Federal Acquisition Regulation; Part 15 Rewrite; Contracting by Negotiation and Competitive Range Determination

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 2, 3, 4, 5, 6, 7, 9, 11, 12, 13, 14, 15, 16, 17,

19, 24, 25, 27, 28, 31, 32, 33, 34, 35, 36, 42, 43, 44, 45, 49, 50,

52, and 53

[FAC 97-02; FAR Case 95-029]

RIN 9000-AH21

Federal Acquisition Regulation; Part 15 Rewrite; Contracting by

Negotiation and Competitive Range Determination

AGENCIES: Department of Defense (DOD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council have agreed to issue Federal

Acquisition Circular 97-02, a final rule which revises Part 15 of the

Federal Acquisition Regulation (FAR) and makes conforming changes to

other parts of the FAR. This regulatory action was subject to Office of

Management and Budget review under Executive Order 12866, dated

September 30, 1993. This is not a major rule under 5 U.S.C. 804.

DATES: Effective Date: October 10, 1997.

Applicability Date: The policies, provisions, and clauses of this

final rule are effective for all solicitations issued on or after

October 10, 1997. However, agencies may delay implementation of this

final rule until January 1, 1998, at which time it becomes mandatory

for all solicitations issued on or after that date. Agencies using the

new policies, provisions, and clauses before January 1, 1998, shall

ensure that the cover page of the solicitation for each acquisition

subject to this rule, and issued before January 1, 1998, contains a

notice that this rule applies to that acquisition. Any solicitation

issued before January 1, 1998, that does not contain such a

solicitation notice or the new provisions and clauses is automatically

conducted in accordance with the FAR excluding changes made by this

final rule.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS

Building, Washington, DC 20405 (202) 501-4755 for information

pertaining to status or publication schedules; For clarification of

content, Ralph DeStefano at (202) 501-1758 or Melissa Rider at (703)

602-0131; For contract pricing issues Jerry Olson at (202) 501-3221 or

Melissa Rider at (703) 602-0131. Please cite FAC 97-02, FAR case 95-

029.

SUPPLEMENTARY INFORMATION:

A. Background

On January 29, 1996, the FAR Council tasked an ad hoc interagency

committee to rewrite FAR Part 15, Contracting by Negotiation. The

rewrite originally was to be accomplished in two phases. Phase I,

consisting of the rewrite of FAR 15.000, 15.1, 15.2, 15.3, 15.4, 15.6,

and 15.10, covering acquisition techniques and source selection, was

published for public comment in the Federal Register at 61 FR 48380 on

September 12, 1996. In the interest of increasing outreach to small

entities, two public meetings were held to discuss the proposed rule:

in Washington, DC, on November 8, 1996, and in Kansas City, MO, on

November 18, 1996. The public comment period closed on November 26,

1996. The Government received 1541 comments from 100 respondents and

considered all comments in drafting revisions to the rule. Due to the

significant changes made as a result of public comments, the FAR

Council decided to publish a revised proposed rule, that included

previously unpublished, Phase II, proposed changes covering Subparts

15.5, 15.7, 15.8, and 15.9, and that incorporated changes made as a

result of public comments submitted in response to FAR Case 96-303,

Competitive Range Determinations. The revised proposed rule was

published in the Federal Register on May 14, 1997 (62 FR 26639). The

public comment period closed on July 14, 1997. The Government received

841 comments from 80 respondents and considered all the comments in

drafting the final rule.

Case Summary

This final rule modifies concepts and processes in the current FAR

Part 15, introduces new policies, and incorporates changes in pricing

and unsolicited proposal policy. In addition, the sequence in which the

information is presented has been revised to facilitate use of the

regulation. The final rule does not alter the full and open competition

provisions of FAR Part 6. The goals of this rewrite are to infuse

innovative techniques into the source selection process, simplify the

process, and facilitate the acquisition of best value. The rewrite

emphasizes the need for contracting officers to use effective and

efficient acquisition methods, and eliminates regulations that impose

unnecessary burdens on industry and on Government contracting officers.

The following were considered in drafting this final rule:

information received in connection with public meetings held on January

25, 1996, November 8, 1996, and November 18, 1996; public comments

received in response to three advance notices of proposed rulemaking

(60 FR 63023, December 8, 1995; 60 FR 65360, December 19, 1995; and 60

FR 67113, December 28, 1995); public comments received in response to

publication of the Phase I proposed rule in the Federal Register (61 FR

48380, September 12, 1996); public comments received in response to

publication of the revised proposed rule in the Federal Register (62 FR

26639, May 14, 1997); public comments received in response to

publication of the Competitive Range Determinations proposed rule in

the Federal Register (61 FR 40116, July 31, 1996); inputs received over

the Acquisition Reform Network (an Internet forum); inputs received

from members of Congress and Congressional staff, Government agencies,

the Defense Acquisition Regulations Council, the Civilian Agency

Acquisition Council, and the Office of Federal Procurement Policy

(OFPP); inputs received in response to other notices of the rewrite in

various print media and conferences; and inputs received from

Government fora such as the Front-Line Professional's Forum and the

Federal Procurement Executive Association.

Summary of Changes

This final rule reengineers the processes used to contract by

negotiation, with the intent of reducing the resources necessary for

source selection and reducing time to contract award. The goals of the

FAR Part 15 Rewrite are to ensure that the Government, when contracting

by negotiation, receives the best value, while ensuring the fair

treatment of offerors. The final rule reengineers the acquisition

process in the current FAR and incorporates changes to the proposed

rule by:

Supporting more open exchanges between the Government and

industry, allowing industry to better understand the requirement and

the Government to better understand industry proposals;

Reestablishing the ``late is late'' rule for receipt of

proposals, responses to requests for information, and modifications;

Emphasizing that no offeror, otherwise eligible to submit

a proposal in response to a Government solicitation, will be excluded

from the competitive range without its proposal being initially

reviewed and evaluated solely against all the evaluation factors

[[Page 51225]]

and significant subfactors in the solicitation;

Reiterating that all proposals received will be evaluated

based upon the criteria in the solicitation;

Reducing the bid and proposal costs for industry by

providing early feedback as to whether a proposal is truly competitive;

Eliminating mandatory forms currently used as cover sheets

for submitting cost or pricing data (SF 1411) and information other

than cost or pricing data (SF 1448);

Simplifying the exception to obtaining cost or pricing

data for modifications to contracts for commercial items;

Revising guidance pertaining to field pricing to reflect

the need for greater flexibility and teamwork in today's acquisition

environment;

Simplifying guidance pertaining to unbalanced pricing to

reflect its use as a proposal analysis technique designed to assess

risk and protect the Government's economic interest;

Eliminating the requirement for a separate determination

and findings supporting cost-plus-fixed-fee contracts;

Realigning fee limitations with statute, and permitting

the contracting officer's signature on the price negotiation memorandum

or other documentation of the negotiated price to serve as a

determination that fee limits have not been exceeded;

Increasing the scope of discussions;

Requiring that adverse past performance to which an

offeror has not had an opportunity to respond be brought to the

offeror's attention before it can be the determining factor for

exclusion from the competitive range;

Requiring that all adverse past performance information be

brought to the offeror's attention during discussions, if the offeror

is placed in the competitive range;

Changing the standard for admission into the competitive

range (to all proposals most highly rated) and implementing Section

4103 of the Clinger-Cohen Act of 1996 (Pub. L. 104-106); and

Streamlining the post-competitive range process by

enhancing the ability of the parties to communicate and document

understandings reached during discussions.

B. Regulatory Flexibility Act

A Final Regulatory Flexibility Analysis (FRFA) has been performed

and will be provided to the Chief Counsel for Advocacy of the Small

Business Administration. Because of the broad range of acquisitions

impacted by this rule and the extensive public response to both of the

proposed rules, the Final Regulatory Flexibility Analysis is published

in its entirety:

Final Regulatory Flexibility Analysis

[FAR Case 95-029, FAR Part 15 Rewrite]

This final regulatory flexibility analysis has been prepared

consistent with the criteria of 5 U.S.C. 604.

1. Succinct statement of the need for, and the objectives of,

the rule.

Historically, the executive branch has undertaken a continuous

improvement approach to the acquisition process, particularly since

the end of World War II. In 1947, the National Security Act

established an acquisition process for the Department of Defense.

Since that time, at least six major executive branch commissions

have separately examined the problems of effectively managing

Federal acquisition. In 1972, the Commission on Government

Procurement recommended that a consolidated Federal Acquisition

Regulation (FAR) be established. Later, the Packard Commission

called for a simpler and clearer acquisition framework. In addition,

the FAR System, composed of the Defense Acquisition Regulations

Council, the Civilian Agency Acquisition Council, and the Federal

Acquisition Regulatory Council, has been active in the maintenance

and continuous improvement of the FAR for many years now.

Congress has also participated substantially in the reform of

Federal acquisition practices. Section 800 of Public Law 101-510

(the National Defense Authorization Act for Fiscal Year 1991)

directed the Department of Defense to establish the ``DoD Advisory

Panel on Streamlining and Codifying Acquisition Laws.'' The panel

recommended changes to acquisition statutes in order to improve the

efficiency and effectiveness of the acquisition process, while

keeping in mind the need to provide a fair and open acquisition

system. The panel's recommendations, published in January 1993,

formed the basis of the reforms contained in the Federal Acquisition

Streamlining Act of 1994 and the Clinger-Cohen Act of 1996.

The Part 15 rewrite is a normal product of the continuous

improvement process employed for maintenance of the FAR. It is worth

noting that in the past few years several other parts of the FAR

have also been rewritten, including Part 13, Simplified Acquisition

Procedures; Part 37, Service Contracting; and Part 45, Government

Property. The Part 15 rewrite, like the rewrite of these other FAR

parts, conforms with the general reform philosophy espoused by the

Clinton-Gore Administration. Vice President Gore, in the Report of

the National Performance Review: Creating a Government that Works

Better & Costs Less recognized the need for deregulation in the

acquisition process. The report, published in 1993, emphasized that

acquisition regulations should be rewritten to provide for

empowerment and flexibility. According to the report, the

acquisition regulations should: shift from rigid rules to guiding

principles; promote decision making at the lowest possible level;

end unnecessary regulatory requirements; foster competitiveness and

commercial practices; and shift to a new emphasis on choosing ``best

value'' products.

We decided to revise Part 15 for several reasons. In 1995, DoD

conducted a survey of the defense industry, military departments,

and defense agencies to ascertain which parts of the FAR were most

in need of revision. The responses indicated a general consensus

that Part 15 was one of the parts that would most benefit from such

an effort. Secondly, within the Government, the preponderance of

contracting expenditures are accomplished using Part 15 procedures.

Finally, the results of a 1991 FAR Improvement Study conducted by

the General Services Administration indicated that Subparts 15.6,

Source Selection, and 15.8, Price Negotiation, were the most

difficult parts of the FAR to use.

On January 29, 1996, the FAR Council tasked an ad hoc

interagency committee to rewrite FAR Part 15, Contracting by

Negotiation. The rewrite was to be accomplished in two phases. Phase

I, consisting of the rewrite of FAR Subparts 15.000, 15.1, 5.2,

15.3, 15.4, 15.6, and 15.10 covering acquisition techniques and

source selection, was published for public comment in the Federal

Register at 61 FR 48380 on September 12, 1996. In the interest of

increasing outreach to small entities, two public meetings were held

to discuss the proposed rule: in Washington, DC, on November 8,

1996, and in Kansas City, MO, on November 18, 996. In addition, the

opportunity for an evening public meeting was publicized in the

September 12, 1996, Federal Register notice to accommodate schedule

constraints that may prevent small entities from being represented

at the public meetings. The public comment period closed on November

26, 1996. We received 1541 comments from 100 respondents. Due to the

significant changes made as a result of analyzing and resolving

public comments, we decided to publish a second proposed rule. All

of the comments received were considered in drafting the second

proposed rule. The rule was expanded to include the Phase II

proposed changes, covering Subparts 15.5, 15.7, 15.8, and 15.9. The

revised rule also subsumed FAR Case 96-303, Competitive Range

Determinations, and addressed the related public comments. The

second proposed rule was published in the Federal Register on May

14, 1997 (62 FR 26639). We received 841 comments from 80 respondents

and considered all the comments in drafting the final rule.

The goal of the rewrite is to infuse innovative techniques into

the source selection process, simplify the acquisition process,

incorporate changes in pricing and unsolicited proposal policy, and

facilitate the acquisition of best value products and services. The

rewrite emphasizes the use of effective and efficient acquisition

methods and eliminates unnecessary burdens imposed on industry and

Government. Elimination of burdens and creation of a simplified,

efficient, and impartial acquisition process benefits all

participants in Government contracting, especially small businesses.

In addition, the rule revises the sequence in which Part 15

information is presented to facilitate use of the regulation.

[[Page 51226]]

2. Summary of the significant issues raised by the public

comments in response to the initial regulatory flexibility analysis,

a summary of the assessment of the agency of such issues, and a

statement of any changes made in the proposed rule as a result of

such comments.

Several significant issues were raised by the public comments.

We have addressed these issues as follows:

Competitive range determinations. Some respondents

expressed concern that the shift in competitive range policy to

encourage retaining only those offerors rated most highly rather

than all those with a reasonable chance of award may inhibit awards

to small entities. This revision is consistent with the philosophy

of Section 4103 of the Clinger-Cohen Act of 1996. The competitive

range guidance in the final rule indicates that contracting officers

shall establish a competitive range comprised of only those

proposals most highly rated. In contrast, the current FAR advises

contracting officers ``when there is doubt as to whether a proposal

is in the competitive range, the proposal should be included.'' We

considered retaining the existing FAR standard for inclusion in the

competitive range, but ultimately rejected it because there are

readily discernible benefits from including only the most highly

rated offers in the competitive range. First, those included will

know that they have a good chance of winning the competition--making

it in their best interests to compete aggressively. Second, those

eliminated from the range are spared the cost of pursuing an award

they have little or no chance of winning. Retaining marginal offers

in the range imposes additional, and largely futile, effort and cost

on both the Government and industry. We also note that comments

received from Government agencies indicate that award is nearly

always made to one of the three most highly rated offerors in the

competitive range. Therefore, including an offeror that is not most

highly rated in the competitive range would not likely impact the

final award decision. This final rule ensures that offerors with

little probability of success, are advised early on that their

competitive position does not merit additional expense in a largely

futile attempt to secure the contract.

This knowledge will benefit both large and small entities, but

will be especially beneficial to small entities that have

constrained budgets. These entities will be able to conserve scarce

bid and proposal funds and employ their resources on more productive

business opportunities. In addition, the new standard has the

derivative benefit of encouraging offerors to submit better, more

robust initial proposals in recognition of the fact that only the

most highly rated proposals will be included in the competitive

range.

Limiting the competitive range in the interest of

efficiency. Some respondents expressed concern that allowing the

contracting officer to limit the competitive range in the interest

of efficiency would provide a level of discretion to contracting

officers that could lead to abuses. The comments expressed a concern

that offerors might be excluded from the competitive range for

arbitrary reasons unrelated to the actual procurement. In addition,

one small business submitted a public comment in support of the

efficient competitive range.

This language implements the requirements of Section 4103 of the

Clinger-Cohen Act of 1996 to permit contracting officers, in certain

circumstances, to reduce the number of proposals in the competitive

range to the ``greatest number that will permit an efficient

competition among the offerors rated most highly.'' Under this final

rule, source selection officials will continue to establish

evaluation factors and identify them in the solicitation, including

any preferences for small entities. The contracting officer may

further reduce the number of proposals that would otherwise be in

the competitive range to the greatest number that will permit an

efficient competition among the most highly rated offerors only if

offerors have been advised of this possibility in the solicitation,

and only after evaluating all proposals received in accordance with

the criteria specified in the solicitation.

