Acquisition Regulation

SUMMARY: The Department of Health and Human Services is republishing

its acquisition regulation (HHSAR), Title 48 Code of Federal

Regulations, Chapter 3, to streamline and simplify it in accordance

with the tenets of the National Performance Review. In doing so, the

Department believes it has eliminated some procedural guidance which is

too encumbering for a simplified system while attempting to empower the

appropriate levels of management and contracting personnel with the

authorities required for them to successfully accomplish their mission

with the least amount of resistance and oversight.

DATES: Comments must be received by March 9, 1999.

ADDRESSES: Comments should be sent to Mr. E. S. Lanham, Office of

Acquisition Management, 200 Independence Avenue, Southwest--Room 517 D,

Washington, D.C. 20201.

FOR FURTHER INFORMATION CONTACT: E. S. Lanham, Office of Acquisition

Management, telephone (202) 690-7590.

SUPPLEMENTARY INFORMATION: The Department emphasizes that it is not

making significant amendments to the existing HHSAR. The amendments

being made to the HHSAR concern internal procedural matters which are

administrative in nature, and will not have a major effect on the

general public, or to contractors or offerors of the Department. The

majority of the amendments eliminate procedural guidance no longer

deemed necessary, or change contracting review and approval authorities

to situate them at levels more appropriate to simplification,

streamlining, and empowerment. The Department has also updated HHSAR to

bring it in line with the latest amendments made to the Federal

Acquisition Regulation (FAR).

The Department of Health and Human Services certifies this document

will not have a significant economic effect on a substantial number of

small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.); therefore, no regulatory flexibility statement has been

prepared. Since this rule conveys existing acquisition policies or

procedures and does not promulgate any new policies or procedures which

would impact the public, it has been determined that this rule will not

have a significant economic effect on a substantial number of small

entities, and, thus, a regulatory flexibility analysis was not

performed.

Furthermore, this document does not contain new information

collection requirements needing approval by the Office of Management

and Budget under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et

seq.). Existing approvals cited in 48 CFR section 301.106 remain in

effect. The provisions of this regulation are issued under 5 U.S.C.

301; 40 U.S.C. 486 (c).

List of Subjects in 48 CFR Chapter 3

Government procurement.

Under the authority of 5 U.S.C. 301; 40 U.S.C. 486(c), the

Department of Health and Human Services revises 48 CFR Chapter 3 as set

forth below.

Dated: November 24, 1998.

John J. Callahan,

Assistant Secretary for Management and Budget.

CHAPTER 3--HEALTH AND HUMAN SERVICES

Table of Contents

Subchapter A--General

Part

301--HHS Acquisition Regulation System

302--Definitions of Words and Terms

303--Improper Business Practices and Personal Conflicts of Interest

304--Administrative Matters

Subchapter B--Competition and Acquisition Planning

305--Publicizing Contract Actions

306--Competition Requirements

307--Acquisition Planning

309--Contractor Qualifications

Subchapter C--Contracting Methods and Contract Types

313--Simplified Acquisition Procedures

314--Sealed Bidding

315--Contracting by Negotiation

316--Types of Contracts

317--Special Contracting Methods

Subchapter D--Socioeconomic Programs

319--Small Business Programs

323--Environment, Conservation, Occupational Safety, and Drug-Free

Workplace

324--Protection of Privacy and Freedom of Information

325--Foreign Acquisition

Subchapter E--General Contracting Requirements

328--Bonds and Insurance

330--Cost Accounting Standards Administration

332--Contract Financing

333--Protests, Disputes, and Appeals

Subchapter F--Special Categories of Contracting

334--Major System Acquisition

335--Research and Development Contracting

Subchapter G--Contract Management

342--Contract Administration

Subchapter H--Clauses and Forms

352--Solicitation Provisions and Contract Clauses

353--Forms

Subchapter T--HHS Supplementations

370--Special Programs Affecting Acquisition

SUBCHAPTER A--GENERAL

PART 301--HHS ACQUISITION REGULATION SYSTEM

Subpart 301.1--Purpose, Authority, Issuance

Sec.

