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Transcript of EXAM PREP COURSE – 2016 SESSION UNIT 3 BY DONALD E. SHANNON CPCM,CFCM, FELLOW Certified Federal...
EXAM PREP C O UR S E – 2016 S ESS IO NU NIT 3
BYDO NALD E . S HAN NO N C PC M, C FC M, FELLO W
Certified Federal Contracts Manager
© 2015 – Rio Grande Chapter NCMA
Copyright Notice
This presentation is the property of the Rio Grande Chapter of the National Contract Management Association © 2015. All rights reserved. This presentation is intended for the private, non-commercial use of the Rio Grande Chapter of the National Contract Management Association (NCMA) for the education and training of candidates seeking certification by the NCMA as a Certified Federal Contracts Manager.This presentation may not be duplicated, reproduced or used in any form or by any means including photocopying and recording or by any information storage and retrieval system without permission in writing from the publisher.
ACQUISITION PLANNING
FAR Part 7
Policy
Agencies shall perform acquisition planning, conduct market research and select the appropriate contract type for all acquisitions to promote/provide: Acquisition of commercial items; and Full and open competition or to obtain competition to
the maximum extent practicable.
Agency Head Responsibilities
Promoting and providing for full and open competition
Establishing criteria and thresholds at which increasingly greater detail and formality in the planning process is required as the acquisition becomes more complex and costly (from firm fixed price to cost type contracts.) Written plan shall be prepared for cost reimbursement and
other high risk contracts
Agency Head Responsibilities
Ensuring that the statement of work is closely aligned with performance outcomes and cost estimates.
Ensuring that no purchase request is initiated or contract entered into that would result in the performance of an inherently governmental function by a contractor
General Procedures
Acquisition planning should begin as soon as the need is identified. Preferably well in advance of the FY in which contract award or order
placement is necessary.Form a team (contracting, legal, fiscal and technical). Review previous plans for similar acquisitions and discuss
the lessons learned. Coordinate with the cognizant small business specialist if
it uses other than full and open competition. Avoid issuing requirements that restrict competition and/or
increases prices. Nominate and designate a Contracting Officer
Representative.
General Procedures
Avoid issuing requirements on an urgent basis or with unrealistic delivery or performance schedules because it restricts competition and increases prices.
The acquisition strategy shall be coordinated with the cognizant small business specialist if the estimated contract is: $8M or > for DOD; $6M or > for NASA, GSA, DOE; and $2.5M or > for all other agencies.
Contents of Written Acquisition Plans
Identify milestones at which decisions should be made
Address considerations that will control the acquisition.
Content will vary but may include: Statement of need, history, and potential
alternatives. List of vendors Applicable conditions, and capabilities. Cost and cost concepts used (life-cycle cost,
design-to-cost). Delivery or performance-period requirements. Consequences of trade-offs and risks.
Contents of Written Acquisition Plans
Plan of action: Identify prospective sources and the impact of bundling. Describe how competition will be sought, promoted and
sustained. Contract type and source-selection procedures. 🔑 Acquisition considerations (multi-year contract, options,
deviations) Contractor vs Government performance & inherently
governmental functions. Make or buy decisions, and security considerations Government-furnished property and information Milestones (SOW, specs & requirements, issuance of synopsis
& solicitation, evaluation of proposals, negotiations, award).
Additional Requirements for Major Systems
Offerors shall incorporate items currently available; and items that can be acquired competitively during the system’s service life.
Offerors shall identify opportunities to competitively obtain required items during the life of the system and provide the right to use technical data for competitive future acquisitions (at a specified cost).
Additional Requirements for Acquisitions Involving Bundling.
Market research must be conducted to determine whether bundling is necessary and justified and would derive measurably substantial benefits as it limits/impedes small business competition.
Benefits must be equivalent to 10% of the estimated contract if the contract is <$94M; if >$94M it is 5% or $9.4M
Bundling may be necessary even when the expected benefits do not meet the thresholds (previous slide) but are critical to the agency’s mission success
Acquisitions Involving Bundling
When a contract has substantial bundling, the acquisition plan must identify the benefits. These include: Ways competition was promoted to small business
concerns Strategies to reduce bundling The rationale for not choosing those alternatives.
A contract is considered to have substantial bundling when it is greater than: $8M for DOD $6M NASA, GSA or DOE $2.5M for all others
Planning for the Purchase of Supplies in Economic Quantities
Procure items in quantities that result in the greatest cost benefit (not to exceed required quantity).
Offeror must state whether the quantity is economically advantageous or if they recommend a different quantity.
