More guidance coming on time-and-materials contracting

Contracting officers have been confused about how time-and-materials contracts work and how to justify them.

Officials intend to clarify the rules that require contracting officers to explain their decisions for awarding time-and-materials contracts for commercial services.

Because of some confusion in the past years about the rules, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council have proposed amending acquisition rules to make it obvious to contracting officers the definition of a time-and-material contract and about explaining why they awarded that type of contract, according to a notice in the Sept. 27 Federal Register.


Related stories:

Agencies turn to GSA Schedules for T&M contracts

DOD tightens reins on contractors


The Government Accountability Office reported in 2009 about several misunderstandings among contracting officers across the government. Many of them thought the fixed-price labor rates in time-and-materials contracts made them a fixed-price type of contract. GAO also found a general misunderstanding about when it's necessary to justify the use of a time-and-materials contract when purchasing commercial services. During an audit, GAO concluded that managers were not detecting that contracting officers were failing to comply with these safeguards around time-and-materials contracts.

When buying commercial services, officers must give an account for their decision to use the type of contract in which a company bills the government for its time or labor hours and its materials. A contract with a set price is safer for the government because the time-and-materials contracts can get out of control, officials say. Regulations also tell the officers to give details about their market research efforts and describe how they will use fixed-price contracts on future or follow-on acquisitions, the councils said.

Contracting officers have been allowed to buy services with this type of risky contract, but the officers also have to justify why they’re using it. Certain parts of the Federal Acquisition Regulation are clear about when a justification is necessary, but other parts are not so obvious, the councils said. And that's caused some problems. Through the proposed modifications, the councils hope to fix those problems.

The councils are accepting comments on their proposal through Nov. 26.

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