Jump to content

Contract Modification or New Contract?


JDRYKS

Recommended Posts

I work on an FMS program that has a FAR Part 12 contract with a vendor for aircraft maintenance of a specific fleet of aircraft. This was a sole source award per FAR 6.302-4 International Agreement. The customer would like to add another fleet of aircraft to the existing contract. They propose to amend the LOA to designate the vendor as the sole source of repair for the additional fleet of aircraft. As this is a sole source award, is there anything to prevent this effort being added to the current contract? Could this be done as a matter of administrative convenience and justified via FAR 6.302-4?

Link to comment
Share on other sites

I work on an FMS program that has a FAR Part 12 contract with a vendor for aircraft maintenance of a specific fleet of aircraft. This was a sole source award per FAR 6.302-4 International Agreement. The customer would like to add another fleet of aircraft to the existing contract. They propose to amend the LOA to designate the vendor as the sole source of repair for the additional fleet of aircraft. As this is a sole source award, is there anything to prevent this effort being added to the current contract? Could this be done as a matter of administrative convenience and justified via FAR 6.302-4?

By administrative convenience, I am assuming that you want to add the new scope to the existing contract as an out-of-scope modification, rather than create a new, separate contract, correct? As far as I know, assuming that you adequately justify the exception to full and open competition, you should be able to do that. I'm assuming that you simply want to piggy-back on the contract's current terms and conditions. I'm not sure what administrative type problems there might be with DoD's standard Procurement System. Perhaps someone can advise...

Link to comment
Share on other sites

By administrative convenience, I am assuming that you want to add the new scope to the existing contract as an out-of-scope modification, rather than create a new, separate contract, correct? As far as I know, assuming that you adequately justify the exception to full and open competition, you should be able to do that. I'm assuming that you simply want to piggy-back on the contract's current terms and conditions. I'm not sure what administrative type problems there might be with DoD's standard Procurement System. Perhaps someone can advise...

Yes, that shouldn't cause a problem with SPS. I've seen similar things done that way before.

Link to comment
Share on other sites

The effort described is clearly out-of-scope work that involves new scope and thus a new J&A or International Agreement Memorandum. This is different from out-of-scope effort that is not considered new work, such as an engineering change proposal.

Thus, what you have is a brand new contract effort. The question is whether to create a new stand-alone contract or add the new effort to an existing contract via a contract modification. While one can "piggy back" off SOME existing contract requirements (e.g., use the same specification or statement of work, or special contract requirements clauses in Section H), the current FAR and DFARS provisions and clauses must be used for the new effort. Just because we choose to modify an existing contract instead of awarding a new contract for new effort otherwise subject to FAR 6.3 does not mean we can ignore the latest mandatory clauses (or new versions thereof). I have had to do this many times. While it takes a little more effort to insert the latest clauses and clearly delineate that the new FAR/DFARS clauses apply only to the new contract line items (CLINs), it may still be less administrative hassle overall then creating a brand new contract.

Link to comment
Share on other sites

Guest Vern Edwards
The effort described is clearly out-of-scope work that involves new scope and thus a new J&A or International Agreement Memorandum. This is different from out-of-scope effort that is not considered new work, such as an engineering change proposal.

Incentivize Me:

Educate me. Please provide an example of an engineering change proposal that would be an "out-of-scope effort" that is not new work.

Link to comment
Share on other sites

"out-of-scope" work that is not "new work" ?

This is a case of semantics -- likely poor semantics on my part.

Let's take out the fact of an FMS customer officially stating the specific vendor. (In that scenario, there is no requirement to synopsize and I'll be using synopsizing as part of my clarifying response to Vern's question.)

Some folks are very specific about the term contract scope and view "new scope" or "out of scope" work quite literally to mean any change in specs (i.e. any non-administrative word, paragraph, page changes) or quantity or pricing.

Other folks view contract scope more broadly by using the litmus test of the need to synopsize and execute a J&A per FAR 6.3. If a synopsis and (presuming no viable industry response from another source to perform the work) a J&A is required, then the work is "new scope" or "out of scope".

Now we introduce an engineering change proposal (ECP). My personal training was that ECPs are "within scope changes". A "within scope increase" was an ECP (if incorporated into contract) that results in an increase to the current contract quantity and/or (mostly likely at least) price (i.e. an equitable adjustment due to the contractor). A "within scope decrease" is an ECP (if incorporated into contract) that results in a corresponding decrease.

However, some folks (of the specific interpretation) often wanted to argue that any ECP requiring an upward equitable adjustment (i.e. "within scope increase" in my book) was "out of scope" simply because the Govt. would be increasing the quantity and/or price. The number of these folks seemed to be growing in the organization I previously worked in so the "terms of choice" evolved into "out of scope work that is new work" vice "out of scope work that is not new work". My thought is that this stricter intrepretation was only adding confusion.

