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GeoJeff

Organizational conflicts of interest and design-build

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Engaged in an office debate. I am being told FAR 36.209 applies to design-build acquisitions. I disagree. Among other reasons, I cite Government Contract Law: The Deskbook for Procurement Professionals, written by the US Army JAG Corps, at page 437, which reads as follows:

"Design-Build Contracting. 10 USC 305a; 41 USC 253m; FAR Subpart 36.3. Background. In the past, a contracting officer could not award a contract to build a project to the firm that designed the project unless the agency head or the agency head's delegee approved. FAR 36.209. See Lawlor Corp., B-241945.2, Mar. 28, 1991, 70 Comp. Gen. 375, 91-1 CPD 335. In 1995, however, Congress established new, two-phase design-build selection procedures that allow the same firm to design and build a project. National Defense Authorization Act of 1996, PL 104-106, 110 Stat 186 (1995)."

I am interested in others' thoughts on this topic.

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See Darst and Curtis, Government Construction Contracting (Federal Publications, 2007), Ch. 4:

Despite the general requirement to develop detailed specifications for construction projects, there has been a growing trend toward the use of Design-Build construction methods by the Government. See Chapter 1, Section G. Previously contracting officers were prohibited from awarding a construction contract to build a project to the firm that had designed the project, unless the head of the agency or his/her designee approved it. See FAR 36.209. However, with the passage of legislating permitting a two-phase Design-Build selection process in 1996, firms or teams of architect-engineer/construction firms may design and build the same project. Clinger-Cohen Act of 1996, Pub. L. No. 104-106, 110 Stat 186 (1996) (originally enacted as the Federal Acquisition Reform Act or ?FARA?).

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Engaged in an office debate. I am being told FAR 36.209 applies to design-build acquisitions.

I am interested in others' thoughts on this topic.

Does the debate concern whether or not FAR 36.209 prohibits the award of a design-build contract to a design firm as the prime or as a joint venture member? It does not, unless the firm prepared the design criteria and/or preliminary design in the design-build request for proposals. In that event, the firm would would likely have an unfair competitive advantage, since it has been intimately involved in the development of the government's functional and technical requirements.

The restriction in FAR 36.209 pre-dates Section 4105 of the Clinger-Cohen Act of 1996 (Public Law 104-106), which specifically authorizes the use of two-phase design-build procedures for construction contracting. D-B contracting is covered in FAR 36.102, 36.104 and 36.3 .

Here is what FAR 36.209 says:

"Construction Contracts With Architect-Engineer Firms.

No contract for the construction of a project shall be awarded to the firm that designed the project or its subsidiaries or affiliates, except with the approval of the head of the agency or authorized representative."

The words "shall be" indicate a future action to award a construction contract. The word "designed" is the past tense of design. Thus, the wording indicates that the project has been designed before the award of the construction contract. Here is another way of stating the restriction, using the active voice: "Do not award a construction contract to the firm or its subsidiaries or affiliates that designed the project , except with the approval of the head of the agency or authorized representative."

I think that it is clear that FAR doesn't specifically bar a design firm that didn't prepare the RFP design criteria or a preliminary design from being a subcontractor member of the design-build team. What unfair competitive advantage would a design entity that did not prepare the RFP have in the role of prime or joint venture partner that it wouldn't have as a subcontractor member of the design-build team?

Does FAR 36.209 really intend to protect the government or building occupants from professional conflicts of interest rather than unfair competitive advantage? The design-build concept of singular responsibility has been traced all the way back to the Code of Hammurabi (circa 1750 B.C.), with very drastic punitive measures being taken for the builder who also was responsible for the "design" of a building. Why would Congress be any less concerned with the builder being responsible for the design than with the designer being responsible for construction?

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Great post, Joel. Thanks.

