AFARS APPENDIX BB

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AFARS -- Appendix BB

Installation Support Services Contract Administration

June 1, 1996

Part 1 -- Introduction

BB-100 Scope and Applicability.

This Appendix prescribes procedures to be followed in administering installation support service contract performance. The need for cooperation between contracting officers and the functional personnel who serve as their authorized representatives, the need for documentation and the application of good business judgment is emphasized. This Appendix is applicable to all service contracts with a value greater than the simplified acquisition threshold.

BB-101 Definitions.

As used in this Appendix, the following terms shall have the meaning given:

"Administrative Team" means the contracting officer and those specialists and authorized representatives from whom the contracting officer may request reports or advice. Composition of the team will vary with the contracting officer's needs.

"Authorized Representative" means a member of a functional activity who is authorized by the contracting officer to monitor or inspect contract performance on a specific contract. The person may be either a Contracting Officer's Representative (COR), Quality Assurance Evaluator (QAE), inspector or monitor.

Part 2 -- Contract Administration at the Installation

BB-200 Cooperation and Leadership.

(a) The administration of installation support service contracts is an important part of Army installation operations. The need to reduce operational costs is increasing the use of contractors to perform installation operations. However, the degree to which savings are achieved and an acceptable level of quality is maintained depends on the motivation and managerial skills of the contractor and, to a lesser extent, the Government personnel assigned. The purpose of contract administration is to assure the contract is performed as specified and assure any significant contractor or Government failures are acted upon promptly. Small problems left unresolved or unreported can eventually result in significant performance problems and even litigation.

(b) Contract administration is a multi -- disciplinary process, the success of which depends on communication and cooperation. The leader of the contract administration team is the contracting officer, who will determine the composition of the team. The FAR and the statutes it implements provide the contracting officer with authority. The authority of the team members is determined by the contracting officer. The skill level and the number of personnel assigned should be commensurate with the technical complexity of the contract and may increase or decrease depending upon the quality of the contractor's performance.

(c) The contracting officer must actively administer the contract and cannot abdicate responsibility to authorized representatives. When authorized representatives are not in the same organization as the contracting officer, the contracting officer must be allowed direct access to these representatives and they to the contracting officer. Any arrangement other than direct access will result in unnecessary delays which diminish both the contracting officer's team control and the probability of receiving timely contract performance.

(d) Successful contract administration is heavily dependent on the application of good business judgment. Accordingly, the requirements of this Appendix should be viewed as fostering good business judgment and not as its substitute. Successful installation support service contract administration depends on both leadership and support from commanders at all levels.

BB-201 Delegation versus Retention of Authority.

In contract administration, the contracting officer is the only official at the installation who has the authority to obligate the Government by issuing a contract modification or change order. This authority is referred to as "actual" authority, and is the only authority that can legally bind the Government. Therefore, contracting officers must be selective in determining who can be entrusted as their authorized representatives. Delegations of actual authority should be restricted to the minimum needed to perform adequate contract surveillance and other postaward contract administration. The contracting officer is under no obligation to make any delegations and may elect to retain all actual authority.

BB-202 Relationship with the Defense Contract Management Command (DCMC).

DFARS 242.203(a)(i)(F) permits the Director of Contracting (DOC) to retain responsibility for administering post, camp and station purchases. Accompanying this responsibility is the potential need to perform all the contract administration functions listed in FAR 42.302(a). Therefore, the contracting officer must carefully consider the activity's capability to execute contract administration functions. Support from the DCMC may be necessary. However, requests for DCMC support should be coordinated to ensure availability of resources.

BB-203 Authorized Representatives.

A contracting officer may select and designate any Government employee, military or civilian, to act as an authorized representative in administering a contract which is not assigned to DCMC for administration, subject to the authority and limitations in DFARS 201.602 -- 2 and 252.201 -- 7000.

Part 3 -- Postaward Orientation of Contractors

BB-300 General.

A key to successful contract performance is mutual understanding by contractor and Government representatives of all contractual requirements and obligations. Conducting a postaward orientation conference as described at FAR Subpart 42.5 can foster that understanding.