The bottom-line litmus test is ensuring the Govt. always stayed mindful of the need to synopsize and comply with FAR 6.3 (J&As). If the synopsis and J&A were required (or in the event of an FMS customer specificying the vendor, just the J&A being required), then the effort is in effect a new contract, even if executed via a contract modification. Thus, if executing via contract modification, one must then include the most current FAR/DFARS clauses in the resulting contract action and cannot simply piggy-back on 100% of the terms & conditions in the existing contract.

Hope this clarifying response "educates" more than "confuses". Any better or official terminology folks can point me to would be most appreciated.

On another note, I was surprised to hear no one object to the notion that the most current FAR/DFARS clauses must be used when a new contract effort (i.e. FAR 6.3 applies) is added as a modification to an existing contract. Later in my career, I noticed a growing number of Govt. attorneys, contract specialists, & PCOs missing this critical step and would get such vehement objections on this very point (or dirty looks from those who I reminded when they forgot about this).

Link to comment
Share on other sites

Guest Vern Edwards

Your explanation neither educates nor confuses.

The phrase "scope of the work" originated with the Changes clauses. See, e.g., FAR 52.243-1, paragraph (a), which begins: "The Contracting Officer may at any time, by written order, and without notice to the sureties, if any, make changes within the general scope of this contract... ."

Today, "within scope" is used in two ways: (1) within the scope of the contract, and (2) within the scope of the original competition. Both uses are discussed in Government Contract Changes, by Nash and Feldman (2008). The concept of "scope" when used in those ways is complex. The authors cite the old Court of Claims to explain the "scope of the contract" problem:

In litigation, the contractor will occasionally argue that a change is outside of the scope?thinking that such a breach theory will be more beneficial than an equitable adjustment pricing theory. However, the appeals boards and courts have almost uniformly rejected these arguments. When confronted with the scope issue, and in determining the proper measure of compensation, courts and boards of contract appeals have typically looked at the facts of the individual case. More than 80 years ago, the United States Supreme Court said that work ?within the general scope of the contract? is work that ?should be regarded as fairly and reasonably within the contemplation of the parties when the contract was entered into.? Because the right to make changes has been specifically reserved to the Government by the standard Changes clauses, except for the standard clause used for commercial items, FAR 52.212-4?, the parties must have contemplated when they signed the contract that some changes would be issued. Thus, changes to elements of the work (materials, parts, components, etc.) would be within the contemplation of the parties as long as the end product of the contract was essentially the same as that contracted for initially...

The Court of Claims frequently used the term ?cardinal? change in applying this test to refer to changes outside the scope of the contract. A good example of the court's reasoning is found in Air-A-Plane Corp. v. United States, where the court stated:

The basic standard ? is whether the modified job ?was essentially the same work as the parties bargained for when the contract was awarded. [The contractor] has no right to complain if the project it ultimately constructed was essentially the same as the one it contracted to construct.? Conversely, there is a cardinal change if the ordered deviations ?altered the nature of the thing to be constructed.? ? Our opinions have cautioned that the problem ?is a matter of degree varying from one contract to another? and can be resolved only ?by considering the totality of the change and this requires recourse to its magnitude as well as its quality.? ? ?There is no exact formula ?. Each case must be analyzed on its own facts and in light of its own circumstances, giving just consideration to the magnitude and quality of the changes ordered and their cumulative effect upon the project as a whole.? ? In emphasizing that there is no mechanical or arithmetical answer, we have repeated that ?[t]he number of changes is not, in and of itself, the test ?.?

The authors explain the "scope of the competition" problem as follows:

In applying the competition rules to contract changes, some cases use the Court of Claims cardinal change approach, explained in ? 3:13 and ?? 4:1 et seq., that the general scope of the contract is determined by its basic function. More frequently, the courts and the GAO in a bid protest have followed the ?scope of the competition? test for determining the proper use of the Changes clause. In Neil R. Gross & Co., the GAO described the basis for deciding such protests as follows:

"As a general rule, our Office will not consider protests against contract modifications, as they involve matters of contract administration that are the responsibility of the contracting agency. 4 C.F.R. 21.3(m)(1). We will, however, consider a protest that a modification is beyond the scope of the original contract, and that the subject of the modification thus should be competitively procured absent a valid sole-source justification.

In weighing the propriety of a modification, we look to whether there is a material difference between the modified contract and the prime contract that was originally competed ? In determining the materiality of a modification, we consider factors such as the extent of any changes in the type of work, performance period and costs between the contract as awarded and modified ?

We also consider whether the solicitation for the original contract adequately advised offerors of the potential for the type of changes during the course of the contract that in fact occurred ? or whether the modification is of a nature which potential offerors would reasonably have anticipated under the change clause."

