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Prohibiting Contractors From Proposing as Prime and Subcontractor

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I have been tasked with doing research to determine why it is beneficial to the government to prohibit a vendor from submitting a proposal as a prime contractor, and also being a subcontractor to a different prime (or primes) who submits a proposal. This would be for a single-award IDIQ contract. I can't imagine what the downside is of having a vendor do this. Any thoughts?

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I don't know about "prohibit[ing] a vendor from submitting a proposal as a prime" if it also participates as a sub to other proposers. However, there might be a question of conflict of interest that the government should resolve with the firm(s) before awarding the ID/IQ.

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Thanks Joel. We have thought about the conflict of interest issue, but isn't that a contractor issue for them to sort out, versus something the government needs to be concerned with?

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Have you thought about whether this arrangement could impact price competition? I don't know of your situation, but could this result in the appearance of adequate price competition so that certified cost or pricing data does not have to be obtained when in reality the two contractors have a "wink-wink" pricing arrangement, possibly with tacit government approval?

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Thanks for the input Retreadfed. This requirement is for IT support services. We expect ro receive numerous proposals, so I do not expect that we will receive a proposal from a vendor as a prime, who would also be the sub on a large number of the other proposals. Therefore adequate price competition should not be an issue.

I asked my boss why would we want to prohibit a vendor from submitting as a prime, and also be a sub on a different vendor's proposal, and her response was , "why would we not want to prohibit it?"; find some justification to prohibit it.

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her response was , "why would we not want to prohibit it?"; find some justification to prohibit it.

It’s contradictory to 52.212-1(e) which encourages offerors to present alternative terms and conditions.

Ultimately it restricts the Government’s options.

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Thanks Joel. We have thought about the conflict of interest issue, but isn't that a contractor issue for them to sort out, versus something the government needs to be concerned with?

jtoli, I don't know why it would be beneficial to prohibit a vendor from submitting a proposal as a prime contractor, and also being a subcontractor to a different prime (or primes) who submits a proposal - for a single award ID/IQ. I could envision problems if the firm were awarded a MATOC base contract and was also a sub to other pool members.

My thought concerning a "conflict of interest" related more so to the possibility of "collusion", which of course would be illegal. However, if the situation of a firm competing directly with other firms that it wished to subcontract to if it didnt win the award arises, I suppose one could inquire of the firm and have it explain how it was involved with the other, competing firms in the compeition.

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It’s contradictory to 52.212-1(e) which encourages offerors to present alternative terms and conditions.

Ultimately it restricts the Government’s options.

jtoli, I feel that 52.212-1 ( e ) is encouraging individual firms to "submit multiple offers presenting alternative terms and conditions or commercial items for satisfying the requirements..."

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I asked my boss why would we want to prohibit a vendor from submitting as a prime, and also be a sub on a different vendor's proposal, and her response was , "why would we not want to prohibit it?"; find some justification to prohibit it.

Because it may unduly restrict competition. Let's say you get a protest alleging that such a prohibition unduly restricts competition. What would be your justification for including the restrictive provision? Is it somehow necessary to satisfy the needs of the agency? The restriction may be justified, but "why would we not want to prohibit it?" is not justification.

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Is the restriction solely on proposing as a prime if also "proposing" as a sub? Can a sub team with multiple primes? If not, it sounds like what you are doing is mandating exclusive teaming arrangements (or what I’ve heard some folks call “prohibiting cross-teaming”). I would suggest that not interfering in prime/sub relationships should be the default, and does not really need to be explained; what would need to be supported would be the decision to interfere. OCI would probably be the most common circumstance.

I would offer that the regulatory framework that informs the decision making process appears in FAR Subpart 9.6, the clause at 52.244-5, and, when implicated, FAR Subpart 3.3. While there may be specific circumstances where it may have the effect of increasing competition, generally speaking, mandating exclusive teaming arrangements is, on its face, anti-competitive. The clause at 52.244-5 provides in part, "The Contractor shall select subcontractors (including supplies) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contract." When the Government mandates exclusive teaming arrangements, it is interfering with prime contractors' ability to maximize competition by decreasing the size of the pool of available subcontractors for each exclusive teaming arrangement.

FAR Subpart 9.6 generally lays out a framework of neutrality on teaming arrangements: "The Government will recognize the integrity and validity of contractor teaming arrangements.... The Government will not normally require or encourage the dissolution of contractor team arrangements." FAR 9.603. However, FAR 9.604 continues, "Nothing in this subpart authorizes contractor team arrangements in violation of antitrust statutes or limits the Government's rights to...pursue its policies on competitive contracting, subcontracting, and component breakout after initial production or at any other time."

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Thanks for the input Jacques. Based on the research I did, I could find nothing that prohibited restricting a prime from also being a sub to another prime in their proposal. But you did bring to light some interesting information with FAR Subpart 9.6. You bring up a good question regarding, "Can a sub team with multiple primes?" I also asked myself that same question yesterday. While doing my research I did find some GAO case law regarding subs teaming with multiple primes. These cases generally involved the requirement for Certificate of Independent Price Determination (FAR 52.203-2), and allegations of price collusion. I think Don asked the question that gets right to the point; What would be your justification for including the restrictive provision? My recommendation to my boss was that we not do it, unless we have some valid reason to do so, which I do not know about.

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Thanks for the input Jacques. Based on the research I did, I could find nothing that prohibited restricting a prime from also being a sub to another prime in their proposal. But you did bring to light some interesting information with FAR Subpart 9.6. You bring up a good question regarding, "Can a sub team with multiple primes?" I also asked myself that same question yesterday. While doing my research I did find some GAO case law regarding subs teaming with multiple primes. These cases generally involved the requirement for Certificate of Independent Price Determination (FAR 52.203-2), and allegations of price collusion. I think Don asked the question that gets right to the point; What would be your justification for including the restrictive provision? My recommendation to my boss was that we not do it, unless we have some valid reason to do so, which I do not know about.

In construction, subs often either team with one prospective prime or provide proposals to multiple firms. They don't have to price their offer the same to every prime. There may be differences in scope or requirements between primes, differences in working relationships, differences between firms in how they treat their subs, how they cooperate with their subs, how they manage their subs, risk allocation or other prior experience factors. Generally speaking, I think that a prime would be foolish to share its general pricing information with a non-teaming partner and a sub would be foolish to share its pricing information to other primes. And it may be illegal and/ or a tort to do so under many circumstances. A flat restriction on subs from proposing to multiple primes would be "unwise" and perhaps an unlawful restraint on free trade. Ask your lwyer.

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Guest Vern Edwards

I asked my boss why would we want to prohibit a vendor from submitting as a prime, and also be a sub on a different vendor's proposal, and her response was , "why would we not want to prohibit it?"; find some justification to prohibit it.

If you have quoted your boss literally, then your boss was being an idiot.

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