Action should only be taken if there is a potential for significant savings. The CO shall consult with the requirements developer before proceeding. If they agree with the offeror, the solicitation should be amended or canceled.
Contractor Versus Government Performance
The Government must perform inherently governmental activities with Government personnel; and subject commercial activities to the forces of competition.
The agency shall give appropriate cost consideration when deciding between agency and contractor performance.
Equipment Lease or Purchase
Considerations to make when deciding to lease or purchase Length of time and extent of use of equipment. Financial and operating advantages of alternative
types and makes of equipment. Cumulative rental payments vs net purchase price. Transportation, installation, maintenance and other
costs. Potential obsolescence because of imminent
technological improvements. Trade-in or salvage value, later use by other agencies,
and imputed interest.
Purchase method. Do not rule out purchasing even if there are technological advances.
Lease method may serve as an interim measure when immediate use is required. A lease with option to purchase is preferable.
Equipment Lease or Purchase
General Service Administration Assistance
GSA assists in decision by providing information such as:
Pending price adjustments to Federal Supply Schedule contracts;
Recent or imminent technological developments;
New techniques and industry or market trends.
Inherently Governmental Functions
Applies to all contracts for services, but does not apply to services obtained through personnel appointments, advisory committees, or personal services contracts issued under statutory authority.
Contracts shall not be used for the performance of inherently governmental functions.
As a general rule, contracts are inherently governmental when it results is the direct conduct, control, or command of an event/decision. It also includes functions that involve determinations, approval or policy decisions.
The functions that are not inherently governmental involve work that is advisory, provides recommendation, or analysis.
REQUIRED SOURCES OF SUPPLIES AND SERVICE
Far Part 8
Required Sources of Supplies and Services
Priorities for use of mandatory Government sources. Federal Supply Schedules Acquisition from Federal Prison Industries Acquisition from Nonprofit Agencies Employing
People Who are Blind or Severely DisabledAcquisition of HeliumAcquisition of Printing and Related SuppliesLeasing of Motor Vehicles
Priorities for Use of mandatory Government Sources
Supplies Inventories of the requiring Excess from other agencies Federal Prison Industries Purchase from a Procurement List maintained by the
Committee for Purchase From People Who Are Blind or Severely Disabled
Wholesale supply sources, such as stock programs of the General Services Administration (GSA), the Defense Logistics Agency (DLA), the Department of Veterans Affairs, and military inventory control points.
Priorities for Use of Mandatory Government Sources
Services Services that are on the Procurement List
maintained by the Committee for Purchase From People Who Are Blind or Severely Disabled This also applies when contractors purchase the
supplies or services for Government use. Federal Prison Industries
Excess Personal Property
When practicable, agencies must use excess personal property as the first source of supply for agency and cost-reimbursement contractor requirements.
You can find this information through Reviewing excess personal property catalogs and
bulletins issued by the GSA Personal contact with the GSA Submission of supply requirements to the regional
offices of GSA Examination and inspection of reports and samples of
excess personal property
Federal Supply Schedules
The Federal Supply Schedule program is also known as the GSA Schedules Program or the Multiple Award Schedule Program
It is directed and managed by GSA and provides Federal agencies with a simplified process for obtaining commercial supplies and services at prices associated with volume buying.
Federal Supply Schedules
GSA schedule contracts require all schedule contractors to publish an “Authorized Federal Supply Schedule Pricelist” This list contains all supplies and services offered by a
schedule contractorGSA offers an on-line shopping service called
GSA Advantage! You can place orders against schedules and search for
part numbers here
Use of Federal Supply Schedule
Parts 13 (Simplified Acquisition Procedures), Part 14 (Sealed Bidding), Part 15 (Contracting by Negotiation), and Part 19 (Small Business Programs) do not apply to orders placed against the federal supply schedules.
For orders over 500k the requiring agency shall make a determination that use of the Federal Supply Schedule is the best approach
Blanket Purchase Agreements (BPAs)
Used to fill repetitive needs for supplies or services
BPAs shall address the frequency of ordering, invoicing, discounts, requirements (e.g., estimated quantities, work to be performed), delivery locations, and time.
No single-award BPA with an estimated value exceeding $103 million (including any options), may be awarded unless It is determined that only one source can provide them It is necessary in the public interest to award the BPA to a
single source for exceptional circumstances
Order Placement
Ordering activities may place orders orally, except for— Supplies and services not requiring a statement of
work exceeding the simplified acquisition threshold; Services requiring a statement of work (SOW); and Orders containing brand-name specifications that
exceed $25,000.
