Jump to content
The Wifcon Forums and Blogs

Recommended Posts

What is meant by passages such as FAR 15.403-1( c )(1)(i)(B) and FAR 15.405(d)?

I have heard if a contracting officer considers a price, profit, or fee unreasonable, and the contracting officer has considered and taken all authorized actions (including alternatives for satisfying the requirement) without success, the contracting officer shall refer the contract action to a level above the contracting officer for award and that award of the action at an unreasonable price should be documented.

Seems like a stretch and inconsistent with the requirement to award contracts and fair and reasonable prices.

Any thoughts?

My initial thought is that if the government 'needs' a particular supply or service and is willing to pay the price, even out of necessity, perhaps the price is fair and reasonable all things considered. For example, a contracting officer has exhausted the CPRG guidance that --

"In making any acquisition, you should consider the alternatives. In a competitive acquisition, you should first consider how an offered price compares with competitive offers. However, your analysis should NOT end there. You should also consider other alternatives for acquiring the product or service. For example, sealed bidding procedures permit the agency head to cancel a solicitation when otherwise acceptable bids are at unreasonable prices (FAR 14.404-1(c)(6)) and negotiation procedures permit the source selection authority to reject all proposals if doing so is in the best interest of the Government (FAR 15.305(b))".

Share this post


Link to post
Share on other sites
ji20874    0

Is $10.00 an unreasonable price for a bottle of water?

In a grocery store in the U.S., where all the competitors are selling their bottles for around $1.00, it might seem that the $10.00 bottle is unreasonably priced.  Someone might buy it if it has a prestige label, I suppose -- if the glitterati are willing to pay that price for the prestige label, maybe $10.00 is unreasonable after all.

In the desert, if your bus breaks down and a cart comes along seven hours later with bottles of water, and the vendor offers to sell a bottle to each passenger at $10.00 per bottle, well, that might be a reasonable price -- after all, he and his donkey walked seven hours to get the water to your bus -- you might buy two for yourself and one for your cash-strapped neighbor.

A price that might be unreasonable to one person might be reasonable to someone else.  A price that is unreasonable to a contracting officer, after "the contracting officer has taken all the authorized actions . . . without success," might be reasonable to someone at a level above the contracting officer.

Share this post


Link to post
Share on other sites
REA'n Maker    0

Contracts for expert witnesses run into that kind of stuff all the time: $700 an hour for 1 FTE sounds crazy, until you realize that this SME is the only one who can provide the required expertise, and the  government is otherwise at risk of a bajillion-dollar judgement against it.  "What a bargain!":o

Share this post


Link to post
Share on other sites

Jamaal,

I'm not seeing the inconsistency.  I don't read FAR 15.405(d) as authorizing or instructing anyone to award a contract at an unreasonable price.  It merely states that the unsuccessful contracting officer "shall refer the contract action to a level above the contracting officer.  Disposition of the action should be documented."  Nowhere does that reference (or any other that I am aware of) give anyone, including the individual one level above the contracting officer, authority to award at an unreasonable price.

While not my precise thoughts on the matter, I presume this may be why the FAR says what it says:

On ‎5‎/‎12‎/‎2017 at 5:16 AM, ji20874 said:

A price that might be unreasonable to one person might be reasonable to someone else.  A price that is unreasonable to a contracting officer, after "the contracting officer has taken all the authorized actions . . . without success," might be reasonable to someone at a level above the contracting officer.

That individual one level above the contracting officer may also have more experience, skills, knowledge, etc. to resolve the situation - I believe the FAR is just instructing lower level CO's on what to do when they reach an impasse.

Share this post


Link to post
Share on other sites

Matthew, I agree and believe it is a viable candidate for removal from FAR. I read it the way you read it, but if someone has a differing argument I'd like to hear it. What I was saying was inconsistent were the interpretations I have heard, in classes and offices, about the level-above requirement.

I know it's not much but, this type of tutorial information can be removed in its entirety.

Share this post


Link to post
Share on other sites
Lionel Hutz    0

15.305(a)(1) provides that "Normally, competition establishes price reasonableness." 

