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  • Question

    Per FAR 52.232-20, Limitation of Cost, can the contractor receive cost greater than what was previously negotiated/contracted? Should I incorporate the new Labor Categories and Direct Labor Rates into my Basic Contract to issue future Task Orders using the new accounting method "Direct Charge" for the new labor categories?


    Answer

    Companies are allowed to change accounting methods which would become effective at the beginning of the next accounting period.  In your situation (CPFF IDIQ contract) the Government will pay all reasonable allowable costs incurred up to the amount on contract.  The change to DIRECT CHARGE should also be identified in the company's updated disclosure statement.  This change will lower certain overhead rates slightly and increase direct charges to the contract.  Once the company reaches the amount funded, we are no longer required to pay, nor are they required to continue performing.  The contracting officer and program team must decide if the contractor's performance or the situation requires that the contractor continue to perform.  If continued performance is required/desired, additional funding must be added to the contract.

    When adding funding, it would make sense to add the labor categories, as they will be part of future task orders.

     

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