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  • Question

    Since our contract is with the AE (prime) contractor, can we expect all subcontractors to use the rates we awarded with the basic contract or do we have to accept the rates of all subcontractors? If so, how can we confirm the higher rates are fair and reasonable?


    Answer

    AE Contracts should be awarded using the Brooks Act procedures detailed in FAR 36.602.  The primary criterion of an AE source selection is to award the contract to the firm that is “best qualified.”  At the end of any negotiation using procedures detailed in FAR 36.606, the Contracting officer and AE Firm have reached an agreed upon firm fixed price that is subject to the statutory 6% of ECC limitation (or that negotiation should have been terminated and proceedings initiated with the second best qualified firm). 
     
    Having to subcontract even 50% of the total would lead me to question 1) the scope of this IDIQ task; or 2) whether the selected firm was the best qualified for the project.  At more than 70% subcontracting effort there is little question that you are either using the wrong AE for the work or the wrong contract. 
     
    AE CAPABIITIES AND SUBCONTRACTING:
    Granted not even the largest AE firms hold every specialty on staff and most small AE firms perform their work through a collection of teaming agreements with the principle designer of record responsible for the coordination.  It is this reason that
    FAR 36.606(e) is a critical factor in every AE negotiation.
    36.606(e) Because selection of firms is based upon qualifications, the extent of any subcontracting is an important negotiation topic. The clause prescribed at 44.204(b), Subcontractors and Outside Associates and Consultants (Architect-Engineer Services) (see 52.244-4), limits a firm’s subcontracting to firms agreed upon during negotiations.

    So if the government did the initial award properly, the subcontracts are now fixed by
    FAR 52.244-4 and the rates are known  - unless there is a task or changed condition that significantly “expands” the original intent of the base contract.   
     
    CONTRACT:  (IDIQ A-E contracts normally have a fairly generic SOW.  Single project/Stand alone AE contracts generally have a very specific SOW)
    • Is this seismic evaluation a new requirement not anticipated in the original SOW? (Cardinal change);
    • Since the work is in Japan,  is the US registration requirement a new issue?  (FAR 36.609-4); 
    • Is this particular task specifically limiting the range of requirements to be only seismic? (Volume or task scope out of the normal range);
     If yes to any of these, then this task would appear to be a new stand-alone design requirement and not in the scope of the original –and necessarily generic - IDIQ contract.
     
    If you determine that this seismic evaluation task was in the original SOW but that this particular task order requires the Prime to subcontract additional staff (for whatever reason:  timing; acceleration; volume), then you need to identify and acknowledge the changed condition, your authority to make the change,  and then audit the Subcontractor rates in the same way you would have in the original award in order to negotiate a fair and reasonable price.
     
    If this work was in the original SOW, and no changes are present to cause a rate adjustment, then the rates and subcontracts are fixed.  The AE is required to design within funding limitations.


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