This course is sponsored by the Federal Acquisition Institute

1. This course is sponsored by the Federal Acquisition Institute The primary organization providing knowledge and support to the federal acquisition workforce

2. Agenda • Welcome • Speaker Introduction • The Basics of Competition and Contract Types • Hot Topics • FAI Closing Remarks

3. Dr Donna McCarthy FAI Director Mathew Blum Associate Administrator

4. Acquisition Learning Seminar The Basics of Competition and Contract Types David J. Capitano Director, Acquisition Oversight Office of the Chief Procurement Officer U.S. Department of Homeland Security January 27, 2010

5. Objectives Upon completion of this ALS, participants will be able to: • Describe the benefits of competition in acquisition • Understand the statutory exemptions from competition among different contract types • Identify when each contract type may/should be used

6. Topics • Competition • Contract Types

7. I. Competition

8. Competition Competition provides the best assurance that we have • Received a fair and reasonable price, and • Obtained the most comprehensive input on the technical aspects of the various methods in which the work can best be performed.

9. Competition Policy Contracting without providing full and open competition after exclusion of sources is a violation of statute, unless permitted by one of the exceptions in 6.302. FAR Part 6.301

10. Competition Policy Each contract awarded without providing for full and open competition shall contain a reference to the specific authority under which it was awarded (FAR 6.301(b)). FAR Part 6.301

11. Competition Policy The contract file must contain adequate written documentation (FAR 6.303) and approval (FAR 6.304) to justify the exception. FAR Part 6.301

12. Competition • Contracting without providing full and open competition is not justified by: • Lack of advance planning • Concerns related to the amount of funds available (e.g., funds will expire)

13. Exceptions from Full and Open CompetitionOnly One Responsible Source • For other than DoD, NASA, and Coast Guard, only one source is available, and no other supplies or services will satisfy agency requirements (FAR 6.302-1) • Substantial duplication of cost to the Government that is not expected to be recovered through competition • Unacceptable delays in fulfilling the agency requirements

14. Exceptions from Full and Open CompetitionOnly One Responsible Source–Brand Name • J&A required for brand name descriptions • Any acquisition that uses brand name descriptions or other purchase description to specify a particular brand name, product, or feature of a product peculiar to one manufacturer does not provide full and open competition regardless of the number of sources solicited.

15. Exceptions from Full and Open Competition • Unusual and Compelling Circumstances (FAR 6.302-2) • Agency need for the supplies or services is of such an unusual and compelling urgency that the Government would be seriously injured unless the agency is permitted to limit the number of sources.

16. Exceptions from Full and Open Competition

17. Full & Open Competition? Background The DDT Program has been extremely satisfied with the performance of their support contractor, Company XYZ, for the last 7 years. The contract is expiring July 31, 2010 and the program requested that the contracting officer issue a sole source contract to XYZ for a three year period, effective August 1, 2010.

18. Full & Open Competition? Market Research Market research indicates there are several companies that could perform the work. But, the program office believes it is more efficient and effective to continue performance with XYZ. Program personnel have stated that they know the other contractors that can perform, and none of them can measure up to XYZ.

19. Full & Open Competition? Question Should the contracting officer issue a sole source contract to Contractor XYZ?

20. Full & Open Competition? Answer No, a sole source award is not appropriate. There are several alternative sources available. The fact that the program office is satisfied with the past performance of the incumbent, or that they believe the other potential offerors won’t measure up to the incumbent, are not sufficient reasons to issue a sole source contract.

21. Full & Open Competition? Answer cont’d The Contracting Officer should issue a solicitation with full and open competition. If Contractor XYZ is the highest rated based on the criteria in the solicitation, then Contractor XYZ will receive the award. Conversely, if another offeror is the highest rated, then Contractor XYZ will not receive the award.

22. Full & Open Competition? Background The contract with Beastay, Inc. to provide IT support to the Polooka office is expiring in August, 2010. The contract requires security clearances for the fifty contractor employees that will be performing at the Government site.

23. Full & Open Competition? The requirements office has requested that the contracting officer enter into a sole source award because Beastay, Inc. already has the security clearances, while award to any other contractor could cause significant delay in performance.