15.403-1(b)(1) then states that obtaining certified cost and pricing data is prohibited when there is adequate price competition.  The last sentence of paragraph (c)(1)(i)(B) is addressing the unusual situation where despite competition, the contracting officer finds the prices to be unreasonable.  In such a case, the contracting officer must document the determination that the price is unreasonable and have that determination approved at a level above himself/herself.

In other words, the higher level approval is not to permit award of a contract at an unreasonable price.  Rather, it is to permit a contracting officer to find a price unreasonable despite the existence of otherwise adequate price competition.

 

Share this post


Link to post
Share on other sites

Refer to FAR 15.402 "Pricing Policy" (emphasis added below):

Quote

Contracting officers shall—

(a) Purchase supplies and services from responsible sources at fair and reasonable prices. In establishing the reasonableness of the offered prices, the contracting officer--

  (1) Shall obtain certified cost or pricing data when required by 15.403-4, along with data other than certified cost or pricing data as necessary to establish a fair and reasonable price; or

  (2) When certified cost or pricing data are not required by 15.403-4, shall obtain data other than certified cost or pricing data as necessary to establish a fair and reasonable price, generally using the following order of preference in determining the type of data required:

  (3) Obtain the type and quantity of data necessary to establish a fair and reasonable price, but not more data than is necessary. Requesting unnecessary data can lead to increased proposal preparation costs, generally extend acquisition lead time, and consume additional contractor and Government resources. Use techniques such as, but not limited to, price analysis, cost analysis, and/or cost realism analysis to establish a fair and reasonable price. If a fair and reasonable price cannot be established by the contracting officer from the analyses of the data obtained or submitted to date, the contracting officer shall require the submission of additional data sufficient for the contracting officer to support the determination of the fair and reasonable price.

  • (i) No additional data from the offeror, if the price is based on adequate price competition, except as provided by 15.403-3(b).

    (ii) Data other than certified cost or pricing data such as—

    • (A) Data related to prices (e.g., established catalog or market prices, sales to non-governmental and governmental entities), relying first on data available within the Government; second, on data obtained from sources other than the offeror; and, if necessary, on data obtained from the offeror. When obtaining data from the offeror is necessary, unless an exception under 15.403-1(b)(1) or (2) applies, such data submitted by the offeror shall include, at a minimum, appropriate data on the prices at which the same or similar items have been sold previously, adequate for evaluating the reasonableness of the price.

      (B) Cost data to the extent necessary for the contracting officer to determine a fair and reasonable price.

(b) Price each contract separately and independently and not --

  (1) Use proposed price reductions under other contracts as an evaluation factor; or

  (2) Consider losses or profits realized or anticipated under other contracts.

(c) Not include in a contract price any amount for a specified contingency to the extent that the contract provides for a price adjustment based upon the occurrence of that contingency.

That policy couldn't be clearer and I do not see any exception to it there or in FAR 15.405.  Short of an approved deviation, I'm not aware of any authority for a Contracting Officer (or even individuals one level above) to make or authorize purchases at unreasonable prices.

Edited by Matthew Fleharty

Share this post


Link to post
Share on other sites
Lionel Hutz    0
20 minutes ago, Matthew Fleharty said:

Huh?  The portion of the FAR you're referencing has to do with Prohibitions on Obtaining Certified Cost or Pricing Data...

The portion I'm referencing is the exact portion that Jamaal asked about in the original question:

On 5/12/2017 at 1:01 PM, Jamaal Valentine said:

What is meant by passages such as FAR 15.403-1( c )(1)(i)(B)

I was explaining what that passage meant.  You know, actually answering the question asked.

I never said it authorized making a purchase at an unreasonable price.  In fact, I said just the opposite:

9 hours ago, Lionel Hutz said:

the higher level approval is not to permit award of a contract at an unreasonable price

 

Share this post


Link to post
Share on other sites
11 minutes ago, Lionel Hutz said:

The portion I'm referencing is the exact portion that Jamaal asked about in the original question:

I was explaining what that passage meant.  You know, actually answering the question asked.

I never said it authorized making a purchase at an unreasonable price.  In fact, I said just the opposite:

 

My apologies Lionel - I read in haste - I'll edit my post accordingly.

