8(a) Sole Source POM/PNM and POP Commencement

[CaptJax]

Scenario:  An 8(a) sole source to replace weathered doors at an OCONUS base was issued as an RFP because the dollar value is above $500K.  After a huge debate with legal as to if this was a service or construction, my argument won that it was indeed a service.  I used FAR 13.5 procedures to issue the RFP.  The proposal was received and I analyzed cost.  The contractor had lump sum line items that I requested to be broken out into basic elements so that I could understand the cost.   During this explanation of costs it was revealed a subcontractor for the base security system did not have its security electronic hardware on the doors, and it was assumed there was base security electronics on the doors, but will probably be installed during the contract POP. However, the PWS did not go into detail the work needed from the base security contractor.  It just said the base security contractor will be required to connect or disconnect its proprietary security hardware.  This was clarified with the 8a contractor who reduced its line item price to show only half of the base security, the connect part, would be needed to performed because there is currently nothing to disconnect. Base security wanted the line item to remain because the doors are expected to be added in the future with the base hardware system, but will on.  By the way, I believe including a cost line item for a currently nonexistent security hardware in FY22 for an anticipated action in FY23 is a bona fide need violation, but I would digress from this topic.   The issue of this post is applying correct negotiation procedures.  At the dollar amount given a formal IGE was not required, I call it a Government Estimate.  The proposal disagreed with the Government Estimate, and the Government Estimate was at best a guess based on previous pre-COVID contracts.   There was no formal Government Estimate, no formal technical PDT team, just an environmental engineer reviewing the technical.  I would argue that for a commercial service contract that the contract specialist could fully perform the technical analysis for doors as this is non-complex in nature requiring specialized expertise. The Government agreed with the contractors proposal, the big difference was number of days that impacted per diem, truck rentals.  The Government did not take into account the logistics of moving people to a remote OCONUS area from CONUS basically.  I wrote this all in a price fair and reasonable memo.

First Issue: I got scolded for not doing a POM, getting legal review and clearance, and then documenting in a PNM. I don't see where a formal negotiation took place, I just asked for a cost breakout to unfurl the contractor's rolled up costs for line items.  So then I had to write a POM that has the Government Position, Objective, then the PNM with the same duplicated position and objective information, but closing it with the negotiated final decision.  In the past with a different KO, we would just get on the phone with the contractor and write-up the decided items in a price fair and reasonable memo, not the more rigorous FAR 15 negotiation process.  In FAR 19 where it discusses an 8a sole source it says negotiation will be done with the proposal.  The new KO is interpreting that to mean FAR 15 negotiation procedures.  If you have an 8(a) sole source for a commercial service, is it wrong to apply simplified procedures and FAR 12 to the acquisition, in that it should only be handled with FAR 15.  FAR 13 steers away from POM/PNM's and allows it all to be documented with informal memos. It's my understanding that in a construction there is RS MEANS that details out line item costs, and there is not a formal detailed price book for services for which a cost engineer to provide a cost analysis from which is build a negotiation position.  It is my understanding that a negotiation occurs when the contractor explains its proposal, and the Government explains its estimate and there is a disagreement with wiggle room where both parties can resolve the gap. Is it dangerous to use terms of clarification, discussions, POM/PNM, negotiation from FAR 15 applied to an 8(a) sole source for commercial services? I believed I was doing FAR 13.5 so I neither clarified or discussed with the contractor; the nature of the exchange was to understand the line items of cost; to clarify if you will.  According to our policy oversight folks anytime you have revised proposals, that's a negotiation that requires documentation, but didn't specify what type of documentation. The KO decided it had to be a POM/PNM after the fact despite the Price Fair and Reasonable in the file. The term "negotiation" in the world of the FAR is it wholly owned by FAR 15?  So if you do any sole source action, 8(a) sole source, that is non-IFB you must develop some form of a  pre-negotiation objective, get authorization from to engage the contractor (business clearance), and write a PNM.  The Army discusses POM and business clearance in AFARS 5115 for FAR 15 actions.  FAR 19 8(a) sole source says its negotiated, but not how it will be documented, FAR 13.5 does talk about negotiation or refer one over to using FAR 15 negotiation procedures. Not sure in the future how to interpret documentation requirements or what is correct procedurally. I would like to know because so many KO's have wildly different interpretations.

