Regulatory Framework in the context of federal gov’t contracts

1. Regulatory Framework in the context of federal gov’t contracts To provide historical basis from which we can draw upon FAR and DFAR - most commonly used regulations DFAR is supplemented by the Defense Acquisition Circular DOD and DCAA CO

2. FAR - Deviations from FAR (are allowed if) 2 prong test They are authorized (by CO) Approved by a designated official Example. Use of a different language, use of a form other than the prescribed form or the omission of a “mandatory” contract clause….. How do you know if it’s a deviation - read the FAR clause DCAA – created in 1965 Perform contract audits Contract negotiations Contract settlements (see terminations for convenience) Investigate fraud and pricing issues On behalf of DOD (and now most other gov’t agencies)

3. Contracting Officer • What do they do • Develop Statement of Work • Develop solicitation and evaluation of bids • Negotiate proposal (if necessary) • Select contractor • Contract administration issues • Modifications • Regular recurring reports • Terminations • Close-out Actual vs. Apparent Authority (of CO) • In a commercial contract – one may be obligated to contract through apparent authority • In government contracts – no such concept • Know the COs limitations to bind the gov’t • Good rule of thumb – get it in writing!

4. Gov’t Contracting vs. Commercial Contracting • Why have such a complicated system • Lawyers (we need something to do) • Fish Bowl – Gov’t spends taxpayer dollars and is accountable to us. The rules are “supposed” to help them get the “best” for “least” • Size of the gov’t • Full & Open Competition – everyone gets a “chance” = long process • Procurement integrity • Social/economic goals of gov’t - $ is a powerful tool • Politics • Ability of losing bidders to protest

5. Procurement Integrity – some general rules • avoid actual or appearance of conflict of interest • Do not accept gratuity, favors, gifts, loans, etc… • Do not provide/accept promises of future employment to gov’t officials • Do not provide/accept inside information

6. Competition in Contracting Act of 1984 • Full & Open Competition – all responsible sources are permitted to submit bids/make offers to gov’t. • Everyone must be solicited - must use a universal method of advertising opportunities • CBD • Internet • Exceptions to F&O • One responsible source • Exact replacement part • Limited data rights • Unique capabilities • Compelling/Unusual urgency • National Security/Emergency

7. Exceptions to F&O • many things are done in the name of national security • Law requires purchase be made from a specific source (rare) 2 types of Procurement Methods • Sealed Bids or Negotiated Contract • Sealed bid meets F&O requirement through the process rigid system – does not allow for discussion, no technical analysis can withdraw/modify bid prior to opening of bids opening of bids is public • Negotiated Contracts • May meet the requirement • Go – No Go Analysis - FAR part 15 allows this = low price/technically acceptable - a detailed SOW exists but not quite detailed enough for a sealed bidding process - should result in a fixed price contract (but can be cost reimbursement contract or mixed use contract)

8. Negotiated Contracts • Proposals generally grouped into 3 areas • Acceptable • Unacceptable but capable of being acceptable • Unacceptable • Proposals in groups 1 and 2 are kept for further discussion, proposals in 3 are eliminated • Discussions and negotiations are held on each • Award without discussion is possible if a proposal • Technically acceptable and • Has lowest cost • After discussions/negotiations – the proposal are re-categorized as acceptable and unacceptable w/ award going to technically acceptable/low bidder

9. Negotiated Contracts • Price/cost is compared to non-price factors Examples – overall technical excellence maintainability/reliability life cycle costs past performance service support available warranty technical troubleshooting special facilities data/intellectual property rights

10. Competitive Steps in Negotiated contracts • Market research • SOW development • Announcement of need • Issuance of RFP • Bidder conference • Receipt of proposals • Evaluation by specialist group • Elimination steps • Possible award w/out discussion • Discussion • BFOs in • selection

11. Prior to FASA – SOWs were written behind closed doors • Bidders rec’d gov’t written SOW and RFP formally • Problems with these documents were hard to resolve • Questions had to be submitted in writing • Answers were in the form of a proposal amendment • FASA required market research • Changes in Far in 1997 encourage the use of draft SOWs and RFPs

12. Market Research is used to determine if a commercial item is available to meet the gov’t need • typical info obtained by market research • Prices • Data and patent issues • State of technology • Sources • Equipment issues • Delivery issues • Warranty and service issues • Commonly used contract provisions

