Is it appropriate for the government to manage completion form task order performance based on labor hour expenditures?
Words from FAR 16.306 (d)
Completion and term forms: "The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g.
, a final report of research accomplishing the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee. However, in the event the work cannot be completed within the estimated cost, the Government may require more effort without increase in fee, provided the Government increases the estimated cost.'
I agree with your concern. The Gov't should be managing your contract to a Performance Work Statement describing the "goal or target and specifying an end product" and to your estimated cost. As you correctly state, the estimated cost and fixed fee is based upon your proposal, the Gov't cost and price analysis of the work to be performed and then a negotiated ageement. I don't know, but I suspect, that the Government is extremely concerned with funding amounts, anti-deficiency violations and is used to using time and materials or labor hour contracts. Your contract should have a limitation of cost (FAR 52.232-20
) or possibly a limitation of funds clause (FAR 52.232-22
) , which I assume is are applied to each task order. Are you and the Gov't using this clause? Do you notify the Gov't when you get close to your estimated cost (Close is defined within the clause).
I recommend that you ask to meet with the contracting officer and discuss this problem. I'm guessing, but I believe a good understanding between the parties of how to use LOC and LOF clauses will help. Below is the Limitation of Cost clause:
52.232-20 -- Limitation of Cost.As prescribed in 32.705-2(a), insert the following clause in solicitations and contracts if a fully funded cost-reimbursement contract is contemplated, whether or not the contract provides for payment of a fee. The 60-day period may be varied from 30 to 90 days and the 75 percent from 75 to 85 percent. “Task Order” or other appropriate designation may be substituted for “Schedule” wherever that word appears in the clause.
Limitation of Cost (Apr 1984)
(a) The parties estimate that performance of this contract, exclusive of any fee, will not cost the Government more than
(1) the estimated cost specified in the Schedule or,
(2) if this is a cost-sharing contract, the Government’s share of the estimated cost specified in the Schedule.
The Contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within the estimated cost, which, if this is a cost-sharing contract, includes both the Government’s and the Contractor’s share of the cost.
(b) The Contractor shall notify the Contracting Officer in writing whenever it has reason to believe that --
(1) The costs the Contractor expects to incur under this contract in the next 60 days, when added to all costs previously incurred, will exceed 75 percent of the estimated cost specified in the Schedule; or
(2) The total cost for the performance of this contract, exclusive of any fee, will be either greater or substantially less than had been previously estimated.
(c) As part of the notification, the Contractor shall provide the Contracting Officer a revised estimate of the total cost of performing this contract.
(d) Except as required by other provisions of this contract, specifically citing and stated to be an exception to this clause --
(1) The Government is not obligated to reimburse the Contractor for costs incurred in excess of
(i) the estimated cost specified in the Schedule or,(2) The Contractor is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs in excess of the estimated cost specified in the Schedule, until the Contracting Officer
(ii) if this is a cost-sharing contract, the estimated cost to the Government specified in the Schedule; and
(i) notifies the Contractor in writing that the estimated cost has been increased and
(ii) provides a revised estimated total cost of performing this contract.
If this is a cost-sharing contract, the increase shall be allocated in accordance with the formula specified in the Schedule.
(e) No notice, communication, or representation in any form other than that specified in subparagraph (d)(2) above, or from any person other than the Contracting Officer, shall affect this contract’s estimated cost to the Government. In the absence of the specified notice, the Government is not obligated to reimburse the Contractor for any costs in excess of the estimated cost or, if this is a cost-sharing contract, for any costs in excess of the estimated cost to the Government specified in the Schedule, whether those excess costs were incurred during the course of the contract or as a result of termination.
(f) If the estimated cost specified in the Schedule is increased, any costs the Contractor incurs before the increase that are in excess of the previously estimated cost shall be allowable to the same extent as if incurred afterward, unless the Contracting Officer issues a termination or other notice directing that the increase is solely to cover termination or other specified expenses.
(g) Change orders shall not be considered an authorization to exceed the estimated cost to the Government specified in the Schedule, unless they contain a statement increasing the estimated cost.
(h) If this contract is terminated or the estimated cost is not increased, the Government and the Contractor shall negotiate an equitable distribution of all property produced or purchased under the contract, based upon the share of costs incurred by each.
(End of Clause)