Are the design costs paid to an AE contractor included in the statutory limitations for using Operation and Maintenance funds for minor construction projects?
Your question address the use of O&M funds to upgrade an existing facility on the installation, exceeding the $750,000 threshold and the acceptability of considering the Architect/Engineer (A/E) effort as a separate project from the construction. There are actually three concerns which need to be addressed. Your question implies that the $750,000 threshold applies to your particular situation. You should review your agency regulations for guidance on the threshold for various situations.
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For instance, Army Regulation 420-1 makes a distinction based on whether the work is necessary to make a facility complete and useable or if the change is necessary to correct a deficiency that is a life/health/safety issue. Secondly, 10 U.S.C. 4540(b) imposes a statutory limitation on the price of design services. DFARS 236.606-70 states that 10 U.S.C. 4540, 7212, and 9540 limit the contract price (or fee) for architect-engineer services for the preparation of designs, plans, drawings, and specifications to six percent of the project's estimated construction cost. Paragraph (c) goes on to state that "the six percent limit applies only to that portion of the contract (or modification) price attributable to the preparation of designs, plans, drawings, and specifications. If a contract or modification also includes other services, the part of the price attributable to the other services is not subject to the six percent limit."
Your statement that the A/E effort was done at a "cost of more than $150,000 indicates you have exceeded the 6% statutory limitation by more than $100,000 You might be able to reduce the percentage spent on A/E services by carefully examining the specific costs included; however, it would not be appropriate to circumvent the law by designating this as two separate projects.
Prior to taking any further action on this project you should consult your legal advisor.