Share this post


Link to post
Share on other sites
Seeker    0

Why do you think FAR 15.405(d) tells COs to refer the matter to higher authority? Is it just so higher authority can say, Yes, the price is unreasonable or No, the price is reasonable? Or is it to authorize purchase even though the price is too high. It is astonishing to read people say that at a level above the contracting officer a government official cannot authorize purchase at an unreasonable price even if there is a valid need, no other choice and no other source. Prepare a memo explaining the situation and what will be done to avoid having to be in the same position in the future then get on with the purchase. Really, what if you just have to have it? What if mission or lives depend upon it and the only source won't reduce its price? To think that higher authority cannot determine that the government will pay the price demanded though unreasonable is to render higher authority helpless in the face of dire need. When the government wanted to avoid the circumstance in the past it resorted to price controls and price renegotiation. We no longer have those laws. The government ordinarily doesn't tell people what they can charge. And it can't tell people in foreign countries what they can charge. What would you prefer, a lie that a price is fair and reasonable when it's not or a memo to file saying we got stuck this time but we're going to take steps to avoid getting stuck in the future? Is this kind of thinking common out in contracting offices?

Share this post


Link to post
Share on other sites

Seeker:

Not sure who this was directed to, but it is essentially what I have heard repeated by instructors, trainers, leaders, contract specialists, and contracting officers, etc. I understand the argument, but do not see how it comports with FAR.

1 hour ago, Seeker said:

Why do you think FAR 15.405(d) tells COs to refer the matter to higher authority? Is it just so higher authority can say, Yes, the price is unreasonable or No, the price is reasonable? Or is it to authorize purchase even though the price is too high. It is astonishing to read people say that at a level above the contracting officer a government official cannot authorize purchase at an unreasonable price even if there is a valid need, no other choice and no other source. Prepare a memo explaining the situation and what will be done to avoid having to be in the same position in the future then get on with the purchase. Really, what if you just have to have it? What if mission or lives depend upon it and the only source won't reduce its price? To think that higher authority cannot determine that the government will pay the price demanded though unreasonable is to render higher authority helpless in the face of dire need. When the government wanted to avoid the circumstance in the past it resorted to price controls and price renegotiation. We no longer have those laws. The government ordinarily doesn't tell people what they can charge. And it can't tell people in foreign countries what they can charge. What would you prefer, a lie that a price is fair and reasonable when it's not or a memo to file saying we got stuck this time but we're going to take steps to avoid getting stuck in the future? Is this kind of thinking common out in contracting offices?

 

 

Share this post


Link to post
Share on other sites
1 hour ago, Jamaal Valentine said:

Seeker:

Not sure who this was directed to, but it is essentially what I have heard repeated by instructors, trainers, leaders, contract specialists, and contracting officers, etc. I understand the argument, but do not see how it comports with FAR.

Jamaal,

It was likely directed at me - Seeker sent me a few PMs laced with ad hominems labeling me an "awful bureaucrat" amongst other things.  I'll no longer be engaging with Seeker on these forums as a result.  Maybe you'll have better luck getting a response that is supported by facts or references to the law/policy/regulation, but I doubt it.

Share this post


Link to post
Share on other sites
55 minutes ago, Seeker said:

I have looked and found nothing that says that the higher official cannot approve a contract award in that circumstance.

Is this "higher official" a contracting officer as well?

Share this post


Link to post
Share on other sites
Seeker    0

Not necessarily. FAR says "In some agencies, a relatively small number of high level officials are designated contracting officers solely by virtue of their positions. Contracting officers below the level of a head of a contracting activity shall be selected and appointed under 1.603." I don't think a higher level official has to be a contracting officer in order to be empowered to authorize a contracting officer to make an award despite an unreasonable price. Is the DOD director of pricing a contracting officer?

I'm not going to continue in this topic. Some people demand proof in order to avoid the logic. What would the proof be? There wouldn't be case law. Is the absence of express authorization proof that something cannot be done? There is no proof of anything on either side. The only basis for interpreting FAR 15.405(d) is a combination of logic and common sense. Some of the thinking here is not practical and is very frustrating to read. I'm with Jamal Valentine's instructors, trainers, leaders, contract specialists and contracting officers. Their thinking is consistent with my training and experience.

