A SAP construction awarded under a commercial SF 1449 enforceable?

[CaptJax]

I often come across a request to replace HVAC in a building that often turns out to be more of an upgrade requiring a lot of construction.  Suppose a one to one replacement of an HVAC is solicited to an 8(a) sole source. The proposal is returned and it turns out a concrete pad has to be poured and stead of pre-fab pad laid down, electrical upgrades are required; requiring an electrician, duct work needs to be added and rerouted which will require walls to removed cut into, trenching is install coolant lines are needed.  I noted that the HVAC Tech on the DBA WD performs installations. Place of Performance is on a DOD Base. If these construction cost elements are incidental to the installation of the HVAC unit, that is, labor is above $2,000 but less than the SAT, and materials to install (electrical conduit, wires, breakers, etc) is above $2,000 but less than the SAT and together represents about 10% of the cost the the HVAC unit, Can the KO lawfully execute a contract using a SF 1449 by approaching the procurement as a supply incidental construction? Or does the construction elements, nature or work (needing DBA HVAC Techs, electricians) necessitate the use of a SF 1442 and applicable construction clauses and not including these would make the contract non-compliant with Davis-Bacon Act and therefore an illegal an unenforceable contract? The contract will probably execute and contractor take the proceeds not matter what form its on, but imagine if an event occured causing the contractor to want to walk away, but the contractor's attorney release the contractor based on these issues? Suppose this action where done OCONUS where SCA/DBA didn't apply.

[joel hoffman]

 

18 hours ago, CaptJax said:

I often come across a request to replace HVAC in a building that often turns out to be more of an upgrade requiring a lot of construction.  Suppose a one to one replacement of an HVAC is solicited to an 8(a) sole source. The proposal is returned and it turns out a concrete pad has to be poured and stead of pre-fab pad laid down, electrical upgrades are required; requiring an electrician, duct work needs to be added and rerouted which will require walls to removed cut into, trenching is install coolant lines are needed.  I noted that the HVAC Tech on the DBA WD performs installations. Place of Performance is on a DOD Base. If these construction cost elements are incidental to the installation of the HVAC unit, that is, labor is above $2,000 but less than the SAT, and materials to install (electrical conduit, wires, breakers, etc) is above $2,000 but less than the SAT and together represents about 10% of the cost the the HVAC unit, Can the KO lawfully execute a contract using a SF 1449 by approaching the procurement as a supply incidental construction? Or does the construction elements, nature or work (needing DBA HVAC Techs, electricians) necessitate the use of a SF 1442 and applicable construction clauses and not including these would make the contract non-compliant with Davis-Bacon Act and therefore an illegal an unenforceable contract? The contract will probably execute and contractor take the proceeds not matter what form its on, but imagine if an event occured causing the contractor to want to walk away, but the contractor's attorney release the contractor based on these issues? Suppose this action where done OCONUS where SCA/DBA didn't apply.

Well, i believe that it’s construction per the definition of construction : alteration or repair of real property*. You are repairing by replacement of an HVAC system.

It’s not a supply contract. It’s a new building system. The installation of a replacement A/C system is to become “real property installed equipment”  or “RPIE” . Therefore the real property installed equipment is not a commercial item per the definition in FAR2.101**. You are purchasing and installing materials to be incorporated into and become real property. It’s not a FAR Part 12 acquisition. I agree that the actual materials are “commercial items”, not government unique,  but it’s not a commercial item acquisition action in this context.

See FAR 36.701(b):

”Optional Form 347, Order for Supplies or Services, may be used for construction or dismantling, demolition, or removal of improvements contracts that are at or below the simplified acquisition threshold provided, that the contracting officer includes the clauses required (see subpart 36.5) in the simplified acquisitions (see part 13).”

So, It’s not a Part 12 acquisition,  plus the DBA is applicable to CONUS work, not to OCONUS.  

