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)."

Rules expand Time and Materials (T&M) plus Labor Hour contracts to commercial services

[This post includes an addition of information regarding T&M and Labor Hour contract D&Fs for contracts over 3 years]
Perhaps you noticed that the FAR got a revision (FAC 2005-15 dated Dec. 12, 2006) to allow T&M and Labor Hour contracts for commercial services. In their deliberations, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council worked to implement the Services Acquisition Report Act of 2003 (SARA). One of the provisions of SARA was to allow using T&M and Labor Hour contracts to purchase services that are commercial in nature.

This new change to the FAR keeps a decided preference for fixed price contacts for services.

Briefly, here is how to use these contract types to buy services (new FAR Part 12.207):

First, the contracting officer needs a determination and finding (D&F) that states a T&M or Labor Hour contract is the only type of contract appropriate for this requirement. Also, for IDIQ contracts, a similar D&F is needed for each task order. [The D&F has some specific requirements that need to be included, so be certain to check them out (FAR 12.207(b)(2)). Also, the D&F authority is HCA for contracts longer than 3 years (FAR 16.601(d)(1)(ii))]

Next, there must be a ceiling price beyond which another determination must be made.

Further:

• The contract must be a competitive award (or small business set aside)
• If using an "other than full and open competition" Justification and Approval (J&A), must have 2 or more offers/proposals or are placing an order under the fair opportunity procedures of a multiple award delivery order contract.

Keep this type of contract arrangement in mind and remember to properly justify its use and make the proper determinations.

Is British concept to "contract for availability" an idea for BASOPS?

Based on Britain's Defence (it's spelled "defence" there) Industrial Strategy, procurement is taking a real turn for performance based contracting. In their strategic document, they state that

(they) also recognise that the bedrock of (their)procurement policy has to be long-term value for money.

This is a principle that we in U.S. federal procurement also believe in.

In fact, they are taking this to great lengths by contracting for aircraft availability, rather than for spare parts or maintenance. The outcome contracted for, then, is having each aircraft available to fly missions.

They call it "through-life support" or lifetime support. They are using it to improve their industrial capabilities. Perhaps, that is a practice we could employ with our vehicle maintenance practices- oh that's right, AMC will be taking that over. How about some of our other recurring contracts.

Let's think about how that might work out by improving our installation capabilities, as well.

Interesting perspective on federal contracting in the future

Commercial practices in federal procurement as a "hot" issue may be back in style. A new report by Government Futures (get your copy of the report in .pdf format or view the webcast) talks about using commercial business practices. We are used to hearing about such practices as buying commercial, off the shelf items, for example.

However, this time, commercial business practices include such things as using web-based buying, tracking and spend analysis systems, strategic sourcing and something they call aggregate buying (buying in bulk throughout the "enterprise" (the whole Army, for instance, not the space ship)).

[Is it legal to have parenthesis inside parenthesis? Just wondering...]

The "quote of the article" is by the president of Government Futures who is quoted as saying

Pockets of excellence sit side by side with shops where innovation is not rewarded

Very interesting take on this topic. The most interesting thing to me, though, is the graphic that estimates how long it will take for federal government adoption of such practices. This report expects widespread adoption by 2014 of web-based procurement systems.

We may get SPS Increment 3 by then.