SPECIAL CONTRACTING METHODS
SUBPART 17.1 - MULTIYEAR CONTRACTING
17.104 General
17.105-1 Uses
17.171 Multiyear contracts for services
SUBPART 17.2 - OPTIONS
17.202 Use of options.
17.203 Solicitations.
17.204 Contracts.
17.206 Evaluation.
17.207 Exercise of options.
17.208 Solicitation provisions and contract clauses.
SUBPART 17.73 - IDENTIFICATION OF SOURCES OF SUPPLY
17.7301 Policy.
17.7302 Procedures.
SUBPART 17.74 - UNDEFINITIZED CONTRACT ACTIONS
17.7403 Policy.
17.7404 Limitations.
17.7404-1 Authorization.
17.7404-2 Price ceiling.
17.7404-3 Definitization schedule.
17.7404-4 Limitations on obligations.
17.7404-6 Allowable profit.
17.7404-90 Other requirements.
SUBPART 17.75 - ACQUISITION OF COMPONENT PARTS
17.7501 Procurement of parts.
17.7504 Limitation of price increases.
SUBPART 17.76 - CONTRACTS WITH PROVISIONING REQUIREMENTS
17.7602 Contracting requirements.
17.7602-2 Issuance of provisioned item orders.
17.7603-3 Negotiating and executing supplemental agreements.
17.7690 Contracting officer's representative - provisioning.
17.7691 Reserved.
17.7692 Data pricing, evaluation, and award.
SUBPART 17.90 - MULTISOURCE CONTRACTING
17.9000 Scope of subpart.
17.9001 Policy and authority.
17.9002 Conditions for use.
17.9003 Limitations on use.
SUBPART 17.91 - USE OF PUBLIC MANUFACTURERS
SUBPART 17.92 - REOPENER CLAUSES
17.9201 General.
17.9202 Procedures.
17.9203 Contract requirements.
17.9204 Clause requirements.
17.9205 Contract clauses.
SUBPART 17.93 – SURGE AND SUSTAINMENT (S&S)
17.9300 Scope of subpart.
17.9301 Definitions.
17.9302 Background.
17.9303 Policy.
17.9304 Acquisition strategy for new business arrangements and long-term contracts.
17.9305 Other acquisition strategies.
17.9306 Other issues.
17.9307 Surge and sustainment requirements for commercial items.
SUBPART 17.94 – CUSTOMER VALUE CONTRACTING
17.9400 Scope of subpart
17.9401 Definitions
17.9402 General
17.9403 Acquisition Planning
SUBPART 17.1 - MULTIYEAR CONTRACTING
(a) DLA contracts that have a base and/or an option period of performance greater than one year that includes more than one year’s worth of requirements are not considered multi-year contracts as set forth in FAR/DFARS 17.1 or as defined in the DoD Financial Management Regulation if 1) they are funded exclusively with working capital funds, and 2) funds are fully obligated at time of award to cover the contract commitment (i.e., guaranteed minimum). However, such acquisitions must comply with the following:
(1) An analysis must be conducted during the acquisition planning process to determine the most beneficial period of performance length, and for indefinite-quantity contracts, the appropriate guaranteed minimum. This analysis must address why the proposed duration and contract minimum provide pricing and business benefits, and also must address the degree of Government risk associated with a longer-term arrangement. Items that should be considered at a minimum include: cost, future potential for competition on the solicited items, whether the resultant contract will contain an EPA clause, associated contractor start-up costs, and potential impact on the current/future small business base. Results of the analysis must be documented in the Acquisition Plan.
(2) Acquisition personnel must coordinate with their comptroller’s office to ensure adequate funding procedures are in place so that such acquisitions do not, singly or cumulatively, create a negative impact on cash flow or obligation authority that impedes support to other procurement requirements.
(b) The authority to approve modification of cancellation provisions pursuant to FAR 17.104(b) is delegated to heads of contracting activities (HCAs). HCAs may further delegate this authority, without power of redelegation, to the Center Senior Procurement Official at each of the Inventory Control Points. Contracting offices not designated as contracting activities (see DLAD 2.101) shall forward requests for modification of cancellation provisions to the Deputy Director, Logistics Operations, (J-3)
for approval.
(b) The authority to enter into a multiyear contract for supplies pursuant to FAR 17.105-1(b) is delegated to heads of contracting activities (HCAs). HCAs may further delegate this authority, without power of redelegation, to the Center Senior Procurement Official at each of the Inventory Control Points. Contracting offices not designated as contracting activities (see DLAD 2.101) shall forward requests to enter into a multiyear contract for supplies to the Executive Director, Acquisition, Technical, and Supply Directorate (J-33 ) for approval.
(c) For the Defense Energy Support Center, the authority to enter into a multiyear contract for services pursuant to FAR 17.105-1(c) is delegated to the HCA, with redelegation permissible to the Center Senior Procurement Official only.
17.171 Multiyear contracts for services.
(a)(v)(3) For DESC, the responsibility for making the determination required by DFARS 217.171(a)(3) is delegated to the HCA. The HCA may further delegate this authority, without power of redelegations.
The responsibility for making the determination required by DFARS 217.103-1(b)(iii) is delegated to the Commander, DRMS, with power of redelegation to the Director, Directorate of Contracting (DRMS-P), for contractual actions not exceeding $10 million in total procurement value and for which the cancellation ceiling does not exceed $500,000. The delegation is unlimited for multiyear determinations when a cancellation ceiling of $0 is included.
(90) The requirements of DFARS subpart 217.74 and subpart 17.74 shall be met for surge, emergency, services or other options which are undefinitized at time of exercise by the Government, i.e., an undefinitized option (UO).
(a) Highlight the inclusion of an option provision in a solicitation by a cross-reference to the option in the price schedule. The option shall require a positive acknowledgment by the contractor (e.g., annotation of its option price). Under no circumstances shall an option procedure be used which results in inclusion of an option clause in any contract due to failure of the offeror to explicitly signify the unacceptability of the provision or counteroffer a different price for the option.
(b) The requirements of 15.403-4(a)(1) shall be addressed when stating the basis of evaluation.
(d) When a separately priced option quantity or period is permitted in a solicitation which also includes an economic price adjustment (EPA) or similar repricing provision applicable to the same option quantity or period price(s) for the same item(s) of supply or services, the contracting officer shall preclude potential overpricing, usually by providing for a price buildup in the schedule (see 52.214-9001) from mutually exclusive portions of the (basic and option) price subject to EPA and the firm fixed price portions. The firm fixed price portion of the option price may exceed the comparable portion of the basic award price (see 52.217-9001). However, "overlap" (i.e., where any portion of the option quantity or period price is also covered by an EPA clause) is permitted only when the contracting officer documents reasons why overpricing will not occur and utilizes a provision which requires offering of prices for the firm fixed price portion of the quantity or period prices which are no higher than that for the basic contract (see also 16.203-3(93)).
(f) Such option price restriction may be used in other exceptional circumstances where fully justified (FAR 17.203(f)) by documentation included in the acquisition plan.
(g) The approval cited in FAR 17.203(g)(2) should also be included in the acquisition plan. The option price restriction shall be conspicuously included in Section M of the solicitation. The cautionary notice (FAR 17.203(g)(1)) shall also be included in Section M.
(e) The total of the base and option ordering periods for most task or delivery order contracts awarded by DoD (see DFARS 217.204(e)) may, under exceptional circumstances, exceed 10 years when approved by the DLA Head of Agency (HoA) (see DLAD 2.101). The DLA Senior Procurement Executive (SPE) must approve each task or delivery order issued against such contracts if performance under the task or delivery order is expected to extend more than one year past the 10 year limit or the approved extended limit (see DFARS 217.204(e)(iv)). Requests to J-3312 for approval of an ordering period in excess of 10 years or for approval of an order performance period to extend more than a year past the end of the ordering period must be submitted with the signature of the Chief of the Contracting Office. Requests for a longer ordering period or performance period must include an in-depth analysis of the unique circumstances that necessitate the longer period. The analysis should clearly discuss what other alternatives were examined and why they are not considered viable. Ensure the extended ordering period is not due to inadequate procurement planning. As mandated in PGI 217.204(e), at the close of each fiscal year, DLA will submit a consolidated report to the Director, Defense Procurement and Acquisition Policy (OUSD(AT&L)DPAP) listing all DLA approvals of ordering period extensions granted during the year with a detailed justification for each.
(b)(90) The determination and approval not to evaluate an option estimated to exceed $550,000 prior to contract award (or definitization, if an undefinitized contract) shall be in the contract file, and shall include (see also 15.403-4(b)(90)) either,
(i) An explanation of the specific exemption that can be applied to avoid the data submission and certification requirements of P.L. 87-653, and identification of the pricing technique(s) available to subsequently determine the option price fair and reasonable without submission of certified cost or pricing data or catalog exemption data; or
(ii) A statement that such option price(s) are identified in the solicitation and contract Schedule as "not to exceed" ceiling price(s) subject to later definitization (see 17.208(a)(90)).
(a) The option clause shall require that the contractor be given adequate notice (see FAR 17.207(a)) of the requirement to perform under the option (as a general rule, at least 14 days prior to the last scheduled delivery date).