Under this scope of the competition test, the broader the scope of the original contract, the broader the range of changes that the agency may order. Thus, the entire contract must be reviewed to determine what work the offerors would have perceived to be within the competition.

Some acquisition folk use the term "scope of work" or "contract scope" as synonymous with "statement of work." That's sloppy. A change to a statement of work is not necessarily a change in the scope of the contract, as that term is used in the changes clause.

You wrote:

Now we introduce an engineering change proposal (ECP). My personal training was that ECPs are "within scope changes". A "within scope increase" was an ECP (if incorporated into contract) that results in an increase to the current contract quantity and/or (mostly likely at least) price (i.e. an equitable adjustment due to the contractor). A "within scope decrease" is an ECP (if incorporated into contract) that results in a corresponding decrease.

In my opinion, you received poor training. The term "Engineering Change Proposal" (ECP) is a configuration management term. See MIL-HDBK-61A, Configuration Control, which says:

6.2 Engineering Change Proposal.An Engineering Change Proposal (ECP) is the management tool used to propose a configuration change to a CI and its Government-baselined performance requirements and configuration documentation during acquisition (and during post-acquisition if the Government is the CDCA for the configuration documentation).

Here is the definition of "Engineering Change Proposal" in the 12th edition of the DAU Glossary of Defense Acquisition Acronyms and Terms:

Engineering Change Proposal (ECP). A proposal to the responsible authority recommending that a change to an original item of equipment be considered, and the design or engineering change be incorporated into the article to modify, add to, delete, or supersede original parts.

There is nothing inherently "within scope" about an ECP, properly defined. Moreover, ECPs do not call for changes in the quantity to be purchased. Whether a particular ECP is for a within scope change depends on what is being proposed. But we can expect most ECPs, as defined above, to be for within scope changes. The notion that an ECP that results in an upward equitable adjustment is, for that reason, not within scope is patently absurd.

As for changes in quantity, see Nash and Feldman:

Increases or decreases in the quantity of major items under the contract are generally considered to be outside of the scope of the contract (except where authorized under another contract clause, such as an option clause or the standard Variation in Estimated Quantities clause (FAR 52.211-18)). For example, the Court of Claims held that the deletion of one building in a 17-building complex was not permissible under the Changes clause. Decisions of the GAO have followed the same reasoning with regard to the addition of buildings to a project. This rule is also followed in supply contracts?changes in the quantity of end items to be delivered must be made outside of the Changes clause.[FN4] Deletions should be handled as partial terminations under the Termination for the Convenience of the Government clause, see ? 4:15, and additions should be made using new procurement procedures.

This rule is not necessarily followed when minor items under the contract are involved. In that case, a change in quantity may be of such small significance in relation to the entire job that it would be held to be within the scope of the contract. For example, changes in the number of spare parts, technical manuals, or other subsidiary items have frequently been made under the Changes clause. Here, it is a question of degree.

It sounds to me like you work with some pretty confused people.

(I have omitted footnotes in all quotes.)

Link to comment
Share on other sites

Thanks for reminding me of the proper terminology.

Understand that ECP is a configuration management (CM) term and as such is not inherently within or outside of scope.

However, if an ECP then gets incorporated into a contract, a determination must be made that the effort is within the general scope of such contract and not outside the scope of the original competition (or, if a sole source contract, within the scope of the corresponding J&A).

My personal experience (using "experience" in lieu of "training" as one has assessed my training to be poor; of course that does not mean my "experience" cannot be characterized as "pathetic") with incorporating an ECP into a contract has been applying the CM term ECPs to changes made to what is currently being bought under the contract. If the ECP was to an item previously bought under another contract but the ECP effort was to be procured under a new contract that stated words to the effect "The contract is to implement an ECP to "X" item that is provided as GFP", then yes, the ECP would be an out-of-scope ECP. However, in my personal (and possibly pathetic) experience, I have not encountered that scenerio.

Is it absolute that an ECP cannot result in an increase in quantity ? For example, let's say the Govt. issued a contract for a surveillance system covering X square miles that must be comprised by Y interoperable units due to the force structure of the mission. The system was accepted on a per unit basis so the units could be immediately used as the old system was phased out. Then, due to a revised force structure, the new system still must cover the same X miles but cannot be interoperable unless 2 more units are added (i.e. Y+2). The Govt. considered it within the general scope of the contract and the orginal scope of the competition. Was this a judgment call or a flat-out wrong decision ?

"The notion that an ECP that results in an upward equitable adjustment is, for that reason, not within scope is patently absurd." I am glad we agree on something....almost. I fail to see how FAR Part 27 has anything to do with this matter. (That was a joke -- not poor training.)

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...