ML20236F369

Discusses Summary of Negotiations for Mod 3 Under Contract NRC-04-88-086 W/Mpr Assoc,Inc

ML20236F369
Person / Time
Issue date:	08/09/1988
From:	Hagey H NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM)
To:	NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM)
Shared Package
ML20236F214	List: ML20236F209 ML20236F355 ML20236F369 ML20236F386 ML20236F397
References
CON-NRC-04-88-086, CON-NRC-4-88-86, FOIA-98-182 NUDOCS 9807020135
Download: ML20236F369 (7)

Text

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MEMORANDUM FOR: The File FROM: Helen Hagey, Contract Administrator Contract Administration Branch Division of Contracts and Property Management /ADM Office of Administration and Resources Management i,

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SUMMARY

OF NEGOTIATIONS FOR MODIFICATION NO. THREE (3) UNDER NRC-04-88-086 WITH MPR ASSOCIATES, INC.

I BACKGROUND I Section H 8 of the basic contract, entitled " Affirmation of Contract Costs" i allowed the Contractor, after award, to affirm its cost estimate after they completed their own procurement for two subcontractors. This cost estimate affirmation was due on March 15, 1988. However, as the NRC Project Officer (P.O.) was scheduled to be away on foreign travel until March 28, 1988, the

! P. O. and the Contractor (MPR) agreed to extend the affirmation due date to

March 30, 198P. The " Affirmation of Costs" was submitted as a revised proposal and das received on April 1, 1988. The two proposed subcontractors are GPU Nuclear (GPUN) based in Pennsylvania at the Three Mile Island site and Power Cutting, Inc. (PCI) based in Illinois. The P. O. submitted his approval of the revised proposal by submitting a RFPA dated April 7,1988 which also certified additional funds of $910,000.00. The additional funds were obligated under Modification No. Two to the contract.

Upon review of the revised proposal, the Contract Administrator (C.A.) found no breakdown of costs to support the reasonableness of the proposed costs.

During a meeting on April 12, 1988, with MPR and the C. A., the C. A.

requested that MPR provide bases for why the proposed additional costs were considered fair and reasonable. MPR submitted additional information in its letter dated April 15, 1988. A copy of this letter was forwarded to the P. O.

who in turn provided his written evaluation, dated April 21, 1988, on both the cost and technical issue. In summary, the P. O. advised that the technical approach was in accordance with the Statement of Work (S0W), but that the cost proposal did not reflect costs for a backup capability to drill out level head

instrument penetration tubes. This cost was supposed to be reflected in PCI's cost proposal. The P. O. later advised the C. A. that he had already discussed this directly with PCI and MPR during his trip to PCI on April 8, 1988.

MPR also submitted a letter dated April 12, 1988, which discussed five items of concern regarding the proposed contract modification. These concerns were discussed with the Office of General Counsel (OGC) for legal advice. The following lists the items and the NRC's joint (OGC and C. A.'s) response:

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Memorandum for The File  !

(cont'd)

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1. GPUN does not want to pass down the FAR provisions to its subcon-  !

tracts that are already in place.

Response: GPUN will not be required to flow down the FAR provisions to its commercial subcontractors prior to execution of this contract, i but will be required to do for any new subcontracts placea specifi- l cally for work under this contract.

2. MPR wants to increase the 75% notification point to 100% for under  !

the Limitation of Cost clause. I a

. Response: As agreed during discussions with MPR, the notification l point is extended, as allowed under the clause, to the maximum l 85%/30 day period value.  :

3. MPR requires incremental funding.  !

Response: Such requirement is satisfied with incremental funds of 5910,000.00 provided in Modification No. Two. I NOTE: Prior to the C.A.'s completion of drafting this Mod No. 3, !

RE5 provided additional funds of $180,000.00 in its memorandum dated I June 21, 1988, which will be provided under this Mod. No. 3.

4. MPR requests deletion of overtime restrictions for its subcontractors.  ;

i Response: As requested by the P. O., he wants to have control of l the amount of time the subcontractors use for overtime. All parties i agreed that the contract will reflect a revised overtime clause specifically for MPR to incorporate in its subcontracts.