(c)(90) In addition to those considerations set forth in the FAR, exercise options only if it is determined that:
(1) There is no cardinal change in the requirement; and,
(2) The contractor's performance is satisfactory. A record of demonstrated superior performance may warrant additional consideration under buying best value guidelines. (See 17.207(e)(90).) Satisfactory performance includes successful implementation of any support to socioeconomic programs which was evaluated as part of source selection as well as any Mentoring Business Agreements which were proposed and evaluated during source selection. For contracts that effected a Shift to Commercial Practices or change in method of customer support, see 42.1103(90).
(d)(1) A new solicitation should not normally be used as a means to determine reasonableness of option prices. Tests of the reasonableness of the option price should generally be made by one of the methods identified in FAR 17.207(d)(2) or (3). Whenever a contracting officer determines that it is necessary to test the reasonableness of the option price by use of a formal solicitation, the contract file must contain a memorandum which briefly explains the reasons for the decision.
(2) The following are examples of factors which may be considered in the informal test of the market and evaluation of the option price(s):
(i) The fact that the option price was evaluated for price reasonableness prior to initial award.
(ii) The relationship of the option price to the price for the initial contract quantity.
(iii) The adequacy of competition at time of initial award and the length of time since the award.
(iv) Changes in the general economy that could affect the contractor's costs.
(v) The results of any market research and analysis efforts (see Part 10).
(2)(90) After conducting an informal analysis of prices or an examination of the market, in accordance with FAR 17.207(d)(2), the contracting officer may determine it is more advantageous to exercise the option and also become aware that another source (such as a surplus dealer) has favorable pricing and/or availability for one or more items on the contract. If so, the contracting officer shall forward the information to the item manager (supply planner). The item manager (supply planner) shall take appropriate action in the best interest of the Government, based on the item manager’s (supply planner’s) judgment; such as initiating a separate, fixed-quantity purchase request, if warranted by the agency’s supply position.
(e)(90) An additional factor to be considered is the desirability of continuing a successful contractual relationship with a vendor that has demonstrated superior quality and delivery performance. Where the market analysis or survey shows that the item may be available at lower cost, this need not preclude the exercise of the option given a history of superior performance by the contractor. Performance criteria, may be used in determining superior performance and evaluating its importance relative to market price considerations and other factors.
(f) Prior to exercising an option, the contracting officer shall consider the factors at FAR 9.104-1 particularly the contractor's performance under the base contract period and any previous options. A decision not to exercise the option after considering responsibility-type factors is not a determination of contractor responsibility, and is not subject to referral to the SBA if the contractor is a small business. The written documentation shall address the basis for the contracting officer’s determination (see FAR 17.207(d)).
17.208 Solicitation provisions and contract clauses.
(a)(90) If the contract includes an option in amount exceeding $500,000 which was not evaluated prior to award, the contracting officer shall include a clause substantially the same as the clause at DFARS 252.217-7001, Surge Option, providing for definitization of the option before option exercise, except in the event urgency dictates post-exercise definitization.
SUBPART 17.73 - IDENTIFICATION OF SOURCES OF SUPPLY
In the interest of maintaining supply system and item integrity, and fostering the spare parts breakout programs, it is essential to know what is being purchased and from whom. It is the policy of DLA to retain the right to require identification of the manufacturing sources of the items purchased. Therefore, refusal of offerors to provide such information when specifically required is a valid basis for rejection of offers.
(c) When required, the source of manufacture must be identified. Refusal of offerors to do so precludes a contracting officer from determining the technical acceptability of the item to be supplied. Therefore, the offer cannot be accepted. Additionally, if an offeror furnishes the information but restricts its use on the basis of confidentiality, except as provided in subparagraph (e) below, the contracting officer must advise the offeror that--
(1) It is not DLA policy to make awards with such restrictions or to hold such information in confidence;
(2) In order to be eligible for award, the confidentiality requirements must be removed; and
(3) If such limitation is not removed, the offer may be rejected.
(d) Obvious reasons for not maintaining confidentiality are that it is operationally impractical because the total administrative costs could outweigh savings on the instant purchase. In addition, because of the volume of purchases, it is difficult to guarantee confidentiality, and DLA could be liable for inadvertent disclosure. Finally, it is contrary to DoD efforts to expand competition.
(e) Notwithstanding subparagraph (d) above, there may be instances when award may be beneficial to the Government whether or not the confidentiality restriction is removed. In these instances, prior to award, the contracting officer shall review the validity of the restriction. For example, if the identified manufacturing source is advertised in trade journals, commercial source listings, or is otherwise known to industry and Government, then holding the identity of the manufacturing source in confidence is not appropriate and shall be challenged. If it is determined that the confidentiality restriction is valid, then that information shall be held in confidence.
(f) Accordingly, a solicitation provision substantially as set forth in 52.217-9003 shall be included in negotiated solicitations, except in solicitations for commercial items. (Note: This provision, when used, may not be used as a modification to the provision at 52.217-9002, Conditions for Evaluation and Acceptance of Offers for Part Numbered Items.)
(g) It must also be noted that, if there is no provision in the solicitation which requires the offeror to disclose manufacturing/production sources, the offeror may properly conceal those sources in a competitive atmosphere.
SUBPART 17.74 - UNDEFINITIZED CONTRACT ACTIONS
(a)(90) The contracting officer shall expedite Government and contractor efforts to secure an acceptable price proposal and evaluation pending and following approval to award a UCA. The chief of the contracting office shall monitor usage of UCAs for conformance with regulatory requirements.
The authority in DFARS 217.7404-1(b) to authorize use of a UCA for a non-urgent requirement, exists only where the non-urgently needed quantity should be included and priced coincident to definitization of an urgently required quantity of the item. Authorization to take this action or the actions cited in DFARS 217.7404-1(a) or (c) is delegated, without authority for further delegation, to:
(a) The chief of the contracting office at the DSCs for a UCA to fill a requisition for a backordered or non-stocked quantity requiring heightened management, i.e.:
(i) a Military Service requisition with Issue Priority Designator (IPD) 01;
(ii) a Military Service requisition with IPD 02 or 03; and either an Anticipated Not Mission Capable Supply (ANMCS) or Not Mission Capable Supply (NMCS) indicator in the required Delivery Date field (record positions 62-64) beginning with a "9", "N", or "E" or an OSD/JCS project code (record position 57-59) beginning with a "9".
(iii) a Foreign Military Sale requisition under the Cooperative Logistics Program Support Agreement (CLSSA) with IPD 02 or 03 and an OSD/JCS project code beginning with a "9".
For such high priority UCAs where the not-to-exceed ceiling price does not exceed the simplified acquisition threshold, this authorization is delegable, but not lower than one level above the contracting officer.
(b) The Administrator/Deputy Administrators, Defense National Stockpile Center and Director, Defense Automated Printing and Support Center;
(c) The Commanders/Deputy Commanders of other activities.
The written approval shall document the specific urgency which compels use of a UCA, demonstrate that the restrictions of DFARS 217.7403 are met, and identify the consequences of failure to take such action.
(90) The "not to exceed" definitized contract total price ceiling shall be based on a "not to exceed" unit price included in the UCA for each item (each labor rate, for labor hour or time and materials type UCAs) with the stipulation that in no event shall the delivery quantity be decreased to affect or minimize increased costs to the contractor.
17.7404-3 Definitization schedule.
(90) The definitization schedule shall include milestone dates for receipt by the contracting officer of a price proposal that provides the required cost or pricing data, normally within 30 calendar days following award, and for beginning negotiations. (This requirement is not applicable to unpriced purchased orders (UPO))
17.7404-4 Limitation on obligations.
(90) To preserve the DFARS flexibility to increase the pre-definitization level following submission of a qualifying proposal (i.e., one which provides the required cost or pricing data and/or other information the contracting officer deems necessary for price definitization), the contracting officer must keep the obligation level below 50 percent of the not-to-exceed UCA ceiling price until receipt of such proposal. (This requirement is not applicable to UPO’s)
(90) The chief of the contracting office shall assure conformance with the requirements of DFARS 217.7404-6(a) and (b). (This requirement is not applicable to UPO’s)
17.7404-90 Other requirements .
(a) Payment limitations. To facilitate timely proposal submission and price definitization, contracting officers should establish initial funding available for interim financing and payments (e.g., progress payments, interim delivery payments (DFARS 232.102-70), public vouchers, and DD250s) consistent with the estimated amounts of contractor expenditures as of the dates specified in the definitization schedule for submission of a qualifying proposal and for price definitization. The contracting officer should subsequently relax or tighten such controls and incentives (e.g., by revising interim billing rates, reducing or suspending progress payments (DFARS 232.503-6), etc.) as necessary and appropriate to achieve timely definitization.
(b) Delivery schedule. Specify a firm delivery schedule, otherwise a "not to exceed" schedule reflecting the Government's minimum needs. A tentative schedule permitting the unilateral contract extension of the delivery schedule shall not be used.
(93) The contracting officer shall identify and include with any delegation of an undefinitized delivery order (BOA, IDC, T&M contract, etc) or other UCA for definitization by the cognizant ACO, any independent Government estimate ("should cost") that have been performed and found useful for determining price reasonableness, establishing negotiation objectives, and for contract negotiations. The delegation letter should request that the ACO furnish feedback on the utility and effectiveness of the IGE to the Center and to office(s) preparing and furnishing the IGE.
