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govcon3684

Contract modification to stay under $150,000

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Hi,

    I've been looking at a lot of bid abstracts for sales to components of the DoD where the winning bid will have a unit amount and per unit price that pushes the contract up over the $150,000 SAP threshold.  However, the procurement history and some of the bid abstracts indicate that the unit amount is revised downward to keep the contract under $150,000.  That revision keeps the contract under the SAP.  I've also seen other instances where larger contracts are broken up into a series of smaller contracts to all stay under $150,000.00.  Who modifies these contracts like this?  Is there a consequence for going over the SAP?  Or is it just more work for the contracting officer?

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Bids and bid abstracts are covered by FAR Part 14, Sealed Bidding. Bid abstracts are available to the public. See FAR 14.403 ( b).

The $150,000 threshold does not apply to FAR Part 14. The $150,000 threshold is covered by FAR 13, Simplified Acquisition Procedures.

Abstracts of quote or offer prices are not made available to the public. See FAR 13.106-3.

Are you sure you saw abstracts of quotes submitted under FAR Part 13?  

.

 

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Hi Napolik,

     The document I have is definitely an abstract of quotes with a small business set aside.  The estimated price was $143,492.4.  The winning bid was for 72 units at $2,194.66 each, which put the total contract price at $158,015.52.  However, the award summary indicates a total contract price of $149,236.88.  The procurement history for this particular item shows that when the contract was awarded it was only for 68 units as opposed to 72 and the price was $149,236.88, which kept it below the SAP threshold.  

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I am surprised that you have been able to get your hands on a abstract of quote prices submitted under FAR Part 13. Except for the prices of the winning quote, the prices placed on the abstract by the contract specialist should not be released to the general public.

Can you provide the number of the solicitation that requested the bids or quotes (e.g. N68171-17-Q-1234, or N68171-17-B-1234)?  

Also, if you have a copy of the solicitation, is there a provision that describes the basis for the award?

 

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There were two quotes received.  The quote with the box with an x marked next to it for suggested award offered both a lower price and a faster delivery time.

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On 2/11/2017 at 0:56 PM, govcon3684 said:

Is there a consequence for going over the SAP?  Or is it just more work for the contracting officer?

There could be more work for the contracting officer (namely, re-soliciting the requirement subject to different acquisition procedures) depending on whether to not the acquisition in question was for commercial items (FAR 13.5 allows SAP up to $7M); however, it could very well be the case the the agency's budget was only $150k so they purchased as many units as they could with that amount.  Remember, a quote is not an offer...the offer is the purchase order issued by the Government to the prospective awardee.  See FAR 13.004 which states:

Quote

(a) A quotation is not an offer and, consequently, cannot be accepted by the Government to form a binding contract. Therefore, issuance by the Government of an order in response to a supplier’s quotation does not establish a contract. The order is an offer by the Government to the supplier to buy certain supplies or services upon specified terms and conditions. A contract is established when the supplier accepts the offer.

(b) When appropriate, the contracting officer may ask the supplier to indicate acceptance of an order by notification to the Government, preferably in writing, as defined at 2.101. In other circumstances, the supplier may indicate acceptance by furnishing the supplies or services ordered or by proceeding with the work to the point where substantial performance has occurred.

(c) If the Government issues an order resulting from a quotation, the Government may (by written notice to the supplier, at any time before acceptance occurs) withdraw, amend, or cancel its offer. (See 13.302-4 for procedures on termination or cancellation of purchase orders.)

Now if the agency placed an order for 68 units and then subsequently placed another order for 4 more units, they'd be in violation of FAR 13.003(c)(2)...but no facts indicating as much have been presented here.

One last piece of advice - be careful using the terms "bid" and "quote" interchangeably (add the term "proposal" to that list) as you have throughout your posts.  As you can see from the reference provided above, a quote is different from a bid (as it is not an offer) so improper usage of terms may negatively impact the ability to receive sound advice from the nice individuals who frequent this forum.

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govcon 3684,

I looked at some of the DLA regs implementing the FAR and DFARS. For noncommercial items for which FAR 13 imposes the SAP limit of $150,000, contractors must sign agreements stating that "The aggregate value of all orders shall not exceed the simplified acquisition threshold (see FAR 2.101)."

I also see that DLA uses an automated procurement system.

I have not been able to see the provisions of a DLA RFQ used with the automated system, but I'll bet that 1) the RFQs lead to awards of IDIQ contracts and that 2) there is a provision stating that the system automatically will seek price reductions if the total evaluated quote prices does exceed $150,000. Or, perhaps the provision says that the quantity of items will be reduced so the total price remains at, or below, $150,000.

