Actual Contract Value Exceeds SAT

[GovKor]

1) The estimated value of the award is below the SAT so Simplified Acquisition Procedures are followed. However, the final award is over the SAT. Does the solicitation have to be canceled and reissued using formal procurement methods?

2) What if the initial award is under the SAT, but a later modification will bring the contract value over the SAT? Are there any issues with this assuming the cost/scope increase is justifiable? 

These are general questions and not regarding a specific procurement. These are based on 2 CFR 200.320, but I'd also be interested in FAR-based answers. My understanding is that these are grey areas that neither the FAR not 2 CFR 200 address specifically (please correct me if I'm wrong and let me know where they are addressed). However, I'm curious how others handle these situations. 

[C Culham]

Yes a grey area for Number 1.   A FAR based and even a 2 CFR 200 answer would depend.  Depend on what?  Well for a FAR procurement, the FAR itself.   For a 2 CFR 200 procurement the documented procurement procedures of the recipient or subrecipient.  

More specific FAR response.  

To your Number 1.  The general rule is if you used simplified acquisition procedures and the award value is above the simplified acquisition threshold (SAT) then you would resolicit because the threshold dictates the acquisition procedure to be used.  The depends to the general rule rears its head by a simple example - what if for a commercial product or service where simplified procedures can be used for a threshold of up to $7.5 million.  Reference FAR 13.500, but pay attention as 13.500 does not change the definition of the SAT as provided for in FAR subpart 2.101.

To your Number 2.  No issues.

Hope my quick response makes sense.

[GovKor]

@C Culham Thank you for your response! Yes, it does make sense and is consistent with my thought process. 

[Vern Edwards]

On 1/22/2025 at 8:00 AM, GovKor said:

The estimated value of the award is below the SAT so Simplified Acquisition Procedures are followed. However, the final award is over the SAT. Does the solicitation have to be canceled and reissued using formal procurement methods?

No. See FAR 13.003(c). Policy. The use of SAP is based on anticipated dollar value, not actual dollar value.

Read the FAR!

[C Culham]

12 hours ago, Vern Edwards said:

No. See FAR 13.003(c). Policy. The use of SAP is based on anticipated dollar value, not actual dollar value.

So are you saying if under the FAR and a noncommercial product or service and I used SAP for a need under the SAT and all the pricing from all quoters came in twice the value of the SAT I could continue to award using SAP?

[GovKor]

@Vern Edwards 13.003(c) addresses when not to use SAP. 13.003(a) says to use SAP "for all purchases of supplies or services not exceeding the SAT." It doesn't specify the anticipated value. 

[GovKor]

9 minutes ago, C Culham said:

So are you saying if under the FAR and a noncommercial product or service and I used SAP for a need under the SAT and all the pricing from all quoters came in twice the value of the SAT I could continue to award using SAP?

My colleague believes we would not need to cancel and re-issue if the award was above the SAT, and this was my argument as well. Surely we would not issue a $2M contract using SAP because the initial estimate was $240K. At what point do we draw the line?

[C Culham]

1 hour ago, GovKor said:

At what point do we draw the line?

My original response regarding what I will call the FAR view was based on the thought that if SAP was used it would seem that the procurement is not keeping to a formal procedure that is is required by the FAR for a need that results in pricing above the SAT.  I have found no GAO case that either supports or disagrees with my thinking.   

As to drawing the line, I think that is where CO discreation comes in as to what next if the pricing received is above the SAT, it just depends.  I already mentioned the commerical product or service twist and then I know of nothing that prevents negotiating a quote yet in my reading of references issues like "sharp practice" come into play.   

Seems like I have used this alot lately but think FAR 1.102-5(e) as the fall back or in other words use good business judgement.  Hopefully in doing so the ultimate goal is accomplished which is the decision makes sense to all, especially those that quoted. 

[Retreadfed]

Govkor, are you reading FAR 13.003(a) as saying that FAR 13 procedures can only be used if the ultimate value of the procurement is below the SAT?  Is there anything in 13.003(a) that prohibits the use of such procedures in other circumstances such as those you posed in your hypo?  How would you apply FAR 1.102-5(e) to what you call this "grey area"?  

 

[Vern Edwards]

@GovKor @C Culham We were asked:

On 1/22/2025 at 8:00 AM, GovKor said:

The estimated value of the award is below the SAT so Simplified Acquisition Procedures are followed. However, the final award is over the SAT. Does the solicitation have to be canceled and reissued using formal procurement methods?

If you anticipate that an award will not exceed the SAT, you must use simplified acquisition procedures, which are prescribed in FAR. So you proceed in accordance with FAR Subpart 13.1. Let's assume your documented estimate of the anticipated value of the award is reasonable based on price history and comes in at $225,000. But you receive two quotes, at $230,000 and $240,000. What do you do? Start a new acquisition pursuant to FAR Part 15? Where does the FAR say to do that?

