Chapter 2:Planning the Acquisition

Let’s face it, acquisition planning isn’t fun; in fact, some consider it a painful process. Nevertheless, it’s mandated by the Competition in Contracting Act. One might compare acquisition planning to getting children to eat vegetables. They might not like it, but it’s good for them. Similarly, acquisition planning is actually good for you. Really! It forces you to go through the process step by step and think about what you need and how you’re going to get it. Once you get past the fact that you have to do something you may not want to, acquisition planning is really not that hard. This chapter explains the planning process and offers suggestions to make it less painful.

During the acquisition planning phase, the government conducts market research and prepares the acquisition plan and source selection plan, if necessary. We’ll look at these parts of the planning process in this chapter.

MARKET RESEARCH

Market research is the process of collecting and analyzing information about capabilities within the market that can satisfy an agency’s needs. It is the first step in acquisition planning and is essential to designing an acquisition strategy and identifying proposal evaluation criteria. In fact, it should be done before the contracting officer or program manager even begins writing the acquisition plan.

Market research must be done before developing new requirements documents, soliciting offers that exceed the simplified acquisition threshold, and soliciting offers below the simplified acquisition threshold when adequate information is not available and the circumstances justify the cost of conducting market research.

By doing market research, acquisition teams can determine which companies are able to fulfill the government’s requirements and can gather information on the customary terms and conditions and typical warranty provisions and financing terms for a particular industry or marketplace.

Recall from the last chapter that the Competition in Contracting Act requires agencies to conduct market research. This requirement, combined with the Federal Acquisition Streamlining Act’s emphasis on commercial practices, puts market research at the forefront of any acquisition.

Market research can be used to determine if a commercial item can meet the government’s needs and to identify commercial practices that may apply to the acquisition. FAR part 12 requires agencies to acquire commercial items or nondevelopmental items when the government’s requirements can be fulfilled with available commercial items.

Market research for complex acquisitions can be intimidating and overwhelming. One approach is to break down each requirement into logical sections. Some use a work breakdown structure as a guide for tackling a project segment by segment. By dividing a complex requirement into smaller sections, the program manager may be able to find commercial components that will satisfy the need even if the end product is not a commercial item.

The results of market research influence the following elements of the request for proposals (RFP):

Writing the statement of work, performance work statement, or statement of objectives

Selecting evaluation factors and contracting and source selection methods

Determining the amount and type of information to request from offerors.

The extent of market research and the degree to which an agency should document the results will vary, depending on such factors as the urgency, estimated dollar value, and complexity of the acquisition, as well as past experience. For less complex acquisitions with a strong procurement history—i.e., previous competitively awarded contracts for the same or similar items, where a well-written SOW along with cost and performance information is available—one person may be able to conduct all the required market research. For more complex requirements or acquisitions for which there is not a strong acquisition history, a team approach may be more successful.

Market Research Data

Acquisitions begin with a description of the government’s needs. This description should be specific enough to allow the acquisition team to conduct market research. A well-planned, thoroughly executed market research process yields data on the following, relative to the government’s requirements:

Existing products

Potential suppliers

Competitive market forces

Generalized pricing information

Available levels of product performance and quality

Commercial practices

Support capabilities

Other organizations’ successful acquisition practices.

Because market research can identify so much information about how an industry conducts business, it is the foundation for building an effective solicitation and a successful contract. Not only that, but market research can also:

Determine whether needs can be met by items available in the commercial marketplace

Identify commercial practices regarding customizing, modifying, or tailoring items to meet customer needs

Identify customary industry terms and conditions

Identify the typical-delivery and logistics-support capabilities of the commercial market

Ensure maximum and effective use of competitive market forces

Ensure maximum practicable use of recovered materials and promote energy conservation and efficiency

Help the agency plan acquisition strategy.

When gathering data on the marketplace’s capabilities, the program manager or contracting officer can ask the following specific questions:

Are there sources capable of satisfying the government’s requirements?

Are commercial items available:

That meet requirements without modification

That could be modified to meet requirements

That could meet requirements if the requirements are modified to a reasonable extent?

If commercial items are not available, are nondevelopmental items available:

That meet requirements without modification

That could be modified to meet requirements

That could meet requirements if the requirements are modified to a reasonable extent?

To what extent could commercial items or nondevelopmental items be incorporated at the component level?

What are customary industry terms and conditions regarding:

Warranties

Acceptance

Inspection

Buyer financing

Maintenance support

Packaging and marking

Pricing?

What is the extent of competition in the environment, including:

The level of market competition—i.e., how competitive vendors are with each other

Sources potentially capable of satisfying requirements—i.e., are there sources that can satisfy the requirements, and how many sources can do so?

The amount of competitive pressure on price

Quality

Product features

Speed of technological improvements

Energy efficiency

Service

Support?

How is the market responding to environmental concerns?

Extent of recovered materials used in market products

Efficiency standards in the marketplace

Market pressures on energy conservation and efficiency.

Market Research Sources

When you consult Consumer Reports magazine or ask a neighbor or coworker how he likes a particular product or which contractor she used to finish her basement, you’re conducting market research, even if you don’t think of it as such. You have a requirement, and you’re looking for sources to fulfill that need. Market research for government acquisitions has the same objective.

The Internet is a valuable market research tool, and it’s a great place to start. But if you need in-depth information, you might use one or more of the market research techniques listed in FAR 10.002:

Contacting knowledgeable individuals in government and industry regarding the market’s ability to meet requirements.

Reviewing the results of recent market research undertaken to meet similar or identical requirements.

Publishing formal requests for information in appropriate technical or scientific journals or business publications.

Querying the government’s interagency databases of contracts and other procurement instruments (available at www.contractdirectory.gov) and other government and commercial databases that provide information relevant to agency acquisitions.

Participating in interactive, online communication among industry and acquisition personnel and customers.

Obtaining source lists ofsimilar items from other contracting activities or agencies, trade associations, or other sources.

Reviewing catalogs and other generally available product literature published by manufacturers, distributors, and dealers. This information may be available online.

Conducting interchange meetings or holding presolicitation conferences to involve potential offerors early in the acquisition process. For complex acquisitions, these conferences can lead to teaming arrangements.

After conducting market research, the agency may need to refine its requirements. The FAR states:

If market research indicates commercial or nondevelopmental items might not be available to satisfy agency needs, agencies shall reevaluate the need and determine whether the need can be restated to permit commercial or nondevelopmental items to satisfy the agency’s needs.

[….] If market research establishes that the government’s need may be met by a type of item or service customarily available in the commercial marketplace that would meet the definition of a commercial item, the contracting officer shall solicit and award any resultant contract using the commercial item acquisition procedures in FAR [p]art 12.

Technical and acquisition staff in government and industry should perform ongoing market research regarding supplies and services that the agency routinely purchases or the company sells. Staying informed about the marketplace and understanding the competitive environment will help ensure that high-quality services or supplies are provided and the government’s needs are met.

Documenting Market Research

After collecting the information the agency needs, the contracting officer and program manager must document the market research. Agencies should document the results of market research in a manner appropriate to the size and complexity of the acquisition. The market research report should summarize the research activities. Specifically, the report should, as appropriate:

Explain the acquisition’s background, including its purpose and any special features.

Identify the market research team members (at a minimum, the buyer and the requirements official).

Describe the agency’s needs, including the functions, performance, or essential physical characteristics of the required goods or services. This section should also summarize any discussions and conclusions reached regarding possible alternatives or modifications to the needs statement or to the potential for trade-off analyses. (See “The Trade-Off Process” later in this chapter.)

Identify the desired or required schedule for the delivery of the end items, and, if applicable, the relationship of the end items to other acquisitions. (Major acquisitions may include multiple contracts for one large program.)

Explain the methodology that was used to compile and refine the lists of potential suppliers, including the number of firms that were contacted and a list of the suppliers in the final consideration.

List the industry sources that were contacted and the types of information obtained from them.

Summarize the customary industry terms, provisions, and conditions, including payment, freight, delivery, acceptance, and warranties.

Identify the price ranges discovered, possible reasons for variations, and the potential for determining a fair market price.

The market research report should also include a description of available commercial or nondevelopmental items, along with their respective merits or shortcomings. This summary may also recommend specific contract terms or provisions covering such areas as training, acceptance, and express warranties. If a commercial item cannot meet the government’s requirements, an explanation for this determination should be provided.

Once the program manager knows which companies can meet the requirements and has learned about the standard business practices in the marketplace, he or she can begin to refine the requirements document, statement of work, or performance work statement. For many agencies, the next step is writing the source selection plan in addition to or in lieu of an acquisition plan. Unlike the acquisition plan, a source selection plan is not required by law or the FAR. Even though an acquisition plan is required by the FAR, a source selection plan can be used as a substitute if it incorporates the required elements of an acquisition plan, thus satisfying the requirement. Confirm the agency’s requirements for a source selection plan or update the acquisition plan to document source selection planning. A written source selection plan is particularly important for a complex negotiated acquisition that will take a long time to complete. Agencies normally do not require source selection plans for less costly acquisitions; the dollar thresholds vary by agency.

ACQUISITION PLANNING REQUIREMENTS

Acquisition planning is the process by which the efforts of everyone responsible for an acquisition are coordinated and integrated through a comprehensive plan for fulfilling the agency’s needs. It includes developing the overall strategy for managing the acquisition. Its purpose is to satisfy an agency’s needs in the most effective, economical, and timely manner. FAR part 7 states the acquisition planning requirements and provides guidance for developing written acquisition plans.

