A management and operating contract is characterized both by its purpose (see 17.601) and by the special relationship it creates between Government and contractor. This subpart prescribes policies and procedures for management and operating contracts for the Department of Energy and any other agency having requisite statutory authority. division C of subtitle I, Procurement.). Formal relational contracts are built on a foundation of trust and are shaped by a shared vision and six universal guiding principles. Economic price adjustment clauses. (2) If approved by the servicing agency, payment for actual costs may be made by the requesting agency after the supplies or services have been furnished. (a) Before placing an order for supplies or services with another Government agency, the requesting agency shall follow the procedures in 17.502-1 and, if under the Economy Act, also 17.502-2. For patent rights, see 27.304-2. (e) Stabilization of contractor work forces. may not be awarded until the head of the agency gives written notification of the proposed contract and of the proposed cancellation ceiling for that contract to the committees on armed services and appropriations of the House of Representatives and Senate. (3) Whether it is likely that qualified offerors will compete for the contract. The contracting officer shall reduce the cancellation ceiling for each program year in direct proportion to the remaining requirements subject to cancellation. The estimates of both the cost of the contract and the cost avoidance through the use of a multi-year contract are realistic. How to build better long-term strategic partnerships. (c) Within 30 days of the beginning of each fiscal year, submit nondefense agency certifications of compliance to Principal Director, Defense Pricing and Contracting at: Office of the Under Secretary of Defense (Acquisition and Sustainment). In the event there are no DoD-unique requirements beyond the FAR, the DoD acquisition official shall so inform the servicing nondefense agency contracting officer in writing. The special challenges of project management under fixed-price contracts For DoD, NASA, and the Coast Guard, the head of the agency may enter into a multi-year contract for supplies if-. (c) (b) A nondefense agency is compliant with applicable procurement requirements if the procurement policies, procedures, and internal controls of the nondefense agency applicable to the procurement of supplies and services on behalf of DoD, and the manner in which they are administered, are adequate to ensure the compliance of the nondefense department or agency with-, (1) The Federal Acquisition Regulation and other laws and regulations that apply to procurements of supplies and services by Federal agencies; and. (3) (e) Ensure uniformity and reliability in equipment, compatibility or standardization of components, and interchangeability of parts. (1) The solicitation contains an option clause; (2) An option is not to be exercised at the time of contract award; (3) A firm-fixed-price contract, a fixed-price contract with economic price adjustment, or other type of contract approved under agency procedures is contemplated; and. Cancellation charge means the amount of unrecovered costs which would have been recouped through amortization over the full term of the contract, including the term canceled. (f) Annual and multi-year proposals. (3) The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowest price obtainable or the more advantageous offer. It is key to the buyer and seller relationship and provides a framework to deal with each other. (1) Functions involving the direction, supervision, or control of Government personnel, except for supervision incidental to training; (2) Functions involving the exercise of police or regulatory powers in the name of the Government, other than guard or plant protection services; (3) Functions of determining basic Government policies; (4) Day-to-day staff or management functions of the agency or of any of its elements; or. However, these tactics not only confer a false sense of security (because both firms switching costs are too high to actually invoke the clauses) but also foster negative behaviors that undermine the relationship and the contract itself. Cancellation ceiling means the maximum cancellation charge that the contractor can receive in the event of cancellation. This subpart applies to all acquisitions made by nondefense agencies on behalf of DoD. The DoD reimburses the allowable incurred costs and pays a fixed amount that is negotiated at the beginning of the contract. The contracting officer shall insert the amount for the first program year in the contract upon award and modify it for successive program years upon availability of funds. Lowest Price Technically Acceptable (LPTA) 2. Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. (a) Effective work performance under management and operating contracts usually involves high levels of expertise and continuity of operations and personnel. Ceilings must exclude amounts for requirements included in prior program years. (2) repairs. CLC 222 Contracting Officers Representative (COR) (ii) Delivery requirements far enough into the future to permit competitive acquisition, production, and delivery. (b) The Economy Act applies when more specific statutory authority does not exist. Presolicitation or pre-bid conferences. When Dell originally selected FedEx, in 2005, to handle all aspects of its hardware return-and-repair process, the companies drew up a traditional supplier contract. (g) Solicitations that require the offering of an option at prices no higher than those for the initial requirement shall-, (1) Specify that the Government will accept an offer containing an option price higher than the base price only if the acceptance does not prejudice any other offeror; and. What are the two most common types of best Value evaluations? contracting officers shall avoid, to the maximum extent practicable, using the lowest price technically acceptable source selection process in the case of a procurement that is predominantly for the acquisition of (1)Information technology services, cybersecurity services, systems engineering and technical Cancellation or termination for insufficient funding. In sealed bidding, the contracting officer shall change the ceiling by amending the solicitation before bid opening. Standard