Let's say you think the best value is $240,000. You award a contract for $240,000 that includes all the required clauses. That's what a sensible CO would do. I ran an Air Force base contracting shop for a year and that's what we did. No review ever found that we had violated FAR.

Now, if the quotes come in at $1,000,000 and above, then ask yourself if your pre-quote estimate was reasonable. If it wasn't...

When a regulation does not prescribe a specific course of action, a CO must use their head.

[Don Mansfield]

From Formation of Government Contracts:

Quote

Thresholds Applicable to Both Solicitation Estimates and Award Values

The dollar values apply to both the amount estimated for the procurement and resulting contract values. Thus, if a procurement is begun using other than simplified procedures based on an estimate that exceeds the applicable threshold, simplified procedures may not be used even though the price of the source selected is lower than the threshold, Global Communications Solutions, Inc., Comp. Gen. Dec. B-299044, 2007 CPD ¶30 (commercial item test program threshold). Conversely, even though a solicitation was issued under simplified procedures, award may not be made above the applicable threshold. However, award on the basis of simplified procedures would be proper if the selected source reduced its price to come within the threshold. Protests that a procurement exceeds the threshold must be submitted before responding to a solicitation if the violation is obvious, Baldt, Inc., Comp. Gen. Dec. B-402596.3, 2010 CPD ¶139.Once an award is properly made using simplified acquisition procedures, there is no requirement that the actual amount paid under the contract be below the threshold. The contract may be modified to an amount above the threshold to cover unforeseen circumstances such as a change order or an unexpected overrun in the quantity of work, Jones Seeding & Sprigging Co., 63 Comp. Gen. 497 (B-215260), 84-2 CPD ¶87.

 

[Retreadfed]

34 minutes ago, Don Mansfield said:

Conversely, even though a solicitation was issued under simplified procedures, award may not be made above the applicable threshold.

Don, was any authority cited for this proposition?

[Don Mansfield]

No. That was a straight copy/paste. 

[C Culham]

I think, using my head,  the issue is CICA which applies to any acquisition in excess of the SAT.  The question being -  Have I complied with CICA as a statute if I award in the OP scenario at a price above the SAT.  Depends, but generally I think I have not complied.

As to we did it this way or that way the world of FAR acquisitions has a plethora of such anecdotes but it does not mean each was in compliance with statute and the applicable regulation codified as a result of the statute.

[formerfed]

I’m reading the Formation of Government Contracts quoteDon posted as saying simplified acquisition procedures cannot be used for award if the value exceeds the SAP threshold.  But if the value exceeds that amount, I see nothing wrong using the results of the simplified acquisition solicitation process to award a contract under FAR 15 procedures.  

[C Culham]

11 hours ago, formerfed said:

I’m reading the Formation of Government Contracts quoteDon posted as saying simplified acquisition procedures cannot be used for award if the value exceeds the SAP threshold.  But if the value exceeds that amount, I see nothing wrong using the results of the simplified acquisition solicitation process to award a contract under FAR 15 procedures.  

I think you could too if you amend the solicitation. My reasoning.  Reference Global and this statement in it- "In this context, GCS states that it considered the $5 million threshold in FAR Part 13 to constitute a ceiling on its quotation. Id. We view GCS’s understanding in this regard to be reasonable."   

[Vern Edwards]

I hope you all realize that the GAO does not have final say about an interpretation of the FAR, and that GAO decisions are not binding on executive agencies, they are only recommendations, which agencies may reject and have, on occasion.

It's a different matter with the COFC. It's decisions are binding, although they may be appealed to the Federal Circuit, which has overruled them.

In any event, in the case cited in Don's post, the anticipated dollar value exceeded the SAT, thus the agency should not have used SAP.

Quote

In short, the record shows that the agency’s estimated value of this acquisition was in excess of $5 million, yet the agency proceeded with this procurement on the basis of authority that had application only to acquisitions below $5 million.

Most of the GAO decision is nothing but dicta.

[C Culham]

I do realize.  But then I wonder @Vern Edwards when in your career did you reject a GAO Decision?  And if so what happened?   It would be an interesting experience to share.

[Vern Edwards]

On 1/25/2025 at 7:08 PM, C Culham said:

But then I wonder @Vern Edwards when in your career did you reject a GAO Decision?

@C CulhamI never did. I only lost one protest.

The GAO is not perfect, and agencies are not required to follow its recommendations. That's law. If I had been working for a smaller agency I might have been able to persuade higher ups to reject the GAO's recommendation. But I was working for a big agency, and they don'r often resist. Too many levels of headquarters.

