(g) The contract modification or other written document which notifies the contractor of the exercise of the option shall cite the option clause as authority. (3) Whether it is likely that qualified offerors will compete for the contract. (b) At the time, there were too many unknowns about how it would be implemented to address the issue formally. Which of the following is, [Identify the various methods of contracting for, Ordering off a Blanket Purchase Agreement, Buys against a GSA Federal Supply Schedule. The contract may not be awarded until the thirty-firstday after the date of notification. Each was crafted to establish a new norm for the partnership. (e) A statement that award will not be made on less than the first program year requirements. simple new builds. At the same time that Oliver and Moore were looking at the contracting problem from an economics perspective, University of Tennessee researchers (including two of us, Kate and David) were working with companies to come up with a new approach that would produce healthier and more sustainable partnerships. (b) Business-case analysis requirements for multi-agency contracts and governmentwide acquisition contracts. (f) Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and part 6. (ii) Competition for the option is impracticable once the initial contract is awarded. Course Hero is not sponsored or endorsed by any college or university. In the first two years, Dell and FedEx were able to reduce costs by 42%, scrap by 67%, and defective parts per million to record-low levels. 1. Their efforts led to the vested methodology for creating formal relational contractsa process that establishes a whats in it for we partnership mentality. They often undermine the partnerlike relationships and trust needed to cope with external uncertainty. x Contracting Officer, The Competition in Contracting Act requires that _________: . To satisfy requirements of part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g.-. We will be recognized leaders in health care. (iii) Include a statement that at least one of the following circumstances applies: (A) The acquisition will appropriately be made under an existing contract of the servicing agency, entered into before placement of the order, to meet the requirements of the servicing agency for the same or similar supplies or services. The business-case analysis shall. (d) (c) Replacement of an incumbent contractor is usually based largely upon expectation of meaningful improvement in performance or cost. Review and, Which three of the following statements about convenience checks are true? For example, Kim Kerrone and Jean Maskey, informal partners, both say that formal relational contracting was transformational for their respective organizations. Sole Source - Justification and Approval - AcqNotes (a) Compliance with this subpart is in addition to the policies and procedures for interagency acquisitions set forth in subpart 17.5. As contrasted with cancellation, termination can be effected at any time during the life of the contract (cancellation is effected between fiscal years) and can be for the total quantity or partial quantity (where as cancellation must be for all subsequent fiscal years quantities). (d) Nor should they. (f) Nondefense agency certifications, waivers, and additional information are available at http://www.acq.osd.mil/dpap/cpic/cp/interagency_acquisition.html. (b) (5) A specific price that is subject to change as the result of changes to prevailing labor rates provided by the Secretary of Labor. A sole source procurement (called an Other than Full & Open Competition) is when the government enters into a contract with a contractor without going through the typical competitive process as required by law because it deems that the contractor is the only source available that can meet the government requirements. Avoidance of the need for establishing quality control techniques and procedures for a new contractor each year. (a) In awarding the basic contract, the contracting officer shall, except as provided in paragraph (b) of this section, 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. (3) (a) This risk is highest when there are many unknowns about what will occur after the contract is signed. (2) The D&F shall be approved by a contracting officer of the requesting agency with authority to contract for the supplies or services to be ordered, or by another official designated by the agency head, except that, if the servicing agency is not covered by the FAR, approval of the D&F may not be delegated below the senior procurement executive of the requesting agency. (a) Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. When Dell originally selected FedEx, in 2005, to handle all aspects of its hardware return-and-repair process, the companies drew up a traditional supplier contract. (2) Any other DoD official authorized to approve a direct acquisition or an assisted acquisition on behalf of DoD. (b) A nondefense agency is compliant with applicable procurement requirements if the procurement policies, procedures, and internal controls of the nondefense agency applicable to the procurement of supplies and services on behalf of DoD, and