Acquisition planning should start when an agency identifies a need for supplies or services. It’s good practice for the entire acquisition team to work together to develop the acquisition plan. The acquisition team consists of all participants in the acquisition, including representatives of the technical, supply, and procurement communities, the customers they serve, and the contractors that provide the products and services. Technical personnel will be able to suggest sources for market research and identify potential risks. Finance personnel can answer questions about budgeting and funding. Contracting personnel can provide input on acquisition considerations and source selection procedures. If just one person writes the acquisition plan, it will not be balanced and could exclude information that will be important during source selection or contract administration.

The Acquisition Plan

The first part of an acquisition plan describes the big picture: what the requirements are and how the procurement will fulfill them. This part consists of eight sections:

1.Statement of need. The first section provides an introduction to the overall acquisition. Summarize the technical and contractual history of the acquisition and how any prior similar acquisitions have shaped potential alternatives. In other words, lessons learned from previous acquisitions could influence the alternatives considered for the current acquisition. The end user of the services or supplies to be acquired writes most of this section. Department of Defense users write a formal mission need statement (MNS) in place of this section.

2.Conditions affecting the acquisition. Identifies requirements for compatibility with existing or future programs and any known cost, schedule, or performance constraints.

3.Cost. States the cost goals for the acquisition and the rationale for those goals. This section should also identify the life-cycle cost considerations, design-to-cost objectives, and how the contracting officer will apply should-cost analysis. Life-cycle cost is the total cost of a system, building, or other product, computed over its useful life. It includes all relevant costs involved in acquiring, owning, operating, maintaining, and disposing of the system or product over a specified period of time, including environmental and energy costs. Design-to-cost objectives establish cost elements as management goals to achieve the best balance between life-cycle cost, acceptable performance, and schedule. In this sense, cost is a design constraint during the design and development phases and a management discipline throughout the acquisition and operation of the system or equipment. A should-cost analysis is a specialized form ofcost analysis and differs from traditional evaluation methods because it does not assume that a contractor’s historical costs reflect efficient and economical operation. Instead, a should-cost analysis evaluates the economy and efficiency of the contractor’s existing work force, methods, materials, equipment, real property, operating systems, and management. A multi-functional team of government contracting, contract administration, pricing, audit, and engineering representatives conduct should-cost reviews to promote both short- and long-range improvements in the contractor’s economy and efficiency, to reduce the cost of contract performance. In addition, by providing a rationale for any recommendations and by quantifying any potential impacts on cost, the government will be better able to develop realistic objectives for subsequent negotiations.

4.Required capabilities or performance characteristics. Identifies how these capabilities or characteristics are related to the requirements.

5.Delivery or performance period requirements. If the acquisition is urgent, the basis for the urgency and a justification for not providing full and open competition appears in this section. The relationship of this procurement to other procurements is often discussed here.

6.Trade-offs. This section discusses the consequences for trade-offs among the cost, performance, and schedule goals. For example, an increase in the budget may increase performance goals. On the other hand, reducing the budget may have a negative effect on performance because the agency can’t buy as much. If the schedule is extended, costs may rise to pay for additional overhead and any cost increases over time.

7.Risks. Explains technical, cost, and schedule risks and what the agency is doing to reduce these risks. How will the acquisition be affected if the agency can’t mitigate the risks? This is a difficult section to write because it forces the agency to admit that something might go wrong. But in doing so, the agency begins to prepare for that possibility. (Remember, the contracting officer should be prepared—like a good Scout).

8.Acquisition streamlining. The final section identifies the acquisition streamlining techniques the contracting officer will use. Acquisition streamlining techniques include a draft RFP, presolicitation conference, or alternative dispute resolution process.

The second part of the acquisition plan is the plan of action. This part details how the contracting officer will conduct the acquisition. It describes sources, the acquisition method, funding, and other considerations.

1.Sources. What sources can meet the agency’s needs? Small businesses, businesses in historically underutilized areas (HUBZone businesses), small disadvantaged businesses, and women-owned small business concerns should be included in the consideration. This section describes the extent and results of market research conducted and its impact on the acquisition plan. It also uses the information obtained from market research to identify companies that can meet the requirements. The program manager and end user lead the writing of this section.

2.Competition. How will the contracting officer promote and sustain competition throughout the acquisition? If full and open competition is not conducted, why not? What is the statutory authority for the exemption to full and open competition? How will competition be promoted and sustained for spare and repair parts? This section describes how subcontract competition is sustained throughout the acquisition, if applicable. What barriers exist to increasing competition, and how will the contracting officer overcome them? The program manager and contracting officer lead the writing of this section.

3.Source selection procedures. This section describes source selection procedures for the acquisition, including the timing for submitting and evaluating proposals. How do evaluation factors relate to the acquisition objectives? The contracting officer leads the writing of this section.

4.Acquisition considerations. This section identifies the contract type contemplated and any options or special contracting methods the contracting officer might use. What special clauses, solicitation provisions, or FAR deviations apply? Will the agency lease or purchase special equipment? The contracting officer leads the writing of this section, with support from other members of the acquisition team.

5.Budgeting and funding. This section provides budget estimates and explains how the agency came up with the numbers. What is the schedule for getting the funds the agency needs for the procurement? This section is developed by the budget and finance office, with support from other members of the acquisition team. The business manager leads the writing of this section, with input from the program manager and contracting officer.

6.Product or service description. This section explains how the program manager determined the performance standards for the acquisition and describes the performance-based acquisition methods used. This section could be written by the technical lead or program manager and end user, with support from other members of the acquisition team.

7.Priorities, allocations, and allotments. When an urgent requirement demands a short delivery or performance schedule, this section is used to explain how the Defense Priorities and Allocations System (DPAS) will be used to fulfill the requirement. See FAR 11.6 for DPAS applicability. The program manager and contracting officer lead the writing of this section.

8.Contractor versus government performance. If applicable, address contractor versus government performance, the policy outlined in Office of Management and Budget (OMB) Circular A-76, as discussed in FAR 7.3. The longstanding policy of the federal government has been to rely on the private sector for needed commercial services. Thus, government agencies shall identify all activities performed by government personnel as either commercial or inherently governmental and conduct a competition to determine if government personnel should perform a commercial activity. The program manager and contracting officer lead the writing of this section.

9.Inherently governmental functions. Contractors may not perform inherently governmental functions; this section ensures that inherently governmental functions are not performed by contractors. FAR 7.503 lists examples of inherently governmental functions. Specifically, the following tasks related to source selection are considered inherently governmental:

(1).Determining what supplies or services are acquired by the government

(2).Participating as a voting member on a source selection board

(3).Determining whether contract costs are reasonable.

The program manager and contracting officer lead the writing of this section.

10.Management information requirements. This section describes the management system the government will use to monitor the contractor’s effort—specifically, the methodology the agency will use to analyze the data and assess contract performance. It also states whether earned value will be used to measure performance. The program manager and contracting officer lead the writing of this section.

11.Make or buy. The prime contractor is responsible for managing contract performance, including administering subcontracts as necessary to ensure the lowest overall cost and technical risk to the government. A make-or-buy program is part of a contractor’s written plan identifying the major deliverables produced or performed by the prime contractor and those that will be subcontracted to other vendors. When a contract requires a make-or-buy program, the government may reserve the right to review and agree on the make-or-buy program to ensure reasonable prices and satisfactory performance. Previous contracts for the same or similar items provide some input on the efficacy of make-or-buy programs. The contracting officer leads the writing of this section.

12.Test and evaluation. This section describes the government and contractor test programs for each major phase of a large system acquisition. Market research provides some information about contractor test programs. The program manager and end user lead the writing of this section.

13.Logistics considerations. This section describes the assumptions for contractor or agency support for start-up and throughout the life of the contract, including maintenance, servicing, and distribution of commercial items. What are the government’s reliability, maintainability, and quality assurance requirements, and are they covered under available warranties? Market research should provide insight into a company’s warranties. Any requirements for contractor data and data rights, along with its estimated cost and how the data will be used, should be included in this section. See FAR subpart 27.4 for regulations regarding data rights.

14.Government property. This section lists any property that will be furnished to contractors, including materials and facilities, and states when the property will be available with regard to the acquisition schedule. If government-furnished property is not available when it is needed, performance schedules and cost estimates may be affected, so it’s better to know in advance if the property will really be available when the agency needs it. If government property will not be available as needed, the contracting officer documents alternative actions—plan B—in this section. The program manager and end user lead the writing of this section.

15.Government-furnished information. This section discusses any government information required for proposal preparation or contract performance, such as manuals, drawings, and test data. Any additional controls to monitor access and distribution of certain information, such as technical data, specifications, maps, or building designs, are described here. This information is generally accessible through the Federal Technical Data Solution. The program manager and end user lead the writing of this section.

16.Environmental and energy conservation objectives. This section describes the environmental and energy conservation objectives and the environmental requirements, if applicable, associated with the acquisition. (FAR part 23 details acquisition policies for protecting and improving the quality of the environment.) Will an environmental assessment be performed or an environmental impact statement prepared? How will environmental issues be resolved? The program manager and end user lead the writing of this section.

17.Security considerations. This section is applicable to acquisitions that deal with classified matters. It explains how adequate security measures will be established, maintained, and monitored. If the acquisition is for information technology, how will the agency’s information security requirements be met? If the contractor will require routine physical access to a federally controlled facility or information system, how will the agency’s requirements be met for personal identity verification of contractors? (See FAR 4.1300 for regulations on personal identity verification of contractor personnel.) The program manager and contracting officer lead the writing of this section with input from the security office.

18.Contract administration. This section describes how the contract will be administered. If the contract is for services, how will the contracting officer enforce inspection and acceptance of the services in accordance with the performance criteria in the statement of work? The contracting officer leads the writing of this section.

19.Other considerations. In this section, the contracting officer and program manager explain any standardization concepts, the industrial readiness program, the Defense Production Act, the Occupational Safety and Health Act, foreign sales implications, and any other matters applicable to the acquisition plan that are not covered elsewhere.