Part 4 -- Development and Use of Contract Surveillance Plans

BB-400 General.

(a) Contract surveillance is intended to monitor contractor performance to ensure the services received are consistent with contract requirements. For that reason, a surveillance plan prepared in accordance with Office of Federal Procurement Policy (OFPP) Pamphlet 4, Chapter 4, The Surveillance Plan, shall be used. Surveillance shall be conducted according to the surveillance plan and surveillance procedures described in OFPP Pamphlet 4, Chapter 5, Doing Surveillance.

(b) Although OFPP Pamphlet 4 refers to the use of Acceptable Quality Levels (AQLs), the surveillance plan should refer to minimum acceptable standards of performance, not AQLs. DoD no longer specifies AQLs in military specifications. AQLs were developed for use in a production environment and should not be confused with minimum acceptable standards of performance in service contracts. The statutory requirement expressed in OFPP Pamphlet 4 is that the statement of work present the actual minimum requirements of the Government. However, the statement of work must avoid requiring more of a contractor than the Government would provide if it were performing the service.

Part 5 -- Contract Payments

BB-500 Fixed -- Price Contracts.

(a) Fixed -- price service contracts include the payments clause at FAR 52.232 -- 1, which stipulates the conditions under which payments shall be made.

(b) The contracting officer is encouraged to counsel contractors on how to submit and properly complete invoices. This may be done at the postaward orientation conference or shortly thereafter. Guidance on the processing of contractor invoices, as well as the preparation and certification of payment vouchers for fixed -- price contracts, is provided in AR 37 -- 1, Chapter 20, Section IV.

(c) Deductions taken from the invoice, as provided in the contract, are the responsibility of the contracting officer. (See OFPP Pamphlet 4, Chapter 5, Doing Surveillance.) The contracting officer shall analyze and validate all documentation for contract deduction and notify the contractor of the proposed deduction. The Government does not have the right to reduce or suspend payments as a retaliatory or punitive action for disagreements with the contractor over issues not subject to deductions.

(d) Once the contracting officer makes the final decision on the amount due the contractor, the payment shall be appropriately reduced. The balance due is payable to the contractor or a designated fiduciary interest. Because of the Prompt Payment Act (PPA), deduction and payment decisions shall be made in a timely manner (AR 37 -- 1, Chapter 20, Section V).

BB-501 Cost -- Type Contracts.

(a) Contractors awarded cost -- type contracts are responsible for preparing and submitting reimbursement claims according to the terms of their contract. Reimbursement claims require the preparation and submission of public vouchers (i.e., Standard Form 1034, Public Voucher For Purchases and Services Other Than Personal) directly to the Defense Contract Audit Agency (DCAA) auditor with a duplicate copy to be sent to the contracting officer. The contracting officer shall ensure that the contractor's public vouchers are submitted in accordance with DCAA Pamphlet 7641.90, Guidance for New Contractors. (Guidance on preparing public vouchers provided at AR 37 -- 1 is generally not applicable to cost -- reimbursement contracts.) All interim public vouchers shall be marked "Cost Reimbursement -- -- Provisional Payment." The final public voucher shall be marked "Cost Reimbursement -- -- Completion Voucher." When requested by the contracting officer, the DCAA auditor shall examine interim vouchers submitted for provisional payment, and transmit them to the contracting officer. Contracting officers, not the DCAA auditors, have primary responsibility for ensuring that interim claims are fully supported by payroll and other appropriate types of documentation. The vouchers must be thoroughly reviewed for allowability, allocability, cost reasonableness and accuracy prior to payment. The contracting officer must disallow any unsupported or unallowable costs that are identified during the billing review process. The contracting officer shall review copies of paid vouchers to assure adequate evaluation of the contractor's overall contract management, cost control effectiveness and performance.

(b) During the examination of vouchers or conduct of audits, deficiencies which reflect seriously upon the contractor's ability to efficiently perform present or future Government contracts may be disclosed. These deficiencies may relate to such matters as cost controls or management practices. Any such disclosures will be reported by the contract auditor to the contracting officer for appropriate action.

