Government contract

Government contract

Contracting with the U.S. Government is based on many of the same principles as commercial contracting andcan be very profitable, but is sufficiently different from commercial contracting to require special care.Persons entering into commercial contracts are pretty much free to do anything that they can agree on.Each represents their own interests and can obligate themselves in any way they believe will benefit them.If one or both persons are represented by agents, usually employees, commercial contracting law allows the agent to form contracts based on generally accepted notions of commercial reasonableness.In essence, the law allows each side to rely on the other's authority to make a binding contract.Of course there are many nuances and cases covering this, but generally speaking the law favors the creation of commercial contracts in order to facilitate business.

The U.S. Government can be thought of as an agent for the American people.It acts only through the powers given to it by the people of the United States.The powers given to the Government are set forth in the Constitution.The government exercises its powers through legislation and regulations issued as prescribed in legislation.Thus, the authority of a Contracting Officer (the Government's agent) to contract on behalf of the Government is set forth in public documents that a person dealing with the Contracting Officer can review.As a result, unlike in the commercial arena, where the parties have great freedom, a contract with the U.S. Government must comply with the laws and regulations that permit it, and be made by a Contracting Officer with actual authority to make the contract.The Contracting Officer has no authority to deviate from the laws and regulations, and the contracting party is held to know the limitiations of the Contracting Officer's authority, even if the Contracting Officer does not.This makes contracting with the United States a very structured and restricted process.

This Article will provide a brief overview of this process for people that may be contemplating entering into a Government contract.It is not intended as a tutorial, or to make the reader an expert.This is a non-intuitive, complex subject.It is the subject of entire college programs, such as the prestigious George Washington University Law School LL.M program in Government Procurement Law, not just courses.There are many books written on the subject and journals covering it.In addition, there is extensive case law.The reader should be prepared to seek the advice of an expert in the field.

The Law

The United States Constitution

The Government gets its ability to act from the powers given to it by the people of the United States through the Constitution.The Constitution gives the Government specific enumerated powers in Article 1 Section 8.While the power to purchase is not explicit in the enumerated powers, it is understood to be implied as part of the specific powers granted.For example, the powers to establish post offices and post roads;to raise and support armies;to provide and maintain a navy; andto provide for organizing, arming, and disciplining, the militia,all would be meaningless if the Government could not purchase goods and services to these ends.In addition, the Government is given the power to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.This clause has been interpreted extremely broadly.

The Statutes

The Government exercises its powers through legislation.We can view legislation in the acquisition arena to fall into two classes.
* First, every acquisition can be traced to legislation that permits the acquisition and that provides money for it.These are normally covered in authorization and appropriation legislation.Generally, this legislation does not affect the acquisition process itself, although the appropriation process has been used to amend procurement laws, notably with the Federal Acquisition Reform Act ("FARA") and the Federal Acquisition Streamlining Act ("FASA").

* Second, every acquisition must follow the rules for acquisition contained in the applicable laws.The procurement process is subject to legislation separate from the authorization and appropriation process.This legislation may apply to specific agencies, such as the Federal Aviation Administration or the United States Postal Service, NASA or the Department of Defense, or may apply to a broad class of agencies.In addition, there is legislation that regulates the process of acquisition itself.

Federal Property and Administrative Services Act

Federal Property and Administrative Services Act

Armed Services Procurement Act


Federal Acquisition Reform Act

Federal Acquisition Reform Act of 1995 Pub. L. No. 104-106, 110 Stat. 186 (1995) Division D of the National Defense Authorization Act for Fiscal Year 1996.

Federal Acquisition Streamlining Act

Federal Acquisition Streamlining Act of 1994 (FASA) Pub. L. No. 103-355, 108 Stat. 3243; see also 10 U.S.C. § 2323 which contains language similar to FASA for the Department of Defense (DoD), NASA and the Coast Guard.

In this legislation, Congress extended the affirmative action authority granted DoD by 10 U.S.C. § 2323 to all agencies of the federal government.See 15 U.S.C. § 644 note. Regulations to implement that authority were delayed because of the decision in Adarand Constructors v. Peña, 515 U.S. 200 (1995).See 60 Fed. Reg. 48,258 (September 18, 1995). See 61 Fed. Reg. 26,042 (May 23, 1996) (proposed reforms to affirmative action in federal procurement) for the basis for the regulations to implement this provision of FASA. See 62 Fed. Reg. 25,648 (May 9, 1997) for government response to comments on the proposal, and 62 Fed. Reg. 25,786 (May 9, 1997) (proposed rules), 63 Fed. Reg. 35,719 (June 30, 1998) (interim rules), and 63 Fed. Reg. 36,120 (July 1, 1998) (interim rules), Federal Acquisition Regulations, Reform of Affirmative Action in Federal Procurement addressing the General Services Administration (GSA), NASA, and DoD.

AntiDeficiency Act (ADA)

It has been noted that fiscal law is not about getting the mission accomplished or getting a good deal for the government. Fiscal law is only about Congressional oversight of the Executive Branch. Thus, fiscal law frequently prevents government agencies from signing an agreement that a commercial entity would not hesitate to execute. Thus, fiscal law has an invisible and frequently negative impact on the ability of a federal agency to accomplish its mission, and this fact is frequently lost on the public and Congress. On the other hand, this is the Constitutionally mandated oversight of the use of public funds which is essential to the scheme of checks and balances in the Constitution. A good working relationship and robust communication between the Executive and Legislative branches is the key to avoiding problems in this area.

The teeth for fiscal law comes from the Anti-Deficiency Act. The Anti Deficiency Act provides that no one can obligate the Government to make payments for which money has not already been authorized. The ADA also prohibits the government from receiving gratuitous services without explicit statutory authority. In particular, an ADA violation occurs when a federal agency uses appropriated funds for a different purpose than is specified in the appropriations act which provided the funds to the Agency. The ADA is directly connected to several other fiscal laws, namely the Purpose Act and the Bona Fide Needs Rule.

The Purpose Act (UnitedStatesCode|31|1301) provides "Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law." The annual DoD appropriations acts include approximately 100 different appropriations (otherwise known as "colors of money"). Money appropriated for one purpose cannot be used for a different purpose, e.g., operations and maintenance (O&M) funds to be used for buying weapons. Even if an expenditure might fall within the scope of one appropriation, such as repair parts for the O&M appropriation, it still may not be permissible to use the funds if there is a more specific appropriation or the agency has made a previous funds election contrary to the proposed use of funds. An example could be O&M can be used for purchasing repair parts, but if the parts are required to effect a major service life extension that is no longer repair but replacement - procurement funds must be used if the total cost is more than $250,000 (otherwise known as the Other Procurement threshold, e.g., Other Procurement Army (OPA) threshold) or another procurement appropriation is available such as the armored vehicle or weapons appropriation.

An ADA violation can also occur when a contract uses funds in a period that falls outside of the time period the funds are authorized for use under what is known as the Bona Fide Needs rule (31 USC 1502), which provides: "The balance of a fixed-term appropriation is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period."

The Bona Fide Need Rule is a fundamental principle of appropriations law addressing the availability as to time of an agency's appropriation. 73 Comp. Gen. 77, 79 (1994); 64 Comp. Gen. 410, 414-15 (1985). The rule establishes that an appropriation is available for obligation only to fulfill a genuine or bona fide need of the period of availability for which it was made. 73 Comp. Gen. 77, 79 (1994). It applies to all federal government activities carried out with appropriated funds, including contract, grant, and cooperative agreement transactions. 73 Comp. Gen. 77, 78-79 (1994). An agency's compliance with the bona fide need rule is measured at the time the agency incurs an obligation, and depends on the purpose of the transaction and the nature of the obligation being entered into. 61 Comp. Gen. 184, 186 (1981) (bona fide need determination depends upon the facts and circumstances of the particular case). In the grant context, the obligation occurs at the time of award. 31 Comp. Gen. 608 (1952). See also 31 U.S.C. Sec. 1501(a)(5)(B). Simply put this rule states that the Executive Branch may only use current funds for current needs - they can't buy items which benefit future year appropriation periods (i.e., 1 October through 30 September) without a specific exemption. The net result of this rule is funds expire after the end date for which Congress has specified their availability. For example, a single year fund expires on 1 October of the year following their appropriation (i.e., FY07 appropriations. (e.g., 1 October 2006 through 30 September 2007) expire on 1 October 2007).

For example, operations and maintenance funds generally cannot be used to purchase supplies after 30 September of the year they are appropriated within with several exceptions - 1) the severable services exemption under 10 USC 2410 and Office of Management and Budget (OMB) Circular A-34, Instructions on Budget Execution, 2) Authorized stockage level exceptions and 3) long lead time exception. (see ) The Government Accounting Office Principles of Federal Appropriations Law (otherwise known as the GAO Redbook at ) has a detailed discussion of these fiscal law rules which directly impact on the ability of a federal agency to contract with the private sector.

The Regulations

The acquisition process is governed by regulations issued pursuant to the statutory authority given by the acquisition statutes.These regulations are included in the Code of Federal Regulations ("CFR"), the omnibus listing of Government regulations,as [ Title 48] .Chapter 1 of Title 48 is commonly called the Federal Acquisition Regulations ("FAR").The remaining chapters of Title 48 are supplements to the FAR for specific agencies.

As with any other regulation, the FAR has been promulgated through the legal regulatory process.This includes publication of proposed rules in the Federal Register and receipt of comments from the public before issuing the regulation.The FAR is considered to have the force and effect of law, thus Contracting Officers have no authority on their own to deviate from the FAR.The supplements to the FAR have been issued following the same process and must also be followed without deviation.

This does not mean that preparation of a contract is a simple matter of cut and paste.The regulations attempt to provide for every possible situation and acquisition from the purchase of paperclips to the acquisition of battleships.As a result, the FAR and its supplements permit a substantial variation.The Contracting Officer and the contractor must seek to achieve their sometimes conflicting goals while following the specific requirements of the regulations.As with any complex document (in book form, Title 48 of the CFR requires several shelves), the FAR and its supplements can be interpreted differently by different people.The reader is cautioned that, as stated above, this is a non-intuitive, complex subject, and the advice of someone knowledgeable in the field will often be required.