*“Construction means construction, alteration, or repair (including dredging, excavating, and painting) of buildings, structures, or other real property. For purposes of this definition, the terms “buildings, structures, or other real property” include, but are not limited to, improvements of all types, such asbridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, cemeteries, pumping stations, railways, airport facilities, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, and channels. Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing, or assembling of vessels, aircraft, or other kinds of personal property (except that for use in subpart 22.5, see the definition at 22.502).”

**The definition of commercial item in FAR2.101 excludes “real property”. 

“Commercial item means— 

(1) Any item, other than real property...”

[FAR-flung 1102]

6 minutes ago, joel hoffman said:

Well it’s

Well, it’s construction per the definition of construction : alteration or repair of real property*.

It’s not a supply contract. The new A/C system is to become “real property installed equipment”  or “RPIE” . Therefore the real property installed equipment is not a commercial item per the definition in FAR2.101**. You are purchasing materials to be incorporated into and become real property. It’s not a FAR Part 12 acquisition.

See FAR 36.701(b):

”Optional Form 347, Order for Supplies or Services, may be used for construction or dismantling, demolition, or removal of improvements contracts that are at or below the simplified acquisition threshold provided, that the contracting officer includes the clauses required (see subpart 36.5) in the simplified acquisitions (see part 13).”

So, It’s not a Part 12 acquisition,  plus the DBA is applicable to CONUS work, not to OCONUS.  

*“Construction means construction, alteration, or repair (including dredging, excavating, and painting) of buildings, structures, or other real property. For purposes of this definition, the terms “buildings, structures, or other real property” include, but are not limited to, improvements of all types, such asbridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, cemeteries, pumping stations, railways, airport facilities, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, and channels. Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing, or assembling of vessels, aircraft, or other kinds of personal property (except that for use in subpart 22.5, see the definition at 22.502).”

**The definition of commercial item in FAR2.101 excludes “real property”. 

“Commercial item means— 

(1) Any item, other than real property..."

DBA is not limited to only it's geographic scope, but also includes the scope considerations of the various Davis Bacon related Acts that can include OCONUS:

https://www.dol.gov/whd/programs/dbra/whatdbra.htm

 

[C Culham]

19 hours ago, CaptJax said:

Can the KO lawfully execute a contract using a SF 1449 by approaching the procurement as a supply incidental construction?

Some may not see it as FAR compliant but it has happened.   This memorandum comes to mind (and was mentioned in a very recent discussion on another topic) and if read completely one could argue that it provides a doorway to something close to the example you have provided being awarded as a commercial item.  Since the memorandum, and as proposed by it, there could be agency guidance that is more clarifying, or even case law, but in truth I did not go searching to determine if any existed.

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/assets/OMB/procurement/far/far_part12.pdf 

 

19 hours ago, CaptJax said:

Or does the construction elements, nature or work (needing DBA HVAC Techs, electricians) necessitate the use of a SF 1442 and applicable construction clauses and not including these would make the contract non-compliant with Davis-Bacon Act and therefore an illegal an unenforceable contract?

Spinning off the title to your question and the above two further thoughts expressed as questions I would offer that the use of an award form would not be the catalyst to determine a contract unenforceable.  I would further offer that having a contract non-complaint with Davis-Bacon would not make the contract illegal and unenforceable.   At least highly doubtful in either case yet in Federal contracting I am not surprised at anything and again did not research to determine if some time some place a decision by a court, administrative or otherwise, determined a contract to be unenforceable by the single fact that its cover award form was not FAR compliant, or by combined facts that the form was not complaint and that the contract was not complaint with Davis Bacon.   By my experience the contract is read as a whole as to whether is was legal and enforceable.  Or stated another way mutual intent, offer, acceptance, and consideration seems more important to a legal and enforceable contract than the cover form used and inclusion or not of Davis Bacon.   

 

[CaptJax]

Excellent commentary from everyone; thank you all!

