Breakout Session #101 Diane K. Whitmoyer, CPCM Vice President, Contracts & Procurement BAE Systems

1. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

2. Introduction to Federal Contracting Breakout Session #101 Diane K. Whitmoyer, CPCM Vice President, Contracts & Procurement BAE Systems Monday, April 26, 2004 11:15 AM – 12:15 AM NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

3. Seminar Objectives • Understand the federal contracting environment from both the buyer(Govt.) and sellers(Federal Contractors) perspective NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

4. Seminar Outline of Introduction To Federal Contracting • Comparison of Fed vs. Commercial Contracting • Phases of the Procurement Process • The FAR • Acquisition of Commercial Items • Procurement Methods • Contract Types • Proposal Analysis Techniques • Contract Award • Contract Administration Issues • Contract Planning/Performance Monitoring • Contract Changes/Govt. Property • Subcontracts/Terminations/Disputes • Inspection/Acceptance/Closeout NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

5. Federal Contracting political influences socioeconomic concerns public accountability size and complexity of contracts Commercial Contracting less regulated no set process no requirement to solicit multiple vendors longer relationships with suppliers different elements in selecting sources Comparison of Federal and Commercial Contracting NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

6. Categories of Contracts • Products/Supplies • Services • Major System Acquisition • R&D • Construction & Architect-Engineer • Information Technology • Utility Services NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

7. Phases of the Procurement Process • Procurement Planning • Contract Formation • Contract Administration NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

8. Contracting Office Contracting Officer Contract Negotiator/ Administrator CORs, COTRs, QAEs Price/Cost Analysts Legal Auditor Competition Advocate/SADBU QA/Trans Specialists Program Office Program/Project Manager Engineers Logistician IT Managers Technical Representatives End User/Customer Contractor The Acquisition Team NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

9. REQUEST FOR PROPOSALS (RFP’S) REQUEST FOR QUOTATIONS (RFQ’S) INVITATION TO BID (IFB) REQUEST FOR INFORMATION (RFI) PROGRAM RESEARCH AND DEVELOPMENT ANNOUNCEMENT (PRDA) BROAD AGENCY ANNOUNCEMENT (BAA) NASA RESEARCH ANNOUNCEMENT (NRA) ANNOUNCEMENT OF OPPORTUNITY (AO) SOLICITATION TYPES NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

10. The FAR • Established to codify uniform policies for acquisition of supplies and services by executive agencies NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

11. Applicability of the FAR • Applies to all acquisitions as defined in FAR Part 2 • Not applicable to: • Grants • Cooperative Agreements • Non-appropriated Fund Activities NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

12. Background of the FAR • Before 1984, each executive agency had its own set of acquisition procedures • Created to present one government wide face to industry NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

13. Organization of The FAR • Parts 1-4 Subchapter A-General • Parts 5-12 Subchapter B-Competition and Acquisition Planning • Parts 13-18 Subchapter C-Contracting Methods & Contract Types • Parts 19-26 Subchapter D-Socioeconomic Programs • Parts 27-33 Subchapter E-General Contracting Requirements • Parts 34-41 Subchapter F-Special Categories of Contracting • Parts 42-51 Subchapter G-Contract Management • Parts 52-53 Subchapter H-Clauses and Forms NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

14. Numbering of The FAR FAR FAR# Title Part 14 Sealed Bidding Subpart 14.1 Use of Sealed Bidding Section 14.103 Policy Subsection 14.103-1 General NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

15. Numbering of The FAR (Cont.) • Subdivisions below the section or subsection level shall consist of : • alpha numeric as follows: lower case alphabet, Arabic numbers, lower case Roman numerals, and upper case alphabet. • Illustrative example: (a)(1)(i)(A) • Subdivisions, below the 4th level, shall repeat the sequence. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

16. Using FAR Part 52.2 • Sets forth the text of all FAR provisions & clauses • Keyed to the parts of the FAR • All FAR provision/clause numbers begin with "52.2" • The next two digits of the provision or clause number correspond to the number of the FAR subpart in which the provision or clause is prescribed • In the body of FAR, clauses and provisions that implement subpart policies and procedures are listed in a subsection entitled “Clause(s)” NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

17. Agency Supplements • An agency head may issue agency acquisition regulations that implement or supplement the FAR • Same structure as the FAR but preceded by the Agency Prefix number, • GSA prefix is 5 • DOD prefix is 2 • Illustrative Example: FAR 6.304; GSAR 506.304 • Must not conflict or be inconsistent with FAR NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

