1
How The New
Time and Materials and Labor Hour Contract Regulations May Affect
Government Contractors
January 25, 2007
Presented By:
Scott Hommer & Keir Bancroft
Venable
LLP
2
Policy
Behind the Changes
T&M Commercial Contracts
T&M
is driven by whether the scope of work is defined well enough to allow
for fixed-price terms. If it is not, then T&M is appropriate.
3
Policy
Behind the Changes
T&M Non-Commercial Contracts
The
new rule clarifies significant items such as subcontract costs, ODCs,
and certain indirect costs that may be appropriate for an acquisition.
4
Policy
Behind the Changes
DoD T&M Non-Commercial Contracts
The
interim rule accounts for large dollar value of DoD procurements; recent
scrutiny of DoD procurements; and the preponderance that DoD contractors
have the capability to establish separate rates.
5
T&M
Rule Matrix
Payment for all labor hours at contract-specified
labor rates for employees satisfying labor category qualifications.
Include wages, indirect costs, G&L, profit. Subcontract labor
not a required pass-through.
Qualifying
Labor Hours Payment
Pre contract, CO D&F stating
no other contract type suitable.
Pre-contract, CO must document:
market research can00 estimate duration or cost structured for future FFP actions to maximize use of FFPD&F
DFARS
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITHOUT Adq. Price Comp.
FAR
Commercial Rule
Requirement
Rule/Acquisition Type
6
T&M
Rule Matrix
Same as subcontracts.
Same as subcontracts.
No profit for transferring org.,
unless service is commercial item.
Offeror specify sep hourly labor rates for prime, each sub, and each division, subsidiary, or affiliate of prime.
Subcontract service through interdivisional
transfer includes no profit.
Offeror specify sep hourly labor
rates for prime, each sub, and each division, subsidiary, or affiliate
of prime.
Same as subcontracts.
Interdivisional
Subcontract Services
Offeror specify the entities to which the hourly labor rates apply; rates established with:
Sep. rates for each entity, Blended rates of all entities, or Combination of specified and blended.Offeror specify if rates apply to
labor by prime, sub, and/or division, subsidiary, or affiliate of prime.
No separate rates required.
Hourly
Rates
DFARS
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITHOUT Adq. Price Comp.
FAR
Commercial Rule
Requirement
Rule/Acquisition Type
7
T&M
Rule Matrix
Services not corresponding with any
labor category in the prime contract are incidental, and reimbursed
as 00aterials.00/font>
Incidental
Services
Contractor00 00wn00commercial items reimbursed at contractor00 catalog or market price; adjusted to reflect quantities acquired and mods. necessary due to contract reqs.
Non-Comm items reimbursed at cost
per FAR cost principles and Allowable Cost and Payment clause.
Comm. items reimbursed at catalog or mkt. price; adjusted to reflect quantities acquired and mods. necessary due to contract reqs.
Non-Comm items reimbursed at actual
cost.
Materials
DFARS
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITHOUT Adq. Price Comp.
FAR
Commercial Rule
Requirement
Rule/Acquisition Type
8
T&M
Rule Matrix
Reimbursed at actual cost provided
indirect costs comprised only of costs excluded from hourly labor rates
and allocated in accordance with contractor00 written or established
accounting practices. Indirect costs not applied to subcontracts
paid at the hourly rates.
Reimbursed fixed amount, excluding costs included in hourly rates, allocated on pro-rata basis set by payment schedule;
CO may limit recovery
Indirect
Costs
Reimbursed at actual cost provided
indirect costs comprised only of costs excluded from hourly labor rates
and allocated in accordance with contractor00 written/established
accounting practices.
Reimbursed actual costs for type
of ODCs designated in contract; CO may limit recovery
ODCs
DFARS
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITHOUT Adq. Price Comp.
FAR
Commercial Rule
Requirement
Rule/Acquisition Type
9
T&M
Rule Matrix
FAR 52.244-2 applies: Government
not required to reimburse subcontract costs incurred prior to obtaining
consent for subcontractors.
No consent required.
Consent
to Subcontractors
Contractor must credit the Government
for cash and trade discounts, rebates, scrap, commissions, other amounts
that have accrued to the benefit of the contractor.
Contractor must reduce material costs
for rebates, refunds, discounts identifiable to contract.
Rebates,
Refunds, Discounts
DFARS
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITHOUT Adq. Price Comp.
FAR
Commercial Rule
Requirement
Rule/Acquisition Type
10
T&M
Rule Matrix
CO retains right to examine records
and other evidence to verify contractor-claimed costs.
CO right to interview contractor
and sub00 employees to verify labor hours claimed by contractor.
Employee
Interviews
Contractor must use 00est efforts00
to perform work.
Contractor must use 00est efforts00
to perform. Reperformance of nonconforming required up to ceiling
price. Contractor comp. for reperformance at labor rates, less
profit (10%).
Standard
of Performance
DFARS
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITH Adq. Price Comp.
FAR
Non-Comm. Rule WITHOUT Adq. Price Comp.
FAR
Commercial Rule
Requirement
Rule/Acquisition Type
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