>
1
Time and Materials & Labor
Hour Contracts
Kevin Cox
SFA Contracts
2
Definitions
and Applications
Time and Materials contracts
provide for acquiring supplies/services on the basis of:
Direct Labor Hours at specified
fixed hourly rates
Materials at cost, including
material handling costs if appropriate
Labor-Hour contracts are
a variation of the T&M contract that exclude materials supplied
by the contractor
3
Definitions and Applications
Time and Material (T&M)
and Labor Hour (LH) contracts are used when it is not possible to estimate
accurately the extent or duration of the work or to anticipate costs
with any degree of confidence.
4
Definitions and Applications
Limitations: T&M &
LH contracts may be used:
Only after the Contracting
Officer executes a determination that no other contract type is suitable
Only if the contract includes
a ceiling price that the contractor exceeds at their own risk. Changes
in ceiling price will be documented by the Contracting Officer
5
Surveillance of T&M/LH Contracts
CAO shall perform surveillance:
T&M/LH contract provides
no positive profit incentive for cost control or labor efficiency.
DCMA is to assure that the
contractor is performing efficiently and using effective cost control
measures
ACO shall, with appropriate
functional elements, establish a surveillance plan immediately
after award.
6
Surveillance of T&M/LH Contracts
Plan shall include periodic
audits of contractors billings and periodic 00loor checks00/font>
ACO shall pay special attention
to the withhold applicable to contractor00 billings
ACO shall review paid and/or
rejected vouchers
ACO is responsible for approving
the final voucher
7
FAR 52.232-7 requires, unless
otherwise prescribed in the Contract Schedule:
Withhold of 5% of Direct
Labor Dollars
Withhold shall not exceed
$50,000 for the contract
Withhold may have to be taken
against several orders at one time
Withhold shall be retained
until the execution of the Contractor00 Final Release
T&M/LH Withhold and Payments
8
For T&M/LH orders under
Basic Ordering Agreements (BOAs), the $50,000 maximum withhold applies
to each BOA order, as each is an individual contract.
For T&M/LH orders under
Indefinite Delivery type contracts (IDTCs), the $50,000 maximum withhold
applies to aggregate of all active orders issued under the IDTC.
T&M/LH Withhold and Payments
9
ACOs should be aware that
withholds which are spread across differing fund cites need to be carefully
monitored to ensure equity among buying activities and to identify the
aging of unliquidated funding.
T&M/LH contracts are
a form of a cost contract and therefore public vouchers are required
for billings
T&M/LH Withhold and Payments
10
T&M/LH Withhold and Payments
Surveillance Plan should
address review of Interim Vouchers for:
Proper billings
Proper withholdings
Reasonable assurance that
efficient & effective cost controls are being used
Additional billings/payments
guidance can be found in the ONE BOOK Chapter on Public Vouchers
11
T&M/LH orders placed
under a BOA are individual contracts. Withholding and release
provisions apply per order.
T&M/LH orders placed
under IDTCs are not stand-alone contracts and are used for control and
tracking within the IDTC. For MOCAS purposes, each IDTC order is tracked
separately.
Closeout of T&M/LH Contracts
12
Closeout of T&M/LH Contracts
IDTC T&M/LH orders require
only one release, one aggregate withhold, and one final voucher for
the contract.
To facilitate the timely
closing of individual IDTC orders, the withhold will be transferred
to a active order.
An IDTC order should not
be closed if it would cause a lack of withholding.
13
The contractor should submit
a 00ast00interim voucher for each delivery order indicating:
This is the final billing
for the delivery order
The withhold amount being
transferred
The delivery order numbers
the withhold is being transferred to
Closeout of T&M/LH Contracts
14
00LOSEOUT00with the associated
final voucher, release, audit and whatever other appropriate closeout
actions are required should occur with completion of the final delivery
order.
00inal closeout00of the
IDTC should reflect all prior actions in closing individual delivery
orders.
Closeout of T&M/LH Contracts
15
Summary & Recommendations
Establish and monitor surveillance
plan
Apply Withhold properly and
fully document
Manage the closeout actions
for the respective type of T&M/LH contract
16
T&M/LH contracts are
a form of cost reimbursement contracts.
Billings must be made on
Public Vouchers.
Administering T&M/LH
contracts requires detailed knowledge of the ONE BOOK Chapter on Public
Vouchers.
Summary & Recommendations
download Time and Materials & Labor Hour Contracts