So, every award stays at $150,000 or below.

The "abstract" you viewed, does it show the names and prices of the firms submitting quotes?

 

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The abstract doesn't matter. What matters is the contract award price.

On 2/11/2017 at 0:56 PM, govcon3684 said:

Is there a consequence for going over the SAP?

FAR 13.003(a) says:

Quote

Agencies shall use simplified acquisition procedures to the maximum extent practicable for all purchases of supplies or services not exceeding the simplified acquisition threshold (including purchases at or below the micro-purchase threshold).

FAR 13.003(c)(1) says:

Quote

The contracting officer shall not use simplified acquisition procedures to acquire supplies and services if the anticipated award will exceed—(i) The simplified acquisition threshold; or (ii) $7 million ($13 million for acquisitions as described in 13.500(c)), including options, for acquisitions of commercial items using subpart 13.5.

Emphasis added.

Okay, so, the CO starts out expecting that the acquisition will not exceed the SAT, she uses SAP and, lo and behold, all the quotes come in above the SAT. What should she do? FAR doesn't say.

An obvious course of action would be to try to negotiate a price that is at or below the SAT. That is generally permissible. But what if that fails? Another course of action might be to reduce the number of units purchased to get the price down to at or below the SAT. That, too, is generally permissible.

If the CO cannot get the price down to at or below the SAT, then I don't think that the problem would be the procedure used to award the contract. The CO used SAP because she "anticipated" that the price would be less than the SAT and it turned out that the price is going to exceed the SAT. The CO didn't violate any rule by using SAP. I think that the problem would be that if the CO enters into a contract valued at more than the SAT without all the clauses required by FAR the CO could end up with a contract that does not conform to law. Most clause prescriptions are based on the actual contract value, not the anticipated value.

Could the CO negotiate the proper clauses into the resultant contract without resoliciting? Possibly, but I think that might be an iffy solution, depending on how the RFQ or RFP was worded and the nature of the responses received.

The conservative answer will be that if the CO cannot get the price down to at or below the SAT she must cancel the solicitation and start over using the appropriate procedure in FAR 8.4, 14, or 15 and a solicitation that includes the prescribed clauses. Any other course of action would be questionable and might be problematical.

I wonder if automated contract writing systems would allow a CO to award a contract in excess of the SAT based on SAP or without clauses appropriate for the dollar value.

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A couple of suggested reads to help.   DLA's process for seeking quotes is fairly specific and has identified regulations and policy.

By my read in certain cases DLA is specific that an award will not exceed $150,000 for a RFQ and provides the process to met this requirement..

Internet search of the DLA DIBBS process will provide detail.

Likewise a read of the DLAD (DLA's FAR supplement) will provide additional information.

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Quote

 

52.213-9008 Automated Contract Evaluation System.

As prescribed in 13.106-2(b)(S-90)(i), insert the following provision:

AUTOMATED CONTRACT EVALUATION SYSTEM (SEP 2016)

(a) Automated contract evaluation: Acquisitions are candidates for automated award under automated contract evaluation systems when the solicitation states that automated contract evaluation systems apply. The program uses price logic and other automated filters to make fully-automated and contracting officer -assisted automated awards valued at the simplified acquisition threshold or less. A purchase order with a “V” in the ninth position denotes an order issued under an automated contract evaluation system, which only considers “qualified quotes” for award. Qualified quotes are in exact compliance with the solicitation requirements (bid type equal to “bid without exception”), and are submitted on the Defense Logistics Agency’s Internet Bid Board System (DIBBS).

 

I have been unable to get a full RFQ containing the evaluation provision. However, I'll bet the automated system issues a solicitation containing a provision stating that no award will exceed $150k and that DLA reserves the right to adjust quantities and or prices to stay below the $150k threshold.

 

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Well, either the quantity or the unit price was reduced to get under $150k non-commercial SAP threshold.

The reduction occurred automatically pursuant to some provision in the solicitation or in some agreement to participate in the automated system described above. Or, it occurred after the CO had negotiations.

By the way, do you have the contract / purchase order number? 

