The following scenario pertains to a major system that is in the final stages of a "smart" shutdown and its related primary development contract. The original large sole source contract was awarded 3 years ago. A critical system component is a piece of software that the contractor asserted as exclusively developed with IR&D funding and having Restricted Rights. At the time, the Government made the business decision to accept the software with these rights. Since then, the program has been placed under Smart Shutdown and the contractor and PM have had some conversations on purchasing the sofware with Unlimited Rights (for future spin-off systems use). The cost to the Government for these improved rights is about 10% of what had been roughly quoted back at the time of original contract award. The projected "purchase" price of these increased rights is about 2/10th's of a percent of the overall contract amount.

Bottom Line Question: Can these rights be increased through the use of an in-scope contract modification? Would this supplemental agreement be within the scope of the original contract?

Additional Key Factor: We are running out of time on this shutdown system (we are in fact on borrowed time). I am being told that I will "probably" need to do this as an out-of-scope mod, thus will require a J&A, etc... all time killers. Are they correct? What is the point??? This change will not change the function of the system (in it's remaining days), the dollar magnitude is negligible, this is the only time anything like this was done under this contract (so no cumulative impact), and it does nothing to increase the complexity of the contract. Lastly, whatever the rights were at original contract award- there would have been no impact on competition as this was sole sourced.

Beauty is in the eye of the beholder.

Same for scope, right?

The way you tell the story, I can agree that acquiring unlimited rights can be a reasonable step as part of a shutdown effort.  I don't know what "Smart Shutdown" is, but if that authority allows you to restructure the contract to allow for orderly shutdown, then maybe that is also your authority for buying the unlimited rights.

I would try to avoid presenting it as a scope question -- a scope question tends to invoke the Changes clause, and I don't think you need to go there.  I think you could buy the rights as part of a termination for convenience settlement, for example.

Did you assure yourself that there are no data rights clauses included in the prime contract (FAR 52.227/DFARS 252.227, etc) that already makes going from Restricted to Unlimited as in-scope?  

Bottom line answer:  Go for it, then. You convinced me.

You said:

"The following scenario pertains to a major system that is in the final stages of a "smart" shutdown and its related primary development contract. The original large sole source contract was awarded 3 years ago. A critical system component is a piece of software that the contractor asserted as exclusively developed with IR&D funding and having Restricted Rights. At the time, the Government made the business decision to accept the software with these rights. Since then, the program has been placed under Smart Shutdown and the contractor and PM have had some conversations on purchasing the sofware with Unlimited Rights (for future spin-off systems use). The cost to the Government for these improved rights is about 10% of what had been roughly quoted back at the time of original contract award. The projected "purchase" price of these increased rights is about 2/10th's of a percent of the overall contract amount.

Bottom Line Question: Can these rights be increased through the use of an in-scope contract modification? Would this supplemental agreement be within the scope of the original contract?

Additional Key Factor: We are running out of time on this shutdown system (we are in fact on borrowed time). I am being told that I will "probably" need to do this as an out-of-scope mod, thus will require a J&A, etc... all time killers. Are they correct? What is the point??? This change will not change the function of the system (in it's remaining days), the dollar magnitude is negligible, this is the only time anything like this was done under this contract (so no cumulative impact), and it does nothing to increase the complexity of the contract. Lastly, whatever the rights were at original contract award- there would have been no impact on competition as this was sole sourced."

 

 

Onix Networking Corporation B-411841: Nov 9, 2015 

"In determining whether a modification is outside the scope of an underlying contract (or in this case, a delivery order), our Office considers whether there is a material difference between the modification and the contract. DynCorp Int’l LLC, B-402349, Mar. 15, 2010, 2010 CPD ¶ 59 at 6; MCI Telecomms. Corp., supra. Evidence of a material difference is found by reviewing the circumstances attending the procurement that originally was conducted, examining any changes in the type of work, performance period, or costs between the contract as awarded and as modified, and considering whether the original solicitation adequately advised offerors of the potential for the type of work contemplated by the modification. See Anteon Corp., B-293523, B-293523.2, Mar. 29, 2004, 2004 CPD ¶ 51 at 5. The overall inquiry is whether the modification is of a nature that potential offerors reasonably would have anticipated competing for the goods or services being acquired through issuance of the modification. Id."
 