Expanded exchanges throughout the acquisition process.

Some respondents expressed concerns that the increased exchanges

between the Government and industry throughout the acquisition

process increased the risk of unfair practices. The final rule

encourages earlier and more meaningful exchanges of information

between the Government and potential contractors to achieve a better

understanding of the Government's requirements and the offerors'

proposals. This rule contains limits on exchanges that preclude

favoring one offeror over another, revealing offerors' technical

solutions, revealing prices without the offerors' permission, and

knowingly furnishing source selection information. In addition, the

guidance in the final rule has been revised to alert contracting

officers of the safeguards contained at 3.104, Procurement

Integrity, and 24.2, Freedom of Information Act.

Use of neutral past performance evaluations. Some

respondents expressed concerns that neutral past performance

evaluations are not adequately defined, and that the rule does not

contain sufficient implementing guidance. One respondent suggested

that, to avoid abuses of neutral rating, offerors granted such

ratings should be required to submit a record of their lack of

opportunity to acquire a record of relevant past performance. The

second proposed rule contained a definition of neutral rating, and

asked respondents to provide suggestions for a better definition. We

received only one such suggestion, and, upon analysis, we found that

the suggestion did not actually provide a definition of neutral

rating but, rather, provided a way to limit the application of

neutral ratings. Instead, the final rule includes language based on

41 U.S.C. 405(j)(2) providing offerors, without a previous

performance history, a rating that neither rewards nor penalizes the

offeror. We selected this alternative to allow the facts of the

instant acquisition to be used in determining what rating scheme

would satisfy requirements of the statute.

Ability of offerors to address adverse past performance

information before it can be used in a source selection.

Respondents, especially the small business community, expressed

concerns that offerors might be excluded from a competition on the

basis of incorrect past performance information that they have not

had the opportunity to address. In response to this concern, the

final rule provides that, when conducting communications prior to

establishing the competitive range, offerors, including small

entities, shall be granted the opportunity to explain situations

that contributed to an adverse past performance rating to which they

have not had a previous opportunity to respond, before such ratings

can be the determining factor for exclusion from the competitive

range.

Impact of oral presentations on small entities.

Respondents expressed concerns that the use of oral presentations

may present barriers to the participation of small entities in

Government procurement because they may be costly and require skills

that small entities may not easily attain. The final rule requires

contracting officers to consider, among other factors, the impact on

small businesses, including cost, before using oral presentations.

In fact, based on a recommendation from the Small Business

Administration, the final rule also contains guidance on selecting

alternatives to in-person presentations (e.g., teleconferencing).

Generally, oral presentations are expected to be less costly to

prepare than formal written proposals. Experience accumulated by

agencies that have already used oral presentations indicates that

use of this technique has either improved participation by small

entities, or has had no adverse impact on their level of

participation.

The Nuclear Regulatory Commission (NRC) and the

Departments of the Army, Energy, HHS, and Treasury submitted

comments describing their experiences in using oral presentations.

The Department of Energy (DoE) indicated that small businesses that

had not previously participated in DoE procurements, competed on

procurements using oral presentations. Ft. Sam Houston in San

Antonio indicated that by using oral presentations, the lead time on

a recent procurement for outpatient clinics was five months,

compared to a lead-time of 13-15 months on previous procurements

that did not use oral presentations. They further indicated that

proposals that previously required ``at least two trips with a two-

wheel dolly'' were reduced to one envelope as a result of using oral

presentations. The Centers for Disease Control (CDC) stated that in

using oral presentations they have always been able to award the

contract ahead of their 180-day lead-time target and have been able

to save the Government thousands of dollars. The CDC has used oral

presentations almost exclusively on small business set-asides, and

comments from the offerors have been very positive. The NRC reports

that in no case did a large business receive an award for work that

was previously performed by a small business.

Estimate of the number of small entities affected by

the rule. Several respondents representing small entities expressed

concerns regarding the estimate in the initial regulatory

flexibility analysis of small

[[Page 51227]]

entities impacted by the proposed rule. We have researched the

statistics available in the Federal Procurement Data System, and

have revised our estimate. Our discussion of the revised estimate is

included in paragraph 3.

Whether or not this is a major rule, subject to OMB

review and analysis under Executive Order 12866. Respondents

expressed concern as to whether this rule should be deemed a major

rule. The Administrator, Office of Information and Regulatory

Affairs, Office of Management and Budget, has determined that this

is a significant rule, under Executive Order 12866, subject to OMB

review and analysis. However, this is not a major rule, as defined

in the Small Business Regulatory Enforcement Fairness Act (SBREFA),

5 U.S.C. 804, because it does not meet the criteria identified at 5

U.S.C. 804(2). In accordance with the requirements of 5 U.S.C. 801

(as added by Subtitle E of Public Law 104-121), a copy of the rule

will be provided to Congress and GAO.

3. Description of and an estimate of the number of small

entities to which the rule will apply or an explanation of why no

such estimate is available.

This rule will apply to all entities, large and small,

(including educational and nonprofit), that offer supplies or

services to the Government in acquisitions using the Part 15

procedures. As a result of comments received in response to the

proposed rule and the initial regulatory flexibility analyses, we

have revised our estimate of the number of small entities that will

be impacted by the rule.

Upon further review and analysis, we have identified an

error in the supporting data for the initial regulatory flexibility

analyses. The figure of 602,000 was described as ``Estimated number

of entities impacted by rule'' while in fact that figure is actually

the product of the estimated number of actions impacted by the rule

multiplied by the average number of participants in each action.

This figure is not the estimated number of entities impacted by the

rule, as it does not take into account the average number of actions

in which each entity participated, and therefore is significantly

larger than the actual number of entities impacted by the rule. In

the next step in the supporting data calculation, this amount was

properly divided by 25, the estimated number of actions in which

each entity participates. The result, 24,080, was properly

identified as the ``Estimated total number of entities affected by

the rule.''

Based on Federal Procurement Data System (FPDS)

statistics for fiscal year 1996, we estimate that 17,717 small

businesses received awards valued at $100,000 or more. This

statistic includes small businesses receiving awards in response to

Part 15 procedures as well as sealed bids. This statistic does not

include small entities other than small businesses, e.g., small

nonprofit organizations and small local governments. Current data

collection categories do not provide this information. Information

quantifying the number of unsuccessful offerors that are small

entities is not collected at this time. Therefore, although we

recognize that the number of small entities impacted by this rule is

greater than the number of small entities receiving awards under

Part 15 procedures, we do not have data that quantifies this

difference.

One respondent to the proposed rule indicated that

approximately 28,000 to 30,000 small businesses participate in DoD

acquisitions, and estimated that 200,000 to 500,000 participate

Governmentwide. We cannot confirm either estimate, however,

available data seems to contradict the Governmentwide estimate.

According to the 1994 Report on Small Business and Competition,

submitted to the President by the Administrator and the Chief

Counsel for Advocacy of the Small Business Administration for

inclusion in The State of Small Business: A Report of the President

1994, estimates of the number of individual companies competing for

Federal contract awards vary between 42,000 and 50,000 (Atch 1).

This includes large as well as small entities. The 1995 Report (the

most recent version available at the time this final regulatory

flexibility analysis was prepared) does not update this estimate.

However, the 1995 Report does indicate that the overall number of

small businesses in the U.S. economy has increased.

FPDS statistics for fiscal year 1996 (the most recent

FPDS statistics available at the time this analysis was prepared)

indicate that there were 17,717 small businesses that received

government contract awards over $100,000 (Atch 2). FPDS advises

that, of the approximately 17,717 Governmentwide small business

awardees, 10,696 received contract awards from DoD (Atch 3).

Application of the resulting ratio to the upper limit of the

respondent's estimated range (28,000 to 30,000 small businesses

participating in DoD procurement) provides an estimate of about

49,692 small businesses participating in Governmentwide

acquisitions. This estimate is probably higher than the actual

number of such small businesses, as it is close to the estimates

referenced in the President's report cited above that include both

large and small entities.

Based on this analysis, we estimate that the number of

small entities affected by this rule is no more than 49,692, or

approximately 50,000.

4. Description of the projected reporting, recordkeeping and

other compliance requirements of the rule, including an estimate of

the classes of small entities that will be subject to the

requirement and the type of professional skills necessary for

preparation of the report or record.

This rule will impose no new reporting or recordkeeping

requirements on large or small entities. The rule removes the

requirement for the use of certain Government forms and formats in

responding to requests for proposal. Offerors may extend the

proposal acceptance period as part of proposal revisions instead of

having to submit a separate, formal confirmation of the extension.

Offerors may identify their authorized negotiators without using a

Government-required format. The Standard Form 1417, Presolicitation

Notice and Response, is no longer required for negotiated

acquisitions using Part 15 procedures.

5. Description of the steps the agency has taken to minimize the

significant economic impact on small entities consistent with the

stated objectives of applicable statutes, including a statement of

the factual, policy, and legal reasons for selecting the alternative

adopted in the final rule and why each one of the other significant

alternatives to the rule considered by the agency which affect the

impact on small entities was rejected.

In developing the policies and procedures contained in the final

rule, we considered the available alternative approaches, and the

impacts, adverse and beneficial, of each of the alternatives to

large offerors, small offerors, and the Government. Some of the

options were bounded by statutory requirements and a preference for

an impartial, efficient, and accessible acquisition system in which

appropriate information is readily available to all participants.

The final rule does not provide for flexible compliance by small

entities because source selection officials will continue to

establish evaluation factors as provided in FAR 15.3, Source

selection, including any applicable preferences for small entities.

There are five significant areas in which we were able to

minimize the impact on small entities:

Competitive range policy. We considered alternatives in

the following areas in order to minimize the impact on small

entities--

(a) Total bid and proposal costs borne by offerors, including

small entities. As an alternative to the language contained in the

final rule, we considered whether the potential payoff of receiving

an award outweighed the additional cost to an offeror of staying in

a competition without having a realistic chance of winning, i.e.,

whether the long shots came in often enough to make it worth the

extra cost of taking the chance. We also note that information

provided by agencies in public comments responding to the proposed

rule indicates that award is nearly always made to one of the three

most highly rated offerors. We have received no comments that

contradict this understanding. The benefits to offerors of including

only the most highly rated offers in the competitive range are that

those included will know that they have a good chance of winning the

competition, making it in their best interests to compete

aggressively, and those eliminated from the range are spared the

cost of pursuing an award when they have little, if any, chance of

winning.

(b) Impacts on resources and cash flow. A smaller competitive

range enables faster progress toward contract award. Therefore, all

offerors excluded from the competitive range expend less resources

on a competition they have little or no chance of winning. The

resources of these offerors can then be applied to the pursuit of

other more promising business opportunities. Successful offerors

receive contract awards faster, thereby improving their cash flow.

Therefore, we decided not to retain the current FAR standard of

including all proposals with a reasonable chance of being selected

for award, and including any proposals for which there is doubt,

i.e., ``when in doubt, leave them in,'' because this standard

[[Page 51228]]

prolongs the award process and increases the costs to offerors with

little or no chance of winning.

(c) Perception of barriers to submitting a proposal. The initial

proposed rule contained a solicitation provision that identified a

target number of offerors to be included in the competitive range.

Public comments indicated that this created a perception that

proposals would not be properly evaluated against the evaluation

criteria in the solicitation prior to establishment of the

competitive range. Respondents indicated that they would view this

as a barrier to submitting proposals and competing on Government

contracting opportunities. Therefore, we have revised the final rule

to eliminate this solicitation provision, and to emphasize that all

proposals received are evaluated against all the evaluation factors

and significant subfactors in the solicitation before the

competitive range is established.

(d) Limiting the competitive range in the interest of

efficiency. The language in the final rule implements Section 4103

of the Clinger-Cohen Act of 1996, that allows contracting officers,

in certain circumstances, to reduce the number of proposals in the

competitive range to the greatest number that will permit an

efficient competition among the most highly rated offerors. We

considered three alternatives to the language contained in the final

rule--

(1) Include at least one small business proposal in the

competitive range. At the suggestion of the Small Business

Administration Office of Advocacy, we considered imposing a

requirement to have at least one small business in the competitive

range whenever any small businesses submit proposals. We did not

adopt this alternative for two reasons. First, as noted above,

public comments from agencies indicate that awards are nearly always

made to the one of the three most highly rated proposals going into

the competitive range. This is true even when small businesses win

full and open competitions. The incidence of award to an offeror

other than one of the three such proposals is so small that it does

not support keeping any business, particularly a small business with

limited bid and proposal resources, in a competition that the

business has virtually no chance of winning. Second, this

recommendation could conflict with the requirements of Section 4103

of the Clinger-Cohen Act to include the most highly rated proposals

in the competitive range, if the small business proposal is not

among the most highly rated.

(2) Provide examples of the factors to be considered in limiting

the competitive range. The proposed rule contained a list of factors

for the contracting officer to consider in establishing the

competitive range. As a result of public comments raising concerns

about the list, we revised the final rule to delete the list of

factors. This permits the facts of the instant acquisition to guide

the judgment of the contracting officer in exercising this

authority, instead of attempting to impose a static list on all

circumstances. Both small and large offerors should benefit from

this flexibility. The goal of our final rule language is to allow

all participants in the process, both industry and Government, to

optimize their resources.

(3) Provide a definition of efficiency. The proposed rule did

not define an efficient competition. We received several public

comments suggesting that such a definition be provided. Our

assessment is that the definition of an efficient competition

depends on the facts of the instant acquisition. Instead of imposing

a definition that may not be appropriate in certain circumstances,

we chose to describe the process for limiting the competitive range

for the purpose of efficiency. This enables the contracting officer

to exercise this authority appropriately in varying circumstances--

all offerors should benefit from this approach.

(e) Responding to adverse past performance information. We

considered alternatives relating to two issues in this area.

(1) Prohibition on the use of certain types of past performance

information. The proposed rule did not prohibit the use of adverse

past performance information. Several public comments suggested that

past performance information on contracts in litigation or dispute

should not be used until the litigation or dispute is resolved. The

rule requires the contracting officer to evaluate the currency,

relevance, source, context, and general trend of the past

performance information. We did not adopt this alternative because

the requirement to evaluate the context of the information already

addresses this concern. In addition, we were concerned that the

suggested alternative may encourage litigation for the purpose of

avoiding the inclusion of adverse past performance information in

future acquisitions.

(2) Responding to adverse past performance information. The

proposed rule did not require contracting officers to allow offerors

to respond to adverse past performance information prior to

discussions. Some public comments recommended that contracting

officers identify any adverse past performance information to the

offeror immediately upon receiving the information. They further

suggested that the offeror be allowed to respond to such information

regardless of the stage of the acquisition. Other public comments

recommended that offerors be afforded an opportunity to respond to

adverse past performance information on which they had not

previously had an opportunity to respond. We revised the final rule

to accommodate these recommendations. The initial proposed rule

authorized communication regarding adverse past performance

information. In the second proposed rule, we revised this guidance

to state that contracting officers, when conducting communications

with offerors before establishment of the competitive range, shall

address adverse past performance information on which the offeror

has not previously had the opportunity to comment. We revised the

final rule to require that offerors, including small entities, shall

be granted the opportunity to explain situations that contributed to

an adverse past performance rating to which they have not had a

previous opportunity to respond before such ratings can be the

determining factor for exclusion from the competitive range. These

revisions, together with the requirement to discuss all deficiencies

and significant weaknesses with those offerors in the competitive

range, ensure that adverse past performance to which an offeror has

not had the opportunity to respond will be addressed any time it can

affect the outcome of the acquisition. We did not revise the rule to

permit offerors to address past performance information to which

they have already had an opportunity to respond because the

solicitation provides offerors with the opportunity to address

problems encountered on previous contracts and related corrective

actions. In addition, FAR Subpart 42.15, Contractor performance

information, already contains formal rebuttal procedures. We did not

revise the rule to permit all offerors to address past performance

information to which they have not had a previous opportunity to

comment because it would prolong the evaluation process by allowing

such exchanges when they will not make a difference in the source

selection decision.

