Is this 17 hours that the vendor is invoicing for a cost that should be paid on this cost - plus award fee contract?
Unless the contractor's cost accounting system has contract administration as a direct charge to each individual contract, this indirect expense goes in the overhead/G&A pool and is not a direct reimbursement. Additionally, all costs shall to be in accordance with FAR part 30, Cost Accounting Standards Administration if the contract is subject to the CAS and all contracts are subject to generally accepted accounting principles .
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The letter seems unnecessary since the contracting officer and FDO agreed to change the award fee amount. It appears the contractor wrote a letter without Government direction to do so.