Found in an array of decision found here - http://www.wifcon.com/pd6_001.htm

Seems I am convinced too. As Joel has said go for it! 

 

C Culham beat me to it!  That is always the first place I go when these questions come up.

I usually think of passages like this form (Overseas Lease Group, Inc., B-402111, January 19, 2010) (emphasis added):

 

Quote

In determining whether a modification triggers the competition requirements in the Competition In Contracting Act of 1984, 10 U.S.C. sect. 2304(a)(1)(A), we look to whether there is a material difference between the modified contract and the contract that was originally awarded. Engineering & Prof’l Servs, Inc., supra, at 4. Evidence of a material difference between the modification and the original contract is found by examining changes in the type of work, performance period, and costs between the contract as awarded and as modified. Atlantic Coast Contracting, Inc., supra, at 4. Here, the record is clear that the purpose and nature of the original contract were not changed by the modification.

I'm in the habit of putting a statement in new contracts like 'The purpose of this Contract is [broad statement]' for this very purpose.  Hope that is a good habit, I think it helps put all proposers on notice what kind of changes could occur.

Sounds like Fear's cost, schedule and type of work do not change much, so it sounds encouraging from the description.

There is no scope issue. The mod will not acquire supplies, services or construction. It will obtain additional rights to software (property) you already have. Thus it will not be an acquisition as defined in FAR 2.101. CICA applies to  acquisitions of contracts for supplies, services and construction. FAR 6.001 and 6.002. Thus CICA does not apply. You do not need a J&A.

What rights clause is in the contract? DFARS 252.227-7014? If so did you read (b)(4)?

16 hours ago, Neil Roberts said:

Did you assure yourself that there are no data rights clauses included in the prime contract (FAR 52.227/DFARS 252.227, etc) that already makes going from Restricted to Unlimited as in-scope?  

There are multiple software and data rights clauses on the prime contracting including DFARS 252.227-7013, 252.227-7014, 252.227-7015, &  252.227-7027. I have been particularly focused on DFARS 252.227-7014(b)(4) "...may be modified by mutual agreement.." How though does this solve the scope issue?

There is no scope issue as I already explained. If the software is noncommercial use the authority in 252.2027-7014(b)(4) on sf 30.

1 hour ago, Seeker said:

There is no scope issue as I already explained. If the software is noncommercial use the authority in 252.2027-7014(b)(4) on sf 30.

thanks Seeker. I had posted prior to your post- from my end anyway- so we cross posted.

 

On 5/11/2017 at 7:33 AM, Seeker said:

There is no scope issue. The mod will not acquire supplies, services or construction. It will obtain additional rights to software (property) you already have. Thus it will not be an acquisition as defined in FAR 2.101. CICA applies to  acquisitions of contracts for supplies, services and construction. FAR 6.001 and 6.002. Thus CICA does not apply. You do not need a J&A.

Do I understand you correctly that the Government can contract for any software rights it desires without regard to CICA?

33 minutes ago, Matthew Fleharty said:

Do I understand you correctly that the Government can contract for any software rights it desires without regard to CICA?

Matthew, relax already. There wasn't any competition for the sole source contract as awarded, to include the current software rights.  

6 hours ago, joel hoffman said:

Matthew, relax already. There wasn't any competition for the sole source contract as awarded, to include the current software rights.  

Why do you assume I'm not "relaxed" Joel?

Seeker's answer appeared to use a position that applies more broadly than this one situation so I feel my question is fair game.

Matthew, your question did make me think about it some more. Is something which the government wants "in-scope" if the government can't unilaterally direct the contractor to provide or perform it under the changes clause or obtain it under some other existing contract clause or contract requirement? 

