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Disputes Part 1: The DCMA Quality Assurance Specialist (QAS)…
Disputes Part 1:
The DCMA Quality Assurance Specialist (QAS) discovered conflicting contract quality requirements that could adversely affect final inspection and acceptance. The contracting activity’s contracting officer authorized the DCMA office to modify contract specifications in the Section C Work Statement using a Change Order to resolve these discrepancies in accordance with the applicable contract clause FAR 52. 52.243-2 Changes–Cost Reimbursement (Aug 1987) – Alternate II. As a result of Change Order Modification A00001 pursuant to paragraph (c) of FAR 52. 52.243-2, the contractor must assert its right to an equitable adjustment in the contract price of CLIN 0001 or schedule or both resulting from the Change Order.
Part 1: Contractor’s Change Order Proposal
Review and consider the contractor’s Proposal Letter to complete this scenario:
As the assigned ACO, upon arrival at your desk, you receive the following letter from the contractor asserting its right to an equitable adjustment to the contract price and schedule resulting from the issuance of Change Order Modification A00001.
Date: 15 Days after date of Modification A00001
Mr. C. O. Doe
Administrative Contracting Officer
DCMA Anytown
14000 Your Way
Anytown, USA 20000-0000
Re: Contract No. “Withheld,” Modification A00001
Dear Mr. C.O. Doe
The purpose of this proposal letter is to assert our right to an adjustment in the contract prices of CLIN 0001 and Option CLIN 1001 and schedule pursuant to paragraph (c) of clause FAR 52.243-2, Changes–Cost Reimbursement (Aug 1987) – Alternate II resulting from contract Change Order A00001 dated 12/21/2015.
1. SUMMARY OF FACTS
The proposed price adjustments against CLIN 0001 and Option CLIN 1001 are caused by the increased quality requirements imposed via Change Order A00001 that are purported to resolve conflicting contract quality requirements. This change now in fact imposes full compliance with certain quality standards.
2. ORIGINAL CONTRACT WORK
We prepared our original proposal cost estimate based on the assumption that only 50% of the task orders would require compliance with any higher quality standards imposed under the current contract. This information can be found on page 49 of our basis of estimate in our cost proposal and was the subject of formal proposal “Discussions” with the customer cost team who did not indicate to us that this assumption was erroneous or unreasonable. The cost in the original contract to comply with any higher quality standards for 50% of the tasks follows.
CLIN 0001 In-Service Engineering Support Services CPFF
Cost Element
Cost Estimate
Direct Labor Quality Supervisor
1920 hours times $54 per hour = $103,680
Direct Labor Quality Technician
680 hours times $26 per hour = $17,680
Overhead costs (110% of Direct Labor)
( $103,680+17,680) times 1.1 = $133,496
GA& costs (12% of Total Cost less G&A)
($103,680+$17,680+$133,496) times .12 = $30,583
Total Negotiated Costs
$285,439
3. COMPENSABLE GOVERNMENT ACTS
Change Order Modification A00001 now requires full compliance with certain specifications that we did not anticipate in the original contract negotiations.
4. THE ADDITIONAL WORK AND TIME
a) 100% compliance with certain higher-level quality requirements requires an additional 1.5 Full Time Equivalents to handle the additional inspection and documentation requirements that are not a part of our standard commercial practices
b) In order to submit the required documentation required by Modification A00001 that was not contemplated in our original schedule we request we be given 90 days from the date of the modification to submit and obtain the required Government approvals.
5. THE ADDITIONAL COSTS
Modification A00001 requires us to incur the following additional costs for both CLIN 0001 and CLIN 1001.
CLIN 0001 In-Service Engineering Support Services CPFF
Cost Element
Cost Estimate
Direct Labor Quality Manager
1,920 hours times $62.50 per hour = $120,000
Direct Labor Quality Technician
960 hours times $26 per hour = $24,960
Overhead costs (110% of Direct Labor)
($120,000 + $24,960) times 1.1 = $159,456
G&A costs (12% of Total Cost before G&A)
($120,000 + $24,960 + $159,456) times .12 = $36,530
Total Estimated Costs (CLIN 0001)
$340,946
Fee (8% per contract schedule)
$340,946 times .08 = $27,276
Total Proposed Price Adjustment to CLIN 0001
$368,222
Option CLIN 1001 In-Service Engineering Support Services CPFF
Cost Element
Cost Estimate
Calculation of Inflation Factor for Option CLIN 1001
$8.9375M [CLIN 1001] / $8.684M [CLIN 0001] = 1.0292
CLIN 1001 Estimated Cost Adjustment
$340,946 times 1.0292 = $350,899
CLIN 1001 Fee (8% per contract schedule)
$350,899 times .08 = $28,072
Total Proposed Price Adjustment to CLIN 1001
$350,899 plus $28,072 = $378,971
6. CERTIFICATION
I certify that the request is made in good faith, and that the supporting data are accurate and complete to the best of my knowledge and belief.
7. CONCLUSION
We look forward to answering any questions that you have about how the costs for this change order proposal were prepared.
Regards,
Ms. A. B. Roads
VP, Contracts and Finance
Your Company
16000 My Way
Onetown, USA 40000-0000
Question 1 Does the Change Order Proposal letter submitted by the contractor constitute a dispute under the Disputes clause?
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Question 2 Does this cost proposal letter require the submission of certified cost or pricing data?
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Question 3 Why is the contractor’s Change Order Proposal letter certified in paragraph 6?
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