Federal Acquisition Regulation

The Contracting Officer

Unless specifically prohibited by another provision of law, an agency's authority to contract is vested in the agency head, e.g., the Secretary of the Air Force or the Administrator, National Aeronautics and Space Administration. Agency heads delegate their authority to Contracting Officers, who either hold their authority by virtue of their position or must be appointed in accordance with procedures set forth in the Federal Acquisition Regulation. Only Contracting Officers may sign Government contracts on behalf of the government. 48 CFR § 1.601. A Contracting Officer has only the authority delegated pursuant to law and agency procedures. This authority is set forth in the Contracting Officer's certificate of appointment (formerly called a "warrant").Unlike in commercial contracting, there is no doctrine of apparent authority applicable to the Government. Any action taken by a Contracting Officer that exceeds the Contracting Officer's actual delegated authority is not binding on the Government, even if both the Contracting Officer and the contractor desire the action and the action benefits the Government. The contractor is presumed to know the scope of the Contracting Officer's authority and cannot rely on any action of Contracting Officers when it exceeds their authority.Contracting Officers are assisted in their duties by Contracting Officer Representatives (CORs) and Contracting Officer Technical Representatives (COTRs), who usually do not have the authority of a Contracting Officer.

Process of Federal Acquisition

The process of federal acquisitions can vary widely depending on the entity or activity which is conducting it, the complexity of the acquisition, the dollar thresholds involved, whether or not the acquisition is for a major federal system, such as a weapons system, the need for special appropriations such as one of the nearly 100 appropriations included in the Department of Defense annual appropriations act (e.g., military construction funds, weapons procurement funds, other procurement funds, etc), the type of acquisition (e.g., services, supplies, equipment), contract type (e.g., fixed price, cost reimbursement, cost-plus, etc).

Generally, federal acquisitions begin with identification of a requirement by a specific federal activity. A basic idea of what is needed and the problem statement is prepared and the requiring activity meets with an acquisition command having a Contracting Officer with an appropriate warrant issued by a specific acquisition activity.

Not all Contracting Officers are created equal. Contracting officers have different contracting thresholds and varying degrees of experience and capabilities. Each one has a specific warrant that states the conditions under which they are permitted to engage in federal contracting. Depending on the contracting activity, some contracting officers may have no experience whatever with the product, service or requirements in question or knowledge of any of the potential vendor base, representing a weakness on the part of the Government procurement process.

Acquisition Planning - The First Step

The requiring activity and Contracting Officer, ideally, will commence acquisition planning as a first step to a federal acquisition. Acquisition planning is described in FAR 7, Acquisition Planning, and any agency supplement to the FAR, e.g., Defense FAR Supplement (DFARS) 207, Acquisition Planning. Components to an agency, such as the US Army, as well as the individual contracting command in question frequently also have an acquisition instruction which includes additional instructions on acquisition planning. For example, the US Army must follow AFARS Part 7, Acquisition Planning.

Acquisition planning is frequently dependent on the circumstances in which it is conducted. For example, during World War II, quantity was the key. As in the Civil War, the U.S. achieved victory due in large part to the American industrial base. A war of attrition requires massive quantities of material, but not necessarily of great quality. During the Cold War, quality was key. The United States may not have had as many pieces of equipment as their opposition, but that equipment could be more effective, efficient, or lethal, and offset the opposition's numerical advantage. Today, the military needs equipment that works where it is needed, is dependable, has a high degree of maintainability, has long-term reliability, is agile, versatile, and avoids equipment choices that result in political debate and partisan politics.

As part of the acquisition planning process, the Government must address its buying power leverage. Many government acquisition commands write acquisitions solely based on haphazard acquisition strategies that are primarily directed toward avoiding bid protests. Thus, it is necessary to emphasize competition and understand the acquisition from the view point of the contractor; Government acquisition commands should ask what is to be achieved and whether or not the program is really in the best interest of the Government.

Many federal acquisitions are rushed due to poor time management. In these cases, the tendency is to issue a sole-source contract to known vendors even though FAR 6 specifically forbids sole-source contracting when it is due to lack of advanced planning. There is also a high cost premium that is added to the cost of an acquisition when a buyer wants a supplier/vendor to rush to execute a contract or push their contract to the head of all other work the contractor/vendor is executing. It is often said that "if you want it bad, you get it bad." Accordingly, bad acquisition planning generally produces poor and unjustifiable acquisition outcomes. Thus, it is critical to understand the time resources that are required to properly plan and execute a federal acquisition. Generally, a Government acquisition for moderate to complex requirements requires at least 120 days.

A variety of factors can affect the contracting process and the contract clauses that are used in a federal acquisition, including:

* Cost: A number of cost thresholds exist that trigger increasing degrees of complexity in the acquisition process. These thresholds include the micro-purchase threshold, the simplified acquisition threshold, and the commercial items threshold. The micro-purchase threshold, as of August 2007, is generally $3,000, with some exception. No competition or publication requirements are mandated for micro-purchases; generally, the Government Purchase Card (GPC) can be used for these purchases under FAR Part 13. From $3,000 to $100,000, agencies may make use of simplified acquisition procedures under FAR 13. Blanket purchase agreements, basic ordering agreements, or other contracts may be awarded under simplified procedures, which allow supplies or services to be ordered at a predetermined fair and reasonable price. The simplified acquisition threshold can be increased in situations specified in FAR 13, including overseas contingency operations (e.g., military operations) and during nuclear/biological/radiological disasters up to the limits described in FAR 2, Definitions. FAR 13 simplified acquisition procedures can be used up to $5,000,000 ($11M under specified exceptions) under a test program in which Congress continues to reauthorize for acquisition of commercial items under FAR 13.5, Test Program for Certain Commercial Items. Items must qualify as a commercial item under the definition of FAR 2 and be supported by market research as specified in FAR 10.

* Type of acquisition (FAR 16, Types of Contracts): There are two main types of contracts - fixed price and cost reimbursement. In deciding which type to use, a Contracting Officer's identification of risk is key. A very well known requirement, such as for commercial off-the-shelf (COTS) items (in which no R&D would be needed and there are no high risk aspects) would be best acquired using a fixed-price contract, in which a price is fixed and includes the contractor's profit; all risk of cost overrun is transferred to the contractor. A higher risk, more unknown requirement is more suited for cost reimbursement type contracts, in which the contractor is reimbursed for all costs, and is paid a fee above that amount. In this arrangement, cost overrun risk is placed mainly upon the Government.

* Buying patterns: If an agency has a continuing need for a requirement over a period of time, a vehicle that permits multiple orders may be advantageous. For example, a blanket purchasing agreement (BPA) or a basic ordering agreement (BOA) as described in FAR Part 13 may be used, which allow for repeated purchases at predetermined fair and reasonable prices. Above the simplified acquisition threshold, an indefinite-delivery, indefinite-quantity (IDIQ) contract may be executed, as described in FAR Part 16.5.

* Availability of existing contract vehicles: Agencies may use existing BPAs or BOAs, provided that the use is within the general scope of the contract. For example, an agency can make use of Federal Supply Schedules as described in FAR 8.4. Schedules offered by the General Services Administration (GSA) provide a number of pre-competed contract vehicles that give an immediate ability to obtain goods or services without going through the full contracting process (

* Mandatory Sources: FAR Part 8 discusses the mandatory use of certain sources for acquiring some types of supplies and services. These sources include the Federal Prison Industries, various vendors who hire blind and disables persons, and Federal Supply Schedules. Certain items cannot be purchased by most agencies, such as passenger motor vehicles; all passenger motor vehicles must be purchased by GSA, unless a waiver is obtained. This is due in part to Congressional restrictions on the use of appropriated funds to purchase vehicles and the special authority that GSA has as the Federal Government's motor pool manager.

* Small Businesses and Socioeconomic Issues: Contracting with small businesses and firms affected by certain socioeconomic factors require a highly complex subset of Government regulation which is described by FAR Parts 19 and 26.

* Other requirements often apply to acquisitions depending upon the circumstances. These can include those listed in FAR Part 36, Construction and Architect-Engineer Contracts; FAR Part 41, Acquisition of Utility Services; and FAR Part 37, Service Contracting. Outside of a specified exception, acquisitions having a cost above the simplified acquisition threshold or the special authority under FAR 13.5 must be performed using the process specified under FAR 14, Sealed Bidding or FAR 15, Contracting by Negotiation.

An acquisition plan may have numerous elements as listed in FAR 7.105; depending upon the estimated cost of the acquisition, these elements include:

*Statement of need and background
*Applicable conditions
*Life cycle costs if applicable
*Capability or performance
*Delivery or performance requirements
*Tradeoffs – expected consequences of tradeoffs among cost, capability and schedule
*Milestone chart depicting acquisition objectives
*Plan of action
*Potential sources
*Competition plan – whether full and open competition used, and if not, justification
*Source selection procedures
*Acquisition considerations
*Potential Government furnished information, equipment or services
*Security and/or force protection considerations
*Budgeting and funding
*Product or service description
*Logistics considerations
*Environmental considerations
*Contract administration issues
*Participants in acquisition plan preparation (including source selection committee)

During the planning of an acquisition, several key aspects of the effort are decided, including:

* The degree of competition required under FAR Part 6, Competition Requirements (i.e., full and open competition, full and open competition after exclusion of sources, or other than full and open competition, also called "sole-source")
* Publication requirements for the acquisition (FAR Part 5, Publicizing Contract Actions)
* Preparation of the SOW/PWS - a document that specifies the "who, what, when, where, how" of the contract; it must be specific enough for the contractor to adequately price the requirement and to be enforceable in court. Measurable outcomes must be stated clearly.
* Required amount and type of funding for the proposed acquisition
* Contract line item number (CLIN) structure: this is generally in Section B of an issued contract that is constructed in the Uniform Contract Format. The CLIN Schedule is what the offeror prices in their offer/proposal. It is often advantageous to construct a CLIN Schedule that matches an outline of the work statement. Failure to properly structure the CLIN structure to the contents of a work statement can lead to an inability to determine how much a contractor should be paid or penalized if performance issues arise.
* Source selection criteria (SSC): Source selection criteria "1) Represent the key areas of importance and emphasis to be considered in the source selection decision; and (2) Support meaningful comparison and discrimination between and among competing proposals." (FAR 15.304, Evaluation factors and significant subfactors).
*Independent government cost estimate
*Market research: Market research is a critical part of knowledge based acquisitions. Information-driven and informed decision making requires complete information to execute successful acquisitions. FAR Part 10, Market Research, gives guidance on the process of market research and its role in federal acquisitions.
* Acquisition Risks: Risk in contracting falls into three categories - schedule risk, performance risk and cost risk. Risks to the acquisition, including negative past experiences, must be identified and mitigation measures and risk allocation between the Government and a potential vendor determined.
* Government provided equipment, resources, support or information: Often times, the Government must provide for equipment, logistics support, information, and many other items vital to performance of a contract. If there are proprietary information in the potential government furnished information (GFI), then measures must be taken to avoid violation of applicable regulations.