20.Milestones for the acquisition cycle. This section addresses the following phases of the acquisition cycle:

Acquisition plan approval

Development of the statement of work

Development of specifications

Development of data requirements

Completion of the acquisition package

Purchase request Justification and approval for other than full and open competition and approval of determination and findings, if applicable. A determination and finding is a document signed by an authorized government official justifying a decision to take a certain action; it is expressed in terms of meeting the regulatory requirements of the situation.

Synopsis of the solicitation

Determination of draft RFP and final RFP release dates

Development of proposal evaluation schedule j. Development of negotiation schedule

Contract preparation, review, and clearance l. Estimated contract award date.

The milestones section illustrates the effects of acquisition planning on the entire acquisition cycle. The dates established in the acquisition plan set the expectations for both government and industry. If contract award is significantly delayed, this affects not only the contractor’s efforts, including the validity of its cost estimates and the availability of personnel and materials, but also the availability of government funding and government-furnished property. On the other hand, pushing to meet an unrealistic schedule can, for example, result in a poorly written RFP that is not properly reviewed. An unclear or inaccurate RFP can yield proposals that do not address the government’s real requirements. These proposals will lengthen negotiation time and delay contract award. Rushing through the process doesn’t necessarily yield a quality contract.

The contracting officer and program manager must think through the potential risks, consequences, and mitigation plan when developing the acquisition plan. When an unexpected event affects the schedule, they should be able to respond quickly to minimize potential problems. If the contracting officer or program manager pretends that nothing could possibly go wrong—and something inevitably will—then they’ll waste valuable time trying to find a solution that should have been addressed in the acquisition plan.

Seldom does the same team that wrote the acquisition plan complete contract close- out, so the acquisition plan serves as a roadmap for the contracting officer who will close out the contract. The acquisition plan should provide guidance for a seamless transition between you and those who take over your job when you move on. Too often, government personnel get important historical information from the contractor, because no one is left on the program who knows what happened and what was planned. This is not a good management strategy, but it can be avoided with a thorough acquisition plan. This is why acquisition planning and tracking is really worth the time and effort.

Now that you understand how to put together an acquisition plan, we’ll discuss the development of the source selection plan. The acquisition plan is a top-level version of the source selection plan. The source selection plan covers many of the same topics, but from a different angle and in greater depth.

The Source Selection Plan

Documenting key elements of the source selection is an important part of the planning process. This documentation can be done either in a separate source selection plan (SSP), if required by the agency, or as a supplement to the acquisition plan. The source selection plan should discuss the acquisition strategy, including the requirements, expected competition, and the method of procurement.

Johnnie E. Wilson writes, “The source selection plan serves several purposes, including:

Defining a specific approach for soliciting and evaluating proposals

Describing the evaluation factors and subfactors, their relative importance, and the methodology used to evaluate proposals

Providing essential guidance to the RFP authors, especially about putting together sections L (proposal preparation instructions) and M (evaluation factors) of the solicitation

Serving as a charter and guide for the source selection team on the roles of the members and the conduct of the entire source selection from proposal evaluation, through the cost/price/technical trade-off, award decision, and debriefing."

Suggested topics to be covered in a source selection plan include the following:

A description of what the agency is buying.

Goals of the acquisition.

A description ofthe source selection organization, including a listing ofindividuals recommended for membership and their titles or functional areas.

A description of presolicitation activities, including market research, the development of the sources-sought synopsis and draft RFP, and the pre-proposal conference. A sources-sought synopsis is issued before the solicitation and is typically published for market research purposes.

Evaluation procedures, including whether award will be made based on the identified lowest priced technically acceptable offer or on a trade-off evaluation.

Proposed evaluation factors and subfactors, their relative importance, and associated standards. The relative importance of the following factors should be identified, as applicable:

Price or cost

Technical proficiency

Management

Past performance.

The proposed acquisition strategy, including anticipated contract type.

The schedule of events, including key events and the projected dates for completion. Key events should include such activities as:

Issuing the solicitation

Receiving proposals

Completing proposal evaluation

Making the source selection decision

Preparing the contract for signature

Completing contract award.

The Source Selection Team

The source selection authority (SSA) is the decision maker who approves the source selection plan and the acquisition plan and is responsible for conducting the entire source selection process, encompassing proposal solicitation, evaluation, and contract award. The SSA has, subject to law and applicable regulations, full responsibility and authority to select the source for award. In carrying out these responsibilities, the SSA:

Reviews and approves the source selection plan (SSP)

Provides executive oversight of the source selection process and results to ensure that the source selection evaluation team (SSET) follows the evaluation process described in the SSP

Authorizes access to or release of source selection records

Authorizes the release of the request for proposal

Approves the exclusion of offerors from the competitive range

Approves entering into discussions with offerors in the competitive range, if required

Determines whether it is appropriate to make award based on initial offers

Ensures that the evaluation criteria are limited to the key discriminators; and

Selects the winning proposal(s) and documents the supporting rationale in the source selection decision document.

The source selection team is charged with working to thoroughly understand the evaluation procedures and criteria. Members of the source selection team may not have a vested interest in the outcome of the source selection process, nor any economic, social, or intellectual conflict of interest concerning the matters discussed during the source selection process. All members of the source selection team must:

Execute nondisclosure agreements and conflict of interest statements

Possess the knowledge and perception to competently evaluate proposals

Understand their roles and responsibilities in the evaluation process, including their obligation to be fair and impartial

Clearly record their impartial individual evaluations and ensure the accuracy of summary evaluations

Defend, in fair debate with their peers, the rationale for their decisions

Prevent the release of source selection information to anyone not authorized to receive it.

An ombudsman is an agency employee who investigates concerns or complaints about source selections, such as potential conflicts of interest or improper activities. The ombudsman may be a senior staff member from outside the program office and the program approval chain. He or she is responsible for providing an unbiased, nonattributable avenue of communication for source selection personnel and offer- ors to submit acquisition-related issues, concerns, or grievances. In other words, if someone contacts the ombudsman, the information the ombudsman receives is not attributed to the person who initiated the contact.

The composition of the SSET or source selection team (SST) is customized for each acquisition. For example, some acquisitions may not have a security panel. Other acquisitions may combine the cost and contract panels. The structure of the source selection team depends on the nature of the acquisition and the agency’s regulations. Figure 2-1 illustrates a sample source selection team. Some agencies may use different terminology, but the elements are similar.

The source selection team structure shown in Figure 2-2 includes a senior-level source selection council (SSC), which may also be called a source selection advisory council. In some agencies, SSCs offer advice and an additional level of independent review for high-dollar or high-visibility acquisitions. An SSC may be composed of senior government personnel, including a senior contracting officer, selected by the SSA. SSC members do not participate in the source selection evaluation. Instead, the SSC conducts an independent review of the source selection evaluation results and recommendations, and presents its findings to the SSET and SSA.

Figure 2-1 A Source Selection Team

Figure 2-2 The Source Selection Council

Source selection councilauthority (SSCA) Source selection teams should decide whether or not the source selection plan should be marked and protected as source selection information (SSI), in accordance with FAR 2.101 and 3.104. The source selection team and the legal office should make this decision together. Per the U.S. Air Force’s Source Selection Plan Guide, source selection teams

should consider whether disclosure of information in the SSP would jeopardize the integrity or successful completion of the acquisition to which the information relates, and whether such information has previously been made available to the public or otherwise disclosed publicly. Openly sharing source selection plan information, evaluation factors and criteria demystifies the source selection process. Moreover, it helps offerors decide whether or not to submit a proposal confident they understand not only the requirement but also the proposal evaluation procedures.

The Acquisition Strategy

One of the first steps in designing an acquisition strategy is to determine which evaluation methodology on the best value continuum to use: lowest price technically acceptable (LPTA) or trade-off. Best value means the expected outcome of an acquisition that, in the government’s estimation, provides the greatest overall benefit in response to the requirements. An agency can obtain best value in negotiated acquisitions by using one or a combination of source selection approaches.

In different types of acquisitions, the relative importance of cost or price may vary. For example, in acquisitions for which the requirement is clearly definable and the risk of unsuccessful contract performance is minimal, cost or price may play a dominant role in source selection. The less definitive the requirement, the more development work required, or the greater the performance risk, the more technical or past performance considerations may play a dominant role in source selection. In either case, the evaluation factors and significant subfactors must be identified in the RFP. Let’s examine how to decide which method of negotiated acquisition to use: LPTA or trade-off.

The Lowest Price Technically Acceptable

A lowest price technically acceptable proposal is a proposal that offers the best price to the government after minimum technical requirements have been met. The lowest price technically acceptable source selection process is appropriate when best value is expected from the technically acceptable proposal with the lowest evaluated cost.

Proposals are evaluated for acceptability but are not ranked based on non-cost/price factors. The RFP must specifically state that award will be made on the basis of the lowest evaluated price, as long as the proposal meets or exceeds the acceptability standards for non-cost factors. All factors are evaluated using the “go/no-go” decisional rule. This rule works like a pass/fail grading system. A proposal will receive a “go,” or an acceptable rating, if it meets all aspects of the standard for evaluation. A proposal will receive a “no-go,” or unacceptable rating, if one or more elements of the offeror’s proposal do not meet the minimum requirement of the standard of evaluation.

Price or cost must always be an evaluation factor when using either LPTA or tradeoff methods. Sometimes, the government cannot predict cost performance or provide data for the offeror’s cost estimation. The risk to the offeror may be unusually high, or the government may demand very high qualifications or experience that a low-cost offeror may not have.

