FAR 1.602-2(b): The Insider Joke

Mention FAR 1.602-2(b) to any contractor who has delivered more than a couple of contracts and you’ll probably get a sarcastic chuckle. The clause reads: “[The Contracting officer shall] Ensure that contractors receive impartial, fair, and equitable treatment.” What can go possibly wrong with so many warm-and-fuzzy words (“impartial”, “fair”, “equitable”) jammed into a clause the is part of the regulation collective that manages contractors’ relationship with the government?

What exactly do these words mean? Well, I confess. I haven’t a clue and wouldn’t want to venture a guess except to take the whole clause to mean that the government is, in a legal and contractual sense of the word, taking responsibility to ensure that a transaction meets a generally-acceptable level of fairness and equity. One of those “you know it when you see it” kind of situations. Yes, it is vague but given the context here, it is reasonable to interpret the clause as Uncle Sam’s explicit promise not to screw a contractor.

Now let me share the relevant details of our case and ask if you think DCMA, representing the United States of America, upheld the above promise and, specifically, whether or not our ACO, Mr. Craig Studley, did perform his duty. I’ll even invite you to judge for yourself!

The dispute in this contract is over the costs we claimed in 2004 on a Cost Plus Fixed Fee (CPFF) contract to deliver sophisticated software research to the Air force Research Labs (AFRL), the end user. In 2004 we spent 1212.5 hours on the project which neither AFRL, nor the DOD oversight agencies (DCAA or DCMA) have ever questioned. The contract had a total value (ceiling or maximum) of $199,950, of which the government has (present tense) only paid $192,159.47. The rest of the due amount has been held by DCMA since 2005 until the final audit of the contract is completed. We’ll of course come back to that issue at a later point but, if you are with me so far, the bottom line is that in totality, the government has paid us $192,159.47 for the entire contract. Period. Not a penny more. OK, keep that in mind.

Now, let’s turn our attention to the Contracting Officer’s Final Decision that instigated our dispute. In his decision, ACO Studley claimed that we were overpaid by $91,992.77. For the moment, let’s suppose that all of ACO Studley’s financial assumptions to support his computations were correct. Even so, as you can clearly calculate for yourself, there is no other way for this math to add up except that the government wants almost 50% of what they paid us back. It is important to again note that none has ever questioned the number of hours we spent on this contract. I might also add that the results of our work was so exceptional that our Principal Investigator and AFRL staff co-authored a technical paper that was published in a prestigious peer-reviewed journal.

You should first convince yourself that there are no math tricks here. Next, try to think of any situation where a contractor delivers every contractual obligation (and then some) but is only entitled to slightly more than 50% of the monies the employer promised them. After that, you’ll immediately see why we consider DCMA abusive and, further, why we view FAR 1.602-2(b) to be a joke but, as promised earlier, I invited you to absolutely judge for yourself.