NFS subpart 1870.5

SUBPART 1870.5

NASA MAJOR SYSTEM ACQUISITION PHASED PROCUREMENT GUIDANCE

1870.501 Purpose.

Major system acquisitions are among NASA's largest and most visible efforts, often requiring the investment of significant Government and contractor resources. These procurements may cover several distinct program phases over a number of years. In most cases, major system acquisitions are accomplished through a phased procurement process involving competitive down-selection techniques. In this process, multiple contracts are awarded during the initial phase and a down-selection is made from among those contractors to determine succeeding phase contractors. Eventually, a single contractor will be chosen for the final phase. Because of the importance and complexity of major systems, it is imperative that the procedures for their acquisition be efficient and effective.

1870.502 Regulations.

The basic regulations governing major system acquisitions are Office of Management and Budget (OMB) Circular No. A-109, NASA Management Instruction (NMI) 7120.4 ("Management of Major System Programs and Projects"), and NASA Handbook (NHB) 7120.5 ("Management of Major Systems Programs and Projects Handbook"), and NASA FAR Supplement (NFS) 1834. In addition to these documents, detailed guidance on the planning and conduct of major system acquisitions appears at 1870.503. This last guidance is designed for use by procurement personnel and other individuals who participate in the major system acquisition process. It will also help the public understand NASA's major system acquisition policies and procedures.

1870.503 Major System Acquisition Procedures.

(a) Major system acquisition procedures are prescribed in Appendix I to this section 1870.503.

(b) NASA may reprint Appendix I as a separate document, provided the following conditions are met:

(1) The issuance date ("cover date") of the procedures shall be the date of the NFS version from which the text is extracted.

(2) With the exception of availability, distribution, and other special prefatory notices, any subsequent modification in the text shall be preceded by a change to NFS 1870.503, Appendix I.

(3) The following notice shall be included in the prefatory material of the document:

IMPORTANT NOTICE

These procedures are a separately bound, verbatim version of NASA FAR Supplement (NFS) (48 CFR 1870.503) section 1870.503, Appendix I. Reference to other parts of the Federal Acquisition Regulation (FAR) and the NFS will be required for complete coverage of all procurement aspects. NASA reserves the right to make changes to NFS 1870.503, Appendix I, without issuing a new edition of these procedures. In the event of apparent conflict between these procedures and the NFS, the NFS shall govern.

APPENDIX I TO 1870.503

NASA PROCEDURES FOR
CONDUCTING MAJOR SYSTEM ACQUISITIONS

NASA PROCEDURES FOR CONDUCTING MAJOR SYSTEM ACQUISITIONS

1. INTRODUCTION

(a) The acquisition of major systems presents a complex challenge for NASA. These acquisitions are among the agency's largest and often require the investment of significant Government and contractor resources over a number of years. These acquisitions are often accomplished in several distinct phases, from preliminary analysis through definition, design, development, and operation. The broad scope of programmatic activity in a major system acquisition demands an effective and efficient acquisition strategy.

(b) There are several approaches to accomplishing these multi-phase major system acquisitions ranging from separate acquisition of each phase to competitive down-selection of combined phases. The preferred technique in NASA is use of a competitive down-selection strategy, and the preferred variation of this strategy is the "progressive competition" approach. In a progressive competition down-selection, a single formal solicitation is issued for all phases, multiple contracts are awarded for the initial phase, and a down-selection from among these contractors is conducted to determine the succeeding phase contractors. Progressive competition procedures, when properly planned and executed, facilitate the realization of the desirable goals of effective and efficient acquisition of major systems, preservation of full and open competition throughout the process, and acquisition streamlining.

(c) This appendix describes the procedures to follow when using the progressive competition technique. Although this appendix addresses progressive competition, many of these procedures are applicable to other phased procurement strategies, and unless specifically prohibited herein, should be considered for use and adapted to accommodate the particulars of these other strategies. For example, the general guidance on the synopsis requirements and acquisition planning applies to all phased procurements, and most of the down-selection procedures apply to all down-selection strategies, not just progressive competitions. Some changes in these procedures may need to be made to recognize inherent differences in strategies, such as the use of new, formal solicitations for each phase of alternative down-selection strategies.

