Blog

February 17, 2014

Consulting Agreements - a somewhat surprising exclusion from the reviewable universe.

Recent CPSR Data Calls have been including the following types of procurements from review:

Consultant Agreements (where the consultant is a contract hire, acting as an employee of the company, under the direct supervision of company personnel).

During live CPSRs (conducted in 2013), we've learned that this exclusion applies to consulting agreements with individuals (or sole proprietors of small businesses) that could have been an employer/employee relationship but, due to internal corporate direction (or for the convenience of the individual) was completed as a contract position. Part of the reasoning behind this new exclusion seems to be an acknowledgement that companies can't always control the Make/Buy process when it comes to hiring highly skilled individuals. 

In other words, you may want to hire them but can't because ... the individual simply doesn't want to be tied down to a 9-5 job. Or you may want to hire them but you lack sufficient funding for a full time position so the position is shifted to hourly due to internal budget issues. Maybe the position is only for 6 months and does not meet internal corporate requirements for a full-time position. In these situations, it would seem DCMA does not want to force contractors to make corporate Make or Buy decisions based solely on potential CPSR requirements while acknowledging that these sorts of consulting agreements (usually labor hour or T&M with travel at actuals) represent relatively low performance and financial risk to the government (e.g. at full time 1920 hours the consultant could make $350 an hour and still have $20K left for travel for a grand total of $692,000.00; you have to have a REALLY EXPENSIVE consultant working full time and travel to come close to TINA). 

So what do you do with consulting agreements? In short, do what you usually do. The regulatory requirements that apply to all contractor supply chain members (price analysis, EPLS, DPAS, etc.) still apply to consultants. Also, it's simply good business practice to review pricing and make sure the company is not debarred!

Three requirements to consider:

Source Justifications - from a practical perspective, I would not let requisitioners know that consulting agreements are potentially exempt from review. If you do, you risk a rush to CA and the abdication of otherwise required documentation. I would keep the requirements facing the requisitioner - including source justifications and technical evaluations - static for consulting agreements whether or not DCMA wants to see them.

Reps and Certs - many of the certs should stay as still applicable (PIA, Debarment, Size Cert) but some (including Buy American Act, EEO, Affirmative Action and Previous Contract Compliance) may be eligible for removal. 

Advance Notice and Consent - Are you required to submit consultants for consent? I would say - yes because you are billing them as subcontract labor and failure to get consent could lead to rejection of invoices. But I would suggest broaching the subject with your A/CO. If the answer now is "yes," the worst that will happen during this conversation is confirmation from the government on the requirement. But you also have an opportunity to get a blanket exemption contract-to-contract if you have an open-minded (or lazy) CO.

And finally:

Fee on Consultant Labor under CPFF prime contracts - This could be a big issue due to prohibitions on pyramiding fee. If the consultant can't provide evidentiary cost data disclosing the fee per rate and/or the contractor can't prove that the overall fee percentage for the project is not exceeded due to the placement of contractor fee on the rate, then the CO can reject fee on consultant hours.