forms can also be useful if the same parties are involved on repeat projects. The primary goal of Step 1 is to establish a partnership mentality. (a) The contracting officer may award a prime contract to a-. The inclusion of recurring costs in cancellation ceilings is an exception to normal contract financing arrangements and requires approval by the agency head. May modify the clause at 52.222-43 in overseas contracts when laws, regulations, or international agreements require contractors to pay higher wage rates; or. (a) Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. (c) The conduct of the work is wholly or at least substantially separate from the contractors other business, if any. Options should not include charges for plant and equipment already amortized, or other nonrecurring charges which were included in the basic contract. (See 17.208.). Remediation Accessed shows whether you accessed those links. (b) Cancellation ceilings. A unit price contract can be used for all or part of a project. (a) The contracting officer shall insert the clause at 52.217-2, Cancellation Under Multi-year Contracts, in solicitations and contracts when a multi-year contract is contemplated. (a) The contract shall specify limits on the purchase of additional supplies or services, or the overall duration of the term of the contract, including any extension. Competitive negotiated contract A streamlined method of acquisition refers to contracting methods aimed at making the acquisition process streamlined as well as procurement facilitating. (f) Insert a clause substantially the same as the clause at 52.217-8, Option to Extend Services, in solicitations and contracts for services when the inclusion of an option is appropriate. Benefits may accrue by including options in a multi-year contract. $15 million May use an economic price adjustment clause authorized by 16.203, when potential fluctuations require coverage and are not included in cost contingencies provided for by the clause at 52.222-43. In a subsequent workshop the team delved deeper, crafting four high-level desired outcomes, seven goals, and 22 tactical and measurable objectives. (b) Insert a provision substantially the same as the provision at 52.217-4, Evaluation of Options Exercised at Time of Contract Award, in solicitations when the solicitation includes an option clause, the contracting officer has determined that there is a reasonable likelihood that the option will be exercised, and the option may be exercised at the time of contract award. (d) Achieve economies in production. (b) The contracting officer for the servicing agency shall ensure that service contractor reporting requirements are met in accordance with subpart 4.17, Service Contracts Inventory. and provides policy and procedures for the use of multi-year contracting. (g) We will be recognized leaders in health care. (g) The contract modification or other written document which notifies the contractor of the exercise of the option shall cite the option clause as authority. (c) A provision that, if the Government determines before award that only the first program year requirements are needed, the Governments evaluation of the price or estimated cost and fee shall consider only the firstyear. (a) The contracting officer shall limit the Governments payment obligation to an amount available for contract performance. (c) The contracting officer shall not employ options if-. The contracting officer shall limit the Governments payment obligation to an amount available for contract performance. developing an independent Government cost estimate.]. To ensure that all interested sources of supply are thoroughly aware of how multi-year contracting is accomplished, use of presolicitation or pre-bid conferences may be advisable. Procurement Contracts in Project Management: Types and Examples (g) It is a description of a task, subtask, activity, and/or deliverable; and reflects corresponding pricing assumptions proposed and accepted by the client. (a) Written agreement on responsibility for management and administration. Economic price adjustment clauses are adaptable to multi-year contracting needs. Under reciprocity, for example, they highlighted the need to conduct ourselves in the spirit of achieving mutual benefit and understanding. Under equity, they acknowledged the unavoidable imbalances that arise in contracts: We are committed to fairness, which does not always mean equality. Stabilization of contractor work forces. (a) Management and operating contracts shall not be authorized for-. Shading happens when one party isnt getting the outcome it expected. Subpart 17.7 - Interagency Acquisitions: Acquisitions by Nondefense Agencies on Behalf of the Department of Defense, This part prescribes policies and procedures for the acquisition of supplies and services through special contracting methods, including-. This subpart prescribes policies and procedures for the use of option solicitation provisions and contract clauses. As provided by that guidance, the funds obligated for multi-year contracts must be sufficient to cover any potential cancellation and/or termination costs; and multi-year contracts for the acquisition of fixed assets should be fully funded or funded in stages that are economically or programmatically viable. (a) Insert a provision substantially the same as the provision at 52.217-3, Evaluation Exclusive of Options, in solicitations when the solicitation includes an option clause and does not include one of the provisions prescribed in paragraph (b) or (c) of this section. These contracts, which are legally enforceable, specify mutual goals and establish governance structures to keep the parties expectations and interests aligned. We consciously approached the economics of the relationship with full transparency and a problem-solving mentality instead of a negotiations mentality, she told us. In addition to complying with the interagency acquisition policy and procedures in this subpart, nondefense agencies acquiring supplies and services on behalf of the Department of Defense shall also comply with the policy and procedures at subpart 17.7. An official website of the United States Government, FAC Number: 2023-02 Effective Date: 03/16/2023. In the event funds are not made available for the continuation of a multi-year contract awarded using the procedures in this section, the contract shall be canceled