Officials talk time and materials

Advance Notice of Proposed Rulemaking

Industry representatives told General Services Administration officials today that any new provisions for time-and-materials and labor-hour contracts should be flexible enough to allow projects to accept different types of bids.

Government and industry officials met today to discuss how provisions for such contracts should be incorporated into federal procurement rules. The Services Acquisition and Reform Act of 2003 authorizes limited use of the contracts, in which contractors are paid based on how long they work and the cost of the materials they use rather than a flat fixed prices. Today's meeting, held at GSA headquarters, was intended as an exchange of ideas among industry and officials from GSA and the Office of Federal Procurement Policy.

Several attendees suggested that the rule should not be written with the assumption that the bids submitted on a particular project will be all fixed-price or all time-and-materials contracts.

"Maybe the government is going where the government doesn't belong," one official said. "Maybe you should give industry the option."

Officials published an advance notice of proposed rulemaking in September. Critics say that allowing contractors to charge a variable price could lead to agencies paying more than they would in negotiating a fixed price. Advocates, however, say that contractors forced to set prices when they don't know what their costs will be will hold out for a higher fixed price.

One industry representative, who declined to identify herself, said that some software development should be open to time-and-materials contracts. "A lot of the technology is really cutting-edge," making it more difficult to predict how long it will take to develop, she said.

Today's discussion focused on how the rulemaking process will work. Matthew Blum, a senior OFPP attorney, moderated part of the discussion and said, "we haven't formed opinions; we're just gathering information."

Although some of the discussion focused on what services were appropriate for time-and-materials contracts, Blum emphasized that the intent is not to create a fixed list.

David Drabkin, deputy chief acquisition officer at GSA's Federal Technology Service, said the rule should emphasize maximizing the use of fixed-price contracts rather than minimizing the use of time-and-materials contracts, as one of Blum's slides put it. Although it is a seemingly slight semantic difference, it has the effect of encouraging agency managers to use time-and-materials contracts where appropriate rather than discouraging them, he said.

The public comment period is open through Nov. 19.