(a) and (b) These clauses are not applicable to UPOs.
SUBPART 17.75 - ACQUISITION OF REPLENISHMENT PARTS
(b)(3) Solicitation Provision.
(i) The provision at 52.217-9002 entitled "Conditions for Evaluation and Acceptance of Offers for Part Numbered Items" may be used in negotiated acquisitions of replacement parts, components, and assemblies which are identified in the acquisition identification description (AID) only by the name of an approved source, a part number, and a brief description, except that the provision at 52.213-9004, Offeror Representations, Certifications, and Fill-in Information--Electronic Commerce, or an alternative method of collecting the data therein, shall be used instead, and shall incorporate 52.217-9002 by reference, whenever a solicitation below the simplified acquisition threshold is automated. (See 13.104(90).) The provision at 52.217-9002 shall be used verbatim, except that the acronym “CLIN” may be substituted for the word “item” wherever it appears in the provision. When the provision is used, the following shall be inserted in the solicitation after each item description:
“Offer” based on:
Manufacturer’s Name . . . . . . . . . . . . . . . . . . . .
Part No. . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) The provision at 52.217-9002 may also be used in acquisitions of NSNs identified as "critical safety items (CSIs)" in the AID (see 11.302-91); however, when acquiring CSIs, offers of "exact product" are evaluated in accordance with the clause at 52.211-9005, Conditions for Evaluation and Acceptance of Offers for Critical Safety Items.
(iii) The provision at 52.217-9002 may be used for simplified acquisitions as well as large purchases, provided that the full text of the provision shall be made available to offerors. (When 52.213-9004, or an alternative data collection method, is used, its inclusion of pertinent fill-in portions of 52.217-9002, and the latter's overall incorporation by reference, shall, along with directions to the offeror on electronic access to, and other availability (including hard copy) of, all applicable guidance, constitute provision in full text.)
(iv) The provision should not be used in procurements when technical personnel have specifically advised that for the current procurement, alternate products cannot be evaluated, e.g., restricted source or source controlled items, National Institute for Occupational Safety and Health (NIOSH) items for which necessary testing equipment is not reasonably available, etc.
(v) It is the Government that determines if evidence furnished by offerors in accordance with 52.217-9002 is acceptable. At a minimum, evidence must be sufficient to establish the identity of the product and its manufacturing source. Contracting officers have broad flexibility to determine if a particular response conforms, as long as the decision is reasonable. Evidence is not necessarily limited to paper documentation. (For example, the contracting officer may request a sample item for testing.)
(vi) When the product being offered is manufactured for an approved source cited in the AID, the offeror must, if requested by the contracting officer, furnish evidence sufficient to demonstrate that the approved source (A) is overseeing and involved in the manufacturer’s production of items; and (B) has authorized the manufacturer to produce the item, identify it by that approved source’s name and part number, and sell the item directly to the Government (see 52.217-9002(b)(1)). Such evidence could be documentation obtained directly from the approved source; or identification on a Web site maintained by the approved source, confirming that the manufacturer is an acceptable source for the item identified by that approved source’s name and part number. If evidence cannot be obtained directly from the approved source, this does not necessarily preclude acceptance of the offer, if the contracting officer can adequately document that the approved source has oversight of and involvement in the manufacturing process by other means.
(b)(4) Evaluation of alternate item offers for spare parts. When the "Conditions for Evaluation and Acceptance of Offers for Part Numbered Items" provision is used, procedures shall be established by each DSC such that they will evaluate alternate offers when the savings projected will meet the savings threshold stated in the provision and there is a reasonable expectation that the alternate offer may be in line for award. When the provision is not used, all alternate offers will be evaluated, unless the solicitation has provided information that only the item cited in the acquisition identification description (AID) will be acceptable (e.g., restricted source or source controlled items, NIOSH items for which necessary testing equipment is not reasonably available, etc.). The level of technical data that the Government has available for use to evaluate the acceptability of an alternate product offered, and the corresponding level of technical data that must be furnished with an offer of alternate product, will be identified either in the AID or in paragraph (c)(2) of the provision at 52.217-9002. If the level of data and submission requirements are not identified in either of these locations in the solicitation, then 52.217-9002(c)(3)(a) applies. DSC procedures shall also provide for prompt notification by the contracting officer to alternate offerors of interim status (when required) and final status of the alternate offer, i.e., approved, disapproved, returned without evaluation. Several other factors should be considered in making a decision to evaluate items prior to award.
(i) Reserved.
(ii) For any purchase, if the time before proposed award does not permit evaluation, and delay of award would adversely affect the Government, then alternate offers may be considered technically unacceptable for the current acquisition and award made to the otherwise acceptable offeror. The benefits which may accrue to the Government, if the alternate item were accepted, must be weighed against any adverse effects caused by delaying award. Consideration shall be given to requesting expedited evaluation if the benefits are significant. For automated procurements, offers of alternate product (which includes offers of previously reverse-engineered product) will not be evaluated for the instant procurement, but will be evaluated for potential use on future procurements. The clause may still be included in the solicitation for purposes of informing vendors about necessary submissions for evaluation under current or future procurements.
(iii) The contracting officer may forward alternate offers for technical evaluation that are not in line for award or offers that do not meet the savings threshold if other factors indicate that an evaluation should be performed. While savings may not be evident without further consideration, benefits should not be weighed only against the instant acquisition. Future benefits should be considered as well; for example, projected future savings on high demand items, breaking a chronic sole source situation, etc. The other factors must be cited on the request for evaluation that is forwarded to technical personnel. If a preaward evaluation cannot be performed for offers that meet these criteria, a postaward evaluation will be performed. Offers that do not meet the above factors will be returned to the offeror without evaluation.
(iv) When a potential contractor submits an alternate item for evaluation for which there is no active procurement request, the activity Competition Advocate, or other office if designated by local guidance, will determine if the alternate item meets the criteria for evaluation listed for alternate offers in DLAD 17.7501(b)(4)(iii) above. The same office will provide the status to parties submitting alternate items and will forward qualifying alternate items to the appropriate technical personnel with the reasons the alternate items should be evaluated. These alternate item evaluations will be tracked according to the time frames set forth in DFARS Appendix E.
(v) When a postaward evaluation is performed, the alternate item offeror will be advised of the evaluation results. The Competition Advocate, or other office if designated by local guidance, will maintain a tracking system for postaward evaluations, in order to insure followup with contractors. Technical personnel will perform a postaward evaluation within 45 days of receiving the alternate offer, unless unusual circumstances require a longer evaluation period. After the 45 days have elapsed, followups will be generated by the Competition Advocate, or other designated office, every 15 days. If the evaluation must be performed by an Engineering Support Activity, the time allowed for evaluation is 90 days with followups generated every 30 days (after the first 90 days)..
(vi) If it is determined that award will be delayed pending an alternate item evaluation, such evaluation request will be forwarded to the appropriate functional element and an estimate made of the time required for evaluation. Upon expiration of the estimated time, inquiry shall be made regarding the status of the evaluation. If the evaluation has not been completed or it is otherwise not imminent, determinations shall be made as to how much longer the evaluation will take and how much longer the award can be delayed. A new suspense shall be established based thereon, or award shall be made immediately if it is not in the Government's interest to further delay the award. Technical personnel are responsible for communication with all parties involved. The decision to hold or proceed with award should not be made until such communication is established and the status of the evaluation has been assessed as accurately as possible. Under simplified acquisition procedures, awards normally should not be held for protracted periods of time unless there are substantial benefits.
(vii) To aid in prioritizing workload, the amount of potential savings or other benefits should be included on any referrals to technical personnel together with any other pertinent factors which would influence the evaluation process.
17.7504 Limitations on price increases.
(a)(2) The thresholds for base price comparison check procedures under SAMMS simplified purchase procedures and local automated procedures shall not exceed 25 percent and $250, after adjustments specified in DFARS 217.7504(a)(1).
(b) The requirement for review and certification to be accomplished before the purchase applies after awards under simplified purchase procedures where the price is not known until after acceptance of the Government's offer. Further, the certification to the HCA is required as a notification to management, not an approval requirement, of substantial price increases. The method and frequency of periodic notification and the degree and level of management involvement may vary, depending on such factors as dollar value, nature of the procurement, and extent of competition; however, regardless of the approach taken (e.g., quarterly oral or written brief using a table comparing the numbers of certified buys by percentage ranges of price increase within award value ranges, with the results of prior periods), HCA awareness is required of significant price increases on a continuing basis. A local focal point (the price analysis branch/element, where one exists) shall compile and provide local management and J-3311, at least annually, with information on such usage based on a copy of each certification furnished by contracting officers.
SUBPART 17.76 - CONTRACTS WITH PROVISIONING REQUIREMENTS
17.7602 Contracting requirements.
17.7602-2 Issuance of provisioned item orders (PIOs).
(90) Reserved.
(91) The file shall be documented when the price or cost analysis techniques discussed at 13.106(c)(90)(ii) and (v) are used for award of priced PIOs and definitization of undefinitized provisioned item orders (UPIOs).
