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Breakout Session # 2103 James S. Phillips, Esq., Centre Consulting, Inc.

GSA Schedules – Subcontracting Issues. Breakout Session # 2103 James S. Phillips, Esq., Centre Consulting, Inc. Barbara S. Kinosky, Esq., Centre Consulting, Inc. Date April 14, 2008 Time 3:00 pm– 4 :00 pm. Challenging Issues. Contractor Teaming Arrangements (CTAs) vs. Prime/Sub:

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Breakout Session # 2103 James S. Phillips, Esq., Centre Consulting, Inc.

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  1. GSA Schedules – Subcontracting Issues Breakout Session # 2103 James S. Phillips, Esq., Centre Consulting, Inc. Barbara S. Kinosky, Esq., Centre Consulting, Inc. Date April 14, 2008 Time 3:00 pm– 4:00 pm

  2. Challenging Issues • Contractor Teaming Arrangements (CTAs) vs. Prime/Sub: The Differences and Their Impacts • The New T&M Rule & Its Impact on Subcontracting • Mandatory vs. Non-mandatory Flow downs & Audit Rights. • Small Business Subcontracting Plan Compliance & Reporting

  3. CTAs vs. Prime /Sub What’s the Difference? • CTA: All teammates are selling off their own Schedule • Prime/Sub: All teammates are selling off the Prime’s Schedule!

  4. CTAs vs. Prime /Sub What’s the Difference? • Prime/Sub: Only the “prime” has privity with the Gov’t customer. • CTA: All teammates are “primes” with “privity” to the Gov’t customer. • But one may act as “team leader” for invoicing and management purposes of the convenience of the Gov’t

  5. CTAs vs. Prime /Sub Issues #1 - Who Pays/Reports IFF? • Prime/Sub: Prime reports all sales and pays IFF. • CTA: Presumption is that each teammate separately reports and pays IFF on their “share” of the sales • Important to address this in the teaming agreement!

  6. CTAs vs. Prime /Sub Issue #2: Prime Markups • Prime/Sub: Prime sets the mark-up on teammate work subject to price limits of Prime’s Schedule. • CTA: Leader may bill for entire team but can never bill more than applicable teammates Schedule rate/price. • Compensation to Leader Needs to be Addressed in Teaming Agreement.

  7. CTAs vs. Prime /Sub Issue #3: Is a Commercial Discount Involved? Problem: GSA Considers Dealings Between a Sub & a Prime to Be a “Commercial” Transaction – If Sub Bills Prime Below its Own GSA Rate It May Trigger a Price Reduction! Unless Prime has LOA to Buy for Gov’t off Schedule

  8. CTAs vs. Prime /Sub Is A Commercial Discount Involved? • Prime/Sub: Clearly a Commercial Transaction that could trigger a Price Reduction. • CTA: Not a Commercial Transaction! But many Gov’t Auditors Get it Confused.

  9. CTAs vs. Prime /Sub Issue #4: Small Biz Set Asides • Prime/Sub: Prime must be small and must do >50% of work on TO or BPA • CTA: All teammates must be small and “team” must do >50% of the work on TO or BPA.

  10. The New T&M Rule & Subcontracting New FAR Rules Provide Multiple Solutions Rule #1 – T&M for Commercial Services (FAR 52.216-31)- Prime & Subs Bill at Prime’s Rate. Rule #2 – T&M for Non Commercial Services with Competition (FAR 52.216-29) – Prime & Subs Bill at Blended Rate. Rule #3 – T&M for Non Commercial Services Without Competition (FAR 52.216-30) – Establish Separate Bill Rates for Prime & Each Sub.

  11. Commercial Item? No Yes DoD Contract? All at Prime’s Rate ____________ Blended, separate or combination No Must use separate rates for prime and subs Adequate Price Competition Yes No The New T&M Rule & Subcontracting

  12. The New T&M Rule & Subcontracting What’s the Rule for GSA Schedules? • No formal position taken to date. • GSA will almost certainly adopt “Commercial Rule” – i.e, entire team bills at rate set by Prime.