 

Second issue: The KO says the POP on a service must begin immediately after the effective date of award, so if I award on Friday, the POP on the 1449 must begin the following Saturday, and you can't have a gap of time because you would need a Notice To Proceed (NTP). You can't award on the 16th of Sept and have service begin on 30 Sept. The only thing I found is that the effective date starts the contractual binding. I'm not sure who is misinterpreting "Period of Performance" (POP). I thought one could award on Friday (Effective Date on 1449), and begin the POP on the following Monday.  I had a contract where the service could only be done during whale season, which is somewhat of a moving target; how could this POP commencement rule be so stringent?  I thought maybe erroneously the KO had discretion as to when to begin a 12 month service such as beginning on the first day of the month, but awarded the contract sometime mid month, so the POP will be for whole months and end on the last day. Not that if you award it on the 16th, the POP in the delivery section of the 1449 must begin on the 17th.

[ji20874]

1.  Sounds like construction to me.  See the definition of construction in FAR 2.101.

2.  Doesn't sound like a commercial service to me.  It seems the price was not based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.  See the definition of commercial service in FAR 2.101.

3.  FAR Subpart 15.4 can easily reach to cover procurements under FAR Subpart 13.5.  The level of documentation should be appropriate to the circumstances.

4.  A contract's effective date certainly can differ from the contract's period of performance start date.

[Vern Edwards]

@CaptJaxReplacing doors on a building is construction, not services. I can't understand why you thought differently, and I can't understand why anyone would agree with you.

As to your first issue, what do you mean by "formal" negotiation? What's that? Have you read FAR 15.000, 15.002(a), 15.400, and 15.402?

As to your second issue, I don't understand what your KO was saying or their reasoning.

 

[C Culham]

@CaptJax  Well I will pile on.....noting especially that everything depends on more specifics, so my comments are generalities!

It is probably construction but could handled as a commercial item rather than under FAR part 36.   You might enjoy this read - 

Pricing?  It looks like you have read the FAR on 8(a) so go back and re-read FAR 19.806.  And also look at FAR 19.807 I hope you are looking at Fair Market Price! 

POP...your KO is confused.

There is much more confusion with regard to FAR guiding principles versus what is happening in reality for you so I will just stop here. 

[joel hoffman]

One or two doors, perhaps. But not an entire PROJECT, at a remote site, requiring mobilization and per diem, costing over $500k. Especially if it includes removal, purchasing the doors,frames and hardware, removal and replacing the frames, trim and hardware. How is that a service, let alone a commercial service??  It’s construction. Is the 8(a) firm a construction contractor? Are there multiple trades involved? Surely more than $2500 of labor is involved. 

And I also agree with Vern and ji on the rest.

P.S. This is DOD, which had a policy that construction projects are seldom commercial services. I don’t know if the policy letter was rescinded.

 

[Guardian]

I am just curious, why do you think FAR section 2.101 defines Commercially available off-the-shelf (COTS) item by parenthetically including "construction material"?

           (1) Means any item of supply (including construction material) that is–

                (i) A commercial product (as defined in paragraph (1)^† of the definition of “commercial product” in this section);

                (ii) Sold in substantial quantities in the commercial marketplace; and

                (iii) Offered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace....

^†Commercial product means—

           (1) A product, other than real property, that is of a type customarily used by the general public or by nongovernmental entities for purposes other than governmental purposes, and–

                (i) Has been sold, leased, or licensed to the general public; or

                (ii) Has been offered for sale, lease, or license to the general public....

[ji20874]

A brick is a construction material and is an item of supply.  A contracting officer can use a commercial item contract to purchase a brick.

A brick building is a matter of construction of real property.  A contracting officer cannot use a commercial item contract to build a brick building.

[Guardian]

29 minutes ago, ji20874 said:

A brick is a construction material and is an item of supply.  A contracting officer can use a commercial item contract to purchase a brick.

A brick building is a matter of construction of real property.  A contracting officer cannot use a commercial item contract to build a brick building.

@ji20874 That makes sense.  So then, for instance, the Government could buy a few cubes of brick for their faculties personnel, who are federal employees, to build or repair a structure. 

[joel hoffman]

12 minutes ago, Guardian said:

@ji20874 That makes sense.  So then, for instance, the Government could buy a few cubes of brick so that their faculties personnel, who are federal employees, could use them to build or repair a structure. 

