NCMA Certification Study Group

CDC PGO

Feb-Mar, 2010

NCMA CertificationStudy Group

Contract Essentials

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Commercial Contract:

An agreement between persons which obliges each party to do or not to do a certain thing. Technically, a valid contract requires an offer and an acceptance of that offer, and, in common law countries, consideration.

• 2 or more parties that have capacity to contract

• Agreement – Offer, Acceptance & Mutual Assent

• Something of Value (Consideration)

• Legal

• Be in the correct form “Formalities” (e.g., in writing)

The Federal Acquisition Regulation(https://www.acquisition.gov/far/index.html)

• Is the basic governing document

• Is reflective of Public Law

• Can be supplemented by Agency Regulations(Health & Human Services Acquisition Regulation HHSAR)

• Can have its prescriptions waived only through a rigorous process

• Is not just “guidance.” For all practical purposes it should be considered tantamount to law.

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FAR 1.103 -- Authority.

(a) The development of the FAR System is in accordance with the requirements of the Office of Federal Procurement Policy Act of 1974 (Pub. L. 93-400), as amended by Pub. L. 96-83.

(b) The FAR is prepared, issued, and maintained, and the FAR System is prescribed jointly by the Secretary of Defense, the Administrator of General Services, and the Administrator, National Aeronautics and Space Administration, under their several statutory authorities.

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FAR General Structure and Subparts

There are 8 Subchapters, an Appendix and an Index• Subchapter A—General• Subchapter B—Competition and Acquisition Planning • Subchapter C—Contracting Methods and Contract Types • Subchapter D—Socioeconomic Programs • Subchapter E—General Contracting Requirements • Subchapter F—Special Categories of Contracting • Subchapter G—Contract Management • Subchapter H—Clauses and Forms

Appendix Index

FAR General Structure and Subparts

Subchapter A—General

Part 1—Federal Acquisition Regulations System

Part 2—Definitions of Words and Terms

Part 3—Improper Business Practices and Personal Conflicts of Interest

Part 4—Administrative Matters

Subchapter B—Competition and Acquisition Planning

Part 5—Publicizing Contract Actions

Part 6—Competition Requirements

Part 7—Acquisition Planning

Part 8—Required Sources of Supplies and Services

Part 9—Contractor Qualifications

Part 10—Market Research

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Part 11—Describing Agency Needs Part 12—Acquisition of Commercial Items

Subchapter C—Contracting Methods and Contract Types

Part 13—Simplified Acquisition Procedures Part 14—Sealed Bidding Part 15—Contracting by Negotiation Part 16—Types of Contracts Part 17—Special Contracting Methods Part 18—Reserved

Subchapter D—Socioeconomic Programs

Part 19—Small Business Programs Part 22—Application of Labor Laws to Government Acquisitions Part 23—Environment, Energy and Water Efficiency, Renewable Energy Technologies, Occupational Safety, and Drug-Free Workplace

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Part 24—Protection of Privacy and Freedom of Information Part 25—Foreign Acquisition Part 26—Other Socioeconomic Programs

Subchapter E—General Contracting Requirements

Part 27—Patents, Data, and Copyrights Part 28—Bonds and Insurance Part 29—Taxes Part 30—Cost Accounting Standards Administration Part 31—Contract Cost Principles and Procedures Part 32—Contract Financing Part 33—Protests, Disputes, and Appeals

Subchapter F—Special Categories of Contracting

Part 34—Major System Acquisition Part 35—Research and Development Contracting Part 36—Construction and Architect-Engineer Contracts Part 37—Service Contracting Part 38—Federal Supply Schedule Contracting Part 39—Acquisition of Information Technology Part 41—Acquisition of Utility Services

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Subchapter G—Contract Management

Part 42—Contract Administration and Audit Services Part 43—Contract Modifications Part 44—Subcontracting Policies and Procedures Part 45—Government Property Part 46—Quality Assurance Part 47—Transportation Part 48—Value Engineering Part 49—Termination of Contracts Part 50—Extraordinary Contractual Actions Part 51—Use of Government Sources by Contractors

Subchapter H—Clauses and Forms

Part 52—Solicitation Provisions and Contract Clauses Part 53—Forms

Appendix

Index

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Contracts basic:

A FAR (Government ) Contract is:

A mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by 31 U.S.C.6301, et seq.