2. DEFINITIONS

(a) Down-selection. In a phased procurement, the process of selecting contractors for phases subsequent to the initial phase from among the preceding phase contractors.

(b) Major System. Any system that: is directed at and critical to fulfilling an agency mission; entails the allocation of a relatively large amount of resources; or warrants special management attention. Designation of a system as "major" is made in accordance with NASA Management Instruction (NMI) 7120.4, "Management of Major System Programs and Projects," and NASA Handbook (NHB) 7120.5, "Management of Major System Programs and Projects Handbook."

(c) Phased Procurement. A program comprised of several distinct steps or phases (e.g., preliminary analysis, definition, design, and development) where the realization of program objectives requires a planned, sequential acquisition of each step or phase. The phases in a phased procurement may be acquired separately, in combination, or through a down-selection strategy.

(d) Progressive Competition. A type of down-selection strategy for a phased procurement. In this method, a single solicitation is issued for all phases of the program. The initial phase contracts are awarded, and the contractors for subsequent phases are expected to be chosen through a down-selection from among the preceding phase contractors. In each phase, progressively fewer contracts are awarded until a single contractor is chosen for the final phase. Normally, all down-selections are accomplished without issuance of a new, formal solicitation.

3. PHASES OF A MAJOR SYSTEM ACQUISITION

(a) As described in NMI 7120.4 and NHB 7120.5, there are five phases in the life cycle of a major system acquisition, three of which are normally included in a phased procurement: Phase B, Definition; Phase C, Design; and Phase D, Development. The most common approach in NASA for acquiring these phases involves two steps: (1) two (or more) competitively awarded Phase B contracts; and (2) down-selection from among the Phase B contractors to a single Phase C/D contractor. To be relevant to the predominant agency practice, the procedures in this appendix address this model. However, the focus on this model does not preclude adaptation of these procedures to suit other phase combinations.

(b) For a detailed description of the phases of a major system acquisition and their interrelationships, consult NHB 7120.5.

4. PLANNING A PROGRESSIVE COMPETITION

(a) Choice of the appropriate procurement strategy for a major system acquisition is accomplished through careful analysis of many factors. The decision to proceed with each phase separately or to use the progressive competition technique must consider, among other things, the number of viable alternative system concept approaches, the risks associated with those approaches, funding, schedule, requirements maturity, and the extent to which an offeror's ability to perform successfully in subsequent phases is tied to successful performance in prior phases.

(b) To be a candidate for a progressive competition, all considerations must play together. Of paramount importance is the need for a clear understanding and expression of program requirements and goals. Also, the planning considerations must carefully address and justify the number and content of the phases, the acquisition schedule and funding for each phase, the number of contractors for each phase, the timing of the down-selection decision, and the planned contract types for each phase.

(c) Certain factors may clearly dictate that the progressive competition technique should not be used. For example, if it is likely that NASA may introduce a design concept independent of those explored by the Phase B contractors, it is also likely that a new, formal solicitation is necessary for Phase C/D and all potential offerors should be solicited. In this circumstance, progressive competition is inappropriate. Also, if there is no direct link between successful performance in the preceding phase and successful performance in the subsequent phase, progressive competition is also inappropriate. In both of these cases, the major system acquisition phases should be procured separately without a down-selection between phases.

(d) It cannot be overemphasized that the success of a progressive competition is directly dependent on thorough planning before initiation. Progressive competition should not be used as a rationale for initiating an acquisition that is poorly planned, not well thought out, or merely a way to meet budget or schedule pressures. The need for clear technical requirements and program goals is in no way diminished by use of progressive competition. Where requirements and goals are not clear, the progressive competition approach shall not be used.

