The administration of T&M, Labor Hour, or FFP-LOE contracts requires mapping labor categories. Review the contract requirements regarding labor categories and document a process for mapping employees.
Education, certification, years of experience. Some require specific skill sets or direct experience with a particular agency or program. Some education and certification requirements can be met with years of service (read your contract to know if this is explicitly allowed or disallowed).
While having well-written job descriptions and a mapping system for your internal labor categories is a great start, it is not the final solution when mapping to other labor categories. Two complaints I hear on a regular basis are the relationship of pay scales to labor categories and the need to maintain multiple labor category maps. It is not uncommon for a highly paid employee to throw a wrench into your labor category mapping. In other words, you may have someone with lots of experience who demands a high level of pay, but may be missing a formal education or certification requirement that limits your ability to invoice the customer at a rate to cover your costs. Employee pay or salary is never a factor in mapping labor categories – this is a tough pill for program managers and owners to swallow after they have hired the most expensive person in the industry who happens to have no formal degree or certification.
Who Does It?
In my experience, HR maintains employee records including training, education, certification, and years of experience – all critical items for mapping labor categories. As such, it stands to reason that HR maintains the labor category map and updates it upon the following events:
- New hire
- Updated training, education, or certification record
- Annually for years of service, and as a best practice review
- New contract or change order (adding or removing labor categories)
You must maintain labor category maps for as many contracts as require it. It is not uncommon to see a matrix of labor categories that spans 6, 9, or 12 contracts.
What You Need
Start by building an internal matrix of labor categories. While you cannot create a single matrix that will satisfy every contract requirement, with a little research, you will find enough commonalities among labor categories to build a good foundation. Make sure you have written job descriptions for all labor categories, and resumes with documentation supporting the training, education, and certification requirements for all employees. Some internal labor categories are single layers or have some other nuance that complicates mapping. I saw one company where the levels were inverted in comparison to industry standards – 1 was the highest instead of the lowest.
Why You Need to Do It
When invoicing labor hours against a T&M, Labor Hour, or FFP-LOE contract, you must invoice the labor categories agreed to in the contract AND you must use personnel that meet the requirements of the labor categories used. Yes, this is a two-part requirement! Missing one or both parts can lead to invoice adjustments, audit findings, and terminations for default. Do not bid categories you cannot fill and always bid an extra category or two as back-up plan in case of changes in personnel.
Key personnel requirements state that specific individuals will be used to perform the work on a contract for a guaranteed minimum of time. If you are signing a contract with four option years, the minimum requirement may be 90 to 120 days (at the Contracting Officer’s discretion). Key personnel must sign an agreement to be available to the contract for the minimum agreed upon time, and contractors must notify the CO of any changes in key personnel.
Invoicing labor categories that are not part of the contract – this will irritate your CO (at the least) and will definitely delay payment of outstanding invoices. I have found that most COs are willing to do change orders as appropriate, but ask for the change order before doing the work and submitting the invoice!
Utilizing personnel that do not mean the labor category requirements – this is a violation of the contract and will definitely irritate your CO! At the very least, you will be required to invoice at the appropriate labor category which may create a need for a change order (more irritation), and you could find yourself in a termination if the behavior is determined to be egregious. While a single offense is not likely to get you terminated, it is going to hit your wallet because the change in labor categories (and billable rates) is going to be downward. Having someone more qualified doing the work is not the problem. Companies who violate this principle do so because they don’t have someone with enough qualifications to do the work. That means you over invoiced the government and potentially cut into your bottom line, even if you could have invoiced at the proper labor category.
Tools & Tips
- Review contracts
- Review employee files at new hire and at least annually or when adding a new contract
- Review mapping matrix annually for qualification updates, employee new hires and terminations, and contract additions, changes, or close-outs.