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By Shirley Garvey on Monday, June 24, 2002 - 10:36 am:

We are wanting to issue a two-phase design build solicitation. In this two-phase solicitation only three offerors will be selected to submit for the second phase. Upon completion of the evaluations of the second phase, and award of the contract to the offeror with the best value proposal, we would like to provide the two unsuccesful offerors a stipend. This is to defray costs incurred in submitting a proposal. I have searched FAR and DFAR and found nothing regarding a stipend for sumbitting a proposal and not being the successful offeror. Is the practice of giving a stipend within regulations and if so can you advise where I may find related information to stipends

By Anonymous on Monday, June 24, 2002 - 10:45 am:

I'm having a bit of trouble with exactly what you are trying to do. I have an uncomfortable feeling you are mixing apples and oranges here by your use of "two-phase design build" and "two-phase solicitation" together. These are two different concepts. Can you explain just what it is you are doing?

By formerfed on Monday, June 24, 2002 - 10:54 am:


I think I understand what you are after. I've seen this used before but stipend isn't the right way to go. What you might want to do is pay each offeror "X dollars" to deliver a product. From these products, one will be selected for ultimate award.

What you need to do is determine if paying for costs incuured enhances competition and ultimately benefits the government. In other words, will you receive proposals just as benefical without paying. If not, you end up buying something and the government selecst the best of the three somethings to move into the next phase.

By bob antonio on Monday, June 24, 2002 - 11:37 am:

Here is an earlier thread about this issue.


By joel hoffman on Monday, June 24, 2002 - 11:38 am:

Shirley, please see my guidance at:

You can download it as a Word File, so the links/bookmarks within the document will work better. Ignore the dialog box, which asks you for a password.

Please refer to Part 9 for the general guidance. Samples of RFP Section 00110 (Proposal Submission Requirements) and 00120 (Proposal Evaluation Criteria) for a 2 phase design-build project (FAR 36.3) with stipends, are in Parts 10 and 11, respectively.

Stipends aren't covered by FAR, one way or the other. I have the latest info available, within the Corps of Engineers. If you want to contact me, I'd be willing to discuss. I'm in the COE e-mail directory. happy sails! Joel Hoffman

By Vern Edwards on Monday, June 24, 2002 - 11:42 am:

Actually, some agencies do pay a stipend for the preparation of proposals during the second phase of a two-phase design build competition. The Army paid a stipend during a two-phase design build for part of the Pentagon renovation. The RFQ said:

"During Phase Two, design, technical and price proposals will be requested from the two to five most highly qualified offerors selected during Phase One. It is the Government's intention to offer a stipend for the development of the Phase Two proposal. The stipend will be paid 30 daysafter Phase Two proposal submission."

The RFQ may be found at:


This is not uncommon in larger design-build projects. The practice is also used in the commercial sector. Go to http://www.google.com and search for <"design-build" AND stipend> and you will find many references to the practice.

By joel hoffman on Monday, June 24, 2002 - 11:48 am:

Shirley, my guidance idicated that USACE was in the process of developing policy guidance on the use of stipends. Please note that the USACE attorney, who was going to issue the guidance, recently passed away, after a long illness. So, I think that the USACE guidance is on hold, again.

I understand that several Districts have tried stipends, at least once. I thought Louisville did, but maybe not, since you are asking. I think that Tulsa- yes, Alaska - yes, Albuquerque(?), Seattle(?) and Sacramento(?) have used it. happy sails! joel

By Anonymous on Monday, June 24, 2002 - 11:52 am:

Formerfed, that is the problem I'm having with the concept. What you seem to be refering to is a design contract followed by a design selection and a build contract. That is not uncommon. It is done with weapon systems fairly often.

I have no problem at all in a selection of three best proposals for a design phase (probably cost contract) ending with an evaluation of designs and production capabilities for a single contractor to produce in a follow on (probably fixed price) contract.

That is one thing. It is definitely not what I get from reading the original message. There I get the impression there is to be some sort of downselect process to award a single design and build contract (unknown type) in which the agency wants to pay the bid and proposal cost of only the final three. Losers of the first round get nothing. One reason I think this is not the other case is that there is not much reason to ask such a question for that case. The model is fairly clear to anyone who investigates.

I think there are real issues with the concept perhaps being considered. My issues lie with both economy to the government and fairness to the offerors of the first round and not in the final three. It sounds like someone has heard of design/build approaches as outlined above and has a "new" idea. One I think has gone wrong.