Effective market research assists the Government in:
*understanding industry terminology,
*understanding the basic concepts of the desired service or equipment item,
*identifying potential contractors that provide the item
*determining the correct scope of the requirement to best fit the vendor base

* Lack of adequate market research often results in contracts that fail to achieve the customer's expectations. Requiring activities are sometimes asked to write work statements on subject matter with which they have little experience. Persons with little knowledge as to how to conduct market research must seek training or guidance or apply the same common sense they would use if they were buying a high value item for themselves.

Thoughts on Risk

*Risk from Program Manager / Contracting Perspective:Risk. A measure of the inability to achieve program objectives within defined cost and schedule constraints. Risk is associated with all aspects of the program, e.g., threat, technology, design processes, Work breakdown structure (WBS) elements, etc. It has two components, the probability of failing to achieve a particular outcome, and the consequences of failing to achieve that outcome.

*Risk from a Lawyer’s Standpoint: Does this contract adequately describe all essential work / expectations, is there a schedule and is it enforceable? What are our remedies, if any?

Requiring activities and frequently contracting officers want to get an acquisition on contract as quickly as possible; sometimes too quickly. Thus, contracting officers and acquisition attornies will frequently have to carefully review the overall acquisition to identify risks to cost, schedule and performance and recommend mitigation measures to decrease these risk areas.

*Risk from an Investor's perspective:What is my expected payoff? The larger the expected payoff, the larger the associated risk, and vice versa. An Investor, who is a shareholder in a contracting company, will seek to carefully balance the expected payoff with the associated risk, and he is incentivized to seek a large payoff, as long as the risk is acceptable. This perspective is unique in the sense that risk represents both opportunity and danger to the Investor, while it only represents danger to the Program Manager and the Lawyer.

In other words, there is a misalignment in the perception of risk between the Program Manager, the Lawyer, and the Investor. It is ultimately the Investor who owns the contracting company, and this misalignment will have an effect on the Investor's behavior and the stock's performance.

Special Note on Commercial Items

The authority under FAR 12, Commercial Items (and services), must be used thoughtfully and carefully. It is very tempting for a contracting officer to use FAR 12 and hence FAR 13, in situations where such use is clearly not appropriate in view of the basic reasons commercial item acquisition authority was created by Congress.

FAR 2.101, definition of a commercial item/service states “a commercial item means – (6) services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions. This does not include services that are sold based on hourly rates without an established catalog or market price for a specific service performed or specific outcomes to be achieved. For purposes of these services –(i)catalog price means a price included in a catalog, price list, schedule or other form that is regularly maintained by the manfacturer or vendor, is either published or otherwise available for inspection by customers and states prices at which sales are currently, or were last, made to a significant number of buyers constituting the general public; and(ii) Market prices means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors."

Note the emphasis in FAR 2.101 definition for commercial items on established market prices. The reason why simplified acquisition is permitted for items above the $100,000 simplified acquisition procedure threshold for commercial items is there is an efficient market pricing mechanism which pressures market participants to provide goods and services at a fair and reasonable price which represents very efficient / non-wasteful pricing mechanisms. Generally, the more efficient and well developed markets have a large number of participating vendors and information is freely available to consumers in that market on the relative merits of each vendor's products and pricing which permits easy comparison of each vendor's products to each other. FAR 12 commercial items acquisition authority was intended to take advantage of the Wal-Mart's (R) and Microsofts (R) of the world where there is no need to go through the extensive, formalistic and resource/time consuming process of a fully negotiated procurement, which requires vendors provide cost and pricing information, to verify a fair and reasonable price. In other words, FAR 12 was intended to increase the number of competitors available to the US Government by jettisoning all of the unique requirements, including cost accounting systems, which are forced upon federal contractors by acquisition processes such as FAR 14, 15, 36 etc; instead, the Federal Government could act more like a normal buyer in a fully functioning commercial market where the Government was but one of a large number of consumers seeking the same or highly similar products or services. However, FAR 12 was never intended to apply where the US Government was the only or one of a very few buyers for an item or service not in demand by the commercial market place.

What happens when there are very few market participants and the goods or services are not widely available to the public? Lets take surveillance systems in a military overseas contingency environment as an example. Battlefield full motion video is not something that is found in the commercial sector - Wal-Marts don't sell this; moreover, frequently there are special restrictions which impact on commercial firms ability to engage in work of this nature. For example, special FAA Administrator permission is required before a US certificated aircraft or pilot can fly in Iraq under Special Federal Aviation Regulation (SFAR) 77; if there are very few, or only one, vendor who can participate in this requirement, there are no vendors out there for meanginful competition which is the bedrock assumption of FAR 12 and FAR 13. In view of the above, the airborne recon contract is NOT a commercial service – thus use of FAR 12 commercial items contracting processes is wholly inappropriate and not permissible under the applicable laws governing federal acquisition.

Taking another example, what happens when significant research and development is needed to adapt a commercial items for government use? Should FAR 12 and 13 be used here? Absolutely not. There are no market pricing mechanisms for the non-standard variant - the government is the only buyer of this particular variant of the commercially available item.

What about situations where government demand overwhelms the commercial markets supply? In this case, the government is actually competing against itself because it has swallowed the market whole and usually has multiple requiring activities competing against each other for the same goods and services. This is exemplified in cases where numerous contracting offices demand the same goods and services unknowingly are driving prices up against each other. Frequently in these case, contracting commands accept take-it or leave-it prices from relatively few vendors (compared to demand) who know that these contracting offices are not coordinating amongst each other or establishing commodity control councils to ration demand against the civilian sources of supply. As the US Federal Reserve will attest to, inflation is one of the most damaging elements in an economic system to investment, capital markets and economic activity. In this case, the effect of driving massive cost inflation directly impacts civilians and non-Government consumers who are also competing for the same goods and services against the US Government acquisition commands; ultimately the deep pockets of the Government win out against the lesser buying power of the non-Governmental market participants. In such cases, as the US Government did during World War II, commodity control councils must be established to identify all available sources of supply and ration supply to the various consumers, including US Government consumers, sometimes with price controls (although this is very dangerous because it frequently leads to black markets run by criminals). One solution in this case is to identify markets unaffected by the Government demand and seek to acquire goods and services through that other market. When the situation of overwhelming government demand occurs in a faltering or damaged economy, government demand that is in excess of what the local vendors can supply to both Government and non-Government consumers should be met by vendors who operate out of the market in question, including through the GSA Schedule system if the damaged market is outside of the United States. Resources and expertise are in the Federal Government that are designed to assist in cases where Federal demand overwhelms civilian supply, one example being the Industrial College of the Armed Forces (ICAF). The ICAF's charter is to maintain the ability to nationalize an economy to achieve strategic objectives or a wartime mobilization, thus is a good resource expertise in this particuar area. Use of FAR 12 and 13 without rationing of demand through a single commodity control council or finding other solutions is likely to create more problems than it solves. Non-commercial contracting methodology and clauses should be used for any acquisition where Government demand overwhelms civilian supply. It is highly unlikely there will be any cost controls or a fair and reasonable price obtained for non-commercial services or goods obtained using FAR 12 and FAR 13 under these circumstances.

Stripped Down Acquisition Plan Components

# Work statement: Deliverable list with performance and objective specifications if not a service contract (no brand names except as example)
**Measurable outcome deliverables in a service contract
**Construction or architecture & engineering (A&E) (FAR 36)
**Schedule / milestones (included in work statement)
# CLINS matched tightly with work statement structure/outline
# Source selection criteria

Note on Contract Line Item Numbers (CLINs)

When evaluating CLINs, ask yourself: “Can I explain this to the contracting officer representative (COR) so they know when it is ok to sign the US Government receiving Report (e.g., DD Form 250) accepting contractor’s performance as conforming?”. The receiving report, e.g., DD Form 250, when signed and accompanied by a funding document (in the Army's case, a Purchase Request and Commitment (PR&C) form), contract and vendor invoice, is what gets the contractor paid by the applicable finance office.

Source Selection Criteria (SSC)

SSCs can be simple or complex depending on the subject of the acquisition. If FAR 15 is used, then a concept called best value can be used; best value simply is an idea that the lowest bidder is not necessarily the winner of a competition - rather, an evaluation of the overall offer based on specified SSCs is accomplished and a source selection decision is accomplished (see below) based on those specified SSCs using a fact based business judgement of the acquiring activity.

SSCs can vary widely in complexity depending on the acquisition process used, e.g., FAR 13, Simplified Acquisition, or FAR 15, Negotiated Procurement. For example, under FAR 15, there is a range of source selection models including:

# Lowest Price (LP) that is Technically Acceptable (TA) based on statement of work (SOW) (LPTA) (use this for VERY SIMPLE BUYS – e.g., pencils)
# LPTA with Past Performance (partial tradeoff) (more complicated)
# Full Tradeoff based on LP, TA, past performance and stated criteria including SOW (VERY COMPLICATED BUYS) (sometimes known as best value)
**Do not have to select lowest price
**Can select higher priced proposal that provides better solution to objectives
**A Business Judgment based decision with rational basis

If FAR 13, simplified acquisition is used, then a contracting officer can select from a range of processes including Government Purchase Card (GPC) for purchases under the micro-purchase threshold (see definition section of FAR for current value (e.g., in U.S., it is currently $2,500), simplified acquisition threshold (see FAR definition section, currently up to $100,000 within the U.S. with certain exceptions), or up to $10M for commercial items/services. Under FAR 13, contracting officers are not required to use FAR 15 processes or follow the publication requirements of FAR 5, however they MUST create their own processes to follow.

