View source for 134.3 Consultant Contract Negotiation

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Tasks, hours and price are negotiated after a consultant is selected and notified. During this process, price can be considered. Firms must be listed on the Approved Annual Financial Pre-Qualification List in order to provide professional services to MoDOT. '''Additional scope beyond what was advertised in the RFQ cannot be negotiated into the contract.''' 

The selected firm will use the provisional overhead rate that was accepted by MoDOT during the firm’s prequalification process with MoDOT. If the firm elects to voluntarily reduce their overhead rate, the following language must be incorporated into the contract: 
:“The Company has voluntarily reduced its overhead rate to ___%. This rate will be used on all billings. Upon completion of these services outlined under this Agreement the final payment for these items will be based on accounting records of the Consultant incurred during the period of the Agreement. MoDOT reserves the right to require the actual audited overhead rates be used if those rates are less than the voluntarily reduced rate noted previously.”

==134.3.1 Engineering Services Contract (ESC)==
Contract negotiation should follow the schedule provided in the solicitation. Consult Chief Council’s Office CCO early in the negotiation phase for any proposed changes in the boilerplate agreement language. Modifications to the standard agreement language may be considered only where no other compromise can be reached to successfully negotiate the agreement, and '''must be approved “as to form” by CCO.''' If the PM/CA works with their Regional Counsel to approve the revisions to the boilerplate agreement, that Regional Counsel will need to approve the partially executed contract “as to form”. In general, no changes are allowed to the ESC.

The standard engineering services contracts (ESCs) can be found in the [https://netprod3.dot.missouri/eAgreements/Search/QuickSearch eAgreements SharePoint site]. ESCs must follow the eAgreements process for drafting, reviewing and executing, as defined in [[:Category:153 Agreements and Contracts|EPG 153 Agreements and Contracts]] and the [https://netprod3.dot.missouri/eAgreements/Home/AllHelpDocs eAgreements Training Manual]. In addition, the appropriate approvals must be obtained through the Professional Services Committee (PSC) process. When the agreement is created and saved in eAgreements, the system will auto-assign a new file name. This auto-assigned file name must be used as the agreement number, in the header, within the agreement itself.

The MoDOT unit responsible for the contract, either the district or the division, provides the consultant with an electronic PDF copy of the tentative contract. The tentative scope of services (including [[237.14 Electronic Design Data Delivery (BIM Deliverables)#237.14.4 Specifications of Electronic Design Data for Consultants and MoDOT|Specifications of Electronic Design Data for Consultants and MoDOT]]) may be provided in a non-PDF electronic format. The PM/CA is responsible for completing the Consultant Contracts. Contract language must be approved by CCO input prior to execution of the contract. 

After reviewing the tentative contract and scope of services, the consultant prepares a proposal containing a detailed estimate of cost that includes task-hours, basic pay rates, pre-qualification accepted overhead rates, direct costs and fixed fee. Each of these items is reviewed by MoDOT to ensure it is reasonable with respect to the type of work involved and anticipated size of the contract. PM/CAs are responsible for the quality and content of professional services agreements. [[media:134.3.1 2017.doc|Fig. 134.3.1, District Checklist for Reviewing Consultant Contracts]] is a tool provided for PM/CAs to utilize while reviewing contracts.

Prior to receiving & negotiating the Scope and Fee from the selected firm, the PM/CA shall develop an Independent Cost Estimate (ICE) in compliance with 23 code of Federal Regulations (CFR) Part 172.7(a)(1)(v)(B) to serve as the basis for the negotiation of the contract.

After the PM/CA and consultant agree to the terms of the agreement, the PM/CA converts the Word document to a pdf file in eAgreements. The pdf file should include the Scope of Services and Exhibits. 

===134.3.1.1 Liability Insurance===
The MoDOT Standard Consultant Contract language includes provisions for the amount of liability insurance that the consultant must provide to cover claims that may result from errors, omissions, or negligent acts of the consultant. Insurance Certificate of Liability must meet [http://insurance.mo.gov/industry/sovimmunity.php Missouri’s Sovereign Immunity Limits]. In rare instances, the PM/CA may request an Acceptance of MHTC Liability to reduce the insurance requirements on the consultants. This process must obtain PSC approval and follow the procedures outlined in the Acceptance of MHTC Liability, available through the CCO, depending on the nature and complexity of the services. 

A copy of the certificate of liability insurance for the prime consultant is to be requested by the PM/CA and kept in the project files with the executed contract. It is the responsibility of the consultant to meet the insurance requirements of the contract. Receipt of the consultant’s certificate of insurance liability does not imply approval of the amounts. 

===134.3.1.2 Payment Bond===
State statute requires that in the event that any subconsultants are used to supply at least twenty five thousand dollars ($25,000) worth of materials and/or labor not within the scope of environmental assessment services or licensed professional services as defined by [https://revisor.mo.gov/main/OneChapter.aspx?chapter=327 Chapter 327, RSMo], the consultant shall require any such subconsultants to provide laborers and materialmen with adequate bond security.