For other acquisitions, the LPTA process may be the most appropriate methodology. It works when the government’s requirements are not complex and the technical and performance risks are minimal, such as acquisitions in which service, supply, or equipment requirements are well defined, but discussions may be necessary. The LPTA method also “may be used in situations where the agency would not realize any value from a proposal exceeding the minimum technical requirements." In such a case, the agency establishes certain standards that a proposal must meet to be considered technically acceptable. The award must then be made to the offeror whose proposal has met the technical requirements, even if just marginally, and is priced lowest.

Johnnie E. Wilson writes:

The lowest price technically acceptable process is similar to a sealed bid approach in that award is made to the acceptable offeror with the lowest evaluated cost or price. The major difference is that the contracting officer can have discussions with offerors before source selection to ensure they understand the requirements and to determine acceptability. Tradeoffs are not permitted and no additional credit is given for exceeding acceptability. Proposals are evaluated, however, to determine whether they meet the acceptability levels established in the solicitation for each non-cost evaluation factor and subfactor.

Table 2-1 compares the LPTA with the trade-off acquisition method.

The Trade-Off

Using the trade-off approach to source selection allows an agency to select the most significant factors for emphasis—cost or price as well as non-cost factors—and allows the government to award the contract to a company that did not submit the lowest price. It is appropriate to use the trade-off process when it may be in the best interest of the government to consider awarding a contract to an offeror whose proposal is not the lowest priced nor the highest rated technically. This process was called “best value” before the FAR part 15 rewrite in 1997.

The RFP for a procurement using the trade-off process must state whether all evaluation factors other than cost or price, when combined, are significantly more important than, approximately equal to, or significantly less important than cost or price. The perceived benefits of the higher-priced proposal must merit the additional cost, and the agency must document the rationale for making the trade-off.

Wilson urges agencies to “always consider the strengths and potential pitfalls of using a trade-off process to ensure that it is consistent with the agency’s overall acquisition strategy." For some acquisitions, the trade-off process is the most effective option and results in the best value to the government. It should be used when it is in the government’s best interest to consider awarding the contract to other than the lowest-priced offeror. The trade-off process is particularly appropriate if:

Table 2-1 LPTA and Trade-Off Comparison

The government’s requirements are difficult to define, complex, or historically troublesome.

There is more than one possible acceptable solution for meeting the government’s needs.

The agency expects measurable differences between proposals in the design, performance, quality, reliability, or supportability.

The services being procured are not clearly defined, or highly skilled personnel are needed to perform them.

The agency is willing to pay extra for capability, skills, reduced risk, or other non- cost factors if the added benefits are worth the premium.

In trade-off acquisitions, evaluation factors other than price are often given more weight. These factors are especially important when there is a high technical risk and thus a stronger imperative to reduce the risk by selecting an offeror with superior technical capabilities. As a general rule, the higher the risk, the greater the emphasis on technical factors over price.

Using the trade-off process, the agency evaluates both cost (or price) and non-cost factors and awards the contract to the offeror whose proposal represents the best value based on the evaluation criteria. This process requires the source selection authority to make trade-offs as he or she considers each proposal’s non-cost strengths and weaknesses, risks, and cost (or price). The SSA selects the successful offeror by considering these trade-offs and using his or her business judgment to choose the proposal that represents the best value.

Common Elements of LPTA and Trade-Off Source Selection

Although there are differences between the way the government evaluates proposals using the trade-off and LPTA methodologies, there are common elements between them. For example, in both source selection methods, contracting officers must:

Make the RFP available through the governmentwide point of entry at http:// www.fedbizopps.gov.

Use the uniform contract format when writing the RFP.

List all evaluation factors and significant subfactors that will affect contract award and their relative importance.

Evaluate proposals in accordance with the evaluation criteria stated in the RFP.

Award without discussions (if permitted by the solicitation) when appropriate. Otherwise, conduct discussions with offerors in the competitive range.

Select the proposal for contract award that represents the best value.

Next, we’ll examine a case study related to acquisition planning and market research. Recall that acquisition planning requires an agency to explain how it will promote and sustain competition or, if the agency is using a sole source exception, to discuss why it did not compete the requirement. What happens if the agency wants to award a sole source contract and does not consider a competitor’s product?

CASE STUDY: INADEQUATE PLANNING

eFedBudget Corporation protested the proposed award of a contract on a sole source basis to RGII Technologies, Inc., pursuant to presolicitation notice No. B-P-06, issued by the Department of State (DOS), for continued implementation, maintenance, enhancement, and support for DOS’s worldwide budget and planning software systems. The protester asserted that the agency’s decision to procure the software services on a sole source basis was improper. Specifically, the protester argued that

The required justification and approval (J&A) was deficient.

The agency unreasonably refused to consider the protester’s approach of developing a nonproprietary software system.

The need for the sole source procurement arose from the agency’s lack of advance planning.

Although the J&A stated that “licensing restrictions dictate that only RGII Technologies can do this work,” it identifies no actions the agency had considered taking to remove or overcome any barriers to future competition resulting from the restrictive license, such as purchasing additional, broader license rights. The J&A notes only that RGII is “assessing the ability” to license other vendors to operate its software, and that the agency “will consider other application, maintenance, and support options based on the degree of success RGII achieves in these endeavors."

The Government Accountability Office’s (GAO) decision in response to the protest stated that:

CICA permits noncompetitive acquisitions in certain circumstances, such as when the services needed are available from only one responsible source. When an agency uses noncompetitive procedures, it is required to execute a written J&A with sufficient facts and rationale to support the use of the cited authority. . . . Our review of an agency’s decision to conduct a sole-source procurement focuses on the adequacy of the rationale and conclusions set forth in the J&A. As a result, an agency’s decision in this regard is not generally questioned by the GAO so long as the J&A sets forth reasonable justifications for the agency’s actions....

Moreover, an agency has broad discretion to determine its needs and the method for accommodating those needs. . . . Use of noncompetitive procedures is not justified, however, where the agency created the need for the sole-source award through a lack of advance planning.

According to GAO,

the agency had produced no record of any steps that it had taken to end its reliance on the services of the incumbent to maintain the existing software systems; in fact, this latest proposed sole-source award had a potential term of 5 years. It is possible, for example, that the agency could purchase additional rights to the proprietary software in order to promote competition.

Under the circumstances here—where the agency ceded substantial rights in the software created by RGII under the development contract, and where there is no indication that the agency has explored the possibility of acquiring additional rights from RGII, GAO stated that, to satisfy its obligation to engage in reasonable advance planning and to promote competition, the agency was required to consider whether the costs associated with a purchase of additional license rights, or some other alternative, outweighed the anticipated benefits of competition.

GAO recommended that the agency “conduct a documented cost/benefit analysis reflecting the costs associated with obtaining competition, either through purchasing additional rights to the proprietary software or some other means, and the anticipated benefits.” If the cost/benefit analysis “reveal[ed] a practicable means to obtain competition,” GAO further recommended that the agency proceed with a competitive procurement.

This case illustrates the importance of advance acquisition planning and market research. The Competition in Contracting Act states that lack of advance planning is not an adequate justification for using a sole source exception. Furthermore, agencies must plan for future competition even if a sole source procurement is appropriate now. Conducting thorough market research into other companies’ capabilities should highlight potential competitors.

Up to this point, the chapter explained the government’s responsibilities in acquisition planning and strategy. While the government develops the acquisition strategy, companies must know how to sell their products and services to the government. The next section explains how this is done.

SELLING TO THE GOVERNMENT

Government employees aren’t the only ones subjected to the planning process. Potential contractors have to go through a maze of paperwork and learn confusing acronyms just for the possibility of winning a government contract. This section explains some of the basic steps of getting started in government contracting.

Central Contractor Registration

To compete in federal government source selections, one of the first things a company must do is register with the Central Contractor Registration (CCR). CCR is the primary registrant database for the federal government. The database collects, validates, stores, and disseminates data in support of agency acquisition missions, including federal agency contracts and assistance awards. (Assistance awards include grants, cooperative agreements, and other forms of federal assistance.) Whether they are applying for assistance awards, contracts, or other business opportunities, all entities are considered registrants.

According to the FAR, prospective contractors must be registered in the CCR database before a contract or agreement is awarded to them, except when:

A governmentwide commercial purchase card is used as both the purchasing and payment mechanism

The contract is classified, and registering in the CCR database or using CCR data could compromise classified information

The contract is awarded by a deployed contracting officer in the course of military operations

The contract is awarded by a contracting officer conducting emergency operations, such as responding to natural or environmental disasters

The contract is awarded to support unusual or compelling needs

The contract is awarded to a foreign vendor for work performed outside the United States

The acquisition is a micropurchase, and electronic funds transfer will not be used.

Both current and potential federal government contractors have to register in CCR in order to receive a contract award by the federal government. Companies must complete a one-time registration in which they provide basic information relevant to procurement and financial transactions. They must update or renew their registration at least once a year to maintain an active status. In addition, entities (including private nonprofits, educational organizations, and state and regional agencies) that apply for assistance awards from the federal government through www.grants.gov must now register with CCR. Note that registration does not guarantee that a company will receive a contract; it only qualifies it to do so.

CCR validates the registrant’s information and electronically shares the secure and encrypted data with the federal agencies’ finance offices to facilitate paperless payments through electronic funds transfer (EFT). Additionally, CCR shares the data with federal government procurement and electronic business systems. Note that any information provided in a company’s registration may be shared with authorized federal government offices. Registrants must also provide a release to the IRS that permits CCR to validate that the company is properly registered to pay its taxes.

Companies or individuals can complete the registration online at http://www.ccr. gov/default.aspx. CCR registrants are required to submit certain types of detailed information on their companies. CCR also requests additional, non-mandatory information. The CCR User’s Guide (http://www.ccr.gov/handbook.aspx) defines and details specific informational requirements.