301.101 Purpose.

301.103 Authority.

301.106 OMB approval under the Paperwork Reduction Act.

Subpart 301.2--Administration

301.270 Executive Committee for Acquisition.

Subpart 301.4--Deviations from the FAR

301.403 Individual deviations.

301.404 Class deviations.

301.470 Procedure.

Subpart 301.6--Career Development, Contracting Authority, and

Responsibilities

301.602 Contracting officers.

301.602-3 Ratification of unauthorized commitments.

301.603 Selection, appointment, and termination of appointment.

301.603-1 General.

301.603-2 Selection.

301.603-3 Appointment.

301.603-4 Termination.

301.603-70 Delegation of contracting officer responsibilities.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 301.1--Purpose, Authority, Issuance

301.101 Purpose.

(a) The Department of Health and Human Services Acquisition

Regulation (HHSAR) is issued to establish uniform acquisition policies

and procedures for the Department of Health and Human Services (HHS)

which conform to the Federal Acquisition Regulation (FAR) System.

(b) The HHSAR implements and supplements the FAR. (Implementing

material expands upon or indicates the manner of compliance with

related FAR material. Supplementing material is new material which has

no counterpart in the FAR.)

[[Page 1345]]

(c) The HHSAR contains all formal departmental policies and

procedures that govern the acquisition process or otherwise control

contracting relationships between the Department's contracting offices

and contractors.

301.103 Authority.

(b) The HHSAR is prescribed by the Assistant Secretary for

Management and Budget under the authority of 5 U.S.C. 301 and Section

205 (c) of the Federal Property and Administrative Services Act of

1949, as amended (40 U.S.C. 486(c)), as delegated by the Secretary.

(c) The HHSAR is issued in the Code of Federal Regulations (CFR) as

Chapter 3 of Title 48, Department of Health and Human Services

Acquisition Regulation. It may be referenced as ``48 CFR Chapter 3.''

301.106 OMB approval under the Paperwork Reduction Act.

The following OMB control numbers apply to the information

collection and record keeping requirements contained in this

regulation:

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

OMB control

HHSAR segment No.

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

315.4...................................................... 0990-0139

324.70..................................................... 0990-0136

342.7101................................................... 0990-0131

352.224-70................................................. 0990-0136

352.233-70................................................. 0990-0133

352.270-1.................................................. 0990-0129

352.270-2.................................................. 0990-0129

352.270-3.................................................. 0990-0129

352.270-5.................................................. 0990-0130

370.1...................................................... 0990-0129

370.2...................................................... 0990-0129

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

The OMB control number ``OMB No. 0990-0115'' is to be included in

the upper right corner of the first page of all solicitations, purchase

orders, and contracts issued by departmental contracting activities.

The number represents approval of the HHS acquisition process and

covers record keeping and reporting requirements which are unique to

individual acquisitions (e.g., requirements contained in

specifications, statements of work, etc.).

Subpart 301.2--Administration

301.270 Executive Committee for Acquisition.

(a) The Deputy Assistant Secretary for Grants and Acquisition

Management has established the Executive Committee for Acquisition

(ECA) to assist and facilitate the planning and development of

departmental acquisition policies and procedures and to assist in

responding to other agencies and organizations concerning policies and

procedures impacting the Federal acquisition process.

(b) The ECA consists of members and alternates from the Office of

Acquisition Management, Administration for Children and Families,

Health Care Financing Administration, Program Support Center, Centers

for Disease Control and Prevention, Food and Drug Administration,

Health Resources and Services Administration, Indian Health Service,

National Institutes of Health, and Substance Abuse and Mental Health

Services Administration. The ECA is chaired by the Director, Office of

Acquisition Management. All meetings will be held at the call of the

Chairman, and all activities will be carried out under to direction of

the Chairman.

(c) The ECA, to facilitate the planning, development, and

coordination of governmentwide and departmentwide acquisition policies

and procedures, is to:

(1) Advise and assist the Chairman concerning major acquisition

policy matters;

(2) Review and appraise, at appropriate intervals, the overall

effectiveness of existing policies and procedures; and

(3) Review and appraise the impact of new major acquisition

policies, procedures, regulations, and development on current

acquisition policies and procedures.

(d) The Chairman will periodically issue a list of current members

and alternates specifying the name, title, organization, address, and

telephone number of each. The member organizations are responsible for

apprising the Chairman whenever a new member or alternate is to be

appointed to the ECA.