(f) Neutral past performance evaluations. We considered

alternatives relating to two aspects of neutral past performance

ratings--

(1) Definition of neutral past performance evaluations. The

proposed rules provided a definition of neutral past performance

evaluations. Public comments recommended that we revise the

definition and provide detailed instructions on how to apply neutral

past performance ratings in any source selection. 41 U.S.C.

405(j)(2) requires offerors without a previous performance history,

to be given a rating that neither rewards nor penalizes the offeror.

We did not adopt the public comment recommendations, opting instead

to revise the final rule to reflect the statutory language, so that

the facts of the instant acquisition would be used in determining

what rating scheme is appropriate. This alternative provides for

flexible compliance to satisfy requirements of the statute.

(2) Limiting the instances of neutral evaluations. The proposed

rule listed examples of information that may be considered to avoid

assigning neutral past performance ratings. One public comment

recommended that, in the interest of fairness to all businesses, as

well as the minority contractors represented by the respondent, the

Government should assign neutral past performance ratings only where

the preponderance of the evidence demonstrates that the offeror

lacked an opportunity to acquire a record on relevant past

performance. In order to minimize the use of neutral past

performance ratings, we revised the final rule to indicate that

contracting officers ``should'' (rather than ``may'') take into

account a broad range of information related to past performance

when performing past performance evaluations.

(g) Providing for increased exchanges between the Government and

industry throughout the acquisition process.

(1) Clarifications. We drafted the rule to allow as much free

exchange of information between offerors and the Government as

possible, while still permitting award without discussions and

complying with applicable statutes. The proposed rule did not

differentiate between exchanges of

[[Page 51229]]

information when award without discussions was contemplated versus

when a competitive range would be established. Public comment

pointed out that the proposed rule language may allow exchanges

beyond what is permitted by applicable statute when making award

without discussions. In drafting the second proposed rule, we

limited these exchanges. The resulting language still permits more

exchange of information between offerors and the Government than the

current FAR. This policy is expected to help offerors, especially

small entities that may not be familiar with proposal preparation,

by permitting easy clarification of limited aspects of their

proposals.

(2) Communications. Public comments indicated that the second

proposed rule did not establish a ``bright line'' distinction

between when communications conducted in order to establish a

competitive range end, and when discussions begin. Small businesses

were concerned that the Government may conduct inappropriate

communications with selected offerors prior to the establishment of

the competitive range to the detriment of small businesses. We

revised the final rule to accommodate this concern by clearly

defining when discussions begin. We adopted this alternative to

preclude the occurrence of the inappropriate communications that

concerned small businesses.

(3) Discussions. The initial proposed rule contained the

existing FAR guidance regarding the type and amount of information

that should be exchanged during discussions.

In response to public comments, the second proposed rule

requires a more robust exchange of information during discussions.

The language requires the Government to identify, in addition to

significant weaknesses and deficiencies, other aspects of an

offeror's proposal that could be enhanced materially to improve the

offeror's potential for award. This change should benefit all

offerors, including small businesses, because it permits offerors to

develop a better understanding of the Government's evaluation of

their proposal, and permits them to optimize their potential for

award.

(h) Oral presentations. The existing FAR does not address oral

presentations. The proposed rule included general guidelines for the

use of oral presentations to provide consistent and impartial

Governmentwide application of this technique. We considered

alternatives in two aspects of oral presentations.

(1) Methods for recording oral presentations. Some public

comments in response to the second proposed rule recommended that

the rule should require the Government to prepare a formal,

verifiable record of each oral presentation, to place the record in

the source selection files, and to provide copies of their own

records to offerors. We revised the final rule to allow contracting

officers to provide each offeror a copy of that offeror's record,

but did not require the Government to make a verifiable record. A

requirement for the Government to make a verifiable record of each

presentation is not consistent with the objective of this rule to

streamline the acquisition process.

(2) Oral presentations and award without discussions. The second

proposed rule text on oral presentations did not refer users to the

limits on communications set forth elsewhere in the rule. Public

comments expressed concerns that the oral presentations might be

detrimental to small businesses because, depending on the stage of

the acquisition, the atmosphere of oral presentations could be

conducive to inappropriate exchanges of information between selected

offerors and the Government. We revised the final rule to help users

of this technique understand the limits on exchanges of information

during the conduct of oral presentations.

C. Paperwork Reduction Act

The following information collection requirements have been

approved by the Office of Management and Budget (OMB) and apply to FAR

Part 15: 9000-0037, Standard Form 1417, Presolicitation Notice and

Response; 9000-0044, Bid/Offer Acceptance Period; and 9000-0048,

Authorized Negotiators. While the Paperwork Reduction Act applies

because the rule revises existing information collection requirements,

resulting in a slight decrease in the estimated burden, it has been

determined that this rule does not materially affect the burden already

approved by OMB. Optional forms 307, 308, and 309 do not require

independent clearance under the Paperwork Reduction Act because they do

not request information beyond identity, date, address, and contact.

Therefore, no adjustments to these information collection requirements

are sought at this time.

List of Subjects in 48 CFR Parts 1, 2, 3, 4, 5, 6, 7, 9, 11, 12,

13, 14, 15, 16, 17, 19, 24, 25, 27, 28, 31, 32, 33, 34, 35, 36, 42,

43, 44, 45, 49, 50, 52, and 53

Government procurement.

Dated: September 22, 1997

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Federal Acquisition Circular--FAC 97-02

Federal Acquisition Circular (FAC) 97-02 is issued under the

authority of the Secretary of Defense, the Administrator of General

Services, and the Administrtator for the National Aeronatics and Space

Administration.

The policies, provisions, and clauses of this final rule are

effective for all solicitations issued on or after October 10, 1997.

However, agencies may delay implementation of this final rule until

January 1, 1998, at which time it becomes mandatory for all

solicitations issued on or after that date. Agencies using the new

policies, provisions, and clauses before January 1, 1998, shall ensure

that the cover page of the solicitation for each acquisition subject to

this rule, and issued before January 1, 1998, contains a notice that

this rule applies to that acquisition. Any solicitation issued before

January 1, 1998, that does not contain such a solicitation notice or

the new provisions and clauses is automatically conducted in accordance

with the FAR excluding changes made by this final rule.

Dated: September 19, 1997.

Eleanor R. Spector,

Director, Defense Procurement, Department of Defense.

Dated: September 10, 1997.

Ida M. Ustad,

Deputy Associate Administrator, Office of Acquisition Policy, General

Services Administration.

Dated: September 10, 1997.

Tom Luedtke,

Deputy Associate Administrator for Procurement National Aeronautics and

Space Administration.

Therefore, 48 CFR Parts 1, 2, 3, 4, 5, 6, 7, 9, 11, 12, 13, 14, 15,

16, 17, 19, 24, 25, 27, 28, 31, 32, 33, 34, 35, 36, 42, 43, 44, 45, 49,

50, 52, and 53 are amended as set forth below:

1. The authority citation for 48 CFR Parts 1, , 3, 4, 5, 6, 7, 9,

11, 12, 13, 14, 15, 16, 17, 19, 24, 25, 27, 28, 31, 32, 33, 34, 35, 36,

42, 43, 44, 45, 49, 50, 52, and 53 continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

2. Section 1.102-2 is amended by adding paragraph (c)(3) to read as

follows:

1.102-2 Performance standards.

* * * * *

(c) * * *

(3) The Government shall exercise discretion, use sound business

judgment, and comply with applicable laws and regulations in dealing

with contractors and prospective contractors. All contractors and

prospective contractors shall be treated fairly and impartially but

need not be treated the same.

* * * * *

3. Section 1.106 is amended in the table following the introductory

paragraph by removing the following entries:

1.106 OMB Approval under the Paperwork Reduction Act.

------------------------------------------------------------------------

OMB control

FAR segment No.

------------------------------------------------------------------------

* * * *

SF 1411.................................................... 9000-0013

[[Page 51230]]

* * * *

SF 1448.................................................... 9000-0013

* * * *

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PART 2--DEFINITIONS OF WORDS AND TERMS

4. Section 2.101 is amended by inserting, in alphabetical order,

the definition ``Best value'' to read as follows:

2.101 Definitions.

* * * * *

Best value means the expected outcome of an acquisition that, in

the Government's estimation, provides the greatest overall benefit in

response to the requirement.

* * * * *

PART 4--ADMINISTRATIVE MATTERS

5. Subpart 4.10 is added to read as follows:

Subpart 4.10--Contract Line Items

4.1001 Policy.

Contracts may identify the items or services to be acquired as

separately identified line items. Contract line items should provide

unit prices or lump sum prices for separately identifiable contract

deliverables, and associated delivery schedules or performance periods.

Line items may be further subdivided or stratified for administrative

purposes (e.g., to provide for traceable accounting classification

citations).

PART 5--PUBLICIZING CONTRACT ACTIONS

6. Section 5.102 is amended by adding paragraph (a)(7) to read as

follows:

5.102 Availability of solicitations.

(a) * * *

(7) If electronic commerce is employed in the solicitation process,

availability of the RFP may be limited to the electronic medium.

* * * * *

PART 6--COMPETITION REQUIREMENTS

7. Section 6.101 is amended by revising paragraph (b) to read as

follows:

6.101 Policy.

* * * * *

(b) Contracting officers shall provide for full and open

competition through use of the competitive procedure(s) contained in

this subpart that are best suited to the circumstances of the contract

action and consistent with the need to fulfill the Government's

requirements efficiently (10 U.S.C. 2304 and 41 U.S.C. 253).

PART 7--ACQUISITION PLANNING

8. Section 7.105 is amended by revising paragraph (b)(5) to read as

follows:

7.105 Contents of written acquisition plans.

* * * * *

(b) * * *

(5) Budgeting and funding. Include budget estimates, explain how

they were derived, and discuss the schedule for obtaining adequate

funds at the time they are required (see subpart 32.7).

* * * * *

PART 11--DESCRIBING AGENCY NEEDS

9. Section 11.002 is amended at the end of paragraph (d) by adding

the following sentence:

11.002 Policy.

* * * * *

(d) * * * Environmental objectives, such as pollution prevention

(e.g., promoting waste reduction, source reduction, energy efficiency

and maximum practicable recovered material content) (see part 23) shall

be considered when describing Government requirements for supplies and

services, and when developing source selection factors for competitive

negotiated acquisitions (see 15.304), when appropriate.

* * * * *

10. Subpart 11.8 is added to read as follows:

Subpart 11.8--Testing

11.801 Preaward in-use evaluation.

Supplies may be evaluated under comparable in-use conditions

without a further test plan, provided offerors are so advised in the

solicitation. The results of such tests or demonstrations may be used

to rate the proposal, to determine technical acceptability, or

otherwise to evaluate the proposal (see 15.305).

PART 14--SEALED BIDDING

14.201-6 [Amended]

11. Section 14.201-6 is amended by removing and reserving paragraph

(n).

12. Section 14.404-1 is amended in paragraph (e)(1) by removing the

reference ``15.103'' and inserting ``paragraph (f) of this

subsection''; and by adding paragraph (f) to read as follows:

14.404-1 Cancellation of invitations after opening.

* * * * *

(f) When the agency head has determined, in accordance with

paragraph (e)(1) of this subsection, that an invitation for bids should

be canceled and that use of negotiation is in the Government's

interest, the contracting officer may negotiate (in accordance with

part 15, as appropriate) and make award without issuing a new

solicitation provided--

(1) Each responsible bidder in the sealed bid acquisition has been

given notice that negotiations will be conducted and has been given an

opportunity to participate in negotiations; and

(2) The award is made to the responsible bidder offering the lowest

negotiated price.

13. Part 15 is revised to read as follows:

PART 15--CONTRACTING BY NEGOTIATION

Sec.

15.000 Scope of part.

15.001 Definitions.

15.002 Types of negotiated acquisition.

Subpart 15.1--Source Selection Processes and Techniques

15.100 Scope of subpart.

15.101 Best value continuum.

15.101-1 Tradeoff process.

15.101-2 Lowest price technically acceptable source selection

process.

15.102 Oral presentations.

Subpart 15.2--Solicitation and Receipt of Proposals and Information

15.200 Scope of subpart.

15.201 Exchanges with industry before receipt of proposals.

15.202 Advisory multi-step process.

15.203 Requests for proposals.

15.204 Contract format.

15.204-1 Uniform contract format.

Table 15-1--Uniform Contract Format

15.204-2 Part I--The Schedule.

15.204-3 Part II--Contract Clauses.

15.204-4 Part III--List of Documents, Exhibits, and Other

Attachments.

15.204-5 Part IV--Representations and Instructions.

15.205 Issuing solicitations.

15.206 Amending the solicitation.

15.207 Handling proposals and information.

15.208 Submission, modification, revision, and withdrawal of

proposals.

15.209 Solicitation provisions and contract clauses.

15.210 Forms.

[[Page 51231]]

Subpart 15.3--Source Selection

15.300 Scope of subpart.

15.301 Definitions.

15.302 Source selection objective.

15.303 Responsibilities.

15.304 Evaluation factors and significant subfactors.

15.305 Proposal evaluation.

15.306 Exchanges with offerors after receipt of proposals.

15.307 Proposal revisions.

15.308 Source selection decision.

Subpart 15.4--Contract Pricing

15.400 Scope of subpart.

15.401 Definitions.

15.402 Pricing policy.

15.403 Obtaining cost or pricing data.

15.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C.

2306a and 41 U.S.C. 254b).

15.403-2 Other circumstances where cost or pricing data are not

required.

15.403-3 Requiring information other than cost or pricing data.

15.403-4 Requiring cost or pricing data (10 U.S.C. 2306a and 41

U.S.C. 254b).

15.403-5 Instructions for submission of cost or pricing data or

information other than cost or pricing data.

15.404 Proposal analysis.

15.404-1 Proposal analysis techniques.

15.404-2 Information to support proposal analysis.

15.404-3 Subcontract pricing considerations.

15.404-4 Profit.

15.405 Price negotiation.

15.406 Documentation.

15.406-1 Prenegotiation objectives.

15.406-2 Certificate of Current Cost or Pricing Data.

15.406-3 Documenting the negotiation.

15.407 Special cost or pricing areas.

15.407-1 Defective cost or pricing data.

15.407-2 Make-or-buy programs.

15.407-3 Forward pricing rate agreements.

15.407-4 Should-cost review.

15.407-5 Estimating systems.

