Tzarina of Compliance

Yep.... I like discretion, provided it is not abused to avoid a more complicated but better solution. In my world, the work is almost proportionally overseas and not overseas under the same contract, and there are plenty of small businesses who want and can do it, so technically I should be doing market research and then setting-aside in every case that FAR 19 tells me to.... but the pressure form the "big" guys is for me to use "discretion" not to set aside, because they do not want smalls getting the work and then growing to compete with them. And, no, the contract does not require it to be done one way or another (in or out of US), it just has to be done. But more importantly, why should it matter where the performance is if there are two (or many more) US small businesses who can do it? Isn't this the whole idea? Wouldn't the "discretion" be better exercised in analyzing the market and capability of smalls to do the work?

If you are providing technical assistance services and writing reports and part of the team is in Egypt and the other is in Arlington VA, is the contract performed overseas?

Also they say you can protest the set-aside and not set-aside decisions.....

@Vern Edwards @Don Mansfield well, the final rule is out and the response to questions. They still do not describe what they mean by "performance" or "outside the US". So if services are "performed" BOTH in the US and overseas under the same contract, I am still not clear if I must set-aside or I may set-aside. Any other reads on this?

Thank you! Watching this...

I thank you @Don Mansfield and @Vern Edwards very much for continued engagement and I am definitely one of those who is not okay with ambiguous rules, especially when they very clearly affect people's livelihoods or fair competition. I wonder if the revised FAR 19 rule "clarification" will respond to the ABA comments that you all shared (thank you!) and reconcile the SBA's "regardless of place of performance" rule with "applies only in the United States" language. Would be most grateful if you all hear something on this and share here. Many thanks again!

My question was really to do with the specific situation but also for almost all agency contracts, which are "delivering services" outside the US, but the services are performed by contractor personnel who are located in the US and outside the US. The COs are also based in the US and/or in overseas locations - sometimes both. Do COs know that some services or a lot of services will be performed in both US and overseas locations? In most cases, yes, because these are cost reimbursable contracts which require large US based recruitment efforts with some personnel traveling overseas and some not. To Vern's point, FAR 19.000(b) does not say "performance", it just says "applies in the United States" and does not explain what this means. The new proposed rule to explain that it means "discretional" application for contracts outside the United States, again means nothing. What does "in the United States" mean? The question is really about the small businesses in this industry. The agency mostly takes the position that because the contracts are performed "almost entirely overseas" ( a term which is not defined) COs may use discretion in setting aside contracts, but are not mandated to do so under FAR 19 even if there are multiple small businesses capable of performing the work. The small businesses disagree and would like to argue that there is no presumed exception for the agency's contracts. The issue is not more rules, but clearer rules as to when US small businesses do not have to be considered and why. I am assuming that the agency's above interpretation of FAR 19.000 (b) "applies in the US" to include consideration of location of performance and the "entire" or not "entire" concept is due to the definition which relates to small business subcontracting plans. FAR 19.702 (b)(3) sets the requirements for small business subcontracting plans under the authority of 15 USC 637(d) and states that the requirement for small business subcontracting plans does not apply " For contracts or contract modifications that will be performed entirely outside of the United States and its outlying area" So there we have it - prime contract set-aside requirements only apply "in the US" and small business subcontracts requirement applies only for contracts "performed entirely outside the US and its outlying areas". What does a pro-US small business CO to do? Thank you all for an interesting discussion.

I am leaning towards it is NOT, although my choice would just be considered "discretionary". Until it is clear what is considered "performance in the US" and how that is determined, people will continue to wing it. At least in this industry, which is non-DOD. I this case, the Foreign Assistance bilaterals do not restrict sources, so it just defaults to the rest of the FAR.

Thats a good point. Having read through all the info provided here, I am thinking that the way the agency obligates funding to specific country accounts before the funding is used to what is called "sub-obligation" to contracts may support the whole "overseas contracting" argument, even though the actual "performance" is in the US if you count it by dollar value or by number of personnel and where they work from. Very confusing. If the whole thing is exempt, then say its exempt and all the set-asides and SB sub plans are completely discretionary. If it is not exempt, then everyone follows the same rules....

Don, thank you. ABA comments are helpful. I hope final rule clarifies, but probably not. Thank you for providing this link. I have requested my office to look up your 2015 article that Vern mentioned. Look forward to reading that. Thank you again.

Thank you so much, Vern. I am looking for some discussion on this, so this is exactly the reading I am looking for, also per your last - I was hopeful with the new FAR 19 "Clarification", but it does not look like they are clarifying this part. This agency's industry has a lot of small and emerging businesses, so I am trying to learn more about how the process works for them. I am not trying to go against any guidelines etc., but I am trying to find out how do I determine when to apply the small business subcontracting requirements and set asides. "Using discretion" in this case seems to affect a lot of businesses. I will gratefully read all the links you shared and thank you all again. Happy Valentine's Day! 🙂❤️

In services contracting, this is the issue. If the work is performed both in the US and overseas, what percentage makes it "performance overseas" for mandatory SB considerations?