But I did some support work for the Social Security Administration, and I learned that they had rejected a GAO recommendation at least twice. Other agencies have rejected GAO recommendations, as well. It's not common, but it's not unheard of. What happens? The GAO notifies the congressional committee that handles the agency's appropriations. Also, the protester might then file with the COFC, which has rejected GAO decisions (what GAO calls "case law" but is really nothing more than policy) on a number of occasions.

In a 1989 article, "Legal Status of General Accounting Office Bid Protest Decisions," Professors Nash & Cibinic wrote this"

Quote

Another question will arise in that rare, but possible, case when the agency refuses to follow the GAO recommendation. What then, is the status of the GAO decision? The “rational basis” standard could in many cases support either one of two decisions [by a Federal court]. If the matter is truly one of agency discretion, both the CO's decision and the GAO “recommendation” might also have a “rational basis.” The court's decision does not address this issue. However, since the decision is that of the agency and GAO only makes a “recommendation” it would appear that the CO decision should prevail. If the CO's decision has no “rational basis” (some might say that failure to follow any GAO recommendation is, by definition, irrational) it should be overturned.

See also, A Critical Reassessment of the GAO Bid-Protest Mechanism, by Metzger and Lyons, Wisconsin Law Review (2007):

Quote

 

Agencies should recognize the possibility that a GAO decision on a bid protest can be wrongly decided and that the GAO may have granted relief that would not be available in a judicial forum. In either case, it may be a prudent decision--one that serves both the public trust and fiscal interests--for an agency to decline to accept a GAO recommendation.

As a historical practice, the GAO's decisions are nearly always adopted. Agencies thus seem to have lost sight of the fact that the power to disregard such decisions is an explicit and important component of the bid-protest system designed by Congress. As noted above, CICA limits the Comptroller General to providing “recommendations” to resolve protests; Congress never intended for the GAO to have the last word in every procurement dispute.

 

If we had a truly professional corps of contracting officers, people with deep mastery, agencies might not lie down and roll over as frequently as they have in the past. The GAO has screwed up a number of its interpretations of the regulations, and done much harm as a consequence. Consider the history of its decisionS about discussions in source selection. But we don't have many such contracting officers. It has been suggested to the president that he do something about that.

In any case, I reported the law concerning GAO recommendations. They are not binding. My personal experience is not pertinent. And under our new president, who knows? Rejections of GAO recommendations might become more common. DOGE might look into it. I certainly hope so. Recommendations have already been made concerning reform of the protest system. In fact, I hope we do away with the system as we now know it. It's not likely, but it's certainly possible. Look at what's been done already! If you stay abreast with developments you know that the protest system is coming under increasing congressional scrutiny and raising congressional doubts about its effects and benefits.

If I made a reasonable estimate of the anticipated cost of a procurement and used SAP only to discover that the lowest acceptable quote was within a reasonable margin of error from my estimate, but higher than the SAT, would I cancel the procurement and revert to Part 15? No. But I would make sure that the resultant contract included all clauses prescribed for a contract of its value.

In short, I'm sticking to my guns. What can I do if bureaucrats are gutless?

[C Culham]

14 hours ago, Vern Edwards said:

In short, I'm sticking to my guns. What can I do if bureaucrats are gutless?

Thank you.

Overall I understand the push pull. 

Gutless?  Who?  I have seen at least two agency head's called before a congressional committee.  Not much fun I would imagine if the chief executive does not have your back!

[Vern Edwards]

@C Culham 

10 hours ago, C Culham said:

Gutless?  Who? 

Carl, I have an interesting story to tell you.

When I was an Air Force GS-05 procurement trainee, I was assigned to prepare an RFP for base guard services. It was a competitive negotiated procurement conducted pursuant to the Armed Services Procurement Regulation. My CO awarded the contract to a company whose owner had a California private detective license. Shortly after our announcement of the source selection decision, we received a protest complaining that the award violated the Anti-Pinkerton Act, 5 USC 3108 (previously codified at 5 USC 53).

None of us, our lawyer (a good one) included, had ever heard of the Act, so I researched it. The Act read, and still does, in its entirety, as follows:

Quote

An individual employed by the Pinkerton Detective Agency, or similar organization, may not be employed by the Government of the United States or the government of the District of Columbia.

Pinkerton Detective Agency had been involved in union busting, providing business owners with what had amounted to a private army to beat up striking workers, and in 1893 Congress enacted the law to prevent the government from doing business with it and with companies like it.