15.408 Solicitation provisions and contract clauses.

Table 15-2--Instructions for Submitting Cost or Pricing Data Are

Required

Subpart 15.5--Preaward, Award, and Postaward Notifications, Protests,

and Mistakes

15.501 Definition.

15.502 Applicability.

15.503 Notifications to unsuccessful offerors.

15.504 Award to successful offeror.

15.505 Preaward debriefing of offerors.

15.506 Postaward debriefing of offerors.

15.507 Protests against award.

15.508 Discovery of mistakes.

15.509 Forms.

Subpart 15.6--Unsolicited Proposals

15.600 Scope of subpart.

15.601 Definitions.

15.602 Policy.

15.603 General.

15.604 Agency points of contact.

15.605 Content of unsolicited proposals.

15.606 Agency procedures.

15.606-1 Receipt and initial review.

15.606-2 Evaluation.

15.607 Criteria for acceptance and negotiation of an unsolicited

proposal.

15.608 Prohibitions.

15.609 Limited use of data.

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

15.000 Scope of part.

This part prescribes policies and procedures governing competitive

and noncompetitive negotiated acquisitions. A contract awarded using

other than sealed bidding procedures is a negotiated contract (see

14.101).

15.001 Definitions.

As used in this part--

Proposal modification is a change made to a proposal before the

solicitation closing date and time, or made in response to an

amendment, or made to correct a mistake at any time before award.

Proposal revision is a change to a proposal made after the

solicitation closing date, at the request of or as allowed by a

contracting officer, as the result of negotiations.

15.002 Types of negotiated acquisition.

(a) Sole source acquisitions. When contracting in a sole source

environment, the request for proposals (RFP) should be tailored to

remove unnecessary information and requirements; e.g., evaluation

criteria and voluminous proposal preparation instructions.

(b) Competitive acquisitions. When contracting in a competitive

environment, the procedures of this part are intended to minimize the

complexity of the solicitation, the evaluation, and the source

selection decision, while maintaining a process designed to foster an

impartial and comprehensive evaluation of offerors' proposals, leading

to selection of the proposal representing the best value to the

Government (see 2.101).

Subpart 15.1--Source Selection Processes and Techniques

15.100 Scope of subpart.

This subpart describes some of the acquisition processes and

techniques that may be used to design competitive acquisition

strategies suitable for the specific circumstances of the acquisition.

15.101 Best value continuum.

An agency can obtain best value in negotiated acquisitions by using

any one or a combination of source selection approaches. In different

types of acquisitions, the relative importance of cost or price may

vary. For example, in acquisitions where the requirement is clearly

definable and the risk of unsuccessful contract performance is minimal,

cost or price may play a dominant role in source selection. The less

definitive the requirement, the more development work required, or the

greater the performance risk, the more technical or past performance

considerations may play a dominant role in source selection.

15.101-1 Tradeoff process.

(a) A tradeoff process is appropriate when it may be in the best

interest of the Government to consider award to other than the lowest

priced offeror or other than the highest technically rated offeror.

(b) When using a tradeoff process, the following apply:

(1) All evaluation factors and significant subfactors that will

affect contract award and their relative importance shall be clearly

stated in the solicitation; and

(2) The solicitation shall state whether all evaluation factors

other than cost or price, when combined, are significantly more

important than, approximately equal to, or significantly less important

than cost or price.

(c) This process permits tradeoffs among cost or price and non-cost

factors and allows the Government to accept other than the lowest

priced proposal. The perceived benefits of the higher priced proposal

shall merit the additional cost, and the rationale for tradeoffs must

be documented in the file in accordance with 15.406.

15.101-2 Lowest price technically acceptable source selection process.

(a) The lowest price technically acceptable source selection

process is appropriate when best value is expected to result from

selection of the technically acceptable proposal with the lowest

evaluated price.

(b) When using the lowest price technically acceptable process, the

following apply:

(1) The evaluation factors and significant subfactors that

establish the requirements of acceptability shall be set forth in the

solicitation. Solicitations shall specify that award will be made on

the basis of the lowest evaluated price of proposals meeting or

exceeding the acceptability standards for non-cost factors. If the

contracting officer documents the file pursuant to 15.304(c)(3)(iii),

past performance need not be an evaluation factor in lowest price

technically acceptable source selections. If the contracting officer

elects to consider past performance as

[[Page 51232]]

an evaluation factor, it shall be evaluated in accordance with 15.305.

However, the comparative assessment in 15.305(a)(2)(i) does not apply.

If the contracting officer determines that a small business' past

performance is not acceptable, the matter shall be referred to the

Small Business Administration for a Certificate of Competency

determination, in accordance with the procedures contained in subpart

19.6 and 15 U.S.C. 637(b)(7)).

(2) Tradeoffs are not permitted.

(3) Proposals are evaluated for acceptability but not ranked using

the non-cost/price factors.

(4) Exchanges may occur (see 15.306).

15.102 Oral presentations.

(a) Oral presentations by offerors as requested by the Government

may substitute for, or augment, written information. Use of oral

presentations as a substitute for portions of a proposal can be

effective in streamlining the source selection process. Oral

presentations may occur at any time in the acquisition process, and are

subject to the same restrictions as written information, regarding

timing (see 15.208) and content (see 15.306). Oral presentations

provide an opportunity for dialogue among the parties. Pre-recorded

videotaped presentations that lack real-time interactive dialogue are

not considered oral presentations for the purposes of this section,

although they may be included in offeror submissions, when appropriate.

(b) The solicitation may require each offeror to submit part of its

proposal through oral presentations. However, certifications,

representations, and a signed offer sheet (including any exceptions to

the Government's terms and conditions) shall be submitted in writing.

(c) Information pertaining to areas such as an offeror's

capability, past performance, work plans or approaches, staffing

resources, transition plans, or sample tasks (or other types of tests)

may be suitable for oral presentations. In deciding what information to

obtain through an oral presentation, consider the following:

(1) The Government's ability to adequately evaluate the

information;

(2) The need to incorporate any information into the resultant

contract;

(3) The impact on the efficiency of the acquisition; and

(4) The impact (including cost) on small businesses. In considering

the costs of oral presentations, contracting officers should also

consider alternatives to on-site oral presentations (e.g.,

teleconferencing, video teleconferencing).

(d) When oral presentations are required, the solicitation shall

provide offerors with sufficient information to prepare them.

Accordingly, the solicitation may describe--

(1) The types of information to be presented orally and the

associated evaluation factors that will be used;

(2) The qualifications for personnel that will be required to

provide the oral presentation(s);

(3) The requirements for, and any limitations and/or prohibitions

on, the use of written material or other media to supplement the oral

presentations;

(4) The location, date, and time for the oral presentations;

(5) The restrictions governing the time permitted for each oral

presentation; and

(6) The scope and content of exchanges that may occur between the

Government's participants and the offeror's representatives as part of

the oral presentations, including whether or not discussions (see

15.306(d)) will be permitted during oral presentations.

(e) The contracting officer shall maintain a record of oral

presentations to document what the Government relied upon in making the

source selection decision. The method and level of detail of the record

(e.g., videotaping, audio tape recording, written record, Government

notes, copies of offeror briefing slides or presentation notes) shall

be at the discretion of the source selection authority. A copy of the

record placed in the file may be provided to the offeror.

(f) When an oral presentation includes information that the parties

intend to include in the contract as material terms or conditions, the

information shall be put in writing. Incorporation by reference of oral

statements is not permitted.

(g) If, during an oral presentation, the Government conducts

discussions (see 15.306(d)), the Government must comply with 15.306 and

15.307.

Subpart 15.2--Solicitation and Receipt of Proposals and Information

15.200 Scope of subpart.

This subpart prescribes policies and procedures for--

(a) Exchanging information with industry prior to receipt of

proposals;

(b) Preparing and issuing requests for proposals (RFPs) and

requests for information (RFIs); and

(c) Receiving proposals and information.

15.201 Exchanges with industry before receipt of proposals.

(a) Exchanges of information among all interested parties, from the

earliest identification of a requirement through receipt of proposals,

are encouraged. Any exchange of information must be consistent with

procurement integrity requirements (see 3.104). Interested parties

include potential offerors, end users, Government acquisition and

supporting personnel, and others involved in the conduct or outcome of

the acquisition.

(b) The purpose of exchanging information is to improve the

understanding of Government requirements and industry capabilities,

thereby allowing potential offerors to judge whether or how they can

satisfy the Government's requirements, and enhancing the Government's

ability to obtain quality supplies and services, including

construction, at reasonable prices, and increase efficiency in proposal

preparation, proposal evaluation, negotiation, and contract award.

(c) Agencies are encouraged to promote early exchanges of

information about future acquisitions. An early exchange of information

among industry and the program manager, contracting officer, and other

participants in the acquisition process can identify and resolve

concerns regarding the acquisition strategy, including proposed

contract type, terms and conditions, and acquisition planning

schedules; the feasibility of the requirement, including performance

requirements, statements of work, and data requirements; the

suitability of the proposal instructions and evaluation criteria,

including the approach for assessing past performance information; the

availability of reference documents; and any other industry concerns or

questions. Some techniques to promote early exchanges of information

are--

(1) Industry or small business conferences;

(2) Public hearings;

(3) Market research, as described in part 10;

(4) One-on-one meetings with potential offerors (any that are

substantially involved with potential contract terms and conditions

should include the contracting officer; also see paragraph (f) of this

section regarding restrictions on disclosure of information);

(5) Presolicitation notices;

(6) Draft RFPs;

(7) RFIs;

(8) Presolicitation or preproposal conferences; and

(9) Site visits.

[[Page 51233]]

(d) The special notices of procurement matters at 5.205(c), or

electronic notices, may be used to publicize the Government's

requirement or solicit information from industry.

(e) RFIs may be used when the Government does not presently intend

to award a contract, but wants to obtain price, delivery, other market

information, or capabilities for planning purposes. Responses to these

notices are not offers and cannot be accepted by the Government to form

a binding contract. There is no required format for RFIs.

(f) General information about agency mission needs and future

requirements may be disclosed at any time.

After release of the solicitation, the contracting officer shall be

the focal point of any exchange with potential offerors. When specific

information about a proposed acquisition that would be necessary for

the preparation of proposals is disclosed to one or more potential

offerors, that information shall be made available to the public as

soon as practicable, but no later than the next general release of

information, in order to avoid creating an unfair competitive

advantage. Information provided to a particular offeror in response to

that offeror's request shall not be disclosed if doing so would reveal

the potential offeror's confidential business strategy, and would be

protected under 3.104 or subpart 24.2. When a presolicitation or

preproposal conference is conducted, materials distributed at the

conference should be made available to all potential offerors, upon

request.

15.202 Advisory multi-step process.

(a) The agency may publish a presolicitation notice (see 5.204)

that provides a general description of the scope or purpose of the

acquisition and invites potential offerors to submit information that

allows the Government to advise the offerors about their potential to

be viable competitors. The presolicitation notice should identify the

information that must be submitted and the criteria that will be used

in making the initial evaluation. Information sought may be limited to

a statement of qualifications and other appropriate information (e.g.,

proposed technical concept, past performance, and limited pricing

information). At a minimum, the notice shall contain sufficient

information to permit a potential offeror to make an informed decision

about whether to participate in the acquisition. This process should

not be used for multi-step acquisitions where it would result in

offerors being required to submit identical information in response to

the notice and in response to the initial step of the acquisition.

(b) The agency shall evaluate all responses in accordance with the

criteria stated in the notice, and shall advise each respondent in

writing either that it will be invited to participate in the resultant

acquisition or, based on the information submitted, that it is unlikely

to be a viable competitor. The agency shall advise respondents

considered not to be viable competitors of the general basis for that

opinion. The agency shall inform all respondents that, notwithstanding

the advice provided by the Government in response to their submissions,

they may participate in the resultant acquisition.

15.203 Requests for proposals.

(a) Requests for proposals (RFPs) are used in negotiated

acquisitions to communicate Government requirements to prospective

contractors and to solicit proposals. RFPs for competitive acquisitions

shall, at a minimum, describe the--

(1) Government's requirement;

(2) Anticipated terms and conditions that will apply to the

contract:

(i) The solicitation may authorize offerors to propose alternative

terms and conditions, including the contract line item number (CLIN)

structure; and

(ii) When alternative CLIN structures are permitted, the evaluation

approach should consider the potential impact on other terms and

conditions or the requirement (e.g., place of performance or payment

and funding requirements) (see 15.206);

(3) Information required to be in the offeror's proposal; and

(4) Factors and significant subfactors that will be used to

evaluate the proposal and their relative importance.

(b) An RFP may be issued for OMB Circular A-76 studies. See subpart

7.3 for additional information regarding cost comparisons between

Government and contractor performance.

(c) Electronic commerce may be used to issue RFPs and to receive

proposals, modifications, and revisions. In this case, the RFP shall

specify the electronic commerce method(s) that offerors may use (see

subpart 4.5).

(d) Contracting officers may issue RFPs and/or authorize receipt of

proposals, modifications, or revisions by facsimile.

(1) In deciding whether or not to use facsimiles, the contracting

officer should consider factors such as--

(i) Anticipated proposal size and volume;

(ii) Urgency of the requirement;

(iii) Availability and suitability of electronic commerce methods;

and

(iv) Adequacy of administrative procedures and controls for

receiving, identifying, recording, and safeguarding facsimile

proposals, and ensuring their timely delivery to the designated

proposal delivery location.

(2) If facsimile proposals are authorized, contracting officers may

request offeror(s) to provide the complete, original signed proposal at

a later date.

(e) Letter RFPs may be used in sole source acquisitions and other

appropriate circumstances. Use of a letter RFP does not relieve the

contracting officer from complying with other FAR requirements. Letter

RFPs should be as complete as possible and, at a minimum, should

contain the following:

(1) RFP number and date;

(2) Name, address (including electronic address and facsimile

address, if appropriate), and telephone number of the contracting

officer;

(3) Type of contract contemplated;

(4) Quantity, description, and required delivery dates for the

item;

(5) Applicable certifications and representations;

(6) Anticipated contract terms and conditions;

(7) Instructions to offerors and evaluation criteria for other than

sole source actions;

(8) Proposal due date and time; and

(9) Other relevant information; e.g., incentives, variations in

delivery schedule, cost proposal support, and data requirements.

(f) Oral RFPs are authorized when processing a written solicitation

would delay the acquisition of supplies or services to the detriment of

the Government and a notice is not required under 5.202 (e.g.,

perishable items and support of contingency operations or other

emergency situations). Use of an oral RFP does not relieve the

contracting officer from complying with other FAR requirements.

(1) The contract files supporting oral solicitations should

include--

(i) A description of the requirement;

(ii) Rationale for use of an oral solicitation;

(iii) Sources solicited, including the date, time, name of

individuals contacted, and prices offered; and

(iv) The solicitation number provided to the prospective offerors.

(2) The information furnished to potential offerors under oral

solicitations should include appropriate items from paragraph (e) of

this section.

15.204 Contract format.

The use of a uniform contract format facilitates preparation of the

solicitation

[[Page 51234]]

and contract as well as reference to, and use of, those documents by

offerors, contractors, and contract administrators. The uniform

contract format need not be used for the following:

(a) Construction and architect-engineer contracts (see part 36).

(b) Subsistence contracts.

(c) Supplies or services contracts requiring special contract

formats prescribed elsewhere in this part that are inconsistent with

the uniform format.

(d) Letter requests for proposals (see 15.203(e)).

(e) Contracts exempted by the agency head or designee.

15.204-1 Uniform contract format.

(a) Contracting officers shall prepare solicitations and resulting

contracts using the uniform contract format outlined in Table 15-1 of

this subsection.

(b) Solicitations using the uniform contract format shall include

Parts I, II, III, and IV (see 15.204-2 through 15.204-5). Upon award,

contracting officers shall not physically include Part IV in the

resulting contract, but shall retain it in the contract file. Section K

shall be incorporated by reference in the contract.