the manner in which they are administered, are adequate to ensure the compliance of the nondefense department or agency with-, (1) The Federal Acquisition Regulation and other laws and regulations that apply to procurements of supplies and services by Federal agencies; and. (a) 11302(e) for Governmentwide acquisition contracts (GWACs). Subpart 17.7 - Interagency Acquisitions: Acquisitions by Nondefense Agencies on Behalf of the Department of Defense, This part prescribes policies and procedures for the acquisition of supplies and services through special contracting methods, including-. The inclusion of recurring costs in cancellation ceilings is an exception to normal contract financing arrangements and requires approval by the agency head. Recurring costs means costs that vary with the quantity being produced, such as labor and materials. (1) 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; (2) Leader company, for the required assistance to a follower company, and a prime contract to the follower for production of the items; or. (h) Termination payment. The review should determine whether meaningful improvement in performance or cost might reasonably be achieved. The primary goal of Step 1 is to establish a partnership mentality. Tradeoff What does Best Value mean? The parties ultimately came up with an alternative to the standard fee-for-billable-hours method. Contracts awarded under the multi-year procedure shall be firm-fixed-price, fixed-price with economic price adjustment, or fixed-price incentive. division C of subtitle I, Procurement.). Under reciprocity, for example, they highlighted the need to conduct ourselves in the spirit of achieving mutual benefit and understanding. Under equity, they acknowledged the unavoidable imbalances that arise in contracts: We are committed to fairness, which does not always mean equality. Nonrecurring costs means those costs which are generally incurred on a one-time basis and include such costs as plant or equipment relocation, plant rearrangement, special tooling and special test equipment, preproduction engineering, initial spoilage and rework, and specialized work force training. (2) Fails to notify the contractor that funds are available for performance of the succeeding program year requirement. These limitations do not apply to information technology contracts. Government Contracting Rules You Need to Know | Wolters Kluwer The final rule revises FAR 19.202-1 to require contracting officers to provide procurement center representatives copies of any proposed acquisition package and other reasonably obtainable information related to the acquisition, if the representatives exercise their discretion to review the acquisition. In this step, contracting parties go beyond crafting the terms of the agreement and establish governance mechanisms that are formally embedded in the contract. Dell felt that FedEx was not proactive in driving continuous improvement and innovative solutions; FedEx was frustrated by onerous requirements that wasted resources and forced it to operate within a restrictive statement of work. (1) The use of such a contract will result in significant savings of the total estimated costs of carrying out the program through annual contracts; (2) The minimum need to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities; (3) There is a stable design for the supplies to be acquired, and the technical risks associated with such supplies are not excessive; (4) There is a reasonable expectation that, throughout the contemplated contract period, the head of the agency will request funding for the contract at a level to avoid contract cancellation; and. Solicitations for multi-year contracts shall reflect all the factors to be considered for evaluation, specifically including the following: (a) Formal relational contracts will never completely replace traditional transactional contracts. The head of a contracting activity may authorize the use of a solicitation requesting only multi-year prices, provided it is found that such a solicitation is in the Governments interest, and that dual proposals are not necessary to meet the objectives in 17.105-2. (e) If it is anticipated that the Government may exercise an option at the time of award and if the condition specified in paragraph (d) of this section applies, solicitations shall specify the price at which the Government will evaluate the option (highest option price offered or option price for specified requirements). Which of the following is NOT, [Recognize how contract types impacts COR responsibilities], Cost reimbursement contracts require less monitoring by the COR than other. How to build better long-term strategic partnerships. (e) The determination of other factors under paragraph (c)(3) of this section-, (1) Should take into account the Governments need for continuity of operations and potential costs of disrupting operations; and. Enhancement of standardization. There is a reasonable expectation that, throughout the contemplated contract period, the head of the agency will request funding for the contract at a level to avoid contract cancellation; and. The formal relational contract addresses these deficiencies. For example, Island