13. Statement of Work (SOW) • Policy to use large complex SOWs in draft form to solicit comments • Comments can then be addressed informally (1 on 1) • Helps in generating less controversy when formal SOW and RFP are issued • Should closely reflect industry capability and acceptable terms and conditions

14. Evaluation and Competitive Range Determination • Usually a technical team • Cost and past performance usually evaluated separately • Factors in the RFP must be used for technical evaluation • Technical committee documentation must be complete and provide a written report • Information is to be used in debriefing and to defend protests • CO conducts cost/price and past performance analysis • CO checks to assure documentation is complete and clear

15. Debriefings • Losing contractors should be debriefed within 5 days after request • Rating of the debriefed contractor must be compared to that of the winning bidder • Overall ranking of all bidders must be disclosed • Gov’t must give summary rationale for the award • Must be a reasonable response to questions on whether the agency followed procedures

16. Protests • Any interested parties may protest • A protest is a written object to the awarding agency or the GAO or Federal District Court • Most protests are filed with GOA • A protest can be before or after award • If before, the award must be delayed unless the agency justifies urgency • If after award, must be submitted 10 days after loser first knows of should have known they lost • Performance is delayed, unless urgency is justified, if the protest is within 10 days after the losing bidder was first notified

17. Protests continued • One exception to the 10 day rule is in negotiated competitive procurements • In this type of procurement the losing contractor is entitled to a debriefing, if requested, within 3 days after they were first notified or should have known of the loss • The rule is ten days after the debriefing or 5 days if the bidder wants an automatic stay or award suspension - days are calendar days but go to Monday or next work day if the clock ends on weekend or holiday • The basis for a protest normally is a failure to follow procedures, law or rules

18. Procurement Methods Many companies resisted exploring sales opportunities within the federal government due to its complexity and the potential liability.

19. Procurement Methods • FASA – Federal Acquisition Streamlining Act of 1994 • Established a streamlined methodology that eliminated many long standing gov’t practices and statutes that inhibited the gov’t from doing business with firms/businesses selling commercial grade products/services. • Old Rule – for the gov’t to be able to buy X, X had to be “sold in substantial quantities to the general public” • What is “substantial quantities – who knows?

20. Procurement Methods • New Rules after FASA • Expanded definition of a commercial item to include services* • Eliminated “sold in substantial quantities” language to – • If it has been sold, offered for sale or (in the case of state of the art technology) it has been conceived but not yet produced. • SBIR grants – promoted use of SOTAT (gov’t use of $$ to promote gov’t agenda) • Created SF 1449 • Changed gov’t preference from fed/mil spec. to commercial standard

21. Procurement Methods • Old Rules • Small purchases - $25K and under • Purchases over $25K required full blown RFP process • After FASA • Micro purchases- $2,500 and under (use gov’t credit card) • Simplified Acquisition Procedures (SAP) - $over $2,500 to $100,000 • Over $100,000 – use RFP process

22. Procurement Methods • Why change? • How did the changes fix the system? • Micro purchases • Use if EDI (internet) • Created a new separate system for commercial items/services

23. Procurement Methods • Micro Purchases • $2500 and under ($2000 and under for construction contracts) • Gov’t credit card vs. Purchase order • Subject only to card restrictions • Current general card restrictions are $25K p/m max. on card • Exempt from nearly all procurement laws • Authority to purchase given to the user of the product/service

24. Procurement Methods • Micro Purchases • Recent study revealed a $58.00 savings to gov’t by using the credit card over the old purchase order method • Commercial entities love it – nearly immediate payment, no paperwork, reduced costs

25. Procurement Methods • Simplified Acquisition Procedures • $2500 to $100,000 • Most common method of purchasing • Hard copy purchase orders • Electronic purchase Orders through Internet (EDI) • Use of credit cards for payment

26. Procurement Methods • SAP Rules • Use only on firm fixed price contracts only • Cannot divide large orders into smaller ones to take advantage of SAPs • Oral proposals encouraged up to $25K • Must develop a synopsis for purchases over $25K – internet notice can be substituted for synopsis • Automatic set asides when over $25K

27. Procurement Methods • SAPs continued • Electronic Commerce – functions • Provide public notice (substitute for synopsis) • Issue electronic solicitations • Receive electronic quotes/questions • Announce awards • Initiate payments • Create a common database

28. Procurement Methods • While there appears to many types on contracts, all can be placed in one of two families • Fixed price • Cost reimbursement