Why are the taxpayers paying for the select few and not everyone here? Why are we perhaps encouraging offerors to throw something together on the off chance they will get into the "stipended" round where they can do their real work with extra pay? No, the message should be "This is a test, put your best effort forward the first time" without reservations.

Then look at the contractor view. Suppose there are five responding in the first round. Two get nothing and watch the other three get a second bite with a "stipend." How about four originals with one shut out of the "stipended" second chance? Then what about three originals who get to do it all over again with a "stipend." That last would be a nice article for the newspapers. I could write a zinger after a three and three!

Want to create some issues and problems? Such a scheme sounds like a good approach.

By Vern Edwards on Monday, June 24, 2002 - 12:17 pm:


I believe that Shirley is talking about the two-phase design-build selection process that is authorized by statute and described in FAR Subpart 36.3? That process is used for construction acquisitions. Are you familiar with that process?

By joel hoffman on Monday, June 24, 2002 - 12:43 pm:

Anonymous, the 2 phase design-build proposal process (FAR 36.3) is now a common practice (since 1997), although payment of a stipend is even more recent and is rare within the Fed Government for design-build. Both practices are consistent with D-B industry practices. Check out the Google search and you will see other Federal and State Governments now doing this.

P.S. , there is little cost involved in preparing a phase 1 qualifications proposal. No stipend is paid for a phase 1 proposal, because it doesn't involve the cost of preparation of design or cost proposals. Phase 1 results in a shortlisting of, usually, 3-5 firms for phase 2, where design and price proposals are submitted by the shortlisted firms. This was an industry proposed change to FAR, back in 1996. The stipend is to offset some of the design proposal cost and to encourage innovation in design proposals. Industry requested provisions for stipends to be included in the 2 phase legislation and in FAR 36.3, but it wasn't, for various reasons. I knew the COE attorney involved in the drafting of the legislation and FAR coverage. happy sails! joel

By Anonymous on Monday, June 24, 2002 - 04:49 pm:

Maybe I got hung up on wording. Maybe coffee hadn't kicked in. I read the question as quite possibly considering a scheme in which companies would propose for a design and build contract with the government paying a stipend for what might be considered best and finals from a final three. I consider, perhaps wrongly, that to be an different animal from "two-phase design-build selection process that is authorized by statute and described in FAR Subpart 36.3" Vern mentioned.

I find what I thought I read here to be a problem, for reasons I described, even if not in violation of any rule or law. It is different, in my view, to select three finalist based on descriptions of their approach, capabilities and experience with perhaps even a sample sketched out design concept - just as described in 36.303-1(a). Those would then begin fleshing out their concepts under a cost, cost sharing, stipend or any other mutually acceptable scheme. In short, they are beginning some real work that at some point, perhaps rather quickly, will form the basis for a final selection. I find that fair, fully acceptable and a fairly common practice.

I suppose some might call or consider 36.303-2(a) nothing more than BAFO under another guise. I see a difference. I think the difference is that a useful Phase Two needs to go considerably further than just adding the usual "technical and price proposals." I suppose FAR 36.303-1 and 36.303-2 could almost be read as doing a quickie and then a BAFO, but that to me would be a misapplication.

For me it is then fair to all to pay all or a portion of the costs that give the government a much sounder basis for a final decision by what is really going part way into performance. As Joel mentions, cost can be significant there. I'd be interested in other views on this difference.

By joel hoffman on Monday, June 24, 2002 - 05:08 pm:

In my last post, I neglected to say that the drafters of the 1996 Clinger-Cohen FARA legislation and FAR 36.3 coverage for the 2 phase shortlisting procedures declined to address stipends because they 1) didn't want to encourage or discourage the practice 2) felt that the practice was already legal and 3) didn't want to get bogged down in the details of stipends.

In summary, Stipends are legal. Stipends aren't necessary for phase 1. Phase 1 industry efforts consist of submission of relatively simple qualifications proposals. Stipends are intended to help offset the sometimes high costs of preparing a design proposal in phase 2 of the competition.

As Vern's suggestion of a "Google Search" indicates, stipends are becoming more common in Federal Design-Build acquisitions, as bolder agencies have demonstrated. Stipends are a viable approach when an agency expects design-builders to expend a considerable sum in preparing a competitive design proposal. We have to do something to maintain industry interest and competition. Most design firms don't have the deep pockets to fund efforts to win design competitions and won't play our game long, without some relief.

