The six principlesreciprocity, autonomy, honesty, loyalty, equity, and integrityform the basis for all contracts using the vested methodology and provide a framework for resolving potential misalignments when unforeseen circumstances occur. Accordingly, for multi-year contracts, the agency head may authorize modification of the requirements of this subpart and the clause at 52.217-2, Cancellation Under Multi-year Contracts. By the eighth year, the parties were at the breaking point. The nature of the requirement should govern the selection of the method of contracting, since the multi-year procedure is compatible with sealed bidding, including two-step sealed bidding, and negotiation. The following criteria can generally be applied in identifying management and operating contracts: (a) Government-owned or -controlled facilities must be utilized; for instance-. Dells cost of switching to another company would be high, and FedEx would have trouble replacing the revenue and profits the contract generated. To date, 57 companies have employed the vested methodology. (c) Reduction of administrative burden in the placement and administration of contracts. The D&F shall-. The contracting officer shall limit the Governments payment obligation to an amount available for contract performance. (a) Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. (b) Economic price adjustment clauses. ), (b) Inclusion of an option is normally not in the Governments interest when, in the judgment of the contracting officer-, (1) The foreseeable requirements involve-, (i) Minimum economic quantities (i.e., quantities large enough to permit the recovery of startup costs and the production of the required supplies at a reasonable price); and. (h) Termination payment. (e) Insert a clause substantially the same as the clause at 52.217-7, Option for Increased Quantity-Separately Priced Line Item, in solicitations and contracts, other than those for services, when the inclusion of an option is appropriate (see 17.200 and 17.202) and the option quantity is identified as a separately priced line item having the same nomenclature as a corresponding line item. South Island has the opportunity to earn incentives if they improve efficiency and billing, which they can invest in research and quality-of-care initiatives they are passionate about. To perform this calculation, the contracting officer should obtain in-house engineering cost estimates identifying the detailed recurring and nonrecurring costs, and the effect of labor learning. Except for DoD, NASA, and the Coast Guard, the contracting officer may enter into a multi-year contract if the head of the contracting activity determines that-, (1) (d) A provision specifying a separate cancellation ceiling (on a percentage or dollar basis) and dates applicable to each program year subject to a cancellation (see 17.106-1(c) and (d)). (2) Multi-year contract including the requirements for each program year. (b) Achieve geographic dispersion of suppliers. 1) What is an Independent Government Estimate (IGE)? Here is your test result.The dots represent the choices you have made. But the reality is that their external motivations are subtly different because of three ways that their work lives differ: How they are paid: Because FTEs receive salary while contractors are . An official website of the General Services Administration. Designed from the outset to foster trust and collaboration, this legally enforceable contract is especially useful for highly complex relationships in which it is impossible to predict every what-if scenario. (c) An interagency acquisition is not exempt from the requirements of subpart 7.3, Contractor Versus Government Performance. If you "overrun" the costs, your fee is the same, or fixed. The formal relational contract addresses these deficiencies. refurbishing. In two-step sealed bidding, discussions conducted during the first step may indicate the need for revised ceilings and dates which may be incorporated in step two. chapter 33, and the agencys regulations governing such contracts. For acquisitions on behalf of the Department of Defense, also see subpart 17.7. One objective, for example, called for improving physicians billing to the provincial Medical Services Plan (MSP) for cost recovery for the hospitalist fees. x Contracting Officer, The Competition in Contracting Act requires that _________: . Because of program requirements and the unusual (sometimes unique) nature of the work performed under management and operating contracts, the Government is often limited in its ability to effect competition or to replace a contractor. We will achieve this vision by building relationships grounded in trust and respect, and anchored in the following Guiding Principles and Intended Behaviors. You need to ensure, Prior to certifying the Managing Accounting Billing Statement for contract payments by Governmentwide Commercial Purchase Card, the Approving/ Billing Official must do what two things? (h) (b) (d) (g) Level unit prices. If cancellation occurs, the Governments liability will be determined by the terms of the applicable contract. (1) The contractor will incur undue risks; e.g., the price or availability of necessary materials or labor is not reasonably foreseeable; (2) Market prices for the supplies or services involved are likely to change substantially; or, (3) The option represents known firm requirements for which funds are available unless-, (i) The basic quantity is a learning or testing quantity; and. Last Updated Apr 24, 2023. simple new builds. Multi-year contract means a contract for the purchase of supplies or services for more than 