Chicago Fed Posted July 10, 2023 Report Share Posted July 10, 2023 Greetings, I'm seeking feedback on whether installation services that are in support of a commercial product can/should be considered or classified as construction and subject to all associated clauses and governing regs, or not. I've received varying perspectives from agency experts on this and our legal teams are risk adverse and simply say to anything that requires a thorough analysis. Details: The installation services i am referring to are to fully operationalize (install) purchased radiology equipment (MRIs, CT Scanners, X-Ray, etc.). This equipment can be purchased off of IDIQ contracts (FAR 16.505(b)) that are supply contracts to purchase commercial items with, in some instances, installation work that has been classified as incidental services. These contracts do not contain the word "construction" within them to describe the installation requirements necessary and therefore, they do not contain any construction clauses or regs, etc. Delivery Orders that are placed against these contracts contain installation requirements that cannot be feasibly separated (e.g. non-segregable incidental services) to furnish an end item of supply (fully functional Radiology systems). The installation work required is highly specialized/complex and it is a best practice for the OEM, or their credentialed subs, to maintain oversight of the entire project (equipment delivery to installation). The goal/principle/scope of these contracts is to produce a single or unified outcome that cannot legitimately be subdivided into separate contracts; however, our legal team is of the opinion that the installation work can be separated as construction contracts to achieve the same outcomes. If we followed their suggestions, this would significantly increase risk and increases the likelihood of unfulfilled requirements and incomplete projects nationwide. FAR 2.101 recognizes installation services as a commercial service in support of a commercial product, not construction. Pure construction work falls under the jurisdiction of a service contract and FAR PART 36. Other agencies such as The Office of Federal Procurement Policy (OFPP) discourage classifying construction as a commercial item. A commerciality determination was issued as the products meet the definition of a commercial end item as they are of a type customarily used by the general public and the associated installation is related to the purchase of the equipment. There are many other particulars to consider, but I'm seeking feedback on whether installation services that are in support of a commercial product can/are separate from the term construction and all associated clauses/regs. Quote Link to comment Share on other sites More sharing options...
Christopher Posted July 11, 2023 Report Share Posted July 11, 2023 *say no to anything... Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 11, 2023 Report Share Posted July 11, 2023 What type of work is involved in the installation of the equipment? Are there alterations to the building or to the electrical, HVAC, plumbing, or ther building systems? Quote Link to comment Share on other sites More sharing options...
C Culham Posted July 11, 2023 Report Share Posted July 11, 2023 23 hours ago, Chicago Fed said: seeking feedback I would suggest the feedback you will get will vary and you will be left to making a determination that is acceptable to your acquisition team for the specific matter at hand. By example Joel has asked a question that may lead to some conclusions that would make one think one way or the other. Noting your OP and Joel's question here is a list of considerations for your team. The definition of construction at FAR subpart 2.101. I suspect it has been considered but since your OP mentions the definition of Commercial Item but not Construction I thought I would point it out. Then there is this dated memo that can still be found on OFPP's website - https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/assets/OMB/procurement/far/far_part12.pdf FAR subpart 22.402. In general some agencies determine something to be "construction" if the Labor Standards for Contracts Involving Construction is applicable. This can be balanced of sorts with the memo previously referenced. Not specific to your work this may be of help on how DoD views contracts for installation support https://www.acquisition.gov/dfars/222.402-70-installation-support-contracts I have provided it as you have mentioned IDIQ contracts and as such I would offer that it sounds like the installation efforts might vary with specific delivery/task orders. SAM.gov. You might want to take a look at how other agencies approach the matter. While not a procurement like yours I did a quick look and found this solicitation for the delivery and installation of a vault toilet. It is classified by the agency as construction. SOLICITATION NUMBER: 140P6423Q0043 Yet here is another where the agency determined that the item with installation was commercial item. Solicitation number FA4528-23-Q-JL02 Hopefully these help in applying judgement to make the final call on how to classify the installation effort for your specific IDIQ and the subsequent delivery/task orders. Quote Link to comment Share on other sites More sharing options...