Table 15-1.--Uniform Contract Format

------------------------------------------------------------------------

Section Title

------------------------------------------------------------------------

Part I--The Schedule

------------------------------------------------------------------------

A.............................. Solicitation/contract form.

B.............................. Supplies or services and prices/costs.

C.............................. Description/specifications/statement of

work.

D.............................. Packaging and marking.

E.............................. Inspection and acceptance.

F.............................. Deliveries or performance.

G.............................. Contract administration data.

H.............................. Special contract requirements.

------------------------------------------------------------------------

Part II--Contract Clauses

------------------------------------------------------------------------

I.............................. Contract clauses.

------------------------------------------------------------------------

Part III--List of Documents, Exhibits, and Other Attachments

------------------------------------------------------------------------

J.............................. List of attachments.

------------------------------------------------------------------------

Part IV--Representations and Instructions.

------------------------------------------------------------------------

K.............................. Representations, certifications, and

other statements of offerors or

respondents.

L.............................. Instructions, conditions, and notices

to offerors or respondents.

M.............................. Evaluation factors for award.

------------------------------------------------------------------------

15.204-2 Part I--The Schedule.

The contracting officer shall prepare the contract Schedule as

follows:

(a) Section A, Solicitation/contract form. (1) Optional Form (OF)

308, Solicitation and Offer-Negotiated Acquisition, or Standard Form

(SF) 33, Solicitation, Offer and Award, may be used to prepare RFPs.

(2) When other than OF 308 or SF 33 is used, include the following

information on the first page of the solicitation:

(i) Name, address, and location of issuing activity, including room

and building where proposals or information must be submitted.

(ii) Solicitation number.

(iii) Date of issuance.

(iv) Closing date and time.

(v) Number of pages.

(vi) Requisition or other purchase authority.

(vii) Brief description of item or service.

(viii) Requirement for the offeror to provide its name and complete

address, including street, city, county, state, and zip code, and

electronic address (including facsimile address), if appropriate.

(ix) Offer expiration date.

(b) Section B, Supplies or services and prices/costs. Include a

brief description of the supplies or services; e.g., item number,

national stock number/part number if applicable, nouns, nomenclature,

and quantities. (This includes incidental deliverables such as manuals

and reports.)

(c) Section C, Description/specifications/statement of work.

Include any description or specifications needed in addition to Section

B (see part 11, Describing Agency Needs).

(d) Section D, Packaging and marking. Provide packaging, packing,

preservation, and marking requirements, if any.

(e) Section E, Inspection and acceptance. Include inspection,

acceptance, quality assurance, and reliability requirements (see part

46, Quality Assurance).

(f) Section F, Deliveries or performance. Specify the requirements

for time, place, and method of delivery or performance (see subpart

11.4, Delivery or Performance Schedules, and 47.301-1).

(g) Section G, Contract administration data. Include any required

accounting and appropriation data and any required contract

administration information or instructions other than those on the

solicitation form. Include a statement that the offeror should include

the payment address in the proposal, if it is different from that shown

for the offeror.

(h) Section H, Special contract requirements. Include a clear

statement of any special contract requirements that are not included in

Section I, Contract clauses, or in other sections of the uniform

contract format.

15.204-3 Part II--Contract Clauses.

Section I, Contract clauses. The contracting officer shall include

in this section the clauses required by law or by this part and any

additional clauses expected to be included in any resulting contract,

if these clauses are not required in any other section of the uniform

contract format. An index may be inserted if this section's format is

particularly complex.

15.204-4 Part III--List of Documents, Exhibits, and Other Attachments.

Section J, List of attachments. The contracting officer shall list

the title, date, and number of pages for each attached document,

exhibit, and other attachment. Cross-references to material in other

sections may be inserted, as appropriate.

15.204-5 Part IV--Representations and Instructions.

The contracting officer shall prepare the representations and

instructions as follows:

(a) Section K, Representations, certifications, and other

statements of offerors. Include in this section those solicitation

provisions that require representations, certifications, or the

submission of other information by offerors.

(b) Section L, Instructions, conditions, and notices to offerors or

respondents. Insert in this section solicitation provisions and other

information and instructions not required elsewhere to guide offerors

or respondents in preparing proposals or responses to requests for

information. Prospective offerors or respondents may be instructed to

submit proposals or information in a specific format or severable parts

to facilitate evaluation. The instructions may specify further

organization of proposal or response parts, such as--

(1) Administrative;

(2) Management;

(3) Technical;

(4) Past performance; and

(5) Cost or pricing data (see Table 15-2 of 15.408) or information

other than cost or pricing data.

(c) Section M, Evaluation factors for award. Identify all

significant factors and any significant subfactors that will be

considered in awarding the contract and their relative importance (see

15.304(d)). The contracting officer shall insert one of the phrases in

15.304(e).

[[Page 51235]]

15.205 Issuing solicitations.

(a) The contracting officer shall issue solicitations to potential

sources in accordance with the policies and procedures in 5.102,

19.202-4, and part 6.

(b) A master solicitation, as described in 14.203-3, may also be

used for negotiated acquisitions.

15.206 Amending the solicitation.

(a) When, either before or after receipt of proposals, the

Government changes its requirements or terms and conditions, the

contracting officer shall amend the solicitation.

(b) Amendments issued before the established time and date for

receipt of proposals shall be issued to all parties receiving the

solicitation.

(c) Amendments issued after the established time and date for

receipt of proposals shall be issued to all offerors that have not been

eliminated from the competition.

(d) If a proposal of interest to the Government involves a

departure from the stated requirements, the contracting officer shall

amend the solicitation, provided this can be done without revealing to

the other offerors the alternate solution proposed or any other

information that is entitled to protection (see 15.207(b) and

15.306(e)).

(e) If, in the judgment of the contracting officer, based on market

research or otherwise, an amendment proposed for issuance after offers

have been received is so substantial as to exceed what prospective

offerors reasonably could have anticipated, so that additional sources

likely would have submitted offers had the substance of the amendment

been known to them, the contracting officer shall cancel the original

solicitation and issue a new one, regardless of the stage of the

acquisition.

(f) Oral notices may be used when time is of the essence. The

contracting officer shall document the contract file and formalize the

notice with an amendment (see subpart 4.5, Electronic Commerce in

Contracting).

(g) At a minimum, the following information should be included in

each amendment:

(1) Name and address of issuing activity.

(2) Solicitation number and date.

(3) Amendment number and date.

(4) Number of pages.

(5) Description of the change being made.

(6) Government point of contact and phone number (and electronic or

facsimile address, if appropriate).

(7) Revision to solicitation closing date, if applicable.

15.207 Handling proposals and information.

(a) Upon receipt at the location specified in the solicitation,

proposals and information received in response to a request for

information (RFI) shall be marked with the date and time of receipt and

shall be transmitted to the designated officials.

(b) Proposals shall be safeguarded from unauthorized disclosure

throughout the source selection process. (See 3.104 regarding the

disclosure of source selection information (41 U.S.C. 423)).

Information received in response to an RFI shall be safeguarded

adequately from unauthorized disclosure.

(c) If any portion of a proposal received by the contracting

officer electronically or by facsimile is unreadable, the contracting

officer immediately shall notify the offeror and permit the offeror to

resubmit the unreadable portion of the proposal. The method and time

for resubmission shall be prescribed by the contracting officer after

consultation with the offeror, and documented in the file. The

resubmission shall be considered as if it were received at the date and

time of the original unreadable submission for the purpose of

determining timeliness under 15.208(a), provided the offeror complies

with the time and format requirements for resubmission prescribed by

the contracting officer.

15.208 Submission, modification, revision, and withdrawal of

proposals.

(a) Offerors are responsible for submitting offers, and any

revisions and modifications to them, so as to reach the Government

office designated in the solicitation on time. If an emergency or

unanticipated event interrupts normal Government processes so that

proposals cannot be received at the office designated for receipt of

proposals by the exact time specified in the solicitation, and urgent

Government requirements preclude amendment of the solicitation closing

date, the time specified for receipt of proposals will be deemed to be

extended to the same time of day specified in the solicitation on the

first work day on which normal Government processes resume. If no time

is specified in the solicitation, the time for receipt is 4:30 p.m.,

local time, for the designated Government office on the date that

proposals are due.

(b) Proposals, and modifications to them, that are received in the

designated Government office after the exact time specified are ``late

and shall be considered only if--

(1) They are received before award is made; and

(2) The circumstances meet the specific requirements of 52.215-

1(c)(3)(i).

(c) The contracting officer shall promptly notify any offeror if

its proposal, modification, or revision was received late, and shall

inform the offeror whether or not it will be considered, unless

contract award is imminent and the notice prescribed in 15.503(b) would

suffice.

(d) When a late proposal or modification is transmitted to a

contracting office in the United States or Canada by registered or

certified mail or by U.S. Postal Service Express Mail Next Day Service-

Post Office to Addressee and is received before award, the offeror

shall be promptly notified substantially in accordance with the notice

in 14.304-2, appropriately modified to relate to proposals.

(e) Late proposals and modifications that are not considered shall

be held unopened, unless opened for identification, until after award

and then retained with other unsuccessful proposals.

(f) The following shall, if available, be included in the

contracting office files for each late proposal, response to request

for information, or modification:

(1) The date of mailing, filing, or delivery.

(2) The date and hour of receipt.

(3) Whether or not considered for award.

(4) The envelope, wrapper, or other evidence of date of submission.

(g) Proposals may be withdrawn at any time before award. Written

proposals are withdrawn upon receipt by the contracting officer of a

written notice of withdrawal. Oral proposals in response to oral

solicitations may be withdrawn orally. The contracting officer shall

document the contract file when such oral withdrawals are made. One

copy of withdrawn proposals should be retained in the contract file

(see 4.803(a)(10)). Extra copies of the withdrawn proposals may be

destroyed or returned to the offeror at the offeror's request.

Extremely bulky proposals shall only be returned at the offeror's

request and expense.

(h) Upon withdrawal of an electronically transmitted proposal, the

data received shall not be viewed and shall be purged from primary and

backup data storage systems.

15.209 Solicitation provisions and contract clauses.

When contracting by negotiation--

(a) The contracting officer shall insert the provision at 52.215-1,

Instructions to Offerors--Competitive Acquisition, in all competitive

solicitations where the

[[Page 51236]]

Government intends to award a contract without discussions.

(1) If the Government intends to make award after discussions with

offerors within the competitive range, the contracting officer shall

use the basic provision with its Alternate I.

(2) If the Government would be willing to accept alternate

proposals, the contracting officer shall alter the basic clause to add

a paragraph (c)(9) substantially the same as Alternate II.

(b)(1) The contracting officer shall insert the clause at 52.215-2,

Audit and Records-Negotiation (10 U.S.C. 2313, 41 U.S.C. 254d, and OMB

Circular No. A-133), in solicitations and contracts except those for--

(i) Acquisitions not exceeding the simplified acquisition

threshold;

(ii) The acquisition of utility services at rates not exceeding

those established to apply uniformly to the general public, plus any

applicable reasonable connection charge; or

(iii) The acquisition of commercial items exempted under 15.403-1.

(2) For facilities acquisitions, the contracting officer shall use

the clause with its Alternate I.

(3) For cost-reimbursement contracts with educational institutions

and other nonprofit organizations, the contracting officer shall use

the clause with its Alternate II.

(4) When the examination of records by the Comptroller General is

waived in accordance with 25.901, the contracting officer shall use the

clause with its Alternate III.

(c) When issuing a solicitation for information or planning

purposes, the contracting officer shall insert the provision at 52.215-

3, Request for Information or Solicitation for Planning Purposes, and

clearly mark on the face of the solicitation that it is for information

or planning purposes.

(d) The contracting officer shall insert the provision at 52.215-4,

Type of Business Organization, in all solicitations.

(e) The contracting officer shall insert the provision at 52.215-5,

Facsimile Proposals, in solicitations if facsimile proposals are

authorized (see 15.203(d)).

(f) The contracting officer shall insert the provision at 52.215-6,

Place of Performance, in solicitations unless the place of performance

is specified by the Government.

(g) The contracting officer shall insert the provision at 52.215-7,

Annual Representations and Certifications--Negotiation, in

solicitations if annual representations and certifications are used

(see 14.213).

(h) The contracting officer shall insert the clause at 52.215-8,

Order of Precedence--Uniform Contract Format, in solicitations and

contracts using the format at 15.204.

15.210 Forms.

Prescribed forms are not required to prepare solicitations

described in this part. The following forms may be used at the

discretion of the contracting officer:

(a) Standard Form 33, Solicitation, Offer, and Award, and Optional

Form 308, Solicitation and Offer-- Negotiated Acquisition, may be used

to issue RFPs and RFIs.

(b) Standard Form 30, Amendment of Solicitation/Modification of

Contract, and Optional Form 309, Amendment of Solicitation, may be used

to amend solicitations of negotiated contracts.

(c) Optional Form 17, Offer Label, may be furnished with each

request for proposal.

Subpart 15.3--Source Selection

15.300 Scope of subpart.

This subpart prescribes policies and procedures for selection of a

source or sources in competitive negotiated acquisitions.

15.301 Definitions.

Deficiency, as used in this subpart, is a material failure of a

proposal to meet a Government requirement or a combination of

significant weaknesses in a proposal that increases the risk of

unsuccessful contract performance to an unacceptable level.

Weakness, as used in this subpart, is a flaw in the proposal that

increases the risk of unsuccessful contract performance. A

``significant weakness'' in the proposal is a flaw that appreciably

increases the risk of unsuccessful contract performance.

15.302 Source selection objective.

The objective of source selection is to select the proposal that

represents the best value.

15.303 Responsibilities.

(a) Agency heads are responsible for source selection. The

contracting officer is designated as the source selection authority,

unless the agency head appoints another individual for a particular

acquisition or group of acquisitions.

(b) The source selection authority shall--

(1) Establish an evaluation team, tailored for the particular

acquisition, that includes appropriate contracting, legal, logistics,

technical, and other expertise to ensure a comprehensive evaluation of

offers;

(2) Approve the source selection strategy or acquisition plan, if

applicable, before solicitation release;

(3) Ensure consistency among the solicitation requirements, notices

to offerors, proposal preparation instructions, evaluation factors and

subfactors, solicitation provisions or contract clauses, and data

requirements;

(4) Ensure that proposals are evaluated based solely on the factors

and subfactors contained in the solicitation (10 U.S.C. 2305(b)(1) and

41 U.S.C. 253b(d)(3));

(5) Consider the recommendations of advisory boards or panels (if

any); and

(6) Select the source or sources whose proposal is the best value

to the Government (10 U.S.C. 2305(b)(4)(B) and 41 U.S.C. 253b(d)(3)).

(c) The contracting officer shall--

(1) After release of a solicitation, serve as the focal point for

inquiries from actual or prospective offerors;

(2) After receipt of proposals, control exchanges with offerors in

accordance with 15.306; and

(3) Award the contract(s).

15.304 Evaluation factors and significant subfactors.

(a) The award decision is based on evaluation factors and

significant subfactors that are tailored to the acquisition.

(b) Evaluation factors and significant subfactors must--

(1) Represent the key areas of importance and emphasis to be

considered in the source selection decision; and

(2) Support meaningful comparison and discrimination between and

among competing proposals.