Subpart 301.4--Deviations from the FAR

301.403 Individual deviations.

Requests for individual deviations to either the FAR or HHSAR shall

be prepared in accordance with 301.470 and forwarded through

administrative channels to the Director, Office of Acquisition

Management for review and approval.

301.404 Class deviations.

Requests for class deviations to either the FAR or HHSAR shall be

prepared in accordance with 301.470 and forwarded through

administrative channels to the Deputy Assistant Secretary for Grants

and Acquisition Management for review and approval.

301.470 Procedure.

(a) When a contracting office determines that a deviation is

needed, it shall prepare a deviation request in memorandum form and

forward it through administrative channels to the official designated

in 301.403 or 301.404. In an exigency situation, the contracting office

may request a deviation verbally, through normal acquisition channels,

but is required to confirm the request in writing as soon as possible.

(b) A deviation request shall clearly and precisely set forth the:

(1) Nature of the needed deviation;

(2) Identification of the FAR or HHSAR citation from which the

deviation is needed;

(3) Circumstances under which the deviation would be used;

(4) Intended effect of the deviation;

(5) Time-frame; and

(6) Reasons which will contribute to complete understanding and

support of the requested deviation. A copy of pertinent background

papers such as a form or contractor's request should accompany the

deviation request.

Subpart 301.6--Career Development, Contracting Authority, and

Responsibilities

301.602 Contracting officers.

301.602-3 Ratification of unauthorized commitments.

(b) Policy. (1) The Government is not bound by agreements or

contractual commitments made to prospective contractors by persons to

whom contracting authority has not been delegated. However, execution

of otherwise proper contracts made by individuals without contracting

authority, or by contracting officers in excess of the limits of their

delegated authority, may be later ratified. The ratification must be in

the form of a written document clearly stating that ratification of a

previously unauthorized act is intended and must be signed by the head

of the contracting activity (HCA).

(2) The HCA is the official authorized to ratify an unauthorized

commitment (but see (b)(3) of this section).

(3) Ratification authority for actions up to $25,000 may be

redelegated by the HCA to the chief of the contracting office (CCO). No

other redelegations are authorized.

(c) Limitations. (5) The concurrence of legal counsel concerning

the payment issue is optional.

(e) Procedures. (1) The individual who made the unauthorized

contractual commitment shall furnish the reviewing contracting officer

all records and documents concerning the commitment and a complete

written statement of facts, including, but not limited to: a

[[Page 1346]]

statement as to why the contracting office was not used, a statement as

to why the proposed contractor was selected, a list of other sources

considered, a description of work to be performed or products to be

furnished, the estimated or agreed contract price, a citation of the

appropriation available, and a statement whether the contractor has

commenced performance.

(2) The contracting officer will review the submitted material, and

prepare the ratification document if he/she determines that the

commitment may be ratifiable. The contracting officer shall forward the

ratification document and the submitted material to the HCA or CCO with

any comments or information which should be considered in evaluation of

the request for ratification. If legal review is desirable, the HCA or

CCO will coordinate the request for ratification with the Office of

General Counsel, Business and Administrative Law Division.

(3) If ratification is authorized by the HCA or CCO, the file will

be returned, along with the ratification document, to the contracting

officer for issuance of a purchase order or contract, as appropriate.

301.603 Selection, appointment, and termination of appointment.

301.603-1 General.

(a) The appointment and termination of appointment of contracting

officers shall be made by the head of the contracting activity (HCA).

This authority is not delegable.

(b) The contracting officer appointment document for personnel in

the GS-1101, 1102, and 1105 series, as well as personnel in any other

series who will obligate the Government to the expenditure of funds in

excess of the micro-purchase threshold, shall be the Standard Form

(SF)--1402, Certificate of Appointment. The HCA may determine an

alternative appointment document for appointments below that threshold.

Changes to appointments shall be made by issuing a new appointment

document. Each appointment document shall be prepared and maintained in

accordance with FAR 1.603-1 and shall state the limits of the

individual's authority.

(c) An individual must be certified under the HHS Acquisition

Certification Program as a prerequisite to being appointed as a

contracting officer with authority to obligate funds in excess of the

micro-purchase threshold (see 301.603-3(a)). The HCA will determine and

require appropriate training for individuals appointed as contracting

officers at lower dollar levels. An individual shall be appointed as a

contracting officer only in instances where a valid organizational need

can be demonstrated. Factors to be considered in assessing the need for

an appointment of a contracting officer include volume of actions,

complexity of work, and structure of the organization.

