Documentation and Contract Cost for the Navy

Freshman (College 1st year) ・Business ・APA ・3 Sources

My business is renowned for its floor coating specialty and it is because of our experienced floor coating specialists, we prefer a success paying method in our contract with Navy to support our operations during our contract, which will help us prevent the funding of negative cash flows. Level-based Fees, also known as PBPs, are customary contract support and are covered in Section 32.10 of the Federal Acquisition Regulation (FAR). In addition, the reason why we use it is that in FAR Part 32.1001 it is stated clearly that PBPs are the preferred Government financing method when the contracting officer finds them practical and when the contractor agrees to their use (United States, 1982). Floor coating is also small service contracts that usually involve fewer and less objective milestones. PBP is a method of payment based upon the achievement of certain specifics and measurable accomplishments that are well defined and possibly valued by both parties to the contract like in this case. In the application of the first coating, the company will need the first payment to the contract with the Navy. Performance-Based Payments will be convenient for both the parties involved in this contract, us as the company biding for this floor coating job and to the Navy who owns the contract. Some of the advantages include; first there is reduced cost of oversight and administration since all the activities involved in coating of the floor will be established upfront and the Navy will not require the oversight to check on the company’s accounting system. PBPs usually do not require much effort prior to the award and validation of event completion during contract performance as the company will always work extra mile to ensure perfection. Secondly PBPs would enhance the focus on technical and schedule performance because of the upfront effort needed to establish a PBP arrangement and the attention required to accomplish the entire effort in a prompt and efficient manner (Whitticks, 2013). Third PBPs financing system would broaden and increase quality of contractor’s participation because the amount my company has may be inadequate to finance the whole process of coating thus the use of PBP will help my company to maintain the standard required for the floor which would otherwise not be possible. Another advantage, which I consider the major one, is that there will be a potential improvement in cash flow for the contractor whom in this case is my floor coating company, since total PBPs can equal to 90% of the contract price it allows my company to effectively plan for all activities to be carried out (Hearn, 2011). Lastly in using PBPs there is likely to be a win-win situation at the end of the contract where my company is going to realize a profit and, at the same time, the Navy is going to feel satisfied with the service offered, the potential for improved cash flow has proven to be real and provides a unique opportunity for a financial Win-Win deal to be negotiated.
According to United States, 2014 PBPs guide, PBPs require mature, experienced and specialized contactors, who have stable production program where the fabrication, assembly and test processes have well been established like me whose company is well known for specialty in floor coating, all these qualifications permit me the privilege to easily identify and calculate the actual cost per process prior to the initiation of the coating activity. This actually puts me on the safe side of not incurring unexpected losses that may be made in the line of duty. Also difficulties arising in selecting events, defining measures or means of confirming their accomplishment or deciding on the valuations are likely not to occur because of my previous experience in floor coating contracts.

Approach and Key terms considered in requesting the use of Navy Floor Equipment

In order for my company to use the Navy’s floor equipment’s, a lot of legal agreements must be made between my contracting company and them as PBPs cannot be placed on contract by simply selecting a prescribed FAR clause. A PBP arrangement plus all elements that affect price like, in this case, using the Navy’s floor equipment which will automatically affect pricing of the contract, cannot be finalized until completion of negotiations. It is legally advised for the contactor to propose a complete PBP arrangement with proposed events and timing, event completion criteria and event values at the starting point for discussion (Hearn, 2011). It is also important for both parties to understand the steps needed to be taken including the in-house resources, personnel and organizations that will be involved in the whole process. Some of the personnel that must be present include: Contractor Personnel, my company will need involvement of my previous contracts, program management, technical and financial personnel; also Government Personnel who are the Navy like the contractor will need involvement of its contracts, program management, technical and contract pricing personnel. However, in addition to these “in-house” resources that we need to use, the Navy will need support from the following organizations:

I. Defense Contract Management Agency (DCMA)

If the Navy will grant my floor coating company the contract, involvement of DCMA personnel shall be considered a must as In-plant DCMA personnel should have first-hand knowledge of the contractor’s processes which can be extremely valuable in the identification of valid PBP event candidates and the associated completion criteria. It is critical that PBP completion criteria be clearly understood by those administering the PBPs, including the Administrative Contracting Officer (ACO). DCMA can be particularly useful in providing unique insight into the contractor’s established work methods and quality processes (Compton, 2010).

II. Defense Contract Audit Agency (DCAA)

DCAA involvement may be necessary in evaluating the reasonableness of my company’s proposed use of the Navy’s floor coating equipment.

III.Defense Finance and Accounting Service (DFAS)

Since DFAS is responsible for the actual payment of funds to the contractor, it is important to consider particular DFAS requirements or special instructions when planning to use their floor equipment. Multiple fund citations may be involved and special instructions are probably required on the use of the Navy’s floor equipment thus any DFAS payment issues should be addressed upfront to avoid unnecessary delay in paying my company for completed PBPs events (Compton, 2010). Once the Navy’s floor equipment have been identified, assessed and selected, it is essential to define them as clearly and precisely as possible, including a specified completion date that they will now have them back. Thus, it is essential that the parties arrive at clear definitions, agree on equipment to be used, and have a consistent understanding of what is expected by the end of the contract.

