Prime contractor policy regarding competition

[C Culham]

Scenario - A Federal government prime contractor has a policy that allows the solicitation of quotes from an OEM and distributors of the OEM products for a certain product that are only carried by the OEM and the distributors for parts needed in the performance of the prime contract. Award determination is to be made on the lowest price offered. The primes policy states that such an RFQ constitutes competition and therefore under the primes policy competition has been satisfied.

Questions are:

Are there any concerns with a prime having such a policy? If there is a concern is there specific Federal government guidance that prevents a Federal prime from having such a policy?

Would such a policy satisfy an exception to the requirement for cost or pricing data if the resulting purchase order was in excess of $700K?

I have found an opinion in Ask a Professor with regard to the interpretation of the FAR regarding such a scenario and its acceptability as adequate competition under the FAR that revolves around the wording "competing independently" of FAR 15.404-1©(1) however I am having difficulty finding a reference that clearly states that such prime contractor policy would or would not be a purchasing system policy that would "comply" (Ref: DFAR 252.244-7001)with FAR and DFAR.

[Guest Vern Edwards]

Are there any concerns with a prime having such a policy? If there is a concern is there specific Federal government guidance that prevents a Federal prime from having such a policy?

I think that such a policy is likely to prompt questions from government personnel reviewing a purchasing system. I don't know how the policy would affect the outcome of such a review.

The Competition in Subcontracting (DEC 1996) clause, FAR 52.244-5, does not require that prime contractors seek or obtain full and open competition as defined and discussed in FAR. Since contractors are not required to seek or obtain full and open competition, FAR 6.302-1( c)(1)(i), which says that purchase of a brand name product does not provide for full and open competition regardless of the number of sources solicited, should not be an issue. However, government personnel may try to make it an issue or cause for concern during a purchasing system review.

I assume that the product in question is a brand name product (as opposed to brand name or equal) as discussed in FAR 11.104 or an item peculiar to one manufacturer as discussed in FAR 11.105. FAR 11.105(a) prohibits agencies from using brand name purchase descriptions, except under limited circumstances. That rule does not apply to contractors, but it may affect how government personnel assess a contractor's purchasing policy. The policy should require written documentation and justification.

Would such a policy satisfy an exception to the requirement for cost or pricing data if the resulting purchase order was in excess of $700K?

You said that award will be made on the basis of lowest price. That sounds like a sealed bid kind of procurement. See FAR 14.101 and 15.000. If so, then adequate price competition is not an issue. If the procurement is not sealed bidding, then the answer depends on whether the standards for adequate price competition have been met. See FAR 15.403-1( c)(1). The main issue would be whether the prospective subcontractors are "competing independently." I don't think the fact that they are all offering the same product necessarily means that they are not competing independently, but some others are almost certainly going to think differently about that. I think that some will say that the standards have been met, and others will say that they have not.

[C Culham]

Thanks Vern your thoughts help.