Health never shared the budget with the hospitalists. (1) Each Economy Act order to obtain supplies or services by interagency acquisition shall be supported by a determination and findings (D&F). (a) Any competitive negotiated acquisition having a basis for award stating that factors in addition to cost/price will be considered in selecting the successful offeror (s) (c) Cancellation or termination for insufficient funding. (h) Providing incentives to contractors to improve productivity through investment in capital facilities, equipment, and advanced technology. (C) The servicing agency is specifically authorized by law or regulation to purchase such supplies or services on behalf of other agencies. Cancellation charge means the amount of unrecovered costs which would have been recouped through amortization over the full term of the contract, including the term canceled. So the sustainability team came up with a pilot project to address how to fairly add the additional scope of work and new role for health care providers to the hospitalists schedule and pricing model. In the event funds are not made available for the continuation of a multi-year contract awarded using the procedures in this section, the contract shall be canceled or terminated. Therefore contracting officers should take extraordinary steps before award to assure themselves that the prospective contractors technical and managerial capacity are sufficient, that organizational conflicts of interest are adequately covered, and that the contract will grant the Government broad and continuing rights to involve itself, if necessary, in technical and managerial decisionmaking concerning performance. (a) The Economy Act ( 31 U.S.C.1535) authorizes agencies to enter into agreements to obtain supplies or services from another agency. Contract Types | Contracts | CDC An official website of the United States Government, FAC Number: 2023-02 Effective Date: 03/16/2023. Physical asset specificity (location, machinery, processes), Level of integration required with suppliers systems or processes. Benefits may accrue by including options in a multi-year contract. The wording crafted by Island Health and South Island, which they embedded in the preamble of their contract, can be used by other companies as a model for drafting their own guiding principles. Benefits may accrue by including options in a multi-year contract. Consider how the Island Health administrators and South Island hospitalists tackled pricing, which had always been their sticking point. 10) Some methods of contracting require more time than others. If funds are not appropriated to support the succeeding years requirements, the agency must cancel the contract. (5) Economists call this the hold-up problem: the fear that one party will be held up by the other. Dells cost of switching to another company would be high, and FedEx would have trouble replacing the revenue and profits the contract generated. (c) Agency funding of multi-year contracts shall conform to the policies in OMB Circulars A-11 (Preparation and Submission of Budget Estimates) and A-34 (Instructions on Budget Execution) and other applicable guidance regarding the funding of multi-year contracts. We consciously approached the economics of the relationship with full transparency and a problem-solving mentality instead of a negotiations mentality, she told us. (e) (2) An agency uses another agency to provide acquisition assistance, such as awarding and administering a contract, a task order, or delivery order. 3) There are two basic contract types, cost reimbursement and fixed-price. (2) May consider the effect on small business. Other contract types include incentive contracts, time-and-materials, labor-hour contracts, indefinite-delivery contracts, and letter contracts. Buyers are crazy to expect us to invest in innovation if they do the math.. (a) Insert a provision substantially the same as the provision at 52.217-3, Evaluation Exclusive of Options, in solicitations when the solicitation includes an option clause and does not include one of the provisions prescribed in paragraph (b) or (c) of this section. (f) Annual and multi-year proposals. (1) The solicitation contains an option clause; (2) An option is not to be exercised at the time of contract award; (3) A firm-fixed-price contract, a fixed-price contract with economic price adjustment, or other type of contract approved under agency procedures is contemplated; and. Cancellation means the cancellation (within a contractually specified time) of the total requirements of all remaining program years. In a negotiated acquisition, negotiations with offerors may provide information requiring a change in cancellation ceilings and dates before final negotiation and contract award. (d) Achieve economies in production. (b) The contracting officer need not evaluate offers for any option quantities when it is determined that evaluation would not be in the best interests of the Government and this determination is approved at a level above the contracting officer. In 2008, Oliver, together with economic theorist John Moore, revisited his work on contracts. Looking for U.S. government information and services? (b) The