Sign In
  • Question

    Is the Government responsible for paying the fixed fees on CLINs from 2007; even if the contractor has yet to invoice for the fees and the contractor signed bilateral mods deobligating funds from these CLINs in 2012 and 2013? Is the Government anti-deficient? If the Government is responsible for paying these fees, what type of funds should be used?


    Answer

    1. The FAR references quoted below in pertinent part are applicable to this response. Based on the timeline information provided in this inquiry, our response assumes that the “MAR 1997” version of FAR 52.216-8 is in the contract.

    FAR 52.216-8 -- Fixed Fee (MAR 1997)
    (a) The Government shall pay the Contractor for performing this contract the fixed fee specified in the Schedule.

    (b) Payment of the fixed fee shall be made as specified in the Schedule; provided that after payment of 85 percent of the fixed fee, the Contracting Officer may withhold further payment of fee until a reserve is set aside in an amount that the Contracting Officer considers necessary to protect the Government’s interest. This reserve not to exceed 15 percent of the total fixed fee or $100,000, whichever is less,

    FAR 52.232-20 -- Limitation of Cost
    (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 … .

    (b) The Contractor shall notify the Contracting Officer in writing whenever it has reason to believe that --
      (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.

    (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 … .

    FAR 52.232-22 -- Limitation of Funds
    (a) The parties estimate that performance of this contract will not cost the Government more than
      (1) the estimated cost specified in the Schedule

    (b) The Schedule specifies the amount presently available for payment by the Government and allotted to this contract, the items covered, … and the period of performance it is estimated the allotted amount will cover. The parties contemplate that the Government will allot additional funds incrementally to the contract up to the full estimated cost to the Government specified in the Schedule, exclusive of any fee.

    (d) Sixty days before the end of the period specified in the Schedule, the Contractor shall notify the Contracting Officer in writing of the estimated amount of additional funds, if any, required to continue timely performance under the contract or for any further period specified in the Schedule or otherwise agreed upon, and when the funds will be required.

    (f) 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 the total amount allotted by the Government to this contract;

    2. The references quoted below in pertinent part is also applicable to this response.

    A. DoD 7000.14-R Financial Management Regulation, Volume 3, Chapter 8, “Standards for Recording and Reviewing Commitments and Obligations”
    0805 Recording Obligations for Commercial Procurement Contracts and Orders
    080503. Cost-Reimbursement and Time-and-Material Contracts
    Cost-reimbursement and time-and-material contracts include: cost, cost-sharing, cost-plus-fixed-fee, cost-plus-incentive-fee, cost-plus-award-fee, time-and-material, and labor-hour contracts. When the contract is executed, an obligation shall be recorded. The amount of the obligation is the total estimated payment provided by the contract’s funded ceiling, including the fixed fee in the case of a cost-plus-fixed-fee contract, … . The amount recorded shall be increased or decreased by amounts provided by contract amendments, … . [I]f the contract is incrementally funded, the amount obligated shall always be the funded increments.

    B. NAVSUP 5252.232-9400 -- Limitation of Liability - Incremental Funding (JAN 1992)
    This contract is incrementally funded and the amount currently available for payment hereunder is limited to $xxx.xxx.00 inclusive of fee. It is estimated that these funds will cover the cost of performance through (TBD date). Subject to the provisions of the clause entitled “Limitation of Funds” (FAR 52.232-22) of the General Provisions of this contract, no legal liability on the part of the Government for payment in excess of $xxx.xxx.00 shall arise unless additional funds are made available and are incorporated as a modification to this contract.

    C. ASBCA Cases concerning “Mutual Mistake”
    Kearfott Guidance & Navigation Corporation, ASBCA No. 55626
    http://www.asbca.mil/Decisions/2011/55626_061011_WEB.pdf

    The Boeing Co., ASBCA No. 52256, 02-1 BCA ~ 31,811
    http://www.asbca.mil/Decisions/2002/52256.pdf

    3. In response to the first question of this inquiry (i.e., Is the Government responsible for paying the fixed fees on CLINs from 2007; even if the contractor has yet to invoice for the fees and the contractor signed bilateral mods de-obligating funds from these CLINs in 2012 and 2013?), the answer would depend upon the exact terms of this CPFF contract. As stated in FAR 52.216-8(a), the Government shall pay the fixed fee set forth in the Schedule of the contract upon completion of the work. Pursuant to either FAR 52.232-20(a) & (b)(2) or FAR 52.232-22(b), whichever clause may apply to the CPFF CLINs in question, the current funding (i.e., funding limit) set forth in the contract expressly excludes the fixed fee amount(s). Therefore, assuming that the contracted work was accepted by the Government, and assuming that there are no other terms and conditions in the contract that would affect the Government’s obligation to pay the fixed fee, then the Government would be still be required to pay the outstanding fee amount pursuant FAR 52.216-8(a), notwithstanding the current funding limit set forth in the contract that covers only the estimated cost specified in the Schedule.

    4. However, as indicated in reference 2A above, the DoD FMR requires that the funding obligated to a CPFF contract include both the cost and payable fee. As a result, most contracting activities include a Special Provision in Section H of the contract, similar to that described in reference 2B above, stating that the total contract funding is “inclusive” of the fixed fee. Therefore, if the terms and conditions of this CPFF contract include a similar clause, then the amount currently obligated to the contract would, by definition, cover both the estimated cost and any payable fixed fee. In that case, because the Government’s liability would be limited to the total amount funded for both cost and fee, then it may not be “technically” liable to pay the balance of the any unpaid fixed fee applicable to the 2007 CLINs.

    5. But notwithstanding our comments in paragraph 4 above, we find it to be very odd that the Government would de-obligate funds from the contract that would be used to pay the balance of the fixed fee specified in the Schedule which the Government was required to pay pursuant to FAR 52.216-8(a). Government payment records should have indicated at the time that the entire fixed fee amount of $378,875.98 had not been invoiced. Therefore, the balance of fixed fee should have been paid in 2012 and 2013 before the funds became cancelled. We also find it to be very odd that the contractor would knowingly agree to sign a contract modification de-obligating contract funding when such action might preclude it from invoicing the balance of fixed fee that it is entitled to receive pursuant to FAR 52.216-8(a). Therefore, it appears that there may have been a “mutual mistake” committed by the parties in executing the funding de-obligation modification. If that is the case, then we believe that the contractor may have a sustainable claim for the payment of the remaining fixed fee in accordance with the ASBCA decisions in reference 2C above.

    6. Regarding the second question posed by this inquiry, there is insufficient information provided in the Background statement for us to render an appropriate response, and therefore the contracting activity’s legal counsel must be consulted to determine if a violation of the Anti-deficiency Act has occurred in this case. Finally, if the Government is ultimately determined to be responsible for paying the balance of the fixed fees, then current O&M funds must be used to pay the fixed fee balance allocable to the O&M CLINs, and current RDT&E funds must be used to pay the fixed fee balance allocable to the RDT&E CLINs.


    Open full Question Details