# DLAD PART 17 – 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.
- 17.208 Solicitation provisions and contract clauses.

- SUBPART 17.5 – INTERAGENCY ACQUISITIONS UNDER THE ECONOMY ACT

- 17.500 Scope of subpart.

- SUBPART 17.73 – IDENTIFICATION OF SOURCES OF SUPPLY

- 17.7301 Policy.
- 17.7302 Procedures.
- 17.7302(90)

- 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 Limitation on obligations.
- 17.7404-5 Exceptions.
- 17.7404-6 Allowable profit.
- 17.7404-90 Other requirements.

- SUBPART 17.75 – ACQUISITION OF REPLENISHMENT PARTS

- 17.7501 Procurement of parts.
- 17.7502 General.
- 17.7502(b)(2)(70)
- 17.7505 Limitations on price increases.

- SUBPART 17.76 – CONTRACTS WITH PROVISIONING REQUIREMENTS

- 17.7602 Contracting requirements.

- 17.7602-2 Issuance of provisioned item orders (PIOs).
- 17.7603-3 Negotiating and executing supplemental agreements.

- 17.7602(95)
- 17.7690 Contracting officer's representative - Provisioning.
- 17.7691 Reserved.
- 17.7692 Data pricing, evaluation, and award.
- 17.7693

- SUBPART 17.78 – CONTRACTS OR DELIVERY ORDERS ISSUED BY A NON-DOD AGENCY

- 17.7800 Scope of subpart.

- 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 The S&S Enterprise Procedures One Book contains a more detailed explanation of the concept and terms used to describe S&S:
- 17.9302 Background.
- 17.9303 Policy.
- 17.9304 Solicitation and contract clauses/provisions.
- 17.9305 Surge and Sustainment (S&S) pricing evaluation.
- 17.9306 Executing S&S.
- 17.9307 Program control measures.

- SUBPART 17.94 – CUSTOMER VALUE CONTRACTING

- 17.9400 Scope of subpart.
- 17.9401 Definitions.
- 17.9402 General.
- 17.9403 Acquisition Planning.
- 17.9404 Ordering Procedures. The following requirements shall be followed regarding placement of orders against CVC contracts--

- SUBPART 17.95 – TAILORED LOGISTICS SUPPORT CONTRACTING

- 17.9500 Scope of subpart.
- 17.9501 Definitions.
- 17.9502 General.
- 17.9503 Acquisition Planning.
- 17.9504 Pricing.
- 17.9505 Pre-Award.
- 17.9506 Ordering Procedures.
- 17.9507 Post Award Actions & Management Oversight.
- 17.9508 Solicitation provisions and contract clauses.

- SUBPART 17.96 – NON-ECONOMY ACT INTERAGENCY ACQUISITIONS

- 17.9600 Scope of subpart.
- 17.9601 Justification for use.
- 17.9602 Ordering procedures.
- 17.9603 Contracting officer review.
- 17.9604 Fiscal matters.
- 17.9605 Follow-up procedures for non-Economy Act transactions.

- SUBPART 17.97 – CORPORATE CONTRACTS

- 17.9700 Contract Clauses.

PART 17 – SPECIAL CONTRACTING METHODS

TABLE OF CONTENTS

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 17.5 – INTERAGENCY ACQUISITIONS UNDER THE ECONOMY ACT

17.500 Scope of subpart.

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.

17.7502 General.

17.7505 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.

17.7693

SUBPART 17.78 – CONTRACTS OR DELIVERY ORDERS ISSUED BY A NON-DOD AGENCY

17.7800 Scope of subpart.

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 & SUSTAINMENT (S&S)

17.9300 Scope of Part.

17.9301 Definition.

17.9302 Background.

17.9303 Policy.

17.9304 Acq Strategy for New Bus. & LTC Contracts.

17.9305 Other Acq. Strategies.

17.9306 Other Issues.

17.9307 Surge & Sustainment.

17.9308 Solicitation Provisions & Contract Clauses.

SUBPART 17.94 – CUSTOMER VALUE CONTRACTING

17.9400 Scope of subpart.

17.9401 Definitions.

17.9402 General.

17.9403 Acquisition Planning.

17.9404 Ordering Procedures.

SUBPART 17.95 – TAILORED LOGISTICS SUPPORT CONTRACTING

17.9500 Scope of Subpart.

17.9501 Definitions.

17.9502 General.

17.9503 Acquisition planning.

17.9504 Pricing.

17.9505 Pre-award.

17.9506 Ordering procedures.

17.9507 Post award actions & management oversight.

17.9508 Solicitation provisions and contract clauses.

SUBPART 17.96 – NON-ECONOMY ACT INTERAGENCY ACQUISITIONS

17.9600 Scope of subpart.

17.9601 Justification for use.

17.9602 Ordering procedures.

17.9603 Contracting officer review.

17.9604 Fiscal matters.

17.9605 Follow-up procedures for non-Economy Act transactions.

SUBPART 17.97 – CORPORATE CONTRACTS

17.9700 Contract Clauses.

SUBPART 17.1 – MULTIYEAR CONTRACTING

17.104 General.

(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 Chief of the Contracting Office at each of the contracting activities. Contracting offices not designated as contracting activities (see DLAD 2.101) shall forward requests for modification of cancellation provisions to the Director, Acquisition Management, (J-7) for approval.

17.105-1 Uses.

(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 Chief of the Contracting Office at each of the contracting activities. 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 Management (J-7) for approval.

(c) For the DLA Energy ( formerly DESC ), 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 Chief of the Contracting Office only.

17.171 Multiyear contracts for services.

(a)(v)(3) For DLA Energy ( formerly DESC ), the responsibility for making the determination required by DFARS 217.171(a)(3) is delegated to the DLA Energy ( formerly DESC ) HCA. The DESC HCA may further delegate this authority, without power of redelegations.

The responsibility for making the determination required by DFARS 217.171(a)(3) is delegated to the Commander, DLA Disposition Services ( formerly DRMS ), with power of redelegation to the Director, Directorate of Contracting (DLA Disposition Services ( formerly 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.

SUBPART 17.2 – OPTIONS

17.202 Use of options.

(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).

(91) For market research requirements related to establishing and maintaining long term contracts (LTCs), see 11.302(b)(91). Additional business rules for LTCs are addressed in the Procurement Business Rule for Long Term Contracting, which can be accessed at https://polh.bsm.dla.mil/.

17.203 Solicitations.

(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.

17.204 Contracts.

(e) The total of the basic and option periods in the case of services, or the total of the basic and option quantities in the case of supplies, may, under special circumstances, exceed 5 years (but only up to 10 years for task or delivery order contracts unless the provisions below are met) when approved by the supply chain HCA, or J-7 HCA for non-supply chains, provided no statutory restriction limits the term of the contract or specifically authorizes a longer duration. Include the HCA signed memorandum to the contract file that fully explains the unusual and special circumstances that justify a contract length beyond 5 years.

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) shall 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-72 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 shall be submitted with the signature of the Supply Chain HCA, or CCO for non-supply chains. Requests for a longer ordering period or performance period shall include an in-depth analysis of the unique circumstances that necessitate the longer period. The analysis shall 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, J-72 will submit a consolidated report to the Director, Defense Procurement and Acquisition Policy 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.

17.206 Evaluation.

(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)).

17.207 Exercise of options.

(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.

(b) In addition to DFARS Clause 252.217-7001, the Contracting Officer shall include the provisions/clauses prescribed in 17.9306.

SUBPART 17.5 – INTERAGENCY ACQUISITIONS UNDER THE ECONOMY ACT

17.500 Scope of subpart.

(b) If more specific statutory authority exists, do not use the Economy Act as the authority to acquire goods or services through a non-DOD agency or another DOD component. For guidance pertaining specifically to non-Economy Act acquisitions, see Subpart 17.96, below, and DLAD PGI 17.96.

SUBPART 17.73 – IDENTIFICATION OF SOURCES OF SUPPLY

17.7301 Policy.

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.

17.7302 Procedures.

(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.

17.7302(90)

Use 52.217-9024, Special Provisions for Bulk Milk Dispensing Equipment (Subsistence Supply Chain), in solicitation and contracts for perishable dairy products.