contracting officer for the servicing agency shall ensure that service contractor reporting requirements are met in accordance with subpart 4.17, Service Contracts Inventory. (g) Payment limit. Companies have traditionally used contracts as protection against the possibility that one party will abuse its power to extract benefits at the expense of the otherfor example, by unilaterally raising or lowering prices, changing delivery dates, or requiring more-onerous employment terms. To the extent practicable, multi-year contracting shall not be carried out in a manner to preclude or curtail the existing ability of the Department or agency to provide for termination of a prime contract, the performance of which is deficient with respect to cost, quality, or schedule. (i) Prior to the issuance of a solicitation, the servicing agency and the requesting agency shall both sign a written interagency agreement that establishes the general terms and conditions governing the relationship between the parties, including roles and responsibilities for acquisition planning, contract execution, and administration and management of the contract(s) or order(s). (c) However, if the servicing agency is not subject to the Federal Acquisition Regulation, the requesting agency shall verify that contracts utilized to meet its requirements contain provisions protecting the Government from inappropriate charges (for example, provisions mandated for FAR agencies by part 31), and that adequate contract administration will be provided. Solicitations for multi-year contracts shall reflect all the factors to be considered for evaluation, specifically including the following: (a) The requirements, by item of supply or service, for the-, (1) First program year; and. Some relationships, such as those involving the purchase of commodity products and services, are truly transactional and only need traditional contracts. Ceilings must exclude amounts for requirements included in prior program years. In the event funds are not made available for the continuation of a multi-year contract awarded using the procedures in this section, the contract shall be canceled or terminated. (2) (1) All program years except the first are subject to cancellation. For example, consider that the total nonrecurring costs (see 15.408, Table 15-2, III. For DoD, NASA, and the Coast Guard, a multi-year contract which includes a cancellation ceiling in excess of Both parties felt that the new model was a win-win solution that would have been unachievable under previous contracts. Broadening the competitive base with opportunity for participation by firms not otherwise willing or able to compete for lesser quantities, particularly in cases involving high startup costs. (2) Limit option quantities for additional supplies to not more than 50 percent of the initial quantity of the same line item. The extent to which cancellation terms are used in multi-year contracts will depend on the unique circumstances of each contract. 6 Construction Project Delivery Methods Compared | Procore (b) Criteria for comparing the lowest evaluated submission on the first program year requirements to the lowest evaluated submission on the multi-year requirements. (b) When leader company contracting is used, the Government shall reserve the right to approve subcontracts between the leader company and the follower(s). Which of the following is not a streamlined method of acquisition? Before jumping into a formal relational contract process, companies must determine whether it is right for them. Accordingly, for multi-year contracts, the agency head may authorize modification of the requirements of this subpart and the clause at 52.217-2, Cancellation Under Multi-year Contracts. CLC 222 Contracting Officers Representative (COR) Such other elements of any department or agency as have been designated by the President, or designated jointly by the Director of National Intelligence and the head of the department or agency concerned, as an element of the intelligence community. The aggrieved party often cuts back on performance in subtle ways, sometimes even unconsciously, to compensate. This wide selection of contract types is available to the government and contractors to provide flexibility in acquiring the large variety and volume of supplies and services required by agencies. Before, we had no one to speak with [if concerns arose]. (c) Insert a provision substantially the same as the provision at 52.217-5, Evaluation of Options, in solicitations when-. The main advantage of using this method is avoiding the need to draft the subcontract from scratch and hopefully saving time negotiating it. 3003(4) which include the-. Obtaining both annual and multi-year offers provides reduced lead time for making an annual award in the event that the multi-year award is not in the Governments interest. The cancellation percentages, after deducting 3 percent for the first program year, would be 7, 4, 2, and 1 percent of the total price applicable to the second, third, fourth, and fifth program years, respectively. The 5 Key Types of Construction Contracts | Procore - Levelset You need to ensure, Prior to certifying the Managing Accounting Billing