Key Steps to Market and Capture Federal Business Steve Sorett June 13, 2012 These materials are...

Key Steps to Market and Capture Federal Business

Steve Sorett

June 13, 2012These materials are copyrighted by the author.

© Copyrighted material

© Copyrighted material2

Overview

• The Basics of Government Contracting

• How to Capture Growth

• Rules for Writing and Winning Proposals

• The Basis of Contract Administration

• Handling Audits


The Basics of Government Contracting

• Roles of government people and their authority

• Basic rules about funding and appropriations

• Different ways that the government buys

• Different types of contracts

• Teaming, subcontracting, and nondisclosure agreements


Roles of Government People and Their Authority

• Contract v. Technical People– Contracting Officers (“COs”)

• Authorized to execute contractual documents that bind the government and to sign determinations and findings and other internal documents

• May be referred to as Procuring Contracting Officers (“PCO”)

– Administrative Contracting Officers (“ACO”)• Authority to administer contracts


Roles of Government People and Their Authority

• Contract v. Technical People– Authorized Representatives

• Contracting Officer Representative (“COR”)• Contracting Officer Technical Representative “COTR”)• Government Technical Representative (“GTR”)• Government Technical Evaluator (“GTE”)


Appropriations Law

• Color of Money– One year funds; usually M&O– No year funds– Funds for a contract

• Bona fide needs rule– Need in year expended


Appropriations Law (cont.)• Anti-Deficiency Act (“ADA”) (31 U.S.C. §

1341)– Contracting Officer may not

• Enter into an obligation in advance of appropriations• Enter into an obligation in excess of appropriations• Accept volunteer services

– Critical points in time• Contract award• Date of modification


Appropriations Law (cont.)• ADA (cont.)

– Significance: Violation of ADA means contract or modification void

– Critical assessment is whether contract value in excess of appropriation to agency

– Issues:• Oral agreements• Performance in advance of appropriations


Different Ways that the Government Buys

• Sealed Bid

• Negotiated Procurement

• Commercial Items Acquisition

• Simplified Acquisition


Sealed Bidding• Government agencies must solicit sealed bids if

– Time permits solicitation, submission, and evaluation of sealed bids;

– Award will be made solely on basis of price and other price-related factors;

– Unnecessary to conduct discussions with responding sources; and

– Reasonable expectation of receiving more than one sealed bid (10 U.S.C. 2304(a)(2); 41 U.S.C. 253(a)(2))


Sealed Bidding Process

• Preparation of Invitation For Bids (“IFBs”)

• Publicizing Invitation For Bids

• Submission of bids

• Evaluation of bids

• Award of contract


Sealed Bidding Process (cont.)

• Preparation of Invitation for Bids (“IFB”)– Uniform Contract Format (FAR 14.201-1)– Standard Form 33 – Solicitation, Offer and Award

(FAR 53.301-33)

• Publicizing IFBs– www.fedbizopps.gov (FAR Subpart 5.2)– Bidders Mailing Lists (FAR 14.205)– Posting in public place (FAR 5.101)



• Submission of Bids – Bid must be responsive to solicitation (FAR

14.301(a))– “Firm Bid Rule”

• Bidder may not withdraw bid during period specified in IFB (FAR 14.301-6(j))

– “Late Bid Rule”• Generally, LATE IS LATE! (FAR 14.304(b)(1); FAR

52.214-7)



• Submission of bids (cont.)– Modifications and withdrawals

• Bidder may modify before bid opening (FAR 14.303)• Bidder may modify after bid opening only if exceptions

to Late Bid Rule apply to modification (FAR 14.304(b)(1))


Sealed Bidding Process (cont.)• Evaluation of bids

– Price evaluation• Price and price-related factors (FAR 14.201-8)• Award made on basis of lowest price offered

– Responsiveness evaluation (10 U.S.C. § 2305, 41 U.S.C. § 253(b))

• Price: bidder must offer a firm, fixed price (FAR 14.404-2(d))• Quantity: bidder must offer quantity required in IFB (FAR 14.404-

2(b))• Quality: bidder must agree to meet quality requirements of IFB

(FAR 14.404-2(b))• Delivery: bidder must agree to delivery schedule (FAR 14.404-

2(c))


Sealed Bidding Process (cont.)• Award of Contract

– Evaluation of responsibility of successful bidder (10 U.S.C. § 2305; 41 U.S.C. § 253(b))

• Contracting Officer must make an affirmative determination of responsibility prior to award (FAR 9.103)

• General rule: Contracting Officer may only award to one responsible bidder (FAR 9.103(a))

• Responsibility defined: bidder’s apparent ability and capacity to perform (FAR 9.104)


Sealed Bidding Process (cont.)• Award of Contract (cont.)