301.603-2 Selection.

Nominations for appointment of contracting officers shall be

submitted to the HCA through appropriate organizational channels for

review. The nomination package, which is usually initiated by the

prospective contracting officer's immediate supervisor, shall normally

include the nominee's current personal qualifications statement or job

history, including the information required by FAR 1.603-2, a copy of

his/her most recent performance appraisal, and a copy of the

certificate issued under the HHS Acquisition Certification Program

indicating the nominee's current certification level, if applicable.

The HCA will determine the documentation required, consistent with FAR

1.603-2, when the resulting appointment and authority will not exceed

the micro-purchase threshold.

301.603-3 Appointment.

(a) Contracting officer appointments shall be made at levels

commensurate with nominees' certification levels as follows:

(1) Level I--Purchasing Agent--Required for all personnel in the

GS-1102 and 1105 series having signature authority for simplified

acquisitions, including orders from GSA sources over the micro-purchase

threshold.

(2) Level II--Acquisition Official--Required for all personnel in

the GS-1102 series. Sufficient for delegation of contracting officer

authority up to $500,000.

(3) Level III--Senior Acquisition Official--Required for all

personnel in the GS-1102 series for delegation of contracting officer

authority above $500,000.

(4) Level IV--Acquisition Manager--Required for delegation of

preaward review and approval authority as specified in Subpart 304.71.

(b) If it is essential to appoint an individual who does not fully

meet the certification requirements of this section for the contracting

officer authority sought, an interim appointment may be granted by the

HCA. Interim appointments may not exceed one (1) year in total, and

shall not be granted unless the individual can meet the certification

requirements within one year from the date of appointment. If the

certification requirements are not met by that date, the appointment

will automatically terminate and cannot be renewed.

301.603-4 Termination.

Termination of contracting officer appointments shall be

accomplished in accordance with FAR 1.603-4.

301.603-70 Delegation of contracting officer responsibilities.

(a) Contracting officer responsibilities which do not involve the

obligation (or deobligation) of funds or result in establishing or

modifying contractual provisions may be delegated by the contracting

officer by means of a written memorandum which clearly delineates the

delegation and its limits.

(b) Contracting officers may designate individuals as ordering

officials to make purchases or place orders under blanket purchase

agreements, indefinite delivery contracts, or other pre-established

mechanisms. Ordering officials, including those under NIH's DELPRO, are

not contracting officers.

(c) Project officers are required to complete the training

specified in 307.170, while ordering officials and others should

receive sufficient instruction from the contracting officer to ensure

the appropriate exercise of the responsibilities and knowledge of their

limitations.

PART 302--DEFINITIONS OF WORDS AND TERMS

Subpart 302.1--Definitions

Sec.

302.101 Definitions.

Subpart 302.2--Definitions Clause

302.201 Contract clause.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 302.1--Definitions

302.101 Definitions.

Chief of the contracting office (CCO) is a mid-level management

official in charge of a contracting office who controls and oversees

the daily contracting operation of an Operating Division (OPDIV) or

major component of an OPDIV. The CCO is subordinate to the head of the

contracting activity, and is located at a management level above other

contracting personnel, usually as a branch chief or division director.

Head of the agency or agency head, unless otherwise specified,

means the head of the Operating Division (OPDIV) for ACF, HCFA, PSC,

CDCP, FDA, HRSA, IHS, NIH, and SAMHSA, or the Assistant Secretary for

Management and Budget (ASMB) for the Office of the Secretary (OS).

