Changing Contract Type After Receipt of Proposals

[Jess]

I am a KO and have a requirement for a specialized type of intelligence analysis services that has been sole sourced for the last 15 years because market research indicates that only one contractor can provide this service. We competed the requirement this year (base plus four) to ensure that no one else in industry can accomplish this type of work. The solicitation stated that "we anticipate an FFP" contract type. We had no communication with the incumbent prior to proposal submission. At the proposal due date, only one proposal was received, a cost-reimbursable proposal from the incumbent who is an educational institution. We asked the contractor why they submitted a cost-reimbursable proposal and their response was that after careful consideration of the dynamic technological areas involved and the

understanding that they were being asked to define deliverables several years into the future based on today's projections of a rapidly changing technology, a cost-reimbursable vehicle was better suited for both the contractor and the government.

We agree. We are currently negotiating the contract type and cost with the contractor. As far as I can tell, the FAR does not dispute chnaging the contract type and there is no case law against this. In fact, FAR 16.103(a) states that "Selecting the contract type is generally a matter for negotiation and requires the exercise of sound judgment. Negotiating the contract type and negotiating prices are closely related and should be considered together. The objective is to negotiate a contract type and price (or estimated cost and fee) that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance."

My leadership says that we should re-post the solicitation because there is a fairness issue at hand. They argue that changing the type of contract type after receipt of proposals significantly shifts the risk from the vendor to the government and it possible that more vendors would have bid had they had the opportunity to bid this as a cost type contract.

I disagree that needs to be re-posted. Would like to hear your thought on this.

many thanks,

Jess

[Kathleen A. Kern]

Jess,

A few questions:

You say that for the past 15 years market research indicates (or indicated?) only one source can provide the service.

What did market research show prior to this current solicitation? What type of market research was performed? What contract type was used previously? Was soliciting the requirement your market research? You say you had no communication with the incumbent prior to proposal submission; was there any communication with industry prior to solicitation issuance?

You reference FAR 16.103 with regard to selection of contract type and it being a matter of negotiation but did not include the part (d)(1), which states: Each contract file shall include documentation to show why the particular contract type was selected. This shall be documented in the acquisition plan, or if a written acquisition plan is not required in the contract file...

Was this documentation completed for the use of FFP and why was FFP selected?

I am inclined to agree with your leadership ?

FAR 15.206 -- Amending the Solicitation.

(a) When, either before or after receipt of proposals, the Government changes its requirements or terms and conditions, the contracting officer shall amend the solicitation?

(e) If, in the judgment of the contracting officer, based on market research or otherwise, an amendment proposed for issuance after offers have been received is so substantial as to exceed what prospective offerors reasonably could have anticipated, so that additional sources likely would have submitted offers had the substance of the amendment been known to them, the contracting officer shall cancel the original solicitation and issue a new one, regardless of the stage of the acquisition.

Changing from a FFP changes the terms and conditions and the shift of the risk from the vendor to the government could encourage others to submit. You could also review the periods of performance and perhaps use a base plus one or two years to decrease the contractor concern of "being asked to define deliverables several years into the future based on today's projections."

Kathleen

[joel hoffman]

I am a KO and have a requirement for a specialized type of intelligence analysis services that has been sole sourced for the last 15 years because market research indicates that only one contractor can provide this service. We competed the requirement this year (base plus four) to ensure that no one else in industry can accomplish this type of work. The solicitation stated that "we anticipate an FFP" contract type. We had no communication with the incumbent prior to proposal submission...

Jesse, it wasn't clear if you performed any current market research for the new acquisition. However, since you didn't talk to the incumbent about switching the contract type to firm fixed price, I doubt that you did any. Certainly, if you are going to switch contract types to a higher risk (to the industry) FFP contract type for a market with a previous universe of one firm under cost reimbursement scenario, it would seem that you must perform some type of research in accordance with FAR 10.001 (a)(2).

Now your leadership says that you "should re-post the solicitation because there is a fairness issue at hand." You said that "[t]hey argue that changing the type of contract type after receipt of proposals significantly shifts the risk from the vendor to the government and it possible that more vendors would have bid had they had the opportunity to bid this as a cost type contract." That may well be true but what is the basis of their assertion? A market survey? What market survey? Is it a "feeling"?

It is apparent that you are now negotiating a contract that is out of scope of the solicitation that you advertised for full and open competition. So, it would seem that you are now not providing for Full and Open Competition for the contract type that you are intending to award. It would seem that you haven't obtained adequate price competition either, based upon the standards in 15.403-1 (c )(1). Note that adequate price competition also relies upon the expectation of offers from 2 or more qualified firms, based upon market research, etc. under that paragraph. Although Part 15.403 deals with exceptions to requirements for cost or pricing data, it seems to establish some expectation of what would have been the reasonable course of action for the entire procurement.