– Standards of Contractor Responsibility • Adequate financial resources to perform contract (FAR 9.104-

1(a))• Ability to comply with delivery or performance schedule (FAR

9.104-1(b))• Satisfactory performance record (FAR 9.104-1(c))• Adequate management and technical capability to perform

contract (FAR 9.104-1(e))• Sufficient equipment, facilities, and production capacity to

accomplish work required by contract (FAR 9.104-1(f))• Satisfactory record of business ethics (FAR 9.104-1(d))


Negotiated Procurement• Contracting Officer must demonstrate that sealed bidding is

not appropriate• Competitive negotiation process:

– Request for Proposals– Exchange with industry before receipt of proposals– Submission of initial proposals– Evaluation of initial proposals– Establish competitive Range– Conduct discussions– Best and Final Offers (“BAFOs”)– Selection for award– Debriefings


Negotiation Process• Request for Proposals (“RFP”)

– Major sections:• Section C: Specifications• Section L: Instructions to Offerors• Section M: Evaluation Criteria

• Exchange with industry before receipt of proposals (FAR 15.201)– Encourages early exchange of information among

interested parties• Industry/small business conferences• Draft RFPs• Request for information (“RFIs”)• Site visits


Negotiation Process (cont.)• Submission of initial proposals

– Agencies must give offerors at least 30 days after issuance of solicitation to submit initial proposals for contracts over simplified acquisition threshold (41 U.S.C. § 416; 15 U.S.C. § 637(d)(3); FAR 5.203)

– Late bid rule applies (FAR 15.208; FAR 52.215-1)– No “Firm Bid Rule”: Offeror may withdraw proposal at any

time before award (FAR 52.215-1(c)(8))– Confidentiality: Offerors may restrict use/disclosure of

information contained in proposals by marking proposal with authorized restrictive legend (FAR 52.215-1(e))


Negotiation Process (cont.)• Evaluation of initial proposals:

– Evaluation criteria • Cost or price (10 U.S.C. § 2305(a)(3)(A)(ii); 41 U.S.C.

§ 253a(c)(1)(B); FAR 15.304(c)(1))• Technical and management factors (FAR 15.304(c)(2))• Past performance (FAR 15.304(c)(3); FAR 15.305(a)

(2)• Small business participation (FAR 15.304(c)(4))


Negotiation Process (cont.)• Establishing competitive range (FAR

15.306(c))– Competitive range is the group of offerors with

whom the Contracting Officer will conduct discussions, and from whom the agency will seek revised proposals

• Conduct discussions (FAR15.306(d))– Contracting Officer must conduct oral/written

discussions with each offeror in competitive range


Negotiation Process (cont.)• Best and Final Offers (“BAFOs”) (FAR 15.307)

– Agency request final proposal revisions – Request notifies offerors that discussions are over

• Selection for award– Agencies must evaluate final proposals using evaluation

factors in solicitation• Debriefings (10 U.S.C. § 2305(b)(5); 41 U.S.C. §

253b(e); FAR 15.505-506)– Notice to unsuccessful offerors (FAR 15.503)– Preaward debriefings (FAR 15.505)– Postaward debriefings (FAR 15.506)


Commercial Items Acquisition• Acquisition of Commercial Items (FAR Part 12)• Types of Commercial Items

– Commercially available off-the-shelf item– Sold in substantial quantities in commercial marketplace,

and offered to the government without modification– Modified commercial item

• Modifications of type in commercial marketplace• Minor modifications needed to meet government requirements

– Component: Item supplied to government as part of an end item or of another component


Commercial Items Acquisition (cont.)• Policy

– Conduct market research to determine if commercial items are available

– Acquire commercial items when available• Description of agency needs

– Specify needs using market research• Promote full and open competition• Include restrictive provisions or conditions only to meet minimum

needs– State requirements in

• Functions to be performed• Performance required• Essential physical characteristics


Commercial Items Acquisition (cont.)

• Description of agency needs (cont.)– No brand name only or feature only unless

• Essential to government’s interest• Market research indicates competitors cannot meet minimum

needs, including through modification• Use of sole source procedures

• Proposals– If adequate, use existing product literature in lieu of

technical proposals– Submit multiple proposals with different products– May allow fewer than 30 days response time


Commercial Items Acquisition (cont.)

• Contract Award– Most advantageous offer

• Contract terms– Only clauses prescribed in FAR Part 12 required

to be used– Determined to be consistent with customary

commercial practice– Market research to determine– Not precluded by law


Commercial Items Acquisition (cont.)• General Services Administration (“GSA”)/multiple

award contracts– GSA awards and administers of the Federal Supply

Schedule (“FSS”) program (FAR Subpart 8.4; FAR Part 38)

– Negotiation objective: “most favored customer” pricing– Agencies place orders with Schedule contractor– Base period of 5 years, with three 5-year option periods– Firm-Fixed-Price


Simplified Acquisition

• Acquisitions of supplies or services in the amount of $100,000 or less (FAR 2.101)

• Purpose (FAR 13.002)– Reduce administrative costs– Increase opportunities for small business

concerns– Promote efficiency and economy in contracting– Avoid unnecessary burdens for agencies and

contractors


Simplified Acquisition (cont.)