Acquisition of Helium
Agencies and their contractors and subcontractors must purchase major helium requirements from Federal helium suppliers, to the extent that supplies are available.
The CO must forward the following information to the Bureau of Land Management within 45 days of the close of each fiscal quarter: The name of any company that supplied a major
helium requirement. The amount of helium purchased. The delivery date(s). The location where the helium was used.
Acquisition from Federal Prison Industries, Inc.
Federal Prison Industries, Inc. (FPI) is also referred to as UNICOR
FPI provides training and employment for prisoners through the sale of its supplies and services to Government agencies
FPI diversifies its supplies and services to minimize adverse impact on private industry.
Supplies and services can be viewed at www.unicor.govBefore purchasing an item of supply listed in the FPI
Schedule, conduct market research to determine whether the FPI item is comparable to supplies available from the private sector that best meet the Government’s needs in terms of price, quality, and time of delivery.
Acquisition from Federal Prison Industries, Inc.
Purchase from FPI is not mandatory and a waiver is not required if— The contracting officer makes a determination that the FPI item
of supply is not comparable to supplies available from the private sector that best meet the Government’s needs in terms of price, quality, and time of delivery; and
The item is acquired in accordance with 8.602(a)(4); Public exigency requires immediate delivery or performance; Suitable used or excess supplies are available; The supplies are acquired and used outside the United States; Acquiring listed items totaling $3,000 or less; Acquiring items that FPI offers exclusively on a competitive
(non-mandatory) basis, as identified in the FPI Schedule; or Acquiring services.
Acquisition from Nonprofit Agencies Employing People Who Are Blind or Severely
Disabled
Procurement priority in relation to Federal Prison Industries Supplies:
Federal Prison Industries, Inc. AbilityOne participating nonprofit agencies. Commercial sources.
Services: AbilityOne participating nonprofit agencies. Federal Prison Industries, Inc., or commercial
sources.
Acquisition of Printing and Related Supplies
Government printing must be done by or through the Government Printing Office (GPO) unless— The GPO cannot provide the printing service The printing is done in field printing plants
operated by an executive agency The printing is acquired by an executive agency
from allotments for contract field printing The printing is specifically authorized by statute
to be done other than by the GPO.
Leasing of Motor Vehicles
“Leasing” means the acquisition of motor vehicles, other than by purchase from private or commercial sources
CO shall: Ensure that vehicles requested are of maximum fuel
efficiency and minimum body size, engine size, and equipment (if any) necessary to fulfill operational needs, and meet prescribed fuel economy standards
Certify that the requested passenger automobiles (sedans and station wagons) larger than small, subcompact, or compact vehicles are essential to the agency’s mission
Internal approvals have been received The GSA has advised it cannot furnish the vehicle
CONTRACTOR QUALIFICATIONS
FAR Part 9
Contractor Responsibility
Contracts shall be awarded to "Responsible" contractors only.
Prime contractors are responsible for making similar determinations for subcontractor responsibility
"Responsible" means Financially sound Past performance Business Ethics Business infrastructure Not disallowed by applicable laws or regulations.
Special standards may be applied on a case-by-case basis.
How Standards are Applied
Past Performance Verification - CO shall verify past performance using FAPIIS and/or PPIRS.
CO Shall have provision regarding contractor responsibility in the Reps and Certs (SAM)
CO is responsible for making a determination (via a "Determination and Finding") of Contractor responsibility prior to award of contract.
For R&D it may be done before the RFP to weed out non-responsible candidates.
How standards are applied cont.
CO Review includes checks for debarment via EPLS and Past Performance via FAPIIS
CO may request a pre-award survey to verify information provided by the offeror
If a finding is made that the offeror is not responsible the CO may disqualify them for the award and proceed to the next most eligible offeror/bidder.
The CO must refer non-responsibile small business offerors to the SBA for resolution SBA May issue a Certificate of Competency
Pre-Award Survey
Accomplished to evaluate potential awardees and verify information provided. Usually performed in cases where insufficient
information available to make a proper determination Survey accomplished by Contracts organization or by
DCMA/DCAA.
Inverted Domestic Corps
Contracts with “Inverted Domestic Corporations” are prohibited (FAR 9.108-2)
Inverted domestic corporations are domestic corporations who’s ownership (> 80% of stock) is held by a foreign entity and
The entity does not have substantial business activities in that foreign country compared to the total business activities of the combined group
Qualified Products
Qualification and listing in a Qualified Products List (QPL), is the process by which products are obtained from manufacturers or distributors, examined and tested for compliance with specification requirements.