(c) The evaluation factors and significant subfactors that apply to

an acquisition and their relative importance are within the broad

discretion of agency acquisition officials, subject to the following

requirements:

(1) Price or cost to the Government shall be evaluated in every

source selection (10 U.S.C. 2305(a)(3)(A) (ii) and 41 U.S.C.

253a(c)(1)(B)) (also see part 36 for architect-engineer contracts);

(2) The quality of the product or service shall be addressed in

every source selection through consideration of one or more non-cost

evaluation factors such as past performance, compliance with

solicitation requirements, technical excellence, management capability,

personnel qualifications, and prior experience (10 U.S.C. 2305(a)(3)

(A)(i) and 41 U.S.C. 253a(c)(1)(A)); and (3)(i) Except as set forth in

paragraph (c)(3)(iii) of this section, past performance shall be

[[Page 51237]]

evaluated in all source selections for negotiated competitive

acquisitions expected to exceed $1,000,000.

(ii) Except as set forth in paragraph (c)(3)(iii) of this section,

past performance shall be evaluated in all source selections for

negotiated competitive acquisitions issued on or after January 1, 1999,

for acquisitions expected to exceed $100,000. Agencies should develop

phase-in schedules that meet or exceed this schedule.

(iii) Past performance need not be evaluated if the contracting

officer documents the reason past performance is not an appropriate

evaluation factor for the acquisition (OFPP Policy Letter 92-5).

(d) All factors and significant subfactors that will affect

contract award and their relative importance shall be stated clearly in

the solicitation (10 U.S.C. 2305(a)(2)(A)(i) and 41 U.S.C.

253a(b)(1)(A)) (see 15.204-5(c)). The rating method need not be

disclosed in the solicitation. The general approach for evaluating past

performance information shall be described.

(e) The solicitation shall also state, at a minimum, whether all

evaluation factors other than cost or price, when combined, are--

(1) Significantly more important than cost or price;

(2) Approximately equal to cost or price; or

(3) Significantly less important than cost or price (10 U.S.C.

2305(a)(3)(A)(iii) and 41 U.S.C. 253a(c)(1)(C)).

15.305 Proposal evaluation.

(a) Proposal evaluation is an assessment of the proposal and the

offeror's ability to perform the prospective contract successfully. An

agency shall evaluate competitive proposals and then assess their

relative qualities solely on the factors and subfactors specified in

the solicitation. Evaluations may be conducted using any rating method

or combination of methods, including color or adjectival ratings,

numerical weights, and ordinal rankings. The relative strengths,

deficiencies, significant weaknesses, and risks supporting proposal

evaluation shall be documented in the contract file.

(1) Cost or price evaluation. Normally, competition establishes

price reasonableness. Therefore, when contracting on a firm-fixed-price

or fixed-price with economic price adjustment basis, comparison of the

proposed prices will usually satisfy the requirement to perform a price

analysis, and a cost analysis need not be performed. In limited

situations, a cost analysis (see 15.403-1(c)(1)(i)(B)) may be

appropriate to establish reasonableness of the otherwise successful

offeror's price. When contracting on a cost-reimbursement basis,

evaluations shall include a cost realism analysis to determine what the

Government should realistically expect to pay for the proposed effort,

the offeror's understanding of the work, and the offeror's ability to

perform the contract. Cost realism analyses may also be used on fixed-

price incentive contracts or, in exceptional cases, on other

competitive fixed-price-type contracts (see 15.404-1(d)(3)). The

contracting officer shall document the cost or price evaluation.

(2) Past performance evaluation. (i) Past performance information

is one indicator of an offeror's ability to perform the contract

successfully. The currency and relevance of the information, source of

the information, context of the data, and general trends in

contractor's performance shall be considered (41 U.S.C. 401). This

comparative assessment of past performance information is separate from

the responsibility determination required under subpart 9.1.

(ii) The solicitation shall describe the approach for evaluating

past performance, including evaluating offerors with no relevant

performance history, and shall provide offerors an opportunity to

identify past or current contracts (including Federal, State, and local

government and private) for efforts similar to the Government

requirement. The solicitation shall also authorize offerors to provide

information on problems encountered on the identified contracts and the

offeror corrective actions. The Government shall consider this

information, as well as information obtained from any other sources,

when evaluating the offeror past performance. The source selection

authority shall determine the relevance of similar past performance

information.

(iii) The evaluation should take into account past performance

information regarding predecessor companies, key personnel who have

relevant experience, or subcontractors that will perform major or

critical aspects of the requirement when such information is relevant

to the instant acquisition.

(iv) In the case of an offeror without a record of relevant past

performance or for whom information on past performance is not

available, the offeror may not be evaluated favorably or unfavorably on

past performance.

(3) Technical evaluation. When tradeoffs are performed (see 15.101-

1), the source selection records shall include--

(i) An assessment of each offeror's ability to accomplish the

technical requirements; and

(ii) A summary, matrix, or quantitative ranking, along with

appropriate supporting narrative, of each technical proposal using the

evaluation factors.

(4) Cost information. Cost information may be provided to members

of the technical evaluation team in accordance with agency procedures.

(b) The source selection authority may reject all proposals

received in response to a solicitation, if doing so is in the best

interest of the Government.

(c) For restrictions on the use of support contractor personnel in

proposal evaluation, see 37.203(d).

15.306 Exchanges with offerors after receipt of proposals.

(a) Clarifications and award without discussions. (1)

Clarifications are limited exchanges, between the Government and

offerors, that may occur when award without discussions is

contemplated.

(2) If award will be made without conducting discussions, offerors

may be given the opportunity to clarify certain aspects of proposals

(e.g., the relevance of an offeror's past performance information and

adverse past performance information to which the offeror has not

previously had an opportunity to respond) or to resolve minor or

clerical errors.

(3) Award may be made without discussions if the solicitation

states that the Government intends to evaluate proposals and make award

without discussions. If the solicitation contains such a notice and the

Government determines it is necessary to conduct discussions, the

rationale for doing so shall be documented in the contract file (see

the provision at 52.215-1) (10 U.S.C. 2305(b)(4)(A)(ii) and 41 U.S.C.

253b(d)(1)(B)).

(b) Communications with offerors before establishment of the

competitive range. Communications are exchanges, between the Government

and offerors, after receipt of proposals, leading to establishment of

the competitive range. If a competitive range is to be established,

these communications--

(1) Shall be limited to the offerors described in paragraphs

(b)(1)(i) and (b)(1)(ii) of this section and--

(i) Shall be held with offerors whose past performance information

is the determining factor preventing them from being placed within the

competitive range. Such communications shall address adverse past

performance information to which

[[Page 51238]]

an offeror has not had a prior opportunity to respond; and

(ii) May only be held with those offerors (other than offerors

under paragraph (b)(1)(i) of this section) whose exclusion from, or

inclusion in, the competitive range is uncertain;

(2) May be conducted to enhance Government understanding of

proposals; allow reasonable interpretation of the proposal; or

facilitate the Government's evaluation process. Such communications

shall not be used to cure proposal deficiencies or material omissions,

materially alter the technical or cost elements of the proposal, and/or

otherwise revise the proposal. Such communications may be considered in

rating proposals for the purpose of establishing the competitive range;

(3) Are for the purpose of addressing issues that must be explored

to determine whether a proposal should be placed in the competitive

range. Such communications shall not provide an opportunity for the

offeror to revise its proposal, but may address--

(i) Ambiguities in the proposal or other concerns (e.g., perceived

deficiencies, weaknesses, errors, omissions, or mistakes (see 14.407));

and

(ii) Information relating to relevant past performance; and

(4) Shall address adverse past performance information to which the

offeror has not previously had an opportunity to comment.

(c) Competitive range. (1) Agencies shall evaluate all proposals in

accordance with 15.305(a), and, if discussions are to be conducted,

establish the competitive range. Based on the ratings of each proposal

against all evaluation criteria, the contracting officer shall

establish a competitive range comprised of all of the most highly rated

proposals, unless the range is further reduced for purposes of

efficiency pursuant to paragraph (c)(2) of this section.

(2) After evaluating all proposals in accordance with 15.305(a) and

paragraph (c)(1) of this section, the contracting officer may determine

that the number of most highly rated proposals that might otherwise be

included in the competitive range exceeds the number at which an

efficient competition can be conducted. Provided the solicitation

notifies offerors that the competitive range can be limited for

purposes of efficiency (see 52.215-1(f)(4)), the contracting officer

may limit the number of proposals in the competitive range to the

greatest number that will permit an efficient competition among the

most highly rated proposals (10 U.S.C. 2305(b)(4) and 41 U.S.C.

253b(d)).

(3) If the contracting officer, after complying with paragraph

(d)(3) of this section, decides that an offeror's proposal should no

longer be included in the competitive range, the proposal shall be

eliminated from consideration for award. Written notice of this

decision shall be provided to unsuccessful offerors in accordance with

15.503.

(4) Offerors excluded or otherwise eliminated from the competitive

range may request a debriefing (see 15.505 and 15.506).

(d) Exchanges with offerors after establishment of the competitive

range. Negotiations are exchanges, in either a competitive or sole

source environment, between the Government and offerors, that are

undertaken with the intent of allowing the offeror to revise its

proposal. These negotiations may include bargaining. Bargaining

includes persuasion, alteration of assumptions and positions, give-and-

take, and may apply to price, schedule, technical requirements, type of

contract, or other terms of a proposed contract. When negotiations are

conducted in a competitive acquisition, they take place after

establishment of the competitive range and are called discussions.

(1) Discussions are tailored to each offeror's proposal, and shall

be conducted by the contracting officer with each offeror within the

competitive range.

(2) The primary objective of discussions is to maximize the

Government's ability to obtain best value, based on the requirement and

the evaluation factors set forth in the solicitation.

(3) The contracting officer shall, subject to paragraphs (d)(4) and

(e) of this section and 15.307(a), indicate to, or discuss with, each

offeror still being considered for award, significant weaknesses,

deficiencies, and other aspects of its proposal (such as cost, price,

technical approach, past performance, and terms and conditions) that

could, in the opinion of the contracting officer, be altered or

explained to enhance materially the proposal's potential for award. The

scope and extent of discussions are a matter of contracting officer

judgment. In discussing other aspects of the proposal, the Government

may, in situations where the solicitation stated that evaluation credit

would be given for technical solutions exceeding any mandatory

minimums, negotiate with offerors for increased performance beyond any

mandatory minimums, and the Government may suggest to offerors that

have exceeded any mandatory minimums (in ways that are not integral to

the design), that their proposals would be more competitive if the

excesses were removed and the offered price decreased.

(4) If, after discussions have begun, an offeror originally in the

competitive range is no longer considered to be among the most highly

rated offerors being considered for award, that offeror may be

eliminated from the competitive range whether or not all material

aspects of the proposal have been discussed, or whether or not the

offeror has been afforded an opportunity to submit a proposal revision

(see 15.307(a) and 15.503(a)(1)).

(e) Limits on exchanges. Government personnel involved in the

acquisition shall not engage in conduct that--

(1) Favors one offeror over another;

(2) Reveals an offeror's technical solution, including unique

technology, innovative and unique uses of commercial items, or any

information that would compromise an offeror's intellectual property to

another offeror;

(3) Reveals an offerors price without that offeror's permission.

However, the contracting officer may inform an offeror that its price

is considered by the Government to be too high, or too low, and reveal

the results of the analysis supporting that conclusion. It is also

permissible, at the Government's discretion, to indicate to all

offerors the cost or price that the Government's price analysis, market

research, and other reviews have identified as reasonable (41 U.S.C.

423(h)(1)(2));

(4) Reveals the names of individuals providing reference

information about an offeror's past performance; or

(5) Knowingly furnishes source selection information in violation

of 3.104 and 41 U.S.C. 423(h)(1)(2).

15.307 Proposal revisions.

(a) If an offerors proposal is eliminated or otherwise removed from

the competitive range, no further revisions to that offeror's proposal

shall be accepted or considered.

(b) The contracting officer may request or allow proposal revisions

to clarify and document understandings reached during negotiations. At

the conclusion of discussions, each offeror still in the competitive

range shall be given an opportunity to submit a final proposal

revision. The contracting officer is required to establish a common

cut-off date only for receipt of final proposal revisions. Requests for

final proposal revisions shall advise offerors that the final proposal

revisions shall be in writing and that the

[[Page 51239]]

Government intends to make award without obtaining further revisions.

15.308 Source selection decision.

The source selection authority's (SSA) decision shall be based on a

comparative assessment of proposals against all source selection

criteria in the solicitation. While the SSA may use reports and

analyses prepared by others, the source selection decision shall

represent the SSA's independent judgment. The source selection decision

shall be documented, and the documentation shall include the rationale

for any business judgments and tradeoffs made or relied on by the SSA,

including benefits associated with additional costs. Although the

rationale for the selection decision must be documented, that

documentation need not quantify the tradeoffs that led to the decision.

Subpart 15.4--Contract Pricing

15.400 Scope of subpart.

This subpart prescribes the cost and price negotiation policies and

procedures for pricing negotiated prime contracts (including

subcontracts) and contract modifications, including modifications to

contracts awarded by sealed bidding.

15.401 Definitions.

Cost or pricing data (10 U.S.C. 2306a(h)(1) and 41 U.S.C. 254b)

means all facts that, as of the date of price agreement or, if

applicable, an earlier date agreed upon between the parties that is as

close as practicable to the date of agreement on price, prudent buyers

and sellers would reasonably expect to affect price negotiations

significantly. Cost or pricing data are data requiring certification in

accordance with 15.406-2. Cost or pricing data are factual, not

judgmental; and are verifiable. While they do not indicate the accuracy

of the prospective contractor's judgment about estimated future costs

or projections, they do include the data forming the basis for that

judgment. Cost or pricing data are more than historical accounting

data; they are all the facts that can be reasonably expected to

contribute to the soundness of estimates of future costs and to the

validity of determinations of costs already incurred. They also include

such factors as: vendor quotations; nonrecurring costs; information on

changes in production methods and in production or purchasing volume;

data supporting projections of business prospects and objectives and

related operations costs; unit-cost trends such as those associated

with labor efficiency; make-or-buy decisions; estimated resources to

attain business goals; and information on management decisions that

could have a significant bearing on costs.

Cost realism means that the costs in an offeror's proposal are

realistic for the work to be performed; reflect a clear understanding

of the requirements; and are consistent with the various elements of

the offeror's technical proposal.

Forward pricing rate agreement means a written agreement negotiated

between a contractor and the Government to make certain rates available

during a specified period for use in pricing contracts or

modifications. Such rates represent reasonable projections of specific

costs that are not easily estimated for, identified with, or generated

by a specific contract, contract end item, or task. These projections

may include rates for such things as labor, indirect costs, material

obsolescence and usage, spare parts provisioning, and material

handling.

Forward pricing rate recommendation means a rate set unilaterally

by the administrative contracting officer for use by the Government in

negotiations or other contract actions when forward pricing rate

agreement negotiations have not been completed or when the contractor

will not agree to a forward pricing rate agreement.

Information other than cost or pricing data means any type of

information that is not required to be certified in accordance with

15.406-2 and is necessary to determine price reasonableness or cost

realism. For example, such information may include pricing, sales, or

cost information, and includes cost or pricing data for which

certification is determined inapplicable after submission.

Price, as used in this subpart, means cost plus any fee or profit

applicable to the contract type.

Subcontract, as used in this subpart, also includes a transfer of

commercial items between divisions, subsidiaries, or affiliates of a

contractor or a subcontractor (10 U.S.C. 2306a(h)(2) and 41 U.S.C.

254b(h)(2)).