(e) The rationale for use of the progressive competition technique shall be thoroughly justified in the procurement plan or Acquisition Strategy Meeting (ASM) minutes. Because the Phase B solicitation will also lead to Phase C/D award, the decision to use the progressive competition strategy must be made prior to initiation of the Phase B procurement. Accordingly, both phases must be addressed in the initial acquisition strategy planning and documented in the procurement plan or ASM minutes.

5. PROGRESSIVE COMPETITION SYNOPSIS REQUIREMENTS

(a) Because of the importance of major system acquisitions, early identification of these programs to industry is encouraged. The research and development (R&D) advance notice described in FAR 5.205 is an effective tool to announce the program and identify the maximum number of qualified potential offerors. Although not required by regulation, use of R&D advance notices on major system acquisitions is strongly recommended.

(b) To ensure that a progressive competition provides for the maximum effective competition and complies with statutory and regulatory requirements for full and open competition, each phase must be synopsized unless one of the exceptions in FAR 5.202 applies. Based on the NASA model of acquiring Phases B and C/D, this means that a separate synopsis must be issued prior to releasing the solicitation for Phase B and again prior to requesting Phase C/D proposals from the Phase B contractors. Each synopsis must be prepared in accordance with FAR 5.207 and NFS 1834.005-1(d).

(c) Although a new, formal solicitation is normally not issued for Phase C/D under a progressive competition, the synopsis publication periods specified in FAR 5.203 still apply to the Phase C/D synopsis. In this case, the synopsis must be published at least 15 days before formally requesting the Phase C/D proposals from the Phase B contractors and at least 45 days prior to the Phase C/D proposal due date.

(d) Notwithstanding the requirement to synopsize Phase C/D, in most cases there will not be any potential offerors for Phase C/D other than the Phase B contractors. However, proposals from other prospective offerors must be considered, and these offerors must be given all of the information necessary to compete for the next phase (e.g., the previously issued solicitation; the preceding phase contracts; the preceding phase system performance and design requirements; all proposal preparation instructions; and evaluation factors, subfactors, and elements). To avoid schedule disruptions, early publication of the Phase C/D synopsis is strongly encouraged. Potential offerors other than the Phase B contractors cannot be summarily dismissed solely because the program schedule did not anticipate their involvement.

(e) The following is a sample synopsis for Phase B of a progressive competition.

A-Presolicitation Notice: _____ (PROGRAM NAME). NASA plans to conduct a progressive competition to define, design, develop, and produce the _____ (PROGRAM NAME). This effort will be a full and open competition and will be acquired in two distinct phases - Phase B, Definition, requiring preliminary system design of _____ (PROGRAM NAME) and Phase C/D, Design and Development, requiring the detailed design, fabrication and delivery of _____ (PROGRAM NAME). Two or more Phase B awards are anticipated leading to a single Phase C/D award. A progressive competition strategy will be used with down-selection of sources between Phases B and C/D. To be eligible for Phase B award, offerors must demonstrate the experience and capability, or ability to acquire the capability, to perform both Phases B and C/D. The competition for Phase C/D will build on the results of Phase B, and the award criteria for Phase C/D will include successful completion of specified Phase B requirements. Accordingly, NASA anticipates that only the Phase B contractors will be capable of successfully competing for Phase C/D. NASA will synopsize the Phase C/D competition in accordance with FAR 5.201 and 5.203, but does not plan to issue a new, formal solicitation. Instead, proposals will be requested from the Phase B contractors by _____ (INDICATE METHOD OF REQUESTING PROPOSALS, E.G., A LETTER) that will include detailed proposal preparation instructions and evaluation criteria. Although a new, formal solicitation will not be issued, any responsible source may submit a proposal for Phase C/D, and these proposals will be considered by the agency. Prospective offerors for Phase C/D other than the Phase B contractors will be provided all the material furnished to the preceding phase contractors necessary to submit a proposal. To be considered for Phase C/D award, offerors must demonstrate a design maturity equivalent to that of the Phase B contractors, such demonstration to include any Phase B deliverables upon which Phase C/D award may be based. Failure to fully and completely demonstrate the appropriate level of design maturity may render the proposal unacceptable with no further consideration for contract award. NASA anticipates releasing the solicitation for Phase B on or about _____ (DATE OF RFP RELEASE). Detailed Phase B requirements are _____ (GIVE A SPECIFIC DESCRIPTION OF PHASE B REQUIREMENTS). It is anticipated that Phase C/D will consist of _____ (GIVE ANTICIPATED PHASE C/D REQUIREMENTS). For further information, contact _____ (NASA POINT OF CONTACT).

