Chapter 9
Monitoring Service Contracts
Personal and Nonpersonal Services
A service contract may be either for personal services or for nonpersonal services. It can also cover services performed by either a professional or nonprofessional entity, whether an individual or an organization. A personal services contract is a contract that, by its express terms or as administered, makes the contractor personnel appear to be, in effect, government employees.
Personal services are characterized by the employer-employee relationship created between the government and the contractor's personnel. Obtaining personal services by contract rather than by direct hire circumvents civil service laws unless Congress has specifically authorized acquisition of the services by contract. (Agencies may not award personal service contracts unless specifically authorized by statute.1) An employer-employee relationship under a service contract occurs when, as a result of the contract's terms or the manner of its administration during performance, contractor personnel are subject to the relatively continuous supervision and control of a government officer or employee. The following are typical of a personal services contract.
- Performance is on-site
- Principal tools and equipment are furnished by the government
- Services directly support the integral effort of an entity to accomplish its assigned function or mission
- Comparable services, meeting comparable needs, are performed in the same or similar agencies using civil service personnel
The need for the type of service provided can reasonably be expected to last beyond 1 year.
The inherent nature of the service or the manner in which it is provided reasonably requires, directly or indirectly, government direction or supervision of contractor employees.
The Federal Acquisition Regulation (FAR) defines a nonpersonal services contract as "a contract under which the personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the government and its employees." Stipulating the employees' duty hours, requiring individuals to report to a government person, requiring the contractor's employees to complete certain inherently governmental forms, maintaining contractor personnel records such as time cards, and granting leave requests are examples of actions that are grounds for the nonpersonal services contractor to initiate a claim against the government. The post-award administration of a nonpersonal services contract is a critical time to use caution to prevent nonpersonal service contracts from becoming personal. The contracting officer's representative (COR) must be vigilant. This is a critical area and one that exposes the COR and the government to liability. The solution is to write an excellent statement of objectives/statement of work/performance work statement (SOO/SOW/PWS) that specifies the duty hours and the contractor's arrangement for supervising its employees.
When contracting for services, it is government policy to use performance-based contracting methods and to contract for nonpersonal services rather than personal services to the maximum extent practicable.
Contractor Inspection Clauses for Service Contracts
FAR 52.246-1, Contractor Inspection Requirements, addresses contractor inspection requirements as follows.
The contractor is responsible for performing or having performed all inspections and tests necessary to substantiate that the supplies or services furnished under this contract conform to contract requirements, including any applicable technical requirements for specified manufacturers' parts.
The related clauses specific to services contracts include the following.
- FAR 52.246-4, Inspection of Services—Fixed-Price, FAR 52.246-5, Inspection of Services—Cost-Reimbursement, and FAR 52.246-6, Inspection—Time-and-Material and Labor-Hour, require the contractor to provide and maintain an inspection system acceptable to the government covering the services to be performed under the contract, to keep complete records of contractor-performed inspection, and to make such records available to the government during the term of the contract.
- FAR 52.246-14, Inspection of Transportation, requires the contractor to furnish government representatives with the free access and reasonable facilities and assistance required to accomplish their inspections and tests.
At a minimum, the contractor's records must indicate the nature of the observations, the number of observations made, and the number and type of deficiencies found. The inspection records must also indicate the acceptability of the services and actions taken to correct deficiencies. The COR must ensure that the contractor complies with this contract requirement.
Performance Work Statements for Service Contracts
The PWS defines the contract's performance requirements, that is, the work to be accomplished. Defining the performance requirements includes identifying required outputs, key performance indicators or performance characteristics, and acceptance standards.
There is no standard template or outline for a PWS. The FAR requires only that agencies, to the maximum extent practicable, do the following.