SUBPART 17.74 – UNDEFINITIZED CONTRACT ACTIONS

17.7403 Policy.

(Follow the procedures of DLAD PGI 17.7404-3 when requesting HQ DLA review and approval of a letter contract or other undefinitized contract action (UCA), regardless of value, or an unpriced change order with an estimated value exceeding $5 million. Only the Director, DLA, has the authority to approve use of a UCA, regardless of value, or an unpriced change order with an estimated value exceeding $5 million. Definitization of any UCA or an unpriced change order valued over $5 million within the mandated time frames does not require DLA Director approval. Definitization beyond the mandated time frames does require the approval of the DLA Director.

(a)(90) The contracting officer shall expedite Government and contractor efforts to secure an acceptable price proposal and evaluation pending and following approval by the Director, DLA, to award a UCA. All proposed UCAs, regardless of value, and all unpriced change orders with an estimated value exceeding $5 million must be approved in accordance with this policy before issuance by the contracting officer. Contracting officers shall ensure that contractors understand that no work is to be performed until the proposed UCA is properly approved and awarded, and that anything done and any costs incurred in anticipation of the UCA are at the contractor’s own risk and will not result in Government liability or be reimbursed by the Government under the UCA. The chief of the contracting office shall monitor usage of UCAs for conformance with regulatory requirements.

(a)(91) The chief of the contracting office (or a local UCA Monitor, where designated) shall:

(i) monitor the activity’s usage of UCAs for conformance with local UCA procedures,

DLAD and higher level regulatory requirements;

(ii) prepare and forward the activity’s template reports, including negative

reports, electronically to HQ DLA J73 not later than ten calendar days following the end of each month and

(iii) ensure UCAs are correctly coded in the Federal Procurement Data System

(c)(90) Use the current electronic version of the DoD Template for Consolidated Undefinitized Contract Action (UCA) Management Report (available from HQ DLA J73, in MS Excel) for enhanced management oversight and monthly reporting of all UCAs having an estimated or actual contract ceiling value (including options) that exceeds $5 million. In addition, include in the report any unpriced change orders over $5 million, as required by DFARS 243.204-70-7.

17.7404 Limitations.

17.7404-1 Authorization.

(a) A proposed undefinitized contract action (UCA), as defined in DFARS 217.7401, regardless of value, or an unpriced change order with an estimated value exceeding $5 million must be submitted to J72 for staffing to the Director, DLA, for approval before entering into the UCA or unpriced change order. No letter contract or other UCA shall be awarded until properly approved in accordance with this requirement. This requirement includes UCAs of any dollar value and those falling under one or more of the exceptions in DFARS 217.7402. Head of Contracting Activity (HCA) authority in DFARS 217.7404-1 to approve entering into UCAs is withheld and shall not be used by PLFAs and other contracting offices.

(b) Requests for approval to use the authority in DFARS 217.7404-1(b) to authorize use of a UCA for a non-urgent requirement will normally be approved only where the non-urgently needed quantity should be included and priced coincident to definitization of an urgently required quantity of the item. Authorization will normally be limited to use of 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".

(c) Follow the procedures of DLAD PGI 17.7404-3 when requesting HQ DLA review and approval of a letter contract or other UCA, regardless of value, or an unpriced change order with an estimated value exceeding $5 million. The request for approval shall document the specific urgency which compels use of a UCA or unpriced change order, demonstrate that the requirements of DFARS 217.7403 and/or DFARS 243.204-70 are met, and identify the consequences of failure to take such action.

17.7404-2 Price ceiling.

(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.

17.7404-3 Definitization schedule.

(90) As required in DFARS 217.7404-3 or 243.204-70-3, DLA contracting activities shall ensure the definitization schedule provides for definitization within the earlier of 180 days from issuance of the UCA or unpriced change order (this may be extended for no more than an additional 180 days following receipt of a qualifying proposal from the contractor) or the date on which the amount of funds obligated under the UCA or unpriced change order is equal to or more than 50% of the not-to-exceed price (subject to the requirements in 17.7404-4(90) below, this may be increased to up to 75% of the not-to-exceed price if the contractor submits a qualifying proposal before obligation of 50% of the not-to-exceed price). The definitization schedule shall include milestone dates for receipt by the contracting officer of a qualifying price proposal that provides the required cost or pricing data (certified or uncertified as appropriate), normally within 30 calendar days following award, and for beginning negotiations.

(91) Any definitization occurring beyond the mandated time frames requires the approval of the DLA Director. Notify J72 immediately if this event is likely to occur. Submit the definitization requiring DLA Director approval a minimum of two weeks prior to the required issuance. J7 and DLA Counsel will review.

17.7404-4 Limitation on obligations.

(90) Upon receipt of required information, the contracting officer should assess the contractor’s performance, the liquidation rate and determine whether a change in the predefinitization obligation rate pursuant to DFARS 217.7404-4 is warranted. The assessment and conclusions shall be documented in the contract file. (These requirements are not applicable to UPOs.)

17.7404-5 Exceptions.

(90) Director, DLA Acquisition (J7), approval is required to use any of the exceptions in DFARS 217.7404-5.

17.7404-6 Allowable profit.

(90) The chief of the contracting office shall assure conformance with the requirements of DFARS 215.404-71-3(d)(2) and 217.7404-6 and document the risk assessment in the contract file. (These requirements are not applicable to UPOs.)

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)) 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

(93) The contracting officer shall identify and include with any delegation of an undefinitized delivery order (against a 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 delegating contracting activity and to office(s) preparing and furnishing the IGE.

SUBPART 17.75 – ACQUISITION OF REPLENISHMENT PARTS

17.7501 Procurement of 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, including when acquisitions are conducted using FAR Part

12, 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, DSCs shall follow the policy in this Section 17.7501 in its entirety when considering alternate offers and when deciding whether to evaluate alternate offers prior to 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. Offers of alternate product will not be evaluated for the instant procurement when acquiring Priority 1 items (IPG 1-3), items on backorder, or Not Mission Capable (NMC) items. Additionally, offers of alternate product shall not be evaluated for the instant procurement unless the contracting officer has coordinated with the Supply Planner and the Product Specialist and determined that delay of award is unlikely to result in backorders. This determination must be based on the Agency supply position, the lead time required for a technical evaluation at the cognizant Engineering Support Activity(ies), and the risk of additional lead time that may potentially be required for a first article test.

(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.

17.7502 General.

17.7502(b)(2)(70)

Use 52.217-9023, Restriction of Alternate Offers for Source Controlled Items, in solicitations when the acquisition is restricted to material manufactured by the sources listed on the source control drawing, as indicated by AMSC code B.

17.7505 Limitations on price increases.

(a)(2) The thresholds for base price comparison check procedures under EBS simplified purchase procedures and local automated procedures shall not exceed 25 percent and $250, after adjustments specified in DFARS 217.7505 .

(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-73, 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 ($150,000 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.

17.7602(95)

Use 52.217-9011, Provisioning, in solicitations and contracts when the need for provisioning is to be determined after award of contract or in negotiated solicitations and contracts when it is known, prior to issuance of the solicitation, that provisioning is required. Also use with DLAD 52.217-9000.

In the first paragraph of the clause, the Contracting Officer shall select the correct statement as follows:

Situation | The need for provisioning is to be determined after award | Negotiated solicitations and contracts when it is known, prior to issuance of the solicitation, that provisioning is required
Paragraph 1 Selection | reserves the right to require | will require
enter date of current issue in effect on date of contract award | enter date of current issue in effect on date of Solicitations

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.

17.7691 Reserved.

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.

17.7693

Use DLAD 52.217-9022, Provisioning Documentation is Waived, when any DLAD Provisioning clauses were included in the solicitation and the buyer determines at time of award that provisioning documentation will be waived.

SUBPART 17.78 – CONTRACTS OR DELIVERY ORDERS ISSUED BY A NON-DOD AGENCY

17.7800 Scope of subpart.

(90) For Agency-specific coverage regarding use of non-DOD contracts, see Subpart 7.90. See also Subparts 17.5 and 17.96 and related PGI material for guidance on the use of Economy Act and non-Economy Act authorities, respectively.

SUBPART 17.90 – MULTISOURCE CONTRACTING

17.9000 Scope of subpart.

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.