18. Publicizing Procurements • Placement of a Synopsis in FedBizOps required for procurements over $25,000 • Synopsis • Description of Supplies/Services to be acquired • Information on obtaining a copy of the solicitation NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

19. Uniform Contract Format(UCF) • Part 1 • A. Solicitation/Contract Form • B. Supplies/Services and Prices • C. Description/Spec./SOW • D. Packaging and Marking • E. Inspection and Acceptance • F. Deliveries or Performance • G. Contract Administration Data • H. Special Contract Requirements NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

20. UCF, cont. • Part 2 Contract Clauses • I. Contract Clauses • Part 3 List of Attachments • J. List of Documents, Exhibits • Part 4 Representations and Instructions • K. Representations, Certifications, and other statements of offerors • L. Instructions to Offerors • M. Evaluation for Award NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

21. Government Acquisition of Commercial Items Policies and procedures unique to commercial item acquisitions • Contained in FAR Part 12 • Establishes acquisition policies resembling the commercial marketplace • Encourages the acquisition of commercial items and components • Mandated by FASA statute • Definition in FAR 2.102 NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

22. Government Acquisition of Commercial Items Agency responsibilities • Conduct market research • Acquire commercial or non-developmental items when they meet needs • Require prime contractors and subcontractors to establish preference for commercial items-flow down clause NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

23. Simplified Acquisition Procedures • Threshold- $2,500 to $100,000 • Set aside for Small Business • Firm Fixed Price Only • Competition requirement limited to reasonable number of sources • Oral quotes up to $25,000 • Synopsis over $25,000 • Initiating Document-RFQ NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

24. Simplified Acquisition Procedures, cont. • Common methods of purchasing • Hard copy and Electronic Purchase Orders • Purchase Orders are offers to buy that are binding upon acceptance • Credit Cards • Interim Test until January 2002 • SAP Can Be used for acquiring Commercial Items up to $5 Million NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

25. Simplified Acquisition Procedures Acquisition between $2,500 - $100,000 reserved for small business • Purpose of SAP • Reduce administrative costs • Improve opportunities for small business • Promote efficiency and economy • Avoid unnecessary administrative burdens NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

26. Sealed Bid Procedures • FAR Part 14 • Describes Sealed Bid Procedures • A well-defined requirement is necessary • Firm Fixed Price or Fixed Price-EPA only • Solicitation Document-Invitation for Bids (IFB) NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

27. Sealed Bidding, cont. • Contractor submits a Sealed Bid by Bid Opening time on Solicitation • No discussions, clarifications, correction • Award is based on price alone NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

28. Government Sealed Bidding Two-step sealed bidding • Combination of competitive procedures • Obtains the benefits of sealed bidding • Adequate specifications are not available • Permits development of descriptive but not restrictive requirements • Subsequent acquisitions made by conventional sealed bidding NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

29. Contracting By Negotiation • Two Types • Sole Source Acquisitions • Competitive Acquisitions • Use of Source Selection Processes • Solicitation Document • Request for Proposal (RFP) NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

30. Source Selection Techniques in Competitive Acquisitions • Best Value Continuum • Lowest Price Technically Acceptable • Best Values is expected to result from selection of the technically acceptable proposal with the lowest evaluated price • Tradeoff Process • Appropriate when it is in the Govt.’s best interest to consider award to other than the lowest priced offeror or the highest technically rated offeror NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

31. Competitive NegotiationsSource Selection Processes • Objective-Select the Proposal that represents the Best Value to the Govt. • Informal Source Selection • CO makes source selection decision • Formal Source Selection • Used in high dollar procurements • Source Selection Authority selects • Source Selection Team recommends NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

32. Formal Source Selection Process-Solicitation Stage • Development of Evaluation factors for Section M, Evaluation Criteria • Price or cost shall be evaluated • Past Performance factor equal to or more than highest rated factor such as Management Capability, Technical Expertise • Rating Approach need not be disclosed but as a minimum state whether all non-cost factors combined are more important, equal or less important than cost or price NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

33. Contract Award Issues • Debriefing-Explanation by procuring agency on why a competitor did not win • Discussion of the significant weaknesses and deficiencies in the offeror’s proposal • Protests-An objection submitted by an interested party • Protest Forums • Agency • Comptroller General (GAO) • U.S. Courts NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

