Commercial Items Contract or Not? Unilateral or Bilateral?

[ShaunaMSACM]

I would have posted this in The Good, The Bad, the Ugly, but I would love to get your thoughts. 

BLUF:

1. Is this a Commercial Items contract (or not)?

2. If it is a Commercial Items contract, how is the agency permitted to only award new task orders/task order mods unilaterally?

Background

• 5-year single award IDIQ contract with multiple task orders/mods issued
• SOW Summary: i. commercial vehicle purchase services; ii. perform minor modifications to purchased vehicles to meet agency requirements; and iii. maintain the vehicles
• The IDIQ contract allows for CR, CPFF and FFP task orders and the government intends for the contract to be used for commercial and non-commercial purchases.  There are no separate line items for commercial and noncommercial items with appropriate clauses designated for each line item
• The parent award does not contain 52.212-4.  Instead, FAR 52.213-4 (Terms and Conditions - Simplified Acquisitions (Other than Commercial Items) is used.
• FPDS shows commercial products and services acquisition procedures were used for the parent award
• The parent contract contains no less than 15 references to the procurement of commercial items, including the following excerpt: “Commercial Items - In accordance with FAR 44.402, all commercial item purchases shall include the flow-down clauses listed in FAR 52.244-6, Subcontracts for Commercial Items, and Service Contract Labor Standards (SCLS). Supplies/services ordered by the agency are considered commercial items unless otherwise stated on the TO.” No task orders have indicated other than commercial items.
•  FPDS shows commercial products and services acquisition procedures were also used for all task orders
• The agency will only award new task orders and task order mods unilaterally, citing authority under 52.243-1 Changes – Fixed Price.

What am I missing here?   

[C Culham]

My apologies I should have addressed each of your questions.  I got caught up in the confusing details.   So here you go.

1.  The details you have provided make one wonder if commercial or not.   The agency might have named it such but one does wonder.  Related and to your final question "What are you missing?" this thought came to mind.   You might be missing the market research prepared by the agency that provides they could both tailor the IDIQ as well as individual Task Orders.  For reference read in full FAR subpart 12.3.  And I might add the conclusion by the agency that as Task Orders the procurement made by each is predominantly a service.

2. TO's. Whether commerical item or not the terms of an IDIQ contract allow the government the right to issue TO's unilaterally.  I am confused about your refereence to the Changes clause to do so.   See clauses 52.216-18 and 52.216-22 that are hopefully in the contract that provide for the unilateral orders.

2a. TO Mods.  Without FAR clause 52.212-4 in the contract it does not apply which is the clause at paragraph (c) that requires for bilateral changes to a commercial item contract.  With 52.243-1 in the contract it becomes the governing clause under which changes to the parent contract and the TO's are modified.  See paragraph (b) of 52.216-18 if in the contract that provides that the parent contract clauses apply to TO/DO's.

 

The initial solicitation for the parent IDIQ would be a very interesting read.

[joel hoffman]

How is a contract or task order when acquiring products or services priced as cost reimbursement or cost reimbursement with fixed fee a FAR commercial product/service contract?

” 12.207 Contract type.

(a) Except as provided in paragraph (b) of this section, agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial products or commercial services.”

(b)  

(1) A time-and-materials contract or labor-hour contract (see  subpart  16.6) may be used for the acquisition of commercial services when…”

[Vern Edwards]

@ShaunaMSACM

The term "commercial item" is no longer in use. The appropriate terms are "commercial product" and "commercial service".

Commercial product and commercial service are defined in FAR 2.101.

It appears that you are asking whether the procurement is legitimately for a commercial service.

The only description of what is being procured that you have provided is as follows:

18 hours ago, ShaunaMSACM said:

SOW Summary: i. commercial vehicle purchase services; ii. perform minor modifications to purchased vehicles to meet agency requirements; and iii. maintain the vehicles

That is not enough information for me to determine whether or not the service is commercial.

