Hourly billing rule proposed

A new rule would authorize the use of time and materials contracts and labor-hour contracts for the procurement of commercial services. A notice of proposed rulemaking, published today by the Civilian Agency Acquisition Council and Defense Acquisition Council, outlines the proposal. It would implement statutory authority granted last year in the Services Acquisition Reform Act.

The contracting types allow agencies to pay contractors based on time worked and the cost of materials used. Historically, federal policy-makers have avoided contracts that don't allow greater predictability and control of costs.

But time and materials contracts are common in the commercial world and would allow federal agencies greater flexibility, said Alan Chvotkin, senior vice president and counsel for the Professional Services Council. Although such contracts are at the bottom of a ranking of preferred contract types listed in the Federal Acquisition Regulation, they are the best option for some types of engagements, Chvotkin said. Contractors who agree to do work with highly unpredictable costs are apt to err toward the higher end of the scale in setting a fixed price, he said.

The assumption is that "if an agency can find a firm fixed price contract, or another kind of contract, those are preferable," he said. "What we have championed is that there are situations where [time and materials contracts] are preferable. Simply putting them at the bottom of the list for all choices" is too arbitrary, he said.