Vendor past performance is generally included as a source selection criteria. It is important to include a requirement for "recent and relevant" past performance.

Inadequate SSCs renders the best work statement and CLIN worthless.

Over-Bundling of Requirements

Cost, schedule and performance risk can be increased by over-bundling of a requirement into a single acquisition vehicle. Over-bundling dries up the possible vendor base that might otherwise compete for a requirement. Thus, it is critical that an evaluation of the possible vendors who might compete for the overall work statement / deliverables be accomplished. For example, having a work statement for asphalt roads, space shuttles, hot dog carts, movie projectors and skyscrapers is unlikely to get a good vendor; only a prime integrator will bid on that type of bloated requirement, thereby stacking a tremendous amount of overhead into the price of the acquisition. In the best case scenario, the prime integrator will merely go out and contract with the vendors the Government should have gone with in the first place. The worst case is the prime integrator will mismanage outsourcing to their subcontractors and poor results will ensue. Overhead costs of over 100% of the price of the subcontractors is not uncommon in this situation, especially in Iraq. This analysis will frequently require splitting up a requirement into different pieces. The bundling of a requirement also has the very bad effect of making the SSCs and CLIN structure difficult to use in source selection, price evaluation and contract administration.

Overbundled requirements frequently suffer from very vague requirements and work statements, particularly in service contracts. In service contracts, the CLIN structure is priced on a per person per hour basis rather than on the service work deliverables themselves. Government or contractor ability to prepare cost or price estimates for vague work statements is severely limited; Accordingly, the Government will negotiate a labor rate, number of people and individual qualifications for the requirement given that is the only feasible way to get an idea of cost. However, use of per person/per hour pricing for services is a poor contracting practice given the Government retains virtually all performance, cost and schedule risk given the contractor has fully performed under the CLIN statement when they provide the qualified body, rather than providing the needed service. One could argue that a CLIN statement which overbundles work in even a well written work statement and prices the work on a per person/per hour basis with limits on the numbers of person and types of qualifications the contractor can use is in contradiction to the work statement given the means the Government has asked the contractor to price the contract bears no relationship to the actual work itself and the Government is directing the contractor on how to execute the requirement - thus interfering with contractor performance and a sign of an employee-employer relationship rather than an independent contracting relationship. Also, the CLIN structure which prices on a per person basis or per hour basis generally pays for such persons on an annual basis rather than merely for the service on an ala cart or as needed basis, therefore driving up costs in many cases. Pricing on a per person or per hour basis is a sign that a contract likely also qualifies as a personal services contract under FAR 37 - technically violating at least the spirit, if not the letter, of the Classification Act and FAR 37 except in specific circumstances and with specific determinations and findings.

Use of prime integrators in overbundled contracts sometimes has led to poor results in a number of major systems acquisitions. For example, what would happen if say the US Navy went too far in allowing contractors to make choices that make economic sense in the specific acquisition but add cost to the overall Navy? Example is a prime integrator who gets a good deal on a specific radar system that is not used in any other ship system – makes this specific buy cheaper but overall this costs the Navy a great deal of money given a lack of inter-operability that drives a need to stand up training schools, supply system, work force increase, etc.

Over-bundling makes it easy for contracting, but many times, especially for complex acquisitions, does not deliver the results expected by the customer or war fighter for complex acquisitions, especially acquisitions that the acquisition command in question has little experience with or has substantial turn over of personnel during the life of the acquisition.

Small business acquisitions have mandatory restrictions on over-bundling. However, non-small business acquisitions are not subject to the same rules.

Example of how over-bundling causes big problems (permutations and evaluation of total price in source selection): Lets say a requiring activity wants to get polling services. Acquisition planning reveals there are five polls in ten different regions. However, it turns out that the Government will only be ordering one of the five polls in any real numbers and that particular poll is much more expensive in actual cost than the other four. If a weighting scheme is not applied to this bundled requirement, a vendor can make the four lightly ordered polls very cheap in their offer and the high volume poll very expensive, based on their knowledge of the ordering patterns of the government in past acquisitions. Thus, on its face, the overall price of a bid when each poll is added together to arrive at a total price (used in source selection) would look attractive but in practice, the Government will burn through its budget very quickly given the vast majority of the actually ordered polls are extremely expensive (even though the actual cost of the most frequently ordered poll is far less than what was in the offer). To avoid the headache of a weighting scheme, all five polls should be broken apart and contracted for separately so they can be judged on their merits. This is an example of what is frequently done on major indefinite duration, indefinite quantity (IDIQ) contracts and explains why some acquisitions are appallingly expensive and require additional funding to achieve the requiring activity's objectives.

Writing SOW/PWS

Start with:

*Your statement of need
*Risks you foresee
*Previous problem areas that your command or other commands have experienced on the proposed acquisition
*Break the deliverables up into what is pushed over the table by the contractor
*Use that as an outline for both the work statement and the CLIN structure – can use sub deliverables as well.
*If contract gets too big, break up into smaller pieces – especially if work is unrelated.

Metrics/Performance Measures

A metric is a meaningful measurement taken over a period of time that communicates vital information about a process or activity, leading to fact-based decisions.

Focus on where things go bad - not resource effective to measure everything. Instead, select the critical few metrics for mission essential processes, process that have historically experienced chronic problems or process choke points and monitor them.

* Characteristics of a good metric:
**Meaningful to the customer
**Simple, understandable, logical and repeatable
**Shows a trend
**Clearly defined
**Data that’s economical to collect
**Drives appropriate action (this is most important feature of a good metric)
**Shows how organizational goals and objectives are being met through tasks and processes

Brand Names

Be wary of use of brand names in solicitation. FAR 11.104, Use of Brand Name or Equal Purchase Descriptions discusses acceptable uses of brand names in solicitations/RFPs and how to do this – use FAR Clause 52.211-6 if FAR 11.104 is used. FAR 11.105 Items Peculiar to One Manufacturer states “agency requirements shall not be written so as to require a particular brand name or product or a feature of a product, peculiar to one manufacturer, thereby precluding consideration of a product manufactured by another company, unless:(a) the particular name brand, product or feature is essential to the Government’s requirements and market research indicates other companies similar products or products lacking the particular feature do not meet, or cannot be modified to meet, the agency’s needs.(b) the authority to contract without providing for full and open competition is supported by the required justification and approvals (See 6.302-1); and(c) the basis for not providing maximum practical competition is documented in the file when acquisition is awarded using simplified acquisition procedures."

Service Contracts

Special rules apply to service contracts - must be performance based. Performance based acquisition simply put is: WHAT, not HOW; MEASURABLE OUTCOMES.

FAR 37.102 and FAR 37.600 requires performance based methods to be used for service contracts to maximum extent practicable. FAR 37.601 has specific requirements for statements of work (SOW) for service contracts requiring performance based standards. Agency supplements also require performance based acquisitions. See e.g., DFARS 237.170 Approval of contracts and task orders for services; DFARS 237.170-2 Approval requirements.

Performance Based Service Acquisition (PBSA) is a process and way of defining requirements that yields well written work statements that are measurable, outcome oriented – thus enforceable. Deming/Six SIGMA style quality assessments and process analysis very useful in writing performance work statements. PBSA and good contracting in general is highly dependent on doing your background research and market research. Would you go into battle without bothering to do recon and intelligence gathering? NO! Same principle applies in PBSA.

Need a Performance Work Statement (PWS) with:

* Outcome based definition of the service deliverable AND
* Performance standards that are measurable
* A plan for measuring and evaluating performance ie what data? What reports? Monthly inspections? By whom? When do they report? Think about what is critical to your requirement and only ask for that.
* Use a matrix of related services ie generator maintenance, that has subsets of services underneath them
* The DOD PBSA guide - in the back – look for a “performance requirements summary” matrix. Use this as an outline for the work statement provisions.

In trying to figure out how much detail you need in a work statement, ask "Can the contractor PRICE this work?" How hard is it for them to estimate cost, how many people, how many times we want it, where we want it, how quickly we want it, to what detail, etc. Contractors add in contingency costs to cover the unknown factor of what the government ACTUALLY wants when the work statement is vague. We pay for NY State but we only needed one block of NY City. Make the work statement concrete – numbers!

Army Federal Acquisition Regulation (FAR) Supplement (AFARS) has an outline for performance based service contracts.

Example (bad to outstanding definition):
# Services (what kind?)
# Maintenance services (what is maintained?)
# Generator maintenance services (which kind of generator maintenance service?, how many? where?)
# Generator preventative maintenance services (PM) for six generators at X locations (what specific model? what maintenance standards?)
# Generator PM services for six Model 2100 SuperMax generators at X locations [outcome you want] IAW original equipment manufacturer (OEM) manuals/standards [this is a performance standard that is measurable]
# Generator PM services for six Model 2100 SuperMax generators at X locations IAW at least the requirements or frequency of maintenance called for by the applicable OEM/US Military manuals [best if you spell out exactly what these are] or OEM/US Military PM standards [ditto] such that the mean time between failure (MTBF) for the generators are on average equivalent to OEM MTBF standards [a more clearly defined performance standard that has more defined measurable features] . The contractor shall immediately notify the Government when it identifies conditions or factors outside of the Contractors’ control that impact on its ability to maintain the generators IAW this paragraph or PWS. The Government shall then consider whether or not such conditions or factors excuse non-performance. The contractor is responsible for all costs associated with failure to report IAW any reporting requirements in this PWS.

What happens when the OEM does not have PM schedules for desert environments? May need to double up the frequency. May need to specify to use at least the OEM standards, or a more stringent standard if required to meet the MTBF rates on average.

The point of the above progression in adding detail is to give enough information to a contractor to price the work and to transfer performance, cost and schedule risk to the contractor so you can hold them liable if the generators blow up. Another important aspect is the need to be able to terminate for default - if prior year funds are used, the contract funds expire when the contract is terminated for convenience - therefore must be able to terminate for default to hold onto prior year funds.