(c) The contracting officer's responsibilities for allowability of the total contract cost extend beyond review of specific transactions. The contracting officer shall always be alert to problems of overstaffing, excessive overhead costs, and other indications of unreasonable costs being incurred. When the contracting officer believes that unallowable costs have been claimed, discussions shall be held with the contract auditor and other technical specialists as necessary to develop a review program for such costs.

(d) Close liaison with the contract auditor is to be maintained to assure timely resolution of all cost issues prior to receipt of final vouchers. The contracting officer shall review the applicable overhead rate agreement when overhead rates are established by audit determination.

(e) The contracting officer has responsibility for reviewing the total amount claimed by the contractor upon completion of cost reimbursement contracts. The DCAA contract auditor is the authorized representative of the contracting officer for the purpose of examining reimbursement vouchers received directly from contractors and transmitting those vouchers approved for provisional payment to the disbursing officer. All suspension or disallowance actions shall be taken through the use of DCAA Form 1, Notice of Contract Cost Suspended and/or Disapproved, which the DCAA auditor issues and submits to the contractor. In addition, the contracting officer may direct DCAA Form 1 to be issued for any cost reimbursement request that should be suspended or disapproved. Completion vouchers are forwarded by the contract auditor to the contracting officer for approval and transmittal to the disbursing officer.

(f) All determinations of allowability of costs shall be in accordance with FAR Part 31, DFARS Part 231 and specific terms of the contract.

(g) In the case of disallowance actions, the contractor has 60 days after receipt of DCAA Form 1 to appeal. If the contractor makes such an appeal, the contracting officer shall make a determination in writing as promptly as practicable, and mail or otherwise furnish a copy to the contractor, the auditor and the payment office. These determinations sometimes involve very complex issues and large amounts of money. Moreover, they may have an impact far wider than the particular transaction at issue. The contracting officer shall seek legal counsel, an auditor's opinion, or other expert advice, as appropriate, before reaching a decision.

(h) If the contracting officer contemplates making a final cost determination that is inconsistent with the auditor's advice and/or the decision has a potentially major impact on contract costs, the contracting officer shall prepare a memorandum describing the pertinent events and factors considered in reaching the decision.

(i) On receipt of the final or completion voucher, the auditor will transmit an advance copy of the voucher and any closing statements received from the contractor to the contracting officer. Upon completion of the audit, the auditor will transmit the original of the voucher and the contract audit closing statement to the contracting officer. The contracting officer shall review the final voucher to -- --

(j) The contracting officer shall approve and transmit the final voucher to the designated payment office for payment only when all administrative closing requirements have been satisfied.

BB-502 Limitation of Cost.

(a) On any cost -- type contract, the status of contract funds is essential information to the contracting officer, the functional managers and the comptroller. Based on an analysis of contract funds status, fund requirements are updated, the need for new funds is forecasted, decisions are made which affect budget estimates, and overrun/underrun conditions are anticipated. There are several methods which allow the Government to stay current on the status of funds:

(b) Under the "Limitation of Cost" clause, the contractor must notify the contracting officer in writing within a certain time period if the contractor expects to incur costs exceeding a certain percentage as specified in the clause. Normally, the contracting officer will evaluate the impact of such a notice by using a pricing team (FAR 15.805). Team members shall be determined by the contracting officer.

(c) The limitation of cost letter is a warning notice sent by the contractor to alert the contracting officer to possible funding problems. Only when one of the clause thresholds is triggered is the letter submitted. Those contracts that include a DD Form 1423 (Contract Data Requirements List) requiring the submission of either a CFSR or similar fund notice from the contractor to the contracting officer will result in periodic reports on the status of funds. The level of reporting, frequency and other instructions related to preparing the report are included in the DD Form 1664 (Data Item Description).

BB-503 Contract Funds Status Report or Funds Notice.