34. Fixed-Price Most desirable type Minimum risk & burden on Govt. Defined Requirements Risk of performance on Contractor Contractor paid upon acceptance of tendered items/services Cost Reimbursement Least Desirable type Maximum risk & burden on Govt. Unknown requirements Risk of performance on Govt. Contractor paid for best efforts Fixed-Price vs. Cost Reimbursement NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

35. Factors to Consider in Selecting Contract Type • Risk factors • Contract administration factors • Type and complexity of the requirement • Urgency of the requirement • Period of performance • Extent of subcontracting NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

36. Contract Types Fixed Price • Provides for a fixed price • Occasional adjustable price for economic factors/incentives • Normally less government oversight • Application • Fairly stable design • Definitive scope • Some government surveillance during performance NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

37. Contract Types Cost type • Pay allowable incurred costs • Total cost estimate established for obligation and contractual ceiling • Contractor exceeds ceiling at own risk • Contractor assumes less risk • More government oversight • Application • Uncertainties exist in contract performance • Fixed-price type cannot be used • Contractor accounting system must be adequate NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

38. Contract Types Time & Materials/Fixed Rate Per Hour • Fixed hourly rates for labor/skill categories • NTE amounts usually established Incurred hrs. for each task order must be supported • Other direct costs or materials reimbursed at actual cost NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

39. Govt.’s Primary Techniques to Proposal Analysis • Price analysis shall be used when cost or pricing data are not required • Cost analysis shall be used when cost or pricing data are required • Cost realism analyses shall be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

40. Price & Cost Analysis • Price analysis is the process of examining and evaluating a proposed price without evaluating its separate cost elements and proposed profit. • Cost analysis is the review and evaluation of the separate cost elements and profit in a proposal and the application of judgment to determine how well the proposed costs represent what the cost of the contract should be, assuming reasonable economy and efficiency NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

41. Cost Realism • Is the process of independently reviewing and evaluating specific elements of each offeror's proposed cost estimate to determine whether the cost elements--- • are realistic for the work to be performed • reflect a clear understanding of the requirements • are consistent with the unique methods of performance and materials described in the offeror's technical proposal. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

42. Contract Administration • Involves those activities performed after a contract has been awarded to determine: • How well the government & the contractor are performing to meet the requirements of the contract • It constitutes the primary part of the procurement process to assure the Govt. gets what it paid for • Focuses on obtaining supplies & services, of requisite quality, on time, & within budget • The nature & extent of it varies from contract to contract • Ranges from the minimum acceptance of delivery & payment to extensive involvement • Ultimate Goal-Assure the end users are satisfied!! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

43. How to Plan for Contract Administration • Planning should start in the early stage of acquisition • Contract administrators should start by reviewing the contract file for •  Primary requirements • Critical clauses • Develop a contract administration plan • The formality of the plan depends on the contract complexity • Simple as determining milestone dates—commercial-type contracts • List terms & conditions • Identify contract milestones • Identify reports & due dates • Identify government or customer interfaces • Go over warranty issues, subcontracting plans, etc. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

44. Performance Monitoring/Problems • Govt. protects interests by • Monitoring contractor performance • Inspecting contractor products • Informing the contractor of any problems • Identifying and implementing non-contractual and contractual remedies NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

45. Types of Contract Changes • Unilateral • directed by CO • Bilateral • Negotiated and signed by both parties • Constructive • a change recognized after it happens NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

46. Govt. Property • Adds Complexity to a contract for both parties • Govt. Responsibilities • Contractor entitled to equitable adjustment for Govt. failure to furnish GFP promised • Contractor Must have a system for: • Preservation • Protection • Accounting • Maintenance • Repair NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

47. Subcontract Issues • Privity between Prime and Subcontractor • Govt lacks privity but requires the Prime to flowdown specified clauses to Subs • Contractor’s Purchasing System Review • CPSR conducted when Prime has annual sales greater than $10 million • Subcontract Consent Requirements NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

48. Terminations • Termination for Convenience • Right of Govt. • Termination for Default • Failure to perform • Termination for Cause • Commercial Item Contract NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

49. Disputes • A disagreement between the contractor and the CO regarding the rights of the parties under a contract • Contract Disputes Act of 1978 • Contractor submits a Claim to CO • CO makes decision within 60 days • Contractor may appeal negative CO decision to: • Board of Contract Appeals • Court of Federal Claims NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

50. Inspection of Goods and Services • Inspection and Acceptance. Under contracts for goods, the products delivered by the contractor should be inspected by the Govt. upon receipt, and either accepted or rejected. • For service contracts, inspection and acceptance may be upon the completion of stated tasks or timely achievement of milestones or events. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”