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  • Question

    How do you structure a professional services support contract to ensure the government only pays for the hours of support actually delivered? Is there a method and authority to structure the contract with Firm Fixed Price labor rates that are invoiced monthly with only the labor hours actually worked or expended by the contractor?


    Answer

    Attempts to get additional information from the submitter were unsuccessful. As a result, I will keep the answer short.

    This is why the FAR highly encourages service contracts be performance-based (see FAR 37.000).

    If the requirement for this acquisition is well defined, performance-based, and the government receives adequate price competition in response to the solicitation, then a Firm-fixed price (FFP) contract should be just fine. "...This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss...” see FAR 16.202-1. Additionally, a FFP contract does not give you the authority to limit payment to only hours actually worked or expended; again see FAR 16.202-1 “A firm-fixed price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract.” Bold italics added for emphasis.

    The only other contract type that would let you structure the contract payments this way would be to use a Labor-hour contract. Note: we ruled out the use of a Firm-fixed-price level of effort term contract type based on the background information provided. It was inconsistent with the description, application, and limitations at FAR 16.207.

    For guidance on a Labor-hour contract see FAR subpart 16.6 with special attention to FAR 16.601 and FAR 16.602. Because invoicing is done against the CLINS you will want to review FAR subpart 4.10.

    Of course, do not forget to review your agency’s FAR supplement for either implemental or supplemental guidance or requirements.

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