• Procedures– Small Business Set-Aside Requirement

• Any acquisition over $2,500 but not over $100K is automatically reserved for small business concerns (FAR 13.003(b)(1); FAR 19.502-2)

– Contracting Officer may use combined synopsis/solicitation procedure (FAR 12.603)

– Competition to the “maximum extent practicable” (10 U.S.C. § 2304(g)(3); 41 U.S.C. §§ 253(a)(1)(A), 259(c); FAR 13.104)


Simplified Acquisition Methods

• Purchase orders (FAR 13.302)– Solicit quotes via oral, electronic, or written methods

(FAR 13.106-1(c); FAR 13.003(f); FAR 13.106-1(d))

• Blanket Purchase Agreements (FAR 13.303)– “Charge accounts” with vendors

• Government-wide Commercial Purchase Card (FAR 13.301)– DoD Contracting Officers must use card for acquisitions

at or below $2,500


Different Types of Contracts• Fixed Price (FAR Subpart 16.2)

– Contractor performs contract at a fixed-price, and bears responsibility to increased costs of performance

– Appropriate for commercial item acquisition

• Cost-reimbursement contracts (FAR Subpart 16.3)– Payment of allowable incurred costs to the extent

prescribed in the contract– Establishes estimate of total cost for purpose of

obligating funds – Establish a ceiling that a contractor may not exceed

without Contracting Officer’s approval


Different Types of Contracts (cont.)• Time-and-materials contracts (“T&M”) (FAR

Subpart 16.6)– Use T&M contracts when not possible at contract

award to estimate accurately the extent or duration of work

– Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, profit, and materials at cost


Teaming Arrangements• Contractor team arrangements (FAR 9.601)

– Joint Venture (“JV”): Two or more companies form a partnership or JV to act as a potential prime contractor

– Teaming Agreement: A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program


Teaming Agreement v. Joint Venture• Teaming Agreement

– Parties relationship will be solely as independent prime and subcontractor for a given procurement

– Parties maintain a clear line of demarcation as prime and subcontractor

– Privity of contract between government and prime, but no privity between government and subcontractor


Teaming Agreement v. Joint Venture (cont.)

• Joint Venture– Parties create a new entity to perform one specific

project or to facilitate a continuing business relationship– JV partners share in the revenues, expenses, and control

of the enterprise– JVs must have written operating agreements with

express terms of relationship– Risk of being found liable for commitments of the other

and establishment of fiduciary duties– Teaming Agreements are more commonly used


Nondisclosure Agreements

• Parties contemplating a Teaming Agreement should first enter into separate Nondisclosure Agreement (“NDA”)

• Purpose: Protect and limit use of proprietary information for

• Prevents disclosure to any 3rd party except as authorized by NDA


Nondisclosure Agreements (cont.)

• NDA should include– Nature and scope of NDA– Definition of “proprietary information”– Period of protection– Standard of care


Subcontracting• What is a subcontract?

– Supplies or services required for performance of prime contract or subcontract

• Contractor must obtain competition to “maximum practicable extent” in subcontracting work to others

• Government consent to subcontracts– All subcontracts under cost-reimbursement contracts– Subcontract under fixed price contracts where

subcontract in excess of simplified acquisition threshold or 5% of estimated cost of contract


Subcontracting (cont.)• Mandatory flowdown clauses (FAR and agency supplement

clauses– Truth In Negotiation Act– Equal employment opportunity– Audit and records - Negotiation

• Necessary flowdown clauses– Inspection– Government Property clause– Notice to Government of Labor Disputes– Changes– Termination for convenience

• Watch for language incorporating flowdown clauses into subcontract


Subcontracting in Teaming Agreement Scenario

• Subcontractor role generally defined in TA provisions• Methodology for calculation

– Percentage value of total prime contract– Specific tasks

• Parties agree to negotiate detailed “work content” at future date– If multiple phases to program, detail role in each phase– State in specific tasks, e.g., fabricate x component for fuselage– Define party’s responsibility for incorporation of changes– Limits on use of “Changes’ and “Termination for Convenience”

Clauses

42

How To Capture Growth


How To Capture Growth

• Small business strategy• Teaming and subcontracting with existing primes• General Services Administration (“GSA”) Schedules• Commercial contracting• Indefinite Delivery Indefinite Quantity (“IDIQ”)

Contracting vehicles• Basic Ordering Agreements (“BOA”)• Time and Materials (“T&M”) Contracting• Qualified Products Lists (“QPL”)


Small Business Strategy• Partnering with small businesses

– Women-Owned Small Businesses (“WOSB”s): 5% of all federal government prime and subcontract $$

– Service-Disabled-Veteran-Owned Small Businesses (“SDVOSB”s): 3% government-wide goal; contracting officers may award a sole source or set-aside contract to SDVOSBs

– Small Disadvantaged Businesses (“SDB”s): government-wide goal of 5% SDB participation

– HUBZone Small Business: 3% government-wide goal; can be sole sourced or set-aside for HUBZone competition

– 8(a): allows the government to contract, on a sole source or set-aside basis, with socially and economically disadvantaged small businesses


Teaming and Subcontracting with Existing Primes

• Why Team?– Leverage each party’s capabilities to provide the

customer enhanced capability and best value– Enhance discriminators

• Technical Expertise• Past Performance• Experience• Customer Knowledge• Cost Performance


Teaming and Subcontracting with Existing Primes

• Is teaming right for your company?– What are ADC’s strategic objectives?– What are ADC’s strengths and weaknesses?– Is ADC’s capable of being the Prime?– Who should ADC’s team with and why?– What type of collaborative business arrangement is

appropriate?– What’s the relationship between the parties?– What’s the duration? Are there any “off-ramps”?