Repair Services Contracts:
*How many systems?
*What type of systems?
*Where are they located?
*What types of repairs? (e.g., overhauls, preventive maintenance, fault troubleshooting, repairs to malfunctions)
*Cost benefit analysis for repair vs replacement?
*Industry standards applicable? What are they?
*DOD or service specific regulations applicable? Technical orders?
*What are the response times for repairs?
*Spare parts management? What are the standards to identify relationship between parts demand and spares on hand to reduce down time and account for long lead time?
*Training (us and them)?
*Demand satisfaction rates for parts?
*Different categories of repairs?
*Reports for down time?
*Reports for when systems can’t be repaired due to lack of spare parts?
*Technical data packages?
*Need special data rights under FAR or DFARS (e.g., DFARS 7015) clause? Markings of proprietary and protected data clause?

Additional Resources for PBSA:
* [ Office of Management and Budget, Office of Federal Procurement Policy, Performance Based Service Acquisition]
* [ Army Material Command PBSA site]
* [ NASA]
* [ Defense Acquisition University - Performance based services acquisition links and templates]
* The [ Guidebook for Performance-Based Services Acquisition (PBSA)] in the Department of Defense December 2000 is an outstanding resource with many examples and ideas
* [ Army Material Command (AMC) Pamphlet 715-17, Guide for Preparation and Use of Performance Based Specifications]
* [ Interactive Internet presentation on performance based services acquisition]
* Air Force Instruction 63-124, Performance-Based Services Acquisition

Office of Federal Procurement Policy (OFPP) has a [ Draft Best Practices Guide on Contractor Performance]

Personal Services Contracts

*Contractors are NOT employees - no remedies under personnel law and no remedies under contract law if vague/badly written work statements used
*Inherent governmental restrictions (See OMB Circular A-76) and FAR 37
*FAR 9.5 Organizational Conflicts of Interest Organizational and Consultant Conflicts of Interest (OCIE) problems

"Nonpersonal services contract" means a contract under which the personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the Government and its employees.

"Personal services contract" means a contract that, by its express terms or as administered, makes the contractor personnel appear, in effect, Government employees (see FAR 37.104).

Advisory and assistance services (A&AS) are permissible (See FAR 37.2)

Personal services are NOT permissible (See FAR 37.104 and Classification Act) without specific authority to obtain such services (meaning, statutory authority)

Permissible to acquire expert and consultant services (5 USC 3109 or 10 USC 129b – expert services) or 10 USC 1091 – health services), as well as health services, intelligence, counter intelligence or special operations command operations requirements under DFARS 237.104, Personal Services Contracts and 10 USC 129b – Contracting must do a determination and finding (D&F) (per FAR 1.7 and 237.104) for this

DFARS 237.170-2 forbids non-performance based contracts unless exception done under DFARS 237.170-2

If an agency is hiring experts, read over 5 USC 3109, Employment of Experts and Consultants, Temporary or Intermittent to see if it applies to FAR 37.104(f). Office of Personnel Management (OPM) has established requirements that apply in acquiring personal services for experts or consultants in this manner (e.g., benefits, taxes, conflicts of interest), “therefore, the contracting officer shall effect necessary coordination with the cognizant civilian personnel office.” Note that personal service contracts are potentially subject to salary caps

See also 10 USC 2331 Procurement of services: contracts for professional and technical services and AFARS 5137.104 -- Personal Services Contracts.

See also agency regulations on specific prohibitions on use of service contractors for inherently governmental activities under OMB Circular A-76, e.g., Army Regulation (AR) 735-5, para 2-11 sets out those property accountability tasks which can and cannot be performed by contractors. (Basically, contractors may not exercise any discretionary authority.)

Examples of prohibited personal services:
*Clerical/administrative/secretarial support to Government personnel
*Technical/Managerial performance of same or similar jobs performed by Government personnel
*Any contractor personnel working in a Government facility and supervised/directed by Government

If you see these words or tasks, you are dealing with a personal services contract:Director, manager, coordinator, direct, approve, liaison, supervision, control, manage, determine, decide, provide oversight, “supports all appropriate tasks that support the mission of the Government activity X”

Be very wary of any service contract which requires the contractor be collocated with the requiring activity, under direct supervision of US government vs through the contracting officer and COR. If the work statement calls for services that looks and smells like an employee vs a contractor for a specific service or good, it is a personal services contract and subject to termination by an auditor mid execution.

Source Selections

The Procurement Integrity Act (PIA) is applicable to the personnel that engage in federal source selections to include prohibitions on gifts to source selection personnel, restrictions on dissemination of procurement sensitive information and post government employment restrictions.

Source selection refers to the process for evaluating contractor proposals or quotes submitted in response to a request for proposals (RFP) or request for quotes (RFQ) based on the contract solicitation. Source selection is driven by what instructions to offerors clause is included in the contract solicitation (e.g., FAR 52.212-2 with the tailored language spelling out what the source selection criteria is, weighting, etc).

After the requiring activity has written their SOW/PWS, figured out source selection approach, then selected factors and subfactors, then figured out weighting of non cost/price factors, then understood consequences of the above, they write a source selection plan (SSP). A SSP gives instructions to a source selection committee on how to evaluate each proposal. Courts will defer to the source selection committee’s business judgment, so facts must be included to base a decision on; the source selection committee must not be arbitrary or lack facts in the record for their findings.

Ultimately, risk evaluation is where a source selection team wants to be. That is what is used to determine weakness, significant weakness and deficiencies, which are briefed to unsuccessful offerors. Making the connection between risk evaluation/source selection criteria/factors and offeror proposals is what source selection is all about

The process used for source selection can be selected from FAR 13, Simplified Acquisition, FAR 14, Sealed Bidding or 15, Contracting by Negotiation.

Contractors competing for a government requirement have an opportunity to request clarification or amendment of a work statement or solicitation. The request for clarification must be done relatively early in the acquisition process, preferably as close to the publication of a solicitation, RFQ, RFP or other publication. Frequently contracting officers will agree to such clarifications if a contractor's request is well reasoned.

Key principles for source selection:

* Tell them what basis you are going to award it on (award criteria) (tell them)
* Award it based on what you said you would award it based on (do what you said you would do)
* Document what you did. (Tell them that you did what you said you would do in the first place) More is better as long as it makes sense.
* If discussions are held, read the bid protests on discussions first to make sure you understand how to do it.
* Competitive Range - Defined at FAR 15.305(c) – used “if discussions are to be conducted ….” Competitive Range is a tool that you use when you expect many proposals so only the most competitive proposals need to be evaluated. FAR 15.209: “If the government intends to make award AFTER DISCUSSIONS WITH THE OFFERORS IN THE COMPETITIVE RANGE … insert [provision at 52.21501 …] ” Offers excluded from competitive range must follow notification procedures at 15.503(a) and debriefing procedures at FAR 15.305(c)(4). Do NOT use competitive ranges to exclude offers/proposals unless solicitation stated discussions were going to be used. FAR 15.306(c). If a competitive range is used, you MUST send pre-award notifications to offerors thus excluded. An agency entering into discussions must provide “meaningful discussions” (See GAO decisions on this issue).

If FAR 15 is used, there MUST be a proposal evaluation under FAR 15.305 to include a “fair and reasonable” price determination under FAR 15.305(a)(1), a past performance evaluation under FAR 15.305(a)(2) and a technical evaluation under FAR 15.305(a)(3)!!!! Make sure they are all there!

For each factor rating, identify each offeror’s key strengths, uncertainties and deficiencies of the proposal and then explain how the strengths, uncertainties and deficiencies resulted in that rating. Focus specifically on the factors and subfactors specifically stated in the solicitation/instructions to offerors. Do not use unstated source selection criteria to select the winning offer.

Discuss those discriminators that make one offeror better than another based on the selection criteria. Be as detailed and focused upon discriminators as the source selection results allow. If something was not a discriminator then say so and also state why it was not. If the strength had no bearing on the offerors rating, state so.

Adequately address the impact of past performance on the decision; remember, no past performance is rated NEUTRAL!!

A drafter of the source selection decision document must show the source selection authorities thought process and reasons behind the comparative analysis. Use a declaration of thinking/intent on the part of the source selection authority (SSA). For example: I selected; I thought; I determined; I reviewed; etc.

Source selections cannot compare the offers against each other. Only against the award criteria.

Spend some time on the summary to make it correct as it is very important. It is meant to very quickly put in words the best of the key discriminators used by the SSA to reach their decision.

Don’t focus the discussion on only one offeror. The Source Selection Decision Document (SSDD) compares assessments of the successful offeror against the others. If there are a large number of offerors, the detailed discussion may be limited to the most highly rated offerors. Some light discussion of lower rated offerors is needed when a competitive range is not established.

Don’t use ratings with contradicting supporting language, such as a “not detailed” rated “excellent.” Examine ratings closely as they relate to your technical discussions. Ensure they are consistent (i.e., avoid having a weakness discussed in one proposal evaluation and not another proposal having the same weakness).

Don’t identify or list weaknesses without discussing them and their importance to the thought process.

Don’t treat a neutral performance confidence assessment favorably or unfavorably. (Don’t disqualify an offeror for having a neutral rating.) No past performance must be rated as neutral under FAR 13 and FAR 15.3.

Ensure that, when documenting an award decision in the SSDD, SSA’s are focusing on the underlying advantages and disadvantages of the proposals rather than merely the ratings themselves. HoveCo, B-298697:

Agency regulations frequently provide guidance on source selections: See e.g., AFARS 5115.308 Source selection decision - "A source selection decision document must be prepared for all source selections and reflect the SSA's integrated assessment and decision. The document must be the single summary document supporting selection of the best value proposal consistent with the stated evaluation criteria. It must clearly explain the decision and documents the reasoning used by the SSA to reach a decision. The document should be releasable to the General Accounting Office and others authorized to receive proprietary and source selection information. When releasing a copy to offerors or to anyone not authorized to receive proprietary and source selection information, redacted material should be limited to that which is proprietary and that which must continue to be protected as source selection information."

