Federal Contracting

Background

• There are more than 60 federal government agencies

• There are more than 1,500 federal government buying offices

• The U.S. federal government is the biggest buyer of supplies and services in the world– More than 14 million procurement actions occur every

fiscal year

– More than $195 billion is appropriated every fiscal year

Procurement Actions

• Of all federal government procurements….– Small purchases (those under $25,000) have

made up more than 50%– Orders (issued per existing task order contracts,

basic ordering agreements, and so on) have made up more than 30%

– New contracts (those over $25,000) have made up less than 1%

Department of Defense (DOD) Procurements• DOD has spent more than $115 billion each

year during the past five fiscal years

• Which DOD departments spend the most?– Air Force– Navy– Army– Defense Logistics Agency (DLA)

The Federal Acquisition Process

Needs RecognitionAcquisition

PlanningSolicitation/Evaluation

ContractAward

ContractAdministration

Preaward Phase

Award Phase

Postaward Phase

Contract Budgeting and Funding

• Key Terms and Concepts– Authorization– Appropriation– Apportionment– Allocation and allotment– Administrative commitment– Obligation and expenditure

Authorization and Appropriation

• Congressional functions• Provide approval and funding• Strict limits on government acquisition

– Annual appropriations (one year money)– Multiyear appropriations (color of money)– No-year appropriations (unlimited)– Anti-Deficiency Act (prohibits an agency from

committing money they do not have)

Apportionment

• Office of Management and Budget (OMB) function (distribution function)

• Time period distribution to agencies

• Limit on obligations

• Controls rate of expenditure

Allocation and Allotment

• Agency functions

• Limits on obligations

• Administrative control and expenditures

Administrative Commitment

• Agency budget office function

• Sets funds aside for procurement

• Ensures availability of funds

• Anticipates obligation

Obligation

• Appropriated funds

• Legally binding commitment to spend

• Function of contracting officer

• Accomplished by contract award– Full funding– Incremental funding

The Federal Acquisition Regulations (FAR)• Federal Statutes and Regulations

– No single procurement law– Governed by many laws– Laws in United States Code (USC)– Laws implemented by regulations– Code of Federal Regulations (CFR)– Federal Register (FR) (announcements of changes to the FAR)

FAR 1.102-4(e) The FAR outlines procurement policies and procedures

that are used by members of the Acquisition Team. If a policy or procedure, or a particular strategy or practice, is in the best interest of the Government and is not specifically addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, Government members of the Team should not assume it is prohibited. Rather, absence of direction should be interpreted as permitting the Team to be innovative and use sound business judgment that is otherwise consistent with law and within the limits of their authority.

Competition Requirements

• Policies– Full and open competition– Full and open after exclusions– Other than full and open competition (required

by law to write a justification)• Competitive procedures

• Justification and approval

• Public notice

Full and Open Competition

• All responsible sources may compete• Competitive procedures

– Sealed bidding– Competitive negotiation– Architect-engineer selections– Research and development (R&D)

announcements/reviews– Multiple-award schedules

Full and Open Competition After Exclusions• To establish or maintain sources

– Requires documentation– Requires approval of agency head

• Set-asides– Small business– Section 8(a)

Other Than Full and Open Competition• Only one responsible source

• Unusual and compelling urgency

• Mobilization or R&D capability

• International agreement

• Authorized or required by statute

• National Security

• Public Interest

Other Than Full and Open Competition cont.• Requires justification and approval

• Justification available to public

• One source exception– Must give public notice– Must consider other offers

• Public interest exception– Approval by agency head– Must notify Congress

Measuring Competition

• Restrictions determining competition

• Not measured by participation

• Full and open/one offer = competitive

Methods of Contracting

• Overview– Simplified acquisition procedures– Negotiation– Special R&D procedures – broad agency

announcements

Simplified Acquisition Procedures (SAT)• Purchases less than the SAT

– Imprest funds ($500 limit)– Purchase Orders ($100,000 limit)– Blanket purchase agreements– Purchase cards (Govt visa, or IMPAC Program)– Other authorized methods– Reserved for small business if above micro-purchase

and if does not exceed SAT• FACNET (Federal Acquisition computer network)

is preferred for solicitation

Simplified Acquisition Procedures cont…• Special test program for certain commercial

items– Allows simplified procedures for acquisition

grater than the SAT, but not exceeding $5 million including options

– Contracting officer discretion– FAR Part 12 procedures

Simplified Acquisition Procedures cont…Standard procedures for SAT purchases• Solicit reasonable number of sources• Request for quotations and solicitations must state

basis for award• FACNET is preferred method• Oral solicitations if –

– FACNET not available– Less than $25,000– Less than $25,000 – apply the rule of three (three quotes)

Simplified Acquisition Procedures cont…Standard procedures for SAT purchases• Evaluation on price alone or price and other

factors– Past performance– Quality– Include transportation charges

• Notification to unsuccessful offerors only if requested

Simplified Acquisition Procedures cont…Purchase Orders• Offers to buy• Binding upon acceptance

– Optional Form 347– Department of Defense Form 1155– Standard Form 44– Electronic Orders

• Minimal contract administration

Simplified Acquisition Procedures cont…Blanket Purchase Agreements (BPA’s)• Charge accounts with vendors• Reduced administrative costs• Used for frequent, repetitive buys• Purchases made orally• Monthly invoicing• Cannot be used to avoid SAT• Does not justify avoiding small business set-asides• Does not justify only one source buys