Or buy thousands of common bricks as a commercial product… for either in-house use or as government furnished materials for construction contractor installation. 

Edited September 14, 2022 by joel hoffman

[Guardian]

15 minutes ago, joel hoffman said:

Or buy thousands of common bricks as a commercial product… for either in-house use or as government furnished materials for construction contractor installation. 

@joel hoffman Understood.  I got through school in part by working with brick masons, or as the Aussies might call them, "brickies."  They referred to a pallet of brick as a "cube," which contains around 500 bricks.  Cubes were typically made up of five individual straps.  But I understand your point; the FAR contemplates no limit to how many "bricks" the Government might purchase as a commericial item supply.

[joel hoffman]

43 minutes ago, Guardian said:

@joel hoffman Understood.  I got through school in part by working with brick masons, or as the Aussies might call them, "brickies."  They referred to a pallet of brick as a "cube," which contains around 500 bricks.  Cubes were typically made up of five individual straps.  But I understand your point; the FAR contemplates no limit to how many "bricks" the Government might purchase as a commericial item supply.

Thanks for that explanation, Guardian. I learn something every day here.  🤠

[C Culham]

21 hours ago, joel hoffman said:

 It’s construction.

Age old argument that has many that do not agree.   Case in point https://www.dsp.dla.mil/Policy-Guidance/FAQs/Commercial-and-Nondevelopmental-Items/ .

Q: What is a commercial item? 

• Standalone services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions. Construction, research and development (R&D), warehousing, garbage collection, and transportation of household goods are examples.

In the specific case of this thread this stands out - OCONUS and 8(a). 

OCONUS   - Davis Bacon does not generally apply outside the 50 United States.   https://www.dol.gov/whd/programs/dbra/whatdbra.htm#:~:text=For example%2C Davis-Bacon prevailing,performed outside the 50 States

8(a) - 13 CFR 124 in like 18 places but consider this -

In order to be awarded a sole source or competitive 8(a) construction contract, a Participant must have a bona fide place of business within the applicable geographic location determined by SBA. This will generally be the geographic area serviced by the SBA district office, a Metropolitan Statistical Area (MSA), a contiguous county (whether in the same or different state), or the geographical area serviced by a contiguous SBA district office to where the work will be performed. SBA may determine that a Participant with a bona fide place of business anywhere within the state (if the state is serviced by more than one SBA district office), one or more other SBA district offices (in the same or another state), or another nearby area is eligible for the award of an 8(a) construction contract.

Now I am going to say it again but with my own personal emphasis  it might be construction but it could a commercial item!   It depends!

 

 

[ji20874]

"It depends" is almost always right. 🙂

That said, I did not discern any hints in the original posting that the contract pricing was "based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions" -- in fact, to me it strongly suggested otherwise, given the cost analysis the original poster wanted to do.  For that reason, and knowing only what little the original poster said, it still sounds like construction to me.  Maybe there is more to the story?

[joel hoffman]

1 hour ago, C Culham said:

Age old argument that has many that do not agree.   Case in point https://www.dsp.dla.mil/Policy-Guidance/FAQs/Commercial-and-Nondevelopmental-Items/ .

Q: What is a commercial item? 

• Standalone services offered and sold competitively, in substantial quantities, in the commercial marketplace based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions. Construction, research and development (R&D), warehousing, garbage collection, and transportation of household goods are examples.

In the specific case of this thread this stands out - OCONUS and 8(a). 

OCONUS   - Davis Bacon does not generally apply outside the 50 United States.   https://www.dol.gov/whd/programs/dbra/whatdbra.htm#:~:text=For example%2C Davis-Bacon prevailing,performed outside the 50 States

8(a) - 13 CFR 124 in like 18 places but consider this -

In order to be awarded a sole source or competitive 8(a) construction contract, a Participant must have a bona fide place of business within the applicable geographic location determined by SBA. This will generally be the geographic area serviced by the SBA district office, a Metropolitan Statistical Area (MSA), a contiguous county (whether in the same or different state), or the geographical area serviced by a contiguous SBA district office to where the work will be performed. SBA may determine that a Participant with a bona fide place of business anywhere within the state (if the state is serviced by more than one SBA district office), one or more other SBA district offices (in the same or another state), or another nearby area is eligible for the award of an 8(a) construction contract.