(92) If the contract contains a progress payment clause without an exclusion provision for orders with a ceiling price below $1 million ($100,000 for small business firms) and/or having a delivery schedule of less than 6 months (4 months for small business firms), a provision precluding such applicability shall be included in all PIOs below these thresholds.
(93) Reserved.
(94) Reserved.
(c) The requirements of DFARS 217.74 and subpart 17.74 shall be met for all UPIOs awarded by DLA contracting offices.
17.7603-3 Negotiating and executing supplemental agreements.
(c)(90) The file shall be documented when the price or cost analysis techniques discussed at 13.106(c)(90)(ii) and (v) are used for the exercise of priced PIOs and definitization of UPIOs.
17.7690 Contracting officer's representative - Provisioning.
Technical personnel at each DSC and additional personnel within that office shall be designated as Contracting Officer's Representative for Provisioning for the purpose of providing technical assistance to offerors/contractors with regard to requirements for equipment support and provisioning for DSC acquired end items/components. Delegation of responsibility shall include authority for actions to be taken by the Provisioning Coordination Office as set forth in DLAD 4100.8, Surveillance of the Contractual Aspects of the Provisioning Cycle in the Defense Supply Centers. For example, the COR for Provisioning is responsible for reviewing purchase request (PR)/MIPR provisioning requirements to ensure compliance with provisioning policy and procedures and proper presentation of provisioning requirements in solicitations and contracts, conducting Pre-Provisioning Guidance and Source Coding Conferences when required by the contract, negotiating reductions in provisioning technical documentation requirements, including recommendations for equitable adjustments in the contract price or delivery terms based on technical provisioning considerations, surveillance necessary to assure receipt of provisioning technical documentation, and notifying the contractor of required corrections (rejection) or acceptance of provisioning technical documentation. The delegation will not include any authority to modify or change the terms of the contract or to make any agreement which will result in an increase in the contract amount or extend the time for delivery of the end items.
17.7692 Data pricing, evaluation, and award.
The clause cited at 52.217-9000, Data Pricing, Evaluation, and Award, shall be inserted in solicitations for acquisition of data with end items. The clause shall be inserted in Section M, Evaluation Factors for Award.
SUBPART 17.90 - MULTISOURCE CONTRACTING
This subpart prescribes policies and procedures for acquisitions of supplies and services from multiple sources when the coverage at FAR 16.504 for making multiple awards of indefinite-quantity task and delivery order contracts is not used.
(a) Provision for making awards to more than one source of supply or service may be made for the following purposes or reasons under the authority described for the respective purpose or reason.
(1) Establishing or maintaining alternative sources. See FAR 6.202.
(2) Industrial mobilization; or engineering, developmental or research capability. See FAR 6.302-3.
(3) Production test. See DLAR 4125.1, Production Testing of DLA Managed Items and FAR 6.101.
(4) Prospective contractor not responsible for entire quantity. See FAR 9.103.
(5) Supply assurance. See FAR 6.101.
(b) Contracting officers shall obtain the advice of local counsel both in acquisition planning and prior to award whenever multisource contracting is proposed on an other than full and open competition basis.
(a) The conditions for use of multisource contracting for the purposes or reasons described in 17.9001(a)(1) and (a)(2) above are described in FAR 6.202 and 6.302-3, respectively.
(b) Multisource contracting may be used when it is necessary for the purpose of testing under contract, the adequacy and practicability of specifications for a new or modified item to assure that the specification will permit quantity or mass production of quality items within economical production practices, and that the specification does not restrict competition.
(c) When the otherwise low, responsive or technically acceptable offer is from a prospective contractor that cannot be determined to be responsible for the entire quantity on which it offered, award may be made to that offeror only for the portion of the total requirements for which the offeror can be determined responsible. In such cases, the contracting officer may award the balance of the total requirements or that portion of the balance of the total requirements to the next low, responsive or technically acceptable offeror(s) to the extent that such offeror(s) is determined to be responsible, provided that the terms and conditions of the solicitation do not limit the Government's right to make multiple awards and the prospective contractor(s) does not condition its offer to preclude such awards. (Note that when the provision at FAR 52.214-10, Contract Award - Sealed Bidding, is included in IFBs, as required by FAR 14.201-6(e)(2), the Government has the right to award less than the total quantity solicited. Bids that take exception to this provision are not responsive. When the provision at FAR 52.215-16, Contract Award, is included in RFPs, as required by FAR 15.407(d)(4), the Government has the right to award less than the total quantity solicited. Offers that take exception to this provision are not technically acceptable.)
(d) Provision for making multiple awards may be made to ensure the availability of supplies in business risk situations. A reasonable basis for making multiple awards in such situations must exist, for example, the record shows a history of poor performance (unrelated to Government caused delay) for a critical item due to a contractors’ or inadequate production capacity; or the specification is complex or difficult and requirements must be satisfied in a relatively constrained timeframe. To adequately justify making multiple awards in such cases, the contracting officer must demonstrate that awarding less than the total requirements to more than one source will aid in ensuring that the prior contractor performance problems will not recur. Further, the benefits of having more than one source under contract for the same supplies or services at the same time should outweigh any anticipated increased prices that result from the award of more than one contract.
(a) When provision for multiple awards is made for the purpose of production testing a specification:
(1) The Government's minimum need must be principally for the purpose of determining that an item of supply can be manufactured to the specification on a production basis. Obtaining delivery of supplies is a secondary purpose.
(2) The quantity to be awarded to any contractor should, normally, be limited to the minimum economic production quantity required to ensure an adequate production test.
(b) When multiple awards are made due to the fact that the low, responsive or technically acceptable offeror cannot be determined to be responsible for the entire quantity solicited, the responsibility determination made on such offeror must reasonably describe the rationale for determining that award of more than the proposed award quantity to such prospective contractor would be beyond that prospective contractor's production or service capacity.
(c) When provision for multiple awards is made to ensure the availability of supplies in business risk situations:
(1) The contracting officer must adequately document a reasonable basis for making multiple awards that: supports the Government's need to make multiple awards to obtain the requirements when needed; explains how awarding more than one contract will reduce or eliminate past performance or supply availability problems; and describes the benefits of obtaining more than one source that outweigh any anticipated increases in prices resulting from the award of more than one contract (see 17.9002(d) above).
(2) The solicitation must permit award of the entire requirement to one offeror.
(3) The solicitation should include a provision reserving the Government's right to make multiple awards to other than the lowest priced offerors.
(4) Sealed bidding cannot properly be used because the solicitation provides that award may not be made solely on the basis of lowest price.
(5) The contracting officer must document, after receipt of offers and prior to award, that a reasonable basis to award to multiple sources exists.
(6) The contracting officer should make provision for a degree of competition, when practicable (e.g., low offeror will be awarded 60 percent of the total requirement, whereas the second low offeror will be awarded 40 percent of the total requirement).
SUBPART 17.91 USE OF PUBLIC MANUFACTURERS
SUBPART 17.92 - REOPENER CLAUSES
(a) A reopener clause is a special contract provision which creates a right for an equitable adjustment in the contract price at a specified time or due to the occurrence or non-occurrence of an event or contingency of the type specified in FAR/DLAD 31.205-7(c)(2).
(b) A reopener clause provides a means of achieving an equitable resolution of the treatment of a significant contingent cost during both the initial pricing of a contract as well as at any time an equitable adjustment to such price is called for under the provisions of the clause. However, its use requires deliberate care to avoid a shift in risk from the contractor to the Government. Consequently, it should be used only in extraordinary circumstances involving high dollar value procurements (i.e., rarely less than $500,000) where the uncertainty associated with particular cost element(s) substantially impacts the contract price.
(c) Circumstances in which its use may be appropriate include, but are not limited to, the following:
(1) The price reasonableness of one or more subcontracts representing a substantial portion of the prime contractor's proposed price cannot be determined prior to award of the prime contract for such reasons as:
(i) The prime contractor's inability to obtain subcontractor cost or pricing data timely
(ii) An adequate cost/price analysis was not performed by the prime contractor; or,
(iii) Adequate field report(s) were not received prior to conclusion of negotiations.
(2) A Forward Pricing Rate Agreement (FPRA) or Recommendation (FPRR) is not achievable because of uncertainties having a significant impact such as:
(i) Supporting contractor budgetary data was not submitted;
(ii) A substantial portion of the business base has not yet materialized; or,
(iii) A potential for purchase, merger, or sale of part of a contractor's operations exists.
(3) The price impact of a change in a contract requirement, term, or condition made during negotiations is significant but cannot be reasonably quantified and resolved prior to award.
(4) The offeror's estimating system contains significant deficiencies (DFARS 215.811-70(g)(2)(vi) and (3)).
When the contracting officer documents that use of a reopener clause is the most appropriate means of overcoming a contingency (see 31.205-7(c)(2)(90)(v)) that will significantly affect the pricing of a contract, as a minimum, the following should be accomplished:
(a) Request the field ACO provide a recommended clause for those cases in which the DCMA recommended its use. In other instances, contact the local cost/price analyst and the field ACO, as appropriate, for assistance in developing and/or modifying a reopener clause;
(b) Query the field ACO, regarding (1) the adequacy of the contractor's accounting system to provide all necessary cost data in the form required to price the adjustment (obtain a review of the adequacy of the accounting system if necessary), and (2) the adequacy of the contractor’s estimating system and whether any estimating system deficiencies have been identified, and if so, whether a reopener clause or other technique is recommended (DFARS 215.407-5-70(g)).