The names of successful products, manufacturers, or potential offerors are included on lists evidencing their status.
Qualified Suppliers
Qualified Manufacturers List (QML), or Qualified Bidders List (QBL) are used to ensure that suppliers have the special skills, abilities etc. to meet stringent requirements. Manufacturers or potential offerors, are provided an opportunity to demonstrate their abilities to meet the standards specified for qualification. Qualification adds cost so must be justified. Includes Pre-qualified bidders which reduces competition
so must be judiciously applied.Qualification is usually done in advance of any
acquisition action
First Article Test/Acceptance.
Typically used for the acquisition of developmental items.
Testing ensures the item being provided meets all contractual specifications before contractor is allowed to produce in quantity.
Debarment, Suspension and Ineligibility.
Debarment means action taken by a debarring official under 9.406 to exclude a contractor from Government contracting and Government-approved subcontracting for a reasonable, specified period. (Usually 1 - 3 years but can be longer)
Ineligibility means excluded from Government contracting (and subcontracting, if appropriate) pursuant to statutory, Executive order, or regulatory authority for example, pursuant to– (1) 40 U.S.C. chapter 31, subchapter IV, Wage Rate Requirements (Construction),
and its related statutes and implementing regulations; (2) 41 U.S.C. chapter 67, Service Contract Labor Standards; (3) The Equal Employment Opportunity Acts and Executive orders; (4) 41 U.S.C. chapter 65, Contracts for Material, Supplies, Articles, and
Equipment Exceeding $15,000; (5) 41 U.S.C. chapter 83, Buy American; or (6) The Environmental Protection Acts and Executive orders.
Suspension means action taken by a suspending official under 9.407 to disqualify a contractor temporarily from Government contracting and Government-approved subcontracting
Debarment
Contractors debarred, suspended, or proposed for debarment are excluded from receiving contracts, and agencies shall not solicit offers from, award contracts to, or consent to subcontracts with these contractors
Agencies may continue contracts or subcontracts in existence at the time the contractor was debarred, suspended, or proposed for debarment unless the agency head directs otherwise.
Ordering activities shall not— (1) Place orders exceeding the guaranteed minimum under indefinite
quantity contracts; (2) Place orders under Federal Supply Schedule contracts, blanket
purchase agreements, or basic ordering agreements; or (3) Add new work, exercise options, or otherwise extend the duration
of current contracts or orders.
Causes for Debarment
Conviction or civil judgment for fraud in connection with a public contract
Violation of Federal or state antitrust statutesCommission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property
Attaching a “Made in America” lable to non-American-made products
Offenses showing a lack of business integrity or honesty (includes unpaid or delinquent taxes)
Not in compliance with Immigration and Nationality Act
Suspension
Suspension is a serious action to be imposed on the basis of adequate evidence, pending the completion of investigation or legal proceedings, when it has been determined that immediate action is necessary to protect the Government’s interest.
Suspension is used for the same causes as debarment and has much the same effect
Suspension are temporary but may lead to debarment if the charges are proven.
Verification of Offeror’s Status
System for Award Management (SAM) Exclusions contains listing of debarred, suspended, or proposed for debarment suppliers
Contracting Officers (and Contractors) must verify a potential awardee’s status using this listing prior to making an award
Proof of the check is usually included in the contract file.
Organizational and Consultant Conflicts of Interest
An organizational conflict of interest may result when factors create an actual or potential conflict of interest on an instant contract, or when the nature of the work to be performed on the instant contract creates an actual or potential conflict of interest on a future acquisition. In the latter case, some restrictions on future activities of the contractor may be required.
CO are responsible for preventing unfair competitive advantage.
An unfair competitive advantage exists where a contractor competing for award of any Federal contract possesses – (1) Proprietary information that was obtained from a Government
official without proper authorization; or (2) Source selection information (as defined in 2.101) that is relevant to
the contract but is not available to all competitors, and such information would assist that contractor in obtaining the contract.
Organizational and Consultant Conflicts of Interest
If a contractor prepares and furnishes complete specifications covering nondevelopmental items, to be used in a competitive acquisition, that contractor shall not be allowed to furnish these items, either as a prime contractor or as a subcontractor, for a reasonable period of time including, at least, the duration of the initial production contract.
In development work, it is normal to select firms that have done the most advanced work in the field. These firms can be expected to design and develop around their own prior knowledge. In many instances the Government may have financed the development.
Thus, while the development contractor has a competitive advantage, it is an unavoidable one that is not considered unfair; hence no prohibition should be imposed.
