Failure To Maintain Required Staffing Allows Reduction In Payment Under Contract

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S U M M A R Y

In a recent case, the Civilian Board of Contract Appeals upheld the General Services Administration's decision to withhold payment from Phoenix Management Group. The decision was made due to understaffing of a fixed-price contract for building maintenance and custodial services in two Texas buildings. The contract required adherence to a proposed staffing plan and permitted GSA to reduce payment in the event of inadequate performance or nonperformance. Phoenix was required to maintain the same number of personnel proposed in its bid, but failed to do so, resulting in GSA's deduction of payment. The Board found that the reduction in payment was properly taken given the failure to maintain the proposed staffing. The case serves as a reminder of the importance of adhering to proposed staffing plans in contracts and the potential consequences of understaffing.

Failure To Maintain Required Staffing Allows Reduction In Payment Under Contract.pdf111.1KB

Failure To Maintain Required Staffing Allows Reduction In..., 17 No. 1 Costs,...

17 No. 1 Costs, Pricing & Accounting Rep. NL ¶ 10

Government Contract Costs, Pricing & Accounting Reports | January 2022

Volume 17, Issue 1

Government Contract Costs, Pricing & Accounting Report® CASES OF SPECIAL NOTE

By Dhananjay (DJ) Manthripragada, Lindsay M. Paulin, Chelsea B. Knudson, Mike Ulmer, & Nicholas L. Perry, Gibson, Dunn & Crutcher LLP

¶ 10. Failure To Maintain Required Staffing Allows Reduction In Payment Under Contract

In Phoenix Management Group, LLC, CBCA 7091, 2021 WL 5833572 (Dec. 2, 2021), Phoenix Management Inc. appealed a final decision from the General Services Administration withholding payment as a result of Phoenix’s understaffing of the contract. The Civilian Board of Contract Appeals accordingly denied Phoenix’s motion for summary judgment and granted GSA’s cross-motion thereto.

The dispute arose out of a firm, fixed-price contract between the parties for Phoenix to provide building maintenance and custodial services in two Texas buildings. The contract provided a fixed monthly price for services to be performed, as specified in the solicitation, and stated that “[t]his is a Firm Fixed Price contract and will not be changed unless there is a change in the scope of work.” The contract also provided that the contractor was to adhere to the proposed staffing plan submitted with the contractor’s bid, but permitted an annual review for staffing adjustments, requiring GSA approval to do so. The contract also provided that “[a]ny deviation from the accepted/approved Management Plan Worksheet may result in a deduction.” Phoenix’s Management Plan Worksheet listed 15.1 full-time equivalents (FTEs). The contract also permitted GSA to reduce Phoenix’s monthly payment in the event of inadequate performance or nonperformance.

Notwithstanding that its staffing plan listed 15.1 FTEs, Phoenix’s staffing declaration submitted prior to contract performance listed 13 FTEs, so GSA reduced the monthly payment in accordance with the contract. Phoenix then filed a claim seeking reimbursement for the difference in its contractually based monthly payment and the payment GSA provided based on the decrease in FTEs. Phoenix timely appealed to the CBCA following GSA’s denial of its claim.

The Board agreed with GSA in full, answering affirmatively that Phoenix was required to maintain the same number of personnel it proposed in its bid, and that GSA’s deduction to Phoenix’s monthly payment was properly taken given the failure to maintain its proposed staffing. The CBCA found that any other determination would render meaningless the numerous contractual provisions supporting this deduction under the circumstances.

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