(c) Obtain, as necessary, cost or pricing data applicable to the cost element(s) and markup factors, to establish the base level in the clause from which adjustment will be made, and ensure such data has been verified;
(d) When the weighted guidelines method is used, the profit objective otherwise developed should reduce the value for contract type risk (DFARS 215.404-71-3(d)(4)(iii)); and the values for management and/or for cost control under the performance risk factor, when use of a reopener clause is needed due to an inadequate analysis of the subcontractor's proposal by the prime contractor (DFARS 215.404-71-2(e)(3)(i)(E)) and/or when there areestimating system deficiencies, cost proposal inadequacies and/or ineffective cost/schedule control (DFARS 215.404-71-2(f)(3)), respectively;
(e) Prepare a proposed schedule of calculations for each affected CLIN which identifies each specific rate, factor, element of cost, profit, etc., to be covered by the reopener clause; and explicitly describes or provides an example of the precise methodology to be used to calculate any resulting price adjustment. Consider whether it is appropriate to retroactively apply a price, as subsequently finalized, to items already delivered on time and to late deliveries.
(f) Obtain legal review for sufficiency and consistency with other contract clauses;
(g) If the clause is to provide for an upward adjustment, notify the local budget office of the necessity to commit funds over and above the contract price to the amount of the ceiling established, or obtain a confirmation from the requiring activity that funds are available and have been set aside) to cover the potential increased obligation (in the event the award is funded by a Military Inter-departmental Purchase Request);
(h) If use of a locally developed clause or one of the clauses at 17.9205 is contemplated on a modified basis, provide an advisory copy of the draft reopener clause, after completing steps (a) through (g) above, to the local contract policy office for review.
(i) If the modifications to one of the clauses at 17.9205 exceed minor changes, i.e., would substantially alter or eliminate any of the provisions of the clause, or if a local clause is used, promptly provide a facsimile copy of the draft clause to Headquarters DLA, J-3311.
(j) Incorporate the amounts and methodology reached through preaward discussions/negotiations with the contractor, in a document executed by both parties which is made an attachment to the price negotiation memorandum (PNM). Absent such agreement, calculations supporting the contracting officer's interpretation of negotiations should be incorporated in the PNM. (NOTE: Because such information may be considered confidential by the contractor, the details should not be incorporated into a reopener clause or otherwise included in the contract.); and
(k) Indicate in any letter of delegation for contract administration that the award contains a reopener clause. Advise the field ACO of any awards retained for local administration which will be affected by a prospective FPRA/FPRR, to assure the required information will be furnished timely.
17.9203 Contract requirements.
Incorporate the cost principles and procedures in FAR Subpart 31, for use as the basis for pricing any adjustment under the reopener clause, and the clauses at FAR 52.215-23, Price Reduction for Defective Cost or Pricing Data - Modifications, FAR 52.215-25, Subcontractor Cost or Pricing Data - Modifications, (if applicable), and FAR 52.215-2, Audit - Negotiation.
A reopener clause shall, at a minimum, incorporate the following:
(a) A title clearly designating it as a reopener clause;
(b) A clear statement of purpose;
(c) A clear identification of the items, amounts, event triggering the reopener procedure, and the responsibilities and rights of the contractor and the Government, including the requirement for certified cost or pricing data, and applicability of the Disputes clause (except for the circumstances in 17.9204(d)(iii)), as specified in DFARS 215.407-5-70(g)(3)(i)-(iv);
(d) A clear statement of the methodology for pricing any adjustment, in the following order of preference:
(i) A preestablished pricing formula which precludes the need for further negotiations;
(ii) If the nature of the contingency is such that its price impact can only be anticipated to fall within a broad range of prices vice one or several alternative price outcomes, the clause may identify the range and specify that the amount for that cost element may be revised within such range through negotiations. A pricing formula or methodology would be used to apply appropriate markup factors from the original contract price negotiation;
(iii) If the nature of the contingency is such that its price impact cannot be anticipated to fall within a broad range and/or original price negotiations did not involve cost or pricing data, the clause may instead specify that the parties will enter into good faith negotiations under the clause and may include a "walk-away" option terminating performance a specified number of days following receipt of written notice by either party in the event of a failure to agree.
(e) To minimize excessive obligation of funds and the potential for substantial over or under-payment, if there is reason to believe one co others, then the amount corresponding to the most likely contingency should normally be incorporated as the value of the interim cost element when establishing the contract price. If all alternatives are of equal likelihood, then a value based on a "best estimate" should normally be used. It may also be appropriate to provide for a price adjustment whenever information indicates, prior to the scheduled time established in the clause for an adjustment in the contract price, that there may be a significant variance from the anticipated finalized price;
(f) A provision for a downward and/or upward adjustment as appropriate (see 17.9104(e)). An exception is authorized only when necessary to achieve final agreement on price. For contracts allowing an upward adjustment above the contract price, establish a firm, not to exceed ceiling, on an aggregate basis (and per unit basis if applicable), above which no price adjustment shall be made;
(g) The method of adjusting any option quantity/period prices, if any, which may result from operation of the clause;
(h) If the contract is not subject to the Cost Accounting Standards (FAR Part 30), the treatment of accounting system changes which impact the price adjustment contemplated by the clause; and
(i) A contractor certification that the award price does not include any amount for the specified contingency except as provided for in the clause.
The reopener clauses listed below are available for use in negotiated contracts only after an advisory copy has been submitted and reviewed in accordance with 17.9202(h):
(a) Reopener clause - Cost of specified direct materials/other direct cost items (52.217- 9004); and
(b) Reopener clause - Pending indirect rates proposal (52.217-9005).
SUBPART 17.93 Surge and Sustainment (S&S)
This subpart prescribes policies and procedures for obtaining S&S capability through DLA contracts.
“New business arrangements,” as used in this subpart, include corporate contracts, prime vendor (PV) contracts, virtual prime vendor (VPV) contracts, and other forms of innovative acquisition.
“Newly sourced items,” as used in this subpart, are items that DLA is purchasing for the first time, either because they have just become available in the marketplace (i.e., are being manufactured for the first time), or because DLA has not used them before as an item of supply.
“Quarterly Program Review (QPR),” as used in this subpart, includes periodic reviews between the Inventory Control Point (ICP) industrial support teams and DLA Headquarters to discuss progress made against readiness metrics, progress in incorporating well-defined S&S requirements, S&S capability assessments, and S&S testing in DLA’s new business arrangements, industrial preparedness measures, and industrial preparedness funding.
“Surge and sustainment (S&S),” as used in this subpart, means the ability of the industrial base to meet increased quantity/accelerated delivery requirements, using industrial capabilities, across a broad spectrum of possible contingencies. This includes both the capability to ramp-up quickly to meet early requirements (i.e., surge), as well as to sustain an increased pace throughout the contingency(ies) (i.e., sustainment). The spectrum of possible contingencies includes major theatre warfare and smaller-scale contingency operations as defined in the Defense Planning Guidance. The increased quantity/accelerated delivery requirements are those above and beyond normal peacetime requirements.
(a) The primary mission of DLA is to support the warfighter in peace and during contingencies (i.e., major theatre war and smaller-scale contingencies). The ability to ramp-up quickly to meet early requirements (i.e., surge), and to sustain an increased pace throughout the contingency, are critical to the execution of U.S. military strategy. DLA’s designation as a Combat Support Agency makes it directly responsible for the timely support of critical material to the Commander-in-Chiefs (CINCs) of Unified and Specified Commands in support of their operational requirements. Because of DLA’s unique role, S&S capability must be a primary consideration in all acquisition strategies and resource investments.
(b) The following are existing statutory, regulatory, and policy coverage related to S&S:
(1) Defense Planning Guidance
(2) Joint Publication 4-0, Doctrine for Logistics Support of Joint Operations (Internet site: www.dtic.mil/doctrine/index.html).
(3) Defense Production Act of 1950
(4) Defense Priorities and Allocations System, 15 CFR 700
(5) DoD 4400.1-M, Department of Defense Priorities and Allocations Manual
(6) House Report 102-311 for FY 93 Defense Authorization Act
(7) DoD Directive 3110.6, War Reserve Materiel Policy
(8) DoD Directive 5000.60, Defense Industrial Capabilities Assessments
(9) DoD 5000.60-H, A DoD Handbook: Assessing Defense Industrial Capabilities.
(a) In the past, DLA inventories have played a large role in meeting contingency requirements. As DLA continues to downsize and reduce its own inventories, new strategies must be developed to assure access to commercial inventories and production capabilities or other industry-based solutions that will enable DLA to satisfy contingency needs. As DLA adopts new business practices that increasingly rely on contractors to provide a full range of integrated logistics support services, S&S capability must also be developed within the contractors’ supplier bases and included as part of their contract support.