Consistency: what is bad for one proposal is bad for all; find an adverse comment, then look at of the proposals of the other bidders and see if the same problem exists in there and was not written up in the evaluation for those proposals. What is good for one proposal is good for all proposals (See above)

Take a hard look at definitions in instructions given to source selection committee – look at the words in them; start with the worst definition ie unacceptable, look at the words in it, then see if those words show up in evaluations that are rated higher than that definition in the rating worksheets.

If you have something bad in the proposal you want to win, then acknowledge it in your source decision document, and STATE THAT IT DID NOT AFFECT YOUR DECISION OF X REGARDING RATING OF THAT PROPOSAL!!! – if the same thing is bad in another proposal, then say the same thing in that one as well.

The word “non-responsive” IS ONLY USED IN SEALED BIDDING! It should NEVER be used in FAR 13 or FAR 15 evaluation processes. Packages missing things are just rated lower e.g., poor, good, unacceptable or IAW FAR of weakness, significant weakness, etc.

Compare SOW and delivery schedules on solicitation (e.g., RFP/RFQ) to what is in proposals word for word to see if everything was addressed. State if something is missing to justify lower ratings; talk about everything that applies for each award criteria to “pile on” good comments for proposals you like; then show that more good was said about the ones you liked, and less good was said about the ones you don’t.

Do the best you can with bad source selection or award criteria. Just make sure it is consistently applied

Clauses for Government Contracts

* Government contracts have mandatory clauses that must be included in a contract document. The FAR and DFARS have prescribing sections in them and the FAR has a table which can be used to determine required, as applicable or optional clauses by subject matter

* FAR 52.301 clause matrix - right clauses for the category e.g. supplies, services, construction or commercial items and Options? IDIQ? Contract TYPE (see FAR 16) (i.e., fixed price (FP), FP with economic price adjustment, cost-reimbursement, incentive, time and materials, IDIQ,, letter contracts, agreements under FAR 16.7, etc). Note in FAR 52.301 that a clause must be in both the contract and the solicitation but provisions are only in solicitations.

Contracting activities have transitioned to automated contract generation tools which have a menu driven system which generates the contract with appropriate clauses. However, frequently contracting officers do not have sufficient knowledge that some optional or required clause is applicable in a particular case - especially for intellectual property or other specialized acquisitions. With the transition to the automated systems, many contracting officers do not possess the knowledge to prepare a manual contract without the automated tool. Also, the automated systems frequently do not allow inclusion of various non standard work statement, instructions or clauses due to limitations on input options.

Deviation from the FAR/Agency Regulations

FAR 1.4, Deviations from the FAR, provides the steps needed for individual deviations from the mandatory FAR or agency FAR supplement. However, no deviation is needed if there is not a precise clause or provision for the specific issue that is at issue.

Commercial Items contracts can be tailored to a great extent, thus deviating in many particulars from the mandatory clause language. See:

12.401 -- General.This subpart provides --

(a) Guidance regarding tailoring of the paragraphs in the clause at 52.212-4, Contract Terms and Conditions -- Commercial Items, when the paragraphs do not reflect the customary practice for a particular market; and

(b) Guidance on the administration of contracts for commercial items in those areas where the terms and conditions in 52.212-4 differ substantially from those contained elsewhere in the FAR.

See also FAR 12.211, Technical Data; FAR 12.212, Computer Software; FAR 12.213, Other Commercial Practices for additional authority to deviate or "tailor" FAR clauses and provisions in the context of commercial items/services.

Intellectual Property (IP) / Data Rights / Technical Data Rights

From the Government perspective, the most critical aspect of IP, data, technical data and patent rights revolve around freedom to operate and freedom of contract, namely freedom to have maximum competition. From the perspective of a contractor, the most critical aspect of this area is protection of competitive advantage from disclosure to its competitors.

IP, data rights and technical data rights is a highly specialized practice area in federal acquisitions. Careful examination of FAR 27 and agency FAR supplements (e.g., DFARS 227) must be performed and consulation with a wide variety of federal statutes accomplished before attempting to deal with IP/data/technical data.

A number of variables drive allocation and use of IP/data/technical data including whether or not the subject of the contract is for research and development (R&D), small business/non-profit or non-small business/for-profit, source of funds used to create the IP in question (exclusively private, exclusively government or mixed funds), acquisition of commercial or non-commercial items/services and whether software or non-software is being acquired. Additional clauses must be added to the acquisition for patent/data/technical data and specific CLINs must be added for data/technical data deliverables per the FAR/DFAR. Various agency regulations separately deal with technical data acquisition as well and must be consulted.

There is a difference between FAR and agency supplements. For example, the FAR focuses on "data" while the DFAR provisions focus on the narrower subset of "technical data". For technical data, DFARS 227.7102-3(b) states "Use the clause at 252.227-7013, Rights in Technical Data--Noncommercial Items, in lieu of the clause at 252.227-7015 if the Government will pay any portion of the development costs. ...." Thus, the Government wouldn't be using that clause if it was not paying some portion of development costs - the question is whether or not this particular item's development costs were in fact paid for by the government. It is prudent to make this determination up front in the CLIN structure of a contract for technical data deliverables.

DFARS 227.7103-4 License rights [Non-commercial items] provides the standard license rights that a licensor grants to the Government are (1) unlimited rights, (2) government purpose rights, or (3) limited rights. Those rights are defined in the clause at 252.227-7013, Rights in Technical Data--Noncommercial Items.

If developed exclusively with government funds, then the Government can use the technical information without restriction including going to another contractor to produce the item in question.

Even if the Government only has limited rights tech data, under the DFARS 252.227-7013 clause, the Government always has unlimited rights to the following:

(iv) Form, fit, and function data;

(v) Necessary for installation, operation, maintenance, or training purposes (other than detailed manufacturing or process data).

Thus, the Government could use the form, fit and function data to go with another contractor no matter what.

With regard to non form, fit or function data, worst case scenario is the Government has limited rights - meaning, developed exclusively at private expense:

DFARS 252.227-7013:"(13) “Limited rights” means the rights to use, modify, reproduce, release, perform, display, or disclose technical data, in whole or in part, within the Government. The Government may not, without the written permission of the party asserting limited rights, release or disclose the technical data outside the Government, use the technical data for manufacture, or authorize the technical data to be used by another party, except that the Government may reproduce, release or disclose such data or authorize the use or reproduction of the data by persons outside the Government if reproduction, release, disclosure, or use is—

(i) Necessary for emergency repair and overhaul; or

(ii) A release or disclosure of technical data (other than detailed manufacturing or process data) to, or use of such data by, a foreign government that is in the interest of the Government and is required for evaluational or informational purposes;

(iii) Subject to a prohibition on the further reproduction, release, disclosure, or use of the technical data; and

(iv) The contractor or subcontractor asserting the restriction is notified of such reproduction, release, disclosure, or use."

A second technical data rights scenario occurs when items/technical data is acquired using mixed funding - the Government gets government purpose rights which allow the Government to go with another vendor provided a non disclosure agreement is signed with that other vendor and any tech data/drawings produced under that other contract are marked in accordance with the DFARS 252.227.7013 clause:

DFARS 7313 Clause:"(11) “Government purpose” means any activity in which the United States Government is a party, including cooperative agreements with international or multi-national defense organizations, or sales or transfers by the United States Government to foreign governments or international organizations. Government purposes include competitive procurement, but do not include the rights to use, modify, reproduce, release, perform, display, or disclose technical data for commercial purposes or authorize others to do so.

(12) “Government purpose rights” means the rights to—

(i) Use, modify, reproduce, release, perform, display, or disclose technical data within the Government without restriction; and

(ii) Release or disclose technical data outside the Government and authorize persons to whom release or disclosure has been made to use, modify, reproduce, release, perform, display, or disclose that data for United States government purposes.



(iii) The Government shall not release or disclose technical data in which it has government purpose rights unless—

(A) Prior to release or disclosure, the intended recipient is subject to the non-disclosure agreement at 227.7103-7 of the Defense Federal Acquisition Regulation Supplement (DFARS); or

(B) The recipient is a Government contractor receiving access to the data for performance of a Government contract that contains the clause at DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends."

If the Government needs to get rights to limited rights manufacturing data, a requiring activity can have contracting go to the vendor and obtain specially negotiated rights. If they refuse, the Government can take form, fit and function data and go to another contractor to procure the item that route. With regard to way ahead, there is an indication of how a government activity could proceed in DFARS 227.7103-2 Acquisition of technical data where it talks about use of performance specs, form, fit and function data to obtain from another source:

"(a) Contracting officers shall work closely with data managers and requirements personnel to assure that data requirements included in solicitations are consistent with the policy expressed in DFARS 227.7103-1.

(b)(1) Data managers or other requirements personnel are responsible for identifying the Government's minimum needs for technical data. Data needs must be established giving consideration to the contractor's economic interests in data pertaining to items, components, or processes that have been developed at private expense; the Government's costs to acquire, maintain, store, retrieve, and protect the data; reprocurement needs; repair, maintenance and overhaul philosophies; spare and repair part considerations; and whether procurement of the items, components, or processes can be accomplished on a form, fit, or function basis. When it is anticipated that the Government will obtain unlimited or government purpose rights in technical data that will be required for competitive spare or repair parts procurements, such data should be identified as deliverable data items. Reprocurement needs may not be a sufficient reason to acquire detailed manufacturing or process data when items or components can be acquired using performance specifications, form, fit and function data, or when there are a sufficient number of alternate sources which can reasonably be expected to provide such items on a performance specification or form, fit, or function basis."

In other areas, problems frequently arise when Federal activities hire support contractors to assist them with executing their mission. These contracts frequently come into at least potential conflict with rules governing permissible use of contractors, such as rules against use of contractors for inherently governmental functions (See OMB Circular A-76) and rules against personal services (see above). One of the most serious problems can occur when a contractor is put into a position where they can see private party trade secrets, proprietary information or other contractor's proprietary information. The Federal Trade Secret Act (18 USC 1905) imposes criminal, civil and administrative sanctions on federal employees who with knowledge allow proprietary, confidential or trade secret information to be used for an unauthorized purpose, including permitting other federal contractors to view the proprietary information in question.