General Services Administration Schedules

• GSA Schedules – One of the primary ways federal government

purchases commercial items– 11 million commercial products and services– 19,000 contractors– FY 2008 sales totaled more than $36 billion– Government procurement method most like

commercial contracting


GSA Schedules (cont.)• Values

– Builds brand recognition by providing you with “preferred vendor” status

– A door opener into the government market– Differentiates you from non-schedule vendors with same

services/products– A multi-purpose contracting device– Reduces contract time from solicitation to award (RFP –

268 days to RFQ – 30 days)– Easier for the government to buy from you


Mechanics of GSA Schedules

• Obtaining a schedule– Submit a proposal in response to schedule

solicitations– Schedule solicitations always open – contractor

may submit proposal at any time– Multiple contracts awarded: No limit to number of

contracts that can seek and obtain contract under given schedule


Mechanics of GSA Schedules (cont.)

• Obtaining a schedule (cont.)– Pricing schedules

• Contractor required to submit data regarding its “commercial sales practices”

– Prices proposed for schedule must be fair and reasonable

• Pricing issues:– Pricing Reductions Clause (“PRC”) clause, GSAR

552.238-75– Economic Price Adjustment (“EPA”) clause, GSAR

552.216-70


Mechanics of GSA Schedules (cont.)• After award

– Government agencies can place orders against schedule (FAR Subpart 8.4)

– Discounts: Schedule contractor may offer discounts off its schedule prices

• Discounts do not trigger reduction to prices in schedule


Commercial Contracting

• Commercial item acquisition

• Small purchases under $100K using Simplified Acquisition– Purchase orders Blanket Purchase Agreements

(FAR 13.303)– Government-wide Commercial Purchase Card

for acquisitions at or below at or below $2,500


Indefinite Delivery Indefinite Quantity (“IDIQ”) Contracts

• IDIQ contracts (FAR Subpart 16.5)– May be awarded by any agency and are initially awarded on basis of

full and open competition– After the base IDIQ contract is awarded, agency then awards

subsequent task or delivery orders directly to contractor• Benefits to government

– Flexibility to place orders for specific products and services, in specific quantities and according to their required delivery schedule as requirements arise

• Government required to order at least a stated minimum quantity of supplies/services (FAR 16.504)

• GSA Schedule contracts are IDIQ contracts available to all federal agencies


Basic Ordering Agreements

• Not a contract but a written instrument of understanding between agency and contractor

• Contractor may not begin work until– Prices have been established– Order establishes a ceiling price and either

• BOA provides adequate procedures for timely pricing of the order early in its performance period or

• The need for supplies or services is compelling and unusually urgent (FAR 16.703(d)(3))


T&M Contracting

• Acquiring supplies or services on the basis of– Direct labor hours at specified fixed hourly rates

that include wages, overhead, general and administrative expenses, and profit; and

– Materials at cost


Qualified Products List (“QPL”)• Manufacturers or distributors provide products which are

examined and tested for compliance with specification requirements (FAR 9.203)

• Specifications requiring a qualified product are included in:– GSA Index of Federal Specifications, Standards and Commercial

Item Descriptions, FPMR 101-29.1– Department of Defense Acquisition Streamlining and Standardization

Information System (ASSIST) at (http://assist.daps.dla.mil).

• Instructions concerning qualification procedures are included in: – Federal Standardization Manual, FSPM-0001. – Defense Standardization Manual 4120.24-M, Appendix 2, as

amended by Military Standards 961 and 962

57

Rules for Writing and Winning Proposals


Rules for Writing and Winning Proposals

• Focus on evaluation criteria and instructions as well as terms and conditions

• Avoid the extraneous

• Get your prices and rates right

• Strive to win 50% - so be selective


Evaluation Criteria and Instructions

• Have a thorough understanding of all evaluation criteria

• Answer each factor carefully as agency has considerable discretion in evaluating proposals

• Be aware of proposal amendment or modification restrictions


Terms and Conditions

• Unique contract provisions

• Standard FAR Clauses


Terms and Conditions (cont.)• Unique contract provisions

– Specifications• Deliverables• Payment

– Share of Risk/Product Liability• Indemnification• Warranties

– Implied/Negotiated


Terms and Conditions (cont.)• Unique contract provisions (cont.)

– Intellectual property rights• Confidential information (NDA/FOIA)• Trademarks• Patent Rights• Copyrights & Technical Data

– Remedies• Revocation• Actual Damages• Liquidated Damages• Consequential Damages


Terms and Conditions (cont.)• Standard FAR Clauses

– Socioeconomic clauses– Audit rights– Defective pricing/price adjustments (TINA)– Intellectual property– Subcontract Flow Down requirements

• Compare Audit rights, defective pricing, IP


Terms and Conditions (cont.)• Standard FAR Clauses (cont.)

– Modification/changes• Unilateral or bilateral• Price adjustments

– Suspension of work– Terminations

• For Clause• Without cause


Avoid the Extraneous

• Sell a particular product, not the entire company– Proposal should focus on selling the product, not

all the products ADC provide for customers– Proposal should not include additional materials

about ADC that does not directly respond to evaluation factors


Prices and Rates• Price reasonableness

– Contracting Officers are required to determine price reasonableness before making contract awards (FAR 14.408-2; FAR 15.404-1(a))

• Get your prices and rates right– Firm-Fixed Price Contracts

• Must price carefully so that costs of performance will not exceed the price or else will incur financial loss

– Time-and-Materials Contracts• Agreed rate will be incurred in contract for each type of labor, so

classifications should not include disparate types of employees or disparate skill levels

• Lack or clarity in contract can lead to serious disputes over proper billing of labor-hours