- Describe work in terms of required results rather than how the work is to be done or the number of hours to be provided
- Enable assessment of work performance against measurable performance standards
- Rely on measurable performance standards and financial incentives in a competitive environment to encourage innovation and cost-effective methods of performing the work
Quality Assurance Surveillance Plans for Service Contracts
A QASP is an important tool that the COR can use as a guide for systematically and effectively monitoring the quality of the services received and compliance with the terms of the contract. It also is used as a guide for determining if and when the government needs to intercede and perhaps terminate a contract, as well as for determining if and when the government needs to exercise contract options. (Options should be exercised after assessing the incumbent's performance under the current contract and testing the market to ensure a fair and reasonable price for conduct of services.) In firm-fixed-price contracts, the purpose of surveillance is to identify any factors that may delay performance, particularly when it becomes necessary for the government to accept performance shortfalls from contractually established standards.
Typically, the requiring unit that drafts the SOO/SOW/PWS also develops the QASP and surveillance methods, tailoring them to meet specific contract requirements and operating conditions. The QASP details how and when the government will survey, observe, test, sample, evaluate, and document contractor performance. It also outlines the corrective procedures to be taken against the contractor for deficient performance, for example, issuing discrepancy reports that require corrective action responses, taking deductions from payments in firm-fixed-price (FFP) contracts (where such provisions have been made), and submitting recommendations to the contracting officer about the nature and significance of any performance shortfalls.
Not every contract, delivery order, or task order requires a QASP. Such a plan is mandatory, though, for any contract, task order, or delivery order for services over the simplified acquisition threshold. Therefore, contracts for services, including time-and-material and labor-hour contracts, must include QASPs to facilitate assessment of contractor performance. These plans must be prepared in conjunction with the preparation of the SOO/ SOW/PWS and should be tailored to address the performance risks inherent in the specific contract type and the work effort addressed by contract.
The objective of contract surveillance is to monitor contractor performance to assure the services received are consistent with contract quality requirements and received in a timely manner. To be effective, contract surveillance requires appropriate and immediate on-site monitoring of the services being performed. On-site monitoring should include periodic verification and analysis of the services performed. The effectiveness of contract surveillance depends on keeping the contracting officer timely informed of deviations from the contractual requirements. The objective of surveillance is to determine if and when to intercede and terminate a contract, when to take other appropriate corrective actions, and if and when to exercise contractual options.
The contracting officer includes the QASP as part of the COR appointment or designation letter, either within the letter itself or as an attachment. The surveillance procedures must be discussed at the post-award conference, or otherwise, to ensure that all parties understand them.
Because it is developed and used by the government, the QASP can be modified at any time. The decision to change the plan depends largely on the contractor's demonstrated capability to carry out its quality control plan effectively.
QASP Composition and Method
The QASP should address the following topics.
- Purpose
- Roles and responsibilities
- Procedures
- Methods of assessment
- Successful performance and remedies
- Certification of services
- Sample of contract discrepancy report
- Complaint procedures and training instructions
- Abbreviations
- At a minimum, the QASP should do the following.
- Provide a schedule for periodic on-site inspections, floor checks, and audits of contractor's billings to ensure that costs being charged to the contract are legitimate and reasonable. Specify how often (weekly, monthly) inspections will occur.
- Identify what will be checked during an inspection, how it will be checked, and what type of sample will be used (random, 100 percent). For example, "Once every month, technical bulletin revisions will be inspected to assess the quality of work and progress toward completion. The revisions will be read for quality and accuracy. Random sampling will be done as work progresses. Near contract completion, a 100 percent inspection will be done."
- Describe the method that will be used for checking cost-type contract invoices to ensure that only those labor categories used for the performance of a task or project are invoiced to the government. Describe how material or supplies will be delivered and accepted under a cost or fixed-price type contract. Identify the frequency for inspections of time cards and payroll records. Specify the policy for delivery and acceptance procedures.
- For cost-type contracts, explain how the contracting officer will ensure that the prime contractor has obtained adequate competition when acquiring materials. For example, state in the QASP that contractor's acquisition of materials by competition will be checked for charges over a certain amount of money.
- Explain how the contracting officer will ensure that progress payments on fixed-price contracts do not exceed the quality and quantity of work completed and that payment is made in accordance with the Progress Payment clause. For example, state that the quantity and quality of work will be inspected to determine if the work completed to date justifies the amount of payment to be made.