[[Page 1347]]

Head of the contracting activity (HCA) is defined in terms of

certain organizational positions within the Office of Grants and

Acquisition Management (OGAM), Administration for Children and Families

(ACF), Health Care Financing Administration (HCFA), Program Support

Center (PSC), Centers for Disease Control and Prevention (CDCP), Food

and Drug Administration (FDA), Health Resources and Services

Administration (HRSA), Indian Health Service (IHS), National Institutes

of Health (NIH), and Substance Abuse and Metal Health Services

Administration (SAMHSA), as follows:

OGAM-OS--Director, Office of Acquisition Management

ACF--Director, Division of Acquisition Management

HCFA--Director, Office of Acquisition and Grants

PSC--Director, Division of Acquisition Management

CDCP--Director, Procurement and Grants Office

FDA--Director, Office of Facilities, Acquisition, and Central Services

HRSA--Director, Division of Grants and Procurement Management

IHS--Director, Division of Contracts and Grants Policy

NIH--Director, Office of Contracts and Grants Management

SAMHSA--Director, Division of Contracts Management

In addition, the Deputy Assistant Secretary for Grants and

Acquisition Management (DASGAM) is designated as an HCA. Each HCA is

responsible for conducting an effective and efficient acquisition

program. Adequate controls shall be established to assure compliance

with applicable laws, regulations, procedures, and the dictates of good

management practices. Periodic reviews shall be conducted and evaluated

by qualified personnel, preferably assigned to positions other than in

the contracting office being reviewed, to determine the extent of

adherence to prescribed policies and regulations, and to detect a need

for guidance and/or training. The HCA shall be certified, or be

certifiable, at Level IV of the HHS Acquisition Certification Program.

Individuals appointed as HCA's who do not meet the Level IV

requirements shall have one year from the date of appointment to obtain

Level IV certification. The heads of contracting activities may

redelegate their HCA authorities to the extent that redelegation is not

prohibited by the terms of their respective delegations of authority,

by law, by the Federal Acquisition Regulation, by the HHS Acquisition

Regulation, or by other regulations. However, HCA and other contracting

approvals and authorities shall not be redelegated below the levels

specified in the HHS Acquisition Regulation or, in the absence of

coverage in the HHS Acquisition Regulation, the Federal Acquisition

Regulation. To ensure proper control of redelegated acquisition

authorities, HCA's shall maintain a file containing successive

delegations of HCA authority through and including the contracting

officer level. Personnel delegated responsibility for acquisition

functions must possess a level of experience, training, and ability

commensurate with the complexity and magnitude of the acquisition

actions involved.

Subpart 302.2--Definitions Clause

302.201 Contract clause.

The FAR clause, Definitions, at 52.202-1 shall be used as

prescribed in FAR 2.201, except as follows:

(a) Paragraph (a) at 352.202-1 shall be used in place of paragraph

(a) of the FAR clause.

(b) Paragraph (h), or its alternate, at 352.202-1 shall be added to

the end of the FAR clause. Use paragraph (h) when a fixed-priced

contract is anticipated; use the alternate to paragraph (h) when a

cost-reimbursement contract is anticipated.

PART 303--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF

INTEREST

Subpart 303.1--Safeguards

Sec.

303.101 Standards of conduct.

303.101-3 Agency regulations.

Subpart 303.2--Contract Gratuities to Government Personnel

303.203 Reporting suspected violations of the Gratuities clause.

Subpart 303.3--Reports of Suspected Antitrust Violations

303.303 Reporting suspected antitrust violations.

Subpart 303.4--Contingent Fees

303.405 Misrepresentations or violations of the Covenant Against

Contingent Fees.

Subpart 303.6--Contracts With Government Employees or Organizations

Owned or Controlled by Them

303.602 Exceptions.

Subpart 303.7--Voiding and Rescinding Contracts

303.704 Policy.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 303.1--Safeguards

301.101 Standards of conduct.

303.101-3 Agency regulations.

The Department of Health and Human Services' Standards of Conduct

are prescribed in Part 73 of Title 45.

Subpart 303.2--Contractor Gratuities to Government Personnel

303.203 Reporting suspected violations of the Gratuities clause.

Departmental personnel shall report suspected violations of the

Gratuities clause in accordance with Subpart M, Reporting Violations,

of 45 CFR Part 73. Refer to Subpart B, Gifts from Outside Sources, (5

CFR 2635.201) for an explanation regarding what is prohibited and what

is permitted.

Subpart 303.3--Reports of Suspected Antitrust Violations

303.303 Reporting suspected antitrust violations.

A copy of each report of suspected antitrust violations submitted

to the Attorney General by the HCA shall also be submitted to the

Director, Office of Acquisition Management.

Subpart 303.4--Contingent Fees

303.405 Misrepresentations or violations of the Covenant Against

Contingent Fees.

(c) Reports shall be made promptly to the contracting officer.