17.9001 Policy and authority.

(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.

17.9002 Conditions for use.

(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 52.215-1, Instructions to Offerors -- Competitive Acquisition, is included in RFPs, as required by FAR 15.407(d)(4), 15.209 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.

17.9003 Limitations on use.

(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

17.9201 General.

(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)).

17.9202 Procedures.

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 are estimating 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-71.

(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.

17.9204 Clause requirements.

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 contingent alternative is more likely to occur than 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.

17.9205 Contract clauses.

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)

(Revised September 15, 2011 through PROCLTR 2011-43)

17.9300 Scope of subpart.

This subpart prescribes policies for obtaining S&S coverage through the acquisition planning and long-term contracting process. This subpart does not apply to DLA Energy. For DLA Energy contracting, S&S coverage will be specified in the currently-approved DLA Energy Annual Surge Capability Plan (ASCP). Updates to the DLA Energy ASCP will be submitted to J74 for review and approval no later than October 31 each year or more frequently as significant changes occur. The policy defines DLA actions for requirements in DFARS 217.208-70(b) and DFARS PGI 217.202(2). Although the goals remain the same, the procedures in this policy do not apply when establishing Corporate Exigency, Minimum Sustaining Rate, or Industrial Base Maintenance Contracts, Vendor Managed Inventory, Prime Vendor WRM, and/or stock rotation as the alternate strategy to support the Services' go-to-war requirements.

17.9301 The S&S Enterprise Procedures One Book contains a more detailed explanation of the concept and terms used to describe S&S:

“D1-D6 Schedule,” represents the surge requirements expressed in exact quantity with a 6-month sustainable accelerated delivery. D1-D6 is the surge requirement, including the Services’ go-to-war requirements. D1-D6 schedule is used when MWR cannot be applied (e.g., Troop Support items that have a definitive fielding schedule such as MREs). D1-D6 Schedule is determined and obtained by using SPIDERS or IBMS, or by consulting the IS.

“Industrial Capability Issue (ICI),” a procurement issue created by the lack of industrial capability, capacity, or raw or semi-finished materials lead-time issues that impact the ability of the supplier to deliver at the wartime rate. The mitigation of the issue would require an investment by the Government to improve capability to deliver at the wartime rate. Normally, such investments are funded through the Warstopper program (refer to Warstopper One Book chapter).

“Long Term Contract(LTC),” are all long-term contract instrument types (e.g., indefinite quantity, corporate, prime vendor) where the ordering period of performance, to include option periods, is greater than 1-year. LTC does not include Indefinite Delivery Purchase Orders (IDPO).

“Monthly Wartime Rate (MWR),” expressed in units per month, represents the combined recurring requirements for all Services after offsets for peacetime DLA Direct (DD) supply chain surge capability and/or DLA managed War Reserve Material (WRM) stocks are applied. MWR is the surge requirement, including the Services’ go-to-war requirements. MWR is used when items have assigned national stock numbers (NSN). MWR for an item is determined and obtained by using the Industrial Base Management System (IBMS) or by consulting the IS.

“Peacetime Support Issue,” occurs when DLA is unable to meet the customer’s required delivery date for a weapon system repair part that is coded Not Mission Capable-Supply (NMCS), a critical item that impacts mission capability (MICAP), or to prevent the loss of life/property, or meets the FAR criteria for an unusual and compelling requirement if routine fulfillment/replenishment procedures will not satisfy the requirement.

“Surge and Sustainment (S&S),” increased quantities and/or accelerated delivery rates required to meet the Services’ requisitions across a broad spectrum of contingencies. The increased quantity and accelerated delivery rate are above and beyond the normal peacetime requirements, and are identified as MWR, D1-D6 schedule, or Surge Quantity Option.

“Surge & Sustainment Coverage,” is a combination of DLA’s ability to fill contingency requisitions through MWR, D1-D6 schedule, or surge quantity option within the customer’s required delivery date (RDD) and the vendor’s ability to meet surge quantity and sustainable accelerated delivery.

“S&S Events,” events that describe the relationship between the S&S planning requirement (S&SPR), the S&S actual requirements, and S&S coverage.

Event I: An item has known surge planning requirements, is not covered for surge, and is not needed in surge quantities during an actual contingency.

Event II: An item has known surge planning requirements, is not covered for surge, and is needed in surge quantities during an actual contingency.

Event III: An item has no known surge planning requirements, is not covered for surge, and is needed in surge quantities during an actual contingency.

Event IV: An item has known surge planning requirements, is covered for surge, but is not needed in surge quantities during an actual contingency.

Event V: An item has known surge planning requirements, is covered for surge and is needed in surge quantities during an actual contingency.

Event VI: An item has no known surge requirements, is covered for surge, and is needed in surge quantities during an actual contingency.

Event VII: An item has no known surge requirements, is covered for surge, and is not needed in surge quantities during an actual contingency.

“Surge and Sustainment Planning Requirements (S&SPR),” (also referred to as “go-to-war requirements”), are the additive monthly wartime demand requirements obtained through collaboration with the customers, which include the Services’ Other War Reserve Material Requirements (OWRMR), Joint Chief of Staff (JCS) project coded requisitions, and items with a Weapon System Essentiality Code (WSEC) of 1, 5, 6 or 7. These are the Services’ go-to-war items for contingency operations, national emergencies, or other readiness needs, where speed of delivery and immediate availability of materials are the primary priority to support national security interests. DODI 3110.06, War Reserve Material Policy, and Secretary of Defense strategic planning guidance require the identification of these Go-to-War requirements to support the national security interests of the United States.

“Surge Quantity Option,” increased quantity above and beyond peacetime demands expressed in percent or exact number with a sustainable accelerated delivery. This is other than MWR or D1-D6 schedule, and used for items that are market ready, commercial, or non-NSN vendor part numbered items (e.g., cataloged commercial items under a prime vendor arrangement) to support increased demands during contingency operations, national emergencies, or other readiness needs. Surge quantity option is calculated using appropriate demand data through market research, or determined by consulting the IS.

“Unsupported Item Issue (UII),” surge requirements that cannot be met through peacetime inventory, normal peacetime contracting, alternative contract strategies, or a successful resolution using investment to an ICI. DLA is required to report these items to the Services for inclusion into their war reserve planning. Examples: Investment to resolve an ICI exceeds cost of a government “buy and hold” solution, or when stocking the item is counter to DOD war reserve policy.

17.9302 Background.

The primary mission of DLA is to support the Warfighter in peacetime and wartime to include smaller contingencies. The ability to surge (ramp up quickly) and to sustain replenishment of wartime consumable items at an increased pace is critical to the execution of U.S. military strategy. S&S coverage is impacted by the continuing emphasis by both DLA and suppliers to reduce inventory and by DLA’s plan to rely on industrial capability. Therefore, S&S capability must be a primary consideration in all acquisition strategies and resource investments.

17.9303 Policy.

a. References. The following are existing statutory, regulatory, policy, and other provisions for surge and sustainment coverage:

(1) DOD Strategic Planning Guidance (SPG)

(2) Defense Production Act of 1950

(3) Defense Priorities and Allocations System, 15 CFR 700

(4) DOD 4400.1-M, Department of Defense Priorities and Allocations Manual

(5) DOD Instructions 3110.06, War Reserve Materiel Policy

(6) Various provisions of Title 10, United States Code

(7) DFARS 217.208-70(b);

(8) DFARS PGI 217.202(2);

(9) Executive Order 12919, National Defense Industrial Readiness Preparedness

(10) FAR Subpart 6.302.3 Other Than Full and Open Competition

b. It is the Agency’s goal to have all Surge and Sustainment Planning Requirements (S&SPR) and the Services’ go-to-war requirements on a long-term contract to ensure coverage for wartime critical materials, in accordance with the regulations, policy, and provisions above. Acquisition planning efforts shall ensure DLA leverages its long-term contract (LTC) acquisitions to obtain S&S coverage that addresses surge events I – VI specified above.

c. Contracting Officers (CO) shall obtain coverage for items identified as go-to-war items during the acquisition process of all long-term contracts, except indefinite delivery purchase orders (IDPO); or modifications to add items to the contract; or when exercising the term option. Refer to the PGI 17.9301 for procedures when processing surge requirements.