The following is a list of basic information required to complete the CCR registration process:

Data Universal Numbering System (DUNS) number: A unique nine-character identification number provided by the commercial company Dun & Bradstreet (D&B). Call D&B at 1-866-705-5711 or visit the D&B website at http://fedgov. dnb.com/webform if your company does not have a DUNS number.

Legal business name and doing business as (DBA) name: Enter the legal name by which the company is incorporated and pays taxes. If the company commonly uses another name, such as a franchise, licensee name, or an acronym, include that in the DBA space below the legal business name. The company’s legal business name as entered on the CCR registration must match the legal business name at Dun & Bradstreet, which must, in turn, match any state registrations. Make sure to include “Inc.” or “LLC,” etc., if those designations are part of the company’s legal business name.

U.S. Federal Tax Identification Number (TIN): A nine-digit number which is either an Employer Identification Number (EIN) assigned by the Internal Revenue Service (IRS) (http://www.irs.gov/businesses/small/article/0,,id=98350,00.html) or a Social Security number (SSN) assigned by the Social Security Administration (SSA) (www.ssa.gov). If you do not know your TIN/EIN, contact the IRS at 1-866-255-0654. If you operate as an individual sole proprietorship, you may use your Social Security number.

Business start date: Enter the date the business was formed or established. This may be used to distinguish your firm from others with similar names.

Fiscal year end date: Enter the day on which the company closes its fiscal year. For example, if the company uses the calendar year, enter 12/31.

Average number of employees, including all affiliates: This information is passed to SBA in order to calculate the company’s business size using SBA’s official size standards for your industry. Enter the average number of persons employed for each pay period over the firm’s latest 12 months, including people employed by the parent organization, all branches, and all affiliates worldwide.

Average annual receipts, including all affiliates: Receipts means total income (or in the case of a sole proprietorship, gross income) plus cost of goods sold, as these terms are defined and reported on Internal Revenue Service tax return forms. Receipts are averaged over a concern’s latest three completed fiscal years to determine its average annual receipts.

North American Industry Classification System (NAICS) code number: NAICS (pronounced nakes) was developed as the standard for use by federal statistical agencies in classifying business establishments for collecting, analyzing, and publishing statistical data related to the business economy of the U.S. NAICS was developed under the auspices of the Office of Management and Budget (OMB) and adopted in 1997 to replace the old Standard Industrial Classification (SIC) system.

Commercial and Government Entity (CAGE) Code: A five-character ID number used extensively within the federal government. The CAGE Code is used to support a variety of mechanized systems throughout the government and provides a standardized method of identifying a given facility at a specific location. The code may be used for a facility clearance, a preaward survey, an automated bidders list, identification of debarred bidders, and fast pay processes, among other functions.

Finding Opportunities

The government isn’t the only party that conducts market research in the acquisition process. Companies must make their products and services known to agencies, too. Part of a company’s marketing charge is to find out which federal agencies need the products or services it provides. Gathering information about the federal target market should be your first step towards increasing federal sales. There are five sources that provide important data about potential federal customers.

Federal Procurement Data Systems

The Federal Procurement Data Center (FPDC), part of the U.S. General Services Administration (GSA), operates and maintains the Federal Procurement Data System (FPDS; www.fpdc.gov). The FPDS is the central repository of statistical information on federal contracting. The system contains detailed information on contract actions over $25,000 and summary data on procurements of less than $25,000. Executive branch departments and agencies award more than $200 billion annually for goods and services, and this system can identify who bought what, from whom, for how much, when, and where. By searching this database, companies can find potential customers. If you learn that a particular agency contracted for a service that your company can provide, contact the agency to discuss how your firm can meet its requirements.

FedBizOpps

The governmentwide point of entry for procurement opportunities, FedBizOpps or FBO (Federal Business Opportunities; www.fedbizopps.gov), which is managed by GSA, is the single source for federal government procurement opportunities over $25,000. Vendors do not have to register, nor do they need a username and password, to begin using FedBizOpps. For vendors, the FedBizOpps system offers:

The ability to browse active procurement notices by posted date, classification code, business set-aside type, and awards for a particular agency, office, or location.

The ability to search for procurement notices through the use of the FedBizOpps synopsis/award search page.

An email notification service (vendor notification service) that allows vendors to receive daily email notifications of procurement notices by agency, office, or location, procurement classification code, set-aside type, or place of performance ZIP code.

An interested vendors module (bidder’s list) to promote teaming opportunities for vendors.

An FBO data feed file, which provides daily posting data in HTML format. The data feed file is available free of charge from the FBO FTP site at www.fedbizopps. gov. The file follows the naming convention “FBOFeedyyyymmdd” and includes all eight types of synopses: presolicitation, modification to a previous notice, award, sources sought, foreign government standard, sale of surplus property, special notice, and combined synopsis/solicitation.

By signing up to automatically receive procurement information, vendors can react more quickly to procurement opportunities because they are better informed. Vendors can also search procurements by solicitation number, date, procurement classification code, and agency for active or archived solicitations. Currently, 140,000 registered vendors receive email notifications from FedBizOpps about opportunities; roughly 50,000 e-mails are sent out daily. Fifty-one agencies (or 17,400 contracting officers/specialists) currently post opportunities on FedBizOpps.

Commerce Business Daily

Although FedBizOpps has replaced the Commerce Business Daily (CBD; http:// cbdnet.access.gpo.gov) as the notification site for procurements over $25,000, the CBD is still a valuable marketing resource. The CBD website contains historical information about government agency purchases. You can find out which potential customers have bought your services in the past and even get an idea of when their existing contracts may expire.

Military Installations

Military installations offer huge opportunities for businesses. The trick to finding these opportunities is locating the right program office. Start with Armed Forces Network’s (www.armedforces.net) list of military installations worldwide, then narrow your search by region, state, and activity.

Long Range Acquisition Estimate

The Long Range Acquisition Estimate (LRAE) is a searchable database that covers projected U.S. Air Force RFPs. It includes information on buying activities, estimated dollar amounts, award dates, points of contact and contact information, and other information potential suppliers need to formulate marketing strategies. The LRAE can be found at http://safsbadmin.mysite4now.net/opportunities/ lraesearch.aspx.

General Services Administration Multiple Award Schedule Contracts

A great way for companies to get experience in federal government contracting is to pursue a General Services Administration Multiple Award Schedule contract. Under the GSA Schedules (also referred to as Multiple Award Schedules and Federal Supply Schedules) Program, GSA establishes long-term governmentwide contracts with commercial firms. GSA Schedule contractors supply more than 11 million commercial products and services, which the government can order directly from the contractors or through the GSA Advantage!® online shopping and ordering system.

To become a GSA Schedule contractor, a vendor must first submit an offer in response to the applicable GSA Schedule solicitation. GSA awards contracts to responsible companies offering commercial items at fair and reasonable prices that fall within the generic descriptions in the GSA Schedule solicitations. Contracting officers determine whether prices are fair and reasonable by comparing the prices/discounts that a company offers the government with the prices/discounts that the company offers to commercial customers. This negotiation strategy is commonly known as most favored customer pricing. In order to make this comparison, GSA requires offerors to furnish commercial price lists and disclose information regarding their pricing/discounting practices.

GSA offers a great deal of assistance to its commercial partners through two programs: the GSA Marketing Partnership and GSA Advantage!®.

The GSA Marketing Partnership

The GSA Marketing Partnership (http://www.gsa.gov/marketingpartnership) is a free service offered by the GSA’s Office of Marketing and Business Development. Participation ensures the success of Schedule contractors in building identification and increasing sales. The website offers information about Schedule Program enhancements, shows, expos, and various marketing opportunities. Participating in GSA’s shows will help your company sell to the government, increase your customer base, and penetrate overseas federal and military markets. In addition, you can download the GSA Starmark logos, GSA SmartPay® logos, and the GSA Advantage!® logos at the partnership website. Using these logos in your printed and online communications will promote your status as a GSA Schedule contractor.

GSA Advantage!®

GSA Advantage!® (www.gsaAdvantage.gov) is an online electronic shopping and ordering system. It provides online access to several thousand contractors and millions of products and services. It allows federal agencies to search for products and services using keywords, national stock numbers, contract numbers and vendor names; compare features, prices, and delivery options; and place orders electronically.

Products and services under contract must be posted on GSA Advantage!®—in other words, participation in GSA Advantage!® is mandatory for Schedule holders. See Clause I-FSS-597 in any GSA Advantage!® solicitation for more details. Every Schedule contract holder is represented by either a product or service listing or a text description of the company’s offerings. When your company submits its GSA Advantage!® information, make sure that the text contains keywords that customers may be using to search the site. Note also the holding of GSA Schedule contractor status requires regular and constant contract administration—e.g., meeting requirements during contract performance, submitting proper invoices, and conducting contract closeout as required by the contract, as well as filing of periodic reports on sales. If a company fails to do so, it can lose the Schedule.

Small Business Opportunities

Another way companies get started in federal government contracting is through the Small Business Administration’s special contracting opportunities. The Small Business Administration (SBA) has procurement center representatives (PCR) who work with federal agencies to identify prime contracting opportunities, reserve procurements for competition among small business concerns, provide small business sources to federal buying agencies, and counsel small firms.

SBA’s commercial marketing representatives (CMR) conduct compliance reviews of prime contractors, counsel small businesses on how to obtain subcontracts, conduct matchmaking to facilitate subcontracting to small businesses, and provide orientation and training on the government’s Subcontracting Assistance Program for both large and small businesses. To find the PCR or CMR representative servicing your company’s area, go to www.sba.gov/aboutsba/sbaprograms/gc/contacts/gc_pcrd1.html.