Effective use of the QASP, in conjunction with the contractor's quality control plan, will allow the government to evaluate the contractor's success in meeting the specified contract requirements. Surveillance should be increased if the contractor begins to experience problems or difficulties in performance, financial strength, management, quality assurance, or accounting system.
Each inspection made by government inspectors must be scheduled and the results must be documented and filed for further reference, audit, and proof of inspection. User complaints, unsatisfactory contract performance, equipment breakdown, meetings, and other similar issues should also be documented and filed. This documentation could be in the form of a contract deficiency report, minutes of meetings, annotations on tally checklists, correspondence, and so forth.
Contract Surveillance Checklist
The COR should use a contract surveillance checklist to ensure correct performance of COR duties. Appendix 8 contains a checklist for contract surveillance.
Incident Reporting
It is important for CORs to know that contractors are required to report offenses alleged to have been committed by or against contractor personnel to appropriate investigative authorities and may need to help the contractor locate the appropriate authority. Victim and witness protection and assistance to contractor personnel in connection with alleged offenses will be provided.
Private Security Contractors
The Department of Defense's (DoD) increased use of private security contractors (PSC) has led to increased scrutiny regarding the management of these contractors. A private security contractor, as defined by DoD Instruction (DoDI) 3020.50, Private Security Contractors Operating in Contingency Operations, is a company employed by DoD to perform private security functions, under a covered contract, during contingency operations. In a designated area of combat operations, the term PSC expands to include all companies employed by United States (US) government agencies performing private security functions under a covered contract. Chapter 3 states that contractors (including PSCs) are not authorized to perform inherently governmental functions; they are limited to a defensive response to hostile acts or demonstrated hostile intent.2
The COR must report the following types of incidents involving PSCs.
- A weapon is discharged by an individual performing private security functions.
- An individual performing private security functions is killed or injured in the performance of their duties.
- A person other than an individual performing private security functions is killed or injured as a result of conduct by PSC personnel.
- Property is destroyed as a result of conduct by a PSC or PSC personnel.
- Misconduct by a PSC or PSC personnel has been alleged.
- An individual performing private security functions has come under attack, including cases where a weapon is discharged against an individual performing private security functions or personnel performing such functions believe a weapon was so discharged.
- Active, nonlethal countermeasures (other than the discharge of a weapon) are employed by PSC personnel in response to a perceived immediate threat in an incident that could significantly affect US objectives with regard to the military mission or international relations.
The COR documents the incidents in a designated common database (per DoDI 3020.50, Private Security Contractors Operating in Contingency Operations).
Contract Work Hours and Safety Standards Act
Depending on the nature of the contract and the COR's appointment or designation letter, the COR may get involved with reviews of the contractor's time charges. The Contract Work Hours and Safety Standards Act (40 United States Code [USC] 3701, Contract Work Hours and Safety Standards Act – Overtime Compensation) requires that certain contracts contain a clause (FAR 52.222- 4) specifying that no laborer or mechanic doing any part of the work contemplated by the contract may be required or permitted to work more than 40 hours in any workweek unless paid for all additional hours at not less than one and a half times the basic rate of pay.
Violations of the act may be detected during a labor interview; a part of the interview requires the employee to divulge the total number of hours he or she has worked during the previous week. Contractors in violation of this contract provision must pay back wages owed the employee plus liquidated damages per day per affected employee. This amount can be withheld from monies owed the contractor under the contract or from any other contract that the contractor has with the federal government.
Notes
- See 5 USC 3109, Employment of Experts and Consultants; Temporary or Intermittent. Top
- DoDI 3020.50, Private Security Contractors Operating in Contingency Operations, 22 July 2009. Top
Chapter Acronyms
COR – Contracting Officer's Representative
DoD – Department of Defense
DoDI – Department of Defense Instruction
FAR – Federal Acquisition Regulation
FFP – Firm-Fixed Price
PSC – Private Security Contractor
PWS – Performance Work Statement
QASP – Quality Assurance Surveillance Plan
SOO – Statement of Objectives
SOW – Statement of Work
US – United States
USC – United States Code
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