1, but not more than 5, program years. (See 35.017; see also 6.302 for procedures to follow where using other than full and open competition.) (g) Broadening the competitive base with opportunity for participation by firms not otherwise willing or able to compete for lesser quantities, particularly in cases involving high startup costs. Accordingly, agencies should provide such information through its internal regulations. (1) The leader company has the necessary production know-how and is able to furnish required assistance to the follower(s); (2) No other source can meet the Governments requirements without the assistance of a leader company; (3) The assistance required of the leader company is limited to that which is essential to enable the follower(s) to produce the items; and. But when contract negotiations begin, they default to an adversarial mindset and a transactional contracting approach. (d) The period may extend beyond the contract completion date for service contracts. (i) State that use of an interagency acquisition is in the best interest of the Government; (ii) State that the supplies or services cannot be obtained as conveniently or economically by contracting directly with a private source; and. Crafting a formal relational contract involves five steps: laying the foundation, cocreating a shared vision and objectives, adopting guiding principles, aligning expectations and interests, and creating systems for staying aligned. (e) (d) Solicitations that allow the offer of options at unit prices which differ from the unit prices for the basic requirement shall state that offerors may offer varying prices for options, depending on the quantities actually ordered and the dates when ordered. Each was crafted to establish a new norm for the partnership. Obtaining both also provides a basis for the computation of savings and other benefits. Cancellation ceilings and dates may be revised after issuing the solicitation if necessary. Multi-year contract means a contract for the purchase of supplies or services for more than 1, but not more than 5, program years. 3501 A case in point is Vancouver Island Health Authority and South Island Hospitalists, a partnership of administrators and doctors who work together to provide inpatient care for patients with the most complex medical issues in British Columbia. (b) Multi-year contracting is a flexible contracting method applicable to a wide range of acquisitions. (2) The potential cost of disrupted support, options may be included in service contracts if there is an anticipated need for a similar service beyond the first contract period. (2) An informal analysis of prices or an examination of the market indicates that the option price is better than prices available in the market or that the option is the more advantageous offer. The head of a contracting activity may authorize the use of a solicitation requesting only multi-year prices, provided it is found that such a solicitation is in the Governments interest, and that dual proposals are not necessary to meet the objectives in 17.105-2. (2) In determining cancellation ceilings, the contracting officer must estimate reasonable preproduction or startup, labor learning, and other nonrecurring costs to be incurred by an "average" prime contractor or subcontractor, which would be applicable to, and which normally would be amortized over, the items or services to be furnished under the multi-year requirements. Which of the following is not a, When a COR is involved in the Source Selection Evaluation Board, what might his/her main roles, The purpose of market research is to determine capabilities in the marketplace able to satisfy the, Who has the official responsibility for performing market research? The requesting agency administers the order; therefore, no written agreement with the servicing agency is required. When Dell originally selected FedEx, in 2005, to handle all aspects of its hardware return-and-repair process, the companies drew up a traditional supplier contract. In some ways, they're similar to the prices of goods at the grocery store. Any extension or renewal of an operating and management contract must be authorized at a level within the agency no lower than the level at which the original contract was authorized in accordance with 17.602(a). (2) If approved by the servicing agency, payment for actual costs may be made by the requesting agency after the supplies or services have been furnished. Some methods of contracting require more time than others. (d) When an interagency acquisition requires the servicing agency to award a contract, the following procedures also apply: (1) If a justification and approval or a D&F (other than the requesting agencys D&F required in 17.502-2(c)) is required by law or regulation, the servicing agency shall execute and issue the justification and approval or D&F. Options should not include charges for plant and equipment already amortized, or other nonrecurring charges which were included in the basic contract. (1) (b) The order may be placed on any form or document that is acceptable to both agencies. Companies understand that their suppliers are critical partners in lowering costs, increasing quality, and driving innovation, and leaders routinely talk about the need for strategic relationships with shared goals and risks. Obtaining both also provides a basis for the computation of savings and other benefits. Each of these contract types is suitable for some projects and not others, and each has both advantages and disadvantages for the various stakeholders . While the contract was being developed, in 2016 and 2017, Canada