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On 2/11/2017 at 3:56 PM, govcon3684 said:

Hi,

    I've been looking at a lot of bid abstracts for sales to components of the DoD where the winning bid will have a unit amount and per unit price that pushes the contract up over the $150,000 SAP threshold.  However, the procurement history and some of the bid abstracts indicate that the unit amount is revised downward to keep the contract under $150,000.  That revision keeps the contract under the SAP.  I've also seen other instances where larger contracts are broken up into a series of smaller contracts to all stay under $150,000.00.  Who modifies these contracts like this?  Is there a consequence for going over the SAP?  Or is it just more work for the contracting officer?

FAR 13 has 2 thresholds. $150,000 for non-commercial items [FAR 13.003 (b )(1)]  and $ 7 million for commercial items [FAR 13.500 (a)]. One cannot exceed the thresholds without moving the procurement to a different FAR Part (e.g. FAR Part 15).

Contracting officers stay within the thresholds for non-commercial or commercial items by negotiating reductions in quantities or unit prices. In the case of DLA, perhaps the AUTOMATED CONTRACT EVALUATION SYSTEM  does the work. 

These negotiations to stay within thresholds are not uncommon.

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Great.  Thank you.

So, just so I am clear, there is nothing wrong with negotiating reductions in quantities or unit price to stay under $150,000, particularly if the initial expectation was that the contract would fall under the $150,000 SAP.  This is true even if the contract is awarded through a manual evaluation instead of an automated evaluation?

But there is a distinction/there is something wrong going on when the contracting officer breaks up a contract into 2 separate contracts to keep each contract under the $150,000 SAP threshold?

(c)(1) The contracting officer shall not use simplified acquisition procedures to acquire supplies and services if the anticipated award will exceed—

(i) The simplified acquisition threshold; or

(ii) $7 million ($13 million for acquisitions as described in 13.500(c)), including options, for acquisitions of commercial items using subpart 13.5.

(2) Do not break down requirements aggregating more than the simplified acquisition threshold (or for commercial items, the threshold in subpart 13.5) or the micro-purchase threshold into several purchases that are less than the applicable threshold merely to—

(i) Permit use of simplified acquisition procedures; or

(ii) Avoid any requirement that applies to purchases exceeding the micro-purchase threshold.

 

 

 

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26 minutes ago, govcon3684 said:

But there is a distinction/there is something wrong going on when the contracting officer breaks up a contract into 2 separate contracts to keep each contract under the $150,000 SAP threshold?

Yes.

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Quote

But there is a distinction/there is something wrong going on when the contracting officer breaks up a contract into 2 separate contracts to keep each contract under the $150,000 SAP threshold?

Another question: Are the contracts covering the same, or different, items?

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The contracts I have seen are for the exact same part.  Instead of one contract for approximately $300,000, the contract will be broken up into two separate contracts at around $149,999 each.

 

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Hmmm.

That appears to conflict with FAR 13.003(c)(2). In fact, GAO sustained a protest against DLA on this matter back in 2009: Critical Process Filtration, Inc., B-400746, B-400747, B-400750, B-400751, B-400752, B-400785, Jan 22, 2009.

 

Quote

DIGEST

2. Protester's contention that a fourth agency procurement for brand-name filters improperly limits competition is sustained where the procurement history information set forth in the solicitation shows that the value of the requirement is likely to exceed the applicable simplified acquisition threshold of $100,000; accordingly, the streamlined procedures applicable to simplified acquisitions cannot be used for this requirement.

...................................................

However, as noted above, RFQ SPM7L4-09-U-A006 provides an estimated quantity of 1,356 filters over the 2-year term of the IDPO. At the lowest historical price listed in the RFQ, the value of this requirement is more than double the simplified acquisition threshold. Since, in our view, neither CPF nor DLA had adequately addressed the implications of this aspect of the record, we asked both parties to address whether DLA's explanation for its actions was consistent with the requirements of the FAR for requirements of this magnitude--that is, greater than $100,000. Fax from GAO to Parties, Jan. 9, 2009, at 1.

In response, DLA argues that the IDPO does not obligate the government to purchase the estimated quantity, and in fact limits purchases to $100,000. DLA argues that this approach is approved by the Defense Supply Center Columbus Acquisition Guide (DAG). Letter from DLA to GAO, Jan. 13, 2009, at 2 (citing DAG sect. 13.9002).[11] In its submission, CPF continued its arguments that the record here shows that the agency has failed to conduct proper acquisition planning. Letter from CPF to GAO, Jan. 14, 2009, at 1‑2.