Now I am going to say it again but with my own personal emphasis  it might be construction but it could a commercial item!   It depends!

 

 

So buying hundreds of thousands of dollars of new exterior doors and hardware (and probably frames and trim) to make repairs to a DoD building or buildings can be a “commercial service”? 

[joel hoffman]

On 9/13/2022 at 11:37 AM, CaptJax said:

After a huge debate with legal as to if this was a service or construction, my argument won that it was indeed a service. 

FAR definition of construction: “Construction means construction, alteration, or repair (including dredging, excavating, and painting) of buildings, structures, or other real property. “

[Vern Edwards]

See this:

https://www.builderspace.com/is-construction-a-service-industry

and this: https://www.lawinsider.com/dictionary/construction-services

and this: https://blog.ifs.com/2017/05/construction-is-becoming-a-service-industry-to-be-a-winner-in-the-future-do-we-need-to-adapt/

and many others.

People, you'll never reach general agreement on the issue of whether construction is a "commercial service" as defined by FAR.

 

[joel hoffman]

On 9/15/2022 at 9:37 AM, ji20874 said:

"It depends" is almost always right. 🙂

That said, I did not discern any hints in the original posting that the contract pricing was "based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions" -- in fact, to me it strongly suggested otherwise, given the cost analysis the original poster wanted to do.  For that reason, and knowing only what little the original poster said, it still sounds like construction to me.  Maybe there is more to the story?

I agree.
Even if there were established catalog or market prices for the labor to “replace a door”, I don’t think that they would be representative of the scale and scope of work for the project as described so far, and at a remote DoD, OCONUS location.

We just had two sets of French doors replaced to our rear covered porch plus a green house window in the kitchen replaced with a sash type . The door company couldn’t quote an estimated price for removal or replacement without making a site visit. They had to determine the existing conditions, access restrictions, what would be necessary for new molding inside and out, with disclaimers for any damage to the interior walls, framing, exterior siding,  etc. They went back to the office and worked up the proposed labor hours and costs/price per set of doors. It was about two thousand dollars for the installation portion. The storm rated (residential) doors, hinges and frames, with impact glass were almost twice that. I bought and installed the hardware separately.

[If the exterior doors for the DoD will be for non-residential buildings, they will likely have to be fire rated and will be larger sizes than residential doors sold in the store at Lowes, etc. Hardware will be commercial grade. I’ve done some of these projects for DoD and for our church, which is a commercial building. It’s a whole different ball-game than residential construction.]

[joel hoffman]

2 hours ago, C Culham said:

OCONUS   - Davis Bacon does not generally apply outside the 50 United States. 

Generally true.  There are exceptions but none that I am aware of for DoD O&M funded construction. However, both the states of Alaska and Hawaii are considered OCONUS. Of course, the OP didn’t elaborate. 

[C Culham]

21 hours ago, Vern Edwards said:

People, you'll never reach general agreement on the issue of whether construction is a "commercial service" as defined by FAR.

I agree.  Yet, I still have to respond to what I believe to be questionable premise.

 

22 hours ago, ji20874 said:

"It depends" is almost always right. 🙂

That said, I did not discern any hints in the original posting that the contract pricing was "based on established catalog or market prices for specific tasks performed and under standard commercial terms and conditions" -- in fact, to me it strongly suggested otherwise, given the cost analysis the original poster wanted to do.  For that reason, and knowing only what little the original poster said, it still sounds like construction to me.  Maybe there is more to the story?

So is not RSMeans a basis of market prices and can not standard commercial terms and conditions for construction contracts be found through market research?   

As to what the original poster is doing I would offer that whole scenario is a hot mess. 

[joel hoffman]

22 hours ago, C Culham said:

I agree.  Yet, I still have to respond to what I believe to be questionable premise.

 

So is not RSMeans a basis of market prices and can not standard commercial terms and conditions for construction contracts be found through market research?   

As to what the original poster is doing I would offer that whole scenario is a hot mess. 

1. RS Means is an estimating guide,  often based upon averages of data provided by contractors and/or other sources.

It is also based upon certain assumed variables, such as labor crew trade composition and certain assumed equipment usage. That should be adjusted for different means and methods, equipment types and resource restrictions, etc. , whether the work is self performed or subcontracted.

