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Lukevan

RFP requiring approved purchasing system -- question

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In a recently released full & open RFP the Government requires each offeror to provide evidence of an approved purchasing system unless they can prove they do not meet the threshold for a purchasing system review in FAR Subpart 44.3 ($25M).  We sell more than $25M annually to the Government so appear to be above the FAR 44.3 threshold, but the Government has never initiated a purchasing system review of our company.  We inquired about this with our DCMA ACO a couple of years ago and he indicated we were unlikely to be reviewed and even if he wanted to schedule one it would take at least a year before anyone would be available to audit us.  We are primarily a labor services contractor and beyond hiring employees to work under contracts we don't do significant amounts of subcontracting or supply/material purchasing, so I suspect we're considered low-risk from a purchasing perspective (but that's just my guess).  The RFP does contain DFAR 252.244-7001 CONTRACTOR PURCHASING SYSTEM ADMINISTRATION-BASIC as well as FAR 52.244-2 SUBCONTRACTS.  I understand that DFAR 252.244-7001 defines the requirements for an acceptable purchasing system and outlines the steps that must be taken if the government identifies deficiencies in the system.  I also understand that the enabling clause (244.305-71) indicates the Contractor Purchasing System Administration clause should be used in the RFP if the RFP also contains 52.244-2.  What's confusing me is that FAR 52.244-2 clearly contemplates a subcontracting process for companies based on whether they do or do not have approved purchasing systems.  I can't see anything in the either of these clauses that says something to the effect that only companies with an approved purchasing system can participate in the contract, but that seems to be what the RFP is saying by requiring we must prove our purchasing system is approved.  I'm trying to figure out whether I misunderstand the way these clauses work or whether the Government is going a step beyond and requiring an approved purchasing system even though it doesn't have to?  This is an RFP primarily for full-time labor services of on-site personnel, so it won't have much supply or material purchasing.  I will monitor any responses and reply back with any additional information needed.  Thanks for any insight you can provide.   

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Do you think the requirement is unfair?  Does the requirement make you ineligible?  You can protest it before the date set for receipt of proposals.

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The language doesn't literally say we aren't eligible for award without the approved system, but it reads very much that way.  We're hesitant to engage in a protest at this stage just given the possibility it could make the customer hostile to us before they've even received proposals.  We did get an outside opinion of an independent accounting firm a few years ago that our purchasing system is compliant with DFAR 252.244-7001, although that is short of having a purchasing system that's been approved by DCMA.  We're leaning toward submitting the outside opinion letter (with our proposal) and the information that we've never been reviewed by the Government (which should be their burden), and arguing in the proposal that 52.244-2 doesn't require an approved system it just sets out the process depending on whether a company does or does not have the approved system (if we do it this way, do you think we've lost our ability to protest later on this basis?).  We could ask them during the Question/Answer phase to eliminate this requirement (or clarify that having an approved system is not a requirement for award), but that approach runs the risk that they'll respond with the answer that it is a requirement and then we'll have no chance unless we protest prior to the solicitation due date.  Thank you. 

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You may want to get further expert advice as I suspect the agency has done due diligence in determining the inclusion of such a requirement.

 

I found this in doing 2 minutes of  research on WIFCON....

www.wifcon.com/cgen/408505.pdf

 

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7 hours ago, Lukevan said:

We're leaning toward submitting the outside opinion letter (with our proposal) and the information that we've never been reviewed by the Government (which should be their burden), and arguing in the proposal that 52.244-2 doesn't require an approved system it just sets out the process depending on whether a company does or does not have the approved system (if we do it this way, do you think we've lost our ability to protest later on this basis?).  

 

If the solicitation REQUIRES that an approved purchasing system be substantiated in your offer, and if you feel this is unfair, you should raise your objection (protest) before the date and time set for receipt of offers.  If you follow your recommended course and the Government later rejects your offer as unacceptable for this reason, your protest after the date and time set for receipt of offers likely will be dismissed as untimely.  Does the solicitation actually REQUIRE approved purchasing system, or just favor one?

7 hours ago, Lukevan said:

We could ask them during the Question/Answer phase to eliminate this requirement (or clarify that having an approved system is not a requirement for award), but that approach runs the risk that they'll respond with the answer that it is a requirement and then we'll have no chance unless we protest prior to the solicitation due date. 

 

Your protest after the date and time set for receipt of offers likely will be dismissed as untimely.  If the solicitation REQUIRES an approved purchasing system, you should raise your objection (protest) before the date and time set for receipt of offers. 

Ask the question and get an answer.  Do it!  If you don't like the answer, file a protest before the date and time set for receipt of offers.  

The case referenced by another poster doesn't fit (if I understand correctly, which is that your solicitation REQUIRES  an approved purchasing system be substantiated in the offer) -- the referenced case did not REQUIRE an approved purchasing system be substantiated in the offer, but only the ability to obtain one -- it allowed for system submission and approval after award.