Prices and Rates (cont.)• Problems of estimating on a government

contract– Hidden contingencies– Hidden profit– Outdated historical data– Failure to use historical data– Failure to use other management data– Failure to document


Strive to Win 50%

• Be selective, don’t chase everything

• Proposal preparation takes considerable time and effort

• Set realistic and reasonable goals as a new federal contractor

69

The Basics of Contract Administration


The Basics of Contract Administration

• Managing scope and handling change orders

• Equitable adjustments

• Invoicing and payment

• Protests and Disputes


Managing Scope

• Scope of contract morphs and grows• Contract interpretation issues

– Intrinsic evidence• Interpret contract as a “harmonious whole”• Define terms by category• Order of precedence clauses

– Sets forth which clause trumps if there are inconsistencies in the contract

– Extrinsic evidence• Pre-award communications• Actions during contract performance• Prior course of dealings• Custom or trade usage/industry standard


Managing Scope (cont.)

• Contract Ambiguities– Patent (obvious)

• Contractor must ask clarification or be bound by government's interpretation

– Latent (hidden)• Construe language against government if:

– Contractor’s interpretation reasonable– Contractor relied at bidding to its detriment


Change Orders• Changes contract clause

– FAR 52.243-1 (fixed price supply contract)

• Four major purposes– Provide government operating flexibility with

unilateral right to order changes in work to accommodate advances in technology and changes in its needs and requirements

– Facilitate more efficient performance and improve quality of products by providing contractor method of proposing changes to work


Change Orders (cont.)• Four major purposes (cont.)

– Give procurement authority to Contracting Officer to order additional work within “general scope” of contract without using new procurement procedures or using new funds.

– Provide contractors legal means to process claims against the government


Change Orders (cont.)• Formal Change Requirements

– Actual authority– Written order– Price change in advance (if possible, price proposal from

contractor)– Issue change before final payment to contractor– Government receives a benefit from contractor– Proper funding – Within scope of Changes Clause– Within scope of contract


Equitable Adjustments• Costs + profit• Related FAR Clauses

– Changes (FAR 52.243-4)• If any change causes an increase in the Contractor’s

cost, the Contracting Officer must make an equitable adjustment

– Differing Site Condition (FAR 52.236-2)• If the conditions materially differ and cause an

increase in the Contractor’s cost, the Contracting Officer must make an equitable adjustment


Equitable Adjustments (cont.)

• Pricing formula

(Reasonable cost to perform additional work)

– (Reasonable cost to perform work as originally required) + (Reasonable profit)



• Recoverable costs– Reasonable

• Reasonably prudent person in conduct of competitive business• Measured from time incurred• Reasonable in both nature and amount

– Allocable• Incurred specifically for the contract• Costs that benefit the contract• Necessary for overall business operation

– Allowable• Not expressly unallowable



• Measurement of costs– Direct costs

• Direct labor, materials, subcontractors

– Indirect costs• Overhead (e.g., utilities)• General & Administrative (“G&A”)

– Profit• If change has much higher risk performing, entitled to increased

profit• See FAR 115.404-4 (structure approach/factors)• DFARS 215-404-71 (weighted guidelines)



• Accounting Standards– Cost Accounting Standards (“CAS”)– GAAP– Equitably and consistently applied

• Show DCAA how the company tracks costs and segregate them


Invoicing & Payment• Types of payment

– Payment of price for completed items of work (FAR 52.232-1)

• Payment of contract price due upon completion of work and submission of appropriate invoices

– Progress payments • Based on cost incurred (FAR 52.232-16); or • Percentage of completion of work (FAR 32.102(e))

– Performance-based payments (FAR 32.10)• Based on completion of segments of work


Payment Procedures• Documentation for payment

– “Receiving Report” and “Invoice”

• Invoices– Prompt Payment Act, 31 U.S.C. § 3901(a)(3)

• “Proper Invoice”: invoice containing substantiating documentation required by regulation or contract

– Must include information such as:

» Name of vendor; invoice date; contract number, vendor invoice number, description, shipping and payment terms, etc. (5 CFR § 1315.9(b))

• Contractor entitled interest for delayed payments when proper invoices are submitted (FAR 52.232-1)


Payment Procedures (cont.)• “Receiving Reports”

– Document completion of work or receipt of supplies (5 CFR § 1315.9(c))

• Payment authority– “Disbursing officials” (31 U.S.C. § 3321)

• Overpayments– Contractor should report overpayment even if not in contract

• Discounts– Discounts for Prompt Payment clause for fixed-price supply contract

(FAR 52.232-8)– Applies to other types of contracts, such as cost-reimbursement

contracts


Protests• Why protest?

– A bidder has reason to believe • A contract has been or is about to be awarded

improperly or illegally; or • Bidder has been unfairly denied a contract or an

opportunity to compete for a contract

• Federal government contract laws are designed to ensure that federal governments are conducted fairly


Protests (cont.)• Multiple forums

• Agency protest• Government Accountability Office (“GAO”)• United States Court of Federal Claims (“COFC”)

• Remedies generally– Forums cannot direct award of contract and may

not award lost profits– Important issue: Automatic stay or suspension of

contract work depends on forum


Agency Protests• File protest with Contracting Officer• Bidder may request independent review of protest level

above Contracting Officer (FAR 33.103(d)(4))• Objectives (FAR 33.103(d))

– Resolve agency protests effectively– Help build confidence in federal acquisition system– Reduce formal protests to GAO and other forums

• Agency procedures (FAR 33.103)– Prior to protest submission, parties must use “best efforts” to resolve

issues by conducting “open and frank discussions”– Protests informal and flexible– Bidder not required to exhaust agency administrative remedies


Agency Protests (cont.)