(a) AR 37 -- 200, Appendix B, contains guidance on the CFSR and funds notice which are designed to provide funding data to the contracting officer and selected functional managers for -- --

(b) The CFSR or funds notice is normally not required on the following contracts:

(c) The CFSR or funds notice shall be compared to prior submissions to determine whether there are any changes in trends requiring a detailed analysis. Factors to look for are significant dollar changes in actual or estimated expenditures, projected overruns or underruns and significant modification activity. Should a more detailed review be necessary, the contracting officer shall designate a pricing team as prescribed by FAR 15.805 to examine the areas of concern.

BB-504 Payment of Award Fee.

The fee pool for paying award fees under cost -- reimbursement contracts is established in negotiations prior to the contract award. The amount of the award fee actually awarded to the contractor is a subjective, unilateral determination by the Government, based largely on contractor performance assessed by following the established contract surveillance plan. DFARS Table 16 -- 1 contains guidance on using contractor performance evaluation criteria, and DFARS Table 16 -- 2 contains guidance on preparing a contractor performance evaluation report.

Part 6 -- Contract Modifications

BB-600 Supplemental Agreements.

When supplemental agreements are issued, it is essential that the changes to the accounting and appropriation data and the performance schedule for each line item affected be included in the modification. The omission of these data adversely affects purchasing, financial and functional activities, often necessitating additional communications between these activities.

BB-601 Change Orders.

Internal requests for the initiation of change orders shall be accompanied by a funds citation for the estimated dollar value of the change. At this time, this information is for internal purposes only and shall not be included in any copies of the change order given to the contractor. Change proposals initiated by the contractor shall be referred to the contracting officer for processing. It is recommended that the contracting officer obtain the contractor's written acceptance of such changes prior to issuing the change order and that the contractor's written communication be referred to in the change order. If the contracting officer determines that the contractor should effect a change at no cost to the government, the contracting officer shall include a statement to that effect in the change order. If the contractor refuses a no -- cost change order, the contracting officer shall reconsider and, if appropriate, negotiate an equitable adjustment and execute a supplemental agreement.

Part 7 -- Postaward Pricing Actions

BB-700 General.

The need for assistance from a cost and price analyst and others in negotiating a fair and reasonable price/cost for a contract modification is determined by the contracting officer who has sole responsibility for determining the Government's position and the final pricing decision (FAR 15.805 -- 1(a) and FAR 15.807).

BB-701 Price Negotiation Memorandum.

At the conclusion of each price negotiation, a PNM shall be prepared in accordance with the requirements of 15.808. The PNM shall contain sufficient detail to permit the tracking of cost elements from the contractor's proposal through the Government's position to the final agreement. The objective is to provide an audit trail and accompanying narrative.

BB-702 Cost Accounting Standards.

Contracts awarded for installation support are generally retained for administration in accordance with FAR 42.203(a) and DFARS 242.203(a)(i)(F). See FAR 30.601. FAR 4.201(d) contains instructions for marking and distributing contracts to DCMC for Cost Accounting Standards Administration only. Consult DLAH 4105.4 to determine the cognizant CAO.

Part 8 -- Subcontracting

BB-800 Consent to Subcontract.

(a) Prime contractors are responsible for selection of subcontractors. As provided in the prime contract, the contracting officer may be required to consent to the placement of subcontracts (FAR 44.201 -- 2). Obtaining and coordinating recommendations from other specialists is also the responsibility of the contracting officer.

(b) The contracting officer shall issue a letter identifying the subcontract and advising of the contracting officer's consent to placement. In the case where consent is not given, state the justification. The letter of consent shall state the following:

(c) The contracting officer shall be responsible for screening the List of Parties Excluded From Procurement Programs to determine if the proposed subcontractor is listed. When a listed firm is proposed as a subcontractor, the contracting officer shall not consent to the subcontract and shall advise the contractor in writing. The reason for the firm being listed will not be divulged to the contractor. Any decision to consent to a subcontract with a firm listed for a felony criminal conviction must first be referred by the contracting officer through the HCA to the Chief, Procurement Fraud Division, Office of the Judge Advocate General, Attn: DAJA -- PF, 901 N Stuart Street, Suite 400, Arlington VA 22203 -- 1837. (See 9.405 and DFARS 209.405 for additional guidance.)