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Contracts Basic – A Contract is:

• Mutually binding

• Legal relationship

• Obligates the seller to furnish the supplies or services (including construction)

• Obligates the buyer to pay for them

• Includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing.

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Contracts include (but are not limited to):

• Awards and notices of awards

• Job orders or task letters issued under basic ordering agreements

• Letter contracts

• Orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance;

• And bilateral contract modifications

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Peculiar to Federal Government Contracts

• Must be in writing

• Must be signed by a Warranted Contracting Officer

• “Apparent authority” insufficient

• Must be fully funded or contract must state level of funding

• Must contain federally mandated clauses

• May require a series of certifications, e.g., Certification of Current Cost or Pricing Data

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A Contract is NOT a Grant (Grants & Coop Act 1977)

• A Contract is formed to benefit the Government

• Contracting is inherent to function of the Executive Department of Government

• A Grant benefits mankind (stimulation or aid)

• Granting is NOT inherent to the function of the Executive but must be specifically authorized in law.

• Different rules apply.

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Contract Management (From NCMA)

Process of managing:

• Contracts,

• Deliverables,

• Deadlines,

• Contract terms and conditions,

• Ensuring customer satisfaction

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Contract Life Cycle:

• Acquisition Planning (Mkt Research, Contract type, acquisition strategy)

• Pre-award – requirements, proposal evaluation, negotiation

• Award – contract, notifying vendors, addresseing mistakes and protests

• Post Award – contract admin – modifications –contract performance, payment, termination or closeout

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Contract Stakeholders

• Requiring organization (end user) Program Office

• Finance office

• Contracting Officer

• Company or org that provides the item or service, including subcontractors

• Institution that finances (“source of funding”) the company

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Organizational Influences

• Organizational management, e.g., change in focus or approach

• Technological change

• Competition (best practices)

• Efficient and effective contracting process required to be market leader.

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Business Competencies

• Management – Planning, Organizing, Directing & Controlling

• Skills: Technical, Communication, Human relations, Time management, Technology

• Operations Managemento Correct quantity of necessary inputso Success of transformation processo Produce correct outputs – quality and quantityo Feedback – informational, corrective, reinforced

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Business Competencies Continued…

• Accounting – capturing financial information

• Budgeting – quantitative plan of operations

• Economics – competition, S&D, inflation, effect of Government policies

• Information Technology – computer based info systems

• Marketing

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Business Competencies Continued…Legal Environment

• Uniform Commercial Code (49 States & LA, part)

o Established by Joint Effort -- Nat. Conf. of Commissioners & American Law Institute

o Consists of nine articles (see page 15 – CMBK)

• Federal Acquisition Regulation

• International Contracting Laws – For. Corrupt Practices, Export Regs, Intl Traffic in Arms, Anti-Boycott, Foreign Laws and Customs

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Business Competencies Continued…Legal Environment

• Standards of Conduct

• Formal, written statements issued by Govt, Businesses, Prof Organizations, etc.

• Ethics – how one should act based on “values” – core beliefs.

• International Contracting Laws – For. Corrupt Practices, Export Regs, Intl Traffic in Arms, Anti-Boycott, Foreign Laws and Customs

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Deviations (FAR 1.4)1.401  Definition.

“Deviation” means any one or combination of the following: (a) The issuance or use of a policy, procedure, solicitation provision (see

definition in 2.101), contract clause (see definition in 2.101), method, or practice of conducting acquisition actions of any kind at any stage of the acquisition process that is inconsistent with the FAR.

(b) The omission of any solicitation provision or contract clause when its prescription requires its use.

(c) The use of any solicitation provision or contract clause with modified or alternate language that is not authorized by the FAR (see definition of “modification” in 52.101(a) and definition of “alternate” in 2.101(a)).

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Cont.Deviations (FAR 1.4)1.401  Definition.

