A contractor’s failure to follow the requirements of DFARS 252.232-7007 (Limitation of Government’s Obligation), also known as the “LOGO” clause, resulted in the contractor performing more than $288,000 in free work for the government.
The contractor’s dilemma is an important reminder to be aware of–and scrupulously comply with–the LOGO clause and similar FAR clauses.
The decision of the Armed Services Board of Contract Appeals in Dynamics Research Corp., ASBCA No. 57830 (2013) involved an Army IDIQ contract awarded to Dynamics Research Corporation, or DRC. In 2010, the Army issued Task Order 8 to DRC. Contract Line Item 2001, “Fixed Price Labor,” prescribed a price of $146,636.56 per month for 12 months, for a total of $1,759.638.67.
Task Order 8 incorporated all of the DFARS clauses in the prime contract, including the DFARS LOGO clause. The LOGO clause, which is similar to the FAR’s Limitation of Costs clause at FAR 52.232-20, requires the contractor to inform the government at least 90 days prior to the date when, in the contractor’s best judgment, the work will reach the point at which the total amount payable by the Government will approximate 85% of the total amount allocated to the contract. The clause also states that the contractor is not authorized to continue work when the total work performed approximates the amount allocated to the contract.
Funding for CLIN 2001 was increased by modifications, but DRC performed work in excess of the modified funded amounts. DRC subsequently filed a claim demanding the payment of $288,111.37 for “unfunded work” it had performed under CLIN 2001. DRC stated that it had performed the work due to the “assurances” of a Government employee, who was not the Contracting Officer or Contracting Officer’s Representative, that funding would be made available.
The Contracting Officer issued a decision denying DRC’s claim in full. The Contracting Officer stated that DRC was not entitled to rely on the assurances of the Government employee, and that in any event, DRC had failed to comply with the LOGO clause’s requirements.
DRC appealed to the ASBCA.
The ASBCA noted that DRC had failed to notify the Contracting Officer when it reached 85% of the funded amount, and further failed to stop work when it reached the total funded amount. “Therefore, DRC cannot recover the costs it incurred in excess of the allotted funds under the LOGO clause,” the ASBCA wrote. The ASBCA denied DRC’s appeal.
The Dynamic Research Corp. ASBCA decision illustrates the importance of complying with the LOGO clause, as well as similar FAR clauses. As DRC discovered, performing work in excess of the allotted amounts may mean that the contractor is working for free.