(b) The contracting officer shall –
(1) Consider S&S in all peacetime acquisition strategies;
(2) To the maximum extent possible, include S&S in DLA’s new business arrangements and other long-term contracts;
(3) Develop alternative contractual arrangements for surge and/or sustainment, if more practical than under DLA’s new business arrangements and long-term contracts; and
(4) Obtain access to S&S capability through contractual, versus non-contractual, arrangements, to the maximum extent possible.
(c) The contracting officer shall include the following elements in new business arrangements and long-term contracts with S&S.
(1) A clear definition of S&S requirements (i.e., items, quantities, and delivery terms).
(2) A requirement that the contractor conduct an assessment of its capability to meet S&S requirements, identify shortfalls, and develop S&S strategies for all items.
(3) A requirement for participation in S&S tests (to include participation in the Joint Chiefs of Staff (JCS) and CINC exercises approved in the DLA Joint Training Plan).
17.9304 Acquisition strategy for new business arrangements and long-term contracts.
(a) Clear definition of S&S items, quantities, and delivery terms.
(1) Clear definition of S&S items, quantities, and delivery terms provides a baseline against which the offeror/contractor can assess its supplier base capabilities and determine shortfalls. It also provides a baseline against which the offeror/contractor’s S&S performance can be measured, and for which the contractor can be held accountable.
(2) In determining S&S items, consider all items to be included in the new business arrangements and long-term contracts for which increased demands are anticipated during a contingency. Items for which increased demands are anticipated may be excluded only if an industrial base analysis or market research has been performed and contractual arrangements have already been made to access sufficient S&S capability, or DLA peacetime assets that can reasonably be associated with the business base covered under the contract are sufficient to cover the full S&S requirement. The latter exception needs to be reassessed periodically, as assets may be drawn down over time. Report all exclusions and their basis in the Acquisition Plan and, if an Acquisition Planning Executive Council (APEC) review is not accomplished, in the QPR or directly to J-339.
(i) In some cases, it may be appropriate or advantageous to:
(A) Include S&S portions (e.g., surge portion or sustainment portion) under separate contracts.
(B) Include surge and/or sustainment requirements for a broader customer base than that served for peacetime support under the contract.
(C) Include provisions for one contractor to act as a back up for another contractor.
In these cases, clearly define in the Acquisition Plan the portion (e.g., surge or sustainment) included in the contract for the peacetime customer base supported under the contract, and any additional surge and/or sustainment requirements included in the contract.
(3) Commodity expertise, historical demand during previous contingencies, Military Service (MILSVC) input, shortfalls from the War Material Requirement or the World Wide Web Industrial Capabilities Assessment Program (WICAP) Analytical Tool (http://dscp123.dscp.dla.mil), and any other information available can be used to define the quantities and delivery terms of S&S items. The S&S quantities shall reflect an overall capability that encompasses the potential for multiple contingencies during the life of the contract, each of which involves a ramp-up and sustainment period.
(4) The definition of S&S requirements should be realistic. This requirements definition is not intended to constrain the contractor from providing parts support exceeding that defined, if needed during an actual contingency and if the contractor is able to provide it.
(5) Clear definition for individual acquisitions may necessitate intensive work with MILSVC customer(s). ICP industrial support teams shall play a large role in the definition process, including interfacing with MILSVC customers. Their knowledge of War Reserve Material, shortfalls identified through the DLA War Reserve Program, weapon systems and components considered to be of critical importance to the CINCs, industrial base capabilities and shortfalls, and existing industrial base solutions shall be considered for the items under each acquisition. Also, industrial support teams need to be an integral part of individual acquisition processes to enable their visibility of S&S capabilities from numerous sources, and their identification of potential integration issues (such as multiple distributors using the same manufacturing sources).
(6) The basis for development of the S&S requirements shall be documented in the Acquisition Plan. When only a portion (e.g., either surge portion or sustainment portion of the requirement) is included in the contract, identify the portion included, and the other contractual arrangement(s) that cover the remaining portion.
(7) There may be instances where definition of S&S requirements (i.e., surge items, quantities, and delivery terms) cannot be achieved prior to award. Under these circumstances, the contracting officer shall identify who will perform this definition and in what time frame. Also, S&S items, quantities, and delivery terms may change during the contract period. To address this, the contracting officer may include requirements for periodic reassessments and bilaterally agreed-upon redefinition. In both instances, the amount of time that S&S items, quantities, and delivery times are indefinite shall be minimized, to prevent lack of coverage and inability to measure contractor performance.
(8) Inclusion of S&S requirements does not negate the contractor’s responsibility to fulfill peacetime level requirements under the contract, even during contingencies.
(b) Contractor assessment of S&S capability.
(1) Assurance that contractors’ S&S capabilities actually exist is of paramount importance. Without this assurance, DLA’s capability to support the warfighter could be seriously degraded. This assurance shall be obtained by requiring the contractor to conduct an assessment of its capabilities to meet S&S requirements and to report the outcome of this assessment.
(2) A S&S evaluation factor, or a contract requirement for a post-award S&S capability assessment shall be used to ensure the contractor actually has the required S&S capability. When S&S capability can easily be assessed (e.g., when item population is small, or consists of parts from only one source), a detailed S&S evaluation factor by itself may be sufficient to provide assurance that S&S capability actually exists. In cases where substantial effort is needed to determine S&S capability (e.g., complex acquisitions requiring the contractor to provide numerous parts from various suppliers), a contract requirement for a S&S capability assessment and submission of a S&S capability report shall be used. When the S&S capability assessment will be conducted after award, a S&S evaluation factor should also be used to determine, prior to award, the contractor’s ability to perform the S&S capability assessment. ICP industrial support staff shall participate in all evaluations of contractors’ proposals under S&S evaluation factors, and in evaluations of S&S capability reports. Defense Contract Management Agency (DCMA) in-plant personnel may be consulted for verification of contractor capabilities or assessment of any contractor identified “problem items” (i.e., items for which S&S cannot be easily met) and proposed investment strategies.
(3) In some circumstances, post-award S&S capability assessments may be complex and resource intensive. In these cases, industrial support staff may request industrial preparedness funds from J-339 to cover the contractor’s cost of performing the post-award S&S capability assessment. Program Description and Approval Documents (PDADs) requesting these funds must include the S&S requirements (i.e., items, quantities, and deliveries), the basis for these requirements, and within what time frames during the contingency (i.e., beginning, middle, end) these requirements will be needed; a detailed explanation of the S&S assessment work to be conducted; and the contractor’s estimate of S&S assessment costs (with basis of the estimate).
(4) The following information shall be obtained through the S&S evaluation factor or S&S capability report:
(i) Contractor’s methodology enabling visibility of supplier base resources on a continuing basis;
(ii) Identification of supplier base inventories, production capability, on-demand manufacturing and advanced technology capabilities, or any other means of support available to meet S&S requirements and, based on this identification, a description of S&S strategies for all items;
(iii) Identification of “problem” items for which S&S cannot be easily met, proposed solutions for these items, and any significant investments (dollars or otherwise) needed to implement these solutions;
(iv) Description of access to, and plans for, coordinating distribution and transportation services for meeting S&S requirements; and
(v) Contractor’s agreements with suppliers and service providers that reflect access to S&S resources.
(vi) Clear identification of any significant investments (dollars or otherwise) under (iii) or other subparagraphs above, needed to develop S&S capability, with the following information:
(A) Why the investment is needed.
(B) What will be purchased with the investment.
(C) Basis for the investment cost.
(D) The S&S capability to be gained from the investment.
(E) For investments to effect S&S strategies, an analysis of what strategies were considered and why the proposed strategies are the most cost effective ones.
(5) When evaluating contractors’ past performance, consider past experience in conducting S&S assessments and providing S&S requirements. Offerors’, and their suppliers’, participation in the industrial capabilities data collection effort (electronic submission via DLA’s WICAP) or hard copy (DD Form 2737 submission) shall be considered as past experience in conducting S&S assessments.
(6) For items that the contractor already knows are readily available and accessible in sufficient quantities to meet the S&S requirements, a contractor-signed statement may be used in lieu of obtaining the more extensive S&S assessment information in 17.9304(b)(4). This statement shall contain
(i) The contractor’s rationale for concluding the S&S items are readily availableand
(ii) The contractor’s ability to meet the S&S requirements through access to these resources.
The commercial nature of an item, in and of itself, is not an adequate rationale for concluding the item is readily available. The statement shall be accompanied by a description of access to, and plans for, coordinating distribution and transportation services for meeting S&S requirements.
(7) S&S solutions.
(i) Use industry-based solutions for S&S, such as access to commercial inventories and production capabilities, to the maximum extent possible. In cases where existing commercial capabilities or access to these capabilities fall short of anticipated S&S quantities and delivery terms (i.e., “problem” items), it may be necessary to make S&S investments. If so, industrial support staff may request industrial preparedness funds from J-339 to finance these solutions.
(ii) Industrial preparedness funds can only be used to fund S&S solutions—
(A) Based on S&S quantities no greater than those estimated for the wartime scenario set forth in the DPG (e.g., two major theatre wars). This limitation is based on the expectation that quantities needed for smaller-scale contingency operation(s) would be much lower than those needed for major theatre wars, and therefore would be covered by the larger estimate;
(B) When commercial capabilities, such as commercial inventories and production capabilities, are insufficient or inaccessible;
(C) When substitute items or alternate manufacturing processes are not available;
(D) After existing DLA and MILSVC customers’ assets (when MILSVC customer base is limited) have been reduced to the minimum amount to be maintained for peacetime support under the new support method, or to an amount close to that minimum;
(E) That are the most cost-effective means of ensuring S&S capability; and
(F) For DLA-managed items.