(d) The use of a solicitation provision or contract clause prescribed by the FAR on a “substantially as follows” or “substantially the same as” basis (see definitions in 2.101 and 52.101(a)), if such use is inconsistent with the intent, principle, or substance of the prescription or related coverage on the subject matter in the FAR.

(e) The authorization of lesser or greater limitations on the use of any solicitation provision, contract clause, policy, or procedure prescribed by the FAR.

(f) The issuance of policies or procedures that govern the contracting process or otherwise control contracting relationships that are not incorporated into agency acquisition regulations in accordance with 1.301(a).

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Deviations (FAR 1.4)

1.402 PolicyUnless precluded by law, executive order, or regulation, deviations from the FAR may be granted as specified in this subpart when necessary to meet the specific needs and requirements of each agency. The development and testing of new techniques and methods of acquisition should not be stifled simply because such action would require a FAR deviation. The fact that deviation authority is required should not, of itself, deter agencies in their development and testing of new techniques and acquisition methods. Refer to 31.101 for instructions concerning deviations pertaining to the subject matter of Part 31, Contract Cost Principles and Procedures. Deviations are not authorized with respect to 30.201-3 and 30.201-4, or the requirements of the Cost Accounting Standards Board (CASB) rules and regulations (48 CFR Chapter 99 (FAR Appendix)). Refer to 30.201-5 for instructions concerning waivers pertaining to Cost Accounting Standards.

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Deviations (FAR 1.4)

1.403  Individual deviations.

Individual deviations affect only one contract action, and, unless 1.405(e) is applicable, may be authorized by the agency head. The contracting officer must document the justification and agency approval in the contract file.

1.404 Class deviationsClass deviations affect more than one contract action. When an agency knows that it will require a class deviation on a permanent basis, it should propose a FAR revision, if appropriate. Civilian agencies, other than NASA, must furnish a copy of each approved class deviation to the FAR Secretariat.

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1.404  Class deviations. Cont.

(a) For civilian agencies except NASA, class deviations may be authorized by agency heads or their designees, unless 1.405(e) is applicable. Delegation of this authority shall not be made below the head of a contracting activity. Authorization of class deviations by agency officials is subject to the following limitations: (1) An agency official who may authorize a class deviation, before doing so, shall consult with the chairperson of the Civilian Agency Acquisition Council (CAA Council), unless that agency official determines that urgency precludes such consultation. (2) Recommended revisions to the FAR shall be transmitted to the FAR Secretariat by agency heads or their designees for authorizing class deviations.

NOTE:(b) And (c) pertain to DoD and NASA

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Determinations and Findings (FAR 1.7)1.701  Definition.

“Determination and Findings” means a special form of written approval by an authorized official that is required by statute or regulation as a prerequisite to taking certain contract actions. The “determination” is a conclusion or decision supported by the “findings.’’ The findings are statements of fact or rationale essential to support the determination and must cover each requirement of the statute or regulation.

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1.702  General. (a) A D&F shall ordinarily be for an individual contract action. Unless

otherwise prohibited, class D&F’s may be executed for classes of contract actions (see 1.703). The approval granted by a D&F is restricted to the proposed contract action(s) reasonably described in that D&F. D&F’s may provide for a reasonable degree of flexibility. Furthermore, in their application, reasonable variations in estimated quantities or prices are permitted, unless the D&F specifies otherwise.

(b) When an option is anticipated, the D&F shall state the approximate quantity to be awarded initially and the extent of the increase to be permitted by the option.

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Minimum Contents of D&F – NCMA

• Identification of Agency• Identification of Contracting Activity• Specific identify the document as a D& F• Nature and description of the action being approved• Citation of the appropriate statue and/or regulation• Findings that detail the particular circumstances, facts,

or reasoning essential to support the determination• The determination based on the findings that the

proposed action is justified under the applicable statue or regulation

• An expiration date• If required, the signature of the authorized official and

date signed.

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Conventions. (FAR 1.108)

The following conventions provide guidance for interpreting the FAR:

(a) Words and terms. Definitions in Part 2 apply to the entire regulation unless specifically defined in another part, subpart, section, provision, or clause. Words or terms defined in a specific part, subpart, section, provision, or clause have that meaning when used in that part, subpart, section, provision, or clause. Undefined words retain their common dictionary meaning.

