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Method of Procurement for 8a Direct Award?


Supes

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Looking to issue an 8a award and my CO is all wrapped around the axel on whether she should use FAR 13 or 15 for the award.  I told her it really doesn't matter but thinking back on it, does it matter? Would it be easier to negotiate within the bounds set by FAR 15 or less documentation needed for FAR 13? 

 

 

 

 

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8 hours ago, ji20874 said:
  • Under SAP?  
  • Commercial item up to $7.5 Million?  

If YES to either or both, treat it as a simplified acquisition.

If Yes and Yes, honestly I'm not seeing a reason why she would want to use FAR 15. FAR 13 really gives you all the same tools as FAR 15 but without the rules right?

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2 hours ago, C Culham said:

This may sound dumb but why not just follow FAR subpart 19.8.   Specifically see FAR 19.811.

As far as I can see (using my phone) there isn't any that really speaks to the documentation requirements for the action other than what form to use really. It does say prepare it iaw agency procedures but what about things like evaluation that the price is fair and reasonable? I like any idea to simplify stuff so I'm curious to see what sort of documentation you'd need included.

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9 hours ago, Supes said:

As far as I can see (using my phone) there isn't any that really speaks to the documentation requirements for the action other than what form to use really. It does say prepare it iaw agency procedures but what about things like evaluation that the price is fair and reasonable? I like any idea to simplify stuff so I'm curious to see what sort of documentation you'd need included.

What is the contract for?  Service, supply, construction, etc. ? If service or supply is it commercial (second request)?  In other words what are you negotiating and pricing?

You know that 15.4 covers pricing methodologies for both non-commercial  and commercial, sole source negotiated acquisitions, right? 

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2 hours ago, joel hoffman said:

What is the contract for?  Service, supply, construction, etc. ? If service or supply is it commercial (second request)?  In other words what are you negotiating and pricing?

You know that 15.4 covers pricing methodologies for both non-commercial  and commercial, sole source negotiated acquisitions, right? 

And agency supplements, too.

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11 hours ago, Supes said:

As far as I can see (using my phone) there isn't any that really speaks to the documentation requirements for the action other than what form to use really. It does say prepare it iaw agency procedures but what about things like evaluation that the price is fair and reasonable? I like any idea to simplify stuff so I'm curious to see what sort of documentation you'd need included.

I appreciate the clarification as to what help you are looking for so let me see if I can get you there..   My response is simple and acknowledges both @ji20874 and @joel hoffman responses and while their remarks are close I personally believe the FAR is a little more explicit.  So here you go.

First FAR 19.202-6 provides a discussion on determining "fair market price" using guidelines of FAR 15.404-1(b).  However at 19.202(b) the FAR becomes more explicit (remember "shall" is defined in the FAR as the imperative) with FAR 19.806 and FAR 19.807 providing further guidance for an 8(a).   I might add that FAR 19.001 provides the definition of Fair Market Price as it applies to efforts pursuant to FAR Part 19 such as 8(a) awards.

By wording of the FAR just remember you are determining Fair Market Price not the often used fair and reasonable but in the end they might be the same but I would advise that you use the term prescribed by FAR part 19 in your evaluation documentation.

So to summarize in my view for an 8(a) sole source you negotiate by receiving pricing from an 8(a) and the evaluation of that pricing and its documentation is based on FAR 15.4 before, during and at final negotiated price that you plan to award at.   I would add that the documentation needed fits the specific procurement.   You might see this as cop out statement on my part but I believe that FAR 15.404 provides wide latitude in evaluating pricing so you can keep it simple when the specific procurement so dictates.

I hope this helps you and your CO.

 

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Good points, Carl. Today’s  extensive use of “best value tradeoff’s”, where the emphasis isn’t always on “lowest price”, is in contrast with the days where the emphasis was on the lowest bid price (IFB) or lowest priced, technically acceptable (LPTA) as the “norm” or expectation. Thus, a fair land reasonable or fair market price allows for a broader perspective.

The FAR definition of fair market price at 19.001 is

“Fair market price means a price based on reasonable costs under normal competitive conditions and not on lowest possible cost (see 19.202-6).”

By normal competitive conditions - I read it to emphasize that the seller isn’t free to charge whatever it pleases, it needs to sharpen its pencil. 

One must also consider that once you select an 8(a) firm (or any individual firm) as your source to negotiate with, you must take into account that it may not be the most skilled or most experienced firm in the business or have the top experts in the line of business.  The 8(a) program was designed for emerging small businesses to be able to develop expertise and share activity in the marketplace.

For example, in construction, a small firm might not have the latest, most advanced construction equipment, the highest paid expert management and labor force, the market power and deep relationships to obtain the best pricing on materials and equipment, etc. They probably don’t have a wide range of equipment to be able to match to specific jobs for maximum productivity, etc., etc.

