T M LH Contracts Kevin Cox

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Time and Materials &

Labor Hour Contracts

Kevin Cox
SFA Contracts
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Definitions and
Applications
Time and Materials contracts provide for
acquiring supplies/services on the basis of:
Direct Labor Hours at specified fixed hourly
rates
Materials at cost, including material handling
costs if appropriate
Labor-Hour contracts are a variation of the
T&M contract that exclude materials
supplied by the contractor
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Definitions and Applications
Time and Material (T&M) and Labor Hour
(LH) contracts are used when it is not
possible to estimate accurately the extent
or duration of the work or to anticipate
costs with any degree of confidence.

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Definitions and Applications
Limitations: T&M & LH contracts may be
used:
Only after the Contracting Officer executes a
determination that no other contract type is
suitable
Only if the contract includes a ceiling price
that the contractor exceeds at their own risk.
Changes in ceiling price will be documented
by the Contracting Officer

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Surveillance of T&M/LH
Contracts
CAO shall perform surveillance:
T&M/LH contract provides no positive profit
incentive for cost control or labor efficiency.
DCMA is to assure that the contractor is
performing efficiently and using effective cost
control measures
ACO shall, with appropriate functional
elements, establish a surveillance plan
immediately after award.
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Surveillance of T&M/LH
Contracts
Plan shall include periodic audits of
contractors billings and periodic floor
checks
ACO shall pay special attention to the
withhold applicable to contractors billings
ACO shall review paid and/or rejected
vouchers
ACO is responsible for approving the final
voucher
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FAR 52.232-7 requires, unless otherwise
prescribed in the Contract Schedule:
Withhold of 5% of Direct Labor Dollars
Withhold shall not exceed $50,000 for the
contract
Withhold may have to be taken against
several orders at one time
Withhold shall be retained until the execution
of the Contractors Final Release

T&M/LH Withhold and Payments
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For T&M/LH orders under Basic Ordering
Agreements (BOAs), the $50,000
maximum withhold applies to each BOA
order, as each is an individual contract.
For T&M/LH orders under Indefinite
Delivery type contracts (IDTCs), the
$50,000 maximum withhold applies to
aggregate of all active orders issued
under the IDTC.
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ACOs should be aware that withholds
which are spread across differing fund
cites need to be carefully monitored to
ensure equity among buying activities and
to identify the aging of unliquidated
funding.
T&M/LH contracts are a form of a cost
contract and therefore public vouchers are
required for billings
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Surveillance Plan should address review of
Interim Vouchers for:
Proper billings
Proper withholdings
Reasonable assurance that efficient &
effective cost controls are being used
Additional billings/payments guidance can
be found in the ONE BOOK Chapter on
Public Vouchers
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T&M/LH orders placed under a BOA are
individual contracts. Withholding and
release provisions apply per order.
T&M/LH orders placed under IDTCs are
not stand-alone contracts and are used
for control and tracking within the IDTC.
For MOCAS purposes, each IDTC order is
tracked separately.
Closeout of T&M/LH Contracts
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IDTC T&M/LH orders require only one
release, one aggregate withhold, and one
final voucher for the contract.
To facilitate the timely closing of
individual IDTC orders, the withhold will
be transferred to a active order.
An IDTC order should not be closed if it
would cause a lack of withholding.
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The contractor should submit a last
interim voucher for each delivery order
indicating:
This is the final billing for the delivery order
The withhold amount being transferred
The delivery order numbers the withhold is
being transferred to
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CLOSEOUT with the associated final
voucher, release, audit and whatever
other appropriate closeout actions are
required should occur with completion of
the final delivery order.
Final closeout of the IDTC should reflect
all prior actions in closing individual
delivery orders.
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Summary & Recommendations
Establish and monitor surveillance plan

Apply Withhold properly and fully
document

Manage the closeout actions for the
respective type of T&M/LH contract
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T&M/LH contracts are a form of cost
reimbursement contracts.

Billings must be made on Public Vouchers.

Administering T&M/LH contracts requires
detailed knowledge of the ONE BOOK
Chapter on Public Vouchers.

Summary & Recommendations

T M LH Contracts Kevin Cox

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Time and Materials &

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