General.Zhukov Posted July 11, 2023 Report Share Posted July 11, 2023 1) Installation can involve both construction & commercial (non-construction) services. Its not either-or. I suspect this is a key point here. You very likely need both. Legal may be correct in that preparing a building to receive a bunch of radiology machines is, indeed, definitely construction and severable. Altering a building. May need to enlarge doors, add RF/magnetic/radiation shielding, lots of electricity/power work, reinforce load-bearing structures because MRI machines are very, very heavy. etc. This work is very likely necessary, entirely separate from anything involving the actual equipment, and can be separately competed and contracting for. For example, adding RF and magnetic shielding - I'd bet a paycheck there are specialized construction firms that do exactly this, and there's probably a formal inspection & certification process. You are probably also correct. Any work that touches the equipment or could affect it's operation isn't construction. An MRI machine isn't a building or real property. Assembling it, QCing, testing, validating, calibration, maintaining, servicing etc. an MRI machine is commercial services, and obviously not construction. 2) You mention its a best practice for OEMs to oversee install. It's often more than that - OEMs of expensive/complicated/dangerous equipment often mandate how it must be installed. An OEM may state that they will only sell to you if you agree to their terms about installation - which may be very detailed and extensive. So legal can argue whatever they want, but if the OEM won't even sell you their MRI machine unless you agree that they (the OEM) will also install it, then it's a moot point about whether installation is separable. Maybe in theory it is, but if want to buy Brand X MRI, then Brand X is also installing it. Ask the OEMs. 3) Ask people who actually know about this. Run this issue by an actual radiologist, the building manager, an engineer who does this type of stuff, and an OEM rep or two. They will probably tell you immediately what must happen, what must not happen, and what you should do. Then you earn your paycheck by translating that into contracting. Footnote: I am friendly with a radiologist, and he knows his equipment & instruments like a chef knows his knives. He is also the King of radiology, and so would not be amendable to legal or an 1102 telling him about how he "must" go about getting his stuff installed. Your mileage may vary. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 11, 2023 Report Share Posted July 11, 2023 It’s important to know the scope of the “installation services”, which you are referring to/asking about. Quote Link to comment Share on other sites More sharing options...
Christopher Posted July 11, 2023 Report Share Posted July 11, 2023 Hey everyone - i managed to create two profiles. This one and Chicago Fed. I will logout of this one and respond from my Chicago Fed account. Sorry for any confusion... --------------- Hey Joel - sure thing. Essentially, a single vendor is awarded a delivery order to supply and interface their medical device to the existing room and utilities. This strategy includes, as a minimum, connecting with existing utilities and furnishing and installing support structures for the medical equipment. Cosmetic work is not allowed in the scope of work. The equipment installation work involved does vary from site to site and is largely dependent upon the facility, the equipment being replaced, and other factors. The installation work is limited to existing room(s) wherein the new replacement system will be installed (exam room where the primary imaging machine is located, control room where workstations or other control stations are located, equipment room where ancillary components and sub-systems are installed, etc.) The installation work can consist of floors having to having to be reinforced, additional shielding incorporated into the walls of the room where an MRI, for example, is going to be located, additional wiring, etc., may need to be put in to meet the power requirements of the MRI machine, and so on. This equipment is not affixed as an integral part of a real property facility, and although the equipment is not readily movable in nature or required for the operation of the real property facility, it is necessary for specified functional operation and activities utilizing the facility. This equipment is detachable and if removed, it will not cause significant damage to the real property facility. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 11, 2023 Report Share Posted July 11, 2023 7 hours ago, Christopher said: The equipment installation work involved does vary from site to site and is largely dependent upon the facility, the equipment being replaced, and other factors. The installation work is limited to existing room(s) wherein the new replacement system will be installed (exam room where the primary imaging machine is located, control room where workstations or other control stations are located, equipment room where ancillary components and sub-systems are installed, etc.) The installation work can consist of floors having to having to be reinforced, additional shielding incorporated into the walls of the room where an MRI, for example, is going to be located, additional wiring, etc., may need to be put in to meet the power requirements of the MRI machine, and so on. So, are there separate orders for equipment/installation for each facility or is it one composite supply/installation contract for all facilities? Is there an identifiable scope and separately identifiable cost or price for this type of work for the contract or each order? How is the specific scope and price for this work determined? See DOL Wage and Hour Division Interpretive Guidance for Davis-Bacon and Related Acts and Contract Work Hour And Safety Standards Act, Field Operations Handbook Chapter 15 https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/FOH_Ch15.pdf Paragraph 15d13 covers interpretation of coverage of the Davis-Bacon and Related Acts coverage for Supply and Installation Contracts meeting the dollar threshold for DBA or for Contract Work Hour and Safety Standards Act. It appears that the type of work that you identified involving the facility alterations and modifications would be performed by trades persons. Quote Link to comment Share on other sites More sharing options...