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Thanks to all who've responded.  The case posted is interesting (and I'm still learning how to search on this site), but I agree with JI20874 that it presents different facts, particularly because the Government in that case amended the RFP so it didn't require an approved purchasing system and allowed offerors to submit their systems to NASA for review.  Here is the language in our RFP:

"Purchasing System – Provide evidence of an approved purchasing system. See FAR Subpart 44.3. If an offeror does not meet the threshold for a purchasing system review, they shall state so in their proposal, state their annual sales to the Government (minus those contracts/subcontracts that were competitively awarded firm-fixed-price, competitively awarded fixed-price with economic price adjustment contracts, or sales of commercial items pursuant to FAR part 12) or affirm that the contractor's sales to the Government do not exceed the threshold that would require a purchasing system review."

This language appears in the Section L instructions and is the only time a purchasing system is mentioned in the RFP except for the DFARS clause I cited above.  It is a contract that is overwhelmingly for the procurement of FTE labor services.  There is a modest plug value for ODCs (mostly travel), so it does not appear the government anticipates significant purchasing of supplies, materials, etc.   I appreciate the comments about filing a pre-proposal protest if we don't get an answer that is satisfactory.  I'm certainly curious about opinions you may have regarding how procurement offices view such protests and whether it may work against you down the road, even if you win the protest.  I do realize there are risks in just proceeding to provide a 3rd party opinion letter without asking the question and potentially waiving the right to protest this issue. 

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Is there any corresponding Section M language telling how the purchasing system information will be evaluated?

Have you submitted a question to the contracting officer yet?  Such as, "Regarding the purchasing system, what should an offeror submit if the offeror meets the threshold for a purchasing system review but no review has been conducted yet?"

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The only thing in Section M related to this is a statement that the items in the Cost Volume that correspond to the cost instructions will be evaluated for completeness.  They never single out the purchasing system issue but I'm sure they are looking for a dispositive statement regarding whether offerors have an approved system or are under the 44.3 threshold.

Questions are not due for about a week, so we have not asked anything yet.

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  • "Regarding the purchasing system, what should an offeror submit if the offeror meets the threshold for a purchasing system review but for who a review has not been conducted yet?"
  • "How will you evaluate an offeror who meets the threshold for a purchasing system review but for whom a review has not been conducted yet?"
  • "Will an offeror who meets the threshold for a purchasing system review but for whom a review has not been conducted yet be deemed ineligible for award?  Will such an offeror be unfavorably rated in the evaluation?"

Don't be wishy-washy in your questions.  Ask direct questions that will force the Government staff to consider your situation, and hopefully you'll get a direct answer.

You don't have to wait until the last minute to submit questions -- the earlier you submit them, the more time the Government will have to deal with them.

By the way, it does not appear to me in the solicitation text you quoted that the Government REQUIRES substantiation of a purchasing system review from on offeror who meets the threshold for a review -- the solicitation asks for it (if it exists), but apparently there is no indicator that an inability to submit the substantiation will make your offer unacceptable.  You really should ask the question -- ask all three.

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And ask NOW. 

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12 hours ago, Lukevan said:

I'm certainly curious about opinions you may have regarding how procurement offices view such protests and whether it may work against you down the road, even if you win the protest. 

I think this is a rare occasion, but I once filed a protest against the terms of a solicitation fifteen minutes before proposals were due.  The protest was hotly contested before GAO and the protester won and ultimately got the contract.

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We received the following response to our questions related to the purchasing system requirement in the thread above:

"Question: Regarding the requirement to show evidence of an approved purchasing system in Section L.9.6.4, what should an offeror submit if the offeror meets the threshold for a purchasing system review but for who a review has not been conducted yet? We have discussed this issue with our DCMA ACO previously and have completed a CPSR questionnaire at his request.  As of yet, DCMA has not selected us for a purchasing system review. We do have an opinion letter from an outside accounting firm indicating that our purchasing system, including our policy and procedure manual, is in compliance with DFARS 252.244-7001. This DFARS clause is used when the FAR clause 52.244-2 SUBCONTRACTS is also included in the solicitation. FAR 52.244-2 is included in the solicitation and it sets out a two-tiered system for the approval of subcontracts depending on whether the prime contractor does or does not have an approved purchasing system, but it does not exclude prime contractors that don’t have an approved system.

a. We assume the Government does not intend to exclude offerors from receiving an award if they do not yet have an approved purchasing system, particularly since the instructions in Section L.9.6.4 allow for the inclusion of offerors who do not currently meet the threshold for a purchasing system review as stated in FAR 44.3? 

b. Will offerors who do not have an approved purchasing system, including those who do not meet the threshold for a review, be evaluated using the same criteria as offerors who do have an approved system?  If not, how will the evaluations differ?