(b) Delegation of authority. Each authority is delegable unless specifically stated otherwise (see 1.102-4(b)).

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Conventions. (FAR 1.108) Cont.

(c) Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.

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Conventions. (FAR 1.108) Cont.

(d) Application of FAR changes to solicitations and contracts. Unless otherwise specified—

(1) FAR changes apply to solicitations issued on or after the effective date of the change;

(2) Contracting officers may, at their discretion, include the FAR changes in solicitations issued before the effective date, provided award of the resulting contract(s) occurs on or after the effective date; and

(3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration

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Conventions. (FAR 1.108) Cont.

(e) Citations. When the FAR cites a statute, Executive order, Office of Management and Budget circular, Office of Federal Procurement Policy policy letter, or relevant portion of the Code of Federal Regulations, the citation includes all applicable amendments, unless otherwise stated.

(f) Imperative sentences. When an imperative sentence directs action, the contracting officer is responsible for the action, unless another party is expressly cited.

Federal Acquisition Regulation (FAR)

OverviewFAR Part 5

Publicizing Contract Actions

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Publicizing Contractual Actions - Part 5

5.1 Dissemination of Information

5.2 Synopses of Proposed Contract Actions

5.3 Synopses of Contract Awards

5.4 Release of Information

5.5 Paid Advertisements

5.6 Publicizing Multi-Agency Use Contracts

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Government Point of Entry (GPE) means the single point where Government business opportunities greater than $25,000, including synopses of proposed contract actions, solicitations, and associated information, can be accessed electronically by the public.  The GPE is located at http://www.fedbizopps.gov.

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Synopses:

In addition to contract solicitations, awards of contracts $25K or over must also be synopsized.

Federal Acquisition Regulation (FAR)

OverviewFAR Part 6

Competition Requirements

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Part 6—Competition Requirements

6.1 Full and Open Competition

6.2 Full and Open Competition After Exclusion of Sources

6.3 Other Than Full and Open Competition

6.4 Sealed Bidding and Competitive Proposals

6.5 Competition Advocates

Part 6—Competition Requirements

6.1 Full and Open Competition

6.101  Policy.

(a) 10 U.S.C. 2304 and 41 U.S.C. 253 require, with certain limited exceptions (see Subparts 6.2 and 6.3) that contracting officers shall promote and provide for full and open competition in soliciting offers and awarding Government contracts.

(b) Contracting officers shall provide for full and open competition through use of the competitive procedure(s) contained in this subpart that are best suited to the circumstances of the contract action and consistent with the need to fulfill the Government’s requirements efficiently (10 U.S.C. 2304 and 41 U.S.C. 253).

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Exceptions to Full and Open Competition

6.202 Establishing or maintaining alternative sources.

6.203 Set-asides for small business concerns.

6.204 Section 8(a) competition.

6.206 Set-asides for service-disabled veteran-owned small business concerns.

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Other than Full and Open Competition

• 6.302-1 Only one responsible source and no other supplies or services will satisfy agency requirements.

• 6.302-2 Unusual and compelling urgency.

• 6.302-3 Industrial mobilization; engineering, developmental, or research capability; or expert services.

• 6.302-4 International agreement.

• 6.302-5 Authorized or required by statute.

• 6.302-6 National security.

• 6.302-7 Public interest.

Federal Acquisition Regulation Part 7: Acquisition PlanningPart 8: Required SourcesPart 9: Contractor QualificationsPart 10: Market Research

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7.102 Policy.

(a) Agencies shall perform acquisition planning and conduct market research (see Part 10) for all acquisitions in order to promote and provide for—

(1) Acquisition of commercial items

(2) Full and open competition (see Part 6)

(b) This planning shall integrate the efforts of all personnel responsible for significant aspects of the acquisition. The purpose of this planning is to ensure that the Government meets its needs in the most effective, economical, and timely manner.

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7.202 Policy.