passed a law legalizing medical assistance in dying. (g) Insert a clause substantially the same as the clause at 52.217-9, Option to Extend the Term of the Contract, in solicitations and contracts when the inclusion of an option is appropriate (see 17.200 and 17.202) and it is necessary to include in the contract any or all of the following: (1) A requirement that the Government must give the contractor a preliminary written notice of its intent to extend the contract. The approach encourages trust and honesty between the two sides, said Ken Smith, a hospitalist at South Island. (a) We will be recognized leaders in health care. Which of the following is, [Identify the various methods of contracting for, Ordering off a Blanket Purchase Agreement, Buys against a GSA Federal Supply Schedule. Nonrecurring costs means those costs which are generally incurred on a one-time basis and include such costs as plant or equipment relocation, plant rearrangement, special tooling and special test equipment, preproduction engineering, initial spoilage and rework, and specialized work force training. (g) Contracts may express extensions of the term of the contract as an amended completion date or as additional time for performance; e.g., days, weeks, or months. (b) Insert a provision substantially the same as the provision at 52.217-4, Evaluation of Options Exercised at Time of Contract Award, in solicitations when the solicitation includes an option clause, the contracting officer has determined that there is a reasonable likelihood that the option will be exercised, and the option may be exercised at the time of contract award. We consciously approached the economics of the relationship with full transparency and a problem-solving mentality instead of a negotiations mentality, she told us. (a) Multi-year contracting; (c) Leader company contracting. (b) Criteria for comparing the lowest evaluated submission on the first program year requirements to the lowest evaluated submission on the multi-year requirements. (a) Before placing an order for supplies or services with another Government agency, the requesting agency shall follow the procedures in 17.502-1 and, if under the Economy Act, also 17.502-2. For example, Spencer Cleave, a hospitalist from South Island, and Kim Kerrone, Island Healths vice president for finance, legal, and risk, led a small group focused on rethinking the conventional fee-for-billable-service-hour payment structure. (c) The period shall be set so as to provide the contractor adequate lead time to ensure continuous production. If I need to make an urgent decision or have a difficult issue that cant wait for the next formal meeting, I can phone my two-in-a-box partner and ask to meet., Such pairings are also highly encouraged outside the governance teams to strengthen the relationship and build trust between parties at all levels. The termination for convenience procedure may apply to any Government contract, including multiyear contracts. (3) The requesting agency shall furnish a copy of the D&F to the servicing agency with the request for order. We not only came in under budget, we also increased our revenue by improving our MSP billing process. Broadening the competitive base with opportunity for participation by firms not otherwise willing or able to compete for lesser quantities, particularly in cases involving high startup costs. (f) Avoidance of the need for establishing quality control techniques and procedures for a new contractor each year. Japanese keiretsu, an arrangement in which buyers form close associations with (and often own stakes in) suppliers, is a type of relational contract (see The New, Improved Keiretsu, HBR, September 2013). This subpart prescribes policies and procedures for management and operating contracts for the Department of Energy and any other agency having requisite statutory authority. (a) The contracting officer shall justify in writing the quantities or the term under option, the notification period for exercising the option, and any limitation on option price under 17.203(g); and shall include the justification document in the contract file. (5) The estimates of both the cost of the contract and the cost avoidance through the use of a multi-year contract are realistic. (e) Waiver. It does not apply to contracts entered into by a nondefense agency that is an element of the intelligence community for the performance of a joint program conducted to meet the needs of DoD and the nondefense agency. And if their previous contracting process led to distrust and a vicious cycle of shading, they should reflect on how and why that happened. (3) Whether it is likely that qualified offerors will compete for the contract. In that event, contracting officers must follow the requirements of subpart 17.2. This subpart prescribes policies and procedures specific to acquisitions of supplies and services by nondefense agencies on behalf of the Department of Defense (DoD). Therefore contracting officers should take extraordinary steps before award to assure themselves that the prospective contractors technical and managerial capacity are sufficient, that organizational conflicts of interest are adequately covered, and that the contract will grant the Government broad and continuing rights to involve itself, if necessary, in technical and managerial decisionmaking concerning performance. And therein lies the beauty of the formal relational contract. may not be awarded until the head of the agency gives written notification of the proposed contract and of the proposed cancellation ceiling for that contract to the committees on appropriations of the House of