My comparison is only to well established, highly competitive firms in the marketplace.

Hopefully, this concept makes sense and can also be relatable to service and supply or other contract types.

However, I don’t know exactly what the original poster is specifically looking for. My hunch was that he/she was looking for guidance for what price evaluation techniques,are necessary, what, if any, negotiation procedures are necessary and how much “documentation” is minimally necessary. He/she doesn’t appear to intend to explain what type of contract effort is involved or if it is for commercial products and/or services. So, we can only direct the OP to the policy and procedures in FAR for one on one sole source negotiated 8(a) acquisitions. 

EDIT: Forgot to mention that small emerging firms don’t often have leverage and market power with potential subs either.  A higher risk for the subs will also logically tend to result in higher subcontract pricing. 

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For the OP, both pre- and post- negotiation “documentation” are not only intended for the benefit those directly involved in the contract action. They also provide justification for the record that those involved used good business judgement to justify the expenditures of the public money.

Often, those who administer contracts need to know what and how the actions transpired, when various circumstances may arise later.

In addition, good pre-negotiation documentation provides the knowledge, notes and other tools for the government to effectively negotiate the contract action. 

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Sorry for taking forever to get back to everyone, my schedule has been packed lately! This is a simple requirement for custodial services which has been in the 8a program for a few years. The CO is new to the effort and the previous contracts have all used FAR 15 and have had some pretty lengthy and detailed documents. It sounds like you're all saying that we can limit the documentation to just the minimum to explain the rationale behind the award. 

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22 hours ago, Supes said:

Sorry for taking forever to get back to everyone, my schedule has been packed lately! This is a simple requirement for custodial services which has been in the 8a program for a few years. The CO is new to the effort and the previous contracts have all used FAR 15 and have had some pretty lengthy and detailed documents. It sounds like you're all saying that we can limit the documentation to just the minimum to explain the rationale behind the award. 

Look at the discussion for pricing follow on contracts in Part 19.

Document your pre-negotiations objectives, which also include or reference cost or pricing evaluations, and technical [analysis per FAR 15.404-1 (e)] or scope evaluation[s], if any and government’s estimate.

Prepare the record of price negotiations (price negotiation memorandum or other agency term) and the rationale for the final, agreed rationale/basis of award.   

Edited by joel hoffman
Clarified that “technical evaluation” means “technical analysis” of price proposal not technical evaluation of contractor’s capabilities. Sorry - It was a hasty, poorly worded post. Thanks to Carl below for questioning why we would do the latter after sel
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1 hour ago, joel hoffman said:

and technical or scope evaluations

Joel - I take friendly exception to this.  In a typical 8(a) procurement sole source procurement the agency and SBA have agreed that the offering is matched with a capable firm.   Technical evaluation should have been done then when the agency did their due diligence of offering the procurement to the 8(a) program.  Something they can and should (must in my own reality)do.  Ref. FAR 19.803 and 19.804.

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21 hours ago, C Culham said:

Joel - I take friendly exception to this.  In a typical 8(a) procurement sole source procurement the agency and SBA have agreed that the offering is matched with a capable firm.   Technical evaluation should have been done then when the agency did their due diligence of offering the procurement to the 8(a) program.  Something they can and should (must in my own reality)do.  Ref. FAR 19.803 and 19.804.

Carl, sorry. I’m not referring to an evaluation of the firm’s capabilities.

I’m referring to analysis of the firm’s understanding of the scope or technical requirements and/or technical approach, if any were performed. I should have said “technical analysis” not “technical evaluation”. But I did say “and technical or scope evaluations, if any”.  Here is more detail about what I was referring to:

“15.404-1 Proposal analysis techniques.

...(e) Technical analysis. (1) The contracting officer should request that personnel having specialized knowledge, skills, experience, or capability in engineering, science, or management perform a technical analysis of the proposed types and quantities of materials, labor, processes, special tooling, equipment or real property, the reasonableness of scrap and spoilage, and other associated factors set forth in the proposal(s) in order to determine the need for and reasonableness of the proposed resources, assuming reasonable economy and efficiency. 

(2) At a minimum, the technical analysis should examine the types and quantities of material proposed and the need for the types and quantities of labor hours and the labor mix. Any other data that may be pertinent to an assessment of the offeror's ability to accomplish the technical requirements or to the cost or price analysis of the service or product being proposed should also be included in the analysis.

(3) The contracting officer should request technical assistance in evaluating pricing related to items that are “similar to” items being purchased, or commercial items that are “of a type” or requiring minor modifications, to ascertain the magnitude of changes required and to assist in pricing the required changes.”

Sorry for the confusion. Was typing in a hurry. For a custodial contract, there might not be a need for such an analysis, especially if the same firm will be performing the follow on contract. I quoted the reference above as written in FAR. Obviously a technical analysis of a custodial contract isn’t anywhere near the complexity of the FAR discussion.