Although DLA argues that its actions are consistent with the statutes and regulations applicable to simplified acquisitions, the use of these procedures must be based on a reasonable expectation that the value of the requirement is at or below the simplified acquisition threshold. Where an agency uses simplified acquisition procedures to meet requirements that should reasonably be valued above the simplified acquisition threshold, our Office will sustain the protest. E.g., Global Commcons Solutions, Inc., B-299044, B-299044.2, Jan. 29, 2007, 2007 CPD para. 30 at 3 (protest sustained where agency used simplified acquisition procedures for commercial item acquisition that record demonstrated could only reasonably be valued above the applicable threshold).

We see no basis for DLA's approach of using simplified acquisition procedures where its estimated requirement for these filters cannot reasonably be expected to fall within the applicable threshold ($100,000) for a simplified acquisition of this nature. Although DLA responds that the use of simplified acquisition procedures is appropriate here because it limits the purchase under each of these IDPOs to $100,000, regardless of the value of the estimated quantity, we think DLA is, in essence, splitting these orders to allow the use of simplified acquisition procedures, which is expressly barred by FAR sect.13.003(c)(2). Cf. Mas‑Hamilton Group, Inc., B‑249049, Oct. 20, 1992, 92-2 CPD para. 259 at 5-6. Under this provision, agencies are advised:

Do not break down requirements aggregating more than the simplified acquisition threshold . . . into several purchases that are less than the applicable threshold merely to--
(i) Permit use of simplified acquisition procedures.

FAR sect. 13.003(c)(2); see also 10 U.S.C. sect. 2304(g)(2) ("A proposed purchase or contract for an amount above the simplified acquisition threshold may not be divided into several purchases or contracts for lesser amounts in order to use the simplified procedures . . .").

In our view, DLA is using the streamlined features of simplified acquisitions where the solicitation on its face demonstrates that the use of those procedures is improper. Indeed, DLA's experience under the resulting IDPO demonstrates this point: less than 1 month after issuance of the IDPO (which the RFQ described as having a maximum term of 2 years), DLA had already reached the $100,000 ceiling. In addition, the procurement history for this part, and the estimated quantity identified in the solicitation, strongly suggest that DLA will make additional purchases to meet its continuing needs. We therefore sustain this protest.

 

Are you sure these items are not "commercial items "?

Quote

“Commercial item” means --

(1) Any item, other than real property, that is of a type customarily used by the general public or by non-governmental 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;

(2) Any item that evolved from an item described in paragraph (1) of this definition through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Government solicitation;

(3) Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but for --

(i) Modifications of a type customarily available in the commercial marketplace; or

(ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. Factors to be considered in determining whether a modification is minor include the value and size of the modification and the comparative value and size of the final product. Dollar values and percentages may be used as guideposts, but are not conclusive evidence that a modification is minor;

(4) Any combination of items meeting the requirements of paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;

(5) Installation services, maintenance services, repair services, training services, and other services if--

(i) Such services are procured for support of an item referred to in paragraph (1), (2), (3), or (4) of this definition, regardless of whether such services are provided by the same source or at the same time as the item; and

(ii) The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;

(6) Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions. For purposes of these services—

(i) “Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer or vendor, is either published or otherwise available for inspection by customers, and states prices at which sales are currently, or were last, made to a significant number of buyers constituting the general public; and

(ii) “Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors.

(7) Any item, combination of items, or service referred to in paragraphs (1) through (6) of this definition, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or

(8) A nondevelopmental item, if the procuring agency determines the item was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments.

  •  

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4 hours ago, govcon3684 said:

(2) Do not break down requirements aggregating more than the simplified acquisition threshold (or for commercial items, the threshold in subpart 13.5) or the micro-purchase threshold into several purchases that are less than the applicable threshold merely to—

(i) Permit use of simplified acquisition procedures; or

(ii) Avoid any requirement that applies to purchases exceeding the micro-purchase threshold.

You can't break down requirements aggregating more than the SAT into several purchases less than the SAT/MPT for the reasons stated. However, you could, for example, break down requirements to encourage greater small business participation. See, for example, FAR 19.202-1(a).

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There could be other reasons for what might appear to be just an effort to stay under SAT as well.

Thanks to downsizing within the Government, my Acquisition team supports four distinctive customer bases.  That's not four units within one organization, that's four different customers pursuing four different missions.  They may, have the same or similar requirements come in at the same time.  I will assign those requirements to the same Specialist.  If you are looking at the award(s) then, it may appear that we have made the same procurement two or three times and may assume it was to keep costs down.  In reality, each order is being shipped to different addresses with different funding, different area's of the country, etc.  They were unrelated requirements.   

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