NOTE: During a telecon oetween the P. O. and the C. A. on June 21, 15EE, this overtime clause will be included in a later modification as there is no current requirement for overtine use at this time.

The clause was drafted by the C. A. and submitted to the P. O. for his comments. This issue will be settled after this modification has been executed.

5. PCI requested exemption from three mandatory clauses.

Response: The Contractor agreed to incorporate all flow-down provisions to its subcontractors and the subcontractors agreed to accept.them.

See note for the file, dated April 28, 1988, which summarizes in more detail the above 5 issues.

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Memorandum for The File ~3-(cont'd)

Since the original schedule involved authorizing PCI to begin work effective April 29,l1988, a written letter contract modification was prepared as the cost data was still incomplete at this time. The letter contract modification was transmitted to the Contractor on April 28, 1988. At this

- point, the' C. A. prepared for 2 days of-leave ( April 29 and May 2,1988) and

- it was' agreed that during this period MPR would execute the letter

! modification and. return it to NRC for the Contracting Officer's (C.O.)

l execution. MPR had previously verbally approved the d_ raft letter contract I modification prior to April 28, 1988.

Since the letter contract modification was not yet executed by both parties, the C.O. gave MPR verbal authority on April 29, 1988, to allow PCI to begin work on April 29, 1988. MPR accepted this verbal authority. Upon the j C.A.'s return on May 3, 1988, the letter contract modification was still not '

yet executed by MPR. During a telecon on May 3 between MPR and the C.A., it was discovered the MPR misunderstood what was written and upon line-by-line review of it with the C.A. agreed it was acceptable. This letter'was rewritten to reflect the verbal authority and was transmitted to the Contractor, presigned by the C.O., on May 9, 1988. On May 18, 1988, while the C.A. was on leave,.an emergency meeting was held with MPR, PCI, the P.O.

and the C.O. (P. Edgeworth). Notes of this meeting are documented and located in the file. As a result'of this meeting, it was found that PCI-had nut begun work on April 29'as authorized, that both GPU and PCI could not provide cost data and that PCI did not want to provide the mandatory pricing cost data certifi_cate. The_C.O. agreed at.that meeting that pricing data would be acceptable and that the $100,000 limit in the letter contract modification for PCI to begin work is deleted. It was found that as PCI is

a. subsidiary of Westinghouse (W), they could n_ot begin work without Westinghouse's approval and Westinghouse would not approve.unless accurate pricing data was submitted to NRC and NRC provided written approval.

A letter was transmitted to MPR by the C.O. summarizing the above event and reiterating the fact that NRC intends to enter into a formal agreement with MPR upon receipt of the pricing data. The piuposal from GPU was received on May 26, 1988'and from PCI on June 2, 1988. Both proposals were submitted to

! the P.O. and to OGC for their evaluation. The P.O.'s written evaluation was received on June 2,1988. In summary, the P.O. advised that he still did i i not feel that PCI proposed adequate backup power supply. 0GC also had I several concerns-regarding the terms and conditions of both proposals. OGC I

and the P.O.'s concerns were conveyed via telecon to MPR on June 6, 1988.  !

In its' June 7,1988 letter, MPR ' responded to the P.O. , C. A. and OGC's j

. concerns. This letter identifies the concerns and addresses MPR's l L - responses. _MPR also submitted a revised proposal dated June 6, 1988. The i

. P.O. and OGC. reviewed the June 6 proposal and the June 7 letter, provided  :

' full acceptance of these 2 documents and recommended that approval be given to MPR to subcontract with PCI and GPU. At this point. on1.y the PCI i proposal was approved by OGC as they had not finished review of the OGC j proposal.