15.402 Pricing policy.

Contracting officers shall--

(a) Purchase supplies and services from responsible sources at fair

and reasonable prices. In establishing the reasonableness of the

offered prices, the contracting officer shall not obtain more

information than is necessary. To the extent that cost or pricing data

are not required by 15.403-4, the contracting officer shall generally

use the following order of preference in determining the type of

information required:

(1) No additional information from the offeror, if the price is

based on adequate price competition, except as provided by 15.403-3(b).

(2) Information other than cost or pricing data:

(i) Information related to prices (e.g., established catalog or

market prices or previous contract prices), relying first on

information available within the Government; second, on information

obtained from sources other than the offeror; and, if necessary, on

information obtained from the offeror. When obtaining information from

the offeror is necessary, unless an exception under 15.403-1(b) (1) or

(2) applies, such information submitted by the offeror shall include,

at a minimum, appropriate information on the prices at which the same

or similar items have been sold previously, adequate for evaluating the

reasonableness of the price.

(ii) Cost information, that does not meet the definition of cost or

pricing data at 15.401.

(3) Cost or pricing data. The contracting officer should use every

means available to ascertain whether a fair and reasonable price can be

determined before requesting cost or pricing data. Contracting officers

shall not require unnecessarily the submission of cost or pricing data,

because it leads to increased proposal preparation costs, generally

extends acquisition lead time, and consumes additional contractor and

Government resources.

(b) Price each contract separately and independently and not--

(1) Use proposed price reductions under other contracts as an

evaluation factor; or

(2) Consider losses or profits realized or anticipated under other

contracts.

(c) Not include in a contract price any amount for a specified

contingency to the extent that the contract provides for a price

adjustment based upon the occurrence of that contingency.

15.403 Obtaining cost or pricing data.

15.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C.

2306a and 41 U.S.C. 254b).

(a) Cost or pricing data shall not be obtained for acquisitions at

or below the simplified acquisition threshold.

(b) Exceptions to cost or pricing data requirements. The

contracting officer shall not require submission of cost or pricing

data to support any action (contracts, subcontracts, or modifications)

(but may require information other than cost or pricing data to support

a determination of price reasonableness or cost realism)--

[[Page 51240]]

(1) When the contracting officer determines that prices agreed upon

are based on adequate price competition (see standards in paragraph

(c)(1) of this subsection);

(2) When the contracting officer determines that prices agreed upon

are based on prices set by law or regulation (see standards in

paragraph (c)(2) of this subsection);

(3) When a commercial item is being acquired (see standards in

paragraph (c)(3) of this subsection);

(4) When a waiver has been granted (see standards in paragraph

(c)(4) of this subsection); or

(5) When modifying a contract or subcontract for commercial items

(see standards in paragraph (c)(3) of this subsection).

(c) Standards for exceptions from cost or pricing data

requirements--(1) Adequate price competition. A price is based on

adequate price competition if--

(i) Two or more responsible offerors, competing independently,

submit priced offers that satisfy the Government's expressed

requirement and if--

(A) Award will be made to the offeror whose proposal represents the

best value (see 2.101) where price is a substantial factor in source

selection; and

(B) There is no finding that the price of the otherwise successful

offeror is unreasonable. Any finding that the price is unreasonable

must be supported by a statement of the facts and approved at a level

above the contracting officer;

(ii) There was a reasonable expectation, based on market research

or other assessment, that two or more responsible offerors, competing

independently, would submit priced offers in response to the

solicitation's expressed requirement, even though only one offer is

received from a responsible offeror and if--

(A) Based on the offer received, the contracting officer can

reasonably conclude that the offer was submitted with the expectation

of competition, e.g., circumstances indicate that--

(1) The offeror believed that at least one other offeror was

capable of submitting a meaningful offer; and

(2) The offeror had no reason to believe that other potential

offerors did not intend to submit an offer; and

(B) The determination that the proposed price is based on adequate

price competition, is reasonable, and is approved at a level above the

contracting officer; or

(iii) Price analysis clearly demonstrates that the proposed price

is reasonable in comparison with current or recent prices for the same

or similar items, adjusted to reflect changes in market conditions,

economic conditions, quantities, or terms and conditions under

contracts that resulted from adequate price competition.

(2) Prices set by law or regulation. Pronouncements in the form of

periodic rulings, reviews, or similar actions of a governmental body,

or embodied in the laws, are sufficient to set a price.

(3) Commercial items. Any acquisition for an item that meets the

commercial item definition in 2.101, or any modification, as defined in

paragraph (c)(1) or (2) of that definition, that does not change the

item from a commercial item to a noncommercial item, is exempt from the

requirement for cost or pricing data.

(4) Waivers. The head of the contracting activity (HCA) may,

without power of delegation, waive the requirement for submission of

cost or pricing data in exceptional cases. The authorization for the

waiver and the supporting rationale shall be in writing. The HCA may

consider waiving the requirement if the price can be determined to be

fair and reasonable without submission of cost or pricing data. For

example, if cost or pricing data were furnished on previous production

buys and the contracting officer determines such data are sufficient,

when combined with updated information, a waiver may be granted. If the

HCA has waived the requirement for submission of cost or pricing data,

the contractor or higher-tier subcontractor to whom the waiver relates

shall be considered as having been required to provide cost or pricing

data. Consequently, award of any lower-tier subcontract expected to

exceed the cost or pricing data threshold requires the submission of

cost or pricing data unless an exception otherwise applies to the

subcontract or the waiver specifically includes that subcontract.

15.403-2 Other circumstances where cost or pricing data are not

required.

(a) The exercise of an option at the price established at contract

award or initial negotiation does not require submission of cost or

pricing data.

(b) Cost or pricing data are not required for proposals used solely

for overrun funding or interim billing price adjustments.

15.403-3 Requiring information other than cost or pricing data.

(a) General. (1) The contracting officer is responsible for

obtaining information that is adequate for evaluating the

reasonableness of the price or determining cost realism. However, the

contracting officer should not obtain more information than is

necessary for determining the reasonableness of the price or evaluating

cost realism. To the extent necessary to determine the reasonableness

of the price, the contracting officer shall require submission of

information from the offeror. Unless an exception under 15.403-1(b)(1)

or (2) applies, such information submitted by the offeror shall

include, at a minimum, appropriate information on the prices at which

the same item or similar items have previously been sold, adequate for

determining the reasonableness of the price (10 U.S.C. 2306a(d)(1) and

41 U.S.C. 254b(d)(1)).

(2) The contractor's format for submitting such information should

be used (see 15.403-5(b)(2)).

(3) The contracting officer shall ensure that information used to

support price negotiations is sufficiently current to permit

negotiation of a fair and reasonable price. Requests for updated

offeror information should be limited to information that affects the

adequacy of the proposal for negotiations, such as changes in price

lists. Such data shall not be certified in accordance with 15.406-2.

(b) Adequate price competition. When adequate price competition

exists (see 15.403-1(c)(1)), generally no additional information is

necessary to determine the reasonableness of price. However, if there

are unusual circumstances where it is concluded that additional

information is necessary to determine the reasonableness of price, the

contracting officer shall, to the maximum extent practicable, obtain

the additional information from sources other than the offeror. In

addition, the contracting officer may request information to determine

the cost realism of competing offers or to evaluate competing

approaches.

(c) Limitations relating to commercial items (10 U.S.C. 2306a(d)(2)

and 41 U.S.C. 254b(d)). (1) Requests for sales data relating to

commercial items shall be limited to data for the same or similar items

during a relevant time period.

(2) The contracting officer shall, to the maximum extent

practicable, limit the scope of the request for information relating to

commercial items to include only information that is in the form

regularly maintained by the offeror as part of its commercial

operations.

(3) Information obtained relating to commercial items that is

exempt from disclosure under 24.202(a) or the Freedom of Information

Act (5 U.S.C. 552(b)) shall not be disclosed outside the Government.

[[Page 51241]]

15.403-4 Requiring cost or pricing data (10 U.S.C. 2306a and 41 U.S.C.

254b).

(a)(1) Cost or pricing data shall be obtained only if the

contracting officer concludes that none of the exceptions in 15.403-

1(b) applies. However, if the contracting officer has sufficient

information available to determine price reasonableness, then a waiver

under the exception at 15.403-1(b)(4) should be considered. The

threshold for obtaining cost or pricing data is $500,000. Unless an

exception applies, cost or pricing data are required before

accomplishing any of the following actions expected to exceed the

current threshold or, in the case of existing contracts, the threshold

specified in the contract:

(i) The award of any negotiated contract (except for undefinitized

actions such as letter contracts).

(ii) The award of a subcontract at any tier, if the contractor and

each higher-tier subcontractor have been required to furnish cost or

pricing data (but see waivers at 15.403-1(c)(4)).

(iii) The modification of any sealed bid or negotiated contract

(whether or not cost or pricing data were initially required) or any

subcontract covered by paragraph (a)(1)(ii) of this subsection. Price

adjustment amounts shall consider both increases and decreases (e.g., a

$150,000 modification resulting from a reduction of $350,000 and an

increase of $200,000 is a pricing adjustment exceeding $500,000). This

requirement does not apply when unrelated and separately priced changes

for which cost or pricing data would not otherwise be required are

included for administrative convenience in the same modification.

Negotiated final pricing actions (such as termination settlements and

total final price agreements for fixed-price incentive and

redeterminable contracts) are contract modifications requiring cost or

pricing data if the total final price agreement for such settlements or

agreements exceeds the pertinent threshold set forth at paragraph

(a)(1) of this subsection, or the partial termination settlement plus

the estimate to complete the continued portion of the contract exceeds

the pertinent threshold set forth at paragraph (a)(1) of this

subsection (see 49.105(c)(15)).

(2) Unless prohibited because an exception at 15.403-1(b) applies,

the head of the contracting activity, without power of delegation, may

authorize the contracting officer to obtain cost or pricing data for

pricing actions below the pertinent threshold in paragraph (a)(1) of

this subsection, provided the action exceeds the simplified acquisition

threshold. The head of the contracting activity shall justify the

requirement for cost or pricing data. The documentation shall include a

written finding that cost or pricing data are necessary to determine

whether the price is fair and reasonable and the facts supporting that

finding.

(b) When cost or pricing data are required, the contracting officer

shall require the contractor or prospective contractor to submit to the

contracting officer (and to have any subcontractor or prospective

subcontractor submit to the prime contractor or appropriate

subcontractor tier) the following in support of any proposal:

(1) The cost or pricing data.

(2) A certificate of current cost or pricing data, in the format

specified in 15.406-2, certifying that to the best of its knowledge and

belief, the cost or pricing data were accurate, complete, and current

as of the date of agreement on price or, if applicable, an earlier date

agreed upon between the parties that is as close as practicable to the

date of agreement on price.

(c) If cost or pricing data are requested and submitted by an

offeror, but an exception is later found to apply, the data shall not

be considered cost or pricing data as defined in 15.401 and shall not

be certified in accordance with 15.406-2.

(d) The requirements of this subsection also apply to contracts

entered into by an agency on behalf of a foreign government.

15.403-5 Instructions for submission of cost or pricing data or

information other than cost or pricing data.

(a) Taking into consideration the policy at 15.402, the contracting

officer shall specify in the solicitation (see 15.408 (l) and (m))--

(1) Whether cost or pricing data are required;

(2) That, in lieu of submitting cost or pricing data, the offeror

may submit a request for exception from the requirement to submit cost

or pricing data;

(3) Any information other than cost or pricing data that is

required; and

(4) Necessary preaward or postaward access to offeror's records.

(b)(1) Unless required to be submitted on one of the termination

forms specified in Subpart 49.6, the contracting officer may require

submission of cost or pricing data in the format indicated in Table 15-

2 of 15.408, specify an alternative format, or permit submission in the

contractor's format.

(2) Information other than cost or pricing data may be submitted in

the offeror's own format unless the contracting officer decides that

use of a specific format is essential and the format has been described

in the solicitation.

(3) Data supporting forward pricing rate agreements or final

indirect cost proposals shall be submitted in a form acceptable to the

contracting officer.

15.404 Proposal analysis.

15.404-1 Proposal analysis techniques.

(a) General. The objective of proposal analysis is to ensure that

the final agreed-to price is fair and reasonable.

(1) The contracting officer is responsible for evaluating the

reasonableness of the offered prices. The analytical techniques and

procedures described in this section may be used, singly or in

combination with others, to ensure that the final price is fair and

reasonable. The complexity and circumstances of each acquisition should

determine the level of detail of the analysis required.

(2) Price analysis shall be used when cost or pricing data are not

required (see paragraph (b) of this subsection and 15.404-3).

(3) Cost analysis shall be used to evaluate the reasonableness of

individual cost elements when cost or pricing data are required. Price

analysis should be used to verify that the overall price offered is

fair and reasonable.

(4) Cost analysis may also be used to evaluate information other

than cost or pricing data to determine cost reasonableness or cost

realism.

(5) The contracting officer may request the advice and assistance

of other experts to ensure that an appropriate analysis is performed.

(6) Recommendations or conclusions regarding the Government's

review or analysis of an offeror's or contractor's proposal shall not

be disclosed to the offeror or contractor without the concurrence of

the contracting officer. Any discrepancy or mistake of fact (such as

duplications, omissions, and errors in computation) contained in the

cost or pricing data or information other than cost or pricing data

submitted in support of a proposal shall be brought to the contracting

officer's attention for appropriate action.

(7) The Air Force Institute of Technology (AFIT) and the Federal

Acquisition Institute (FAI) jointly prepared a five-volume set of

Contract Pricing Resource Guides to guide pricing and negotiation

personnel. The five guides are: I Price Analysis, II Quantitative

Techniques for Contract Pricing, III Cost Analysis, IV Advanced Issues

in Contract Pricing, and V Federal Contract Negotiation Techniques.

These references provide detailed discussion and examples

[[Page 51242]]

applying pricing policies to pricing problems. They are to be used for

instruction and professional guidance. However, they are not directive

and should be considered informational only. Free copies of the

references are available on the World Wide Web, Internet address http:/

/www.gsa.gov/fai.

(b) Price analysis. (1) Price analysis is the process of examining

and evaluating a proposed price without evaluating its separate cost

elements and proposed profit.

(2) The Government may use various price analysis techniques and

procedures to ensure a fair and reasonable price, given the

circumstances surrounding the acquisition. Examples of such techniques

include, but are not limited to the following:

(i) Comparison of proposed prices received in response to the

solicitation.

(ii) Comparison of previously proposed prices and contract prices

with current proposed prices for the same or similar end items, if both

the validity of the comparison and the reasonableness of the previous

price(s) can be established.

(iii) Use of parametric estimating methods/application of rough

yardsticks (such as dollars per pound or per horsepower, or other

units) to highlight significant inconsistencies that warrant additional

pricing inquiry.

(iv) Comparison with competitive published price lists, published

market prices of commodities, similar indexes, and discount or rebate

arrangements.

(v) Comparison of proposed prices with independent Government cost

estimates.

(vi) Comparison of proposed prices with prices obtained through

market research for the same or similar items.

(c) Cost analysis. (1) Cost analysis is the review and evaluation

of the separate cost elements and profit in an offeror's or

contractor's proposal (including cost or pricing data or information

other than cost or pricing data), and the application of judgment to

determine how well the proposed costs represent what the cost of the

contract should be, assuming reasonable economy and efficiency.

