Contractor is requesting a modification from the original CLIN to increase the item by 35% to cover the expedited shipping, but also requests 20% for profit and G&A. I don't see how profit and G&A would be allowable for a FFP contract, competed under FAR Part 13. Is the 20% justified for expedited shipping on an item that was competitively awarded post award?
(Please keep in mind that any/all information provided herein is advisory in nature and is based on the information provided above. Be sure to consult your cognizant contracting officer and program attorney.)
Open full Question Details
It seems that what the contractor is requesting (an additional 35% for expedited shipping and 20% profit on top of that) on an already negotiated and issued FFP contract is in direct conflict with how a FFP contract is described in the regulations. FAR 16.202-1 says that a FFP contract price is NOT SUBJECT TO ANY ADJUSTMENT ON THE BASIS OF THE CONTRACTOR"S COST EXPERIENCE IN PERFORMING THE CONTRACT. While it may be unfortunate that the contractor has only just realized these additional charges, there is no requirement for you to re-open this pricing effort and increase the agreed to price.
Considering the fact that your award was based on competitive offers, it was the responsibility of your contractor (and all competitors) to know enough about the requirement before proposing and, in return, propose an appropriate FFP amount. If they did not do their due diligence and are just now finding out about the expedited shipping charges, that does not mean there is an inherent responsibility on the Government to re-open the pricing of this contract and pay for it later. As a matter of a fact, to re-open the price discussions for this effort might cause other competitors to ask questions - could the Government have received a better price/deal by going to one of the other offerors initially?
On a side note, both profit and G&A are in fact allowable on a FFP contract, or any contract for that matter. However, in your scenario, it appears you had adequate price competition on this effort and may have only received limited cost and pricing information from the offerors, as only a price analysis would have been required in your evaluations. If that was the case, you probably did not see the contractors costs broken down to the individual cost element level. However, since it doesn't appear there is any reason to re-open the pricing for the increased shipping claim, the additional 20% on top of that for profit and G&A becomes a moot point.