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FAR 12 vs FAR Subpart 8.4

Imagine these parts of the FAR are heavyweight prize fighting boxers.  FAR 8.4 holding the title is challenged by FAR 12.  Who do you think will win?  FAR 12 of course.

That is exactly what happened on March 10, 2015 when the United States Court of Appeals for the Federal Circuit in CGI Federal, Inc. V. United States  2014-5143 reversed and remanded the COFC's ruling that FAR 12 is not applicable to orders under FAR 8.4.

Excerpt from the Federal Circuit's ruling:  To the extent there is any perceived inconsistency between FAR Subpart 8.4 and FAR Part 12, FAR Part 12 controls. 48 C.F.R. § 12.102(c) (“When a policy in another part of this chapter is inconsistent with a policy in this part, this part 12 shall take precedence.”).

 

FAR 12.102(c) is one of my favorite parts of the FAR.  Why? Because Lord of the Rings is also one of my favorite movies.  FAR 12.102(c) is akin to Sauron's Ring which is the one ring that rules them all.  FAR 12 trumps all that disagree with it. One cannot help but have profound reverence for such power.

 

Hereafter I will refer to FAR Subpart 12.102(c) as Sauron's Ring (SR).  One example of SR's power is the fact that all changes to contracts (remember, an “order” is also a contract) subject to FAR part 12 procedures can only be accomplished bilaterally in accordance with FAR 52.212-4(c).  A contracting officer (CO) who literally follows the FAR’s prescription in FAR 43.205 for either Fixed Priced Contracts or Time and Material/Labor Hour (T&M/LH) Contracts will undoubtedly insert the changes clauses in such contracts (Reference FAR 52.243-1 and 52.243-3).  However, the CO will soon feel the power of SR as those clauses (while literally prescribed by the FAR) are trumped by FAR 52.212-4(c) for the acquisition of commercial items.

 

Based on the Federal Circuit’s ruling that FAR part 12 is indeed applicable to orders under FAR subpart 8.4, does this mean that SR would trump FAR 8.402(f) with regard to T&M/LH orders governed by FAR 52.212-4 Alt I which exists in every Schedule Contract for professional services?

 

Every Schedule contract for professional services reads as follows with regard to FAR 52.212-4 Alt 1(i)(1)(ii)(D):

 

  1. Other Costs. Unless listed below, other direct and indirect costs will not be reimbursed.

 

  1. Other Direct Costs. The ordering activity will reimburse the Contractor on the basis of actual cost for the following, provided such costs comply with the requirements in paragraph (i)(1)(ii)(B) of this clause: To be determined by task order CO.

 

  1. Indirect Costs (Material Handling, Subcontract Administration, etc.). The ordering activity will reimburse the Contractor for indirect costs on a pro-rata basis over the period of contract performance at the following fixed price: To be determined by task order CO.

 

Notice the above filled in language at the Schedule contract level in bold “To be determined by the task order CO.”   What does that mean?  Exactly what it says.  To be determined by the task order CO who follows the procedures for reimbursement detailed in FAR 52.212-4 Alt I.  FAR 8.402(f) on the other hand is most definitely inconsistent with these FAR part 12 procedures.  Again, the Federal Circuit ruled  To the extent there is any perceived inconsistency between FAR Subpart 8.4 and FAR Part 12, FAR Part 12 controls. 48 C.F.R. § 12.102(c) (“When a policy in another part of this chapter is inconsistent with a policy in this part, this part 12 shall take precedence.”).

 

While it is certainly a stretch to make a bold assertion that SR trumps ordering procedures under FAR 8.4 (indeed it is one thing to develop requirements in an order RFQ that are inconsistent with commercial practices which are trumped by SR as shown in the above ruling and quite another to use that same analogy to assert that SR trumps FAR 8.402(f) itself for T&M orders), it makes us even more aware that the disharmony between the procedures at FAR 52.212-4 Alt 1(i)(1)(ii) and FAR 8.402(f) needs resolution.

 

Hence I encourage all to be on the lookout for FAR Case 2015-023** Federal Supply Schedule Order Level Materials as this case will help foster forward progress to resolve the disharmony between FAR 12 Vs FAR 8.4 with regard to procuring order level materials on T&M orders under MAS. You can track the status of the case by viewing the FAR Open Cases Report here: http://www.acq.osd.mil/dpap/dars/far_case_status.html

 

**UPDATE** This FAR case is on hold. See GSAR Case 2016-G506 published September 9, 2016. It is also detailed in this blog post titled GSA Proposes New Rule Allowing Other Direct Costs into Scheduls Program

 

 

Important note: The views expressed on this blog post are those of the individual content creators. These views and posted comments do not necessarily reflect GSA policy and should not be viewed as such. The stated opinions contained herein are just that, our opinions as experienced contracting professionals.  

 

Author of this blog post: Brad deMers

 

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