Can you provide more details?

 

 

[ShaunaMSACM]

All, my apologies for the delayed response.  I am very grateful for your insight and assistance!

Several hours after I posted the above, I took a rather nasty fall in my house. In addition to my pride being hurt, I broke multiple fingers.  I'm wearing a cast and I'm having to hunt and peck and my hand is tired. I will post addtl info in the next several days.  

Thank you again for your insight and understanding.  It really sucks getting older sometimes!☹️

[Vern Edwards]

14 hours ago, ShaunaMSACM said:

It really sucks getting older sometimes!

Truer words were never written. I just got my first hearing aids.

I hope the fingers don't hurt too much.

[Retreadfed]

Shauna, whether the contract is for commercial products/services or not, from the information you provided in the Background, in my opinion the agency really screwed up in the way it wrote the contract.

[C Culham]

21 hours ago, ShaunaMSACM said:

It really sucks getting older sometimes!☹️

 

7 hours ago, Vern Edwards said:

Truer words were never written. I just got my first hearing aids.

I hope the fingers don't hurt too much.

Ditto.  There are days when I wonder about Del Webb coining the "golden years".

Just as I wonder about the example of a Commercial Product/Service Contract described in this thread.

[REA'n Maker]

On 9/27/2024 at 2:30 PM, Retreadfed said:

Shauna, whether the contract is for commercial products/services or not, from the information you provided in the Background, in my opinion the agency really screwed up in the way it wrote the contract.

Yeah; I'm not sure how that would work. Does the contract have both commercial and non-commercial clauses? 

[Neil Roberts]

On 9/27/2024 at 11:30 AM, Retreadfed said:

...in my opinion the agency really screwed up in the way it wrote the contract.

@Retreadfed, just trying to learn more about government interaction between an agency and the contracting officer. Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency? Why is the "agency" called out as the party that "screwed up" vs "the government?" In my contractor world we would say the company screwed up, not the program office or contracts office or supplier management (ok maybe if we knew, internally we might pin it on one of the acting participants in the contract.) Not picking on you. Have heard this said before about "agencies" and have always wondered about it. Thanks!   

Edited October 4, 2024 by Neil Roberts
duplicate words

[joel hoffman]

15 hours ago, Neil Roberts said:

@Retreadfed, just trying to learn more about government interaction between an agency and the contracting officer. Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency? Why is the "agency" called out as the party that "screwed up" vs "the government?" In my contractor world we would say the company screwed up, not the program office or contracts office or supplier management (ok maybe if we knew, internally we might pin it on one of the acting participants in the contract.) Not picking on you. Have heard this said before about "agencies" and have always wondered about it. Thanks!   

The “agency” includes the KO, too. There is an acquisition team.

[Vern Edwards]

19 hours ago, Neil Roberts said:

[J]ust trying to learn more about government interaction between an agency and the contracting officer. Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency? Why is the "agency" called out as the party that "screwed up" vs "the government?"

Think of two functional groups within an agency. There are the people who do the agency's work and need products or services in order to do it. They are the "requiring activity". Then there are the people who buy what the the requiring activity needs. They are the "contracting activity".

Sometimes the two activities are part of one and the same office within an agency—a program or project office—and work for the same boss. But sometimes the two activities are in separate offices or even separate agencies and work for separate bosses. Sometimes the two activities are in the same building and sometimes they are distant from one another, even in separate states.

In order to buy what the requiring activity needs the contracting office asks for a "procurement package" which contains information and documentation necessary to conduct the procurement. In an ideal situation the two activities work together to develop an acquisition strategy and plan. Based on the acquisition plan the contracting activity prepares a solicitation, announces it to the public and, working with the requiring activity, selects a contractor and prepares a contract.

According to FAR 1.602-2: "Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment." Contracting officers prepare solicitations and contracts, but they must rely on technical information and specifications or statements of work provided by the requiring activity, and they rely on the requiring activity for advice and assistance during the contractor selection process.