Teaming
Teaming is an arrangement in which Two or more companies form a partnership or joint
venture to act as a potential prime contractor; A potential prime contractor agrees with one or more
other companies to have them act as its subcontractors under a specified Government contract or acquisition program.
The companies involved normally form a contractor team arrangement before submitting an offer.
Joint ventures are subject to the SBA affiliation rules for size determination
Defense Production Pools and R&D Pools
Pools are two or more suppliers who are associated together in order to obtain and perform, jointly or in conjunction with each other, defense production or research and development contracts; Have an agreement governing their organization,
relationship and procedures Agreement approved by SBA (e.g. Section 8a) Official under Defense Production Act (anti trust
implications)
TYPES OF CONTRACTS
FAR Part 16
Selecting Contract Type
A wide selection of contract types is available to the Government and contractors in order to provide needed flexibility in acquiring the large variety and volume of supplies and services required by agencies. Contracts resulting from sealed bidding shall be firm-fixed-price contracts or
fixed-price contracts with economic price adjustment. Contracts negotiated under Part 15 may be of any type or combination of types
that will promote the Government’s interest, except as restricted in this part (see 10 U.S.C. 2306(a) and 41 U.S.C. 3901).
Contract types not described in this regulation shall not be used, except as a deviation
The cost-plus-a-percentage-of-cost system of contracting shall not be used No contract may be awarded before the execution of any determination and
findings (D&F’s) required by this part. Each contract file shall include documentation to show why the particular
contract type was selected. This shall be documented in the acquisition plan, or in the contract file if a written acquisition plan is not required by agency procedures.
Factors in Selecting Contract Types
Price Competition, Price Analysis, and Cost Analysis
Type and complexity of requirement(s)Combining contract types (where
requirements can be separated) Fixed price CLIN Cost CLIN
Urgency of requirementPeriod of performance or length of
production runAdequacy of contractor’s accounting system
Basic Contract Types
Three basic types Fixed Price Cost Reimbursement Time and Materials
Each type has characteristics that make it applicable for a type of procurement Risk (Cost, Schedule,
Quality) are primary consideration
Completeness /detail of specifications will often determine risk
Contract Types
Fixed Price
Firm Fixed Price
Fixed Price LOE
Fixed Price Economic Price
Adjustment
Fixed Price Redetermination Prospective
Fixed Price Redetermination Retroactive
Cost Reimbursement
Cost Contract
Cost Sharing
Cost Plus Fixed Fee
Time and Materials
Time and Materials
Labor Hours
Cost Risk and Contract Type
Risk must be viewed from each parties perspective Buyer (Often the
Government) Seller
Both parties seek to minimize their risk Cost risk Technical risk / Performance
risk Contract type is negotiable
(FAR 16.103) Selecting the contract type is
generally a matter for negotiation and requires the exercise of sound judgment.
Negotiating the contract type and negotiating prices are closely related and should be considered together.
Risk Elements
Buyer Risks Price will exceed
established ‘budget’ Work will not meet
customer requirements Poor quality
Inferior workmanship Substandard
materials Late delivery
Seller Risks Specifications incomplete or
missing Differing Site Conditions Changing business conditions
Material Prices Labor concerns Laws / regulations Weather
“Force Majeure” .. Unforeseen events Acts of God War Performance failures by failures
outside of either parties control
Fixed Price Contracts
Buyer and Seller agree to a price
Generally the price is not changed (i.e., it is “fixed”)
Offers buyer lowest risk by transferring risk to seller
Does NOT immunize buyer from all cost risks Differing Site conditions Imperfect specifications Seller agrees to do all work
/ deliver all goods for one price
Seller assumes most risks and has little recourse for cost variations
Preferred contract type for most Government agencies.
Firm Fixed Price
Price is not subject to adjustments
Sometimes called “lump sum”
Strong incentive for seller to control costs
Buyer must be able to accurately state requirements and estimate costs.
Applicable to: Construction Commercial purchases
Fixed Price – Economic Adjustment
Allows upward and downward revision of contract price
Revisions are keyed one or more factors Established prices Actual cost of labor or
material Published indexes
Fixed Price - Redetermination
Fixed price for part of the contract with Redetermination of future
prices at some point during performance (Prospective) Especially useful if prices
are subject to large swings such as oil or currency exchange rates.