(d) Contracting officers shall withhold consent to subcontracts requiring submission of certified cost or pricing data under the conditions described in FAR 15.804 -- 2 unless such data are obtained.

(e) The contracting officer shall consider FAR 44.202 prior to consenting to subcontracts.

BB-801 Small Business and Small Disadvantaged Business Concerns.

It is Government policy that small business and small disadvantaged business concerns receive a fair share of contracts and subcontracts and that all contracting and contract administration activities take reasonable actions to increase participation by such firms. When contracts contain an incentive subcontracting program clause (FAR 52.219 -- 10), the small and disadvantaged business utilization (SADBU) specialist shall work closely with the contracting officer to provide assessments of the contractor's performance and recommendations regarding the percentage of fee to be awarded, if any.

Part 9 -- Labor Relations and Labor Standards

BB-900 General.

The federal government is neutral in any dispute between a contractor and its employees. Consequently, the contracting officer may not attempt to mediate or otherwise resolve the dispute. Instead, the contractor shall be advised that continued performance is expected and any reasonably avoidable delays arising from the work stoppage may not be excused (FAR 22.101). If it is apparent that the contractor will be unable to continue installation support services due to a labor dispute, the contracting officer shall either initiate contingency actions to continue services using Government personnel (AR 210 -- 10, paragraph 5 -- 11 and Appendix A) or take other appropriate actions under the terms of the contract.

BB-901 The Army Labor Advisor.

The Army Labor Advisor, identified in 22.001, plays a key role in the consistent interpretation of labor laws and regulations in the Army. It is essential that those involved with labor issues carefully follow Part 22, FAR Part 22, and DFARS Part 222.

BB-902 Classification of Service Employees.

The contracting officer should be alert to the possibility that the contractor may attempt to use the conformance process to lower labor costs (e.g., having properly classified secretaries effectively reclassified as lower paid file clerks), thereby increasing profits or competitive advantage. The contractor assumes the risk of misjudging unlisted rates when formulating the bid (Sunstate International Management Services, Inc., Comp. Gen. B -- 227036, 87 -- 2 CPD 124 (31 Jul 87) and Collins International Service Company v. U.S., 744 F. 2d 812 (Fed. Cir. 1984)). If the contractor bids unreasonably low labor rates, the conformance action cannot be used to enhance the contractor's financial position to the detriment of the employees.

BB-903 Reconsideration of Wage Rates.

When the DOL reconsiders wage rates, the rates are reevaluated based upon the latest available data. Consequently, a request for reconsideration will most often result in higher labor rates and higher costs to the contracting agency.

Part 10 -- Property Administration

BB-1000 General.

Contractors are ordinarily required to furnish all property necessary to perform government contracts; however, if contractors possess Government property, follow the policy in FAR 45.102 and the applicable portions of the DoD 4161.2 -- M, Manual for the Performance of Contract Property Administration.

Part 11 -- Options

BB-1100 General.

While the functional performance of installation support services contracts is needed year after year, it remains difficult to determine both what may be needed and what a fair price would be over an extended period of time. Accordingly, each decision to exercise an option must be made carefully. In reaching a decision, the contracting officer shall make the determinations at FAR 17.207(c). Document the contract file to support the action taken.

Part 12 -- Disputes and Appeals

BB-1200 General.

Follow the guidance at Subpart 33.2, FAR Subpart 33.2, and DFARS Subpart 233.2.

Part 13 -- Contract Closeout

BB-1300 General.

Follow the guidance at FAR 4.804 and DFARS 204.804.

BB-1301 Terminated Contracts.

(a) Upon a complete or partial termination for convenience of the Government, the contracting officer shall provide a copy of the DD Form 1597 to the TCO. The TCO shall complete and sign the DD Form 1597 and return it to the contracting officer, together with the completed termination case file. The contracting officer shall then resume normal contract closeout procedures. (In the absence of a TCO, the ACO shall assume the TCO duties described in FAR 49.105.)

(b) The complete or partial termination of a contract for default is the responsibility of the PCO who shall resolve the terminated portion. Any unaffected portion shall be processed for closeout upon contract completion.

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