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    Can the contractor be paid for the work completed prior to award of Phase II?


    Answer

    The following response is based solely on the question and background information provided.  As we do not have all the facts particular to your situation, we highly recommend you consult, as applicable, your contracting officer and/or Legal Office for further guidance.
     
     
    "FAR 31.205-32 -- Precontract Costs.
    Precontract costs means costs incurred before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award when such incurrence is necessary to comply with the proposed contract delivery schedule. These costs are allowable to the extent that they would have been allowable if incurred after the date of the contract (see 31.109).
     
    Precontract costs can be deemed allowable provided they meet the following three requirements of FAR 31.205-32:
      1) Costs must be incurred pursuant to negotiation and in anticipation of contract award.
      2) Costs must be necessary to comply with delivery schedule
      3) Costs must have been allowable if incurred after the date of contract
     
    From the background information:
      1) Costs must be incurred pursuant to negotiation and in anticipation of contract award.
      Negotiation in process?  YES or NO.  Source selection is a type of negotiation and the actions/costs were clearly in anticipation of award.  This could be considered YES
      2) Costs must be necessary to comply with delivery schedule
      This could be considered YES
      3) Costs must have been allowable if incurred after the date of contract
       This is likely YES
    While it is not clear these costs are allowable as we do not have the full details of your contracting situation; if we assume we could answer YES, there are some other considerations. 

    This is a cost contract and the contractor was awarded based on, among other things we assume, its cost.  Now the contractor could be considered to be effectively raising the cost.  If these costs were allowed, it would have to be within the price of the awarded contract, not in addition to it. They would be counted as part of the cost when determining the price in the incentive calculations. 

    Another concern would be, "How does the contractor bill?"  In a firm fixed-price situation, it does not really matter if the contractor starts early; in a cost situation how does one address the costs as properly assignable to the contract before it existed?
     
    We add language from the clause which should be part of the contract; "FAR 52.216-7 -- Allowable Cost and Payment.
     (a) Invoicing.
      (1) The Government will make payments to the Contractor when requested as work progresses, but (except for small business concerns) not more often than once every 2 weeks, in amounts determined to be allowable by the Contracting Officer in accordance with Federal Acquisition Regulation (FAR) Subpart 31.2 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract."
     
    We find no language that explicitly states these costs are not allowed.
     
    In this paragraph and in other places, the decision as to allowability is a contracting officer determination.  This information should help in the decision, but the decision is ultimately a contracting officer call.  Whatever determination the contracting officer makes should be well documented in the file.
     

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