Retroactive adjustment after completion Fixed ceiling price at start Retroactive adjustments
can not exceed ceiling
Fixed Price – Level of Effort
Fixed sum paid over time Contractor provides a ‘level of
effort’ Can be based on labor hours (e.g.,
Full Time Equivalent (FTE) Contractor not obligated to
continue performance beyond that limit
Used when exact requirements can not be accurately stated but buyer wishes to cap total cost.
Fixed price is invoiced over time as percentage of Period of Performance (1/12 per month etc.)
Cost Reimbursement Contracts
Contractor is paid (reimbursed) for actual costs
Ceiling cost is established Contractor may not exceed
ceiling except at own risk Contract shall make ‘best
efforts’ to complete work within ceiling
Types of Cost Reimbursement Contracts Cost Contract Cost Sharing Cost Plus Fixed Fee
Cost Contract
Contractor is reimbursed for their costs Must be “allowable” (i.e.,
not specifically prohibited) Must be allocable to the
“final cost objective” Must be “reasonable”
Arms-length dealing What would be normally
paid by a prudent buyer in the normal course of business
No profit or fee is paid Often to non-profit
institutes, colleges, universities, etc.
Cost Sharing Contracts
Both the buyer ad the seller share in the actual costs
Benefits to both parties Often used for
developing intellectual property shared by both
One gets ownership and sales rights
Other benefits from a paid-up license to use the technology
Cost Plus Fixed Fee Contracts
Most commonly used form of cost contract
Fee is calculated as a fixed value based on estimated costs
“Best Effort” of seller to complete work for estimated cost
Stop performance when the cost is reached
If costs exceed estimate buyer may be provide added funds with or without additional fee No fee if costs are determined to
be ‘overrun’
Incentive Contracts
Applicable to both Cost and fixed price contracts
Provide additional motivation for seller to control a specific risk e.g., cost, schedule, quality.
Cost Incentive Permits adjusting final contract price
using a formula based on Final negotiated cost Target cost
Performance (Quality) Incentive Bonus for exceeding certain
performance goals Delivery Incentive
Bonus for early completion Penalty for late completion Liquidated damages
Guidelines for Selecting Contract Type
Contracting Officers consider a number of factors when selecting contract type
Risk is the primary factor Sellers should be rewarded for
accepting increased risk Incentives, adjustments and award
fees can be used to share the risk Equity .. What is fair and reasonable
for both parties Buyer (Government) should never
place itself in a position to make or break a seller (offeror)
When … Select a …
The offeror can actually estimate cost(s) Firm Fixed Price Contract
Economic conditions that will likely affect cost significantly and are outside offeror’s control but otherwise offeror can accurately estimate costs
Fixed Price Economic Adjustment
There are substantial cost uncertainties but it should be possible to estimate/control costs
Fixed Price Incentive Fee
Cost uncertainties are so great that fixed price would force seller to accept unreasonable risk but reasonable targets and formulas for sharing costs can be negotiated
Cost Plus Incentive Fee
The Level of Effort is uncertain and it is not feasible to negotiate an adjustment formula but likelihood of meeting objectives can be enhanced by a clear subjective fee plan
Cost Plus Award Fee
Cost uncertainty is so great the establishment of predetermined targets and incentive arrangements could result in a final fee out of line with the real work
Cost Plus Fixed Fee
Indefinite Delivery Contracts
Indefinite deliver contracts also known as Task Order contracts for services Delivery Order contract for supplies
Several variations depending on whether quantity or delivery point/date are variable
Indefinite Quantity – contract for supplies or services that are defined but actual quantity is determined by task/delivery orders placed against agreement
Indefinite Delivery – quantity is determined however delivery details (date, location, etc.) are undefined until delivery order / task order is placed.
Indefinite Delivery / Indefinite Quantity (ID/IQ) Includes an assurance of some minimum quantity or value. Items are typically stated but quantity to be delivered and date for delivery need not be stated.
Other Contract Devices
Basic Agreement – Pre-negotiated agreement. Includes Offer and Acceptance of terms but has no value
Basic Ordering Agreement (BOA) – Similar to above except may include pre-negotiated prices for standard items – again no value
Letter Contract – Temporary agreement pending negotiation of key terms and conditions – undefinitized contract actions
SPECIAL CONTRACTING METHODS
FAR Part 17
When and Why Use Multiyear Contracts?