From the Code of Hammurabi (http://www.fordham.edu/halsall/ancient/hamcode.asp):

229 If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death.

230. If it kill the son of the owner the son of that builder shall be put to death.

231. If it kill a slave of the owner, then he shall pay slave for slave to the owner of the house.

232. If it ruin goods, he shall make compensation for all that has been ruined, and inasmuch as he did not construct properly this house which he built and it fell, he shall re-erect the house from his own means.

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Thanks, Vern. To be less wordy, I didn't quote the six Hammurabi provisions which deal with responsibility for safety of design and construction. You quoted four of them. I will add the other two after I return to office from the car repair shop. :)

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I left out the first one, 228, because I don't understand it. I left out the last one, 233, because it deals only with warranty of uncompleted work. Anyway, neither is as dramatic as the ones I quoted.

Here are the missing ones:

228. If a builder build a house for some one and complete it, he shall give him a fee of two shekels in money for each sar of surface.

233. If a builder build a house for some one, even though he has not yet completed it; if then the walls seem toppling, the builder must make the walls solid from his own means.

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Joel and Vern,

Thank you both for the thoughtful replies.

Sadly, the debate long ago took a turn towards the absurd. I work for an agency within the Department of Interior. DIAR 1436.209 expands on FAR 36.209 as follows:

"Approval to award a contract for construction to a firm or its subsidiaries that designed the project shall be made by the HCA only after discussion with Director, PAM, and with legal concurrence. The request for approval prepared by the CO shall include the reason(s) why award to the design firm is required; an analysis of the facts involving potential or actual organizational conflicts of interest, including benefits and detriments to the Government and the prospective contractor; and the measures which are to be taken to avoid, neutralize or mitigate conflicts of interest. A copy of the documentation shall be forwarded to PAM at the time of consultation."

The Fish and Wildlife Service, another agency within the Department, has awarded a multiple award task order contract (MATOC) for construction and design-build. From the "scope" paragraph in the MATOC ordering guide: "The objective of this contract is to provide comprehensive technical design-build and construction services for all bureaus within the Department of Interior. Task orders may require work including (but not limited to) investigations, analyses, studies, design0build, construction administration and management, NEPA, archaeological and historical compliance, and actual construction. Design services regulated by the Brooks Act are NOT included within the scope of the MATOC."

The Department has taken the position and promulgated it to the bureaus that, before a design-build task order is competed/issued under the MATOC contract, the waiver described above in 1436.209 is required. I have already made all of the arguments against this position (I think), to no avail.

I am at a loss as to how to proceed, since I don't believe 36.209 or 1436.209 even applies to design-build actions. I have reached out to the solicitor's office, given that "legal concurrence" is required, and they don't know what to do either. In desperation, I have even reached out to the USFWS Contracting Officer who awarded the MATOC contract in the first place to obtain sample waivers. Perhaps not surprisingly, the Contracting Officer has retired and her deputy/replacement will not return my emails or phone calls.

Any advice?

Thanks again for the participation thus far. The excerpts from Hammurabi's Code were very interesting.

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Sorry, but I have no advice. My motto: Never try to teach a pig to sing. It wastes your time and annoys the pig. Trite, but true.

That pigs are ignorant and stubborn is in their nature, and it is not a problem on the farm. It only becomes a problem when the pigs are in charge.

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Geojeff, you said: "Sadly, the debate long ago took a turn towards the absurd. I work for an agency within the Department of Interior. DIAR 1436.209 expands on FAR 36.209 as follows:

"Approval to award a contract for construction to a firm or its subsidiaries that designed the project shall be made by the HCA only after discussion with Director, PAM, and with legal concurrence. The request for approval prepared by the CO shall include the reason(s) why award to the design firm is required; an analysis of the facts involving potential or actual organizational conflicts of interest, including benefits and detriments to the Government and the prospective contractor; and the measures which are to be taken to avoid, neutralize or mitigate conflicts of interest. A copy of the documentation shall be forwarded to PAM at the time of consultation."

This is not a problem, because in design-build the construction contract is awarded before the design-builder provides the design of the project, as I explained above. Thus, the firm has not "designed the project" before award of the design-build construction contract and 36.209 is meaningless in this context.