Quality Control and Inspection Procedures to be used in Assessing Performance

Performance specifications tell the Bidder the minimal acceptable level of performance. There should be a quantifiable Performance Standard corresponding to each service specification to provide a legitimate means of the Contracting Authority or the Navy to evaluate my company’s compliance through monitoring service performance and comparing it to the set standard. My floor coating company has set the following quality control standards to be checked in the contract. All materials we will use in the floor coating system shall be from a single manufacturer for the purpose of compatibility and proper bonding, as we would not like to do a shoddy work that is somehow confused and not to our set standards. For proper performance of the floor coating work, we will use a large number of adequate skilled workers who are thoroughly trained and experienced in the crafts and completely familiar with the specified methods. My company shall also designate a single qualified individual who shall work as the contract foreman to ensure our floor coating standards are actually adhered to through the whole process of coating.
On delivery, storage and handling of materials, my company shall ensure all materials delivered to the job site is sealed, undamaged and clearly marked with the manufacturer’s label showing type of material, color and lot number. On storage, all materials to be used in the site shall be stored in a clean dry place with a temperature range that is in accordance with the manufacturer’s instructions (O'Brien, 1997). Lastly all materials shall be handled with care to avoid unnecessary damages of the containers, all labels and safety data sheets read prior before use. On inspection of performance, my company shall allow the Navy’s authorized persons for inspection and verification of the work done both during and after the process of floor coating. We would like the Navy to inspect all surfaces to ensure the surfaces are coated as per the standards and to verify that surfaces are dry, clean, and free of contaminates that would prevent epoxy flooring from properly adhering to the surface. Also they should conduct calcium chloride testing according to ASTM F1869 and surface profile inspection according to ICRI Technical Guideline No.03732. Before initiation of the work, the Navy’s authorized officer should report in writing to the authority in jurisdiction any unsatisfactory conditions and verify coatings and other materials are as specified. My company will also allow them to verify coverage of the system as work progresses and areas found not meeting the required thickness shall receive additional material until specified thickness is attained.

Patent infringement objection

The Navy would not have a patent infringement objection for the use of the coating since my floor coating company has a private patent issued by federal government agency entailing a solicitation, which specifies the applicable FAR provisions. The company‘s strategy relating to this particular contract also accords with the Navy’s overall contract strategy as the development of this contact strategy is designed to establish the form of the contract and provide assistance in determining the formulation and award of the contract. And the style and type of management to be adopted for the subsequent service delivery, relationship management and contract administration. A successful contract management strategy should achieve benefits by managing the organization’s own responsibilities during the contract ensuring the contractor meets the minimum performance criteria, such as compliance allowing the achievement of both short and long term contractor performance and improvement through developing effective contractor relationships. Although PBPs are not prohibited in competitive solicitations, they are likely to require significant discussions between the Government who are the Navy and my floor coating company in order to reach agreement on the PBP events, completion criteria and valuation. Therefore, it is recommended that the solicitation state that proposal pricing and contract award will be based on customary progress payment financing, but the Government will be willing to modify the contract with the successful contract. And use PBPs if they are determined to be practical by the contracting officer, the contractor agrees to their use and adequate consideration is received by the Government FAR 32.005 and DFARS 232.1004. Once the candidate events have been selected, it is essential to define them as clearly and precisely as possible, including a specified completion date, so that their accomplishment can be objectively determined. Ideally, the definitions of these events and the measurements or other indicators to be used to determine their achievement should be such that there can be no argument or uncertainty about whether they warrant making a PBP. All completion criteria should specify Government verification before payment can be made.

Mechanism for Contract Closeout

Contract closeout phase is the last phase in the contract lifecycle; it occurs when the contract has met all the terms and all administrative actions have been completed, but is still not finished until all disputes settled, final payment made and all administrative actions required by the Federal Acquisition Regulation and specific agency procedures accomplished (ITRM, 2006). It begins when the Navy accepts the contract deliverables and when the site foreman or oversight authority concludes that the contract has met the earlier established goals. The major focus of a contract closeout is the administrative closure and logistics, and it includes: turnover of contract deliverables to operations, redistribution of resources like staff, facilities, equipment, and automated systems, closing out contract financial accounts, completing, collecting, and archiving contract records, documenting the successes of the contract, documenting lessons learned and lastly planning for Post Implementation Review. Once the Navy’s procuring officer confirms that all receivables have been completed with the assistance of a contracting officer representative, my company begins the closeout process as per FAR 4,804-4 which states that a contract is physically completed when the contractor has completed the required deliveries and the government has inspected and accepted the supplies. The contractor has performed all services and the government has accepted these services and all option provisions if any have expired or the government has given the contractor a notice of complete contract termination. FAR 4,804-5 also lists some of the items which the contracting officer must verify during closeout process and they include: disposition of classified material is completed, final patent report is cleared, final royalty report is cleared, no outstanding value engineering change proposal, plant clearance is received, property clearance is received. Interim or disallowed costs are settled, price revision is completed, subcontracts are settled by the prime contractor, prior year indirect cost rates are settled, termination docket is completed, contract audit is completed, contract’s closing statement is completed, contractor’s final invoice has been submitted, contract funds review is completed and excess funds de-obligated. Some the contract closeout tasks my floor coating company will engage in with the Navy include: Turnover to Operations, Contract Closeout Transition Checklist and Administrative Closure. The most essential aspect of contract closeout is the physical turnover of control of the service delivered by the contract. All contract deliverables will need to be maintained and supported after my company leaves and the Navy is expected to assume responsibility.


Compton, P. B. (2010). Federal acquisition: Key issues and guidance. Vienna, VA: Management Concepts.
Hearn, E. E. (2011). Federal acquisition and contract management. Los Altos, Calif: Hearn Associates
ITRM. (2006). Project Management Guideline.
O'Brien, J. J. (1997). Construction Inspection Handbook: Total Quality Management. Boston, MA: Springer US.
United States. (1982). Contract administration manual for contract administration services. Alexandria, Va: Dept. of Defense, Defense Logistics Agency.
United States. (2014). Performance Based Payments Guide.
Whitticks, E. (2013). Construction Contracts. Burlington: Elsevier Science

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