The questions are: should this be a set-aside under FAR 19 and if its not a set aside does it require a Small Business Subcontracting Plan (over $750K)? The contract is to provide technical assistance to the Government of let's say Egypt, in creating financial management system which can be used by various departments of the Egyptian Government. The expected offerors will be US based contractors, who will perform the work in Egypt with the back office support, compliance etc., in the United States. 70% of the contract costs are incurred in the US to pay salaries of both personnel posted to Egypt, and personnel supporting the effort in the US, indirect costs, etc. The Agency's position is that since all of its contracts are performed overseas, they do not have to (but can) offer set-asides or require small business subcontracting plans. My question is not to the point of the FAR 19 and whether or not it should be used more often in contracts which are performed overseas.

Okay, so if the contract is for provision of technical assistance to the Government of Greece and the contractor provides technical experts deployed to Greece to assist Greek Government but hires and pays them in the US, and the compliance aspect of the contract, accounting, subcontract management, executive oversight, program management etc., is handled in the home office by 30+ people, all charged to the Government through indirects. Is the contract performed overseas? In its entirety?

I have read the threads on this forum in regard to the application of FAR 19 to acquisition of services which are to be performed overseas. I have also read all the linked decisions and the recent proposed rule to clarify FAR 19 application (https://www.govinfo.gov/content/pkg/FR-2019-08-12/pdf/2019-16957.pdf) which basically says COs CAN set aside contracts performed overseas but do not have to. The question I have is still not answered though, or this may be the issue with my intelligence limitations 😞 . How does one determine "performance outside the US", not even mentioning "entirely outside the United States" - what is "performance" for this purpose? In a services acquisition under cost type contracts, performance - i.e. delivery of actual services - may be overseas or benefiting overseas contracting activity, but the services are purchased from personnel hired in the United States and posted overseas, plus the indirect cost pools are for personnel who are located in the United States. So, if I have a contract which is to be performed under Foreign Assistance Act in, lets say, Egypt, and I am hiring contractors in the US, who then go and hire personnel in the US and send them to Egypt and also maintain a home office in the US which is paid for by indirect costs. Let's say all the costs that are actually "incurred" overseas for the performance are about 30% of the contract and the rest are "incurred" in the US. Is the contract performed overseas? If there is a definitive thread on this that exists, grateful for a link. Thanks!

I don't. I want a way to calculate fee objectives within the maximum for various effort and for an industry which is other than DOD contractors. I am trying to see the best way to do that - what affects lower than normal 5% what affects higher than normal 5%, so the ranges. I just wanted to see how those ranges were developed originally for DOD so that I can have something to compare my exercise to. I think the LMI study is the best explanation although I run down all the rabbit holes that Vern linked in 🙂 and that was useful.

So yes, this exercise is for pre-negotiated objectives. DOD ranges % for various technical, management, cost, capital, IT etc are based on DOD contractors and their industry. In my review of my agency's 250 contracts so far, the range that is acceptable seems to be 3-8% with average of 5%. Even though it is not based on anything but random CO's experience with what is acceptable. So I am trying to see if that is, in fact, the case and then see what could influences the above "normal" of 5% and below normal of 5% in the contracts with this specific agency. How does a CO and a contractor determine and justify what is a reasonable fee. Sorry I know there is a lot more to that, but that is my objective. Not to raise the statutory limitations but the mechanics of how to determine where within the limitations the fee objective should be. Sorry for sloppy grammar, trying to do too many things.

@Vern Edwards So yes, this exercise is for pre-negotiated objectives. DOD ranges % for various technical, management, cost, capital, IT etc are based on DOD contractors and their industry. In my review of my agency's 250 contracts so far, the range that is acceptable seems to be 3-8% with average of 5%. Even though it is not based on anything but random CO's experience with what is acceptable. So I am trying to see if that is, in fact, the case and then see what could influences the above "normal" of 5% and below normal of 5% in the contracts with this specific agency. How does a CO and a contractor determine and justify what is a reasonable fee. Sorry I know there is a lot more to that, but that is my objective. Not to raise the statutory limitations but the mechanics of how to determine where within the limitations the fee objective should be. Sorry for sloppy grammar, trying to do too many things.

Talking about WGL and the ranges in my original question.

Just asked one my friends at LMI for a copy. Can you elaborate on "big mistake"? Do you have thoughts on how to determine what acceptable fees are under CPFF contracts when you do not really have competition?

This is exactly what I was looking for. I know that they did do a study to come up with the ranges. I am writing something to encourage a civilian agency to conduct their own study and so wanted to give a primer and use the methodology as an example. Imperfect as it is. Thank you so much @Vern Edwards!!!! Spasibo

Many thanks. This is a great start. Looks like the original ranges were based on a 100 contractor survey, I have the 1985 Touche Ross survey - were the ranges changed based on that? I know at some point only CPFF is now limited to 10% and 15% for R&D. Have you gone beyond the 1947? What was done in the 1963 study that ended up in the ranges for weighted guidelines?

Is there any materials I could read on how the original weighted guidelines method (ASPR 308 and FAR 15.4) was introduced and specifically how and when the original ranges were developed and when they were modified and why. I have the 1985 Touche Ross Survey for DOD contractors. But was there one in 1962 which set up the base ranges? Any help is greatly appreciated.

THANK YOU!!!!! This is super helpful

Very very interesting. Thank you for food for thought on this.... I just saw your Solzhenitsyn quote and wow, I can totally see why you would like it ❤️