Formerfed and anonymous, does that make the concept of "stipends" clearer to you? happy sails! joel

By joel hoffman on Monday, June 24, 2002 - 05:37 pm:

Anon, I just read your 4:49 post. According to my attorney, who chaired the FAR 36 committee (and the 36.3 writeup, as well as representing DOD during the drafting of the legislation), the intent of the legislation was, as the norm, not to have the phase 1 offerors prepare any actual preliminary designs. Rather, the drafters intended phase 1 to resemble the Brooks Act A-E selection procedures.

Although "technical approach" submission information is allowed to be requested, FAR 36.303-1 also states that no detailed design or technical information is allowed. "Technical approach", was intended mean the approach that the offeror would take to execute design and construction of the project.

I did challenge my attorney, stating that the actual FAR language concerning technical approach didn't clearly state their intent to prohibit any preliminary design in phase 1. She admitted that the wording could be interpreted to allow the Government to request some very minor preliminary design work in Phase 1, but highly discouraged such practices, based on the sentiment of industry during the legislative process.

As the process has evolved since 1997, I don't know of any case where we asked for preliminary design in phase 1, at least on Corps of Engineers projects. It is generally useless to develop and submit a very preliminary design, without expending extensive efforts/costs to validate the design feasiblity, practicality and cost boundaries of you preliminary design. That defeats the purpose of the 2 phase procedures.

However, if one were acquiring an unusual, unconventional or rather unique facility, such as a monument, one could utilize the 2 phase procedures, asking for some simple sketches of the concept. You'd still risk losing the offeror in phase 2, if their more developed phase 2 design proposal development of an over-optimistic phase 1 concept exceeds the available budget. happy sails! joel hoffman

By Anonymous on Monday, June 24, 2002 - 07:31 pm:

JOel, I too would discourage even a sample or "preliminary" design in phase one. My reasons probably differ. I've seen too many cases in which people exposed to proposal levels of such things fall in love with the sample or model. Some even want to try to incorporate those into the contract! Education doesn't seem to help much either.

Just out of curiosity do you see my issue if Shirley's agency had been contemplating a "stipended BAFO" instead of the FAR 36.3 model? Perhaps I'm drawing a line where there is none. I don't think so, but am interested in views.

By joel hoffman on Monday, June 24, 2002 - 08:09 pm:

Anon, by a "stipended BAFO", do you mean full fledged design development, something like a fighter plane competitive prototype design or something in between that and a quicky BAFO?

For design-build construction, we don't go that far. Users can't afford much and don't want to pay much for design proposals, plus one can reasonably price construction projects with a modest degree of phase 2 conceptual design development, depending upon the project requirements. We found from experience that we were asking for much more proposal info than necessary to reach a mutual understanding about scope, price and quality.

I'll admit I've no experience with a stipended BAFO! happy sails! joel

By Anonymous on Monday, June 24, 2002 - 08:41 pm:

Joel, "stipended BAFO" is my invention here. What I thought was being contemplated was absolutely not the classic design build. I may have misread, but several signs in the original post led me to believe the agency was thinking of a full initial proposal, downselect to three and then another round. That is why I initially said "I have an uncomfortable feeling you are mixing apples and oranges here by your use of "two-phase design build" and "two-phase solicitation" together."

To me the 36.3 process means you select finalist based on your assessment of general capabilities. You let them demonstrate by doing some fairly costly real design work and then select the demonstrated best capability. It is reasonable to defray some of that expensive demonstration that is to your long term benefit.

I thought Shirley's agency was possibly doing the full proposal, with technical and cost proposals that are not part of a phase one, downselecting and then chipping in on a conventional best and final. From my viewpoint that would be a distortion to say the least of the 36.3 process. I think the reasons I gave earlier apply to such a distortion and not to the legitimate 36.3 processes.

By joel hoffman on Monday, June 24, 2002 - 11:27 pm:

I understand, Anon. However, I'm pretty sure that Shirley's organization will be handling a conventional 2 phase D-B acquisition, because I teach D-B with one of Shirley's contemporaries. Her District is one of the better ones at D-B. They just haven't included a stipend, yet. I'm fairly certain that their client, the Air Force, is requesting payment of stipends on an acquisition. happy sails! joel

By Shirley Garvey on Tuesday, June 25, 2002 - 10:54 am:

We will be using the guidelines in FAR 36 for a two phase design build. I believe Joel has the clearest understanding of what I was asking.