The payment bond value shall equal the amount of the total subcontracted non-engineering services and applicable direct costs. If there is uncertainty about whether an item of work is considered as non-engineering or as an applicable direct cost, it should be included in the amount covered by the payment bond. Fully document all decisions regarding contracted services not included in the payment bond amount and retain in the project file until the contract has been closed and audited for final payments. A copy of the payment bond is to be requested by the project manager and kept in the district project files with the executed contract. 

For more information on the payment bond language, refer to [[153.9 Design|DE01 Consultant Services Master Agreement (All_Fees)]].

==134.3.2 Fixed Fee Review==
The fixed fee is the profit to the consultant. It is based on the scope, complexity of the project, contract duration, risk to the consultant, amount of sub consultant management, and professional nature of the services as well as the size and type of contract. Fixed fees are calculated based upon direct salary cost. Direct salary cost includes direct labor, overhead on direct labor, plus general and administrative overhead. It does not include travel expenses, printing, miscellaneous expenses or sub consultant costs. The Facilities Capital Cost of Money Rate (FCCM) shall not be included in the fixed fee calculation. The percentage of the fixed fee to the direct salary cost must not exceed the maximum allowable profit curve shown in [[media:134.3.2 2021.pdf| Fig. 134.3.2 MoDOT Allowable Profit Curve]]. For standard solicitation contracts, the maximum allowable profit is capped at 15 percent, even if calculated to be higher. For consultant contracts that potentially include multiple future phases, the fixed fee will be based on the estimated total direct salary cost for the current phase plus all future phases. For MOU contracts, the maximum allowable profit is 12 percent as agreed to in the Consultant Services Master Agreement, DE01. The maximum subconsultant fixed fee for MOUs is also capped at 12 percent.

Fixed fees shall not be calculated on direct expenses. Sub consultants are a direct expense to the prime consultant. Therefore, sub consultant expenses are not included in the fixed fee calculations for the prime consultant. It should be noted the “fixed fee” is a fixed dollar amount and will be paid in full at the conclusion of the contract, even if the consultant does not use all the hours in the contract. Therefore, care should be taken to not overestimate man-hours.

==134.3.3 Task-Hours Review==
In order to establish a measure of “Fair & Reasonable” a pre-negotiation estimate is required by federal regulations in 2 CFR 200.324. The MoDOT PM/CA shall develop an estimate based on the task-hours that MoDOT would require to perform the same service. The consultant task-hour estimate is reviewed and compared to the MoDOT estimate. The consultant’s fee proposal submittal must include detailed hours and cost breakdowns by sub-task and by job title. For any subtask on the scope, it should be known how many different people, how many hours per person, any direct expenses, etc. for the prime and any subs. Negotiations should occur to assure that task-hours in the contract are comparable to the MoDOT estimated hours and those from similar projects. PMs should confer with the appropriate Central Office liaison for concurrence with the review.

==134.3.4 Basis of Payment==
The majority of Design Consultant Engineering Services Contracts are actual cost contracts. This means that all costs submitted for payment must be based on actual wages, overhead. Federal regulations ([https://www.acquisition.gov/far/part-16#FAR_16_102 FAR Part 16.102]) prohibit the use of cost plus a percentage of cost or percentage of construction costs as a method of compensation. The following methods may be used as the basis of payment in a contract:
* Actual Cost Plus Fixed Fee (majority of contracts)
* Specific rates of pay (for emergency situations only)
* Lump Sum (prior approval required).

Each Subcontractor or subconsultant must be identified in the contract. Subcontractor expenses should also be calculated based upon actual costs. Prompt payment of subconsultants is required per [https://www.acquisition.gov/far/part-32#FAR_Subpart_32_9 FAR Subpart 32.9].

Per [[#134.3.5.1 Subconsultant Cost Exceeding $25,000|EPG 134.3.5.1]], if the consultant is using a subconsultant with a cost exceeding $25,000, then the subconsultant shall include a detailed estimate of cost and a detailed overhead rate schedule (cost plus fixed fee breakdown).

Per [[#134.3.5.2 Subconsultant Cost NOT Exceeding $25,000|EPG 134.3.5.2]], if the consultant is using a subconsultant with a cost that DOES NOT exceed $25,000 then a letter quote from the subconsultant can be submitted with the engineering service contract.

Retainage is not allowed as a routine part of the contract i.e. blanket retainage is prohibited. Payment may be withheld on any particular work item that has not been completed in accordance with the contract. This can include work incidental to the work item, and required documentation directly related to the work.

Direct costs must be estimated using current Privately Owned Vehicle (POV) mileage reimbursement rates and per diem rates for Missouri. These rates can be found on the following web pages.