Representatives and Senate and the appropriate oversight committees of the House and Senate for the agency in question. Unfortunately, this story is not unique. (c) The requesting and servicing agencies should agree to procedures for the resolution of disagreements that may arise under interagency acquisitions, including, in appropriate circumstances, the use of a third-party forum. In the event funds are not made available for the continuation of a multi-year contract awarded using the procedures in this section, the contract shall be canceled or terminated. When using sealed bidding, the contracting officer shall make a written determination that there is a reasonable likelihood that the options will be exercised before including the provision at 52.217-5, Evaluation of Options, in the solicitation. Always have a copy of the contract, price assumptions, budgets, scope baseline, and other related documents nearby. They are especially useful for complex purchasing arrangements, outsourcing, strategic alliances, joint ventures, franchises, public-private partnerships, large construction projects, and collective bargaining agreements. Multi-year contracting shall be used in such a manner as to seek, retain, and promote the use under such contracts of companies that are subcontractors, suppliers, and vendors; and. The contract may not be awarded until the thirty-firstday after the date of notification. To the extent practicable, multi-year contracting shall not be carried out in a manner to preclude or curtail the existing ability of the Department or agency to provide for termination of a prime contract, the performance of which is deficient with respect to cost, quality, or schedule. The Economy Act also provides authority for placement of orders between major organizational units within an agency; procedures for such intra-agency transactions are addressed in agency regulations. However, these tactics not only confer a false sense of security (because both firms switching costs are too high to actually invoke the clauses) but also foster negative behaviors that undermine the relationship and the contract itself. Formal relational contracts are built on a foundation of trust and are shaped by a shared vision and six universal guiding principles. (f) The Governments administrative costs of annual contracting may be used as a factor in the evaluation only if they can be reasonably established and are stated in the solicitation. (c) This subpart does not apply to-, (1) Interagency reimbursable work performed by Federal employees (other than acquisition assistance), or interagency activities where contracting is incidental to the purpose of the transaction; or. The minimum need to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities; (3) (d) 2) What is a KEY role of the COR in Acquisition Planning? Under reciprocity, for example, they highlighted the need to conduct ourselves in the spirit of achieving mutual benefit and understanding. Under equity, they acknowledged the unavoidable imbalances that arise in contracts: We are committed to fairness, which does not always mean equality. First program year; and. Except as provided in agency regulations, this subpart does not apply to contracts for (a) services involving the construction, alteration, or repair (including dredging, excavating, and painting) of buildings, bridges, roads, or other kinds of real property; (b) architect-engineer services; and (c) research and development services. The entities decided to explore relational contracting in 2016, two years after their conventional contract had expired and countless hours of contentious negotiations had failed to replace it. The head of a contracting activity may authorize the use of a solicitation requesting only multi-year prices, provided it is found that such a solicitation is in the Governments interest, and that dual proposals are not necessary to meet the objectives in 17.105-2. This method is most advantageous for relatively straightforward and small projects such as: renovations. In preparing interagency agreements to support assisted acquisitions, agencies should review the Office of Federal Procurement Policy (OFPP) guidance, Interagency Acquisitions, available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/assets/OMB/procurement/interagency_acq/iac_revised.pdf . Their efforts led to the vested methodology for creating formal relational contractsa process that establishes a whats in it for we partnership mentality. (2) May consider the effect on small business. (b) Information on such committees may not be readily available to contracting officers. For nearly a decade, FedEx met all its contractual obligationsbut neither party was happy in the relationship. If the interagency business transaction does not result in a contract or an order, then the FAR does not apply. (5) (b) The contracting officer shall ensure that any contract awarded under this arrangement contains a firm agreement regarding disclosure, if any, of contractor trade secrets, technical designs or concepts, and specific data, or software, of a proprietary nature. (3) Because private enterprise is unable or unwilling to use its own facilities for the work. For example, consider that the total nonrecurring costs (see 15.408, Table 15-2, III. To ensure that all interested sources of supply are thoroughly aware of how multi-year contracting is accomplished, use of presolicitation or pre-bid conferences may be advisable. (a) The contracting officer shall insert the clause at 52.217-2, Cancellation Under Multi-year Contracts, in solicitations and contracts when a multi-year contract is contemplated.