FrankJon

Thanks Neil. Profit is discussed at 10 USC 3374. This would override my commerciality argument, although the term “substantial portion” still seems to present a great deal of ambiguity.

OK, well for starters neither 52.216-24 nor 52.232-16 are commercial clauses, so neither belongs in the scenario I described. Clause 52.216-25 is a commercial clause, but unfortunately DFARS 216.603-4(b)(3) tells us to replace that clause with 252.217-7027, which is not a commercial clause. In the scenario I described, what gives me the authority to audit the contractor’s costs and adjust its profit? What gives me the authority to demand cost data at all? Certainly no terms I included in my letter contract appear to convey this. Why would any of this be common knowledge among today’s practitioners if the use of UCAs is so limited? It’s amusing to me that the regulations so poorly describe this process we must look to audits and some level of experiential learning to piece together the true nature of UCAs, yet the confused practitioner asking reasonable questions (in this case me) is the a-hole. Thanks for your help, Vern.

Still seems like you’re talking to me. I didn’t say that.

Was this to me or @C Culham? I'm aware of that definition. It doesn't align to what Carl appears to think is very clearly stated by the regs.

If you'd like to point me to an authoritative discussion or rule on UCAs and letter contracts, I'd gladly read it. Apart from the regulations and DoDIG language I cited (which you then cited back to me), I've reviewed Formation of Government Contracts (5th Ed.) and The Government Contracts Reference Book seeking information the topic of UCA pricing. I've also discussed UCAs and LCs with multiple colleagues with experience awarding them, and each colleague has had unique ideas about the "right" way to do them. Likewise, it seems some your "regulars" don't quite agree on this topic either.

Can you provide a citation to this definition? This doesn't match any definition I've found.

Thank you for the substantive discussion, @ji20874, @formerfed, @Retreadfed. I really don't want to get bogged down with nomenclature here, as that was the least important part of my question. I'm more interested in the ability to adjust a contractor's profit under the circumstances I've described. If I've erred, I'll own it. But Vern's silly response aside, I've seen nothing definitive that would indicate this.

Well if 52.216-26 is properly excluded from the UCA because the CO anticipates a FFP definitized contract, how is the contractor apprised that the Government will reimburse allowable costs? Where does the Government explain how it will calculate allowable costs? How does the contractor know to submit cost data? Which contract term defines "qualifying proposal," and what if the contractor doesn't agree to submit cost data? I'm no expert in CR contracting, but it's not clear to me why the parties must necessarily assume the UCA is a CR contract type. Take my situation. I had a requirement for severable, commercial services. I loaded the UCA with commercial clauses as well as UCA- and letter contract-specific clauses I felt applied.* The contractor indicated it would view this as a labor-hour arrangement until definitization, and I saw no issue with this since the work provided an hourly benefit to the Government. In 252.217-7027 paragraph (b), I requested a FFP proposal. The contractor submitted a timely FFP proposal with two CLINs, one covering the UCA period, the other covering post-definitization work. The UCA period included LCATs, fully-burdened rates, and actual hours worked. The post-definitization period included the same LCATs and fully-burdened rates, but with estimated hours. Using FAR subpart 13.5 procedures, I determined the rates to be fair and reasonable and proceeded immediately to award the definitized contract. What is wrong with that? (*One thing that I learned may have been wrong after the fact was including 252.217-7027 at all, as this is not listed as a commercial clause in DFARS part 212. It was actually DFARS Case 2021-D0003 that tipped me off to this. This Case states of DFARS 252.217-7027: "The clause will continue to not apply to acquisitions at or below the SAT and to acquisitions of commercial services and commercial products.")

DFARS 217.7404-6 requires that "[w]hen the final price of a UCA is negotiated after a substantial portion of the required performance has been completed, the head of the contracting activity shall ensure the profit allowed reflects" any reduced risk to the contractor. In its 2020 report Audit of Military Department Management of Undefinitized Contract Actions, DoDIG states: Source: https://media.defense.gov/2020/May/13/2002298926/-1/-1/1/DODIG-2020-084.PDF. DoDIG repeats this assertion that a UCA is "essentially cost reimbursable" throughout the report. Questions: Why does DoDIG assume that all UCAs are cost-reimbursement contracts? Where does the FAR or DFARS support this assertion? I see clause 52.216-26, but that is only required when a cost-reimbursement definitive contract is contemplated. Assuming the contract is definitized on time in accordance with paragraph (d) of clause 252.217-7027 and the CO does not include any other terms authorizing the adjustment of profit, what gives the Government de facto authority to adjust a contractor's profit in accordance with DFARS 217.7404-6? Since unilaterally adjusting profit is not compatible with commercial procedures and utilizing weighted guidelines is not compatible with simplified acquisition procedures, would the inclusion of commercial terms in the UCA and the application of FAR subpart 13.5 procedures to the definitized contract action negate the requirement to follow DFARS 217.7404-6? Since "substantial portion" is not defined by the DFARS, it seems to me that the CO has total discretion to determine when the 217.7404-6 analysis applies, depending on her definition of "substantial" under the circumstances. Am I missing something?

Yes, nothing there that I see. I would have a valid exception to competition pursuant to FAR 6.302-5. Barring any express prohibitions to using the 8(a) Program in this way, scope of competition would not be an issue.

Can you elaborate? I read what you’d written and was asking myself what the actual risk would be if someone incorrectly interpreted my action. I couldn’t come up with anything. Is that why you retracted your comment?

