A SBIR Phase III IDIQ “satisf[ies]… competition requirements,” but are its sole-source FFP TOs subject to CPSR?

[Drew]

Our company has multiple Phase III SBIR IDIQ contracts through GSA, each of which can be used by DoD components to award FFP, FFP LoE, or T&M Task Orders.

The TOs are negotiated using Alpha contracting processes, and are sole-source awards.  The government’s requirement(s) for competition were met in the Phase I and Phase II awards under the SBIR program.  

Quote

 

     15 U.S. Code § 638 - Research and development  (at https://www.law.cornell.edu/uscode/text/15/638)

     …

     (r)Phase III agreements, competitive procedures, and justification for awards

         (4)Competitive procedures and justification for awards. To the greatest extent practicable, Federal agencies and Federal prime contractors shall—

               (A) consider an award under the SBIR program or the STTR program to satisfy the requirements under sections 3201 through 3205 of title 10 and any other                           applicable competition requirements; and

               (B) issue, without further justification, Phase III awards relating to technology, including sole source awards, to the SBIR and STTR award recipients that                                developed the technology.

 

The IDIQ solicitation and contract, and the resulting TOs, include the Subcontracting clauses 52.244-5 Competition in Subcontracting, 52.244-2, Subcontracts, as well as DFARS 252.244-7001 Contractor Purchasing System Administration.   Subcontract purchases under these TOs require consent to purchase, as we are still in the process of setting up, but do not yet have, a CPSR-reviewed and approved purchasing system.

Refer to the thread CPSR driven by FAR 52-244-2? for the kind of logic I want to apply to make sure we get all relevant contracts and subcontracts into the population of CPSR-reviewable purchases (and exclude those that don't need reviewed).

Are the subcontracts and purchase orders for TOs that are firm, fixed-price subject to the CPSR?  The two sides of the argument:

IN:  Since the TOs are not competitively awarded FFP TOs, their subcontracts and purchase orders would be subject to a CPSR. 

OUT: The IDIQ, however, did fulfill the government’s requirements for competition, and the SBIR law says the awards should be considered to satisfy the requirements for competition.  So perhaps the FFP TOs, and their subcontracts and purchases, should be excluded from the CPSR population?

On which side of the fence should we come down?  Are the FFP TOs in or out of the CPSR population?

Thanks all!

[Don Mansfield]

It sounds like the IDIQ contract doesn't have prices--the task orders have prices. If that's the case, I don't see how one could argue that the task orders are competitively awarded FFP contracts.

[C Culham]

5 hours ago, Drew said:

Are the subcontracts and purchase orders for TOs that are firm, fixed-price subject to the CPSR? 

Would not the ACO along with the CPSR Audit team help you make this decision?  Reference FAR 44.3?  I pose the question in part not only based on Don's response along with a two fold thought.  One - you say T&M for TO's and Two - sole source TOs where I suspect an ACO would want to see what's going on.

[Neil Roberts]

On 1/2/2024 at 12:25 PM, Drew said:

Our company has multiple Phase III SBIR IDIQ contracts through GSA, each of which can be used by DoD components to award FFP, FFP LoE, or T&M Task Orders.

The TOs are negotiated using Alpha contracting processes, and are sole-source awards.  The government’s requirement(s) for competition were met in the Phase I and Phase II awards under the SBIR program.  

The Sept 2021 CPSR Guide states: "A contractor is eligible for a CPSR when sales to the Government are expected to exceed $50 million during the next 12 months (excluding competitively awarded firm-fixed-price contracts awarded with or without an economic price adjustment and sales of commercial items pursuant to FAR part 12). 

I am a little confused by some of the language in your post when you say "our company has," followed by "competition were met." Do you agree that your company qualifies for a CPSR in the first place? Is that what you are really asking?    

Edited January 4, 2024 by Neil Roberts
deleted redundant language

[Neil Roberts]

4 minutes ago, Neil Roberts said:

(excluding competitively awarded firm-fixed-price contracts awarded with or without an economic price adjustment and sales of commercial items pursuant to FAR part 12). 