(d)(4) Suspected fraudulent or criminal matters to be reported to

the Department of Justice shall be prepared in letter format and

forwarded through acquisition channels to the head of the contracting

activity for signature. The letter must contain all pertinent facts and

background information considered by the contracting officer and chief

of the contracting office that led to the decision that fraudulent or

criminal matters may be present. A copy of the signed letter shall be

sent to the Director, Office of Acquisition Management.

Subpart 303.6--Contracts With Government Employees or Organizations

Owned or Controlled by Them

303.602 Exceptions.

Approval of an exception to the policy stated in FAR 3.601 shall be

made by the HCA (not delegable).

Subpart 303.7--Voiding and Rescinding Contracts

303.704 Policy.

For purposes of implementing FAR Subpart 3.7, the authorities

granted to

[[Page 1348]]

the ``agency head or designee'' shall be exercised by the HCA (not

delegable).

PART 304--ADMINISTRATIVE MATTERS

Subpart 304.6--Contract Reporting

Sec.

304.602 Federal Procurement Data System.

Subpart 304.8--Government Contract Files

304.804-70 Contract closeout audits.

Subpart 304.70--Acquisition Instrument Identification Numbering System

304.7000 Scope of subpart.

304.7001 Numbering acquisitions.

Subpart 304.71--Review and Approval of Proposed Contract Awards

304.7100 Policy.

304.7101 Procedures.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 304.6--Contracting Reporting

304.602 Federal Procurement Data System (FPDS).

The Departmental Contracts Information System (DCIS) represents the

Department's implementation of the FPDS. All departmental contracting

activities are required to participate in the DCIS and follow the

procedures stated in the Enhanced Departmental Contracts Information

System Manual and amendments to it. The HCA (not delegable) shall

ensure that all required contract information is collected, submitted,

and received into the DCIS on or before the 15th of each month for all

appropriate contract and contract modifications award of the prior

month.

Subpart 304.8--Government Contract Files

304.804-70 Contract closeout audits.

(a) Contracting officers shall rely, to the maximum extent

possible, on non-Federal single audits to close physically completed

cost-reimbursement contracts with colleges and universities, hospitals,

non-profit firms, and State and local governments. In addition, where

appropriate, a sample of these contractors may be selected for audit,

in accordance with the decision-making process set forth in the

following paragraph (b).

(b) Contracting officers shall request contract closeout audits on

physically completed, cost-reimbursement, for-profit contracts as

follows:

(1) Decisions on: the need for and allocation of contract audit

resources and services; the selection of contracts or contractors to be

audited; the identification of the audit agency to perform the audit;

and the type or scope of closeout audit to be conducted, shall be made

by the Office of Inspector General (OIG) and Office of Grants and

Acquisition Management, in consultation with the Department's Contract

Audit Users Work Group. These decisions shall be based upon the needs

of the customer, risk analysis, return on investment, and the

availability of audit resources. When an audit is warranted prior to

closing a contract, the contracting officer shall submit the audit

request to the OIG's Office of Audit via the appropriate OPDIV

representative on the Contract Audit Users Work Group.

(2) Except where a contracting officer suspects misrepresentation

or fraud, contract closeout field audits shall not be requested if the

cost of performance is likely to exceed the potential cost recovery.

Contracts that are not selected for a field audit may be closed on the

basis of a desk review, subject to any later on-site audit findings.

The release executed by the contractor shall contain the following

statement:

The Contractor agrees, pursuant to the clause in this contract

entitled ``Allowable Cost'' or ``Allowable Cost and Fixed Fee'' (as

appropriate), that the amount of any sustained audit exceptions

resulting from any audit made after final payment shall be refunded

to the Government.''

Subpart 304.70--Acquisition Instrument Identification Numbering

System

304.7000 Scope of subpart.

This subpart prescribes policy and procedures for assigning

identifying numbers to contracts and related instruments, including

solicitation documents, purchase orders, and delivery orders. The HCA

(not delegable) is responsible for establishing the numbering system

within the OPDIV.

304.7001 Numbering acquisitions.

(a) Acquisitions which require numbering. The following

acquisitions shall be numbered in accordance with the system prescribed

in paragraph (b) of this section:

(1) Contracts, including letter contracts and task orders under

basis ordering agreements, which involve the payment of $2,500 or more

for the acquisition of personal property or nonpersonal services. (The

number assigned to a letter contract shall be assigned to the

superseding definitized contract).