24. Full & Open Competition? Question Should the contracting officer issue a sole source award to Beastay, Inc.?

25. Full & Open Competition? Answer No, a sole source award is not appropriate. To assure that there is no break in service, the Contracting Officer and the requirements office need to work together to assure that the procurement is conducted with enough adequate advance time to permit obtaining the necessary clearances.

26. Full & Open Competition? Answer cont’d In addition, if necessary, a bridge contract can be negotiated with the incumbent to assure there is no break in service.

27. Q&A FAR Part 16.602

28. II. Contract Types

29. Major Contract Types Fixed Price Cost Type Time and Materials/Labor Hour FAR Part 16

30. Firm Fixed Price VersusCost Reimbursement Contracts Cost Reimbursement • Government pays the contractor’sactual, allowable costs Firm Fixed Price • Government pays the Contractor the agreed to price** **Contractor absorbs losses if the costs are greater than price

31. Key Accounting System Consideration • Anytime payment will be based on actual costs incurred, the contractor’s accounting system has to be “adequate” for accumulating actual costs incurred.

32. Contract Types - Incentives • Both cost type and fixed price contracts can also include: • Cost Incentives • Schedule Incentives • Performance Incentives

33. Contract Types - Incentives • Incentives can be: • Objective; and/or • Subjective (Award Fees)

34. Cost Incentives • Cost incentives: • Fixed price incentive contracts (FAR 16.204) • Cost reimbursement incentive contracts (FAR 16.304)

35. Cost Incentives • Adjustment formula • Fixed Price: Adjusts profit and final contract price • Cost Reimbursement: Adjusts fee • Intended to motivate the contractor to effectively manage costs

36. Schedule/Performance Incentives • Objective measures to maximum extent possible • Designed to relate profit/fee to results achieved by the contractor

37. Award Fee • Subjective measures (include incentives with objective measures to maximum extent practical) • Establish award fee pool/base fee • Provide process for periodic evaluation of the contractor’s performance against the award fee plan • Require HCA approval that contract is in best interest of the Government • Cost-benefit analysis

38. Contract-Type Risk HighContractorLow Degree of Risk Cost Sharing FP - EPA CPFF & FPAF FPIF T&M CPAF CPIF FFP & LH CR LowGovernmentHigh

39. Key Selection Criteria --Requirements Definition • Requirements are the key to selecting the correct contract type. • Well defined requirements facilitate use of fixed price contracts.

40. Key Selection Criteria --Requirements Definition • Contracts are not well defined because: • Acceptable: Research indicates that desired outcome does not lend itself to well-defined requirements; or • Unacceptable: Adequate research has not been expended to develop well-defined requirements.

41. Fixed Price Contract Types • In general • The Government pays the contractor for the agreed-to-price ……. regardless of the costs incurred by the contractor to perform the contract. • Profit is in the agreed-to-price. • Interim financing available for Fixed Price Contracts • Performance based payments • Progress payments based on cost

42. Fixed Price Contract Types Firm Fixed Price • Definition • Use when • Highest risk to the contractor • Lowest risk to the Government FAR Part 16.202

43. Fixed Price Contract Types Fixed Price/Economic Price Adjustment • Definition • Use when • Adjustments • Indexes • Established Prices • Actual Cost Incurred FAR Part 16.203

44. Fixed Price Contract Types Fixed Price Incentive Fee • Definition • Use when • Objective cost incentive FAR Part 16.205

45. Fixed Price Contract Types Fixed Price Award Fee (Subjective) • Definition • Use when • Combine with objective incentives to maximum extent practical FAR Part 16.404

46. Cost Type Contracts • Government reimburses contractor for all actual, allowable costs • Fixed Fee (if applicable) is negotiated • Interim reimbursement on public vouchers

47. Cost Type Contracts Cost Reimbursable • Definition • Use when • No fee FAR Part 16.302

48. Cost Type Contracts Cost Sharing • Definition • Use when • Contractor and government share costs • Agreement with Cognizant Federal Agency Official and contractor that contractor share will not be charged to any other Government cost-based contracts FAR Part 16.303

49. Cost Type Contracts Cost Plus Incentive Fee* • Definition • Use when • Incentives for: • Cost • Schedule • Performance FAR Part 16.304 & 16.405-1

50. Cost Type Contracts Cost Plus Award Fee • Definition • Use When • Combine with objective incentives to maximum extent practical FAR Part 16.305 & 16.405-2