You went on to say that "The Fish and Wildlife Service, another agency within the Department, has awarded a multiple award task order contract (MATOC) for construction and design-build. From the "scope" paragraph in the MATOC ordering guide: "The objective of this contract is to provide comprehensive technical design-build and construction services for all bureaus within the Department of Interior. Task orders may require work including (but not limited to) investigations, analyses, studies, design0build, construction administration and management, NEPA, archaeological and historical compliance, and actual construction. Design services regulated by the Brooks Act are NOT included within the scope of the MATOC."

"The Department has taken the position and promulgated it to the bureaus that, before a design-build task order is competed/issued under the MATOC contract, the waiver described above in 1436.209 is required. I have already made all of the arguments against this position (I think), to no avail."

The scope of the cited MATOC is a bit problematic in that the type of services described may conflict with the statement that they will not be of the type regulated by the Brooks Act. While true that the Brooks Act doesn't apply to design-build, it may well apply to investigations, analyses and studies and possibly to NEPA and historical preservation efforts. Thus task orders for such activities may be improper for non A-E contracts. And if design-build or construction task order scopes are developed from the studies and investigations in those other task orders, then 36.209 may very well apply...

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Geojeff, you said: "Sadly, the debate long ago took a turn towards the absurd. I work for an agency within the Department of Interior. DIAR 1436.209 expands on FAR 36.209 as follows:

"Approval to award a contract for construction to a firm or its subsidiaries that designed the project shall be made by the HCA only after discussion with Director, PAM, and with legal concurrence. The request for approval prepared by the CO shall include the reason(s) why award to the design firm is required; an analysis of the facts involving potential or actual organizational conflicts of interest, including benefits and detriments to the Government and the prospective contractor; and the measures which are to be taken to avoid, neutralize or mitigate conflicts of interest. A copy of the documentation shall be forwarded to PAM at the time of consultation."

This is not a problem, because in design-build the construction contract is awarded before the design-builder provides the design of the project, as I explained above. Thus, the firm has not "designed the project" before award of the design-build construction contract and 36.209 is meaningless in this context.

Joel,

It IS a problem when those who have the power to say so say that it does, despite the fact that it is meaningless.

Regarding your other comments on the MATOC's scope, I agree. It was written hastily in order that it would be ready for ARRA-funded task orders to be placed. As with much ARRA-related, it was quick and dirty and the problems linger.

I appreciate your comments. I wish there were more right-thinking people in positions of power throughout the Government, but I suppose that sentiment is shared by many.

Thanks,

-Geo

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Joel,

It IS a problem when those who have the power to say so say that it does, despite the fact that it is meaningless...

Thanks,

-Geo

Geo, why would Congress specifically authorize something that would then directly conflict with 36.209??? That is incredulous and you can tell whoever interprets FAR 36.209 to conflict with FAR 36.104 and 36.3 that I said it. I don't have any problem with the actual language in DIAR 1436.209. My problem is with someone's interpretation of the language.

The proposed rule to implement Section 4105 of the Clinger-Cohen Act of 1996 (Public Law 104-106), authorizing the use of two-phase design-build procedures for construction contracting, was published in the Federal Register at 61 FR 41212, August 7, 1996 with request for public comment. There were 77 respondents. After analysis of the public comments and further consideration of the proposed language, the rule was slightly revised and published on January 2, 2007 at http://www.gpo.gov/fdsys/pkg/FR-1997-01-02/html/96-33217.htm .

Nothing in that language mentioned a ban on an A-E firm or an integrated design-build firm with in-house design capability participating in the prime award of a design-build contract. There were integrated design-build contractors involved with the Design-Build Institute of America, who was one of the major proponents of the Legislation. One of the founders of the DBIA in 1993 and one of the leaders in pressing for the legislation was the Haskell Company, an integrated D-B firm in Jacksonville, FL. Preston Haskell, then CEO of Haskell Company was the founding Chairman of the DBIA and was President of DBIA from 1993-1994. You can bet your BIPPY that had Congress intended a ban on a design firm or integrated design-builder from being awarded a D-B contract, Preston Haskell would have been aware of it and would have been raising heck over it. I've been a member since the 1990's and have NEVER heard of such an interpretation by anyone!

