“Help” like this is not
desired by small businesses.
The first part of the
proposed change, per the Federal
Register notice, states:
…The first of the two existing FAR policies provides
the option to require separate labor hour rates for each subcontractor under a
T&M/LH contract, in addition to the labor hour rates established for the
prime contractor. See FAR 16.601(e). The current FAR policy authorizes an
agency either to permit individual contracting officers to decide if separate
labor hour rates are necessary or to establish an agency procedure making
separate rates mandatory. This rule proposes to establish a DHS-wide procedure
to make the FAR option for consistent use of separate rates mandatory for DHS
T&M/LH contracts…
The second part of the
ruling is to require consistency with contractors and subcontractors in the way
they account for labor hour expenditures, requiring them to check a box for
which accounting process will be used to account for overtime labor hours for
employees exempt from the Fair Labor Standards Act.
DHS wants “to eliminate
unintentional windfall payments to the prime contractor" that can come
when work done by subcontractors is billed at the prime contractor's labor
rate, according to the notice.
It amazes me when proposed
policy changes like this are announced. Does anyone in government understand
business anymore? We can expect higher direct labor rates to cover the overhead
of managing subcontractors, which would have been previously earned by the
markup on the labor.
Those pesky “pass through”
fees that subcontractors pay for the privilege of getting crumbs on the
contract. Subcontractors can expect fewer profits on a contract, as the “low
cost” buying model means even smaller margins.
Profits are not wasteful,
and they certainly are not “windfall” payments. Who came up with that language?
More importantly, how does
this help small business?
I think one of the
commentators on the FCW article gave a very clear picture of the environment
that small businesses face:
…The so called "windfall" payments are the
only real justification to the Prime to include subcontractors. Do you really
think we add subs out of the kindness of our hearts? We do it because you
require us to reach out to the small business community. If we lose all
incentives to do this, why would we continue to add subs unless they provide a
part of the solution that we don't have the ability to provide. The Prime has
to get something out of the contract to bring on a sub. There is a cost to
administering subcontracts, or had you forgotten that fact? I am sad to see how
many skilled acquisition professionals have left the Government for private
industry or to retire. The remaining staff just don't understand how Private
Industry works. What a shame!...
Small businesses do not need
this type of “help.”
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