Scenario: 1. Agency is within DoD. 2. Competitive 8(a) set-aside results in ~$100M award to an ANC. 3. Later, a separate but similar requirement valued at ~$90M is identified. 4. Agency seeks to procure additional work by modifying the original ANC contract on a sole source basis without a JOFOC pursuant to FAR 6.302-5 and DFARS 206.303-1(a). I’ve found nothing explicit in law, regulation, or policy that prevents us from “stacking” the 8(a) Program into a single contract in this way. FAR 19.808-1(e) prevents another participant owned by an ANC from receiving a sole source follow-on contract under the 8(a) Program, but these circumstances don’t apply here. Is anyone aware of any showstoppers I’m missing?

Did you allow offerors to submit a single proposal responsive to more than one region/solicitation? This is what we did to save paperwork on their end and avoid redundant evaluations on our end. We also tried to convince the customer to consider a regional workload model, as acquisition leadership was much more comfortable with a contract structure divided according to objective criteria instead of the discretion of the customer. But the customer wouldn’t agree to this. So in the end, apart from meeting the minimum guaranteed quantities (each a healthy sum), the government may use each contract entirely as it wishes.

Scenario recap: Two years ago, I received a multibillion dollar requirement for nationwide commercial services over a five-year period. The customer requested two contract awards. Workload would be assigned daily, and could vary significantly from day to day. The most appropriate delivery arrangement would be an indefinite-delivery contract or FSS BPA. The customer also had one unusual request: for national security purposes, the contractors would need to remain at workload parity. In other words, the Government would need the flexibility to give each contractor an approximately equal share of the work over the lives of the contracts so that at any moment one contractor would be able to stand in for the other and rapidly scale its workforce to take all or part of the other contractor’s workload. The FAR and DFARS applied. Problem: The FAR doesn’t describe a way to award two IDCs for the same requirement and allocate work between them. It specifically precludes allocation in a multiple-award IDIQ scenario (FAR 16.505(b)(ii)(B)) and stipulates that a requirements contract is for “one contractor” to fulfill the Government’s requirements (FAR 15.503(a)). In addition, FAR 8.405-3 establishes a multiple-award BPA ordering process that basically mirrors the multiple-award IDIQ ordering process. Proposed Solution: After researching the issue, I landed on the strategy of awarding “split” requirements contracts (which I referred to at the time as multiple-award requirements contracts). We had a robust discussion about the merits of this approach here: Outcome: Despite legal concurrence, neither the customer nor SSA would agree to this strategy. The SSA was uncomfortable operating this far outside of the seemingly clear language of FAR 16.503. The customer believed our projected quantities were too speculative to meet the legal standard of a requirements contract (and did not want to be locked into a promise we couldn’t keep). After several briefings to advocate for this approach, the SSA told the acquisition team to start over. We looked at multiple avenues. We considered a deviation to fair-opportunity procedures (blocked by statute), FAR part 13 BPAs (ordering threshold too low), and very high guaranteed minimums in a multiple-award scenario (too risky). We considered other methods, too, but struggled to come to consensus on anything. We were basically at the end of our rope when legal counsel joked, “I wish we could just award two single-award IDIQs.” On a whim, I started to look at how that could conceivably be accomplished under the FAR, and landed on the following path: There would be no way to avoid fair-opportunity competition in a multiple-award scenario. Every definition of “multiple-award contract” at FAR 2.101 contemplates a “single solicitation.” So to avoid classification as a multiple-award contract, we could issue two, substantially identical solicitations simultaneously, with each cross-referencing the other and encouraging offerors to respond to both. Assuming each offeror responded to both solicitations with the same proposal, the question then became how to prevent one offeror from winning both awards. The answer was under FAR 6.202, which allows us to exclude a source from award in order to maintain another source. We would determine the awardee for one solicitation, then execute a D&F pursuant to FAR 6.202 excluding that source from consideration under the second award. And this is exactly what we did. We called them “parallel” single-award IDIQs. Though nobody within my agency could articulate a strong reason why this approach would not work, we nevertheless faced a lot of skepticism and criticism. The SSA accused me of playing fast-and-loose with the rules (I responded that this is exactly what “acquisition innovation” looks like). Many said that this was all unnecessary because many agencies utilize allocation to place orders against their multiple-award IDIQs and BPAs (though no one could ever explain how this was allowable under the rules). Others said that having dual contract files would be administratively burdensome and that conducting the source selection under each solicitation would be too complicated (we considered the risks and didn’t agree; ultimately, ~95% of each contract file is composed of identical documents, including the proposals). Luckily, a new SSA took over midway through this process and gave us the green light. We were careful to vet this with industry, too. We explained the delivery arrangement in a draft solicitation and gave contractors an opportunity to air concerns, but none did. We were also sure to explain within the solicitation the reason we needed to take this approach, the exact steps we would take to execute it, and the risks the contractors would be accepting if they received award. Nobody complained. Nobody questioned it. We’re presently scheduled to make award in December and thereafter will have total flexibility to utilize these IDIQs in a manner that best suits the Government, with virtually no concerns of protest mid-performance. And that’s what happened. I’m proud of this one. It’s been a long time coming (too long), with many hard-fought and probably unnecessary battles along the way. It’s an important requirement with a troubled history and significant national security implications. The prices are good, the customer believes that these contracts give them exactly the flexibility they need to mitigate risk going forward, and I believe the contracts are defensible under the FAR. I’ve done contracting for 11 years now and can’t say I’ve derived much satisfaction from it in that time. But this one, in this moment, makes it all seem worth it.

Parts 8 and 16 cover a lot of different topics. Are you referring specifically to subpart 8.4 (GSA FSS) and section 16.505 (IDIQ ordering) procedures?