I interpret the above language in the CPSR Guide as having nothing to do with subcontracts. It is instead about your contracts with the Government.

[JRT132]

Not that it would matter, but you could review how the Government classified the task orders in FPDS-NG or US Spending assuming the data had to be reported. 

[Drew]

First, thanks to everyone for this critical analysis.  An important part of this posting-and-response dynamic is refining the question and/or picking on the right points to argue from, and I appreciate the give and take.

@Don Mansfield: the IDIQs have "rate schedules," which are not prices.  Admittedly, different things.  We recognize the TOs are sole-source.   But does applying 5 USC § 638 in any way change or override the determination of what contracts, and their subcontracts, are in the scope of the CPSR?  ...638 says to consider these awards to satisfy competition.  

@C Culham I'm sure they ACO and CPSR review team would definitely "help" us.  What I'm trying to avoid is missing the mark first time out.  As I understand a CPSR review, they ask for the population of sub-k's and purchase orders in the period under review, we pull and provide those data, or give them access to the system, and then that's what the review is performed on.  What happens if I include too much or too little? 

• If I include too little I don't want a finding that comes back and says "you're not properly tracking the right body of procurement events to have a compliant purchasing system - fix that." 
• If I include too much, I risk possibly exposing more items to review and findings where I may have mistakenly misapplied or not applied all relevant (FAR/DFARS-driven) business rules (because I thought they were out of the review population). 

So it's only a matter of getting the population correct.  Knowing and fixing that target, I can make sure we apply all the rules correctly, and consequently have the right data available for the CPSR.

Also, to reiterate from some other posts I've asked on this general topic of CPSRs and sub-k's: we're not trying to avoid this in any way.  We know it's coming and are just trying to prepare for it the right way.

@Neil Roberts responding to your posts in reverse order, yes the CPSR Guide points to contracts, but then the rest of the review is concerned with purchases in support of those contracts.  So yes, the Guide's applicability, and our being subject to CPSRs, comes at the top-level, sales-to-the-government amount.  But then everything below that population-of-contracts-that-determines-CPSR-eligibility is the population of subcontracts that will get reviewed.  So that leads to back to your first question:  We believe, and GSA has advised us, that there will be enough sales to the government in the T&M TOs to qualify for a CPSR.  What I'm asking is, do the FFP TOs also count in that total for the CPSR review eligibility and the contract review population, such that their supporting subcontracts are also part of the procurement review population?

Is there any additional info I can provide to clear up the confusion regarding "company has" and "requirement(s) for competition were met?"  We were awarded the Phase III SBIR IDIQs ("company has"), and they were sole-sourced to us because we competed in Phase I and Phase II solicitations as these products matured.

@JRT132 I have no familiarity with it, but I will review the FPDS-NG and US Spending to see if they shed any light.  But why disclaim that it might not matter?

 

Thanks all for your comments!

[Neil Roberts]

5 hours ago, Drew said:

• If I include too little I don't want a finding that comes back and says "you're not properly tracking the right body of procurement events to have a compliant purchasing system - fix that." 
• If I include too much, I risk possibly exposing more items to review and findings where I may have mistakenly misapplied or not applied all relevant (FAR/DFARS-driven) business rules (because I thought they were out of the review population). 

So it's only a matter of getting the population correct.  Knowing and fixing that target, I can make sure we apply all the rules correctly, and consequently have the right data available for the CPSR.

Your approach is on the money.

If I were you, unless you have some real business heartburn over it, I would go along with the government's position that FFP Task Orders are to be included in calculating sales to the government. I assume these are Task Orders you received from a DOD component and that they are under the umbrella of the sole source IDIQ contract you have...and they do not exist as stand alone contracts. When a contract is included in sales estimates, procurements thereunder should also be included in its review universe. I would ask your accounting system to generate a listing of government contract numbers and procurement purchase contract numbers booked against them. Some of the questions you have should be visible and discussed with the government in the prereview questionnaire

[C Culham]

 

@DrewIn an attempt to offer clarity.   My view.....and in a different order of your questions because they conflict, in my view, with each other.