When purchasing more than one year’s requirement provides for Results in substantial savings Promotes economy in administration and
performance of the contract When the year-to-year quantities remain
relatively constant When the design is stable and unlikely to be
affected by technical or obsolescence risks The head of the agency will continue to
request/provide annual funding
Procedural Information
May use sealed bids or negotiated contracting (Far 14 or FAR 15)
Contract type should favor Fixed Price with economic adjustments
Cancellation All years except first may be cancelled. (First year may be
terminated if necessary) CO must establish a cancellation ceiling for each contract year Ceilings exclude amount for requirement in preceding year(s) –
hence it is a declining value Must account for amortization of non-recurring costs Cancellation costs are limited to that specified in the contract
Multiyear Contract Solicitations
Must state first year and annual requirements for product/services
Criteria to be used evaluating lowest first year vs. lowest multi-year requirements
If government changes from multi-year to single year prior to award, the evaluation shall consider only the first year requirements
Must include cancellation ceiling (percent or dollar) for first year and each program year
Increased emphasis on the use of subcontractors, suppliers and vendors to broaden the defense industrial basis
Expeditious paymentProtection of existing authorityCancel or terminate for insufficient fundingContracts must be Fixed Price and may include
incentive and/or price adjustmentsAllows inclusion of recurring costs in cancellation
ceiling but requires agency head approval
Solicitation Provisions for NASA, DoD and the Coast Guard
Annual and multi-year proposals sought to facilitate computing cost savings May be waived by head of contracting agency if dual proposals
not required.
Level Unit Pricing Amortize non-recurring over over contract life to obtain level
pricing Unit price will therefore contain some amount of NR expense. Variable pricing is optional if approved.
Solicitation Provisions for NASA, DoD and the Coast Guard
Multiyear contracts may include options if they provide benefit
Congressional Notification For other than DoD, NASA and USCG must notify
appropriation committee and oversight committee in both House and Senate when cancellation ceiling > $12.5M
For DoD, NASA and USCG must notify appropriation committee and oversight committee in both House and Senate when cancellation ceiling > $125M
May not award until 31st day following notice.
Multiyear Contracting – Other Provisions
Options
Options can be used for both sealed bidding and contracting by negotiation when it is in the Government’s interest.
When using sealed bidding, the contracting officer shall make a written determination that there is a reasonable likelihood that the options will be exercised before including the provision at 52.217-5, Evaluation of Options, in the solicitation. (See 17.207(f) with regard to the exercise of options.)
Inclusion of an option is normally not in the Government’s interest when, in the judgment of the contracting officer the foreseeable requirements involve Minimum economic quantities An indefinite quantity
Solicitations With Options
Shall state the basis of evaluation, either exclusive or inclusive of the option
When appropriate, inform offerors that it is anticipated that the Government may exercise the option at time of award.
Should normally allow option quantities to be offered without limitation as to price,
Must be stated in the solicitation if unit prices which differ from those for the basic requirement are allowed for the options, depending on the quantities actually ordered and the dates when ordered
Evaluation of Options
In awarding the basic contract, the contracting officer shall evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the Government is likely to exercise the options
Exercise of Options
Exercise of an option is a unilateral right and the supplier is obligated to perform if the option is exercised
The CO shall provide written notice to the contractor within the time period specified in the contract of the Government’s intent to exercise the option
Such notice is non-binding and does not obligate the Government to actually exercise the option
Exercise of Options
CO is responsible for making a determination prior to exercising the option Services/supplies are still required and fulfill a
Government need Exercising the option is the most advantageous means
of fulfilling the requirement Funding is available Contractor is responsible as per FAR Part 9
Leader Company Contracting
Leader company contracting is limited to special circumstances and utilized only when its use is in accordance with agency procedures.
A developer or sole producer of a product or system is designated to be the leader company, and furnishes assistance and know-how under an approved contract to one or more designated follower companies, so they can become a source of supply. The objectives are one or more of the following:
Reduce delivery time. Achieve geographic dispersion of suppliers. Maximize the use of scarce tooling or special equipment. Achieve economies in production. Ensure uniformity and reliability in equipment, compatibility or
standardization of components, and interchangeability of parts. Eliminate problems in the use of proprietary data that cannot be resolved
by more satisfactory solutions. Facilitate the transition from development to production and to
subsequent competitive acquisition of end items or major components.
Limitations on Use of Leader Co.
Leader company must have the necessary production know-how and is able to furnish required assistance to the follower(s);
No other source can meet the Government’s requirements without the assistance of a leader company;
Assistance required of the leader company is limited to that which is essential to enable the follower(s) to produce the items
Use must be authorized in accordance with agency procedures.
Government has the right to approve subcontracts between the leader company and the follower(s).