Share this post


Link to post
Share on other sites
Lionel Hutz    0
13 hours ago, Seeker said:

Why do you think FAR 15.405(d) tells COs to refer the matter to higher authority? Is it just so higher authority can say, Yes, the price is unreasonable or No, the price is reasonable?

Yes.  Price reasonableness is a subjective determination.  A higher level authority may have greater/different knowledge, perspective, or understanding that allows him or her to determine a price is reasonable in a certain situation.

13 hours ago, Seeker said:

Or is it to authorize purchase even though the price is too high. 

No.  FAR 15.405 says nothing about authorizing purchases or providing exceptions to other FAR requirements. You can't just read an exception into the FAR because it seems practical to do so.

13 hours ago, Seeker said:

Really, what if you just have to have it? What if mission or lives depend upon it and the only source won't reduce its price?

The contracting officer or higher authority should find the price to be reasonable.

13 hours ago, Seeker said:

What would you prefer, a lie that a price is fair and reasonable when it's not

Why would it be a lie?  What is a determination of price reasonableness if not a subjective opinion?  There is no mathematical equation that tells you something is reasonable or not.  I'm not saying any price can be justified to be reasonable.  But, as ji20874 explained above, what is unreasonable in one circumstance may be reasonable in another.  And, in an extreme case where lives are on the line and only one product can save those lives, the contracting officer would have a lot of leeway to find an otherwise high price to be reasonable.  I'd like to see the audit report that says x number of lives are only worth x number of dollars and paying more than that represented paying an unreasonable price.

5 hours ago, Seeker said:

Is the absence of express authorization proof that something cannot be done?

No, but a federal regulation stating that a contract "shall" be awarded at a fair and reasonable price is an express prohibition against awarding at an unreasonable price.  If you want to argue that there is an exception to that requirement, the burden is on you to identify it.  But, nothing in 15.405(d) suggests that it is providing such an exception.

Share this post


Link to post
Share on other sites

I tend to agree with Seeker's logic.  However, the FAR language is so convoluted that I can't tell what is actually supposed to happen if the KO can't determine that the price is fair and reasonable for award purposes and the higher level agrees that it isn't fair and reasonable.  

It should be evident that, even under competition, if the prices do not appear to be fair and reasonable, the KO can request , if necessary, information other than certified cost or pricing data" in order to evaluate the pricing. 

But it appears that, upon completion of the evaluation, if the prices are determined not to be fair and reasonable, then the standards for the "adequate competition" exception to the requirement to obtain certified cost or pricing are not met.

Seems to then go into a "do loop". Is the next step to obtain a waiver of the requirement before awarding?  Or just bump it up to a high enough level to award regardless? 

 

Share this post


Link to post
Share on other sites
7 hours ago, Lionel Hutz said:

No, but a federal regulation stating that a contract "shall" be awarded at a fair and reasonable price is an express prohibition against awarding at an unreasonable price.  If you want to argue that there is an exception to that requirement, the burden is on you to identify it.  But, nothing in 15.405(d) suggests that it is providing such an exception.

Agree 100%.

55 minutes ago, joel hoffman said:

I can't tell what is actually supposed to happen if the KO can't determine that the price is fair and reasonable for award purposes and the higher level agrees that it isn't fair and reasonable.  

I think the FAR's pricing policy is crystal clear that awards shall be made at fair and reasonable prices...if no one can do that and, therefore, compliance with the FAR is not possible, I'd imagine one would have to pursue a Deviation IAW FAR Subpart 1.4 (emphasis added below).

Quote

“Deviation” means any one or combination of the following:

(a) The issuance or use of a policy, procedure, solicitation provision (see definition in 2.101), contract clause (see definition in 2.101), method, or practice of conducting acquisition actions of any kind at any stage of the acquisition process that is inconsistent with the FAR.

(b) The omission of any solicitation provision or contract clause when its prescription requires its use.

(c) The use of any solicitation provision or contract clause with modified or alternate language that is not authorized by the FAR (see definition of “modification” in 52.101(a) and definition of “alternate” in 2.101(a)).