(iii) Examples of S&S solutions that can be funded with industrial preparedness funds are--
(A) Access to commercial capabilities, if efforts to obtain such access at no cost are unsuccessful.
(B) Raw materials and partially finished parts needed to provide long lead-time items in short time frames, not finished parts;
(C) Contractors’ storage costs for S&S materials;
(D) Production tooling needed to expand production capability beyond that needed to meet peacetime requirements.
(iv) Use of S&S investments. S&S investments—
(A) Cannot be used as safety stock to support peacetime spikes in demand;
(B) Can be used to support smaller-scale contingencies;
(C) Are for use in support of major theatre wars.
(v) (A) Industrial support staff shall submit PDADs to J-339 to obtain industrial preparedness funds for S&S solutions. PDADs must include a description of the S&S requirements (i.e., items, quantities, and deliveries), the basis for these requirements, and the time frames during the contingency (i.e., beginning, middle, end) when these requirements will be needed; the reason solutions are needed for this specific set of items (e.g., long lead-time items and insufficient contractor supplier base inventories or production capability, and DLA and MILSVC (when the MILSVC customer base is limited) inventories); and a detailed explanation of what will be purchased, the S&S capability gained through the investment (i.e., level and time period of coverage provided), the estimated cost of the solutions (with basis for these costs), an analysis of what S&S strategies were considered and why the proposed strategies are the most cost effective ones, and the strategy for handling S&S investments at the end of the contract.
(B) Because industrial preparedness funds are programmed, notification to J-339 of potential need should be provided as soon as possible. S&S efforts and solutions to be funded with industrial preparedness funds should also be incorporated into ICP business plans, with yearly costs projected through the POM cycle.
(vi) The contracting officer, through ICP industrial support staff, shall—
(A) Obtain approval from J-339 for any exceptions to use of industrial preparedness funds defined in paragraphs (ii) and (iii) of this subsection, prior to obligation of these funds.
(B) Notify ICP readiness staff and J-339 when S&S investments are used for smaller-scale contingencies, so they are aware of the impact on readiness for potential major theatre wars.
(vii) The approach for handling S&S investments at the end of the contract (or in the event of termination of the contract), and whether S&S investments will be considered government property, must be included in the Acquisition Plan and PDAD. The approach should be coordinated with legal and comptroller staff, to ensure any statutory, regulatory, or policy guidance concerning government property and appropriate use of funding are met. Any changes in the approach, made as a result of negotiations, should be reported to J-339 prior to award of the contract (or, if in the post-award phase, prior to issuing the contract modification).
(c) S&S tests.
(1) Once S&S capability has been developed through conduct of a S&S capability assessment and implementation of any necessary S&S investments, S&S tests can be performed to validate the developed capabilities. A requirement for S&S testing shall be included in all DLA contracts that include contractor-provided S&S capability. The requirement shall include, but is not limited to, participation in JCS and CINC exercises approved in the DLA Joint Training Plan, and testing of both ramp-up (i.e., surge) and sustainment capabilities. S&S tests may also be paper exercises, simulations, participation in live exercises, command post exercises, or any other methodology that can validate the S&S capability.
(2) The contracting officer shall also consider requiring--
(i) Contractor submission of S&S test plans, as the contractor’s methodologies for gaining visibility of supplier base capabilities may enable cost-effective Government or contractor testing within an already existing structure for monitoring supplier base capabilities;
(ii) Contractor submission of S&S test reports describing S&S test performance;
(iii) Remedial actions for any deficiencies identified during S&S testing.
(3) If needed, industrial support staff may request industrial preparedness funds from J-339 to cover these costs:
(i) Development of test plans.
(ii) Actual test costs (except purchase of parts themselves).
(iii) Development of test reports.
(4) PDADs must include the S&S requirements (i.e., items, quantities, and deliveries), the basis for these requirements, and when these requirements will be needed (i.e., at beginning or end of the contingency); a description of the test function(s) (development of S&S test plan, performance of S&S tests, development of S&S test reports) to be purchased; and the estimated costs and their basis.
(d) Maintaining S&S capability. The contractor needs to maintain S&S capability once it is established. Periodic redefinition of S&S requirements by the Government (or contractor), and reassessments of supplier base capabilities by the contractor may be necessary, especially if items are added after award of the contract. For contracts allowing items to be added after award, include in the Acquisition Plan the approach for the added items, for: defining S&S requirements, obtaining the contractor’s assessment of surge capability, and addressing surge testing. Industrial preparedness funds may be used to cover contractor costs to maintain the capability, if needed. Requests for such funds should be part of the original PDAD to obtain funds for S&S assessment and testing, and to show the basis for the maintenance costs.
(e) Separate contract line items (CLINs) and SUBCLINS are required, as specified in 4.7103-2(a)(90) and 4.7104-2(a)(2)(90), for each S&S element (i.e., definition of S&S requirements, S&S capability assessment, S&S investments, S&S testing, maintenance of S&S capability) to be financed through industrial preparedness funds. Visibility of element costs will facilitate industrial preparedness budget planning for future S&S efforts.
(f) The following methods may be used to overcome barriers to contractor provision of S&S capability, or to such provision at a reasonable cost:
(1) Compete S&S requirements to the maximum extent possible.
(2) Hold industry conferences or pre-proposal conferences.
(3) Elevate negotiations.
(4) As a last resort, obtain partial capability, if available and if such action is in the best interests of the Government.
(g) Reporting requirements.
(1) For each new PV/VPV initiative, ICP industrial support staff shall report to J-339 on how S&S will be addressed in the acquisition, prior to award of the PV/VPV contract. If an APEC is conducted on the initiative, this reporting can be accomplished via the APEC process. If an APEC is not conducted, this reporting can be accomplished during the Quarterly Program Review (QPR) (if QPR occurs prior to award) or directly to J-339(if award will occur prior to the QPR). For corporate and other long-term contracts, ICP industrial support staff may be required to report on S&S coverage in these contracts on an ad hoc basis.
(2) After award of PV/VPV initiatives, the status of S&S actions taken under these initiatives shall be reported to J-339 during the QPRs.
(3) If contractor provision of S&S capability is not possible, after all potential avenues for providing such capability have been explored and negotiations have been elevated to the level of the ICP Commander/Director, the lack of S&S coverage shall be documented in the contract file and reported to J-339 prior to contract award. If the contractor is not the sole manufacturer, also report your plans to pursue alternative strategies to obtain S&S coverage.
17.9305 Other acquisition strategies.
(a) Other acquisition strategies must be pursued:
(1) If surge and/or sustainment capability cannot be obtained through peacetime contracts identified in subpart 17.9304;
(2) If it is more practical to obtain surge and/or sustainment capability through alternative contractual arrangements than through peacetime contracts identified in subpart 17.9304; and
(3) To cover S&S requirements for items not under new business arrangements and long-term contracts.
(b) Industrial support staff must identify S&S items and work with contracting staff to ensure S&S capability is developed for items in (a)(3) above.
(c) Examples of acquisition methods that may be used are:
(1) Stock rotation contracts and other forms of vendor-managed inventory arrangements;
(2) Third party shared production or shared inventory agreements with manufacturers and their commercial customers;
(3) Industrial base maintenance contracts;
(4) Minimum sustaining rate (MSR) contracts;
(5) Corporate exigency contracts (i.e., acquiring visibility of and access to industrial base resources).
(a) Defense conversion (i.e., contractors’ decreased dependence on Government contracts based on developing or expanding a commercial base of customers) and use of dual use technologies should be encouraged, when appropriate, to avoid maintaining expensive defense unique production capabilities.
(b) Prepositioned Government-furnished equipment (GFE) or leasing arrangements may be used as means of augmenting contractors’ production capabilities in order to meet contingency requirements. This is appropriate whenever industry is unable or unwilling to invest in capital equipment due to diminishing peacetime requirements. Providing GFE should also be considered as a means of disseminating dual-use technology to industries supplying critical items to facilitate their cultivation of commercial business. Storage and maintenance agreements should also be negotiated to facilitate contractor maintenance of the GFE in their possession.
17.9307 Surge and sustainment (S&S) requirements for commercial items.
(a) The current environment of downsizing and inventory reduction necessitates reliance on the commercial capabilities to fulfill S&S requirements. When S&S requirements for commercial items exist, the government’s S&S needs may necessitate incorporating S&S terms and conditions. This may include tailoring inconsistent with customary commercial practice. See FAR 12.302(c). J-33 has obtained the approval required by FAR 12.301(f) to include the clause at 52.217-9006 in solicitations and contracts for commercial items made under FAR Part 12.
(b) The following addresses use of S&S requirements and related terms and conditions in commercial item contracts:
(1) If S&S requirements are cost-based, they cannot be included under FAR Part 12 procedures because of the statutory prohibition on use of cost type contracts for commercial items. Any such requirements would be considered a separate “non-Part 12” requirement. However, cost-based S&S requirements can be placed on the Part 12 contract, along with non-Part 12 terms and conditions applying to them, for convenience.
