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Skip Navigation LinksDiscussions List : Contract Type

Started: 7/11/2018 8:26 AM
Picture Placeholder: KARREN CARRUTHERS
KARREN CARRUTHERS
Contract Type

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We are interested in knowing some of the pros' and cons' of contract type selection when considering a fixed price or a labor hour type contract using a GSA Schedule Contract 

Scenario -  We have mail room contractors working to service our buildings mail distribution, postage processing, delivery (within building), and mail pickup. We created a Statement of Work that includes all the required duties and responsibility. The mail clerks know what is expected and do not need to be supervised. We estimated the amount of hours each contractor must work. We have used a GSA Schedule Contract and the associate fixed price hourly rate. We know how much each contractor will cost on a weekly, monthly, and annual bases. Since we have an accurate cost estimate we created a multiple year (5), fixed price contract. We are now wondering if we should have used a labor hour contract type as a better fit. 

Any one have an idea?  Lets discuss.



Picture Placeholder: KARREN CARRUTHERS
  • KARREN CARRUTHERS
/_layouts/15/images/person.gif" alt="Picture Placeholder: KARREN CARRUTHERS" />
KARREN CARRUTHERS

​

We are interested in knowing some of the pros' and cons' of contract type selection when considering a fixed price or a labor hour type contract using a GSA Schedule Contract 

Scenario -  We have mail room contractors working to service our buildings mail distribution, postage processing, delivery (within building), and mail pickup. We created a Statement of Work that includes all the required duties and responsibility. The mail clerks know what is expected and do not need to be supervised. We estimated the amount of hours each contractor must work. We have used a GSA Schedule Contract and the associate fixed price hourly rate. We know how much each contractor will cost on a weekly, monthly, and annual bases. Since we have an accurate cost estimate we created a multiple year (5), fixed price contract. We are now wondering if we should have used a labor hour contract type as a better fit. 

Any one have an idea?  Lets discuss.



27/11/2018 8:26 AM7/11/2018 8:26 AMNoAsk the Community
29.4207777777778
4/27/2018 11:17 AM
Posted: 7/13/2018 12:06 PM
Picture: DONALD MANSFIELD
DONALD MANSFIELD

I don't think you are framing the problem correctly. You shouldn't be weighing the pros and cons of fixed-price and labor-hour contracts and deciding which is best. The default contract type for acquiring commercial services under a Federal Supply Schedule contract is fixed-price (see FAR 8.404(h)(2)). A labor-hour contract may be used, but the contracting officer would have to execute a D&F justifying, among other things, that a fixed-price order is not suitable (see FAR 8.404(h)(3)(ii)(A). FWIW, I think you would have a hard time justifying why a fixed-price order would not be suitable for mail services.

What problem would you be trying to solve by changing contract type?

Picture: DONALD MANSFIELD
  • DONALD MANSFIELD
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DONALD MANSFIELD

I don't think you are framing the problem correctly. You shouldn't be weighing the pros and cons of fixed-price and labor-hour contracts and deciding which is best. The default contract type for acquiring commercial services under a Federal Supply Schedule contract is fixed-price (see FAR 8.404(h)(2)). A labor-hour contract may be used, but the contracting officer would have to execute a D&F justifying, among other things, that a fixed-price order is not suitable (see FAR 8.404(h)(3)(ii)(A). FWIW, I think you would have a hard time justifying why a fixed-price order would not be suitable for mail services.

What problem would you be trying to solve by changing contract type?

KARREN CARRUTHERS6307/13/2018 12:06 PM7/13/2018 12:06 PM
7/27/2017 2:46 PM
Posted: 7/26/2018 7:58 AM
Picture: ADAM STROUP
ADAM STROUP

You have an accurate cost estimate because you have a good handle on your requirements.  As long as you got sufficient competition, hopefully one of the offers is in line with the cost estimate, I would think fixed price was the right choice.  The fixed-price contract ought to be easier to administer and as Don pointed out, it's the default contract type.  Fixed price can be a problem when you don't know your requirements (including demand patterns and changes to those demands).  Ensuring those requirements are in performance terms helps as opposed to just buying X hours of time when sometimes you don't need X.

Picture: ADAM STROUP
  • ADAM STROUP
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ADAM STROUP

You have an accurate cost estimate because you have a good handle on your requirements.  As long as you got sufficient competition, hopefully one of the offers is in line with the cost estimate, I would think fixed price was the right choice.  The fixed-price contract ought to be easier to administer and as Don pointed out, it's the default contract type.  Fixed price can be a problem when you don't know your requirements (including demand patterns and changes to those demands).  Ensuring those requirements are in performance terms helps as opposed to just buying X hours of time when sometimes you don't need X.

KARREN CARRUTHERS6307/26/2018 7:58 AM7/26/2018 7:58 AM
7/26/2018 7:58 AM
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