(2) Contracts which involve the payment of $2,000 or more for

construction (including renovation or alteration).

(3) Contracts which involve more than one payment regardless of

amount.

(4) Requests for proposals and invitations for bids.

(5) Purchase and delivery orders.

(6) Requests for quotations.

(7) Basic ordering agreements.

(b) Numbering system for contracts. All contracts which require

numbering shall be assigned a number consisting of the following:

(1) The three digit identification code assigned to the contracting

office by the Office of Financial Operations, Program Support Center.

(2) A two digit fiscal year designation; and

(3) A four digit serial number. For example, the initial contract

executed by the Office of Acquisition Management, OS, for fiscal year

1996 would be numbered 100-96-0001. While it is required that a

different series of four digit serial numbers be used for each fiscal

year, serial numbers assigned need not be sequential.

(c) Numbering system for other acquisitions. The HCA is responsible

for developing a numbering system for the acquisitions other than

contracts listed in HHSAR 304.7001 (a)(4) through (a)(7), and any other

types of acquisitions that may be used.

(d) Assignment of identification codes. Each contracting office of

the Department shall be assigned a three digit identification code by

the Office of Financial Operations. Requests for the assignment of

codes for newly established contracting offices shall be submitted by

the headquarters acquisition staff office of the contracting activity

to the Office of Financial Operations must be notified. A listing of

the contracting office identification codes currently in use is

contained in the Enhanced Departmental Contracts Information System

Manual.

Subpart 304.71--Review and Approval of Proposed Contract Awards

304.7100 Policy.

This subpart requires each HCA (not delegable) to establish review

and approval procedures for proposed contracts actions to ensure that:

(a) Contract awards are in conformance with law, established

policies and procedures, and sound business practices;

(b) Contractual documents properly reflect the mutual understanding

of the parties; and

(c) The contracting officer is informed of deficiencies and items

of questionable acceptability, and corrective action is taken.

304.7101 Procedures.

(a) All contractual documents, regardless of dollar value, are to

be

[[Page 1349]]

reviewed by the contracting officer prior to award.

(b) The HCA is responsible for establishing review and approval

procedures and designating acquisition officials to serve as reviewers.

Each HCA is responsible for determining the criterion (criteria) to be

used in determining which contracts are to be reviewed, and that a

sampling of proposed contracts not included in the ``to be reviewed''

group are reviewed and approved.

(c) Officials assigned responsibility for review and approval of

contract actions must possess qualifications in the field of

acquisition commensurate with the level of review performed, and, at a

minimum, possess those acquisition skills expected of a contracting

officer. However, if any official is to serve as the contracting

officer and sign the contractual document, the review and approval

function shall be performed by an appropriate official at least one

level above.

PART 305--PUBLICIZING CONTRACT ACTIONS

Subpart 305.2--Synopsis of Proposed Contract Actions

Sec.

305.202 Exceptions.

Subpart 305.3--Synopsis of Contract Awards

305.303 Announcement of contract awards.

Subpart 305.5--Paid Advertisements

305.502 Authority.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 305.2--Synopsis of Proposed Contract Actions

305.202 Exceptions.

(b) When a contracting office believes that it has a situation

where advance notice is not appropriate or reasonable, it shall prepare

a memorandum citing all pertinent facts and details and send it,

through normal acquisition channels, to the Deputy Assistant Secretary

for Grants and Acquisition Management (DASGAM) requesting relief from

synopsizing. The DASGAM shall review the request and decide whether an

exception to synopsizing is appropriate or reasonable. If it is, the

DASGAM shall take the necessary coordinating actions required by FAR

5.202(b). Whatever the decision is on the request, the DASGAM shall

promptly notify the contracting office when a determination has been

made.

Subpart 305.3--Synopses of Contract Awards

305.303 Announcement of contract awards.

(a) Public announcement. Any contract, contract modification, or

delivery order in the amount of $3 million or more shall be reported by

the contracting officer to the Office of the Deputy Assistant Secretary

for Legislation (Congressional Liaison), Room 406G, Hubert H. Humphrey

Building. Notification shall be accomplished by providing a copy of the

contract or award document face page to the referenced office prior to

the day of award, or in sufficient time to allow for an announcement to

be made by 5:00 p.m. Washington, DC time on the day of award.