(a) Agencies are required by 10 U.S.C. 2384(a) and 41 U.S.C. 253f to procure supplies in such quantity as—

(1) Will result in the total cost and unit cost most advantageous to the Government, where practicable; and

(2) Does not exceed the quantity reasonably expected to be required by the agency.

(b) Each solicitation for a contract for supplies is required, if practicable, to include a provision inviting each offeror responding to the solicitation—

(1) To state an opinion on whether the quantity of the supplies proposed to be acquired is economically advantageous to the Government; and

(2) If applicable, to recommend a quantity or quantities which would be more economically advantageous to the Government. Each such recommendation is required to include a quotation of the total price and the

unit price for supplies procured in each recommended quantity.

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Subpart 7.3-Contractor Versus Government Performance

7.300  Scope of subpart.

This subpart prescribes policies and procedures for use in acquisitions of commercial or industrial products and services subject to— (a) OMB Circular No. A-76 (Revised) (the Circular), Performance of Commercial Activities; and (b) The Supplement to OMB Circular No. A-76.

7.301  Policy. The Circular provides that it is the policy of the Government to (a) rely generally on private commercial sources for supplies and services, if certain criteria are met, while recognizing that some functions are inherently Governmental and must be performed by Government personnel, and (b) give appropriate consideration to relative cost in deciding between Government performance and performance under contract. In comparing the costs of Government and contractor performance, the Circular provides that agencies shall base the contractor’s cost of performance on firm offers.

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Part 8—Required Sources of Supplies and Services

8.1 Excess Personal Property

8.4 Federal Supply Schedules

8.5 Acquisition of Helium

8.6 Acquisition from Federal Prison Industries, Inc.

8.7 Acquisition from Nonprofit Agencies Employing People Who Are Blind or Severely Disabled

8.8 Acquisition of Printing and Related Supplies

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Part 9—Contractor Qualifications

9.1 Responsible Prospective Contractors

9.2 Qualifications Requirements

9.3 First Article Testing and Approval

9.4 Debarment, Suspension, and Ineligibility

9.5 Organizational and Consultant Conflicts of Interest

9.6 Contractor Team Arrangements

9.7 Defense Production Pools and Research and Development Pools

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10.001 Policy.

(a) Agencies must—

(1) Ensure that legitimate needs are identified and trade-offs evaluated to acquire items that meet those needs;

(2) Conduct market research appropriate to the circumstances—

(i) Before developing new requirements documents for an acquisition by that agency;

(ii) Before soliciting offers for acquisitions with an estimated value in excess of the simplified acquisition threshold;

(iii) Before soliciting offers for acquisitions with an estimated value less than the simplified acquisition threshold when adequate information is not available and the circumstances justify its cost;

(iv) Before soliciting offers for acquisitions that could lead to a bundled contract (15 U.S.C. 644(e)(2)(A)); and

(v) Agencies shall conduct market research on an ongoing basis, and take advantage to the maximum extent practicable of commercially available market research methods, to identify effectively the capabilities, including the capabilities of small businesses and new entrants into Federal contracting, that are available in the marketplace for meeting the requirements of the agency in furtherance of a contingency operation or defense against or recovery from nuclear, biological, chemical, or radiological attack;

Federal Acquisition Regulation

Subchapter C—Contracting Methods and

Contract Types

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Part 13—Simplified Acquisition Procedures

Part 14—Sealed Bidding

Part 15—Contracting by Negotiation

15.1 Source Selection Processes and Techniques

15.2 Solicitation and Receipt of Proposals and Information

15.3 Source Selection

15.4 Contract Pricing

15.5 Preaward, Award, and Postaward Notifications, Protests, and Mistakes

15.6 Unsolicited Proposals

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15.2 Solicitation and Receipt of Proposals and Information

This subpart prescribes policies and procedures for—

(a) Exchanging information with industry prior to receipt of proposals;

(b) Preparing and issuing requests for proposals (RFPs) and requests for information (RFIs); and

(c) Receiving proposals and information.

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15.3 Source Selection 15.302  Source selection objective.

The objective of source selection is to select the proposal that represents the best value.