FAR-Flung: Good point about the Davis Bacon Act.  Would you consider replacing weathered doors with custom made doors, and a ramp with hand rails installed for a pre-fab kit and affixed to a building opening also to be RPIE? Would it make a difference if doors, ramps, and HVAC units are going on a modular trailer type unit not classified on the books as real property, but classified as equipment?

 

C Culham: I didn't know the OMB issued a letter concerning this topic; great find. Our legal reviewed the Acq Strat and found no legal objections. I believe we meet the basic definition of a contract based on the legal review.

[Vern Edwards]

34 minutes ago, CaptJax said:

Our legal reviewed the Acq Strat and found no legal objections. I believe we meet the basic definition of a contract based on the legal review.

It's unwise to acquire construction under Part 12, and it's more trouble than it's worth.

[joel hoffman]

2 hours ago, CaptJax said:

Excellent commentary from everyone; thank you all!

FAR-Flung: Good point about the Davis Bacon Act.  Would you consider replacing weathered doors with custom made doors, and a ramp with hand rails installed for a pre-fab kit and affixed to a building opening also to be RPIE? Would it make a difference if doors, ramps, and HVAC units are going on a modular trailer type unit not classified on the books as real property, but classified as equipment?

Various DoD and individual service regulations specifically address modular trailers and differentiate between real and personal property for supporting installation work. From memory, I believe that what you described above is not real property or RPIE (real property). 

[joel hoffman]

2 hours ago, Vern Edwards said:

It's unwise to acquire construction under Part 12, and it's more trouble than it's worth.

I agree.

And for simple, small jobs, we shouldn’t have to reference or attach 150 pages of clauses and provisions, most of which have nothing to do with actual construction contracting terms and conditions, if they aren’t otherwise required for commercial item acquisitions. There are probably no more than a couple of dozen clauses that are important for construction . When I was a consulting engineer and when I was a city engineer, that was about the typical number of contract terms and conditions that we used.

Without going through the entire Matrix, things like the prescribed clauses in Part 36, the Changes, payment, prompt payment, disputes, inspection and acceptance. Defaults, suspension of work, time extensions, inspection and acceptance come to mind. Many are similar to the commercial acquisition  terms and conditions, but written for construction. 

[C Culham]

18 hours ago, Vern Edwards said:

It's unwise to acquire construction under Part 12, and it's more trouble than it's worth.

I just can not wrap my arms completely around this statement.  Why?  There is no magic line in the sand.  With the statement my mind immediately goes to dollar value and extent of work.   Much like that implied by the OFPP letter.  

15 hours ago, joel hoffman said:

Without going through the entire Matrix, things like the prescribed clauses in Part 36, the Changes, payment, prompt payment, disputes, inspection and acceptance. Defaults, suspension of work, time extensions, inspection and acceptance come to mind. Many are similar to the commercial acquisition  terms and conditions, but written for construction. 

This comment lends to my inability to completely agree that it is unwise to acquire construction under FAR part 12, which I read any and all construction regardless of value or extent of work.  After all one can tailor 52.212-4.  While I understand the list you have referenced is not exclusive what comes to mind for you  in the list are all clauses that can be tailored pursuant to FAR part 12.   I can not get to having the need to the paint and wallpaper  the inside of an office building as unwise for FAR part 12 procedures.

[joel hoffman]

So, can you tailor -4 for payment terms, prompt payment terms for construction, subcontractor payment terms, ? To add progress payments in lieu of upon completion (assuming that someone wants to use commercial acquisition for larger   or longer than a day or few) jobs? To provide for other than up front bilateral changes? To add differing site conditions? To add standard warranty clause, which also provides for extended, commercial item warranties? To add for materials stored on site but not incorporated? To allow off-site stored materials? To add disputes, inspection and acceptance. Defaults, suspension of work, time extensions, etc.? Miller Act? What about the various contract interpretation clauses establishing order of precedence between plans, specs, shop drawings, etc., etc.? 

If you’re going to tailor the commercial acquisition clauses for construction, why do you want to use Part 12 anyway?