Mileage, subsistence and lodging must follow federal travel regulation guidelines.
* [https://www.gsa.gov/travel/plan-a-trip/transportation-airfare-rates-pov-rates-etc/privately-owned-vehicle-pov-mileage-reimbursement?gsaredirect=mileage&_gl=1%2A1tsqq73%2A_ga%2ANDYzMzAxNDIwLjE2NTcwMjY4MDU.%2A_ga_HBYXWFP794%2AMTczNjUyNzQ0OS4yMC4xLjE3MzY1Mjc0NzAuMC4wLjA. Current POV Mileage Reimbursable Rates]
* [https://www.gsa.gov/travel/plan-book/per-diem-rates/per-diem-rates-results?action=perdiems_report&fiscal_year=2024&state=MO&city=&zip= Current Per Diem Rates for Missouri]

==134.3.5 Subconsultants==
The use of subconsultants is allowed provided that each firm is identified in the engineering services contract. DBE firms should be listed under Disadvantaged Business Enterprise (DBE) Requirements, and other subconsultants should be listed in Subconsultants. The use of 2<sup>nd</sup> and 3<sup>rd</sup> Tier subconsultants is not allowed, that is, only the prime consultant can have subconsultants, the subconsultants cannot have subconsultants. Subconsultants do not have to be prequalified but it is strongly encouraged especially if the subconsultants routinely performs work >$25,000. 

===134.3.5.1 Subconsultant Cost Exceeding $25,000===
If the consultant is using a subconsultant with a cost exceeding $25,000, then the subconsultant shall include a detailed estimate of cost and a detailed overhead rate schedule (cost plus fixed fee breakdown).[https://epg.modot.org/forms/DE%202017%20Forms/LPA/134.3.6.1.1%20Common%20Unallowable%20Costs.pdf Fig. 134.3.6.1.1] lists common unallowable costs. If the subconsultant is prequalified, the overhead rate listed must be the current overhead rate accepted by MoDOT through the annual financial prequalification process In this case, a detailed overhead rate schedule would not be required.

If the subconsultant is not pre-qualified with MoDOT then the firm shall also include their [[media:134.3.5.1 Form.pdf|Consultant Certification of Indirect Cost Form]]. Each subconsultant in this category must show its overhead in the required format.[https://epg.modot.org/forms/DE%202017%20Forms/LPA/134.3.6.1.2.pdf Fig. 134.3.6.1.2] provides an example Overhead Schedule. The detailed overhead rate schedule should be reviewed for possible unallowable costs per [https://www.acquisition.gov/far/part-31 FAR Part 31.2], [https://epg.modot.org/forms/DE%202017%20Forms/LPA/134.3.6.1.1%20Common%20Unallowable%20Costs.pdf Fig. 134.3.6.1.1] lists common unallowable costs. The prime consultant is responsible for ensuring that all subconsultants comply with state and federal regulations, such as E-Verify, and are registered to do business in Missouri.

===134.3.5.2 Subconsultant Cost NOT Exceeding $25,000===
If the consultant is using a subconsultant with a cost that DOES NOT exceed $25,000 then a letter quote from the subconsultant can be submitted with the engineering service contract. The letter should quote the subconsultant’s cost shown in Exhibit III of the consultant contract. It is preferred however, that the subconsultants have cost plus fixed fee break down. If the subconsultant is not pre-qualified with MoDOT, the firm shall also include their [[media:134.3.5.1 Form.pdf|Consultant Certification of Indirect Cost Form]]. The prime consultant is responsible for ensuring that all subconsultants comply with state and federal regulations, such as E-Verify, and are registered to do business in Missouri.

==134.3.6 Ceasing Negotiation==
If the district/division cannot negotiate a reasonable price with the consultant selected, they can formally cease negotiations with a formal written letter and begin negotiations with the next most qualified firm. After the district/division has ceased negotiations with the selected firm and have started negotiations with the next most qualified firm, they cannot go back to the first firm and start another round of negotiations; this is looked upon as price shopping and is unallowable. See the [http://www.fhwa.dot.gov/programadmin/consultant.cfm FHWA Consultant Services webpage] for more information. If a contract cannot be negotiated with the second consultant, MoDOT may choose to negotiate with the third most qualified consultant. At any time, all proposals may be rejected and MoDOT can re-advertise the project with a revised scope.

==134.3.7 Negotiation Documentation==
All correspondence with the consultant during the course of the negotiations shall be documented and included in the MoProject file for the consultant contract, including all email correspondence. Document in writing all verbal communication and personal visits with the consultant regarding the contract negotiations and include in the MoProject file. These records shall be maintained for a period of three years after the final voucher is submitted in FMIS by Financial Services. If any litigation, claim, negotiation, audit or other action involving the records is started before the expiration of the three-year period, the records are retained until completion of the action and resolution of all issues arising from it or until the end of the three-year period, whichever is later.

==134.3.8 Contract Assurances==
Prior to executing a contract with a consultant, MoDOT will assure the following: 
# The consultant has been apprised of all applicable technical work requirements and administrative controls, including those of the FHWA and any other agencies that may have jurisdictions over the project. 
# After selection, the firm was provided all pertinent information relative to the desired engineering services or other professional services requested. The tentative contract set out the scope of the services in sufficient detail to provide the consultant with a definite knowledge of the services and results expected. The consultant was instructed to submit a proposal that indicated clearly identifiable, sufficiently detailed, and easily auditable charges for the work and/or units of work. These proposed charges (rates and man-hours) were reviewed for acceptability before negotiations proceeded. 
# Contracts include a requirement for a three-year retention of records after the final voucher is submitted in FMIS by Financial Services. On actual cost contracts, the consultant was informed that records must be open for inspection by authorized government personnel.


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