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15.4 Contract Pricing

15.402 Pricing policy. Contracting officers must—

(a) Purchase supplies and services from responsible sources at fair and reasonable prices. In establishing the reasonableness of the offered prices, the contracting officer must not obtain more information than is necessary. To the extent that cost or pricing data are not required by 15.403-4, the contracting officer must generally use the following order of preference in determining the type of information required:

(1) No additional information from the offeror,

(2) Information other than cost or pricing data:

(i) Information related to prices

(ii) Cost information, that does not meet the definition of cost or pricing data at 2.101.

(3) Cost or pricing data.

(b) Price each contract separately and independently and not—

(1) Use proposed price reductions under other contracts as an evaluation factor; or

(2) Consider losses or profits realized or anticipated under other contracts.

(c) Not include in a contract price any amount for a specified contingency to the extent that the contract provides for a price adjustment based upon the occurrence of that contingency

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Part 16—Types of Contracts

16.1 Selecting Contract Types

16.2 Fixed-Price Contracts

16.3 Cost-Reimbursement Contracts

16.4 Incentive Contracts

16.5 Indefinite-Delivery Contracts

16.6 Time-and-Materials, Labor-Hour, and Letter Contracts

16.7 Agreements

Contract types vary according to—

(1) The degree and timing of the responsibility assumed by the contractor for the costs of performance; and

(2) The amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.

(b) The contract types are grouped into two broad categories: fixed-price contracts (see Subpart 16.2) and cost-reimbursement contracts (see Subpart 16.3). The specific contract types range from firm-fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit (or loss), to cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee (profit) is fixed. In between are the various incentive contracts

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16.2 Fixed-Price Contracts

16.202 Firm-fixed-price contracts.

16.202-1 Description.

A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.

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16.202-2 Application.

A firm-fixed-price contract is suitable for acquiring commercial items (see Parts 2 and 12) or for acquiring other supplies or services on the basis of reasonably definite functional or detailed specifications (see Part 11) when the contracting officer can establish fair and reasonable prices at the outset, such as when—

(a) There is adequate price competition;

(b) There are reasonable price comparisons with prior purchases of the same or similar supplies or services made on a competitive basis or supported by valid cost or pricing data;

(c) Available cost or pricing information permits realistic estimates of the probable costs of performance; or

(d) Performance uncertainties can be identified and reasonable estimates of their cost impact can be made, and the contractor is willing to accept a firm fixed price representing assumption of the risks involved.

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Cost Reimbursement Type -- 16.301-1  Description.

Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

16.301-2  Application.

Cost-reimbursement contracts are suitable for use only when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.

16.301-3  Limitations.

(a) A cost-reimbursement contract may be used only when—

(1) The contractor’s accounting system is adequate for determining costs applicable to the contract; and

(2) Appropriate Government surveillance during performance will provide reasonable assurance that efficient methods and effective cost controls are used.

(b) The use of cost-reimbursement contracts is prohibited for the acquisition of commercial items (see Parts 2 and 12).

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16.5 Indefinite-Delivery Contracts16.501-2  General.

(a) There are three types of indefinite-delivery contracts: definite-quantity contracts, requirements contracts, and indefinite-quantity contracts. The appropriate type of indefinite-delivery contract may be used to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at the time of contract award. Pursuant to 10 U.S.C. 2304d and section 303K of the Federal Property and Administrative Services Act of 1949, requirements contracts and indefinite-quantity contracts are also known as delivery order contracts or task order contracts.

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16.601  Time-and-materials contracts.

(a) Description. A time-and-materials contract provides for acquiring supplies or services on the basis of—

(1) Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and

(2) Materials at cost, including, if appropriate, material handling costs as part of material costs.

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Federal Acquisition Regulation

Part 12:

Acquisition of Commercial Items CDC PGOFeb-Mar, 2010

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Commercial item” means—

(1) Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and—

(i) Has been sold, leased, or licensed to the general public; or

(ii) Has been offered for sale, lease, or license to the general public;

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12.207  Contract type.

Agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items. Indefinite-delivery contracts (see Subpart 16.5) may be used where the prices are established based on a firm-fixed-price or fixed-price with economic price adjustment. Use of any other contract type to acquire commercial items is prohibited. These contract types may be used in conjunction with an award fee and performance or delivery incentives when the award fee or incentive is based solely on factors other than cost (see 16.202-1 and 16.203-1).

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12.208  Contract quality assurance.

Contracts for commercial items shall rely on contractors’ existing quality assurance systems as a substitute for Government inspection and testing before tender for acceptance unless customary market practices for the commercial item being acquired include in-process inspection. Any in-process inspection by the Government shall be conducted in a manner consistent with commercial practice.

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12.209  Determination of price reasonableness.

While the contracting officer must establish price reasonableness in accordance with 13.106-3, 14.408-2, or Subpart 15.4, as applicable, the contracting officer should be aware of customary commercial terms and conditions when pricing commercial items. Commercial item prices are affected by factors that include, but are not limited to, speed of delivery, length and extent of warranty, limitations of seller’s liability, quantities ordered, length of the performance period, and specific performance requirements. The contracting officer must ensure that contract terms, conditions, and prices are commensurate with the Government’s need.

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12.210  Contract financing.

Customary market practice for some commercial items may include buyer contract financing. The contracting officer may offer Government financing in accordance with the policies and procedures in Part 32

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Federal Acquisition Regulation

Other Topics

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Contractor Financing

32.000   (a) Payment methods, including partial payments and progress payments based on percentage or stage of completion;

(b) Loan guarantees, advance payments, and progress payments based on costs;

(c) Administration of debts to the Government arising out of contracts;

(d) Contract funding, including the use of contract clauses limiting costs or funds;

(e) Assignment of claims to aid in private financing;

(f) Selected payment clauses;

(g) Financing of purchases of commercial items;

(h) Performance-based payments; and

(i) Electronic funds transfer payments.

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Subpart 7.5—Inherently Governmental Functions

7.500  Scope of subpart.

The purpose of this subpart is to prescribe policies and procedures to ensure that inherently governmental functions are not performed by contractors. It implements the policies of Office of Federal Procurement Policy (OFPP) Policy Letter 92-1, Inherently Governmental Functions.

7.503  Policy.

(a) Contracts shall not be used for the performance of inherently governmental functions.

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Subchapter D—Socioeconomic Programs

Part 19—Small Business Programs

19.1 Size Standards 19.2 Policies 19.3 Determination of Small Business Status for Small Business Programs 19.4 Cooperation with the Small Business Administration 19.5 Set-Asides for Small Business 19.6 Certificates of Competency and Determinations of Responsibility 19.7 The Small Business Subcontracting Program 19.8 Contracting with the Small Business Administration (The 8(a) Program) 19.9 Very Small Business Pilot Program 19.10 Small Business Competitiveness Demonstration Program 19.11 Price Evaluation Adjustment for Small Disadvantaged Business Concerns 19.12 Small Disadvantaged Business Participation Program 19.13 Historically Underutilized Business Zone (HUBZone) Program 19.14 Service-Disabled Veteran-Owned Small Business Procurement Program

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37.104  Personal services contracts.

(a) A personal services contract is characterized by the employer-employee relationship it creates between the Government and the contractor’s personnel. The Government is normally required to obtain its employees by direct hire under competitive appointment or other procedures required by the civil service laws. Obtaining personal services by contract, rather than by direct hire, circumvents those laws unless Congress has specifically authorized acquisition of the services by contract.

(b) Agencies shall not award personal services contracts unless specifically authorized by statute (e.g., 5 U.S.C.3109) to do so.

PGO

Unauthorized Commitments

1.602-3  Ratification of unauthorized commitments.

(a) Definitions.

“Ratification,” as used in this subsection, means the act of approving an unauthorized commitment by an official who has the authority to do so.

“Unauthorized commitment,” as used in this subsection, 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.

PGO

Contract Termination• Termination for Cause (Default)

Lack of delivery of acceptable product on schedule. May result in charging contractor with the costs of reprocurement.

• Termination for Convenience

Work stopped at Government request, although work was acceptable and on time. Contractor can claim all allowable and allocable costs.