Simplified Acquisition Procedures cont…Imprest funds

• Petty cash funds

• Maximum purchase is $500

• Purchases made orally without competition

Simplified Acquisition Procedures cont…Micro-purchase

• Threshold is $2,500

• Any simplified acquisition method is permitted

• Purchase card use is encouraged

• Competitive quotations are not required

Negotiation

• Any procedure that is not sealed bidding

• May be used when…– Time is of the essence– Price is not the only award factor– Discussion is necessary– No competition

Competitive Negotiations

Basis for award – best value continuum

• From lowest-priced technically acceptable source selection process, to

• Tradeoff process

Note: This process is also called “competitive proposals contracting” and “source selection”

Competitive Negotiations cont…

Procedures• Government plans acquisition• Government prepares request for proposals (RFP)• Government publicizes RFP• Offerors submit proposals• Government evaluates offerors/proposals• Government awards without discussions or

determines competitive range

Competitive Negotiations cont…

Procedures cont…• Government conducts discussions• Government requests proposal revisions• Offerors submit proposal revisions• Government evaluates proposal revisions• Government selects winner• Government awards contract• Government debriefs unsuccessful offerors

Special R&D Procedures—Broad Agency Announcements• Applicable to..

– Applied research– Basic research

• Award criteria– Merit– Funding

• Simplified proceduresNote: The term “program research and

development announcement” (PRDA) is also used for this procedure

Special R&D Procedures—Broad Agency Announcements cont…• Procedures

– Periodic CBD announcements– Peer or scientific reviews– Selection and award

Note: Government need not evaluate proposals competitively. FAR Subpart 15.6 (unsolicited proposals) rules do not apply. Awards continue until funding is exhausted.

Solicitations

• Describe government requirements• Solicit offersOffer: “A proposal to do a thing or pay an amount,

usually accompanied by an expected acceptance, counter-offer, return promise or act. A manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it”

--Black’s Law Dictionary--

The Uniform Contract Format (UCF) • Part I – The Schedule

• Part II – Contract Clauses

• Part III – List of Documents, Exhibits, and Other Attachments

• Part IV – Representations and Instructions

The Uniform Contract Format (UCF) cont…Part I – The Schedule• Sections A through H• Specific contract requirements• Describes deliverables• States prices or costs and fees• Sections E and F include…

– FAR clauses– Agency supplement clausesNote: Beware of section H – Special Contract

Requirements

The Uniform Contract Format (UCF) cont…Part II – Contract Clauses

• Section I

• Includes..– FAR Clauses (by reference)– Agency supplement clauses (by reference)

The Uniform Contract Format (UCF) cont…Part III – List of Documents, Exhibits, and Other

Attachments• Section J• List varies from agency to agency• Examples:

– DOD Form 1423, Contract Data Requirements List (CDRL)

– DOD Form 254, Contract Security Classification Specification

• Often includes specifications/statement of work

The Uniform Contract Format (UCF) cont…Part IV – Representations and Instructions• Sections K, L, and M• Representations and certifications (K)• Solicitation provisions• Proposal preparation instructions (L)• Evaluation factors for award (M)

– For negated procurements over $100,000, past performance is a mandatory evaluation factor

– Price is ALWAYS an evaluation factor

Contract Types

Background

• Tools for managing uncertainty

• Differences according to..– Pricing arrangement– Delivery terms

• Selected by contracting officer

• Combinations permitted

Contract Types

Classifications

• Purpose

• Pricing arrangement

• Method of formation

Contract Types

Overview

FAR ReferenceSubpart 16.2Subpart 16.3Subpart 16.4Subpart 16.5Subpart 16.6Subpart 16.7

Fixed-priceCost-reimbursementIncentiveIndefinite-deliveryTime-and-materials, labor-hour, letter contractsAgreements

Arrangement

Contractor (risk) Government (risk)

Firm Fixed Price

Cost PlusFixed Fee

Fixed Price w/Economic price

adjustment

Fixed Price Cost Reimbursement

Risk

Fixed Price Contracts

• Payment upon acceptable performance

• Contractor must succeed

• Contractor bears greatest risks

Cost-Reimbursement Contracts

• Payment not tied to performance

• Payment based on actual costs

• No obligation to succeed

• Government bears most of the risk

Incentive Arrangements

• Link profit/fee to performance

• Incentive based on..– Cost control– Schedule management– Technical achievement– Combination

• Effectiveness is debatable

Indefinite-Delivery

Definite-quantity• Negotiated elements

– Definite quantity

– Unit Price(s)

– Ordering procedures

– Delivery terms

– Period of performance

Note: The government must buy the specified quantity

Indefinite-Delivery cont…

Indefinite-quantity• Negotiated elements

– Minimum and maximum quantities

– Unit Price(s)

– Ordering procedures

– Delivery terms

– Period of performance

Note: The government must buy the minimum and may buy up to the maximum quantity

Time-and-Materials, Labor-Hour, Letter ContractsOverview

FAR ReferenceSubpart 16.601Subpart 16.602Subpart 16.603

Time-and-MaterialsLabor-hourLetter contracts

Arrangement

Time-and-Materials

• Provides for acquiring supplies or services on the basis…– Direct Labor hours at specified fixed hourly rates– Materials at cost, including handling costs

• Used only when it is not possible to estimate accurately the work– Only after contracting officer determines no other

contract type is suitable– Only is the contract ceiling includes a ceiling price

• Requires government surveillance

Labor-hour contracts

• Is a variation of the T&M contract, differing only in that materials are not supplied by the contractor

Letter Contracts

• Written preliminary contractual instrument that authorizes the contractor to begin immediately manufacturing supplies or performing services

END OF PRESENTATION