Small Disadvantaged Business Certifications enable qualified firms to gain access to federal prime contracting and subcontracting opportunities. To qualify, a business must be at least 51 percent owned and controlled by one or more individuals who are socially and economically disadvantaged. Contracting officers and prime contractors may query Central Contractor Registration and the Dynamic Small Business Search for potential contractors that can help fulfill their goals.

There are several self-certification programs in which the small business certifies on the representations and certifications portion of the RFP and on a federal contract that it meets the requirements of that program. These programs are:

Service-disabled veteran-owned small business. The federal government has established special procurement opportunities for service-disabled veterans. Under certain conditions, contracting officers may award a sole source or set-aside contract to a small business owned and controlled by a service-disabled veteran. To determine whether your business is eligible, contact your local veteran’s business development officer in the nearest SBA district office (go to http://www.sba.gov/ localresources for contact information), or contact the SBA’s Office of Veterans Business Development (see http://www.sba.gov/vets for more information).

Veteran-owned small business. A veteran-owned small business is defined as one which is at least 51 percent owned and controlled by one or more veterans, or, in the case of any publicly owned business, at least 51 percent of the stock is owned by one or more veterans, and the management and daily business operations are controlled by one or more veterans. If your company is a small business that meets the definition of veteran-owned, it can self-certify on a proposal for a contract. The Department of Veterans Affairs has authority to conduct veteran-owned business set-asides for its own procurements. For information on VA programs, go to www.va.gov. For information on SBA’s programs and services for veterans, contact the SBA’s Office of Veterans Business Development (visit http://www.sba.gov/vets for more information).

Woman-owned small business. The federal government has established a governmentwide goal for participation by small businesses owned and controlled by women. Not less than 5 percent of the total value of all prime contract and subcontract awards for each fiscal year shall be made to woman-owned small businesses. A woman-owned small business is defined as one that is at least 51 percent owned and controlled by one or more women, or, in the case of any publicly owned business, at least 51 percent of the stock is owned by one or more women, and the management and daily business operations are controlled by one or more women. If your company submits a proposal for a federal contract, it can self-certify that it is a woman-owned small business. For more information on SBA’s programs and services for women entrepreneurs, go to http://www.sba.gov/ aboutsba/sbaprograms/onlinewbc.

Agencies have a strong incentive to look for qualified small businesses when awarding contracts. Contract managers should therefore apply for the formal certifications and self-certifications for which their companies qualify. Federal agencies’ Offices of Small and Disadvantaged Business Utilization have specialists to assist small businesses. Go to http://www.osdbu.gov/offices.html for more information.

Developing a Marketing Plan

After your company identifies agencies that need its products or services, the next step is to put together a plan that describes how the company can meet their requirements. Just as a federal agency must write an acquisition plan if it wants a procurement to succeed, your company should develop a marketing plan.

First, the contract manager must understand how the company can fulfill the agency’s needs. Many companies like to meet with agency personnel to discuss their products or services. Before meeting a potential customer, the contract manager should compile a list of the company’s previous clients and be able to clearly and concisely answer these questions:

What is the agency’s mission?

Which department in the agency has a requirement for your firm’s product or service?

How can your company help the agency meet its goals and objectives?

What features do your products or services have that attracted customers to your company?

Once you understand the value your company can provide, create a plan that will show the agency why it should buy your product or services.

Research information on the agency’s budgets. The Budget Analyst website (www. budgetanalyst.com) is a good starting point.

Understand the agency’s mission and goals, and match your company’s products and services to the agency’s mission.

Research GAO Reports on the agency you’re targeting to see what kind of issues or problems it has had in the past. Be prepared to explain how your company can help the agency avoid that issue or solve that problem. GAO Reports are available at http://www.gpoaccess.gov/gaoreports/index.html.

Get the agency’s organization chart and develop a plan for calling agency staff— i.e., who will call whom? For example, if someone in the company already knows the contracting officer or program manager, it makes sense for that person to initiate the call or introduce the appropriate parties.

Now that you understand the planning process for both government and industry, let’s discuss the methods of acquisition and contract types available.

METHODS OF ACQUISITION

Different acquisition methods are used to accommodate different requirements. There is often more than one way to do things, so contracting officers must understand different acquisition methods so the agency’s requirements can be met in the most effective manner. The federal government uses three primary methods of acquisition:

1.Simplified acquisition procedures (FAR part 13)

2.Sealed bidding (FAR part 14)

3.Contracting by negotiation (FAR part 15).

Each of these three methods may be modified if the acquisition involves the purchase of commercial items as defined by law and regulation. Commercial acquisitions are sometimes viewed as a fourth acquisition method, but there are only three authorized methods of acquisition. The rules for each of the three methods also govern commercial item procurements, but they are simplified, in an effort to encourage broader participation by commercial contractors in federal acquisitions.

How does the agency decide which method to use for a given procurement? It must consider the acquisition’s purpose, objective, or mission. Another consideration is maximizing competition. Some methods of acquisition lend themselves to more competition. Generally, the less complex the solicitation and method of acquisition, the more companies are interested in competing. Commercial item procurements, no matter which of the three acquisition methods are used, are simpler and faster because certain laws aren’t applicable.

In addition, the contracting officer must consider the requirement’s complexity. Sometimes it makes sense to use negotiation as an acquisition method when discussions are required for complex requirements.

Simplified Acquisition Procedures

FAR part 13 establishes policies and procedures for simplified acquisitions. There are three different ways to use simplified acquisition procedures: (1) commercial purchase card, (2) purchase orders, and (3) Blanket Purchase Agreements (BPA). The simplified acquisition threshold is currently $100,000. If the purchase is for supplies or services that are used to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack, the threshold is $250,000 for any contract to be awarded and performed, or purchase to be made, inside the United States, and $1 million for any contract to be awarded and performed, or purchase to be made, outside the United States. There is also a special authority for commercial item acquisitions over the $100,000 simplified acquisition threshold and under $5.5 million. See FAR 13.5 for a description of the test program for certain commercial items.

The primary purposes of the simplified acquisition procedures are to:

Reduce administrative costs

Improve opportunities for small, small disadvantaged, woman-owned, veteran- owned, HUBZone, and service-disabled veteran-owned small businesses to obtain a fair proportion of government contracts

Promote efficiency and economy in contracting

Avoid placing unnecessary burdens on agencies and contractors.

The governmentwide commercial purchase card is the preferred method for making and paying for micropurchases. The micropurchase threshold is generally $3,000. For construction acquisitions subject to the Davis-Bacon Act, the threshold is $2,000, and for acquisitions of services subject to the Service Contract Act, the threshold is $2,500. These thresholds may change, so readers are advised to check FAR 2.101 for the current micropurchase thresholds.

Solicitations under simplified acquisition procedures may require companies to submit either a quotation or an offer. The primary type of solicitation used under simplified acquisition procedures is the request for quotations (RFQ).

Contracting professionals are responsible for choosing the appropriate method of solicitation (electronic commerce, verbal, or written) and for establishing the time frame for issuing the solicitation and receiving quotations or offers. The contracting officer also has to decide which clauses and provisions to include in the solicitation.

When contracting officers request quotations, they should notify potential vendors of the basis on which award will be made, such as price alone or price, past performance, and quality. Contracting officers have broad discretion in determining the evaluation procedures and may draw from those described in FAR parts 14 and 15. However, these procedures are not mandatory. For example, developing formal evaluation plans, establishing a competitive range, and holding discussions are not required. The contracting officer must evaluate the quotations based on what is established in the RFQ.

Keep in mind that a quotation is not an offer and cannot be accepted by the government to form a binding contract. When the government issues an order in response to a supplier’s quotation, therefore, it does not establish a contract. The order is an offer by the government to the supplier to buy certain supplies or services based on specified terms and conditions. A contract is established when the supplier accepts the offer, either formally, by signing the purchase order, or by initiating performance.

Sealed Bidding

Sealed bidding is an acquisition method in which the government issues an invitation for bid (IFB). The IFB is publicized by distributing it to prospective bidders, posting it in public places, and posting it on the FedBizOpps website. Sufficient time must be allowed between the time the IFB is publicized and bids are opened publicly to enable prospective bidders to prepare and submit bids.

An IFB should describe the government’s requirements clearly, accurately, and completely. Unnecessarily restrictive specifications or requirements that might unduly limit the number of bidders are prohibited. The invitation includes all documents (whether attached or incorporated by reference) furnished to prospective bidders for bidding purposes.

Agencies must use a fixed-price contract for sealed bidding. A pre-bid conference may be used, generally for a complex acquisition, as a means of briefing prospective bidders and explaining complicated specifications and requirements to them as early as possible after the invitation has been issued and before the bids are opened. The pre-bid conference should never be used as a substitute for amending a defective or ambiguous invitation.

To be considered for award, a bid must comply in all material respects with the invitation for bids. Such compliance enables bidders to stand on an equal footing and maintain the integrity of the sealed bidding system. Bidders are responsible for submitting bids and any modifications or withdrawals in time to reach the government office designated in the invitation for bid by the time specified in the IFB. They may use any transmission method authorized by the IFB (such as regular mail, email, or facsimile). If no time deadline is specified in the IFB, the deadline is 4:30 p.m. (local time for the designated government office) on the date that bids are due.

The bids are publicly opened, and the award is made based on price or price-related factors without any discussions or negotiations. Award can be made only to an off- eror whose bid conformed to the invitation. The contracting officer must award the contract within the time frame for acceptance specified in the bid to the responsible bidder whose bid will be most advantageous to the government, considering only price and the price-related factors stated in the IFB.

Sealed bidding should be used when all of the following conditions exist:

The specifications are precise enough to permit price and price-related factors to be the determining criteria for award.

There’s enough time for soliciting, submitting, and evaluating sealed bids.