It must be adjusted for actual labor rates, material costs, job conditions, whether rental or owned equipment is used and their costs.

Mobilization, demob, general conditions, specific design and site or project conditions, union or non-union trade restrictions, overhead and G&A as applicable to the job.

Etc., Etc. Etc.

Do you ever wonder why all bids and proposals aren’t for the same price? 

The Air Force SABRE and Army JOC contracts that use Standard Price Books based upon RS Means and similar price books with a proposed general “factor” have traditionally been criticized by those contractors. They are too general and often not aligned  with actual means and methods, sub/vs. self-performed work, cost  price escalation/variations, etc. The contractors often try to show that there weren’t applicable activities in the price book, so would build activity costs in lieu of those in the price book.

For reasons, such as discussed above, that’s why - for other than small, simple   activities - for developing the pre-negotiation objectives, we used both cost and price analysis evaluation methods, including a technical analysis of means and methods, site conditions, available equipment and labor conditions, productivity, schedule, concurrent activities in the same spaces, and other considerations. 

2. “Standard commercial terms and conditions” for construction contracts vary widely based upon the source organization and interests.

And they aren’t written for contracting with the federal government with its established risk allocations between parties, delays, impacts,  social engineering requirements, legally defined differing site conditions,  safety requirements, installation requirements, etc., etc., etc.

[joel hoffman]

I’ve seen few construction projects that didn’t require any changes in the drawings or specs or encountered conditions, and/or user desires. The commercial item provisions for making changes or various other mods require mutual agreement in order to effect the change. That isn’t really workable for other than very simple, small changes. 

[Vern Edwards]

When Congress enacted FASA back in 1994, they did not address construction contracts, only contracts for supplies (goods) and services.

A $500,000 project to replace doors at a military installation is construction as addressed in FAR Part 36, NOT a service as addressed in FAR Part 37, and is not a commercial service as addressed in FAR Part 12, and it's dumb to suggest that it is. If you have to be told why, then you are just clueless.

The Office of Federal Procurement Policy waffled on this about 15 years ago and caused a lot of confusion. Some agencies undoubtedly conduct construction acquisitions under FAR Part 12, but it is improper. They get away with it because nobody complains.

Some work that fits the description of construction could be acquired as a commercial service, such as routine plumbing or electrical repairs. But not a $500,000 door replacement project.

Get real.

 

 

[C Culham]

21 hours ago, joel hoffman said:

I’ve seen few construction projects that didn’t require any changes in the drawings or specs or encountered conditions, and/or user desires. The commercial item provisions for making changes or various other mods require mutual agreement in order to effect the change. That isn’t really workable for other than very simple, small changes. 

Ah but the commercial item provision on changes can be tailored.

 

14 hours ago, Vern Edwards said:

Get real.

It would seem that the OP has proven reality.   The contract as noted by the OP is a commercial item  whether viewed by some as improper or not.

What has not been stated throughout this whole thread is for what reason or purpose the contract could not be a commercial item contract.  Not one reason why the contract as  a commercial item contract is a strategy that would not be in  the best interests of the Government and is addressed in the FAR,  law (statute or case law), Executive order or other regulation, that the strategy, is not a permissible exercise of authority.

[joel hoffman]

27 minutes ago, C Culham said:

What has not been stated throughout this whole thread is for what reason or purpose the contract could not be a commercial item contract.  Not one reason why the contract as  a commercial item contract is a strategy that would not be in  the best interests of the Government and is addressed in the FAR,  law (statute or case law), Executive order or other regulation, that the strategy, is not a permissible exercise of authority.

Obviously, you don’t understand what you have or haven’t been reading. And the contract is for a “service” (commercial service). The described project isn’t a service, let alone “commercial service”.

Carl, you could argue with a lamp post, so I’ll bow out. Since you apparently think that using the R.S. Means numbers at face value represents established catalog prices or a basis of market prices, there’s no further need to debate.  

[C Culham]

Just now, joel hoffman said:

Obviously, you don’t understand what you have or haven’t been reading

 

I do understand.

Just now, joel hoffman said:

Since you apparently think that using the R.S. Means numbers

RS Means has as it basis market prices.

I will leave you with this as you bow out - 10 USC 3453