In this case, the contractor would have to agree to provide the additional software rights, even though it is closely associated with the scope of the original contract.  The contractor is now apparently willing to provide this.

The contractor is seemingly the only entity that can provide the additional rights.

It appears to be is a logical extension of the original, awarded requirement.

Matthew, I think that CICA has already been regarded concerning this matter. The original contract is a negotiated, sole source contract.

From the description given,  the parties could have agreed to include the additional rights initially, so it would have been within the originally awarded scope.There was some exception to full and open competition to begin with that would have encompassed these expanded rights, had the parties agreed. 

I can't tell from the OP whether the contractor would have agreed at the time or what the government's "business decision" was not to.  It was apparently within the intended scope but not agreed to include the expanded rights.

I don't think that the original exception to full and open competition for the intended scope expired for a term that didn't get incorporated in the initial contract award for some reason, which is no longer applicable.

I have seen a lot of "in-scope mods" come through and be signed that looked a LOT more out of scope than this. At least this was contemplated during negotiations. It didn't seem to be a scope issue then.

"Get 'er done" one way or another is my advice. 

On May 11, 2017 at 10:44 AM, Seeker said:

There is no scope issue as I already explained. If the software is noncommercial use the authority in 252.2027-7014(b)(4) on sf 30.

So, I modify my first paragraph above - the referenced clause and specific paragraph allows the parties to modify the terms for government rights by mutual agreement and scope isn't an issue. 

But if it were, CICA has already been considered.  There is an exception to full and open competiton for the entire acquisition that would apparently cover the present modification to the government rights, which was part of the government's original intent.

 Plus the rights being sought are for specific software provided under the contract. Nobody else could provide it.

Thanks, Seeker. Sorry that I didn't read your reference earlier. 

19 hours ago, joel hoffman said:

Matthew, I think that CICA has already been regarded concerning this matter. The original contract is a negotiated, sole source contract.

Joel that wasn't my question.  Regardless of the OPs situation, Seeker appeared to take the position the any/all contract(s) for software rights are exempt from CICA because software rights are not supplies, services, or construction and CICA only applies to "acquisitions" which, according to the FAR 2.101 definition only covers "supplies, services, or construction" and does not expressly state "software/data rights" (at least I think that is Seeker's position and presumably Seeker believe thats software/data rights do not fall into any of those categories, hence my question).  I'm trying to pull on that thread - hopefully that is more clear now.

Matthew, I saw that, too. I hadn't addressed that aspect of seekers post yet, just the reference to the clause.  I recognize the point you are trying to debate but I doubt if Seeker will bite. 

In my opinion, the acquisition involves software and the data rights are an aspect related to that acquisition.  CICA would apply if the action is out of scope but there is already an exception. If the contractor developed the software, nobody else could provide the expanded data rights. But those issues are moot, here. 

Bottom line is that the contract clause 252.2027-7014(b)(4) allows the parties to bi-laterally modify the data rights. Thus, the action is within scope of the contract (even if not within the scope of the Changes clause). 

On 5/14/2017 at 6:13 AM, joel hoffman said:

I can't tell from the OP whether the contractor would have agreed at the time or what the government's "business decision" was not to. 

Clarification: The contractor would have agreed at the time of the original award to provide the increased rights, but the price would have been much higher. The customer business decision balanced the price (at the time) against identified benefits and made the business decision not to purchase the increase rights.

On 5/11/2017 at 10:33 AM, Seeker said:

CICA applies to  acquisitions of contracts for supplies, services and construction. FAR 6.001 and 6.002. Thus CICA does not apply.

That is an interesting interpretation but PepeTheFrog is not sure it is accurate.

PepeTheFrog seconds Matthew Fleharty's line of questioning on this matter.

Is there something interesting to learn from Seeker, or was that a very specific assertion, limited to this scenario, and not related to other contracts for licenses, software, etc.?

2 hours ago, PepeTheFrog said:

was that a very specific assertion, limited to this scenario, and not related to other contracts for licenses, software, etc.?

Exactly.

Thanks, Seeker. Have a great weekend.