Statement for contract payments by Governmentwide Commercial Purchase Card, the Approving/ Billing Official must do what two things? Multi-year contracting is a flexible contracting method applicable to a wide range of acquisitions. Nondefense agency means any department or agency of the Federal Government other than the Department of Defense. A multi-year contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds, and (if it does so provide) may provide for a cancellation payment to be made to the contractor if appropriations are not made. (b) Solicitations containing option provisions shall state the basis of evaluation, either exclusive or inclusive of the option and, when appropriate, shall inform offerors that it is anticipated that the Government may exercise the option at time of award. (c) An interagency acquisition is not exempt from the requirements of subpart 7.3, Contractor Versus Government Performance. (3) The servicing agency is responsible for compliance with all other legal or regulatory requirements applicable to the contract, including-, (i) Having adequate statutory authority for the contractual action; and. Formal relational contracts are built on a foundation of trust and are shaped by a shared vision and six universal guiding principles. The 100-page-plus document was filled with supplier shall statements that detailed FedExs obligations and outlined dozens of metrics for how Dell would measure success. Early research by one of us (Oliver, who won the 2016 Nobel Prize in economics for his work on contracts) predicted that in response to the combined problems of hold-ups and incomplete contracts, companies are very likely to make distorted investments that produce poor outcomes. Type of contract. (1) In the interest of national defense or mobilization readiness; (2) To perform the agencys mission adequately; or. (1) The option cannot be evaluated under 17.206; or; (2) Future competition for the option is impracticable. There is a stable design for the supplies to be acquired, and the technical risks associated with such supplies are not excessive; (4) Cancellation results when the contracting officer-, (1) Notifies the contractor of nonavailability of funds for contract performance for any subsequent program year; or. The Governments administrative costs of annual contracting may be used as a factor in the evaluation only if they can be reasonably established and are stated in the solicitation. Termination-for-convenience clauses create perverse incentives for suppliers to not invest in buyer relationships. (e) Historically, the two parties had operated under a shroud of opaqueness. The benefits of informal handshake deals have been studied and promoted over the decades; legal scholars Stewart Macaulay and Ian Macneil were early advocates in the 1960s. For acquisitions on behalf of the Department of Defense, also see subpart 17.7. In a negotiated acquisition, negotiations with offerors may provide information requiring a change in cancellation ceilings and dates before final negotiation and contract award. Last Updated Apr 24, 2023. (e) Nonsponsoring Federal agencies may use a Federally Funded Research and Development Center (FFRDC) only if the terms of the FFRDCs sponsoring agreement permit work from other than a sponsoring agency. (a) The nature of the requirement should govern the selection of the method of contracting, since the multi-year procedure is compatible with sealed bidding, including two-step sealed bidding, and negotiation. If demand is lower during the term of the contract than the buyer stated in the RFP or the scope expands in an unanticipated area, the suppliers profit will take a hit. This method may be used in sealed bidding or contracting by negotiation. Some methods of contracting require more time than others. Companies understand that their suppliers are critical partners in lowering costs, increasing quality, and driving innovation, and leaders routinely talk about the need for strategic relationships with shared goals and risks. 3501 The Truth in Negotiation Act of 1962 required both prime and subcontractors on contracts over $500,000 to certify the cost data submitted under the solicitation. (b) Agencies may authorize management and operating contracts only in a manner consistent with the guidance of this subpart and only if they are consistent with the situations described in 17.604. It is crucial that all terms and conditions of the formal relational contract are aligned with the guiding principles. (a) Interagency acquisitions are commonly conducted through indefinite-delivery contracts, such as task- and delivery-order contracts. The contracting officer shall insert the amount for the first program year in the contract upon award and modify it for successive program years upon availability of funds. (2) A statement that an extension of the contract includes an extension of the option. Subcontracting under construction contracts - Pinsent Masons The total estimate of the above costs must then be compared with the best estimate of the contract cost to arrive at a reasonable percentage or dollar figure. Use of multi-year contracting is encouraged to take advantage of one or more of the following: (b)