July 6, 2012 at 4:43 pm #165542
I wrote earlier this year about some of the difficulties in execution and management of contracts, especially when it deals with contract type.
I do not understand what the problem is here. A Firm Fixed Price (FFP) contract should be the easiest contract type to manage, yet is seems to be one of the most challenging. Why is that?
Well, perhaps it is just a matter of education. A FFP contract is just that, a fixed price. The contractor will submit an invoice for the contract amount divided by the period of performance. Simple. Focus on performance and if the job is getting done. Do not worry about labor hours, and specific costs (i.e. G&A, OH, profit, etc.)
Where things get complicated is when procurement personnel treat it as a Labor Hour contract, demanding information not applicable for FFP. The result is that time and money is wasted on needless administration on both sides.
1) Are you managing FFP like T&M? Why?
2) What benefits are there for asking for labor hours, categories, etc. for a FFP contract?
3) If you are a contractor, how do you deal with this situation?
July 6, 2012 at 7:54 pm #165562
Peter G. TuttleParticipant
What a great subject, Jamie. One complication comes in when the government adds in requirements beyond the agreed-to scope of work and the contractor’s program and corporate management decide not to push-back or charge for the out-of-scope work for fear that playing hard ball would damage the “relationship.” I have heard this ad nausem. Bad business practices only get worse over time nomatter who makes them.
Folks – just manage your contract like you are supposed to.
July 6, 2012 at 8:19 pm #165560
Pete – That is exactly the reasonings that I have heard from industry. By not playing by the rules and stopping bad behavior upfront, the relationship starts to get damaged immediately. Further, it will only get worse as the contractor gets more abused and bullied, and is forced into a situation of giving away free services that are out scope to make the client “happy.”
Can’t do that last I checked, but it happens everyday.
July 9, 2012 at 12:45 pm #165558
Jaime – part of the problem is people don’t understand the difference between FFP and LH (or as some folks call it FP-LH). On the Govt side, folks who have previously had LH contracts and heard them called FFP get into a “true” FFP contract and just do what they’ve always done – even though the contract type is different
July 9, 2012 at 2:09 pm #165556
It is an expensive and tremendously difficult situation, a difficulty mostly borne by small businesses. I do not see Top 100 contractors get pushed around like this, but small businesses do. They are forced to take a loss until they can file a claim, which costs legal fees that are not reimbursable.
It is a sham this continues to happen, as it beyond improper.
July 10, 2012 at 6:23 pm #165554
While I don’t condone the Government “pushing around” its contractors, I have little sympathy for a contractor who, instead of asserting its rights under the contract, chooses to complain that they are getting pushed around to anyone who will listen.
July 10, 2012 at 6:26 pm #165552
Don – That really is part of the problem. The small businesses who have been subjected to this have tried to discuss with the CO of course, but usually get shut down. God help the firm that goes over the CO’s head.
What recourse is there?
July 10, 2012 at 7:57 pm #165550
If the contractor is being directed to do work that is not required by the contract, the contractor can submit a claim. In a blog entry titled “Tips for the Would-be Clueless Contractor,” Vern Edwards gives the following tip:
If you win the contract, take a firm, formal, arm’s-length, businesslike approach to all aspects of the deal. Comply strictly with all contract terms and insist that the government do the same. Know all of your contractual deadlines and meet them. Know all of the government’s contractual deadlines and notify them in writing the moment that they are late. The very moment. Neither ask for nor grant exceptions except through formal processes, such as engineering change proposals, formal waivers, and change orders. Know your obligations and fulfill them. Know your rights and insist upon them. When you truly believe that the government owes you something, ask for it in writing. If you don’t get favorable action within a reasonable period of time, submit a claim in accordance with the contract Disputes clause and FAR Subpart 31.2. If the contracting officer does not make a decision within the deadlines set by the Disputes clause, hire an attorney and appeal to a board of contract appeals or to the Court of Federal Claims, unless you are willing to let the government keep what you think is yours.
Another relevant tip:
Never yield to threats from a contracting officer or a contracting officer’s representative. If you do, things will only get worse. When you insist upon your rights and the contracting officer’s representative says: That cuts both ways, just say: Yes, and we can live with that.
July 10, 2012 at 8:08 pm #165548
Great advice from Vern. Of course, I don’t think anyone is in any disagreement. This is indeed the process, the law, and the way things need to be.
However, the way things are usually are quite different. Regretfully, there are some COs/CORs out there that will not stand for their authority to be questioned. As a result, retaliation is done under the table, and consequences for following these procedures is severe. Firms are labeled trouble-makers, and competitors eat their lunch when they are vulnerable.
Again I 100% agree with Vern, and advise small business clients and colleagues of the same when they are faced with this dilemma, almost word-for-word.
However, the “relationship” is what is paramount, not the process. I have yet to see a small business go through this process, again by the book, and not suffer negative consequences.
It is a reality, and an unfortunate one.
July 11, 2012 at 8:57 pm #165546
Jaime, I agree completely.
Laws, rules, and protest procedures are unfortunately different than reality. Reality is that contractors (especially small business) can (and do) get pushed around and any push-back on their part damages a relationship which can affect future opportunities with that agency as well as others.
There are two things that can help contractors in these situations; personality and proactive communication.
Contractors need to drive the conversations (these important things cannot be left to just assuming that people will read the contract and act accordingly.) Contractors need to lay out the scope early on and be proactive in getting expectations (form both sides) straight. Being proactive in developing clear guidelines, rules, timeline, etc. upfront allows the contractor to take on a leadership role. However, it is critical that they do so in a non-threatening and non-condescending manner. (Being a leader and being bossy are two totally different things.) The former improves relationships while the latter ruffles feathers.
This is a very tricky thing to manage which is why the personality and skill set of those representing the vendor are absolutely critical. You wouldn’t send someone who is horrible presenting to groups to represent your firm in a public venue, yet it seems that many vendors will send in people to manage projects and cultivate relationships that lack the skill set needed without a second thought. This is crazy.
Everything should be in black and white and a contract should “manage itself” however, if a vendor wants to not be in a situation where an agency can put them between a rock and a hard place, they must have the right people on the team! Nothing is “fair” and contractors need to have competent people representing them if they want to be successful and treated with respect.
Developing a reputation as a firm that always puts out superior products/services and makes the managing of a contract from start to finish a dream rather than a nightmare will set the tone for future engagements and guarantee that the contractor and the agency get what they are expecting (which is the point.)
July 14, 2012 at 10:54 pm #165544
Great comments Kurt. Wold add that a contractor also develop and cultivate the relationships upfront so that expectations are met, and that the contract can go into “auto-pilot” once the parties understand the way each side operates, and the things that need to be done to be successful.
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