Chicago Fed Posted July 12, 2023 Author Report Share Posted July 12, 2023 23 hours ago, joel hoffman said: So, are there separate orders for equipment/installation for each facility or is it one composite supply/installation contract for all facilities? Is there an identifiable scope and separately identifiable cost or price for this type of work for the contract or each order? How is the specific scope and price for this work determined? See DOL Wage and Hour Division Interpretive Guidance for Davis-Bacon and Related Acts and Contract Work Hour And Safety Standards Act, Field Operations Handbook Chapter 15 https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/FOH_Ch15.pdf Paragraph 15d13 covers interpretation of coverage of the Davis-Bacon and Related Acts coverage for Supply and Installation Contracts meeting the dollar threshold for DBA or for Contract Work Hour and Safety Standards Act. It appears that the type of work that you identified involving the facility alterations and modifications would be performed by trades persons. Yes. There are separate equipment orders that contain installation services (incidental services) for each facility. Each facility provides As Built drawings in their purchase request and then a site visit is scheduled for a walkthrough. Installation costs are not included in the price of the equipment (not on contract) and are individually negotiated on a site specific basis. After the site visits, the contractor submits their quotes that include a statement of work (room drawings and price breakdown for the installation work to be performed) and then the customer performs their source selection. Regarding the DOL handbook, these contracts do not recognize any installation work as construction; Installation services ≠ construction. Further, in the perspective that the installation is considered construction, the work cannot be legitimately separated for some of the reasons General mentioned in paragraph 2 of his post. Anything can be separated, but in doing so the level of expertise, experience, oversight, etc. is removed from the project order and only increases risks and inefficiencies and therefore, makes it illegitimate to separate (non segregable) the equipment from the installation required to fully operationalize the system. Definitely appreciate all of the feedback! Just trying to gain some more insight so that we can establish a path to meet our mission! Quote Link to comment Share on other sites More sharing options...
Chicago Fed Posted July 12, 2023 Author Report Share Posted July 12, 2023 On 7/11/2023 at 10:19 AM, General.Zhukov said: 3) Ask people who actually know about this. Run this issue by an actual radiologist, the building manager, an engineer who does this type of stuff, and an OEM rep or two. They will probably tell you immediately what must happen, what must not happen, and what you should do. Then you earn your paycheck by translating that into contracting. Appreciate the feedback! We've done what you've mentioned in paragraph 3. This is actually how the IDIQ solicitations were "approved" and 40+ contracts were established. We've run into problems after the fact. Now stakeholders who were not previously involved have called many aspects of the contracts into question. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2023 Report Share Posted July 12, 2023 3 hours ago, Chicago Fed said: Yes. There are separate equipment orders that contain installation services (incidental services) for each facility. Each facility provides As Built drawings in their purchase request and then a site visit is scheduled for a walkthrough. Installation costs are not included in the price of the equipment (not on contract) and are individually negotiated on a site specific basis. After the site visits, the contractor submits their quotes that include a statement of work (room drawings and price breakdown for the installation work to be performed) and then the customer performs their source selection. Regarding the DOL handbook, these contracts do not recognize any installation work as construction; Installation services ≠ construction. Further, in the perspective that the installation is considered construction, the work cannot be legitimately separated for some of the reasons General mentioned in paragraph 2 of his post. Anything can be separated, but in doing so the level of expertise, experience, oversight, etc. is removed from the project order and only increases risks and inefficiencies and therefore, makes it illegitimate to separate (non segregable) the equipment from the installation required to fully operationalize the system. Definitely appreciate all of the feedback! Just trying to gain some more insight so that we can establish a path to meet our mission! So, DOL would say that the portion of installation of the equipment involving alterations to the building or the utilities is not subject to the DBA and related Acts, thus either no construction wage rates* are applicable or service contract rates are applicable instead? I’m not concerned about using separate contracts for equipment/ associated setups and the the facility/utility construction work. I probably should have mentioned that earlier. Ive been involved with several significant supply and service contracts which included some construction work. We included the construction contract requirements applicable only to that portion of the contract work in the overall supply or service contracts. I would be concerned about those aspects of construction work that are subject to safety and labor laws and perhaps other typical hiccups during this type of work, like changes, differing site conditions, accident prevention, OSHA safety requirements, supervision, etc. Also, If these are medical facilities, it SHOULD be important to document any changes to the as-built facility files, especially if they are on electronic media. It is usually needed “for the record” and for future use. It wasn’t clear from your original post whether these are “supply contracts” or Part 12 commercial products contracts. I know that you should be able to segregate the cost and scope of what I’d consider to be construction from the other installation, testing, commissioning, etc. work and provide control, supervision or technical oversight. That doesn’t necessarily mean that you have to issue separate contracts or “separate the [construction] work from the order”. You indicated that the work was designed, identified, priced and negotiated. Again - You don’t have to contract separately for the “construction” portion of the work. *(I’m Assuming that the extent of the applicable portion of the work exceeds the DBA threshold- maybe it doesn’t? ) Quote Link to comment Share on other sites More sharing options...