(d) The use of a solicitation provision or contract clause prescribed by the FAR on a “substantially as follows” or “substantially the same as” basis (see definitions in 2.101 and 52.101(a)), if such use is inconsistent with the intent, principle, or substance of the prescription or related coverage on the subject matter in the FAR.

(e) The authorization of lesser or greater limitations on the use of any solicitation provision, contract clause, policy, or procedure prescribed by the FAR.

(f) The issuance of policies or procedures that govern the contracting process or otherwise control contracting relationships that are not incorporated into agency acquisition regulations in accordance with 1.301(a).

The only question that remains is whether or not such a deviation is precluded by law, executive order, or regulation...

Share this post


Link to post
Share on other sites
Retreadfed    0

Joel, as you indicated, the FAR does not tell what the higher level official is to do once (s)he receives a referral like this from a contracting officer.  That gives them a lot of wiggle room on what they do.  In my experience, what happens at the higher level is up to the person occupying the higher level position.  In some cases, they will call the CEO or other officer of the company and try to work something out.  Sometimes, they direct the CO to go back to the contractor and state that the higher official agrees that the price is unreasonable and that if the contractor does not lower its price, it will not get the award.  Or as ji has indicated, they may review the record and say the price is reasonable.

Share this post


Link to post
Share on other sites

Retreadfed:

3 hours ago, Retreadfed said:

In my experience, what happens at the higher level is up to the person occupying the higher level position.  In some cases, they will call the CEO or other officer of the company and try to work something out.  Sometimes, they direct the CO to go back to the contractor and state that the higher official agrees that the price is unreasonable and that if the contractor does not lower its price, it will not get the award.

That has been my experience too.

Share this post


Link to post
Share on other sites

1. I have checked Titles 10 and 41 of the U.S.C. (Annotated) and found no statement to the effect that agencies may award contracts only at "reasonable" or "fair and reasonable" prices.

2. FAR 15.402 states that "contracting officers" shall purchase supplies and services at fair and reasonable prices. It is thus addressed to those who negotiate and award contracts--working level COs. It is clear that COs cannot award contracts at unreasonable prices. However, FAR does not say that agencies or agency heads shall purchase supplies and services only at reasonable or fair and reasonable prices.

3. I searched all of Title 48 of the CFR, Chapter 1, and found no explicit or implied statement to the effect that agencies or agency heads may award contracts only at reasonable or fair and reasonable prices. Nor did I find any prohibition explicit or implied against award of a contract at an unreasonable price in appropriate circumstances.

4. I found the following in FAR 13.106-3(a)(3):

Quote

Occasionally an item can be obtained only from a supplier that quotes a minimum order price or quantity that either unreasonably exceeds stated quantity requirements or results in an unreasonable price for the quantity required. In these instances, the contracting officer should inform the requiring activity of all facts regarding the quotation or offer and ask it to confirm or alter its requirement. The file shall be documented to support the final action taken.

Presumably, that rule means that if the requiring activity confirms its requirement, the contracting officer could issue a purchase order to the supplier despite the unreasonable price for the quantity required. If that's a proper interpretation of the rule, then it puts the lie to any general proposition that agencies cannot award contracts at unreasonable prices.

5. FAR 15.405(d) says:

Quote

If, however, the contractor insists on a price or demands a profit or fee that the contracting officer considers unreasonable, and the contracting officer has taken all authorized actions (including determining the feasibility of developing an alternative source) without success, the contracting officer shall refer the contract action to a level above the contracting officer. Disposition of the action should be documented.

6. FAR states no limitation on the nature of the "disposition."

7. The direction to refer the action to a level above the contracting officer is consistent with my belief that FAR 15.402 is directed at working level contracting officers and not at higher level officials.

8. The rule in FAR 15.405(d) originated with DOD. It was added to the Defense Acquisition Regulation in 1982, 47 FR 9399, March 5, 1982, DAC 76-31, without explanation. The rule appeared in DAR 3-801.1(c) as follows:

Quote

When the contractor insists on a price or demands a profit or fee which the contracting officer considers unreasonable, the contracting officer shall (i) determine the feasibility of developing an alternate source of supply, or (ii) take any other action within his authority. If, after exhausting the above course of action, a satisfactory solution has not been obtained, the contracting officer shall refer the prospective procurement to higher authority. Such referral shall include a complete statement of the attempt made to resolve the matter. With regard to a contractor's refusal to provide cost or pricing data, see 3-807.5.

