, and the level of effort required is unknown; or
      (ii) The contract is for development and test, and using a cost-plus-incentive-fee contract is not practical.

    2. Reallocating contract funds from labor to materials under a cost-plus-fixed-fee (CPFF) type contract may or may not be proper depending upon the scope of the contract work as defined in the Statement of Work (SOW) or Performance Work Statement (PWS) as the case may be. However, given the criteria set forth in FAR 16.301-2 and FAR 16.306 for the proper use of a CPFF type contract, we believe that it would be highly unusual, to say the least, to purchase such items as office cabinets, phones and FAX machines using a CPFF pricing arrangement and that the use of firm-fixed-price contracting would definitely be more appropriate. Depending upon the specifications, the use of firm-fixed-price contracting may also be more appropriate for the purchase of the spare parts and the CONEX boxes (assuming this term means military shipping containers).

    3. Therefore, based on the limited information provided in this inquiry, we believe that a delivery or task order issued under a CPFF IDIQ contract should not be used to purchase such items because this pricing arrangement would not comply with the requirements specified in FAR 16.301-2 and FAR 16.306 for the proper use of CPFF contracting.



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