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.e l *- Memorandum for The File [ (cont'd)-

l Also, at this point, two additional items will be discussed here:

, 1. FAR 15.806(a) states that a cost analysis should be con-i ducted whenever a cost or pricing data is required. As stated above, only pricing analysis can be conducted for the work under this contract. The Director of the Division l of Contracts and Property Management provided approval to

waive the requirement for Cost Analysis in a memorandum dated June 8, 1988.

l 2. Clause No. 52.216.7, " Allowable Cost and Payment" is to be

! modified to allow MPR to bill NRC on the basis of costs incurred rather than pay its subcontractors before billing NRC. The Director of the Division of Contracts and Property Management provided approval to modify this contract in a memorandum dated June 8,1988,,

In a letter dated June 8,1988. MPR advised that PCI inadvertently listed the Mobilization price as a time and material price rather than a fixed price and submitted a cost proposal which corrected the categories. The total price i does not change. The C. A., OGC and the P. O. accepted this revised, corrected proposal from PCI. In a letter dated June 9, 1988, MPR was given l approval by the C. O. to. enter into a subcontract with PCI, MPR provided one

! signed original subcontract between MPR and PCI which is located in the file.

! All oetails regarding the price and contract type are provided in paragraph B.

below.

l Upon receipt of OGC's approval of GPUN's proposal, MPR was given approval by l the C. O. in a letter dated June 17, 1988, to enter into a subcontract with l' GPUN. This subcontract has not yet been executed by MPR and GPUN.

l B. PROPOSED AND ACCEPTED COST AND PRICES The following chart reflects the proposed cost under the basic contract L and the final proposed cost with the two subcontracts which have been j

! accepted for this Modification No. Three: j COST PROPOSED FOR MOD. j COST PROPOSED FOR i NOTE CATEGORY BASIC CONTRACT THREE(withSubcontracts)-  !

1. Direct Labor 171,829 290,648

2. Overhead 135,367 228,972 l

, 3. Subcontracts 1,350,000 1,590,123 l 4. Fabrication Costs 396,000

5. Shipping Costs 4,000 '

6. Computer 2,375 2,375

-7. Contract Sves. 1,600 1,600

8. Delivery Sycs. 1,600 1,600

9. Meetings 515 515

10. Telephone 1,600 1,600

11. Travel and Meals 46,505 46,505  ;

12. Escalation 11,122 22,244

13. Profit 172,251 258,618 TOTAL $1,894,764 $2,844,600

Memorandum for The File (cont'd)

NOTES

1. Direct Labor: Labor rates are same rates as proposed and accepted in basic contract, per auditor's recommendation. MPR's labor hours are increased from 6,597 hours0.00691 days <br />0.166 hours <br />9.871032e-4 weeks <br />2.271585e-4 months <br /> to 11.279 hours0.00323 days <br />0.0775 hours <br />4.613095e-4 weeks <br />1.061595e-4 months <br /> because MPR will do certain tasks that they originally planned for a subcontractor to do. The NRC Project Officer recommended acceptance of increased hours for MPR's efforts based on fact that in his technical judgment, the proposed in-crease level of labor effort is reasonable for successful and timely work within the period of performance under this contract.

2. Overhead: Rate of 78.78 percent of direct labor is same rate as proposed and accepted in basic contract, per auditor's recommendation. The cost under this category is increased as a result of increased direct labor base.

3. Subcontracts: MPR proposes two subcontractors, Power Cutting, Inc. (PCI) and GPU Nuclear (GPU). Both subcontractors certified that there are no conflicts of interest involved. The revised proposal reflects a cost increase for the proposed subcontract costs. This increase covers tooling and site operations, as well as utility site assistance which the NRC Project Officer recommended acceptable. Discussion of each subcontract proposal follows.

A. GPU Nuclear (GPUN)

MPR submitted a final revised proposal dated May 26, 1988, which included its draft Purchase Order No. NRC-04-88-086-GPUN and pricing data to support the proposed costs by its subcontractor, GPU Nuclear. MPR proposes a time and material type contract with its subcontractor. MPR also proposes to incorporate its Master Service Agreement (MSA) between MPR and GPUN as a part of the subcontract'.