(1) PRESOLICITATION PHASE

(A) CO conducts market research (e.g., historical surge plan and performance, collaboration with industrial specialist) to determine the appropriate strategy to obtain S&S coverage.

(i) If market research clearly shows that surge quantities and delivery schedule can be met through the LTC contract maximum and required delivery, and can satisfy both peacetime and wartime requirements, CO shall consult the IS to determine if surge-specific provisions can be excluded, in part or as a whole, from the solicitation.

(ii) CO shall only exclude surge-specific provisions after receiving approval from the Industrial Base (IB) Chief through the waiver process in PGI 17.9301, and will clearly document the market research result, surge coverage decision, and approval in the acquisition plan.

(B) CO verifies and validates LTC population for surge requirements using the appropriate IB tool or by consulting the Industrial Specialist (IS) to determine surge requirements. Methods for incorporating surge requirements into the LTC:

(i) Include surge requirements using MWR or D1-D6 in the solicitation/contract under a separate CLIN; or

(ii) Include surge quantity option (percent or exact number) with a sustainable delivery for items that are market ready, commercial, or non-NSN vendor part numbered (e.g., cataloged commercial items under prime vendor arrangement). The exact quantity or percent for the surge quantity option shall be calculated based on historical consumption data or other appropriate demand data.

(C) CO shall collaborate with the IS when developing the evaluation criteria for S&S requirements.

(D) The CO shall obtain IS approval of the S&S coverage strategy and clearly document in the acquisition plan.

(2) SOLICITATION PHASE

(A) When surge requirements apply, CO shall include MWR, D1-D6, or surge quantity option CLINS, insert appropriate clauses/provisions and evaluation criteria in the solicitation.

(B) CO shall notify the IS immediately upon issuing the solicitation and when it becomes available in the electronic contract file (ECF) to update the corresponding IB tool.

(C) CO shall collaborate with the IS prior to making changes to surge requirements and coverage in the solicitation to assess the impact of the proposed change to the Services go-to-war items.

(D) CO shall notify the IS when an amendment is issued affecting surge coverage, close dates, and/or LTC population.

(3) EVALUATION PHASE

(A) CO shall submit the capability assessment plan (CAP), and Warstopper or Government investment request (if applicable), to the IS for review and recommendation. Refer to PGI 17.9301 Section 4 for CAP evaluation procedures.

(B) See 17.9305 for surge price evaluation. CO shall document surge price objectives in the pre-negotiation briefing memorandum.

(C) CO shall ensure that the CAP includes an exit strategy and that the proposed exit strategy is in the government’s best interest. Refer to PGI 17.9301 Section 5(d) and (e) for exit strategy alternatives.

(4) NEGOTIATIONS/DISCUSSIONS PHASE

(A) CO shall conduct negotiations/discussions to make every attempt to obtain surge coverage and collaborate with the IS or IB Chief for assistance for alternate surge strategy, if necessary. Refer to PGI 17.9301 Section 5(n) for alternate strategies to support go-to-war items.

(B) CO shall consult the IS for Warstopper or Government investment determination and recommendation when an ICI is identified by the supplier and/or if supplier is requesting Government investment.

(C) CO shall ensure that approved Warstopper or Government investment is offered to all suppliers competing in the acquisition.

(D) CO shall negotiate an exit strategy that is in the Government’s best interest. Refer to PGI 17.9301 Section 5(d) and (e) for exit strategy considerations.

(E) CO shall document negotiation/discussion results to include surge prices, delivery, ramp-up time if applicable, and exit strategy in the price negotiation memorandum.

(F) When surge coverage is unobtainable and/or negotiations/discussions are unsuccessful, or when the CO, in collaboration with the IS, determines that it is in the Government’s best interest to exclude surge in part or as a whole, the CO shall submit a waiver request to the IB Chief for approval prior to excluding the surge item(s) and/or requirements from the solicitation. Refer to PGI 17.9301 Section 4(m) for surge waiver process.

(i) CO shall only exclude surge-specific provisions, in part or as a whole, from the solicitation/contract upon receiving approval from IB Chief and shall document the waiver approval in the contract file.

(ii) Upon receiving the IB Chief’s approval to remove surge-specific provisions in part or as whole, CO shall factor surge quantities in the contract maximum calculation and obtain accelerated delivery schedule that will satisfy both peacetime and wartime requirements.

(iii) CO shall notify the IS and SMSG/IST Lead via email of the surge provision exclusion to determine the alternate support strategy for the Services’ go-to-war items or that an unsupported item issue (UII) exists. Refer to PGI 17.9301 Section IV (n) for alternative strategies.

(v) CO shall document unsuccessful attempts to obtain surge coverage in the contract file.

(5) AWARD PHASE

(A) CO shall incorporate the approved CAP, exit strategy, and CLIN 9965 for the approved Government investment amount (if applicable).

(B) CO shall notify the IS when the contract is available in the ECF to update the appropriate IB tool.

(C) CO shall establish the appropriate surge CLINS (i.e., MWR, D1-D6, surge quantity option, 9900) in the SAP Outline Agreement (OA) to ensure proper sourcing of surge line items or orders in the Enterprise Business System (EBS). Refer to the S&S Procurement Job Aid in EBS Online Help for instructions when loading surge information.

(6) POST AWARD PHASE

(A) CO shall coordinate with the IS before making any changes to the surge coverage after contract award and shall document the contract file for any changes made to the surge coverage. Refer to PGI 17.9301 Section 7 & 9 when there are changes in surge coverage.

(B) CO shall assess and validate the existing surge coverage when conducting market research prior to exercising the term option and consult the IS for changes in industry capability (e.g., natural disaster, bankruptcy, debarment or excluded party list). Refer to PGI 17.9301 Section 7(d) when exercising the term option with surge.

(C) CO shall conduct surge check when pricing additions to LTC items in accordance with the Add/Delete Clause; obtain a CAP and surge pricing for MWR or D1-D6. Refer to PGI 17.9301 Section 7(b) when pricing additions to LTC items in accordance with the Add/Delete Clause.

(7) SURGE EXECUTION

(A) CO shall invoke and execute surge in accordance with 17.9306. Refer to PGI 17.9301 Section 8 when invoking and executing surge.

(B) CO shall invoke and execute surge for peacetime support issue on a case-by-case basis and only when authorized by HQ DLA J7.

(8) SUPPLIER’S CHANGE IN S&S CAPABILITY

(A) CO shall consult the IS for assessment and recommended courses of action when supplier(s) requests change to surge capability or can no longer meet surge coverage obligation in the contract. Refer to Section 9 for procedures when there are changes to the supplier’s capability.

(B) If surge coverage includes Warstopper or Government investments, CO shall make adjustments to the investment as necessary when changes are made to the CAP. If supplier(s) can no longer support surge coverage, CO shall exercise the exit strategy and recoup Warstopper or Government investment (i.e., funds, raw material, finished goods) to the maximum extent possible.

(C) CO shall document surge coverage change and results of exit strategy in the contract file.

(9) CONTRACT EXPIRATION/TERMINATION

(A) CO shall exercise the exit strategy specified in the contract prior to termination or expiration to recoup Warstopper or Government investment or to ramp-down the supplier’s surge inventory, if applicable. Refer to PGI 17.9301 Section 10 for contract termination or expiration involving surge.

(B) CO shall consult the IS for assistance if necessary prior to exercising the exit strategy for contract termination/expiration and document the contract file of the exit strategy result.