or terminated. (h) Public Law 95-507, which amended the Small Business Act of 1978, formalized the Small Business Subcontracting Plan requirement in contracts over $500,000 to large businesses. L. 110-181, section 801, as amended ( 10 U.S.C. Always have a copy of the contract, price assumptions, budgets, scope baseline, and other related documents nearby. Some Days Require More Carpe Than Others October 29, 2013. It is crucial that all terms and conditions of the formal relational contract are aligned with the guiding principles. For acquisitions on behalf of the Department of Defense, also see subpart 17.7. (a) But when contract negotiations begin, they default to an adversarial mindset and a transactional contracting approach. The limitation in paragraph (a) of this section shall not apply to the acquisition of supplies and services on behalf of DoD by a nondefense agency during any fiscal year for which the Under Secretary of Defense for Acquisition and Sustainment has determined in writing that it is necessary in the interest of DoD to acquire supplies and services through the nondefense agency during the fiscal year. Cancellation ceiling means the maximum cancellation charge that the contractor can receive in the event of cancellation. If funds are not appropriated to support the succeeding years requirements, the agency must cancel the contract. They designed a hybrid pricing model with a combination of fixed and variable rates, coupled with incentives to improve efficiencies. Solicitations for multi-year contracts shall reflect all the factors to be considered for evaluation, specifically including the following: (a) Imagine that a supplier of engineering services submits a proposal in a competitive bidding process and wins the contract. (a) Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. To ensure that all interested sources of supply are thoroughly aware of how multi-year contracting is accomplished, use of presolicitation or pre-bid conferences may be advisable. Recurring costs in cancellation ceiling. Course Hero is not sponsored or endorsed by any college or university. However, if the servicing agency is not subject to the Federal Acquisition Regulation, the requesting agency shall verify that contracts utilized to meet its requirements contain provisions protecting the Government from inappropriate charges (for example, provisions mandated for FAR agencies by part 31), and that adequate contract administration will be provided. The FAR applies when one agency uses another agencys contract to obtain supplies or services. What Is a Unit Price Contract & When to Use It? | NetSuite Nonrecurring costs means those costs which are generally incurred on a one-time basis and include such costs as plant or equipment relocation, plant rearrangement, special tooling and special test equipment, preproduction engineering, initial spoilage and rework, and specialized work force training. Reduction of administrative burden in the placement and administration of contracts. (c) For use of project labor agreements, see subpart 22.5. Historically, the two parties had operated under a shroud of opaqueness. (c) The contracting officer may exercise options only after determining that-. Exam (elaborations) - Clc 222 mod 5 contract monitoring: documentation & handling issues exam 5. Level unit prices. (Its called vested because the parties have a vested interest in each others success.) (a) The Economy Act ( 31 U.S.C.1535) authorizes agencies to enter into agreements to obtain supplies or services from another agency. The indefinite-delivery contracts used most frequently to support interagency acquisitions are Federal Supply Schedules (FSS), Governmentwide acquisition contracts (GWACs), and multi-agency contracts (MACs). (2) Multi-year contract including the requirements for each program year. Accordingly, for multi-year contracts, the agency head may authorize modification of the requirements of this subpart and the clause at 52.217-2, Cancellation Under Multi-year Contracts. The extent to which cancellation terms are used in multi-year contracts will depend on the unique circumstances of each contract. x Contracting Officer, The Competition in Contracting Act requires that _________: . (C) The servicing agency is specifically authorized by law or regulation to purchase such supplies or services on behalf of other agencies. For example, Kim Kerrone and Jean Maskey, informal partners, both say that formal relational contracting was transformational for their respective organizations. (d) Contracts awarded under the multi-year procedure shall be firm-fixed-price, fixed-price with economic price adjustment, or fixed-price incentive. 11302(e) for Governmentwide acquisition contracts (GWACs). When contracting for services, the contracting officer-. (3) The requesting agency shall furnish a copy of the D&F to the servicing agency with the request for order. (b) Solicitations containing option provisions shall state the basis of evaluation, either exclusive or inclusive of the option and, when appropriate, shall inform offerors that it is anticipated that the Government may exercise the option at time of award. Exam (elaborations) - Clc 222 mod 3 contract management exam 4. Examples of more specific authority are 40 U.S.C. In that event, contracting officers must follow the requirements of subpart 17.2. (1) The option cannot be evaluated under 17.206; or; (2) Future competition for the option is impracticable. (b) Part 17 - Special Contracting Methods | Acquisition.GOV At Island Health and South Island, the parties tossed out the old contract and chartered a team of 12 administrators and 12 hospitalists to design a formal relational contract. Before jumping into a formal relational contract process, companies must determine whether it is right for them. (f) Solicitations may, in unusual circumstances, require that options be offered at prices no higher than those for the initial requirement; e.g., when-. (a) Solicitations shall include appropriate option provisions and clauses when resulting contracts will provide for the exercise of options (see 17.208). In some ways, they're similar to the prices of goods at the grocery store. When the period of production is likely to warrant a labor and material costs contingency in the contract price, the contracting officer should normally use an economic price adjustment clause (see 16.203).