(f) The following is a sample synopsis for Phase C/D of a progressive competition.

A-Presolicitation Notice: _____ (PROGRAM NAME). NASA is conducting a progressive competition to define, design, develop, and produce the _____ (PROGRAM NAME). This effort is a full and open competition and is being acquired in two distinct phases - Phase B, Definition, requiring preliminary system design of _____ (PROGRAM NAME) and Phase C/D, Design and Development, requiring the detailed design, fabrication and delivery of _____ (PROGRAM NAME). The Phase B solicitation was described in the _____ (CITE DATE) Commerce Business Daily. Phase B contracts were awarded to _____ (CITE CONTRACTORS) on _____ (CITE AWARD DATE). A progressive competition strategy will be used with down-selection of sources from Phase B to determine the single Phase C/D contractor. The competition for Phase C/D will build on the results of Phase B, and the award criteria for Phase C/D includes successful completion of the Phase B requirements identified below. Accordingly, NASA anticipates that only the Phase B contractors will be capable of successfully competing for Phase C/D. A new, formal solicitation will not be issued for Phase C/D. Instead, proposals will be requested from the Phase B contractors by _____ (INDICATE METHOD OF REQUESTING PROPOSALS, E.G., A LETTER) that will include detailed proposal preparation instructions and evaluation criteria. However, any responsible source may submit a proposal for Phase C/D, and these proposals will be considered by the agency. Prospective offerors for Phase C/D other than the Phase B contractors will be provided all the material furnished to the preceding phase contractors necessary to submit a proposal. To be considered for Phase C/D award, offerors must demonstrate a design maturity equivalent to that of the Phase B contractors, such demonstration to include the following Phase B deliverables upon which Phase C/D award will be based: _____ (CITE SPECIFIC PHASE B DELIVERABLES). Failure to fully and completely demonstrate the appropriate level of design maturity may render the proposal unacceptable with no further consideration for contract award. NASA anticipates requesting Phase C/D on or about _____ (DATE) and proposals will be due _____ (CITE NUMBER) days thereafter. Detailed Phase C/D requirements are _____ (GIVE A SPECIFIC DESCRIPTION OF PHASE C/D REQUIREMENTS). For further information, contact _____ (CITE NASA POINT OF CONTACT).

6. PROGRESSIVE COMPETITION SOLICITATION

(a) One of the major benefits of the progressive competition technique is that, in most circumstances, only one solicitation is used. This single solicitation not only covers the initial phase, but also all subsequent phases. That is, the solicitation for Phase B also satisfies the requirement for soliciting Phase C/D. Eliminating the need for a new, formal solicitation after the initial phase streamlines the process and should result in schedule economies. However, these savings will not be realized without proper planning. The potential for gaps between phases will still exist unless the Phase C/D down-selection is initiated during Phase B performance, allowing enough time to complete evaluation, make selection, and negotiate and award the Phase C/D contract not later than the conclusion of Phase B.

(b) Only phased procurements using the progressive competition technique can acquire all phases of the procurement through a single formal solicitation. All other phased procurements must issue new, formal solicitations for each phase. However, merely calling a major system acquisition a progressive competition does not in itself mean that the formal initial phase solicitation is sufficient to cover all subsequent phases. Under a progressive competition, a clause substantially the same as that in 1852.234-71 must be included in the Phase B solicitation and contracts. (The clause at 1852.234-70 should be used for other types of down-selection strategies). This clause may be modified to suit the particulars of a given procurement, but it must include the information in 1834.005-170(a) and (b) as a minimum. Failure to include any of this information may call into question the integrity of progressive competition procedures and require a new, formal solicitation for Phase C/D.