17.9304 Solicitation and contract clauses/provisions.

The CO shall insert the following provisions/clauses in solicitations when MWR, D1-D6, or surge quantity option is required. The CO, in coordination with the supply chain’s industrial support, shall obtain the approval of DLA HQ J-74 prior to authorizing any exceptions to the provisions/clauses. Exceptions from and/or alteration to the clauses listed below are not subject to the review and approval requirements set forth at DLAD 1.301-91. Exceptions or alterations must be submitted in writing to HQ DLA J-74 for approval.

a. Use 52.217-9006, Surge and Sustainment (S&S) Requirements, only when including MWR or D1-D6 in the solicitation. Insert 52.217-9006 ALT I only when including surge quantity option in the solicitation, in accordance with 17.9303(c)(2)(A).

b. Use 52.217-9007, Surge and Sustainment (S&S) Instructions to Offerors, only when including MWR or D1-D6 in the solicitation. Insert 52.217-9007 ALT I only when including surge quantity option in the solicitation, in accordance with 17.9303(c)(2)(A).

c. Use 52.217-9008, Surge and Sustainment (S&S) Evaluation, only when including MWR or D1-D6 in the solicitation. Insert 52.217-9008 ALT I only when including surge quantity option in the solicitation, in accordance with 17.9303(c)(2)(A).

d. Use 52.217-9009, Surge and Sustainment (S&S) Pricing, when including MWR or D1-D6 in the solicitation, in accordance with 17.9303(c)(2)(A).

e. Use 52.217-9010, Limitations on Surge and Sustainment (S&S) Investments, when including MWR, D1-D6, or surge quantity option in the solicitation in accordance with 17.9303(c)(2)(A).

17.9305 Surge and Sustainment (S&S) pricing evaluation.

a. CO shall evaluate surge pricing for MWR or D1-D6 in accordance with FAR 15.404-1 to determine price reasonableness and cost realism (see FAR 2.101 and 15.403 for when to obtain cost or pricing data).

b. If the CO cannot independently justify the surge price, the CO shall ensure offerors submit information other than cost or pricing data or, if applicable, certified cost or pricing data, as circumstances require, that sufficiently explain causes of price difference between surge and peacetime quantities, in accordance with 52.217-9009. The information may be submitted in the offeror's own format unless the contracting officer requests a specific format in the solicitation.

c. CO shall consider the unique factors affecting S&S pricing when evaluating prices for MWR or D1-D6, which may cause higher pricing than peacetime quantities since S&S involves increased production and accelerated delivery time (usually 30-days or less) during contingency operations. In addition, S&S pricing is often based on vendors’ estimates of future costs or projections since contingency operations are unpredictable and there is uncertainty when or if the Government will exercise surge. Certified cost or pricing data will not always apply to S&S. Instead, information other than cost or pricing data as described in FAR 15.402(a)(2) may apply. The vendor may have other costs in addition to the normal peacetime costs to support S&S requirements, such as:

(A) premium pay for overtime and/or additional shifts to fulfill increased production to support surge;

(B) additional costs for expedited delivery of materials from sub-tier vendors to meet the accelerated delivery requirement of surge;

(C) the cost to order minimum purchase quantity from sub-tier suppliers, in addition to peacetime ordering, to pre-position materials required to produce or supply S&S quantities, with a factor for the risk that the Government will not issue a surge order and/or buy-back any excess or unconsumed materials before contract expiration or termination;

(D) having to maintain reserve production capacity that otherwise would generate revenue; and/or

(E) having to maintain extra inventory, raw materials, or components specifically to support surge requirements.

(2) The Government is not obligated to exercise the surge CLINS during the contracted performance period. The suppliers are assuming all the risks of incurring additional costs and holding additional inventory to support S&S coverage, until the Government executes a surge order to support contingency operations and other emergencies.

(3) In addition to allowing for extra costs, the Contracting Officer should consider whether to allow for additional profit over and above any amount for the peacetime requirement. When the Weighted Guidelines method is applied in 215.404-71, the Contracting Officer should review DFARS 215.404-71-2(e)(1)(ii), as well as (e)(2)(i)(B), (e)(2)(ii)(C), and 215.404-71-3(d)(ii) and (3)(i) to see if they are applicable. These references respectively address management involvement, degree of integration and coordination, critically important milestones, adequacy of cost data, and cost history.

(4) A review of the S&S Capability Plan may assist in analyzing the Surge Price in comparison to the Peacetime price, since it may indicate costs that the offeror expects to incur if the S&S requirement is invoked.

d. CO shall also consider guidance in DFARS 217.7505(b)(2) and the definition of S&SPR under 17.9301, when evaluating the surge prices that are higher than the peacetime prices. The Services’ go-to-war requirements directly support the national security interests of the United States.

e. If surge prices are deemed unreasonable or if surge negotiations will cause the delay of contract award, CO shall submit a waiver request to the IB Chief for approval prior to removing surge requirement, in part or as a whole, from the solicitation/contract. Refer to PGI 17.9301 Section 5(m) for the waiver procedure.

17.9306 Executing S&S.

a. CO shall invoke and execute a surge order when:

(1) Supporting project-coded requisitions for:

(A) Wartime or Contingency operations;

(B) Reconstitution of contingency resources following wartime operations or a major exercise;

(C) NMCS, MICAP, unusual and compelling requirements;

(2) Senior leadership determines executing and invoking surge are appropriate to prepare the Agency for anticipated increases in demand due to a national emergency via a memorandum or other written authorization;

(3) Recognizing a Peacetime Support Issue where inventories and peacetime delivery rates alone cannot or will not support total demand. A Peacetime Support Issue may exist prior to the establishment of JCS Project Code. Under such circumstance, HQ DLA J-7 in coordination with J-3 provides the Supply Chain with the authorization to execute and invoke surge to support a peacetime issue; or

(4) Testing, validating, or maintaining the operability of the S&S capability. Under these circumstances, HQ DLA J-74 authorization and approval is required prior to invoking and executing surge.

b. CO shall invoke and execute surge when it is in the Government’s best interest and shall consider the following:

(1) Any premium costs associated with exercising S&S compared with other options such as expedited delivery, spot buys, diversion, redistribution orders, reclamation;

(2) Whether the supplier is contractually obligated to provide S&S coverage and consider surge ramp-up and/or recovery time after S&S activations;

(3) Availability of funds and priorities.

c. CO shall exercise great prudence when exercising surge with Warstopper investment and only execute surge when one or more of the conditions below apply. CO shall consult the IS before executing surge when there is Warstopper- funded property, equipment, or materials involved. Free issue of consumables involving Warstopper investments require HQ DLA J-74 approval.

(1) Deploying or deployed troops shall be in an actual or anticipated contingency (including a declared contingency with or without a project code);

(2) A build up of troops is in process in preparation for a contingency;

(3) Call up of Reserves for deployment is in process; or,

(4) Any other preparation events intended to place DOD resources in a contingency, or at a higher than normal operations tempo.

d. CO shall report surge execution to the lead IS within 30 days for tracking purposes. Refer to PGI 17.9301 Section 8 for surge execution procedures.

17.9307 Program control measures.

The effectiveness in obtaining surge coverage will be assessed, measured, and tracked by HQ DLA J-74 in accordance with the DLA One Book.

End of Policy

SUBPART 17.94 – CUSTOMER VALUE CONTRACTING

17.9400 Scope of subpart.

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.

17.9401 Definitions.

"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.

17.9402 General.

(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.

17.9403 Acquisition Planning.

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.

SUBPART 17.95 – TAILORED LOGISTICS SUPPORT CONTRACTING

(Revised September 13, 2011 through PROCLTR 2011-36)

17.9500 Scope of subpart.

This subpart prescribes policies and procedures for soliciting offers, awarding contracts, placing orders, and post award administration under DLA’s Tailored Logistics Support Contracting initiatives. Included in this category are Prime Vendor (PV), similar existing support arrangements known as Modified Prime Vendor initiatives (MPV), and future initiatives that have characteristics of PV arrangements, but are not considered traditional PV. This subpart also discusses the management attention required throughout the life of a Tailored Logistics Support contract. It includes a clause to be used when the Government is relying on the Contractor’s purchasing system to verify that the Contractor competed the items or services or to justify fair and reasonable pricing. Any deviation from this subpart must be requested in writing and be approved by the Senior Procurement Executive. Deviations may be requested on a program rather than an individual acquisition basis.

17.9501 Definitions.

“Catalog” is a vendor’s listing of items that have been determined to have fair and reasonable pricing by DLA and are now available for ordering by authorized users. The catalog is limited to DLA approved items and is not necessarily inclusive of the full range of items that a vendor can provide.

“Distribution and Handling Fee” is one component of the total item price listed in the catalog. It is the portion paid for stocking, handling, and delivering the item, as awarded under the contract. It does not include the cost of the actual item that the tailored logistics provider may have manufactured itself or procured from another supplier. It is expressed in fixed dollar amounts only, not in percentages, except for those Prime Vendor acquisitions found in the PGI 17.9504 (a) pricing model.