Given the overwhelming reliance on support contractors, it is now necessary to address this question of authorized use under the Federal Trade Secret Act. A simple solution is to include in the CLIN structure a statement, such as for example, "the Government may provide proprietary information received under this contract to support contractors provided no organizational conflict of interest occurs under FAR 9.5, the support contractor is not directly competing on the acquisition in question which originated the proprietary information in question and a non-disclosure agreement with each contractor recipient is accomplished requiring the contractor ensure such proprietary information is not disclosed outside of the Government activity handling the proprietary information." In this way, the contract that is the entry point for such proprietary information being handled by US Government support contractors includes an explicit authorization which avoids violation of the Federal Trade Secret Act provisions relating to authorized versus unauthorized use.

The DFARS includes a non-disclosure agreement at DFARS 227.7103-7, para c, which can be used in this case.

Markings is a critical piece of data, technical data and proprietary data management in a government contract. For example:

DFARS 252.227-7025 (Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends),

FAR 27.404(h) – Unauthorized marking of data – discusses the marking provisions of FAR clause 52.227-14

DFARS 252.227-7017, Identification and Assertion of Use, Release or Disclosure Restrictions (Great clause to include for marking requirements, along with 52.227-14 clause)

Markings also covered in DFARS clause 252.227-7013, Rights in Technical Data – Noncommercial Items, para (f)

FAR 27.404(i) Omitted or incorrect notices – states that data delivered under a contract with FAR clause 52.227-14 without restricted markings/legends will be presumed to have been delivered with unlimited rights and the Gov assumes no liability for disclosure of such data.

All contracts which may include technical data of some type must include a markings section to ensure a contractor properly marks all proprietary information and the Government protects it accordingly.

Trade-In or Sales Authority in Government Acquisitions

40 USC 181(c) provides: “In acquiring personal property, any executive agency, under regulations to be prescribed by the Administrator, subject to regulations prescribed by the Administrator for Federal Procurement Policy pursuant to the Office of Federal Procurement Policy Act may exchange or sell similar items and may apply the exchange allowance or proceeds of sale in such cases in whole or in part payment for the property acquired . . . . . .”

According to OMB, the Federal Property and Administrative Services Act (FPASA) of 1949 gives all agencies, unless directed otherwise in their specific legislation, authority to collect proceeds from sale of personal property which can be applied to replace similar property during the fiscal year in which the property is sold and one fiscal year thereafter. (like a used car trade in)

The Miscellaneous Receipts Act (31 USC 3302) mandates that all funds received by the US Government must be deposited in the miscellaneous receipts account at the US Treasury unless there is a specific exemption authorized by Congress. This is part of the power of the purse under the US Constitution by Congress over the Executive Branch. The Miscellaneous Receipts Act prevents the Executive Branch from self financing itself except as specifically authorized by Congress. 40 USC 181(c) thus is necessary to ensure a command that essentially trades or sells items, frequently information technology (IT) equipment, can retain the receipts from the trade in or sale and apply them to acquisition of replacement items.

Health Care Contracts

Special acquisitions rules and laws govern acquisition of health or medical related services. For example, DoD Instruction (DoDI) 6025.5, Personal Services Contracts (PSCS) for Health Care Providers (HCPS) has extensive requirements that must be addressed in any DoD health care contract. DoD 6025.18-R, DoD Health Information Privacy Regulation also has substantial mandates concerning medical records as well as HIPAA compliance. See

Military service regulations also deal with this issue extensively: e.g., See AR 40-400 Medical Support Provisions - Authority

Contract Administration

What happens after a government contract is signed? That subject is referred to as contract administration. Contract administration tasks can include:

* Payments (prompt payment essential)
* Modifications and Adjustments: Typically done using a changes clause (but other options exist)
*Includes Requests for Equitable Adjustments (can process under FAR 49.002(c)) (these are essentially modifications under the applicable contract changes clause e.g., FAR 52.212-4 clause)
* Terminations for cause or convenience – for commercial items, you use the terminations clauses in the 52.212-4 clause.
* Bid protests, ratifications and contract claims

See the [ DCMA Handbook] for more information on contract administration.

Requests for Equitable Adjustments (REAs)

Think of these as modifications of the contract that were not done formally or properly. REAs are frequently based on changes clause, but there may be other clauses to base this onTypically occurs when new work is added or a change in current work is ordered, hopefully, by the contracting officer (usually not), but without the required documentation. Changed circumstances and other equitable reasons can be used as well for a contractor to ask for a REA. Contractors can ask for delay damages arising from contract changes in REAs; delay damages can get enormous rapidly so they must be attended to as soon as possible.

The key to REAs is documenting the increased costs. Burden of proof is on the contractor, so the contractor must provide evidence of increased costs. Special rules exist for entitlement to whether or not contractor is entitled to profit in addition to the actual costs they incurred, especially in the cases of leased equipment that was held over due to delays on the part of the government or the government’s failure to properly integrate other contractors who then interfered with our contractor’s work. Cases out there that say the government can reduce profit if risk was reduced due to the change.

Can use the settlement procedures in FAR 49, per FAR 49.002(c) but be advised that this section is really written for terminations – you have to adapt the settlement procedures, probably for terminations for convenience, to the REA.

The Government should make sure there is a release of claims (ROC) clause in the REA’s contract modification – FAR / DFAR do not have a sample ROC clause. In the context of FAR 12 commercial items, the changes clause requires BILATERAL AGREEMENT.

A substantial number of federal cases deal with REAs: “It is black letter law that every contract with the government contains an implied obligation that neither party will do anything to prevent, hinder, or delay performance." Sterling Millwrights, Inc. v. United States, 26 Cl.Ct. 49, 67 (1992) (citing Lewis-Nicholson, Inc. v. United States, 213 Ct.Cl. 192, 550 F.2d 26, 32 (1977)). When government actions delay contractor performance and increase costs, "the contractor has a claim for damages." (Lewis-Nicholson, 550 F.2d at 26). "A constructive change generally arises where the Government, without more, expressly or impliedly orders the contractor to perform work that is not specified in the contract documents." Lathan, 20 Cl.Ct. at 128 (citing Chris Berg, Inc. v. United States, 197 Ct.Cl. 503, 525, 455 F.2d 1037, 1050 (1972)). Contractors may recover excess costs through an equitable adjustment, however, it "bears the burden of proving liability, causation, and resultant injury." Ralph L. Jones, 33 Fed.Cl. at 331 (citing Wunderlich Contracting Co. v. United States, 173 Ct.Cl. 180, 199, 351 F.2d 956 (1965); Electronic & Missile Facilities, Inc. v. United States, 189 Ct.Cl. 237, 253, 416 F.2d 1345 (1969)). The standard of meeting this burden is high. Before an equitable adjustment will be granted, contractors must demonstrate: (1) increased costs arose from conditions materially different from what the contract documents indicated and that such conditions were reasonably unforeseeable based on all information available to the contractor; and (2) the changes in the requirements caused the increased costs in question. Johns-Manville Corp. v. United States, 12 Cl.Ct. 1, 33 (1987). A contractor must distinguish for the court those delays for which the government is responsible as opposed to its own; the contractor's standard for proving damages does not require "absolute exactness or mathematical precision." Ralph L. Jones, 33 Fed.Cl. at 336 (quoting Electronic & Missile, 189 Ct.Cl. at 257). The court "needs only enough evidence to make a fair and reasonable estimate." Id. (citing Miller Elevator, 30 Fed.Cl. at 702; Electronic & Missile, 189 Ct.Cl. at 257).


Two types of scope determinations in contracts. One is scope of the original contract – meaning, do we have to pay anything for this modification. The second one is whether or not the modification or change is within the scope of the original competition. The first issue comes up when a contractor demands more money (i.e., demand for more money in a CDA claim or REA); the second issue comes up when the Government wishes to modify the contract and the contractor agrees, but another contractor objects to the failure to recompete the contract.

Modifications are governed by the changes clause in the contract. However, the question of competitive scope must be determined first to determine if there will be a Competition in Contracting Act (CICA) violation first. As a collateral issue, the question of whether or not the modification is a good deal must be evaluated because any modification is inherently a sole source award to the incumbent contractor. Thus, there is no price competition for the modification. If the acquisition was done under FAR 12, Commercial Items, the Government has no ability to demand cost and pricing information from the Contractor to evaluate whether or not the contractor is ripping off the Government with inflated or padded charges.

With regard to competitive scope determinations, the GAO in American Air Filter Co., 57 Comp. Gen 567 (B-188408), 78-1, para 443, at 573, stated:

"The impact of any modification is in our view to be determined by examining whether the alteration is within the scope of the competition which was initially conducted. Ordinarily, a modification falls within the scope of the procurement provided that it is of a nature which potential offerors would have reasonably anticipated under the changes clause.

To determine what potential offerors would have reasonably expected, consideration should be given to the procurement format used, the history of the present and related past procurements, and the nature of the supplies or services sought. A variety of factors may be pertinent, including: whether the requirement was appropriate initially for an advertised or negotiated procurement; whether a standard off the shelf or similar item is sought; or whether, e.g., the contract is one for research and development, suggesting that broad changes might be expected because the Government's requirement are at best only indefinite."