It turns out that the GAO had ruled earlier that the government could not award a contract to a firm with a detective license:

Quote

THE DETECTIVE EMPLOYMENT PROHIBITION IN THE ACT OF MARCH 3, 1893, 5 U.S.C. 53, IS APPLICABLE TO CONTRACTS OR AGREEMENTS WITH DETECTIVE AGENCIES AS WELL AS TO CONTRACTS WITH INDIVIDUAL EMPLOYEES OF SUCH AGENCIES AND PRECLUDES THE EMPLOYMENT OF A DETECTIVE AGENCY OR ITS EMPLOYEES, REGARDLESS OF THE CHARACTER OF THE SERVICES TO BE PERFORMED AND EVEN THOUGH THE SERVICES ARE NOT TO BE OF A DETECTIVE OR INVESTIGATIVE NATURE; THEREFORE, A LOW BID FOR FURNISHING MAINTENANCE, SECURITY AND GUARD SERVICES TO A MILITARY INSTALLATION SUBMITTED BY A CONCERN WHICH IS IN FACT A DETECTIVE AGENCY IS SUBJECT TO THE PROHIBITION AND MUST BE REJECTED.

38 Comp. Gen. 881, B-139965 (1959). Capitalization in the original.

I researched the Anti-Pinkerton Act to find out why it had been enacted and concluded that it prohibited contracting with companies like Pinkerton ("or similar organizations") that provided what were essentially private armies, not companies that merely did private detective work. I argued strongly for defending the protest on that basis. Our lawyer agreed with me, but in light of the GAO's "case law" the lawyers at higher headquarters did not, and did not present our argument to the GAO.

The GAO sustained the protest. See H.L. Yoh Company; Hammer Security Service of California, Inc. B-186347 (1976). They also denied a request for reconsideration, Inter-con Security Systems, Inc., B-186347 (1977). We had to terminate the contract.

Two years later the GAO issued a memo "To the Heads of Federal Departments and Agencies", 57 Comp. Gen. 524, B-139965 (1978), based on a 1978 decision of the 5th Federal Circuit Court of Appeals, informing them that the Anti-Pinkerton Act did not apply to contracts for guard services:

Quote

FIFTH CIRCUIT COURT OF APPEALS, IN UNITED STATES EX REL. WEINBERGER V. EQUIFAX, CONSTRUED 5 U.S.C. 3108, THE ANTI-PINKERTON ACT, AS APPLYING ONLY TO ORGANIZATIONS WHICH OFFER ‘QUASI-MILITARY ARMED FORCES FOR HIRE.‘ ALTHOUGH THE COURT DID NOT DEFINE ‘QUASI-MILITARY ARMED FORCE,‘ WE DO NOT BELIEVE TERM COVERS COMPANIES WHICH PROVIDE GUARD OR PROTECTIVE SERVICES. GENERAL ACCOUNTING OFFICE WILL FOLLOW COURT'S INTERPRETATION IN THE FUTURE. PRIOR DECISIONS INCONSISTENT WITH EQUIFAX INTERPRETATION WILL NO LONGER BE FOLLOWED. SEE 57 COMP.GEN. 480 (B-190784, MAY 25, 1978).

See also the GAO's 1980 letter to the U.S. Senate:

https://www.gao.gov/assets/b-139965.pdf

Capitalization in the original.

The GAO is wrong sometimes, and hardheaded, and agencies should not roll over when they think it is. Before CICA, agencies had to go along because GAO had to certify their use of appropriations. But CICA changed all that and explicitly made GAO decisions recommendations. Agencies certify themselves. But agencies did not adjust.

I'm hoping that under the new regime agencies will show a some guts and start rejecting GAO recommendations more often when they think they have the better argument. A recommendation is just that. Of course, in order to pull that off agencies will need first rate contracting officers. It would also help if Congress established strict deadlines for filing protests with the Court of Federal Claims and prohibited two bites of the apple, going to the COFC after losing at the GAO.

Forgive any typos in this. I'm having some eyesight issues.

[C Culham]

On 1/27/2025 at 5:28 AM, Vern Edwards said:

I'm hoping that under the new regime agencies will show a some guts and start rejecting GAO recommendations more often when they think they have the better argument.

Very interesting indeed and I could not agree more.

[Retreadfed]

2 hours ago, Vern Edwards said:

FIFTH CIRCUIT COURT OF APPEALS, IN UNITED STATES EX REL. WEINBERGER V. EQUIFAX, CONSTRUED 5 U.S.C. 3108, THE ANTI-PINKERTON ACT, AS APPLYING ONLY TO ORGANIZATIONS WHICH OFFER ‘QUASI-MILITARY ARMED FORCES FOR HIRE.‘

I wonder how this concept applies in regard to companies like Blackwater?  As a side note, see, FAR 37.109.

[ricroy]

To support Vern's perspective that the estimated/anticipated value should guide and support the acceptable use of SAP in the OP's scenario.

FAR 1.108(c) - Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.   (emphasis mine)

 

[joel hoffman]

50 minutes ago, ricroy said:

To support Vern's perspective that the estimated/anticipated value should guide and support the acceptable use of SAP in the OP's scenario.

FAR 1.108(c) - Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.   (emphasis mine)

 

I don’t think this reference supports the perspective that the estimated or anticipated value prior to establishing the value of the action for awarding under simplified procedures…