Technical analyses of construction contract price proposals are common for construction contract and claims and modifications pricing. We analyzed proposed means and methods, such as materials, equipment selections and labor crew makeups, terms of equipment rental agreements, site mobilization, subcontracting, etc., etc., etc.

In fact, the DCAA would specifically mention whether or not a TA was provided to them with our agency’s audit request. 

I’ve performed some TA’s for some more complex service contract actions, such as O&M contracts, too.

 

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And the KO/negotiator should ensure that there is a mutual understanding of the actual scope of the work. That is one of the key aspects of proposal evaluation and successful negotiations.

EDIT: The pre-negotiation objectives should consider the price proposal; cost and price analyses using a review of the price proposal, technical analysis (if applicable), comparisons with government estimates (if any), field pricing support (including audits, if applicable), market pricing where applicable, previous purchases adjusted for current conditions, scope verification described here, etc.

Edited by joel hoffman
Explaining that the pre-negotiation objectives consider, where applicable, the various evals and analyses of the proposal, government estimate, market pricing, etc.
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Of course, the extent of evaluations and analyses depend upon the nature and complexity of the negotiated contract action.  For instance, we didn’t know what the nature and purpose of the acquisition in the original post were. We don’t know whether the same contractor is going to perform the follow on custodial contract. If so, the documentation and negotiations for the new contract could be less complex.

23 hours ago, Supes said:

Sorry for taking forever to get back to everyone, my schedule has been packed lately! This is a simple requirement for custodial services which has been in the 8a program for a few years. The CO is new to the effort and the previous contracts have all used FAR 15 and have had some pretty lengthy and detailed documents. It sounds like you're all saying that we can limit the documentation to just the minimum to explain the rationale behind the award. 

It just occurred to me why the new KO: 

On 12/7/2020 at 9:28 PM, Supes said:

my CO is all wrapped around the axel on whether she should use FAR 13 or 15 for the award.

Hopefully, if the same contractor will perform the follow-on contract, there is adequate documentation of award of the current contract to help the new KO simplify the new negotiated contract action.

If not the same contractor, it may require similar “lengthy and detailed documents”. The good thing would be to be able to use the knowledge of and documentation for previous awards to help develop the pre-negotiation objectives documentation for the new contract action. 

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23 hours ago, Supes said:

Sorry for taking forever to get back to everyone, my schedule has been packed lately! This is a simple requirement for custodial services which has been in the 8a program for a few years. The CO is new to the effort and the previous contracts have all used FAR 15 and have had some pretty lengthy and detailed documents. It sounds like you're all saying that we can limit the documentation to just the minimum to explain the rationale behind the award. 

Yes using FAR Part 19 as the guiding principles.

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On 12/7/2020 at 9:28 PM, Supes said:

I told her it really doesn't matter but thinking back on it, does it matter? Would it be easier to negotiate within the bounds set by FAR 15 or less documentation needed for FAR 13?

If nothing else, Supes should consider that good documentation now will help the next new KO negotiate the next follow on contract.

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43 minutes ago, C Culham said:

Yes using FAR Part 19 as the guiding principles.

“19.807   Estimating the fair market price.

(a) The contracting officer shall estimate the fair market price of the work to be performed by the 8(a) contractor.

(b) In estimating the fair market price for an acquisition other than those covered in paragraph (c) of this section, the contracting officer shall use cost or price analysis and consider commercial prices for similar products and services, available in-house cost estimates, data (including certified cost or pricing data) submitted by the SBA or the 8(a) contractor, and data obtained from any other Government agency.

(c) In estimating a fair market price for a repeat purchase, the contracting officer shall consider recent award prices for the same items or work if there is comparability in quantities, conditions, terms, and performance times. The estimated price should be adjusted to reflect differences in specifications, plans, transportation costs, packaging and packing costs, and other circumstances. Price indices may be used as guides to determine the changes in labor and material costs. Comparison of commercial prices for similar items may also be used.”

___________________________

The SBA (or the FAR’s writers) are using the term “estimate” inconsistently here.

In paragraph (b), it looks to me that, since the contractor’s proposal and cost or price analyses are being considered and also mentions “in-house cost estimates”,  it refers to the “estimate” as the government’s pre-negotiation objectives for fair market pricing, consistent with what I described above.

In paragraph (c) however, there is no  reference to a contractor’s proposal. Here the term “estimate” seems to be an “independent government estimate” of fair market pricing, without regard to a proposal.

The government has to negotiate a “repeat purchase” (whatever that means), whether a follow on contract with the same or a different contractor or an additional purchase under an existing contract. So the actual purchase will usually require the parties to negotiate a proposal or quote.

The pre-negotiation objectives for achieving a fair market price must consider both the “estimate” described in paragraph (c),  as well as the contractor’s proposal or quote.

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