That rule was included in the original FAR at 15.803(d) in virtually the same language as now appears in FAR 15.405(d)

9. I have searched high and low for any current or historical guidance on the proper implementation of FAR 15.405(d) and the discretion of higher level contracting officials and have found none. I have found nothing in the decisions of the GAO, the boards of contract appeals, the Court of Federal Claims, or the Federal Circuit.

10. In the course of a 45-year career I have been taught and have believed that higher ups could authorize award at an unreasonable price in appropriate circumstances if necessary to get the job done. I have been taught that in official DOD schools. I have read nothing in this thread or elsewhere that persuades me that my career-long belief is not sound.

I conclude that neither statute nor the FAR prescribes any policy or procedure for the proper disposition of situations in which an agency needs something from someone who wants an unreasonable price, has no other source, and has no other option, except that the disposition "should" be documented. Each agency has been left to develop its own policy and procedure.

I further conclude that there is no rule in FAR that precludes award of a contract at an unreasonable price at the direction or with the authorization of an official at least one level above the contracting officer if there is no alternative that will permit mission success.

For what it's worth, I have made inquiries of known and respected persons with many years of experience in acquisition who agree with my conclusion. In fact, when I asked them, they expressed surprise that anyone doubted it.

My policy when interpreting the FAR has long been to seize as much authority as the regulation allows. I have always taken the power I needed to further my agency's mission. When a regulatory passage is ambiguous, as is FAR 15.405(d), I have construed it to give me the authority that I needed.

My policy is consistent with the FAR guiding principles--if a course of action is not forbidden, then it is permissible as long as it makes sense. Others may take a different view and assume that a contracting officer or higher official cannot act without express authority. They have their view; I have mine.

Thanks for reading, and goodbye.

Share this post


Link to post
Share on other sites
Lionel Hutz    0

Good discussion!  Let me refine my thoughts...

“Contracting Officer” is defined in the FAR.  It includes anyone “with authority to enter into … contracts and make related determinations and findings.”  See FAR 2.101.  Further, FAR 1.601 states, “Contracts may be entered into and signed on behalf of the Government only by contracting officers. In some agencies, a relatively small number of high level officials are designated contracting officers solely by virtue of their positions.”

It seems pretty clear that when the FAR says “contracting officer” it means anyone with authority to contract on behalf of the government.  Unless defined differently elsewhere, a mandatory FAR requirement directed at “contracting officers” is not limited to working level contracting officers.

FAR 15.402 then states that contracting officers (i.e., anyone with authority to contract) “shall … Purchase Supplies and services from responsible sources at fair and reasonable prices.”  Per FAR 2.101, “Shall means the imperative”; in other words, it is required.  There is no exception in the regulation.  Therefore, contracting officers, including high level agency officials, may not purchase supplies and services at an unreasonable price.  UNLESS, as Matthew points out, a deviation is authorized. 

FAR 1.403 provides that an Agency Head may authorize an individual deviation.  That authority is then delegable pursuant to agency procedures/regulations.  In addition, the FAR requires that the contracting officer “document the justification and agency approval [of the deviation] in the contract file.”  FAR 1.403.  This documentation requirement fits in nicely with FAR 15.405’s requirement that “Disposition of the action should be documented.”

FAR 15.405 does not list every potential “disposition” of a referral because there are a myriad of potential outcomes.  The higher level authority could agree that the price is unreasonable and cancel the procurement; negotiate a lower price that is reasonable; determine the price is, in fact, reasonable; discuss changing the requirements with the requiring activity; refer the matter even higher in order to seek an individual deviation; etc.  The fact that the FAR does not list every possible course of action available does not mean that a course of action otherwise prohibited is now authorized.