(c) Because of the significant dollar value of major system acquisitions, formal Source Evaluation Board (SEB) procedures must be used for all phases of the procurement, unless one of the exceptions in 1815.613-71(a) applies. Accordingly, a separate set of evaluation factors must be developed for each phase in a progressive competition. For the most part, these factors are developed the same way for a progressive competition as for any other NASA competitive procurement. However, there is one element inherent in the very nature of the progressive competition technique, or any other competitive down-selection strategy, that must be reflected in the evaluation factors for such procurements. Since these competitive down-selection strategies anticipate that one of the Phase B contractors will also be the Phase C/D contractor, the Phase B offerors must clearly demonstrate the ability to perform the subsequent phases. Accordingly, the evaluation factors for the Phase B award must specifically include the evaluation of the Phase B offerors' abilities to perform not only Phase B but also Phase C/D.

(d) Although a new, formal solicitation is normally not issued subsequent to the initial phase when using the progressive competition technique, this practice is not absolute in all cases. If the Government requirements or evaluation procedures change so significantly after award of the initial phase contracts such that a substantial portion of the information provided in the initial phase synopsis, solicitation, or contracts is invalidated, a new, formal solicitation for subsequent phases is required. To ensure that schedules are not compromised or the benefits of phased procurements diminished, contracting offers, beginning at Phase B award, should carefully monitor the degree to which the acquisition particulars may be changing. If it appears that the procurement circumstances have changed significantly, the contracting officer should take immediate action to begin generation of a formal solicitation for the next phase of the procurement.

7. PROGRESSIVE COMPETITION INITIAL CONTRACTS

(a) In general, the Phase B contracts awarded in a progressive competition will look much like any other NASA contract for similar design efforts. There are certain features, however, that must be included (or must not be included) in these contracts to accommodate and authorize the continued use of this technique in the subsequent down-selection. One feature that must be included in the Phase B contracts is the clause that explains the progressive competition technique and the plans for the down-selection. As stated in paragraph 6(b) of this appendix, a clause substantially the same as that in 1852.234-71 must be included in the Phase B contracts when using the progressive competition technique and 1852.234-70 when using other down-selection strategies.

(b) An important feature of these clauses is the paragraph indicating that the Phase C/D proposals are not a contract requirement and the costs of preparing these proposals shall not be a direct charge to the Phase B contract or any other Government contract. To be consistent with this paragraph, the Phase B contracts shall not include any requirement for delivery of Phase C/D proposals nor shall they include a remuneration mechanism for the proposals. Options for such proposal activities, priced or unpriced, are prohibited.

(c) The rationale for these prohibitions is twofold. First, making the Phase C/D proposals a contract requirement can cause significant and contentious data rights problems over which party owns the data in the proposal. Unless this issue is clearly resolved, contractors may be reluctant to provide unique or innovative information, fearing that it may be appropriated and given to a competitor. The technical objectives of the procurement would then be compromised. Second, by requiring Phase C/D proposals and paying for them, an outside offeror may successfully protest that the Phase B contractors were given an unfair competitive advantage for Phase C/D. The procurement may then no longer be considered full and open competition.

(d) In addition to including the specific contract clause discussed above, the Phase B contracts should be carefully structured to allow down-selection at a discrete performance milestone such as a significant design review or at contract completion. Such advance planning will not only avoid gaps between phases but will also eliminate unnecessary duplication of effort or the need to terminate the remaining Phase B efforts of an unsuccessful Phase C/D offeror. It is critical to remember, however, that determination of the appropriate contract structure is not made based solely on schedule or contract considerations. Rather, it is also driven by, and reflective of, programmatic technical content and objectives.