The award will be made on the basis of price and other price-related factors.

It is not necessary to conduct discussions with the responding bidders about their bids.

There is a reasonable expectation of receiving more than one sealed bid.Contracting by Negotiation

If sealed bidding is not appropriate for a particular acquisition, contracting officers use the competitive negotiated method. When contracting by negotiation, contracting officers have much more flexibility than with other acquisition methods because they can select from all of the available contract types, conduct discussions (negotiations), and evaluate factors other than price.

An agency gets best value in negotiated acquisitions by using any one or a combination of source selection approaches. In different types of acquisitions, the relative importance of cost or price may vary. For example, in acquisitions for which the requirement is clearly definable and the risk of unsuccessful contract performance is minimal, cost or price may play a dominant role in source selection. The less definitive the requirement, the more development work required, or the greater the performance risk, the more technical or past performance considerations may play a dominant role in source selection. This process is called the best value continuum.

In a negotiated acquisition, the contracting officer uses a request for proposals to communicate government requirements to potential offerors and to solicit proposals. RFPs for competitive acquisitions describe the:

Government’s requirements

Anticipated terms and conditions that will apply to the contract

Information required to be in the offeror’s proposal

Factors and significant subfactors that will be used to evaluate the proposal and their relative importance.

With negotiated acquisition, contracting officers can choose from two methods that were discussed earlier in this chapter: the trade-off procedure or the lowest priced technically acceptable procedure.

Commercial Items

As discussed in the first chapter, the Federal Acquisition Streamlining Act changed the definition of commercial items, giving the government greater flexibility. Agencies conduct market research to determine if commercial items are available that can meet their requirements. The government’s policy is to purchase commercial items when they are available to meet the agency’s needs.

The FAR states that contracting officers “shall” (meaning that if the item meets the definition of commercial item, there is no discretion) use the policies unique to commercial items in FAR part 12, along with the policies and procedures in FAR parts 13 (simplified acquisition), 14 (sealed bidding), and 15 (negotiation). Thus, a commercial item purchase will use one of the three proscribed methods of acquisition, modified as permitted for commercial items.

The Small Business Act and the Office of Federal Procurement Policy Act require that agencies make notices of proposed contract actions available to prospective offerors. This notification action is called synopsis, and it is typically a separate step in the process. The FAR, however, provides a streamlined method for soliciting and evaluating commercial items. The streamlined procedures may combine the synopsis and solicitation into a single document. Because the synopsis and solicitation are combined, it isn’t necessary to publicize a separate synopsis 15 days before issuing the solicitation. The solicitation response time may also be less than 30 days for commercial item acquisitions, but contracting officers must consider the circumstances of the individual acquisition, such as complexity and urgency, when establishing the due date. While the FAR sets forth solicitation provisions and contract clauses for commercial items, contracting officers may tailor the terms and conditions to reflect the specific market for that acquisition.

Commercial item contracts must be firm fixed-price or fixed-price with an economic price adjustment.

CONTRACT TYPES

Acquisition professionals in government and industry may choose from a wide selection of contract types to get the flexibility they need when acquiring supplies and services. Contract types vary according to the degree and timing of the responsibility assumed by the contractor for the costs of performance and the amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.

There are two broad categories of contract types: fixed-price contracts and cost- reimbursement contracts. A fixed-price contract stipulates a fixed sum of money to be paid the contractor as consideration for performance. The contractor is obligated to deliver an acceptable product or services for the agreed-to price, no matter how much it costs the contractor to perform the work.

Under a cost-reimbursement contract, the government reimburses the contractor for the reasonable, allowable, and allocable costs of performance as or after they are incurred. The contractor is only obligated to make a “good faith” effort within the estimated cost and may not continue performance once the money runs out.

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 these extremes are various kinds of incentive contracts, under which the contractor’s responsibility for the performance costs and the profit or fee incentives offered are tailored to the uncertainties of contract performance.

Four contract types deserve more detailed attention here:

Fixed-price contracts

Cost-reimbursement contracts

Incentive contracts

Time-and-materials contracts.

Fixed-Price Contracts

In fixed-price contracts, there is a firm price, or in some cases, an adjustable price. Fixed-price contracts with an adjustable price may include a ceiling price, a target price (including target cost), or both. Unless otherwise specified in the contract, the ceiling price or target price can be adjusted only by applying a contract clause that allows an equitable adjustment or other price revision under stated circumstances. In appropriate circumstances, a fixed-price redeterminable contract may be used with either prospective or retroactive features. Redeterminable contracts permit the parties to adjust or redetermine the prices. This adjustment may be made prospectively at predetermined times during contract performance (see FAR 52.216-5) or retroactively within a specified time after contract delivery (see FAR 52.216-6).

The price of a firm fixed-price (FFP) contract may not be adjusted during contract performance. This contract type places the risk and full responsibility for all costs and resulting profit or loss on the contractor. It also provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden on government oversight. A firm fixed-price contract is suitable for acquiring commercial items or other supplies or services based on reasonably definite functional or detailed specifications, and when the contracting officer can establish fair and reasonable prices at the outset, such as when one of these conditions is met:

There is adequate price competition.

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.

Available cost or pricing information permits realistic estimation of the probable costs of performance.

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

Another type of fixed-price contract is a fixed-price contract with an economic price adjustment (EPA). This type of contract allows the contract price to be adjusted upward and downward when specified contingencies occur. Economic price adjustments are of three general types:

1.Adjustments based on established prices. These price adjustments are based on increases or decreases from an agreed-upon level in published or otherwise established prices of specific component items or the contract end items.

2.Adjustments based on actual costs of labor or material. These price adjustments are based on increases or decreases in specified costs of labor or materials that the contractor actually experiences during contract performance. Note that this provision may not be used to protect against performance risk from inaccurately estimating the amount of labor or materials required, but only the cost of the proposed amount of labor or materials needed.

3.Adjustments based on cost indexes of labor or materials. These price adjustments are based on increases or decreases in labor or material cost standards or indexes (such as the cost index for gold) that are specifically identified in the contract.

Contracting officers use a fixed-price contract with economic price adjustment when serious doubt exists about the stability of market or labor conditions that will exist during an extended period of contract performance. This type of contract is also appropriate when major contingencies (that would otherwise be included in the contract price) can be identified and covered by a price adjustment clause in the contract. Price adjustments based on established prices should normally be restricted to industry-wide contingencies. Price adjustments based on labor and material costs should be limited to contingencies beyond the contractor’s control.

Cost-Reimbursement Contracts

Cost-reimbursement contracts pay allowable incurred costs to the extent prescribed in the contract. The estimated total cost is used to obligate funds and establish a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer. Cost-reimbursement contracts are suitable for use only when uncertainties associated with contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.

A cost-reimbursement contract may be used only when the contractor’s accounting system is adequate for determining costs applicable to the contract, and appropriate government surveillance during performance provides reasonable assurance that the contractor is using efficient methods and effective cost controls. Contracting officers may not use cost-reimbursement contracts for commercial item acquisitions.

One popular type of cost-reimbursement contract is the cost-plus-fixed-fee (CPFF) contract. CPFF is a cost-reimbursement contract that pays the contractor a negotiated fee that is fixed at contract award. The fixed fee does not vary with actual cost, but may be adjusted as a result of contract changes. This contract type enables acquisitions that might otherwise present too great a risk to contractors, but it gives the contractor only a minimum incentive to control costs.

Contracting officers may use a cost-plus-fixed-fee contract when the contract is for performing research, preliminary exploration, or study, and the level of effort required is unknown. CPFF contracts can also be used for development and test when using a cost-plus-incentive-fee (CPIF) contract is not practical.

A cost-plus-fixed-fee contract may take one of two basic forms—completion or term.

The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g., a final report on research that accomplished the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee. If the contractor can’t complete the work within the estimated cost, however, the government may require the contractor to complete performance by increasing the estimated cost without increasing the fee.

The term form describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period. If the government considers performance satisfactory, the fixed fee is payable at the end of the stated period, after the contractor shows that it expended the specified level of effort during contract performance. If the contract is renewed for additional periods of performance, that is considered a new acquisition that involves new cost and fee arrangements.

Because the contractor assumes different obligations and risk depending on whether the term or completion form of CPFF contract is used, the government prefers the completion form whenever the work, or specific milestones for the work, can be defined well enough to permit the contractor to develop estimates within which they will complete the work. Term form CPFF contracts require contractors to provide a specific level of effort within a definite time period.

Agencies should avoid using a cost-plus-fixed-fee contract when developing major systems once preliminary exploration, studies, and risk reduction have indicated a high degree of probability that the development is achievable and the government has established reasonably firm performance objectives and schedules.

Before awarding a cost-plus-fixed-fee contract, the contracting officer must first analyze the proposal per FAR 15.404 and ensure that the contractor has an adequate accounting system and the government has an appropriate surveillance system in place to ensure that the contractor is performing efficiently.

Incentive Contracts

Incentive contracts may be used when a firm fixed-price contract is not appropriate and the required supplies or services can be acquired at lower costs and, in certain instances, with improved delivery or technical performance, by relating the amount of profit or fee payable under the contract to the contractor’s performance. Incentives may include cost, performance, or delivery incentives, or any combination ofthe three. Incentive provisions can be included in both fixed-price and cost-type contracts.

Incentive contracts are designed to obtain specific acquisition objectives by

Establishing reasonable and attainable targets that are clearly communicated to the contractor

Including appropriate incentive arrangements designed to motivate contractor efforts that might not otherwise be emphasized and to discourage contractor inefficiency and waste.

When predetermined formula-type incentives on technical performance or delivery are included, increases in profit or fee are provided only for achievement that surpasses the targets, and decreases are provided for if targets are not met. The incentive increases or decreases are applied to performance targets rather than minimum performance requirements.