Finally, Vern made a great point that this requirement is not found in Title 41 or 10; it is only a regulatory requirement.  As such, it is limited to the scope delineated in the regulation.  In this case, we are discussing a FAR Part 15 requirement that only applies to the award and modification of FAR Part 15 negotiated contracts, as well as “modifications to contracts awarded by sealed bidding.” FAR 15.400.  In other words, it does not apply to the award of FAR Part 14 contracts, the award of contracts under FAR Part 13, or the modification of contracts awarded under FAR Part 13.

Based on all of this, I conclude that contracts can be awarded at an unreasonable price; however, it is not FAR 15.405(d) that provides such authority.  Either, there is no restriction in the first place (e.g., FAR Part 13), or a higher level authority must approve an individual deviation waiving the requirement of FAR 15.402.  There may be others that think a higher level authority can always approve award at unreasonable prices and that a deviation is never needed.  And as a practical matter, a contracting officer probably has little personal or professional exposure if a high level agency official tells him it is okay to award without an official deviation.  But in the end, such a position is not supported by the language of the regulation.

Share this post


Link to post
Share on other sites
6 hours ago, Lionel Hutz said:

It seems pretty clear that when the FAR says “contracting officer” it means anyone with authority to contract on behalf of the government.  Unless defined differently elsewhere, a mandatory FAR requirement directed at “contracting officers” is not limited to working level contracting officers.

I disagree with Lionel's assertion "contracting officer" refers to "anyone" with authority to contract. I also disagree that higher level officials must of necessity obtain a deviation in order to authorize an award at an unreasonable price.

(I'm arguing now on principle. I have no issue with them seeking approval to deviate if they wish to do so.)

1. Lionel's argument rests on a single proposition: that all persons with contracting authority are contracting officers and that FAR 15.402(a) applies to them. I disagree.

FAR 2.101 says, in part:

Quote

“Contracting officer” means a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings.

Thus, a contracting officer is a person who has certain authority. It does not logically follow that all persons who have that authority are contracting officers. All professional basketball players are athletes, but not all athletes are professional basketball players.

Consider--we know from FAR 1.601 that all authority to contract vests in the agency head. Thus, agency heads have authority to enter into contracts. Are agency heads contracting officers? Does FAR 15.402(a) apply to them? Does it apply to heads of contracting activities (HCAs) who have contracting authority?

While many of us, myself included, have said that agency heads are contracting officers, that is loose talk. The definition of contracting officer in FAR 2.101, quoted above, is fundamentally the same as the definition of contracting officer in the Contract Disputes Act of 1978, 41 USC 7101:

Quote

(6) Contracting officer.—The term “contracting officer”—

(A) means an individual who, by appointment in accordance with applicable regulations, has the authority to make and administer contracts and to make determinations and findings with respect to contracts; and

(B) includes an authorized representative of the contracting officer, acting within the limits of the representative’s authority.

Yet the Federal Circuit has found that the terms "agency head" and "contracting officer," as used in the Contract Disputes Act, are not equivalent. See Joseph Morton Co., Inc. v. U.S., 757 F. 2d 1273 (1985). In that case the government argued that a restriction in the Contract Disputes Act against agency heads settling claims based on fraud also applied to contracting officers. The Federal Circuit disagreed:

Quote

[T]he Government does not even suggest that the term “contracting officer,” who, under the second sentence of section 605(a) [41 USC § 605, now § 7103], shall decide “[a]ll claims by the government,” and the term “agency head” in the sentence quoted above, are equivalents. Unless this can be shown, the fact that an agency head does not have a particular grant of authority neither adds to nor subtracts from the authority granted a contracting officer. We are persuaded that the use by Congress of two different terms in the same paragraph of the statute manifests an intent that they not be considered equivalents.

Now here is FAR 1.601, General, paragraph (a):

Quote

Unless specifically prohibited by another provision of law, authority and responsibility to contract for authorized supplies and services are vested in the agency head. The agency head may establish contracting activities and delegate broad authority to manage the agency’s contracting functions to heads of such contracting activities. Contracts may be entered into and signed on behalf of the Government only by contracting officers. In some agencies, a relatively small number of high level officials are designated contracting officers solely by virtue of their positions. Contracting officers below the level of a head of a contracting activity shall be selected and appointed under 1.603.

