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  • Question

    Can we issue a labor hours MOD to a Firm Fixed Price contract? If we write a D&F supporting the use of Labor Hours, if we have a negotiated unit price and we have a set quantitiy that they cannot exceed? We would also issue the MOD with language stating that they would have to prove the hours woked and that we would take a credit for any hours not used.


    Answer

    Combining contract types (hybrids) under a single instrument is authorized by FAR 16.102(b). A labor hour contract is a subset of time and materials type contracts, so all the justifications need to be in place to use this contract arrangement.
     
    The biggest risk to the Government on hybrid contracts is that the contractor moves costs normally included in the FFP portion over to the labor hour portion- so it is critical that the accumulation of costs and accounting records, and their supporting processes, properly segregate costs, and allow the Government complete access to those records as well as full transparency.
     

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