0GC provided recommendation of accepting all terms and conditions of the proposed subcontract including the terms and conditions within the MSA. GPUN's overall total estimate to perform the work is

$465,400.00 which includes $460,400.00 for their entire effort and

$5,000.00 for the shipping costs. As described in GPUN's letter dated May 23, 1988 to MPR, GPUN will be using their existing site structure of GPUN personnel and support subcontractors who have been used while working on the DOE /EG&G R&D defueling tasks. GPUN states that all proposed labor costs for the NRC effort are the same cost and pricing structure used for the DOE effort. No indirect costs or l

profit / fee are charged. As stated above, the Project Officer i determined all proposed labor categories and hours to be reasonable and acceptable for timely and successful work under this contract.

Upon the above basis, the proposed GPUN costs are derned acceptable as fair and reasonaole.

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Memorandum for The File (cont'd)

B. Power Cuttinc, Inc. (PCI)

MPR submitted a final revised proposal dated June 1,1988, and as corrected in its June 8,1988 prcposal, which included its draft Purchase Order No. NRC-04-88-086-PCI and pricing data to support the proposed costs by its subcontractor, PCI. MPR proposes to use a time and materials type contract for the on-site operations and a fixed price type for the tooling developments, fabrication, testing and delivery. 0GC provided recommendation of accepting all terms and conditions of the proposed subcontract. PCI's overall total proposed cost is $1,I24,723 of which $316,518 is for the on-site operations (on a time and materials basis), and $808,205 is for the off-site tooling development on a fixed price basis. For the on-site costs, MPR stated in its June 1, 1988 letter that PCI is currently providing site services to GPUN in support of the defueling effort at TMI-2. GPUN is paying PCI for site support in each of the proposed labor categories at the same hourly rate. MPR stated that PCI's commercial rates for site services are current rates and they feel the rates are fair and reasonable for the work to be performed. The per diem rates proposed for on-site work are well within the rates allowed under the Federal Travel Regulations.

The cost for renting the MDM Power supply is at $17,500 per week.

It is anticipated that only one week of use will be required for this power supply. However, at the request of the Project Officer, one additional week of this pcwer supply rental was incorporated in the time and material portion of the overall cost proposal. For the off-site tooling development effort, MPR provided comparisons of prices PCI charged for similar projects in the past. Upon review of the comparable projects / costs, the Project Officer determined that the firm fixed price for the off-site effort as required for this contract is deemed a fair and reasonable price for timely and successful work.

4 Fabrication Costs and 5. Shippino Costs: These two categories were originally within the subcontractor cost estimates, but now will be performed by MPR. Also, additional costs for the back-up drill tool are included in this category. The prices for the tool fabrication are estimated costs based on MPR's past experience with costs associated with fabricating specialty tools for use at TMI-2, as well as for shipping them. No drawings or detailed specifications exist for the drill tool, but this tool is similar to other tools made for the TMI-2 project in the past. Based on this, MPR again estimated its cost for fabrication expenses. The Project Officer recommends that MPR's preposed costs for this category is reasonable and acceptable.

6. Computer through 11. Travel and Meals: The costs for these six categories are the same costs as proposed and as determined reasonable and acceptable under the basic contract.

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4 Memorandum for The File ..

(cont'd)

12. Escalation: The factor of 4.5% is the same as proposed and accepted, per audit recommendation, in the basic contract.

13. Profit: The 10% fee is the same percentage as proposed and accepted under the basic contract. During procurement of the basic contract, the cost plus-fee was based on an estimated subcontractor cost which, was stated in Section H.8 of contract, could be adjusted based on agreements the Contractor reached with its subcontractors. Therefore, as the cost was increased, as discussed above, the fee was increased accordingly. The fee of 10% includes a risk factor and is considered reasonable and acceptable. It is well within the statutory limitation of 15% for research efforts.

Based upon the foregoing, it is hereby recommended that MPR's final proposal in the amount of $2,844,800.00 be accepted and incorporated into the contract. This final proposal raises the total ceiling amount of the

, contract by $950,036.00 from $1,894,764.00 to $2,844,800.00. Chairman approval was previously granted for this ef fort at an estimated amount of

$3,600,000.00.

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f- 7-98' Date x W Helen Hagey, Contract Administrator Contract Administration Branch Division of Contracts and Property Management, ARM Date Paul J. Edgeworth, Contracting Officer Contract Administration Branch Division of Contracts and Property

Management, ARM -

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