Award-fee contracts are also a type of incentive contract. A cost-plus-award-fee (CPAF) contract is a cost-reimbursement contract that provides for a fee consisting of a base amount fixed at inception of the contract and an award amount that the contractor may earn in whole or in part during performance. The award amount should sufficiently motivate excellence in such areas as quality, timeliness, technical ingenuity, and cost-effective management. The amount of the award to be paid is determined by the government’s subjective judgment of the contractor’s performance in terms of the criteria stated in the contract. This determination and the method for determining the award fee are unilateral decisions made solely at the discretion of the government. Award-fee plans, which may be renegotiated on a periodic basis as the needs of the program change, are usually developed for award- fee contracts.

Contracting officers use a CPAF contract when the work required does not permit establishing a predetermined, objective incentive target for cost, technical performance, or schedule. A CPAF contract can also be used if it enhances the likelihood of meeting acquisition objectives, because this contract type effectively motivates the contractor toward exceptional performance and gives the government the flexibility to evaluate both actual performance and the conditions under which it was achieved. Contracting officers need to consider the additional administrative effort and cost required to monitor and evaluate performance in a CPAF contract.

A contractor is evaluated at regular intervals while performing a CPAF so that the government can give feedback on the quality of its performance and the areas in which it expects improvement. Generally, the contractor is paid part of the fee during each evaluation period. Thus, by inducing the contractor to improve poor performance or to continue good performance, the award fee acts as an effective incentive. The award-fee criteria and rating plan should motivate the contractor to improve performance in the areas noted as needing improvement, but not at the expense of at least minimum acceptable performance in all other areas.

Contracting officers may not award a CPAF contract unless the contractor has an adequate accounting system and the government has appropriate surveillance systems in place to ensure efficient and effective cost controls.

Time-and-Materials Contracts

Another type of contract that doesn’t fit into the fixed-price or cost-reimbursement categories is the time-and-materials (T&M) contract. A time-and-materials contract allows the government to purchase supplies or services on two bases: direct labor hours at a fixed hourly rate and the cost of materials. The direct hourly rate includes wages, overhead, general and administrative expenses, and profit. The material expenses are reimbursed based on their actual cost.

A time-and-materials contract may be used only when it is not possible to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence at contract award. A time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Appropriate government surveillance of contractor performance is therefore required to give reasonable assurance that efficient methods and effective cost controls are being used.

By now, you can see that some contract types are riskier to the government; other contract types are riskier to the contractor. Figure 2-3 illustrates the relationship between risk and contract type for both government and contractor.

Note that firm fixed-price contracts have the least risk for the government, but the most risk for the contractor. Similarly, time-and-materials contracts have the least risk for the contractor but the most for the government. This risk relationship makes selecting a contract type challenging.

Selecting a Contract Type

How do you know which type of contract will work best for your procurement? There are a lot of different ways the contracting officer can go about choosing a contract type. The contract type is generally selected by negotiation, although agencies will recommend or suggest a contract type in the RFP. Negotiating the contract type and negotiating prices are closely related, and contract type and price should be considered together. The objective is to negotiate a contract type and price (or estimated cost and fee) that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance.

Figure 2-3 Contract Type Risk Ranking

Agencies use a firm fixed-price contract emphasizing profit, for example, when the risk involved is minimal or can be predicted with an acceptable degree of certainty. When a reasonable basis for firm pricing does not exist, however, contracting officers must consider other contract types and direct negotiations toward selecting a contract type (or combination of types) that links profit to contractor performance.

The FAR discourages using a cost-reimbursement or time-and-materials contract type over an extended period of time. Experience with a particular product or service provides a basis for firmer pricing.

Sealed bidding requires firm fixed-price contracts or fixed-price contracts with economic price adjustment. Contracts negotiated under FAR part 15 may be of any type or combination of types that will promote the government’s interest, except the cost-plus-a-percentage-of-cost system. That contract type is prohibited.

Selecting a contract type that is inappropriate for a particular acquisition can cause severe performance problems or lead to a default termination. For example, using a firm fixed-price contract when the circumstances call for a cost-reimbursement contract will put pressure on the contractor to either propose a very high price to protect itself or perhaps deliver an inadequate product for the agreed-upon price.

The U.S. Navy’s A-12 aircraft contract is an infamous example of selecting the wrong contract type. In 1984, the navy awarded two teams fixed-price contracts for concept formulation and demonstration validation. Even though the initial contract results from the concept formulation phase indicated that the design was immature, the navy awarded McDonnell Douglas and General Dynamics a full-scale engineering and development contract to develop the A-12, a stealth aircraft.

In 1990, the contracting team informed the navy that the schedule for first flight had slipped significantly and that it couldn’t absorb a contract ceiling overrun or meet some performance specifications. The navy terminated the contract for default in 1991. The claims court ruled that the termination for default was improper and converted it into a termination for the convenience of the government. The government appealed the decision, and after several years of appeals, the U.S. Court of Federal Claims ruled in favor of the government, stating:

The Government can point to reasons in retrospect why plaintiffs were not making the progress that some officials hoped and perhaps expected. So long as those reasons form a rational basis for a reviewing court to uphold defendant’s decision to terminate, the court must do so.

Boeing (which now owns McDonnell Douglas) appealed to the United States Court of Appeals for the Federal Circuit on May 4, 2007; we still await the result. The lesson learned from this contract, even though it’s been litigated longer than it was performed, is that selecting the correct contract type can mean the difference between success and failure.

There are many factors that the contracting officer should consider when selecting and negotiating the contract type, including:

Price competition. Normally, effective price competition results in realistic pricing. A contract type that shifts too much risk to the contractor may reduce the level of or amount of competition. If an RFP poses too much risk, companies may not submit proposals, thereby reducing the amount of competition.

Price analysis. Price analysis, with or without competition, may provide a basis for selecting the contract type. Contracting officers should carefully consider the degree to which price analysis can provide a realistic pricing standard.

Cost analysis. In the absence of effective price competition, and if price analysis is not sufficient, the offeror’s and government’s cost estimates provide the bases for negotiating contract pricing arrangements. It is essential to identify and evaluate the uncertainties involved in performance and their possible impact upon costs, so that the contracting officer can negotiate a contract type that places a reasonable degree of cost responsibility upon the contractor.

Type and complexity of the requirement. The government usually assumes more risk in contracts with complex requirements, particularly those unique to the government. This is especially true for complex research and development contracts, when performance uncertainties or the likelihood of changes makes it difficult to estimate performance costs in advance. As a requirement recurs or as quantity production begins, the cost risk should shift to the contractor, and the contracting officer should consider a fixed-price contract.

Urgency of the requirement. If urgency is a primary factor, the government may choose to assume a greater proportion of risk, or it may offer incentives to ensure timely contract performance.

Period of performance or length of production run. In times of economic uncertainty, contracts extending over a relatively long period may require economic price adjustment terms.

Contractor’s technical capability and financial responsibility. A contractor that must hire the necessary personnel or that suffers from high employee turnover may not be able to perform under some contract types. A contractor experiencing financial difficulty may not have the resources to purchase required supplies or meet payroll for contract performance.

Adequacy of the contractor’s accounting system. Before agreeing on a contract type other than firm fixed-price, the contracting officer must be certain that the contractor’s accounting system will permit timely assembly of all necessary cost data in the form required by the proposed contract type. This factor may be critical if the contract type requires price revision during contract performance, or if the parties are considering a cost-reimbursement contract, and all current or past experience with the contractor has been on a fixed-price basis.

Concurrent contracts. If performance under the proposed contract involves concurrent operations under other contracts, the contracting officer should consider the impact of those contracts, including their pricing arrangements. For example, companies must have an accounting system that can differentiate between charges incurred on fixed-price and cost-reimbursement contracts so that mischarging does not occur.

Extent and nature of proposed subcontracting. If the contractor proposes extensive subcontracting, the contracting officer should select a contract type reflecting the actual risks to the prime contractor.

Acquisition history. As the contractor gains experience in providing the products or services required, it is exposed to less risk, so a fixed-price contract may be appropriate for follow-on acquisitions. More definite product or service descriptions also reduce risk, and facilitate the use of a fixed-price contract type.

There are so many factors to consider before selecting a contract type, it’s no wonder that there are occasionally mismatches between the acquisition and the contract type. Keep in mind, however, that the contract type is negotiable. The contract type the government suggests in the RFP is a recommendation, not a requirement. An offeror may propose another contract type and explain in its proposal why the alternative makes more sense from a risk or performance standpoint. Sometimes, the parties determine to change the contract type during contract performance. In any case, the contracting officer must document why he or she selected a particular contract type.

CHAPTER SUMMARY

Chapter 2 explains the essential tasks government agencies and potential offerors perform when planning for a federal acquisition. First, for most procurements, agencies must perform market research. We discuss the types and sources of market research data and detailed how to document data once it is collected.

Next, the agency writes an acquisition plan and a source selection plan, which guide the acquisition strategy. Depending on their requirements, agencies can choose one of two basic acquisition strategies: awarding to the lowest-priced technically acceptable offeror or awarding to another offeror based on factors unrelated to cost or price.

Switching to industry’s perspective, we discuss the elements of selling to the government. The chapter details the essential Central Contractor Registration process and offers guidance on finding federal business opportunities for businesses of any size and those new to federal contracting. We also offer suggestions for developing a marketing plan.

Finally, the chapter covers four methods of acquisition (simplified acquisition, sealed bidding, contracting by negotiation, and contracting for commercial items) and details the requirements for each. It also explains the four basic contract types— fixed-price, cost-reimbursement, incentive, and time-and-materials—and suggests factors to consider when selecting a contract type.