Contracting officers are rarely truly independent. In my last contracting officer job my office was in one state and the requiring office was in another, but both offices worked for the same senior official. In one procurement we disagreed on contract type. The requiring activity complained about me to the Big Boss and even went underground to industry, which complained to a U.S. Senator about me. The Big Boss convened a meeting and he listened to both sides. Then he said, "Vern's the contracting officer. It's his decision." And that was that. I worried that the requiring activity would try to sabotage the contract, but they didn't, God bless them, and the contract was a great success. But I supervised that contract like it was a prize racehorse.

When a procurement goes wrong it may be due to poor work by the requiring activity, poor work by the contracting activity, or poor work by both. But when people say that a contract is a mess they usually blame the contracting activity.

[Neil Roberts]

@Vern Edwards, thank you so much for this detailed summary and the anecdote. It was exactly what I was looking for to help me better understand the situation between contracting officer and Agency.

[C Culham]

@Neil Roberts  As I follow the thread I have this thought. 

A contractor should shoulder some part of the poor work, especially in any negotiated procurement.  I do not know all the facts but if the OP is correct and the discussion is with regard to "contract" I would offer that the contractor might have been foolish to accept the award of the contract.  The contractor enhanced the mess!

"You made your bed, now lie in it"

[Jamaal Valentine]

On 10/4/2024 at 11:46 PM, Neil Roberts said:

Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency?

Contracting means purchasing, renting, leasing, or otherwise obtaining supplies or services from nonfederal sources. Contracting includes description (but not determination) of supplies and services required, selection and solicitation of sources, preparation and award of contracts, and all phases of contract administration. FAR 2.101.

To Vern’s point, I think of three groups within an agency: (1) the requiring activity (source of bona fide need); (2) the comptroller (source of funding authority); and (3) contracting officer (source of contracting authority). You must have all three - need, money, authority to contract.

On 10/4/2024 at 11:46 PM, Neil Roberts said:

Why is the "agency" called out as the party that "screwed up" vs "the government?"

This depends on the context. For example, agency can be used to reference a specific executive agency rather than the broader government. Consider the GAO protest system. Parties may protest a federal agency’s procurement action. The term agency is more specific.

The Congress, the courts, agencies, and the public use GAO decisions for various reasons. Note that ‘the public’ is broader than a ‘contractor’ or a ‘seller.’ All three are within the public, but a contractor could be distinguished as having a contract and a seller is merely competing for a contract. Again, I think the phrasing is made relevant by the greater context.

[Neil Roberts]

On 9/25/2024 at 3:04 PM, ShaunaMSACM said:

The IDIQ contract allows for CR, CPFF and FFP task orders and the government intends for the contract to be used for commercial and non-commercial purchases

@ShaunaMSACM by your summary, it appears to be a mixed contract type. I would make sure the company has 3 different charge number for work performed (CR, CPFF and FFP {and, did you mean CR no fee?]). I would go through all the terms and conditions and determine which apply to each contract type and product or service thereunder and act accordingly. If I received a unilateral change to a commercial product or service, I would thank the customer and then submit a claim. I would discuss the entire contract with the contracting officer, present my view and see what can be worked out.

[ShaunaMSACM]

All, thank you again for your patience while I am on the mend from the fall.  In addition to breaking fingers, the doctor thinks that I also dislocated others, so my recovery is moving slower than I had hoped.

@C Culham  FAR 52.216-18, 52.216-22 and 52.243-1 are in the IDIQ contract.  You mentioned that the initial solicitation for the parent IDIQ would be a very interesting read.  Here is a link to it on SAM.gov: https://sam.gov/opp/25276e239dad42e6b6b3b1a5d459a1c4/view.  You will not be disappointed.  It is unlike any contract I've supported in 20+ years.

@joel hoffman Please see Sections B & C in the solicitation.  Nearly all services and products under this contract meet the definitions of "Commercial Services" and "Commercial Products".  The services in this contract are core to my company; we sell them to commercial customers across the globe.