I'm in the process of trying to obtain the FAR Council or committee's responses to those 77 respondents' comments for another work purpose. I'll let you know if the FAR Council knew that even though FAR 36.104 said design-build is authorized - that it is considered a conflict of interest to actually award a design-build contract to an A-E firm as prime, as a joint venture partner or as a subcontractor or as an integrated design-build contractor. :)

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Let me clarify that if a firm prepared the partial design or design criteria used in a design-build solicitation, then FAR 36.209 is applicable concerning any attempted participation by that firm in the resulting competition for the D-B contract.

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:) By my count, Joel, you have written more than a thousand words about this to someone who agrees with you. Another thousand words and you'll have enough for an article in Contract Management magazine. Why not write about it there and make your point that people who think that 32.209 applies to two-phase design build are idiots? I mean, if you're going to go to the trouble of querying the FAR councils, why not get published?

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I mean, if you're going to go to the trouble of querying the FAR councils, why not get published?

That's for something else. It has nothing to do with this topic.

I suggest that Geo can do something about his problem. I've tried to provide him some info he could use. If he didn't plan on doing something about it, he shouldn't have asked "for others' thoughts on this topic".

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It is impossible for me to follow the logic of those who are contesting GeoJeff's position. Essentially they would have to argue that a provision within FAR Subpart 36.2 applies to FAR Subpart 36.3 despite the fact that nothing in FAR Subpart 36.3 references 36.209, and, to do so would lead to a clearly absurd result. The argument seems even more odd in that they are attempting to apply an agency acquisition regulation to the contracting officer based on this misreading of the FAR. In my view, this would violate FAR 1.304(:)(2) which states, "Agency acquisition regulations shall not ... conflict or be inconsistent with FAR content." I don't see how anyone could argue that applying DIAR 1436.209 to a design build contract is anything other than inconsistent with the FAR.

As to your question regarding how to proceed, I don't think anyone can answer that for you. You would have to get this issue in front of someone who understands it and can get the agency back on the right track.

Good luck.

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I think everyone should calm down. First, all we have is GeoJeff's side of the story. There may be, and probably is, more to it. I learned long ago not to rely too much on first-poster facts. I'm not trying to insult GeoJeff. I'm just stating my experience here. Joel knows what I'm talking about.

GeoJeff started out talking about an "office debate." Now he seems to be talking about policy. But the DIAR provision he cited, 1436.209, could be interpreted in a number of ways. It is not clear from that text that it is supposed to apply to two-phase design build. The DIAR does not supplement FAR subpart 36.3. GeoJeff then says:

The Department has taken the position and promulgated it to the bureaus that, before a design-build task order is competed/issued under the MATOC contract, the waiver described above in 1436.209 is required.

I haven't seen the language of that promulgation, and I don't know that, whatever it says, it is supposed to apply to the two-phase design-build selection process. I'm not sure how it is to be interpreted and applied. In any case, nothing prohibits an agency from putting internal restraints on the use of a procedure. We haven't heard the other side.

Agency policy makers do what they do. Before we complain so bitterly, we should take the professional approach of making sure that we understand the policy and the reasons for it.

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I will say again that I don't have any problem with the wording of the DIAR 1436.209. it implements procedures for obtaining the necessary waiver in the event that someone wants to award a construction contract to an entity which prepared the government furnished design (whether full, partial or simply the design criteria) used in the solicitation being awarded.

I also don't have any problem with the policy of someone having to approve the use of a design-build task order on the MATOC that Geojeff described, either. That is within the discretion of the agency. That particular contract has a scope which could include A-E services that are subject to the Brooks Act procedures, contrary to the disclaimer that it doesn't. I think somebody ought to scrutinize every task order issued on it, not just D-B task orders.