Note that FAR 1.601 does not say that agency heads (or HCAs) are contracting officers. It says that in "some" agencies higher level officials are contracting officers by virtue of their positions, but "some" is not all. The FAR does not identify any such agencies. The DFARS, for instance, does not say that agency heads (Sec of Defense, Sec of Air Force, Sec of Army, Sec of Navy, etc.)  and HCAs are contracting officers. As in the Contract Disputes Act, other statutes and the FAR system regulations routinely distinguish among agency head, head of the contracting activity, and contracting officer. We can assume that they do for a reason. I have found nothing in the FAR system that says or otherwise confirms that all persons with authority to contract are contracting officers. I think Lionel has made a logical error in interpreting the definition of contracting officer in FAR 2.101.

When FAR 15.405(d) directs contracting officers to refer matters of unresolved unreasonable pricing to "a level above the contracting officer," it makes a distinction between the "contracting officer" mentioned in FAR 15.402, who must award at fair and reasonable prices, and the official to whom the matter must be referred, who may dispose of the matter as he or she sees fit.

For more on the confusion about the roles of various acquisition officials, see Cibinic and Nash, "Procurement Officials: You Need A Program To Tell The Players," The Nash & Cibinic Report, May 1987.

Thus, I conclude that "contracting officer," as used in FAR 15.402(a), does not include higher level officials to whom unreasonable prices are to be referred under FAR 15.405(d). It follows that authorization to award at an unreasonable price is not a deviation and that approval to deviate is not necessary.

2. Moreover, just because a person is a head of a contracting activity does not mean that he or she has contracting authority, so by virtue of Lionel's argument such officials would not need a deviation in order to authorize award at an unreasonable price.

Here is the definition of HCA from FAR 2.101:

“Head of the contracting activity” means the official who has overall responsibility for managing the contracting activity.

A manager of contracting officers need not be a contracting officer. My first HCA was a three-star general, Richard C. Henry, the person who appointed me a contracting officer, and he made it clear in no uncertain terms that he was not a contracting officer. My next HCA was a four-star. He did not consider himself a contracting officer, either.

See Reifel et al., "Contracting Officer Authority," 86-4 Briefing Papers 1 (May 1986):

Quote

The fact that an official holds a higher-ranking position than the C.O. should not, however, be interpreted to mean that he automatically acts with authority equivalent to a C.O. and may change the contract. If the superior has not been granted authority to bind the Govt to an agreement, it is irrelevant that he is the “boss,” that his approval is needed for contract budget modifications, or that he is the “contact” person for upcoming contract negotiations.

According to Lionel's argument, an HCA who is, in fact, a contracting officer and has a certificate of appointment, needs a deviation to approve award at an unreasonable price, but an HCA who is not a contracting officer does not. Make sense?

3. It is true that FAR 15.405(d) does not grant authority to authorize award at an unreasonable price.

I know of no statute or regulation that does. But one does not need express authority to do a thing in contracting unless the thing is otherwise prohibited. See FAR 1.102(d) and 1.102-4(e).

Given that FAR 15.402(a) does not apply to higher level officials to whom unreasonable prices have been referred, nothing in statute or FAR prohibits an official at a level above the contracting officer from authorizing award at an unreasonable price in appropriate circumstances. Thus, such authorization would not constitute a deviation. So unless agency policy requires it, approval to deviate is not prerequisite to authorizing an unreasonably priced award. FAR 15.402(a) indicates that contracting officers cannot award at unreasonable prices and that they must refer stalemates at unreasonable prices to higher level authority for disposition. What that disposition might be is a matter of agency policy and managerial discretion.

Bottom line: I won't object if an HCA or chief of a contracting office decides to seek approval to deviate in order to do what he or she is empowered to do without a deviation, but I'll shake my head at the needless paperwork. Otherwise, I'm glad that Lionel and I agree that contracts may be awarded at an unreasonable price in appropriate circumstances, as when there is no alternative but mission disruption or failure. I think that was the real issue.

I should add that this discussion in largely academic. I know that some COs have referred negotiations pursuant to FAR 15.405(d), but I'm pretty certain that it very rarely done.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×