(2) The Government may use various cost analysis techniques and

procedures to ensure a fair and reasonable price, given the

circumstances of the acquisition. Such techniques and procedures

include the following:

(i) Verification of cost or pricing data and evaluation of cost

elements, including--

(A) The necessity for, and reasonableness of, proposed costs,

including allowances for contingencies;

(B) Projection of the offeror's cost trends, on the basis of

current and historical cost or pricing data;

(C) Reasonableness of estimates generated by appropriately

calibrated and validated parametric models or cost-estimating

relationships; and

(D) The application of audited or negotiated indirect cost rates,

labor rates, and cost of money or other factors.

(ii) Evaluating the effect of the offeror's current practices on

future costs. In conducting this evaluation, the contracting officer

shall ensure that the effects of inefficient or uneconomical past

practices are not projected into the future. In pricing production of

recently developed complex equipment, the contracting officer should

perform a trend analysis of basic labor and materials, even in periods

of relative price stability.

(iii) Comparison of costs proposed by the offeror for individual

cost elements with--

(A) Actual costs previously incurred by the same offeror;

(B) Previous cost estimates from the offeror or from other offerors

for the same or similar items;

(C) Other cost estimates received in response to the Government's

request;

(D) Independent Government cost estimates by technical personnel;

and

(E) Forecasts of planned expenditures.

(iv) Verification that the offeror's cost submissions are in

accordance with the contract cost principles and procedures in part 31

and, when applicable, the requirements and procedures in 48 CFR Chapter

99 (Appendix to the FAR looseleaf edition), Cost Accounting Standards.

(v) Review to determine whether any cost or pricing data necessary

to make the contractor's proposal accurate, complete, and current have

not been either submitted or identified in writing by the contractor.

If there are such data, the contracting officer shall attempt to obtain

them and negotiate, using them or making satisfactory allowance for the

incomplete data.

(vi) Analysis of the results of any make-or-buy program reviews, in

evaluating subcontract costs (see 15.407-2).

(d) Cost realism analysis. (1) Cost realism analysis is the process

of independently reviewing and evaluating specific elements of each

offeror's proposed cost estimate to determine whether the estimated

proposed cost elements are realistic for the work to be performed;

reflect a clear understanding of the requirements; and are consistent

with the unique methods of performance and materials described in the

offeror's technical proposal.

(2) Cost realism analyses shall be performed on cost-reimbursement

contracts to determine the probable cost of performance for each

offeror.

(i) The probable cost may differ from the proposed cost and should

reflect the Government's best estimate of the cost of any contract that

is most likely to result from the offeror's proposal. The probable cost

shall be used for purposes of evaluation to determine the best value.

(ii) The probable cost is determined by adjusting each offeror's

proposed cost, and fee when appropriate, to reflect any additions or

reductions in cost elements to realistic levels based on the results of

the cost realism analysis.

(3) Cost realism analyses may also be used on competitive fixed-

price incentive contracts or, in exceptional cases, on other

competitive fixed-price-type contracts when new requirements may not be

fully understood by competing offerors, there are quality concerns, or

past experience indicates that contractors proposed costs have resulted

in quality or service shortfalls. Results of the analysis may be used

in performance risk assessments and responsibility determinations.

However, proposals shall be evaluated using the criteria in the

solicitation, and the offered prices shall not be adjusted as a result

of the analysis.

(e) Technical analysis. (1) The contracting officer may request

that personnel having specialized knowledge, skills, experience, or

capability in engineering, science, or management perform a technical

analysis of the proposed types and quantities of materials, labor,

processes, special tooling, facilities, the reasonableness of scrap and

spoilage, and other associated factors set forth in the proposal(s) in

order to determine the need for and reasonableness of the proposed

resources, assuming reasonable economy and efficiency.

(2) At a minimum, the technical analysis should examine the types

and quantities of material proposed and the need for the types and

quantities of labor hours and the labor mix. Any other data that may be

pertinent to an assessment of the offeror's ability to accomplish the

technical requirements or to the cost or price analysis of the service

or product being proposed should also be included in the analysis.

(f) Unit prices. (1) Except when pricing an item on the basis of

adequate price competition or catalog or market price, unit prices

shall reflect the intrinsic value of an item or service and shall be in

proportion to an item's base cost (e.g., manufacturing or acquisition

costs). Any method of distributing costs

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to line items that distorts the unit prices shall not be used. For

example, distributing costs equally among line items is not acceptable

except when there is little or no variation in base cost.

(2) Except for the acquisition of commercial items, contracting

officers shall require that offerors identify in their proposals those

items of supply that they will not manufacture or to which they will

not contribute significant value, unless adequate price competition is

expected (10 U.S.C. 2304 and 41 U.S.C. 254(d)(5)(A)(i)). Such

information shall be used to determine whether the intrinsic value of

an item has been distorted through application of overhead and whether

such items should be considered for breakout. The contracting officer

may require such information in all other negotiated contracts when

appropriate.

(g) Unbalanced pricing. (1) Unbalanced pricing may increase

performance risk and could result in payment of unreasonably high

prices. Unbalanced pricing exists when, despite an acceptable total

evaluated price, the price of one or more contract line items is

significantly over or understated as indicated by the application of

cost or price analysis techniques. The greatest risks associated with

unbalanced pricing occur when--

(i) Startup work, mobilization, first articles, or first article

testing are separate line items;

(ii) Base quantities and option quantities are separate line items;

or

(iii) The evaluated price is the aggregate of estimated quantities

to be ordered under separate line items of an indefinite-delivery

contract.

(2) All offers with separately priced line items or subline items

shall be analyzed to determine if the prices are unbalanced. If cost or

price analysis techniques indicate that an offer is unbalanced, the

contracting officer shall--

(i) Consider the risks to the Government associated with the

unbalanced pricing in determining the competitive range and in making

the source selection decision; and

(ii) Consider whether award of the contract will result in paying

unreasonably high prices for contract performance.

(3) An offer may be rejected if the contracting officer determines

that the lack of balance poses an unacceptable risk to the Government.

15.404-2 Information to support proposal analysis.

(a) Field pricing assistance. (1) The contracting officer should

request field pricing assistance when the information available at the

buying activity is inadequate to determine a fair and reasonable price.

Such requests shall be tailored to reflect the minimum essential

supplementary information needed to conduct a technical or cost or

pricing analysis.

(2) Field pricing assistance generally is directed at obtaining

technical, audit, and special reports associated with the cost elements

of a proposal, including subcontracts. Information on related pricing

practices and history may also be obtained. Field pricing assistance

may also include information relative to the business, technical,

production, or other capabilities and practices of an offeror. The type

of information and level of detail requested will vary in accordance

with the specialized resources available at the buying activity and the

magnitude and complexity of the required analysis.

(3) When field pricing assistance is requested, contracting

officers are encouraged to team with appropriate field experts

throughout the acquisition process, including negotiations. Early

communication with these experts will assist in determining the extent

of assistance required, the specific areas for which assistance is

needed, a realistic review schedule, and the information necessary to

perform the review.

(4) When requesting field pricing assistance on a contractor's

request for equitable adjustment, the contracting officer shall provide

the information listed in 43.204(b)(5).

(5) Field pricing information and other reports may include

proprietary or source selection information (see 3.104-4 (j) and (k)).

Such information shall be appropriately identified and protected

accordingly.

(b) Reporting field pricing information. (1) Depending upon the

extent and complexity of the field pricing review, results, including

supporting rationale, may be reported directly to the contracting

officer orally, in writing, or by any other method acceptable to the

contracting officer.

(i) Whenever circumstances permit, the contracting officer and

field pricing experts are encouraged to use telephonic and/or

electronic means to request and transmit pricing information.

(ii) When it is necessary to have written technical and audit

reports, the contracting officer shall request that the audit agency

concurrently forward the audit report to the requesting contracting

officer and the administrative contracting officer (ACO). The completed

field pricing assistance results may reference audit information, but

need not reconcile the audit recommendations and technical

recommendations. A copy of the information submitted to the contracting

officer by field pricing personnel shall be provided to the audit

agency.

(2) Audit and field pricing information, whether written or

reported telephonically or electronically, shall be made a part of the

official contract file (see 4.807(f)).

(c) Audit assistance for prime contracts or subcontracts. (1) The

contracting officer may contact the cognizant audit office directly,

particularly when an audit is the only field pricing support required.

The audit office shall send the audit report, or otherwise transmit the

audit recommendations, directly to the contracting officer.

(i) The auditor shall not reveal the audit conclusions or

recommendations to the offeror/contractor without obtaining the

concurrence of the contracting officer. However, the auditor may

discuss statements of facts with the contractor.

(ii) The contracting officer should be notified immediately of any

information disclosed to the auditor after submission of a report that

may significantly affect the audit findings and, if necessary, a

supplemental audit report shall be issued.

(2) The contracting officer shall not request a separate preaward

audit of indirect costs unless the information already available from

an existing audit, completed within the preceding 12 months, is

considered inadequate for determining the reasonableness of the

proposed indirect costs (41 U.S.C. 254d and 10 U.S.C. 2313).

(3) The auditor is responsible for the scope and depth of the

audit. Copies of updated information that will significantly affect the

audit should be provided to the auditor by the contracting officer.

(4) General access to the offeror's books and financial records is

limited to the auditor. This limitation does not preclude the

contracting officer or the ACO, or their representatives, from

requesting that the offeror provide or make available any data or

records necessary to analyze the offeror's proposal.

(d) Deficient proposals. The ACO or the auditor, as appropriate,

shall notify the contracting officer immediately if the data provided

for review is so deficient as to preclude review or audit, or if the

contractor or offeror has denied access to any records considered

essential to conduct a satisfactory review or audit. Oral notifications

shall

[[Page 51244]]

be confirmed promptly in writing, including a description of deficient

or denied data or records. The contracting officer immediately shall

take appropriate action to obtain the required data. Should the

offeror/contractor again refuse to provide adequate data, or provide

access to necessary data, the contracting officer shall withhold the

award or price adjustment and refer the contract action to a higher

authority, providing details of the attempts made to resolve the matter

and a statement of the practicability of obtaining the supplies or

services from another source.

15.404-3 Subcontract pricing considerations.

(a) The contracting officer is responsible for the determination of

price reasonableness for the prime contract, including subcontracting

costs. The contracting officer should consider whether a contractor or

subcontractor has an approved purchasing system, has performed cost or

price analysis of proposed subcontractor prices, or has negotiated the

subcontract prices before negotiation of the prime contract, in

determining the reasonableness of the prime contract price. This does

not relieve the contracting officer from the responsibility to analyze

the contractor's submission, including subcontractor's cost or pricing

data.

(b) The prime contractor or subcontractor shall--

(1) Conduct appropriate cost or price analyses to establish the

reasonableness of proposed subcontract prices;

(2) Include the results of these analyses in the price proposal;

and

(3) When required by paragraph (c) of this subsection, submit

subcontractor cost or pricing data to the Government as part of its own

cost or pricing data.

(c) Any contractor or subcontractor that is required to submit cost

or pricing data also shall obtain and analyze cost or pricing data

before awarding any subcontract, purchase order, or modification

expected to exceed the cost or pricing data threshold, unless an

exception in 15.403-1(b) applies to that action.

(1) The contractor shall submit, or cause to be submitted by the

subcontractor(s), cost or pricing data to the Government for

subcontracts that are the lower of either--

(i) $10,000,000 or more; or

(ii) Both more than the pertinent cost or pricing data threshold

and more than 10 percent of the prime contractor's proposed price,

unless the contracting officer believes such submission is unnecessary.

(2) The contracting officer may require the contractor or

subcontractor to submit to the Government (or cause submission of)

subcontractor cost or pricing data below the thresholds in paragraph

(c)(1) of this subsection that the contracting officer considers

necessary for adequately pricing the prime contract.

(3) Subcontractor cost or pricing data shall be submitted in the

format provided in Table 15-2 of 15.408 or the alternate format

specified in the solicitation.

(4) Subcontractor cost or pricing data shall be current, accurate,

and complete as of the date of price agreement, or, if applicable, an

earlier date agreed upon by the parties and specified on the

contractor's Certificate of Current Cost or Pricing Data. The

contractor shall update subcontractor's data, as appropriate, during

source selection and negotiations.

(5) If there is more than one prospective subcontractor for any

given work, the contractor need only submit to the Government cost or

pricing data for the prospective subcontractor most likely to receive

the award.

15.404-4 Profit.

(a) General. This subsection prescribes policies for establishing

the profit or fee portion of the Government prenegotiation objective in

price negotiations based on cost analysis.

(1) Profit or fee prenegotiation objectives do not necessarily

represent net income to contractors. Rather, they represent that

element of the potential total remuneration that contractors may

receive for contract performance over and above allowable costs. This

potential remuneration element and the Government's estimate of

allowable costs to be incurred in contract performance together equal

the Government's total prenegotiation objective. Just as actual costs

may vary from estimated costs, the contractor's actual realized profit

or fee may vary from negotiated profit or fee, because of such factors

as efficiency of performance, incurrence of costs the Government does

not recognize as allowable, and the contract type.

(2) It is in the Government's interest to offer contractors

opportunities for financial rewards sufficient to stimulate efficient

contract performance, attract the best capabilities of qualified large

and small business concerns to Government contracts, and maintain a

viable industrial base.

(3) Both the Government and contractors should be concerned with

profit as a motivator of efficient and effective contract performance.

Negotiations aimed merely at reducing prices by reducing profit,

without proper recognition of the function of profit, are not in the

Government's interest. Negotiation of extremely low profits, use of

historical averages, or automatic application of predetermined

percentages to total estimated costs do not provide proper motivation

for optimum contract performance.

(b) Policy. (1) Structured approaches (see paragraph (d) of this

subsection) for determining profit or fee prenegotiation objectives

provide a discipline for ensuring that all relevant factors are

considered. Subject to the authorities in 1.301(c), agencies making

noncompetitive contract awards over $100,000 totaling $50 million or

more a year--

(i) Shall use a structured approach for determining the profit or

fee objective in those acquisitions that require cost analysis; and

(ii) May prescribe specific exemptions for situations in which

mandatory use of a structured approach would be clearly inappropriate.

(2) Agencies may use another agency's structured approach.

(c) Contracting officer responsibilities. (1) When the price

negotiation is not based on cost analysis, contracting officers are not

required to analyze profit.

(2) When the price negotiation is based on cost analysis,

contracting officers in agencies that have a structured approach shall

use it to analyze profit. When not using a structured approach,

contracting officers shall comply with paragraph (d)(1) of this

subsection in developing profit or fee prenegotiation objectives.

(3) Contracting officers shall use the Government prenegotiation

cost objective amounts as the basis for calculating the profit or fee

prenegotiation objective. Before applying profit or fee factors, the

contracting officer shall exclude any facilities capital cost of money

included in the cost objective amounts. If the prospective contractor

fails to identify or propose facilities capital cost of money in a

proposal for a contract that will be subject to the cost principles for

contracts with commercial organizations (see subpart 31.2), facilities

capital cost of money will not be an allowable cost in any resulting

contract (see 15.408(i)).

(4)(i) The contracting officer shall not negotiate a price or fee

that exceeds the following statutory limitations, imposed by 10 U.S.C.

2306(e) and 41 U.S.C. 254(b):

(A) For experimental, developmental, or research work performed

under a cost-plus-fixed-fee contract, the fee shall

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not exceed 15 percent of the contract's estimated cost, excluding fee.

(B) For architect-engineer services for public works or utilities,

the contract price or the estimated cost and fee for production and

delivery of designs, plans, drawings, and specifications shall not

exceed 6 percent of the estimated cost of construction of the public

work or utility, excluding fees.

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