• Timing: – Pre-award protests (challenging propriety of

solicitation) must be filed prior to bid opening or date for receipt of proposals

– Other protests must be filed within 10 days of when protestor knew or should have known of the bases for protest

– Untimely protests: Agency has discretion to consider merits of protest with “significant issues” (FAR 33.103(e))


Agency Protests (cont.)• Pre-award automatic stay

– Contracting Officer cannot award contract if an agency protest is filed before award (FAR 33.103(f)(1))

• Agency may override pre-award stay – Contract award justified in light of “urgent and

compelling” reasons; or– Prompt award is in “the best interest of the Government” – Override Decision must be in writing and approved by

agency official above Contracting Officer


Agency Protests (cont.)• Post-award stay

– If agency receives protest within 10 days of contract award or 5 days of a required debriefing date offered by agency, Contracting Officer must suspend contract performance immediately (FAR 33.103(f)(3))

• Agency may override post-award stay– Contract performance justified in light of “urgent and

compelling” reasons; or– Contract performance is in “the best interests of the

Government”– Override determination must be in writing and approved

by agency official above Contracting Officer


Agency Protests (cont.)• Remedies (FAR 33.102)

– Award costs to protestor for prosecution of protest

• If agency head determines solicitation, proposed award or award is improper for failure to comply with applicable law or regulation


GAO Protests• Who may protest?

– “Interested Party”: actual or prospective bidder whose direct economic interest would be affected by award of contract or failure to award contract (31 U.S.C. § 3551(2); 4 C.F.R. § 21.0(a))

• What may be protested?– Protestor must allege violation of procurement

statute or regulation (31 U.S.C. § 3552)


GAO Protests (cont.)• Timeline

– Defective solicitation: GAO must receive protest before bid opening or closing date for receipt of initial proposals

– Protest based on most other matter must be submitted within 10 days after receiving actual or constructive knowledge of basis for protest (4 C.F.R. § 21.2(a)(2))


GAO Protests (cont.)• Automatic Stay (“CICA Stay”)

– Pre-award protests: Agency may not award contract after receiving notice of a timely protest from GAO (31 U.S.C. § 3553(c); 4 C.F.R. § 21.6; FAR 33.104(b))

– Post-award protests: Contracting Officer must suspend contract performance immediately when agency receives notice of protest from GAO within 10 days of date of contract award or within 5 days after date offered for required post-award debriefing (31 U.S.C. § 3553(d); 4 C.F.R. § 21.6; FAR 33.104(c)


GAO Protests (cont.)• CICA Override

– Pre-award stay: Agency may override stay if head of contracting activity finds:

– Urgent and compelling circumstances that significant affect the interest of the U.S. will not permit waiting for GAO’s decision; and

– Agency is likely to award contract within 30 days of written override determination

– Post-award stay: Agency may override contract suspension if the head of contracting activity finds:

• Contract performance will be in the best interest of the U.S.; and• Urgent and compelling circumstances that significant affect the

interest of the U.S. will not permit waiting for GAO’s decision


GAO Protests (cont.)• CICA Override (cont.)

– Agency decision to override may be challenged at COFC

• Remedies– GAO may recommend agency grant the following

remedies (4 C.F.R. § 21.8)• Refrain from exercising options under an existing contract• Terminate existing contract• Recompete contract• Issue new solicitation• Award of contract consistent with statute and regulation• Other recommendations as GAO determines necessary to

promote compliance with CICA


CFOC Protests

• Who may protest– Interested parties (same as at GAO)

• When must protest be filed?– Currently, no specific timelines requirement.

However, bidder should promptly file protest to demonstrate immediate and irreparable harm necessary to obtain injunctive relief

• Defective solicitation: Adopted GAO rule. Must file prior to bid opening or closing date for receipt of initial proposals


COFC Protests (cont.)• Temporary Restraining Orders and Preliminary

Injunctions– Four element test (COFC Rules 65(a))

• Likelihood of success on the merits• Degree of immediate irreparable injury if relief not granted• Degree of harm to the party being enjoined if relief is granted• Impact of injunction on public policy considerations

• Standard of review– Whether agency acted arbitrarily, capriciously, or

otherwise in accordance with law (5 U.S.C. § 706)


Disputes

• Contractors can seek relief from actions and events that occur after contract award

• Contract Disputes Act of 1978 (“CDA”), 41 U.S.C. § 601 et seq. establishes procedures and requirements for asserting and resolving claims subject to the Act


Disputes Process FlowchartContractor Claim

Contracting Officer’s Final Decision

No AppealBCA

CAFC

U.S. Supreme Court

COFC


Elements of a claim

• Demand in writing (41 U.S.C. § 605(a); FAR 33.201)• Seeking

– Payment of money in a sum certain; or– Other relief relating to contract

• Reformation or rescission• Note: specific performance Is not available

• Submit to Contracting Officer for final decision (41 U.S.C. § 605(a))

• Certification: contractor must certify any claim exceeding $100K (41 U.S.C. § 605(c)(1); FAR 33.207)