Leader Co. Contract Procedures
The contracting officer may award a prime contract to a - Leader company, obligating it to subcontract a designated portion of
the required end items to a specified follower company and to assist it to produce the required end items;
Leader company, for the required assistance to a follower company, and a prime contract to the follower for production of the items; or
Follower company, obligating it to subcontract with a designated leader company for the required assistance.
Contract awarded under this arrangement must contain a firm agreement regarding disclosure, if any, of contractor trade secrets, technical designs or concepts, and specific data, or software, of a proprietary nature.
Interagency Acquisitions
Commonly conducted through indefinite-delivery contracts, such as task- and delivery-order contracts.
The indefinite-delivery contracts used most frequently to support interagency acquisitions are Federal Supply Schedules (FSS), Governmentwide acquisition contracts (GWACs), and Multi-agency contracts (MACs).
Allows other agencies to share in savings or economies of administration by sharing existing contract vehicle Contracting agency is usually compensated by other users of
the contract for a proportionate share of administrative expenses
Assisted vs. Direct Acquisitions
Assisted - Agency makes an acquisition on behalf of another agency e.g., National Park Service uses its contract to purchase services for the Bureau of Indian Affairs.
Direct – Agency ID/IQ is used by another agency who issues a Task Order or Delivery Order against that contract
In either case requires a determination by the requesting agency that this is the “best procurement approach”
Requesting agency must also obtain the concurrence of their (the requesting agency’s) contracting office
Determination for Interagency Acquisitions
Is the proposed contract vehicle “suitable”What is the value of using the contract
vehicle including: Administrative savings Lower prices Number of vendors Reasonable vehicle access fees
The expertise of the servicing agency to administer such contracts
Management and Operating Contracts
Used for contractor operation of Government owned facilities e.g., GOCO Example Sandia National Laboratory, Los Alamos National
Laboratory, Palmdale Production PlantCreates a special relationship between Government
and contractor E.g., safety, security cost control etc.
Work performed is wholly or substantially separate from contractor’s other work
Generally a long-term relationship with very carefully orchestrated hand-over to successor contractors
May be difficult to compete and have OCI issues
EMERGENCY ACQUISITIONS
FAR Part 18
Emergency Acquisitions
Acquisition flexibilities created in other FAR Parts General flexibilities that do not require emergency
declaration or designation of a “contingency operation”
Acquisition flexibilities specifically created for emergency acquisitions Contingency Operations Defense or recovery from certain attacks Disaster or Emergency assistance operations
Available Flexibilities
SAM Registration may be waived
Synopsis of proposed contract action not required
May limit number of sources and full and open competition may be waived
Federal Supply Schedule or Federal Prison Industry rules relaxed
May waive enforcement of Part 9 Qualification requirements
May use DPAS prioritiesMay single source
acquisitions under the SAT
8a Awards to SBA on sole source or competitive basis
SDVOSB sole sourceOvertime approvals may
be retroactive
Available Flexibilities
Trade agreement policies may be waived
Use of patented technology under NAFTA waived
Bid guarantees may be waived
Electronic funds transfer requirement may be waived
Agency protest override may allow performance of protested award
Rent-free use of government property
Extraordinary Contract Actions Amend contract without
consideration Correction or mitigation
of mistakes in contracts Formalizing informal
commitments
Contingency Operations / Defense or Recovery from Certain Attacks
A military operation Designated by Sec of Defense in which military forces
are or may be involved in operations or hostilities against an enemy or opposing force
Results in calling up or extending the duty of forces During a war or other National Emergency declared
by the President or CongressDefense against a nuclear, biological,
chemical, or radiological attack
Additional Flexibilities Provided
Increase in Micro-purchase threshold to $20,000 in the U.S or $30,000 outside the U.S
Increases the Simplified Acquisition Threshold to $300,000 in the U.S. and $1,000,000 outside the U.S. Also raises SAT for commercial items from $7,000,000 to $13,000,000
Relaxed limits on the use of the SF 44
Emergency Or Major Disaster Declaration
Requires a Declaration of Emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act Preference given to local organizations, firms and
individuals Waiver of ocean transport by U.S. flagged vessels
Other Guidance National Response Framework establishes a
comprehensive, national, all-hazards approach to domestic incident response
Office of Federal Procurement Policy “Emergency Acquisitions Guide”
Coming Next Week
Class #4
SECTION 2 Pages 39 thru 44 of the Study GuideFAR Part 10 – Market ResearchFAR Part 11 – Describing Agency NeedsFAR Part 12 – Acquisition of Commercial
Items
SECTION 3 Pages 45 thru 54 of the Study GuideFAR Part 13FAR PartFAR Part