I have a question regarding appropriate billing to the Government for FFP-type subcontracts. I believe there are three FFP-type contracts: FFP, FFP LOE and FFP Labor Hours.
How should a Prime contractor, who has been awarded a CPFF contract, bill the Government for each of these types of FFP if they have been awarded to a subcontractor?
Specifically, in which FFP-type scenario may the Prime bill subcontractor labor costs against the labor CLIN and ADD their (the Prime's) fixed fee and in which case should the Prime bill against a non-labor CLIN?
First, you have told me that the Prime contract is CPFF and so I'm assuming that all the CLINs are CPFF. With that understanding, I think you are mixing up the rules for Cost Reimbursement contracts with those for Fixed Price and Time and Material. In a CPFF contract, the Gov't will pay the prime contractor all their reasonable, allowable and allocable costs. So that means all the allowable/reasonable/allocable subcontractor cost are paid for, regardless of the CLIN they are associated with. Your question seems to center around fee. You are concerned about how fee is allocated to a CLIN. You seem to be suggesting that the contractor will get more fee if they bill subcontractor labor costs against a labor CLIN and that no fee is associated with a non-labor CLIN. This is how Time and Material contracts work, but not CPFF. In CPFF contracts, the Prime contractors fee is a fixed number of dollars. It is not a percentage of the dollars spent by the prime or its subcontractors. The fixed fee amount will not change with actual cost (regardless of the CLIN it is applied to). The fixed fee amount will only change if the contract is modified for additional work or some other in scope change and the negotiated agreement results in adding more estimated cost and fixed fee amount.
Open full Question Details
More information about CPFF contracts is at FAR 16.306. You might also review the Allowable Cost and Payment close used in CPFF contracts, FAR 52.216-7.