@Vern Edwards Thank you for your input on this thread and I appreciate the bonus learning opportunity re: agency relationships.  I always learn something new in your posts!

 

[Retreadfed]

On 10/5/2024 at 2:47 PM, Neil Roberts said:

It was exactly what I was looking for to help me better understand the situation between contracting officer and Agency.

Being a little late on this topic, if you really want to complicate things, consider Foreign Military Sales and Foreign Funded contract actions where the requiring activity is a foreign government but the contracting officer is a U.S. government employee.

[ShaunaMSACM]

You aren't kidding - what a minefield to navigate!  

[C Culham]

@ShaunaMSACM  Thank you!  I took a quick look and I have some thoughts but I want to look in a little more detail before I give a conclusion.  Stay tuned.

 

[ShaunaMSACM]

Thank you!

[joel hoffman]

On 10/10/2024 at 10:19 AM, ShaunaMSACM said:

All, thank you again for your patience while I am on the mend from the fall.  In addition to breaking fingers, the doctor thinks that I also dislocated others, so my recovery is moving slower than I had hoped.

@C Culham  FAR 52.216-18, 52.216-22 and 52.243-1 are in the IDIQ contract.  You mentioned that the initial solicitation for the parent IDIQ would be a very interesting read.  Here is a link to it on SAM.gov: https://sam.gov/opp/25276e239dad42e6b6b3b1a5d459a1c4/view.  You will not be disappointed.  It is unlike any contract I've supported in 20+ years.

@joel hoffman Please see Sections B & C in the solicitation.  Nearly all services and products under this contract meet the definitions of "Commercial Services" and "Commercial Products".  The services in this contract are core to my company; we sell them to commercial customers across the globe.

@Vern Edwards Thank you for your input on this thread and I appreciate the bonus learning opportunity re: agency relationships.  I always learn something new in your posts!

 

@shaunaMSACM, thanks for the link. I’m out of town and it’s very difficult to try to read the solicitation on my cell phone where I am. I read the description of the intended services but will read the details later. However, my original post asked how a commercial products or commercial services contract for inspecting and refurbishing a ship can be priced as cost reimbursement? And the change clause cited is for fixed-price (task orders).   I’ll read the details… 

Edited October 12, 2024 by joel hoffman

[Vern Edwards]

On 9/25/2024 at 3:04 PM, ShaunaMSACM said:

BLUF:

1. Is this a Commercial Items contract (or not)?

2. If it is a Commercial Items contract, how is the agency permitted to only award new task orders/task order mods unilaterally?

@ShaunaMSACM The contract is for vessel acquisition management (VAM) services.  In order to answer your first question, I read parts of the SAM documentation at the link that you provided. Keep in mind that I have read only parts of the SAM documentation.

In answer to your question, I could not find a FAR commercial clause in the contract. Thus, I assume the contract is not a "commercial item" contract. However, a search of the internet indicates that vessel acquisition is done commercially. Here is a link to a commercial vessel acquisition agreement. https://www.lawinsider.com/contracts/4LXjfRXHHn9#administrative-agent.

It looks like the contractor 𑁋 the vessel acquisition manager (VAM) 𑁋 will act as an agent of the federal government in the search, inspection, selection, and purchase of used ships, a kind of contracting officer: From the Statement of Objectives SOO):

Quote

MARAD (Department of Transportation, Maritime Administration) will acquire replacement vessels through a contract with a Vessel Acquisition Manager (VAM), an entity which has experience procuring, reflagging, re-classifying, and modernizing vessel(s). The contractor will not sell the vessels to the government, but buy the vessels on behalf of the government.

In short, the VAM will act as a contracting activity. I don't know all of the legal background, but this appears to be perfectly legitimate government practice. (So you old timers, please don't start squawking about whether this is legal. Read the SAM post documentation.)