(2) If S&S requirements are fixed price, the contracting officer will need to determine whether the S&S requirement is part of the commercial item requirement for the parts themselves or constitutes a separate requirement, and to document the basis for this determination in the contract file. This determination would include an assessment of the S&S requirement based on the definition of “commercial item” in FAR 2.101.
(i) When the S&S requirement is part of the commercial item requirement, Part 12 terms and conditions apply to the S&S requirement. The contracting officer will then need to determine whether any S&S terms and conditions to be used are consistent with customary commercial practice or not.
(A) When consistent with customary commercial practice, the contracting officer must document this finding in the contract file and can incorporate the commercially consistent S&S terms and conditions. No approval is required.
(B) When inconsistent with customary commercial practice, the contracting officer must follow the policy regarding tailoring at FAR 12.302(c).
(ii) When the S&S requirement is a separate requirement, the contracting officer will need to determine whether the requirement meets the definition of a commercial item, and to document the basis for this determination in the contract file.
(A) When the S&S requirement meets the definition of a commercial item, FAR Part 12 terms and conditions apply to the S&S requirement.
(a) When any S&S terms and conditions to be used are consistent with commercial practice, the contracting officer must document the finding of consistency in the contract file, and can incorporate the commercially consistent S&S terms and conditions in the solicitation and the resulting contract.
(b) When any terms and conditions to be used are inconsistent with customary commercial practice, the contracting officer shall follow the policy regarding tailoring at FAR 12.302(c).
(B) When the S&S requirement does not meet the definition of a commercial item, FAR Part 12 terms and conditions cannot apply to the S&S requirement, but the S&S requirement can be placed on the Part 12 contract, along with applicable non-Part 12 terms and conditions.
17.9308 Solicitation provision and contract clause.
(a) The contracting officer shall insert the clause at 52.217-9006, Limitations on Use of Surge and Sustainment (S&S) Investments, in solicitations and contracts when use of industrial preparedness funds for surge and/or sustainment solutions is contemplated. The Contracting Officer, through ICP industrial support staff, shall obtain the approval of J-339 prior to authorizing any exceptions to this clause, including any access requested under paragraph (h) of the clause.
SUBPART 17.94 CUSTOMER VALUE CONTRACTING
This subpart prescribes policies and procedures for soliciting offers, awarding contracts, and placing orders under DLA’s Customer Value Contracting (CVC) initiative. The Administrator of General Services and DLA have agreed that DLA is responsible for developing and maintaining Federal Supply Schedule type contracts for assigned items in furtherance of the National Supply System concept (see DoD 4140.1-R, Appendix 7). Authority for this is also found in FAR 8.401(a) and FAR 38.000.
"Customer Value Contracting” is a Multiple Award Schedule (MAS) method of providing logistics support that empowers the customer to select the product that best meets their mission needs. This multiple award, customer best value approach is similar to GSA Federal Supply Schedules. CVC is similar to the multiple award delivery order contracts covered by FAR Subpart 16.5 in that it uses either an indefinite delivery/indefinite quantity contract with a minimum ordering amount or an indefinite delivery requirements contract. It differs from the multiple award delivery order contracts covered by FAR Subpart 16.5 with regard to the solicitation and award process. In FAR Subpart 16.5 acquisitions, CICA and the FAR require a statement of definite requirements allowing direct competition in the award of contracts, but this degree of requirements definition is not required for CVC, thus allowing CVC contracts to include entire product lines and catalogs of products.
(a) The CVC contract approach provides DLA customers access to multiple indefinite delivery contracts involving the same or similar commercial items/product lines, enabling them to select the item (s)/product lines they determine meet their requirements using the lowest overall cost alternative, utilizing best value ordering procedures to satisfy mission requirements.
(b) Activities shall adhere to all applicable FAR, DFARS, and DLAD requirements in establishing CVC contracts. These include, but are not limited to:
(i) FAR Part 5, Publicizing Acquisitions;
(ii) FAR Part 6, Competition Requirements;
(iii) FAR Part 7, Acquisition Planning
(iv) FAR Part 8, Required Sources of Supplies and Services
(v) FAR Part 9, Contractor Qualification;
(vi) FAR Part 10, Market Research;
(vii) FAR Part 11, Describing Agency Needs;
(viii) FAR Part 12, Acquisition of Commercial Items;
(ix) FAR Part 16, Types of Contracts
(x) FAR Part 19, Small Business Programs; and,
(xi) FAR Part 25, Foreign Acquisition
(c)(i) CVC contracts are awarded pursuant to “competitive procedures” within the meaning of the Competition in Contracting Act (CICA) (10 U.S.C. § 2302(2)) since 1) participation in the program is, open to all responsible, responsive sources whose prices have been determined fair and reasonable, and 2) orders and contracts under the program result in the lowest overall cost/best value alternative to meet the needs of the United States.
(c)(ii) CVC contracts involve a variety of equipment, parts, inserts, and/or number of catalogs for same or similar product lines. If new CVC contracts are being awarded for same or similar product lines already available under existing CVC contracts, they may be awarded sequentially. If new CVC contracts are being awarded for products or product lines not already available under existing CVC contracts, the DLA customer must be advised that independent competition to satisfy the customer’s need(s) will be required, unless a non-competitive acquisition can be properly justified.
(d) CVC solicitations will appropriately advise prospective offerors that all offerors that submit technically acceptable offers at fair and reasonable prices are eligible for award on the MAS; if award will be made to less than all qualified offerors, the solicitation must state the basis for award, including evaluation factors and their relative weights. The solicitation shall also indicate that individual orders will be placed based on the DLA customer’s determination as to the best value/lowest overall cost alternative.
(e) Activities shall ensure CVC solicitations contain small business plan provisions/clauses if required.
Based on market research an analysis should be conducted to determine and identify those items/product lines that demonstrate a reasonable probability of being requisitioned in a CVC environment. Use of CVC shall be annotated in acquisition planning documents.
17.9404 Ordering Procedures. The following requirements shall be followed regarding placement of orders against CVC contracts--
(a) CVC contract awarding activities shall ensure ordering activities are aware of proper ordering procedures, to include the best value and ordering requirements specified in paragraphs (d) and (e) below. If the CVC contracts are available for ordering through an online ordering system, then the online ordering system must inform ordering activities of the ordering requirements of this section.
(b) Ordering activities must be made aware of all available CVC sources of supply. This can be done via a number of methods, to include use of web-based resources.
(c) Orders valued at or below the micro-purchase threshold may be placed with any CVC contractor, without regard to the requirements of this section.
(d) Orders exceeding the micro-purchase threshold shall be placed with the CVC contractor that can supply the item that represents the best value to the Government. Ordering activities are required to maintain their best value determination documentation as part of their order file in accordance with (i) below. Areas that should be considered to determine best value include:
(1) Price;
(2) Item features required for effective mission performance, e.g., quality, customer/user considerations, reliability, transportability including airlift capability;
(3) Warranty considerations;
(4) Delivery requirements;
(5) Past performance;
(6) Interchangeability
(7) Environmental and energy efficiency considerations;
(8) Small business considerations;
(9) Special features of the supply or service required for effective program performance;
10) Trade-in considerations;
(11) Probable life of the item selected compared to that of a comparable item; and
(12) Maintenance and repair availability and uniformity with current equipment.
(e) Orders exceeding the micro-purchase threshold shall be placed using the following ordering procedures:
(1) Review available vendors on online electronic ordering systems or at least three CVC pricelists; and
(2) Select the best value based on (d) above
(f) Ordering offices need not seek further competition, synopsize the requirement, make a separate determination of fair and reasonable pricing, or consider small business programs.
(g) Contracting officers awarding CVC contracts have already determined the prices of items under those contracts to be fair and reasonable. By placing an order against a CVC contract using the procedures in this section, the ordering office has concluded that the order represents the best value and results in the lowest overall cost alternative (considering price, special features, administrative
costs, etc.) to meet the Government's needs.
(h) Orders placed under a CVC contract—
(1) Are not exempt from development of an acquisition plan (see FAR Subpart 7.1) and an information technology acquisition strategy (see FAR Part 39);
(2) Are not exempt from the mandatory sourcing requirements of FAR Part 8; and
(3) Must comply with all FAR requirements for a bundled contract when the order meets the definition of “bundled contract” (for the purposes of this section the definition of “single contract” used in the definition of “bundling” in FAR 2.101(b) is expanded to include an order placed against a CVC contract).
(i) Documentation:
(1) Minimum documentation is generally all that is required. Orders should be documented, at a minimum, by identifying the contractor the item was purchased from, the item purchased, and the amount paid. If an Activity requirement in excess of the micro-purchase threshold is defined so as to require a particular brand name, product, or a feature of a product peculiar to one manufacturer, thereby precluding consideration of a product manufactured by another company, the ordering office shall include an explanation in the file as to why the particular brand name, product, or feature is essential to satisfy the agency’s needs. Ordering activities shall maintain appropriate documentation for each order in their files.
(2) Orders must be reviewed on a periodic basis to determine which products represent the best value at the lowest overall cost alternative to the Government and give each CVC contractor a fair opportunity to have its products considered.