“Distribution and Pricing Agreement (DAPA)” is an agreement with a manufacturer or supplier that establishes both the selling price of a product and an affirmation from the DAPA-holder to allow Tailored Logistics Support contractors to distribute its products. A DAPA allows for the delivery of selected products at specified prices.

“Market Basket” is an evaluation tool that uses a representative group of line items on the proposed contract to establish fair and reasonable price determinations. Items and quantities selected for inclusion in a market basket must represent a minimum of 75 percent of the anticipated dollar value of the planned acquisition. Market Basket price reasonableness determinations are made in accordance with FAR Subpart 15.4 and may consist of comparisons with historical pricing data, catalogs, market prices, various price indexes, and similar standard pricing standards.

“Modified Prime Vendor (MPV)” are those PV-like arrangements that provide additional capabilities beyond distribution. Some of these other support arrangements have been known in the past as Integrated Prime Vendor and Virtual Prime Vendor. There may or may not be a direct relationship between the prime vendor and the customer.

“National Allowance Pricing Agreement (NAPA)” is an agreement with a manufacturer or supplier that provides discounts on a national basis. Tailored Logistics Support contractors pass on these savings to the end customer.

“Prime Vendor (PV)” is a supplier of a wide variety of products within a specific industry/sector, which along with supplying those products provides additional capabilities such as distribution. The additional capabilities are evaluated as part of the best value decision making process. Examples are the Medical/Surgical, Pharmaceutical, and Garrison Feeding PV contracts.

17.9502 General.

Acquisition and acquisition personnel involved in Tailored Logistics Support arrangements, such as PV, MPV, and other similar support arrangements, both existing and future, are subject to the policies and procedures contained in this subpart.

The DLA Tailored Logistics Support approach provides access to an extensive variety of products through indefinite delivery contracts, enabling DLA customers to obtain products quickly and efficiently while utilizing the commercial inventory and distribution infrastructures established by primary distributors. They may be part of a Performance Based Logistics (PBL) initiative, and if so, would also be subject to the PBL Acquisition Process coverage in 90.15. Selecting a Tailored Logistics Support approach requires a clear and convincing business case justification that this acquisition strategy shall provide the best support for the customer, provides competitive pricing and transparency of those prices throughout the life of the contract, and that there are sufficient resources available to adequately monitor compliance with all contract terms and conditions.

(c) Training of acquisition workforce. Individuals assigned to work on or provide significant support for PV or MPV contracts shall take part in a Tailored Logistics Support program of instruction, tailored by the supply chain to its programs, within one month of assuming their duties on a PV, MPV, or other Tailored Logistics Support program. These individuals shall be required to obtain annual certification of training in Tailored Logistics Support requirements and pricing from their supply chain. See in PGI 17.9502 mandatory guidance for a suggested course curriculum.

(d) For field activities without an Acquisition Executive (AE), all Tailored Logistics Support (TLS) acquisitions require DLA HQ review and approval of the acquisition plan regardless of dollar value. Also refer to DLAD 7.104-91 for AAPT requirements. Acquisition planning documents and briefings to DLA HQ shall address the elements of this subpart, in order.

17.9503 Acquisition Planning.

All acquisition strategies for all dollar value Tailored Logistics Support contracts must be approved by DLA HQ before public notice of the procurement is published and a solicitation is issued. As described below, included in the request for approval must be an acquisition plan, a business case analysis, and a contract management plan.

(a) Acquisition Plans. Acquisition plans shall comply with all requirements for acquisition plans prepared in accordance with the regulatory coverage referenced at 7.102(90) and, in addition, contain the following:

(i) A discussion of the factors that indicate a Tailored Logistics Support contract arrangement is the best acquisition strategy. Discussion should include the type and variety of incidental services included and why the proposed supply arrangement will provide the best support for the customer.

(ii) A description of surge & sustainment requirements, capability, and testing;

(iii) A description of how this acquisition will maximize opportunities for Small Business programs.

(iv) Documentation showing how the Tailored Logistics Support contract shall be performance based for the service aspects of the contract.

(v) A discussion of whether the acquisition is or will become part of a current or future Performance Based Logistics initiative.

(vi) Show how the vendor will periodically assess and monitor suppliers’ compliance with domestic sourcing requirements, particularly the Berry Amendment and show how DLA will monitor vendor compliance in this area. For example, a vendor’s plan could include random sampling and unannounced inspections of its suppliers’ product origin. Evaluating proposals should include determining if the vendor has a viable plan. Contract administration responsibilities would include checking to see that the vendor is following its plan. See 25.7002-2(91)(e) for discussion of potential actions to ensure continued contractor compliance.

(vii) If the purchasing review clause is applicable to the acquisition (see 17.9508(a)), discuss how the vendor’s purchasing system will be evaluated, approved, and implemented. Some basic characteristics of a good purchasing system, in proportion to the size and capability of the vendor, are:

(a) Internal audits or management audits, training, and policies and procedures for the purchasing department to ensure the integrity of the purchasing system.

(b) Policies and procedures to assure purchase orders and subcontracts contain all flow down clauses, including terms and conditions required by the prime contract, as well as any clauses needed to carry out the requirements of the prime contract.

(c) An organizational and administrative structure that ensures effective and efficient procurement of required quality materials and parts at the most economical cost from responsible/reliable sources.

(d) Selection processes to ensure the most responsive and responsible sources for furnishing required quality parts and materials and to promote competitive sourcing among dependable suppliers so that purchases are reasonably priced and from sources that meet contractor quality requirements.

(e) Price or cost analysis performed with every purchasing action.

(f) Procedures to ensure that proper types of subcontracts are selected and that there are controls including oversight and surveillance of subcontracted effort.

(viii) Documentation of market research performed.

(ix) A discussion of the management information system being used for the program and its use of acquisition metrics.

(x) If market basket is applicable, describe the approach being taken, such as number of items, dollar value of market basket items, etc.

(xi) Discounts and Rebates. Discuss how trade, quantity, volume, and early payment discounts or rebates are expected to be allocated to DLA orders. Discuss the sharing arrangement to be negotiated with the vendor. Ensure the vendor has a way to track and record the discount or rebate activity and issue the appropriate amounts to the Government.

(xii) A discussion of anticipated unusual freight charges. Discuss how these will be controlled by the Government.

(xiii) A discussion of any system impacts, changes, and approvals needed before implementation of the initiative. Discuss how these are consonant with BSM architecture and other agency system architectures.

(b) A business case analysis (BCA). See the One Book Chapter “Acquisition Business Case Analysis Process” for content requirements. Generally, a Type I BCA shall be sufficient at this stage. The BCA shall discuss acquisition alternatives and risk.

(c) Source selection plan and solicitation.

(d) A contract management plan. A contract management plan (CMP) describes how performance shall be monitored over the life of the contract. The CMP specifically addresses the resources assigned to conduct and sustain contract monitoring procedures. The eMP shall be approved as part of the acquisition approval process prior to alvard of the contract (see DLAD 7.104-90 for acquisition approval levels). See the recommended guidance for pricing tools to be used as a part of this contract oversight in PGI 17.9507(c)(ii) and (v). See PGI 17.9503(e) for an example of a contract management plan that is provided as recommended guidance.

(i) Areas to address in the plan shall include but not be limited to: resources required and each resource’s responsibilities, assignment of a COR/COTR, order flow, pre-solicitation or pre-proposal conferences, post-award audits describing who shall be responsible for performing monthly, quarterly, and annual reviews, invoicing procedures, performance measurement metrics to include identification of the number of reviews and the process for review and reporting on these metrics, incidental services required as part of the contract, assignment of contract administration responsibilities for orders, contracts, and subcontracting plans, options, post-award conferences, domestic preference provisions, special contract administration concerns, responsibilities for monitoring contract performance including ascertaining whether BCA objectives have been met, non-compliance issues, and contract closeout. In short, the CMP makes it clear who is responsible for performing which function.