On 1/2/2024 at 12:25 PM, Drew said:

Are the FFP TOs in or out of the CPSR population?

In. 

A CPSR is already determined to occur.  The CPSR is not contract specific even though in your case it seems the GSA contract is driving the review.  FAR 44.302 " Generally, a CPSR is not performed for a specific contract."  

Your company per your post receives TO's (aka contracts - FAR 2.101) that are not competitively awarded.   Some are even T&M.  You have not stated they are determined to be for commercial supplies/services or not.   Therefore  based how the TOs are being awarded I am guessing a conclusion was made by somebody that a CPSR was determined to be necessary. 

On 1/2/2024 at 12:25 PM, Drew said:

Since the TOs are not competitively awarded FFP TOs, their subcontracts and purchase orders would be subject to a CPSR. 

The TO's are not the decision point your subcontracts that support your government prime contracts (aka the TO's) are.  FAR  44.303 subcontracts that support a prime contract that are "competitively awarded firm-fixed-price, competitively awarded fixed-price with economic price adjustment, or awarded for commercial supplies and commercial services pursuant to part  12." are excluded from the review.   Also supported by https://www.dcma.mil/Portals/31/Documents/CPSR/CPSR_Guidebook_091021.pdf at page 85.  Therefore any subcontract (including purchase orders FAR 2.101 as provided by FAR 52.244-2) that is competitively awarded FFP or FFP with EPA or is awarded for commercial supplies and services would not be included.  

All considered since the CPSR is of your system (P&P) and the CPSR team has some discretion in determining that the P&P is being followed.  As such I suggest the team will ask you for a list of all subcontracts awarded.  I also suggest they will request the subcontract information something like this - 1) That were specific to support of a Government prime contract (again the TO's), and show the type of contract awarded, and how it was awarded and whether it was a commercial contract.  See page 4 of the Guide.  Based on this list they will then stipulate what they want to look at.  At the CPSR entrance briefing further clarification on "what" can be and should be clarified.

All considered the basis for my earlier suggestion that most especially the CPSR team will guide you on what they want to see. 

PS - Working on this when @Neil Roberts replied and sending anyway.

 

[Don Mansfield]

On 1/7/2024 at 7:42 AM, Drew said:

But does applying 5 USC § 638 in any way change or override the determination of what contracts, and their subcontracts, are in the scope of the CPSR?

Assuming you meant 15 USC 638, I don't think so. I think that is just clarifying that the procedure complies with CICA. 

But I'm just guessing.

[Neil Roberts]

@Drew FAR Case 2010-010 includes implementation of competition requirements unique to Phase III awards under the SBIR and STTR Programs. It is still pending. The proposed implementing FAR Regulations did not appear to include any impact on the scope of CPSR's.

Proposed rules at https://www.federalregister.gov/documents/2023/04/07/2023-06420/federal-acquisition-regulation-small-business-innovation-research-and-technology-transfer-programs

 

[Neil Roberts]

On 1/7/2024 at 7:42 AM, Drew said:

What I'm asking is, do the FFP TOs also count in that total for the CPSR review eligibility and the contract review population, such that their supporting subcontracts are also part of the procurement review population?

@Drew My answer is yes.

[Drew]

All, thanks for your reasoning through on this question.  We're going to consider these FFP TOs as "in" the population of contracts that then decide the population of subcontracts subject to review.  

To clarify for some of the threads: A CPSR has NOT yet been determined as necessary.  GSA is advising us to get ready for one.  Based on historical performance under our first IDIQ and the 40 or so TOs awarded under it, and the second IDIQ recently awarded and the third IDIQ solicited-but-not-yet-awarded, we all expect our sales to the USG to reach the threshold where a CPSR would be needed.  The DCMA would then conduct the review.  We're anticipating that in CY 2025, to be conducted on the population of TOs and their subcontracts that are awarded to us, and issued by us, through calendar year 2024.  

Again, many thanks.