C Culham Posted July 13, 2023 Report Share Posted July 13, 2023 On 7/10/2023 at 7:19 AM, Chicago Fed said: I'm seeking feedback on whether installation services that are in support of a commercial product can/should be considered or classified as construction and subject to all associated clauses and governing regs, or not. It could be that me coming back to the thread is overkill but as the discussion unfolded I just felt a need to come back. To the above quoted point it would seem the feedback suggests "it depends" with regard to the extent of installation necessary. By my read it is the primary inquiry of the original post. On 7/10/2023 at 7:19 AM, Chicago Fed said: This equipment can be purchased off of IDIQ contracts (FAR 16.505(b)) that are supply contracts to purchase commercial items with, in some instances, installation work that has been classified as incidental services. 13 hours ago, joel hoffman said: Again - You don’t have to contract separately for the “construction” portion of the work. As the responses departed from the primary question other thoughts were offered. Following suit I am adding this thought regarding the OP reference to IDIQ. First I do want to note that while not stated my implied read of the OP comments is that the subject IDIQ(s) are multiple award. An IDIQ can be a "hybrid" a term sometimes used to define an IDIQ that is for both commercial and non-commercial items. So with regard to legal's concern one could imagine an IDIQ that has CLINs or anticipates orders with CLINs that are both commercial and non-commercial. Noting this one could imagine that determination of commercial item or not (construction) would be made at the order level. One could also imagine that specific to construction that the parent IDIQ could have construction clauses in it whereby there is a statement in the parent IDIQ that says these clauses apply when a specific order includes CLINs that are identified as construction. In the alternative one could imagine the parent IDIQ stating something to the effect that if installation work is determined to be construction the fair opportunity effort will so identify and include applicable construction clauses that will be applicable to the order. Variation of these thoughts could be applied to a single award IDIQ as well. In support of the above I provide the following GAO protest as reference. While not specific to construction versus not, it does provide reference as support to having a hybrid IDIQ. All said the bottomline for me is construction or not as a commercial item it would seem that a IDIQ could be fashioned to deal with the matter and not require separate contracts as Joel has noted. https://www.gao.gov/assets/b-418676.pdf Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 13, 2023 Report Share Posted July 13, 2023 On 7/12/2023 at 4:39 PM, Chicago Fed said: Anything can be separated, but in doing so the level of expertise, experience, oversight, etc. is removed from the project order and only increases risks and inefficiencies and therefore, makes it illegitimate to separate (non segregable) the equipment from the installation required to fully operationalize the system. 10 hours ago, C Culham said: As the responses departed from the primary question other thoughts were offered. Following suit I am adding this thought regarding the OP reference to IDIQ. Carl, Chicago Fed expressed concerns that construction type work and the overarching management, oversight and expertise for the installation and commissioning of the equipment would have to be removed from the various project orders (ID/IQ). This thread is under the Beginners Forum topic area. I came to the realization that this appears to be the reason for Chicago Fed’s concerns in the original and follow up posts. “You don’t have to contract separately for the ‘construction’ portion of the work. “ Quote Link to comment Share on other sites More sharing options...
.gif)
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.