The government will purchase the vessel from the seller, a subcontractor of the VAM, through the VAM. I don't know all the details. The VAM will conduct the purchase and prepare the commercial sale document in accordance with commercial practices. The vessels will be delivered to the government.

There is more to it, but that's the essence.

@ShaunaMSACMAs to your second question:

Quote

If it is a Commercial Items contract, how is the agency permitted to only award new task orders/task order mods unilaterally?

It's not a "commercial item" (FAR Part 12) contract.

It is a single-award indefinite-delivery indefinite-quantity (task order) contract. Unilateral orders is standard practice permitted by FAR Subpart 16.5.

@ShaunaMSACMAs to your third question:

Quote

What am I missing here? 

This acquisition is of one of those specialized kinds that most contract specialists never see. (Including me.) You have to have worked in and been trained in an office that does this kind of thing in order to understand it. In short, there are more kinds of acquisitions in heaven and earth than most contracting people ever dream of. This is over the head of most 1102s. (Including me.)

[formerfed]

1 hour ago, Vern Edwards said:

@ShaunaMSACM

It looks like the contractor 𑁋 the vessel acquisition manager (VAM) 𑁋 will act as an agent of the federal government in the search, inspection, selection, and purchase of used ships, a kind of contracting officer: From the Statement of Objectives SOO):

In short, the VAM will act as a contracting activity. I don't know all of the legal background, but this appears to be perfectly legitimate government practice. (So you old timers, please don't start squawking about whether this is legal. Read the SAM post documentation.)

The government will purchase the vessel from the seller, a subcontractor of the VAM, through the VAM. I don't know all the details. The VAM will conduct the purchase and prepare the commercial sale document in accordance with commercial practices. The vessels will be delivered to the government.

There is more to it, but that's the essence.  

@ShaunaMSACM

As an old timer, I can attest this is a perfectly legal action.  40 years ago we did a contract for an IT facility manager.  The contractor acquired a large mainframe computer system for the government which became government property.  The contractor acquired space, installed the computer system, and ran it using their own staff and subcontractors.

We placed orders under the contract using a mix of fixed price, LH, and cost reimbursement types.

[Vern Edwards]

Anyone who would like to read up on this acquisition method should go to Google Books and search for: "Review of Fiscal Year 2025 Maritime Transportation Budget Requests, Pt. 1: Maritime Administration and Federal Maritime Commission: (118-55) Hearing Before the Subcommittee on Coast Guard and Maritime Transportation of the Committee on Transportation and Infrastructure, House of Representatives, One Hundred Eighteenth Congress, Second Session".

Quote

MARAD is working to advance the urgent recapitalization of the RRF (Ready Reserve Force) with the limited authorities provided. MARAD is making use of the authority Congress provided to purchase vessels for RRF through a contracted Vessel Acquisition Manager (VAM). This innovative process allowed MARAD to efficiently purchase the first two ships in FY 2022. In Q2 FY 2023, the VAM completed purchase of three more extremely capable ships including one that is 10 and two that are 11 years old. These ships were purchased for approximately $90 million per ship.

See H. Rept. 116-617 1784 (2020-12-03) WILLIAM M. (MAC) THORNBERRY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2021, page 1738:

Quote

 

The conferees direct the Secretary of the Navy to conduct a business case analysis of acquisition strategies for the new U.S.- built sealift ship program described in section 2218(f)(3)(E) of title 10, United States Code, and submit such analysis and the Secretary's intended course of action to the congressional defense committees not later than July 1, 2021.

In conducting this business case analysis, the Secretary shall consider, at a minimum, the following options and associated acquisition strategies: (1) Current Navy acquisition processes for acquiring Combat Logistics Force ships; (2) The use of a commercial executive agent or vessel acquisition manager, similar to the acquisition of the National Security Multi-Mission Vessel; and (3) A commercial-government hybrid acquisition biased toward maximum commerciality in both specifications and process.

 

Emphasis added.

Contracting out contracting. Who knew?