Class Deviation 2012-O0016
Approval Threshold for Time-and-Materials and Labor-Hour Contracts and Preference for Cost-Plus-Fixed-Fee Term Contracts

Effective immediately, prior to awarding time-and-materials (T&M) and labor-hour (LH) contracts, or T&M/LH orders, contracting officers shall use the attached text in lieu of FAR 16.601(d)(1) and DFARS 216.601(d)(i) and (ii). The limitations at FAR 16.601(d)(2) remain unchanged.

This class deviation requires that -

  1. The determination and findings for use of a T&M/LH contract or order in which the portion of the requirement performed on a T&M/LH basis exceeds $1 million, shall be approved by the senior contracting official within the contracting activity; and
  2. In addition to the current DFARS content requirements for the determination and findings, the contracting officer shall also address why a cost-plus-fixed-fee (CPFF) term type of contract is not appropriate.
  3. For acquisitions of noncommercial items where the contractor has an adequate accounting system, a CPFF term contract type is preferred over a T&M/LH contract type.

The additional internal approval level required by this deviation will increase oversight and management of T&M and LH contracts and orders, which inherently lack incentives for cost control and labor efficiency. This approval authority may not be delegated. Although requirements to monitor contractor performance are in place, these types of contracts remain the least preferred business arrangements.

Contracts that support contingency or peacekeeping operations, or provide humanitarian assistance, disaster relief, or recovery from conventional, nuclear, biological, chemical, or radiological attacks are exempt from the requirements of this deviation.

This class deviation remains in effect until it is incorporated in the DFARS, or is otherwise rescinded.

Effective Date: October 11, 2012 (10 years ago)
Expire Date: None Given
Incorporated: May 26, 2015 (7 years ago)
Official Documents: Memo
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