  13. The New T&M Rule & Subcontracting Special DoD Issue • 2008 DoD Authorization Act mandates new DFAR by late June limiting DoD’s use of T&M contracts for “commercial services” • No Rule to date: But expect Rule making it very hard for DoD to buy commercial services on T&M basis • If GSA adopts “commercial” T&M rule then DoD Schedule Buys will likely have to be FFP or FFP LOE

  14. The New T&M Rule & Subcontracting Other Prime/Sub Issues Prime’s Invoices are Subject to Audit! • Audit Focus extends to time records and labor qualifications • Need to flow down ability to obtain and audit Sub’s time records and resumes • If Sub’s Personnel don’t meet Prime’s Qual Reqts, Sub Labor must be billed at “Cost”

  15. GSA Prime/Sub Flowdown & Audit Issues Mandatory Flowdowns Per FAR Part 12 • Utilization of Small Business Concerns (FAR 52.219-8) • Equal Employment Opp (FAR 52.222-26) • Affirm. Action for Disabled Vets (FAR 52.222-36) • Affirm. Action for disabled Workers (FAR 52.222-36) • Preference for Privately Owned US Flagged Vessels (FAR 52.222-41) • Service Contract Act (FAR 52.222-41)

  16. GSA Prime/Sub Flowdown & Audit Issues Other “Desirable” Flowdowns • Termination Rights • Changes Rights • Gov’t Audit Rights. • Any Requirements Imposed on the Prime by the Government

  17. GSA Prime/Sub Flowdown & Audit Issues Special Subcontractor Audit Issues • Products: Buy America & Trade Agreements Act Compliance • Services: Time Keeping and Labor Qualification Compliance

  18. Small Biz Subcontracting Plans ISSUE#1 - Compliance • Applies to large businesses only. • Plans Set Forth Goals That Contractor Is to Strive to Achieve In Performing GSA Task Order Awards • GSA is Relatively Inflexible in Negotiating the “Goals.” Views Requirement as a SBA Mandate • Plans Become a Contract Requirement Whereby Large Business Must Exercise & Demonstrate “Good Faith” In Pursuing Socio-Economic Goals

  19. Small Biz Subcontracting Plans Compliance Response • Annual Reports of Goal Achievement to Be Submitted to GSA– Individual Subcontract Report (i.e., the former SF 294) • Failure to Achieve Goals Subjects Contractor to Potential Audit of Whether It Exercised “Good Faith” in Pursuing Goals. • Be Prepared to Demonstrate “Outreach” efforts if Goals aren’t met.

  20. Small Biz Subcontracting Plans SBA Regs Give The Following Examples Of “Good Faith Efforts”(13 CFR 1235.3(b)) • Break up work into small enough pieces for small businesses • Do market research to look for small businesses in all appropriate places, including CCR, Pro-Net • Attend “matchmaking” events • Give small businesses plenty of time and help in preparing proposals • Help small businesses finance contract work • Participate in a mentor/protégé program

  21. Small Biz Subcontracting Plans Issue #2 – Reporting • Historical Issue. Ordering Agencies Want Credit For Subcontracting On GSA Task Orders • GSA’s Position Is That Ordering Agencies Should Not Require Subcontracting Plans On GSA Task Orders. • GSA Claims Including A Subk Plan On A Task Order Is An Illegitimate Modification To The Terms Of The Schedule Contract - Double Counting

  22. Small Biz Subcontracting Plans Other Issues – Summary Reporting • The SF 295 is a summary form that covers all subcontracting at an agency. Now called a Summary Subcontract Report (SSR) • Ktr must file a SSR if Ktr has SubK plan on any contract at that agency • Issue: Will a GSA TO at an agency trigger the requirement to submit a 295? • GSA & SBA maintain “No.”

  23. Small Biz Subcontracting Plans Other Issues – FFATA Reporting • New FAR 52.204-10 Reporting Subcontract Awards • Implements the Federal Funding and Accountability Transparency Act • Contractors required to report subcontracts over $1 million to www.esrs.gov

  24. GSA Schedules – Subcontracting Issues Questions?

  25. GSA Schedules – Subcontracting Issues Thank You! bkinosky@centreconsult.com jphillips@centreconsult.com bcaney@centreconsult.com

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