For larger jobs, if you issue the solicitation concurrent with the notice, you are shooting yourselves in the foot. Construction contractors already complain that they don’t have adequate time to organize a team, visit the job site, seek material quotes and subcontractor proposals, prepare their own take-offs and estimates within a 30 day period, even after a 15 day preliminary notice then give you their best pricing. That phantom advantage is no advantage in my opinion for anything other than simple, short duration projects.

Granted, the scenario described here is for a relatively shorter job.

Otherwise, whose standard construction terms and conditions are you going to use for anything other than very simple tasks? Construction contractors don’t usually write construction contracts, the owners do - and like I have said before, there are numerous industry formats, depending upon who the proponent or special interest is.

What if a disagreement arises concerning schedules, concurrent or non-concurrent delays, contract interpretation, etc.  Federal construction contract case law is well established, often based upon the terms and conditions and risk allocation established in standard FAR construction clauses. I’d hate to be a judge assigned to cases where local or specific industry terms and conditions - or no applicable terms and conditions were included. And State construction case law isn’t even consistent across the various states and territories. 

I fully admit that I’m addressing more complex scenarios than a single, one for one A/C replacement.
As the Junior Warden (glorified, unpaid building and grounds manager) for my 13 year old 250,000 FT church building and five acres of property, I’ve had to Replace -one unit at a time - 5 of 8 A/C system units (ranging from 7-15 tons of cooling) in the past year. That involved replacing the outside compressors and condenser units (double outside units for the big systems) the pads, the inside air handling units consisting of the frames, enclosures, blowers, expansion valves, coils, heat strips etc. Those were all one to two day relatively simple jobs, re-using the existing spaces, ductwork and lines. No problem from me on being able to use commercial work orders for simple jobs.

I wouldn’t classify the scenario described in this thread as a simple job. I believe that the unit described is a new, redundant unit, if new ducts and lines, removing walls etc.  are necessary. 

[C Culham]

58 minutes ago, joel hoffman said:

So, can you tailor -4 for payment terms, prompt payment terms for construction, subcontractor payment terms, ? To add progress payments in lieu of upon completion (assuming that someone wants to use commercial acquisition for larger   or longer than a day or few) jobs? To provide for other than up front bilateral changes? To add differing site conditions? To add standard warranty clause, which also provides for extended, commercial item warranties? To add for materials stored on site but not incorporated? To allow off-site stored materials? To add disputes, inspection and acceptance. Defaults, suspension of work, time extensions, etc.? Miller Act? What about the various contract interpretation clauses establishing order of precedence between plans, specs, shop drawings, etc., etc.? 

Yes I believe you can.  And are they not the same decision questions you give consideration to for construction otherwise not done under Part 12?  In essence tailoring the proposed  contract to fit the project.  As I hope you can tell my question is the reverse of yours, which is, why would you not procure a need for construction via commercial item FAR part 12?  It has been concluded has it not that it is not specifically excluded.

 

58 minutes ago, joel hoffman said:

If you’re going to tailor the commercial acquisition clauses for construction, why do you want to use Part 12 anyway?

Combined synopsis solicitation, shortened synopsis period, a format that a particular industry is use to so garners more competition like painting and wallpapering. 

 

1 hour ago, joel hoffman said:

Otherwise, whose standard construction terms and conditions are you going to use for anything other than very simple tasks?

I think this has been answered above.  Think again tailoring the requirement to utilize market research to defend the tailoring.

In the end I do not believe using FAR part 12 to complete a particular well chosen construction project that fits commercial contracting ideals would forego litigating any disputes under Federal construction case law.   If it applies it applies.

As reminder I noted value and extent of work as caveats.  I would not advocate all jobs for commercial item yet I do believe there are some that fit.  

 

Its a confusing world.....just because it is done does not make it right or wrong!

https://beta.sam.gov/opp/391ddd7680214245a00c63a8503448d8/view

https://beta.sam.gov/opp/3e7c546d011e44b9b4242b1dc25bed5a/view