DFAR keeps up with T&M and Labor Hour changes

This Defense Federal Acquisition Regulation Supplement (DFARS) case is an update to payment options brought on by the the new FAR change (see below) to allow Time and Material (T&M) and Labor Hour contracts for commercial services.

There were three payment options specified in the FAR rule. The Defense Department narrows them to one. Here is how the DFAR case explained it:

DoD believes it is in the best interests of the Department to select, and make mandatory... requiring separate fixed hourly rates that include profit for each category of labor performed by the contractor and each subcontractor, and for each category of labor transferred between divisions, subsidiaries, or affiliates of the contractor under a common control.

That is the way DoD hopes to keep the final outcome of T&M and Labor Hour contracts to be as predictable and controllable (manageable???) as possible.

The DoD head of procurement has a good overview of this change on their DFARS site. There is even a chart comparing before and after use of T&M and labor hour contracts. Just scroll down the page a little to the heading, "Labor Reimbursement on DoD Non-Commercial Time-and-Materials and Labor-Hour Contracts (DFARS Case 2006-D030)."