I have a problem, if someone interprets 36.209 as applicable to award of a D-B contract or task order to a firm that WILL design the D-B project after award, assuming that the entity did not provide the design or design criteria that is included in the D-B solicitation.

The 36.209 restriction was in FAR before there was any mention of D-B in the FAR, which was added, effective 2 January, 1997.

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GeoJeff: The only agency that has apparently addressed this issue directly in their FAR supplement is the VA. The VA FAR Supplement's implementing language on this is found at section 836.209, "Construction contracts with architect-engineer firms." That provision flatly states that "[t]his section does not apply to design-build contracts, as defined at FAR 36.102."

I could not find any other agency FAR supplement that directly addresses this issue.

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Did someone raise a stink with the Department over this??? :lol:

After reading Vern's post, I went to our bureau intranet to find the "language of the promulgation" to post it here. For the record, here it is:

The initial statement, posted as a policy announcement on our bureau SharePoint, was as follows, under the title "Design-Build Approval":

"Please note the DIAR as currently written contains the following provision:

1436.209 Construction contracts with architect-engineer firms.

Approval to award a contract for construction to a firm or its subsidiaries that designed the project shall be made by the HCA only after discussion with Director, PAM, and with legal concurrence. The request for approval prepared by the CO shall include the reason(s) why award to the design firm is required; an analysis of the facts involving potential or actual organizational conflicts of interest, including benefits and detriments to the Government and the prospective contractor; and the measures which are to be taken to avoid, neutralize or mitigate conflicts of interest. A copy of the documentation shall be forwarded to PAM at the time of consultation.

There is some confusion about whether PAM continues to expect bureaus to request such consultation. OAG has a number of construction projects in process at this time, and a number of new ones are slated to be initiated soon using Working Capital Funding sources. While guidance relating to design-build was very specific for ARRA projects, the situation for non-ARRA projects is unclear. A request for guidance is pending with DOI. Meanwhile, please consider this when developing acquisition strategies with your customers. Time to allow approval of a design-build, if that is the best overall strategy, should be factored into your milestone planning.​"

Because I was attempting to secure approval for a design-build project at the time, I pushed the "request for guidance" with DOI. Despite my arguments to the contrary, I received a written response from the lead policy analyst to this effect:

"I just talked to the PAM Office. The ruling is that DIAR 1436.209 applies to design-build. Therefore, OAG will need to submit the documentation requested in this DIAR reference to PAM via the HCA (name redacted). The SPE (name redacted) has also asked that any documentation include a discussion point about whether or not the D-B project is on the bureau five year construction plan."

Based on this direction, I engaged the solicitor's office, because DIAR 1436.209 requires "legal concurrence." Having never prepared such a waiver before, my solicitor contact didn't know where to start and elevated it up her chain of command to DOI HQ solicitor, with my arguments as to why this policy should not apply in this case.

This morning, at the same SharePoint policy page, was this announcement, again under the heading of "Design-Build Approval":

"DOI has just revised interpretation of the language below, acknowledging changes in current Federal acquisition policy. DOI approval is not required per the DIAR provision below for projects where the initial acquisition strategy is to use a design-build approach. The provision only applies if we award a stand-alone design requirement, then decide to award the construction of that requirement under a separate contract to the same firm that completed the design."

I particularly like the reference to "changes in current Federal acquisition policy." When were those changes made again? :)

Thanks for all for participating. I think it's a strange coincidence that my frustration finally boiled over enough to start this thread, and concurrently and independently the Department saw the light, so to speak.

-Geo

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Thanks for all for participating. I think it's a strange coincidence that my frustration finally boiled over enough to start this thread, and concurrently and independently the Department saw the light, so to speak.

-Geo

Geo, Congratulations on your successful efforts to inform the policy makers that 36.209 doesn't restrict the use of the D-B construction delivery method or preclude award to a design firm that didn't prepare the design criteria or preliminary design, if there is any.

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