Answer: Purchasing system approvals by a Federal Government agency will be accepted. If a non-Federal Government entity purchasing system review is submitted, it is the responsibility of the offeror to provide sufficient information for the Government to document that 1. the non-Federal Government entity documentation provided is able to be accepted as proof of an approved purchasing system by the Government in lieu of a Federal Government agency purchasing system approval and 2.the offeror’s purchasing system meets the requirements utilized by the Federal Government to approve a purchasing system. (emphasis added with italics)

If the delay in receiving a Federal Government agency review of the offerors purchasing system is for the most current review, but the offeror’s purchasing system has been approved in the past, the offeror shall provide documentation of past approvals.  The Governments sole purpose is to be in accordance with the FAR and DFAR regulations. FAR 44.3 provides the threshold at which a purchasing review is required. The instructions at Section L.9.6.4 allow for the inclusion of offerors who do not meet the threshold for a purchasing system review because if they do not meet the threshold, then the requirement does not apply.  All offerors will be evaluated consistently as to if they possess an approved purchasing system (if they meet the threshold in FAR 44.3)." [END OF ANSWER]

Based on this response it appears the Government believes an approved purchasing system is a requirement for companies that meet the $25 Million threshold of sales to the Government as described in FAR 44.3.   By the answer they gave in the italicized part above it seems they want us provide proof that a 3rd party audit is acceptable by the Government (which seems like it would be up to them to decide) and they are essentially asking us to demonstrate what was already reviewed in our 3rd party audit.  Fortunately the cost volume doesn't have a page limit.  If anyone has any thoughts on an efficient way to address this or other thoughts they are greatly appreciated.

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Do you have time to engage a 3rd party to perform the review of your purchasing system? If not, I think you are SOL.

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We had that done 2-3 years ago and received a positive response that our system appears compliant.  So we will include that in our proposal.  I guess my bigger concern is how do we go about documenting that a 3rd party audit is able to be accepted as proof of an approved purchasing system by the Government ...  I may be parsing the words too much, but a 3rd party can't "approve" a purchasing system.  Only the Government can do that.  A 3rd party audit can provide evidence that a formal review by the Government would likely result in approval, but it feels like a circular trap.  It still they don't understand that there is no requirement for an approved system in the DFARS.  There is just a definition of what a purchasing system must include in order to be approved and the concept in 44.3 that the Government should perform a review of companies meeting a certain threshold.  But FAR 44.2 clearly contemplates companies conducting subcontracting who do not have approved purchasing systems and we know DCMA has not performed CPSRs on many companies who exceed the $25M threshold, so that leaves us in limbo if the acquiring activity takes this position. 

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Lukevan,

It's an equivalency thing. Is the 3rd party independent? Is it competent? Did it document the work it performed? Did it send you an opinion suitable to provide to the SSEB? You need to be in a position to argue that the work performed was equivalent to a DCMA CPSR and that the opinion you received regarding system adequacy can be relied upon.

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Lukevan, I think you need to get a good government contracts attorney to help you here.  I see several problems with what the government is doing that should be addressed by a competent attorney.

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It appears that the agency may be defacto restricting competition to certain firms with recent government contracts experience.

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10 hours ago, joel hoffman said:

It appears that the agency may be defacto restricting competition to certain firms with recent government contracts experience.

Joel,

I would be intererested to learn the rationale for requiring the successful contractor to have an approved purchasing system. In what ways does it reduce the customer's risk?

I mean, if the contractor will be acting as a purchasing agent for the government, then that's one thing. Or if there is a LOT of material/ODC content in the cost proposal, then maybe. But if this is a services contract, the requirement would on its face appear to be arbitrary.

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This is a very traditional services contract that is overwhelmingly about hiring FTEs to work at a Government site.  At this point ODCs appear primarily for travel and a very modest amount of other ODCs (they provide a plug value in the RFP).  It makes me think this is just language that is in an RFP template and they haven't given much thought to whether purchasing is a significant function under this contract. 

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Do you think the requirement is unfair?  Does the requirement make you ineligible?  You can protest it before the date set for receipt of proposals.

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Just FYI, See this site for some government thoughts about a similar protest, although your fact situation seems to be stronger https://www.gao.gov/products/B-408505#mt=e-report

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13 hours ago, Neil Roberts said:

Just FYI, See this site for some government thoughts about a similar protest, although your fact situation seems to be stronger https://www.gao.gov/products/B-408505#mt=e-report

Neil, that Protest was cited and discussed earlier in this thread.  There are some distinctions between Symvionics and this solicitation.

There, the RFP was amended so that it wasn’t a pass-fail requirement to have a purchasing system that has been previously APPROVED or provable that it would pass a review and approval process to be eligible for award. 

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