(e) For example, if the acquisition strategy calls for formal completion of Phase B effort at Preliminary Design Review (PDR), but it is not financially practical or technically necessary (for Phase C/D selection and performance purposes) to carry all Phase B contractors through PDR, the Phase B contracts should be structured with a basic period of performance through a significant, discrete milestone before PDR with a priced option for the effort from that milestone through PDR. The down-selection would be planned for the earlier milestone, the PDR option exercised for only the winner of the down-selection, and formal Phase C/D performance initiated at completion of the PDR option. In this scenario, the earlier milestone must be carefully chosen to ensure successful accomplishment of both program technical objectives and all activities leading to completion of the down-selection process. That is, design maturity at that point must be sufficient to accommodate an informed down-selection decision leading to successful accomplishment of Phase C/D.

(f) In other program strategies, it may be both affordable and technically desirable to have all the Phase B contractors complete PDR. In these cases, the contract should be structured as a basic effort through PDR, down-selection made at that point, and Phase C/D performance beginning thereafter.

(g) Regardless of the contract structure that is appropriate given the program objectives, the schedule leading to down-selection must also be carefully crafted and followed. This schedule must allow ample time for synopsizing the Phase C/D down-selection, responding to any other offeror's intention to submit a proposal, generation of whatever information is necessary for Phase C/D proposals (e.g., final technical requirements, proposal preparation instructions, and evaluation factors), submission and evaluation of the proposals, negotiation, and award. In some cases, the earliest of these activities will commence shortly after Phase B award. However, unless these activities are planned and executed in reasonable time periods to accommodate timely Phase C/D award, many of the benefits associated with the progressive competition technique, or any other down-selection strategy, will go unrealized.

8. REQUESTING PHASE C/D PROPOSALS

(a) Although a new, formal solicitation is normally not issued for Phase C/D when using the progressive competition technique, Phase C/D proposals must be formally requested and the offerors given all information necessary to submit a proposal. The preferred approach for requesting Phase C/D proposals is by letter. This letter shall include the following:

(1) A specific due date for the Phase C/D proposals along with a statement that FAR 52.215-10, Late Submissions, Modifications, and Withdrawals of Proposals, applies to this proposal due date.

(2) Complete instructions for proposal preparation, including page limitations, if any.

(3) Final evaluation factors.

(4) Any statement of work, specification, or other contract requirements that have changed since the Phase B solicitation.

(5) All required clause changes applicable to new work effective since Phase B contract award.

(6) Any representations or certifications, if required.

(7) Any other required contract updates. (E.g., Phase C/D small and small disadvantaged subcontracting goals.)

(b) Although the exception and not the rule, there are circumstances in which a new, formal solicitation must be issued for Phase C/D. Significant changes in paragraphs 8(a)(3) and (4) of this section, in particular, require a careful assessment as to whether a new solicitation should be issued. Determining the significance of changes is often subjective and difficult, however. These determinations should only be made after coordinated consultation among procurement, legal, and technical personnel. Some cases will be particularly clouded, and no clear resolution of the magnitude of the changes can be made. In these instances, the issue should be resolved on the side of caution and a new, formal solicitation issued.

9. PHASE C/D AWARD

(a) As stated in paragraph 6(c) of this appendix, evaluation of Phase C/D proposals will normally be accomplished in accordance with formal SEB procedures. Phase C/D award may be made by either a new contract, or by a new work supplemental agreement to the existing Phase B contracts.

(b) Keep in mind that, no matter what is included in the original solicitation or Phase B contracts regarding the progressive competition technique, or any other alternative down-selection strategy, the Phase C/D effort is new work and not an in-scope change under the "Changes" clause, or any other clause, of the Phase B contract. If a supplemental agreement is used to implement Phase C/D, it shall cite the applicable "Phased Procurement" clause (either 1852.234-70 or -71) included in the Phase B contracts as authority for award.

(c) Whether a new contract or new work supplemental agreement is used, the document must incorporate all applicable statutory and regulatory requirements (e.g., contract clauses) in effect as of its issuance. The Phase C/D award date is controlling and not the date of the Phase B awards.

(d) In addition, regardless of the time of Phase C/D award or the contract vehicle used to effect it, the Phase C/D period of performance should commence only upon completion of Phase B tasks.