Disputes (cont.)• Settlement

– Agencies are encouraged to resolve claims by mutual agreement (FAR 33.204; FAR 33.210)

– Generally, Contracting Officers or their authorized reps may settle contract claims

• Interest– Accrual of interest on CDA claims– Interest calculated every 6 months based on rate

established by the Treasury (41 U.S.C. § 611; FAR 33.208)


Filing a CDA claim

• Routine request converted into a claim– Voucher, invoice or other routine request for

payment that is not in dispute is NOT a valid CDA claim (FAR 2.01; FAR 52.233-1)

– Contractor may convert into valid CDA claim if:• Complies with submission and certification of the

Disputes clause; and• Contracting Officer either 1) Disputes submission as

to liability or amount; or 2) Fails to act in a reasonable time (FAR 33.201; FAR 52.233-1)


Filing a CDA claim (cont.)• Request for Equitable Adjustment (“REA”)

submission converted into a claim– Request Contracting Officer’s final decision – Certify the claim

• Convenience Termination Settlement Proposals (FAR 49.206)– Such proposals are nonroutine submissions under the

CDA– Converted to a claim if parties reach an impasse

attempting to reach settlement– Interest: government cannot pay interest on proposal

unless it turns into CDA claim and contractor successfully appeals to ASBCA or COFC


After Filing a Claim• Final Decision

– Contracting Officer must issue a written final decision (51 U.S.C. § 605(a); FAR 33.206; FAR 33.211(a))

• Appeals to the Board of Contract Appeals (Armed Services or Civilian Board)– Contractor may appeal a Contracting Officer’s final decision to an

agency Board of Contract Appeals (41 U.S.C. § 606)• File suit before the Court of Federal Claims (“COFC”)

– Contractor may bring action after a Contracting Officer’s final decision

• Appeal to the Court of Appeals for the Federal Circuit (“CAFC”)– Jurisdiction over agency BCA and COFC (28 U.S.C. § 1295(a)(3)

and (10))

105

Handling Audits


Handling Audits Overview• Government’s right to audit

• Auditors

• Three kinds of audits

• Overhead rates (G&A, indirect, etc)

• Job cost accounting

• Close out of contracts


Handling Audits• Government’s right to audit

– Government has broad statutory and contractual audit rights, both prior to award and post award

– Government generally has right to audit a contractor’s books and records at any time up to 3 years after final payment under a contract


Handling Audits• Who are the Auditors?

– Defense Contract Audit Agency (“DCAA”)• Department of Defense (“DOD”) relies on DCAA for its

auditing requirements• Performs pre- and post-award audits

– Office of the Inspector General• Investigate fraud, waste and abuse uncovered as a

result of internal audits

– U.S. Department of Justice• Responsible for enforcement of the civil and criminal

statutes involving fraud against the U.S.


Handling Audits (cont.)• Subjects of DCAA Audit

– Contractor’s internal control systems– Management policies– Accuracy and reasonableness of cost representations– Adequacy and reliability of records and accounting

systems– Financial capability– Contractor compliance with contract provisions having

accounting or financial significance such as the Cost Principles (FAR Part 31), the Cost Accounting Standards Clause (FAR 52.230-2 and clauses pertaining to TINA (FAR 52.215-10, -11,-12 and -13)


Handling Audits (cont.)• What are Auditors looking for?

– Cost mischarging– Violation of ethics rules– False Claims Act violations– Product substitution– Misuse of property– Proposal misrepresentation


Handling Audits (cont.)• Three kinds of audits

– Pre-award (FAR 52.215-20)• Commercial Sales Practices (“CSP”) Disclosures• Defective pricing

– Post-award (FAR 522.215-71)• Compliance with performance obligations

– “Contractor Assistance Visits”• An audit by any other name…


Contractor Goals in Handling Audits• First, do no harm• Second, respond to audit requests and

issues as fully and accurately as possible• Third, create an accurate record of the audit• Fourth, identify any potential fraud

concerns and findings• Fifth, begin organizing a response to the

potential fraud concerns


The Minefield of Potential Harm• Criminal violations

– False Claims Act, False Statements Act, Obstruction of a Federal Audit (18 U.S.C. § 1516), Conspiracy

– Civil Sanctions• Civil False Claims Act

– Administrative• Administrative fraud• Unnecessary disallowances, adverse findings, and

penalties• Bad relationship and Spillover


Avoiding Harm

• Accurate and complete representations, information and data

• Cooperation

• Timely access to records


Accurate and Complete

• Procedure for receiving requests for information

• Procedure for gathering information

• Procedure for assuring accuracy and completeness

• Procedure for communicating accurate and complete information and responses


Cooperation

• Procedure for receiving requests for information

• Procedure for gathering information

• Procedure for assuring accuracy and completeness

• Procedure for communicating accurate and complete information and responses


Timely

• “Reasonable” requirement– Do not have to shut down business– DCAA will consider if there is an unreasonable

delay, and if so, how often


Procedures for Full and Accurate Responses

• Preparation for the audit– Audit request should be in writing

• Should state type of audit• Should identify the government audit team• Should provide an estimate of the time• Likely will include a Preliminary Request for files


Procedures for Full and Accurate Responses (cont.)