(ii) The Contract Management Plan shall be updated in a timely manner when any of the above functions, procedures, or metrics change the way in which contract performance will be monitored. Updates to CMPs following contract award shall be approved by the CCO. The CCO may delegate approval of minor, non-substantive updates, as determined by the Contract Administration and Compliance Division, to the Supply Chain Director of Supplier Operations. Approved individual CMPs for all PV contracts shall be posted electronically to the Contract Administration & Compliance Division or the Contract Review Division intranet site, if such a site is maintained, and include the date of the latest effective change, as well as to the ECF. If no such intranet site is maintained, the CMP shall be included in the ECF.

17.9504 Pricing.

(a) A PV Contract must be able to comply fully with one of the established PV pricing models found in PGI 17.9504(a).

(b) A Modified PV Contract or other Tailored Logistics Support contract must be able to comply fully with one of the pricing models in PGI 17.9504(b).

(c) Catalog pricing. The initial catalog of DLA approved items available for ordering under the TLSC is created at time of contract award, generally based on the market basket of items used during pre-award price reasonableness determinations, as specified in the established pricing models found in 17.9504 (a) or (b). Post award, the catalog can be supplemented with new items and with price changes to existing items, as long as a price reasonableness determination is made for each new item and for each price change on existing items. This 100 percent price reasonableness determination also applies to any incidental services for supply contracts.

17.9505 Pre-Award.

Contracting officers shall develop metrics to monitor critical factors in the Tailored Logistics Support arrangement to include price and other factors. In addition to complying with the acquisition planning requirements at 17.9503, contracting personnel shall utilize the automated Tailored Logistics Support tools to perform analyses and justifications for the contract. These tools are found in PGI 17.9505(a).

17.9506 Ordering Procedures.

(a) Contracting Officers shall ensure ordering procedures comply with the pricing model applicable to the contract.

(b) Contracting officers shall clearly define contract scope and communicate it to trained and approved ordering officers. Contracting officers shall ensure that orders are within the scope of the contract.

17.9507 Post Award Actions & Management Oversight.

Adding Items. Items may be added to the contract in accordance with the pricing model for the contract.

Obtaining refunds, rebates, and volume discounts. Refunds, rebates and volume discounts from contractors should be sought in accordance with clause 52.217-9017, Tailored Logistics Support Purchasing Reviews, or as otherwise specified in the contract if the clause is not used.

(c) Management Oversight. Tailored Logistics Support Contracts are subject to continuous and rigorous oversight as follows:

(1) Reviews/Audits shall be conducted on a monthly, semi-annual, and annual basis.

(i) The Program Manager/IST Chief (i.e. one level above the contracting officer) for each Tailored Logistic Support Program (i.e. the team administering the program, for example Metals, MRO Supplies, Spec Ops) shall perform monthly pricing reviews. Reports will include a representative sample based on the total number of orders for that month. Upon completion of these reviews, the Tailored Logistics Support program manager/IST chief shall forward the results to the Director of Supplier Operations for review and approval. Pricing review tools include but are not limited to the tools found in PGI 17.9507(c)(ii) mandatory guidance. In addition, each activity shall perform a monthly review on the progress and completion of corrective actions planned as a result of J-73 Procurement Management Review and Center of Excellence for Pricing report findings. The CCO or designee shall provide a consolidated report on the status of open corrective actions to J-73, including a copy to the local Center of Excellence for Pricing on-site representative, on or before the last day of each month.

(ii) The Contract Administration & Compliance Division or the Contract Review Division shall perform contract audits for vendors’ compliance with non-pricing contract terms on a semi-annual basis (or quarterly at the discretion of the supply chain), and shall furnish a copy of the contract audit report to J-73 no later than 45 days after the end of the semi-annual period, or no later than 45 days after the end of the quarter if quarterly reviews are conducted in lieu of semi-annual.

(iii) The J-73 Center of Excellence for Pricing (COEP) will examine the sufficiency of the Contracting Officer’s price documentation and the vendor’s adherence to the pricing methodology as required by the contract terms, the contract management plan and the approved PV pricing model, on a semi-annual basis. The COEP shall perform one review concurrently with the Prime Vendor PMR, if one is scheduled. The subsequent COEP review shall be performed six months following the previous review. The COEP shall furnish a copy of the semi-annual contract pricing audit report to J-7 within 21 days of the last day of the review for reviews conducted in conjunction with the PV PMR, and no later than 45 days after the end of the semi-annual period for subsequent reviews. J-7 shall furnish a copy of the final COEP report to the PLFA HCA or designee.

(iv) The COEP shall perform annual audits for each fiscal year, examining the vendor’s adherence to contractual pricing methodology. The annual audit is a risk assessment targeted to specific vendors who were chosen for inclusion based on contract dollar value, audit results in paragraph (iii) of this section, previous annual audits, or other criteria. A minimum of 12 vendors per year shall be reviewed. Low risk programs may be subjected to limited review, including deferral of the review. The determination for limited review, including deferral, will be made by J-73. Some indicators of low risk include programs operating under multiple award ID/IQ type contracts where competition at the PV level drives the prices, the government does not rely on the vendor’s purchasing system, prices are firm fixed and are determined fair and reasonable prior to order issuance, and there are no opportunities for rebates or refunds. For those supply chains with fewer than 12 TLS contracts, the COEP shall conduct an annual audit of all TLS vendors. The COEP shall furnish a copy of the annual audits to J-7 no later than 45 days after the close of the fiscal year. J-7 shall furnish a copy of the final COEP report to the PLFA HCA or designee.

(2) Management tools used for oversight as appropriate to the program shall include but are not limited to the tools found in PGI 17.9507(c)(v).

17.9508 Solicitation provisions and contract clauses.

(a) When a Tailored Logistics Support acquisition relies on the Contractor’s purchasing system to verify that the Contractor competed the items or services or to justify that prices are fair and reasonable, the provision/clause at 52.217-9017 “Tailored Logistics Support Purchasing Reviews” shall be inserted in all solicitations and contracts meeting the definition of Tailored Logistics Support.

SUBPART 17.96 – NON-ECONOMY ACT INTERAGENCY ACQUISITIONS

17.9600 Scope of subpart.

(a) Agency-specific coverage on use of non-DOD contracting activities and vehicles may be found in Subpart 7.90. Such acquisitions may only be made under appropriate statutory authority.

(b)(1) DOD policy guidance on use of non-Economy Act orders (USD(C) Memorandum dated October 16, 2006, subject: “Non-Economy Act Orders”) applies to assisted acquisitions using non-DOD contracting activities. This policy is not directly applicable to DLA customers’ relationships with DLA.

(2) DLA normally receives a requirement from a requesting activity and executes that requirement by one of three methods: 1) delivery from DLA stock; 2) individual DLA procurement or ordering against a DLA contract; or 3) ordering against a non-DLA contract. Because the DOD policy on non-Economy Act orders is largely concerned with transfers of funds to a non-DOD activity for execution of a requesting activity’s requirement, normally DLA’s transactions will not be directly affected by the DOD policy. There are some instances, however, when DLA activities use assisted acquisitions for internal support, and the DOD policy would be applicable in full. The coverage in 17.9601 through 17.9605 implements the DOD policy and is applicable to non-Economy Act orders executed as assisted acquisitions by non-DOD contracting activities.

17.9601 Justification for use.

DLA may place a non-Economy Act order as an assisted acquisition, as defined in 2.101, including orders to fill DLA’s own internal needs, with a non-DOD activity if all the following conditions are met:

(a) Proper funds are available.

(b) The non-Economy Act order does not conflict with another agency’s designated responsibilities (e.g., real property lease agreements with GSA).

(c) The requesting agency or unit and, if different, the DLA contracting office, determines that the order is in the best interest of the Department/Agency. Some factors in the determination include, but are not limited to:

(1) Ability to satisfy the requirements.

(2) Schedule, performance, and delivery considerations.

(3) Cost-effectiveness and cost reasonableness, taking into account discounts, fees, surcharges, and the like of the performing agency.

(4) Contract administration, including oversight.

(d) The performing activity has the ability and authority to provide the ordered goods or services.

(e) The performing activity will abide by DOD competition requirements and other Defense-unique terms, conditions, and reporting requirements, as identified by the requiring activity and/or the DLA contracting officer and submitted via the ordering documentation.