GAO issued a decision on 31 Jan 06 in DOR Biodefense Inc. and Emergent BioSolutions, B-296358.3 and B-296358.4 regarding whether a modification is within the scope of the original competition under the Competition In Contracting Act (CICA). Modifications outside the scope of the original competition must be competed or justified as sole source actions. Scope analysis is not mechanical, but requires an integrated assessment of multiple factors, including contract type, specification or statement of work, cost and performance period. Whether the modification requires competition also depends upon whether the original solicitation adequately advised offerors of the potential for that type of change, and thus whether the modification would have changed the field of competition. In Biodefense, the Army issued a single award ten year indefinite quantity contract for development and certification of vaccines for biological defense. The challenged modification was exercise of an optional CLIN for development of a type of vaccine not expressly listed in the solicitation's option that extended the performance period for the option by 8 years at a significant increase in cost. The GAO determined that this modification was, nevertheless, within the overall scope of the original competition based on the broad developmental purpose of the contract and the solicitation's express notice to offerors that additional vaccine types could be added after award and that changes in regulation may affect performance period and costs. The discussion of actions taken by the Army in the original solicitation to put competitors on notice of the potential for post-award modifications provides good practice insight. See DOR Biodefense, Inc.; Emergent BioSolutions:

See DCMA's Contract Administration Handbook for more information:

Sample Release of a Claim

Release of ClaimsIn consideration of the premises contained in contract modification number _______________ of contract number ______________________________, executed on _____________, and sum of $______________to be paid by the United States Government under the above noted contract, the undersigned contractor does release and discharge the Government, its officers, agents, and employees of, from all liabilities, obligations, and claims whatsoever in law and equity arising out of or by virtue of said contract, except as follows:

[fill this in or state – no exceptions]

IN WITNESS WHEREOF, this release has been executed this ___ day of _________. __________________________ Contractor Signature

Contract Claims under the Contract Disputes Act (CDA)

Contract claims are handled under the disputes clause in commercial items contracts or another clause in different types of contracts. The clause simply refers to another clause, the contract dispute clause. That clause invokes the CDA and specific procedures that must be followed.

The Government should NEVER TREAT A REQUEST FOR MORE MONEY OR A CHANGE TO THE CONTRACT AS A CLAIM if they can avoid it. Why? For starters, the Government has to pay interest from the date of receipt to the date of payment. Second, if the amount is over a specified amount, then the claim must be certified (see the FAR and CDA). Certification is essentially a company swearing under pain of 18 USC false claims act penalties that they are not falsifying the claim

Instead of dealing with it as a claim, the Government should deal with it as a REA; the contractor will have to decide what is more advantageous to it - a REA or CDA claim.


Ratifications are governed by FAR 1-602-3. What is a ratification? Basically, it is where a requiring activity or government employee without any authority enters into an agreement to procure goods or services. A contracting officer has to ratify the agreement. Very specific limits exist on ratifications thus reference must be made to the applicable regulations as well as agency rules on the subject, such as for the Army at AFARS 5101.602-3. A ratification package will require a legal memo going through the analysis on whether a ratification complies with law on ratifications of unauthorized commitments.Key points are unauthorized commitment was made, the commitment would have been proper if it had been done by a contracting officers and that funds were available then and are still available.

FAR 1.602-3 (a) states a ratification is … the act of approving an unauthorized commitment by an official who has the authority to do so. Unauthorized commitment … means an agreement that is not binding solely because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government. FAR 1.602-3(a)(2) through (3); There are dollar limits to the authority to ratify unauthorized commitments. AFARS 5101.602-3(b). The three approval levels are: $10,000 or less -- Chief of Contracting Office; $100,000 or less – PARC; Greater than $100,000 -- HCA. Specific contracting commands always have a specific regulation that covers ratifications, thus reference to that command's instruction is necessary as well.

Under FAR 1.602-3, Ratification of Unauthorized Commitment, paragraph (c), a ratifying official may ratify only when:(1.) The government has received the goods or services.(2.) The ratifying official has authority to obligate the United States now, and could have obligated the United States at the time of the unauthorized commitment.(3.) The resulting contract would otherwise be proper, i.e., adequate funds are available, the contract is not prohibited by law, etc.(4.) The contracting officer determines that the previously paid price was fair and reasonable and recommends payment, with concurrence of legal counsel.(5.) The ratification is in accordance with any other limitations prescribed under agency procedures

AFARS 5101.602-3-90 -- Ratification Procedures, provides:

“(a) The individual making the unauthorized commitment must send relevant documentation to the individual’s commander or senior staff officer designated for this purpose to include –(1) A signed statement describing the circumstances, the reason normal contracting procedures were not followed, what bona fide Government requirement necessitated the commitment, the benefit received, and its value and any other pertinent facts; and(2) All other relevant documents, including orders, invoices or other evidence of the transaction.(b) If the commander or senior staff officer designated concurs that the commitment should be ratified, the documentation must be sent to the chief of the contracting office with an endorsement that –(1) Verifies the accuracy and completeness of the documentation;(2) Describes the measures taken to prevent a recurrence of unauthorized commitments, including a description of any disciplinary action to be taken; and (3) Provides a complete purchase description and funding for the ratifying contract.(c) The chief of the contracting office will assign the action to an individual contracting officer who will be responsible for –(1) Reviewing the case and determining the adequacy of all facts, records, and documents and obtaining any additional material required; and(2) Preparing a summary of facts to include a recommendation as to whether or not the transaction should be ratified and reasons for the recommendation. A recommendation not to ratify must include a recommendation as to whether or not the matter should be processed under FAR Part 50 and DFARS Part 250 (Pub. L. 85-804) as a GAO claim or in some other appropriate way.(d) Upon receipt and review of the complete file, the individual responsible for approving the ratification may approve the ratification if it is considered to be in the best interest of the Government, or may direct other disposition. “

Contractor Damage to Government Furnished Equipment (GFE)

FAR 45 provides rules on the Contractor’s obligations and the Government’s remedies in these cases. Specific clauses should be in the contract to deal with GFE situations

Cancellation of Contract

Contractors are understandably quite upset when an awarded contract is cancelled before contract performance can begin. There is some authority for a contractor to recover bid preparation costs in very limited circumstances. Even so, a contracting agency need only establish a reasonable basis to support a decision to cancel an RFQ; in this regard, so long as there is a reasonable basis for doing so, an agency may cancel an RFQ no matter when the information precipitating the cancellation first arises, even if it is not until quotations have been submitted and evaluated. Quality Tech., Inc., B-292883.2, Jan. 21, 2004, 2004 CPD para. 29 at 2-3; DataTrak Consulting, Inc., B-292502 et al., September 26, 2003, 2003 CPD para. 169 at 5. It is well established that an agency’s lack of funding for a procurement provides a reasonable basis for cancellation, as agencies cannot award contracts which exceed available funds. First Enter., B-221502.3, Mar. 24, 1986, 86-1 CPD para. 290 at 3. Procurement authorities are presumed to act in good faith and in order for GAO to conclude otherwise, the record must show that procuring officials intended to injure the protester. Cycad Corp., B‑255870, April 12, 1994, 94-1 CPD para. 253 at 5. A protester’s mere inference of bad faith is insufficient.


The Government may terminate a contract for cause (commercial items), for default (T4D) or for convenience (T4C). Terminations for CAUSE for commercial items (FAR 12) contracts are governed by 252.225.212-4 clause, not the T4C or T4D clauses relative to FAR 49. FAR 49 prescribes T4D and T4C clauses in FAR 52 for non-commercial items (FAR 12) related contracts. In particular, T4D is covered by FAR 49.4, Terminations for Default. T4C is covered by several sections of FAR 49.

Termination for default reviews can be done a variety of ways, however, one method is to start with what is the ACTUAL deliverable on the contract, not the one that the customer thought they had. Carefully track what the contractor’s actual performance is against the specific language in the contract. If there has been verbal changes by the government without going through the contracting officer (which should never happen), is there something that indicates the contractor consented to those changes? In writing? For example, the DFARS 252.212-4 clause section that deals with modifications states that mutual consent is required for all modifications. In this review, use the language from the contract and then see if you have adequate evidence from the government documenting the actual performance. Ask if the Government COR has signed any receiving reports e.g., DD Form 250s accepting performance (so they can get paid). Is there anything in the record that shows the Government placed the contractor on notice of their default or non conforming deliveries?

FAR 49 should be read that to get information on terminations including notice to cure and show cause notices. The more the Government tries to give the contractor chances to remedy their default, the more the Government bolsters its case that T4D is appropriate.

The various courts that review T4Ds have a high standard of review for T4Ds, so the Government should consider making sure the T4D is well supported and the Government has had little or no role in the contractors non-conforming performance as well as ensuring there is a clearly defined deliverable, several chances to cure and nothing in the record that indicates the government failed to do something that was condition precedent to performance or the Government interfered with contract performance or failed to provide required cooperation/support. (For example, failure to provide security escorts or access to a work site thus causing delays on the part of Contractor performance).

The key point for T4Ds is that it is the only way that a Government agency can use prior year single year appropriated funds, such as O&M or many types of procurement funds, for reprocurement of the item in question. Accordingly, it is very important the Agency get the acquisition right up front because bad work statements and poor contract administration destroy the Government's ability to T4D, thus keep their prior year funds to get a replacement contractor.

Defense Contract Management Agency (DCMA) has a [ Terminations Handbook] which is very useful in dealing with terminations for convenience issues.

ee also

The following are a minuscule selection of the materials available and are included only as examples.Their listing does not result from an endorsement or preference.

Governmental resources

* [] provides information that explains how to become a federal contractor, how to find business opportunities, and the rules and regulations that federal contractors need to follow.

* [] - official US Federal Government website of the Integrated Acquisition Environment, functioning under the auspices of OMB's Office of Federal Procurement Policy and the Chief Acquisition Officers Council

Additional resource

* [ Where In Federal Contracting (WIFCON)] A nonofficial information clearing house that posts daily news and regulatory updates, provides links to important materials, and features a discussion page.


* [ George Washington University]


* [ Federal Publications]
* [ ESI]
* [ The FAR Bootcamp]
* [ Contracting Training]
* [ Contract Compliance Associates]
* [ The Centre Federal Contracting Institute]




* [ Public Contract Law Journal]
* CCH Government Contract Reports
* West Briefing Papers
* West The Government Contractor
* West International Government Contractor
* West The Nash & Cibinic Report
* West Costs, Pricing & Accounting Report

Case Law

* [ Supreme Court Decisions]
* Court of Claims (Claims Court) Decisions; West Federal Claims Reporter
* Courts of Appeals Decisions; West Federal Reports
* Federal District Court Decisions; West Federal Supplement
* Boards of Contract Appeals' Decisions; CCH Contract Appeals Decisions
* West Comptroller General's Procurement Decisions
* West Government Contracts Citator

ee also

* No-bid contract
* Cost-plus pricing
* Small and medium enterprise
* United States Court of Appeals for the Federal Circuit
* Defense Contract Audit Agency, responsible for audits of many defense contractors
* Defense Contract Management Agency, responsible for contract administration of US Department of Defense contracts.

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