• Entrance Conference– Identify point of contact to the Auditors– Discuss procedures for requests for information– Discuss procedures for copies– Request an Exit Conference and a copy of the

Draft Audit Report



• Procedures for the Audit– Use point of contact procedures– Respond within reasonable time to requests– Make a record of al information provided to Auditors– Assure that requests are within scope of the type of audit– Negotiate the request if unreasonable, burdensome, or

outside the scope– Identify potential issues and begin preparation of

response



• Exit Conference– Auditors should summarize results and inform

contractor of procedures for issuance of Final Report

– Contractor should express its position on issues– Contractor should request a copy of Draft Report– Contractor should request an opportunity to

respond in writing


Written Response to Audit Findings

• Prepare a written response

• As accurate and complete as possible

• First opportunity to present your position in your words

• Will be reviewed by Contracting Officer, investigators, prosecutor, and judge or jurors


Pre-Award Audits Issues

• GSA Schedules– Commercial Sales Practice (“CSP”) disclosures

• Disclose Most Favored Customer(s) (“MFCs”)– All customer receiving pricing equal to or better than the

government

• Disclose MFC Pricing– Discounts – Concessions


Pre-Award Audits Issues (cont.)

• GSA Schedules (cont.)– CSP best practices

• Current, accurate and complete– Conduct review of CSP within 14 days of proposal– Conduct 2nd review of CSP within 14 days of the end of

negotiations

• Ensure the contract clearly identifies Basis of Award Customer or Category, and the pricing relationship


Recognizing When an Audit has Become an Investigation

• Shift in focus of the audit• Unusual focus on a particular aspect of the audit• Failure to discuss an aspect of the audit• Failure to provide an Exit Conference• Refusal to discuss findings on a particular issue• Failure to include an aspect of the audit in an Audit

Report• Failure to issue an Audit Report


Preparation of a Response to Fraud Allegations

• Include counsel

• Conduct an internal investigation– Can start with audit records

• Carefully consider and include counsel on any further response to auditors


Overhead Rates

• Important and relates to pricing• G&A costs

– General and administrative costs (e.g., corporate, division, or branch allocations) attributable to the general management, supervision, and conduct of the contractor’s business as a whole

• Indirect cost rate (aka overhead rate)– Percentage or dollar factor that expresses the ratio of indirect

expense incurred in a given period to direct labor cost, manufacturing cost, or another appropriate base for the same period (FAR 42.701)

– Final indirect rate: Established and agreed upon by government and contractor not subject to change (FAR 42.701)


Job Cost Accounting• Must understand cost principles

– Accounting requirements– Identify unallowable (not reimbursable) costs– Determines reimbursement in cost contracts– Affects pricing in firm-fixed-price contracts

• Fundamental concept of unallowable cost– Reasonableness– Allocable– Comply with Cost Accounting Standard (“CAS’) or

Generally accepted Accounting Principles (“GAAP”)– Prohibited by contract– Prohibited by FAR Subpart 31.2


Job Cost Accounting (cont.)

• Contractors often employ computerized job cost accounting system to allocate and track all costs– Systems used to compile actual costs incurred for work

under the contract

• Best practices– Set up job cost account methods to track allowable costs– Make appropriate allocations among contracts


Contract Close Out

• After work is completed and accepted, contractor seeks final payment– Timely presentation of properly executed and

certified invoice to disbursing official – Invoice must show agreed amount, less amounts

previously paid– Final invoice submitted more than 1 year after

completion of performance is too late


Contract Close Out (cont.)

• Final Payment (cont.)– Fixed-Price Contracts: See standard Payments clause

(FAR 52.232-1)• Government shall pay contractor, on contractor’s submission of

proper invoices, prices stipulated in contract for supplies delivered and accepted, less any deductions provided in contract

– Cost-Reimbursement Contracts: Payments made in accordance with Allowable Cost and Payment clause (FAR 52.216-7)

• Allowable cost as determined by Contracting Officer according to terms of contract and cost principles (FAR 31.201)


Contract Close Out (cont.)

• Quick closeout procedure (FAR 42.708)– Contracting Officer must negotiate settlement of

indirect cost for specific contract before determination of final indirect cost rate if:

• Contract is physically complete;• Amount of unsettled indirect cost to be allocated to

contract is relatively significant; and• Agreement can be reached on reasonable estimate of

allocable dollars


Government Contracts Research Internet Resources

• Federal Business Opportunities– https://www.fbo.gov/

• United States Code– http://www.gpoaccess.gov/USCODE/index.html

• Code of Federal Regulations– http://www.gpoaccess.gov/CFR/

• Federal Acquisition Regulation (“FAR”)– https://www.acquisition.gov/far/

• Department of Defense FAR Supplement– http://farsite.hill.af.mil/VFDFARA.HTM


Government Contracts Research Internet Resources (cont.)

• General Services Administration Acquisition Manual (contains General Services Administration Regulation (“GSAR”))– https://www.acquisition.gov/gsam/gsam.html

• GAO Bid Protest Rules– http://www.gao.gov/decisions/bidpro/new.reg/

regulation.htm

• U.S. Court of Federal Claims Rules– http://www.uscfc.uscourts.gov/./sites/default/files/

court_info/rules_20100111_v6.pdf

Date post:	17-Dec-2015
Category:	Documents
Upload:	colleen-griffin
View:	219 times
Download:	0 times

Key Steps to Market and Capture Federal Business Steve Sorett June 13, 2012 These materials are...

Documents