17.9602 Ordering procedures.

See mandatory procedures at PGI 17.9602 for the “mechanics” of, and the elements to consider with regard to, non-Economy Act ordering from another Department or Agency.

17.9603 Contracting officer review.

DOD policy requires DOD-warranted contracting officer review of all non-Economy Act orders over $500,000. DLA policy, as depicted in Table 2 at 7.104-90(a), and as stated in 7.9001(a)(90), 7.9002(a), and 7.9003(a), requires that a DLA warranted contracting officer review the assisted acquisition from a non-DOD entity of either supplies or services valued over $150,000. This review must be accomplished prior to sending the order to the funds certifier or issuing the military inter-departmental purchase request (MIPR) to the non-DOD activity. If the requesting official is different from the contracting officer, he or she shall also review the acquisition package to ensure compliance with FAR, DFARS, and DLAD Part 7. Requirements will not be split into smaller amounts in order to avoid contracting officer review.

17.9604 Fiscal matters.

(a) Certification of funds. Non-Economy Act orders are subject to the same fiscal limitations that are contained within the appropriation from which they are funded. Because the performing entity may not be aware of all appropriation limitations, the DLA certifying official in the Financial Management/J-8 organization must certify that the funds leaving the Agency that are cited on the order -

(1) are available;

(2) meet a need of the requesting entity, and are currently available for obligation; and

(3) are for the purpose designated by the appropriation, or may properly be used for the intended purpose.

(b) Prohibitions. Non-Economy Act orders may not be used to violate provisions of law, nor may they be used to circumvent conditions and limitations imposed on the use of funds, to include extending the period of availability of the cited funds.

(c) Bona fide need.

(1) Non-Economy Act orders citing an annual or multi-year appropriation must serve a bona fide (that is, legitimate) need arising, or existing, in the fiscal year or years for which the appropriation is available for new obligations.

(2) If the requiring activity is providing operations and maintenance (O&M) funds (“one-year money”) or other annual appropriations that are only available for obligation for a specific period, the facts that the requirement is submitted to a Revolving Fund (e.g., Defense Working Capital Fund (DWCF)) activity on a reimbursable basis, and that the Revolving Fund activity will obligate “no-year money” for the actual acquisition, do not extend the life of the requiring activity’s funds. In the following situations, the order must be placed or an agreement entered into before the requiring activity’s appropriation expires (i.e., is no longer available for new obligations):

(i) The transaction between the requiring activity and the Revolving Fund activity is an Economy Act transaction (this is not applicable if the transaction is pursuant to DLA’s IMM authority under DOD 4140.1-R and 4140.26-M); or

(ii) The requiring activity’s funds will be cited on the order or agreement with the non-DOD activity.

When DLA accepts a MIPR (generally via return of the DD Form 448-2 to the customer) or other requisition (i.e., the DD Form 1348-1 or -6), and the customer’s requirements are specified in the MIPR or requisition with sufficient detail to satisfy 31 U.S.C. 1501 (see (d), below), this creates a binding obligation between the two Defense entities, and obligates the customer’s funds to DLA. In the situations in (2)(i) and (ii), above, DLA must, in turn, obligate funds to the non-DOD agency during the fiscal year for which the customer’s funds are available. If these situations are not applicable (e.g., if DLA is obligating DWCF), it may be done during the fiscal year for which the customer’s funds are available, or as soon thereafter as reasonably possible.

(d) Obligation. In accordance with 31 U.S.C. 1501, an amount shall be recorded as an obligation only when supported by documentary evidence of an order required by law to be placed with an agency, or upon meeting all the following criteria:

(1) There is a binding agreement between an agency and another person (including an agency).

(2) The agreement is in writing. This writing must be specific, definite, completely descriptive of the goods or services being acquired, and traceable to the ultimate transaction for fulfillment of the requirement. If more than one document is involved (as with manual requisitions), each should refer to the other(s) in order to constitute a complete requirements package. The MIPR or manual requisition must include the signature of a person authorized to certify funds (availability and usage), or otherwise demonstrate that the funds have been properly certified by a person authorized to certify funds.

(3) The agreement is for a purpose authorized by law.

(4) It serves a bona fide need arising, or existing in, the fiscal year or years for which the cited appropriation is available for obligation.

(5) In the situations described in (c)(2)(i) and (ii), above, it is executed before the end of the period of availability for new obligation of the appropriation or fund used.

(6) It provides for specific goods to be delivered or specific services to be supplied.

(e) Deobligation.

(1) Although funds deobligation, per se, is not a contracting function, the deobligation process for interagency acquisitions must be set in motion by a contracting official or program manager. The contracting officer who contributed to or reviewed the acquisition plan IAW 7.9001(a)(90), 7.9002(a), 7.9003(a), and 17.9603, above, or post-award personnel from that contracting officer’s office, shall be responsible for, or shall ensure that the program manager or other requirements generator is aware of his/her responsibility for, tracking funds’ “burn rate” and usage commensurate with contractor performance. These parties (contracting officer, post-award contracting official and/or program manager) will also provide notice to the Comptroller organization to proceed with funds deobligation, as applicable.

(2) Supplies. In an assisted acquisition, if goods are ordered but not delivered, and the availability of the funds provided to a non-DOD performing agency for the supplies thereafter expires, the funds shall be deobligated and returned by the performing agency, unless the request for goods was made during the period of availability of the funds AND the item(s) could not be delivered within the funds’ period of availability solely because of delivery, production or manufacturing lead time, or unforeseen delays that are out of the control of, and not previously contemplated by, the contracting parties at the time the contracting action was taken. Therefore, where materials cannot be obtained in the same fiscal year in which they are needed and contracted for, provisions for delivery in the subsequent fiscal year do not violate the bona fide need rule, as long as the time intervening between contracting and delivery is not excessive, and the procurement is not for standard commercial off-the-shelf (COTS) items readily available from other sources. The “reasonable period” of performance should, if possible, be limited to the first quarter of the next fiscal year. The delivery of goods may not be specified to occur in the year subsequent to funds availability.

(3) Severable services. An agreement for severable services may, according to 10 U.S.C. 2410a, begin in one fiscal year and end in the next, provided that the period of performance does not exceed one year (exclusive of options). Thus, the performance of severable services may begin during the funds’ period of availability, and end one year from the beginning date (see DFARS 232.703-3(b)). Therefore, annual appropriations provided to a non-DOD performing agency in an assisted acquisition that have expired must be deobligated, unless the performance of the services requested began during the funds’ period of availability, and the period of performance does not exceed one year. The annual appropriation from the earlier fiscal year may be used to fund the entire cost of the one-year period of performance; however, an annual appropriation may not be used to enter into a severable services agreement where the period of performance for services requested is entirely in the following fiscal year. In no instance may the period of performance extend beyond September 30th of the subsequent year for services funded with annual appropriations.

(4) Non-severable services. Non-severable services contracts must be funded entirely with appropriations available for new obligations at the time the contract is awarded; nevertheless, the period of performance may extend across fiscal years. Funds provided to a non-DOD performing agency that become excess (e.g., a requirement has been fully satisfied and funds remain obligated but unexpended for that requirement) shall be deobligated.

(5) Excess or expired funds. (A) Activities shall reconcile all obligations and remaining funds available for orders. This is the responsibility of the contracting officer, post-award contracting official or of the program manager or other requirements generator, as applicable. The purpose of this reconciliation is to ensure the proper use of funds and to identify and coordinate the return of expired or excess funds. In an assisted acquisition, excess or expired funds must be returned by the non-DOD performing agency and deobligated by the requesting agency to the extent that the performing agency or unit filling the order has not:

(i) provided the goods or services, or incurred actual expenses in providing them; or

(ii) entered into a contract with another entity to provide the requested goods or services.

(B) Expired funds shall not be available for new obligations.

17.9605 Follow-up procedures for non-Economy Act transactions.

See DLA PGI 17.9605 for mandatory procedures and other considerations pertaining to oversight, fund status monitoring, payment, and close-out of non-Economy Act transactions.

SUBPART 17.97 – CORPORATE CONTRACTS

17.9700 Contract Clauses.

(a) For solicitations/contracts for Corporate Contracts, DLAD 52.217-9020, Corporate Contracts - Fill Rate & Unfilled Orders may be used.