I suppose part of the answer depends upon how much and what type of market research your office performed. But I tend to agree with your leadership that you shouldn't simply proceed with negotiation and award. It appears now to be a sole source negotiation without any public notice that you are doing something other than what you advertised as a full and open, FFP acquisition.

[Guest Vern Edwards]

We agree. We are currently negotiating the contract type and cost with the contractor...

My leadership says that we should re-post the solicitation because there is a fairness issue at hand. They argue that changing the type of contract type after receipt of proposals significantly shifts the risk from the vendor to the government and it possible that more vendors would have bid had they had the opportunity to bid this as a cost type contract.

I disagree that needs to be re-posted. Would like to hear your thought on this.

The question is whether the solicitation permitted offerors to propose alternative contract types and, if it did, whether it was sufficiently clear on that point. By sufficiently clear I mean that the solicitation positively stated that the Government would consider such alternative proposals. I would not consider silence to be sufficient.

If the solicitation was sufficiently clear that you would consider alternate proposals for contract type, then I would proceed with the negotiation.

If the solicitation was not sufficiently clear, I would stop negotiations and amend the solicitation to permit other prospective offerors to propose on a CPFF basis. I would not call for proposals. Instead, I would ask prospective offerors to respond by email telling me whether they would be willing to submit a CPFF proposal if given enough time, and tell them that if I received a positive response from any responsible prospective contractor I would extend the proposal due date by some reasonable time and consider additional proposals. I would list the criteria that I would consider with regard to responsibility (security clearance, experience, accounting system, etc.). I would give prospective offerors two weeks to let me know if they would respond and to provide responsibility info. I would ask for input in the response as to how much time would be reasonable for proposal preparation, but I would give at most only the same amount of time provided by the original solicitation, assuming that time was reasonable. I would wait two weeks and then proceed as appropriate depending on whether I got any responses from responsible prospective contractors. If I got no responses I would then proceed with negotiations with the incumbent.

Of course, you could just cancel the solicitation and start over. That might be quicker. Probably would be. (What a pain!)

And of course, you could simply go on with the current negotiations. If you get no protests you're home free.

P.S. Joel: Adequate price competition is about whether or not certified cost or pricing data are required. It has absolutely nothing to do with CICA and full and open competition. Why do you bring it up?

[joel hoffman]

P.S. Joel: Adequate price competition is about whether or not certified cost or pricing data are required. It has absolutely nothing to do with CICA and full and open competition. Why do you bring it up?

I never said that it had anything to do with CICA. It is just another indicator of the need for market research before finalizing an acquisition strategy if you expect to get some competition on a program that has had none for 15 years. Not only that but the organization changed from a lower risk (to industry) cost type to a higher risk, likely less attractive FFP type. Jesse seems to think that it is now reasonable to proceed because they gave it a shot on the open market. It doesn't appear to me to be reasonable to simply proceed without further attempts to assess the market. I tend to agree with his management, but assess the market first before just going back out with a cost type solicitation.

[formerfed]

The market for this type of work, intelligence analysis, is small and limited. There are just a few companies that do it and they know each other well. I seriously doubt changing the contract type by itself will attract competition.

If I were the CO I would make a decision after a long dialogue with my management on how important is competition. If the agency felt it was, I would put a plan in place to develop competition. But that takes time. Meanwhile, I would do as Vern suggested and that is amend the current solicitation to allow CPFF proposals. I might also shorten the contract period as well if developing competition looks feasible.

[Guest Vern Edwards]

The government must comply with CICA and get full and open competition. That means that it must give all responsible offerors a chance to compete for the stated requirement. The government issued an RFP and only one contractor responded. What was the stated requirement? Was it for FFP or was if for FFP or any alternate that anyone wanted to propose?

If the RFP said that only an FFP proposal would be acceptable, then changing the requirement now to CPFF would require the government to go back out for full and open competition. But if the DCP clearly permitted FFP or a CPFF alternate, then the government has already gotten full and open competition and need not do so again.

This is not about market research unless the government decides (1) that the original RFP did not clearly permit an alternate proposal, (2) that it is now willing to accept CPFF, and (3) that it intends to negotiate CPFF with the incumbent without new competition. If it decides those three things, then it must do market research to support justification other than full and open competition. If it amends the RPF as I described, and if it gets no responses, then it will have gotten full and open competition and may proceed to negotiate with the incumbent without a J&A. It can also take credit at FPDS for having conducted a competitive action.

Contracting 101. What makes the most sense: J&A or amendment? Whatever. Get on with it.