Subpart 305.5--Paid Advertisements

305.502 Authority.

The contracting officer is authorized to publish advertisements,

notices, and contract proposals in newspapers and periodicals in

accordance with the requirements and conditions referenced in FAR

Subpart 5.5.

PART 306--COMPETITION REQUIREMENTS

Subpart 306.2--Full and Open Competition After Exclusion of Sources

Sec.

306.202 Establishing or maintaining alternative sources.

Subpart 306.3--Other Than Full and Open Competition

306.302 Circumstances permitting other than full and open

competition.

306.302-1 Only one responsible source and no other supplies or

services will satisfy agency requirements.

306.302-7 Public interest.

306.303 Justification.

306.303-1 Requirements

306.303-2 Content.

306.304 Approval of the justification.

Subpart 306.5--Competition Advocates

306.501 Requirement.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 306.2--Full and Open Competition After Exclusion of Sources

306.202 Establishing or maintaining alternative sources.

(a) The reference to the agency head in FAR 6.202(a) shall mean the

appropriate competition advocate cited in 306.501.

(b)(1) The required determination and findings (D&F) shall be

prepared by the contracting officer based on the data provided by

program personnel, and shall be signed by the appropriate competition

advocate. The D&F signatory is not delegable.

Subpart 306.3--Other Than Full and Open Competition

306.302 Circumstances permitting other than full and open competition.

306.302-1 Only one responsible source and no other supplies or

services will satisfy agency requirements.

(a)(2)(ii) Follow-on contracts for the continuation of major

research and development studies on long-term social and health

programs, major research studies, or clinical trials may be deemed to

be available only from the original source when it is likely that award

to any other source would result in unacceptable delays in fulfilling

the Department's or OPDIV's requirements.

(b) Application. (4) When the head of the program office has

determined that a specific item of technical equipment or parts must be

obtained to meet the activity's program responsibility to test and

evacuate certain kinds and types of products, and only one source is

available. (This criterion is limited to testing and evaluation

purposes only and may not be used for initial outfitting or repetitive

acquisitions. Project officers should support the use of this criterion

with citations from their agency's legislation and the technical

rationale for the item of equipment required.)

306.302-7 Public interest.

(a) Authority. (2) Agency head, in this instance, means the

Secretary.

(b) Limitations. An ``approval package'' must be prepared by the

contracting officer and staffed through departmental acquisition

channels to the Secretary. The package shall include a determination

and findings for the Secretary to sign that contains all pertinent

information to support justification for exercising the exemption to

competition, and a letter for the Secretary to sign notifying Congress

of the determination to award a contract under the authority of 41

U.S.C. 253(c)(7).

306.303 Justifications.

306.303-1 Requirements.

(b) Preliminary arrangements or agreements with the proposed

contractor shall have no effect on the rationale used to support an

acquisition for other than full and open competition.

(f) When a program office desires to obtain certain goods or

services by contract without full and open competition, it shall, at

the time of

[[Page 1350]]

forwarding the requisition or request for contract, furnish the

contracting office a justification explaining why full and open

competition is not feasible. All justifications shall be initially

reviewed by the contracting officer.

(1) Justifications in excess of the simplified acquisition

threshold shall be in the form of a separate, self-contained document,

prepared in accordance with FAR 6.303 and 306.303, and called a

``JOFOC'' (Justification for Other Than Full and Open Competition).

Justifications at or below the simplified acquisition threshold may be

in the form of a paragraph or paragraphs contained in the requisition

or request for contract.

(2) Justifications, whether over or under the simplified

acquisition threshold, shall fully describe what is to be acquired,

offer reasons which go beyond inconvenience, and explain why it is not

feasible to obtain competition. The justifications shall be supported

by verifiable facts rather than mere opinions. Documentation in the

justification should be sufficient to permit an individual with

technical competence in the area to follow the rationale.

306.303-2 Content.

(a)(1) The program office and name, address, and telephone number

of the project officer shall also be included.

(2) This item shall include project identification such as the

authorizing program legislation, to include citations or other internal

program identification data such as title, contract number, etc.

(3) The description may be in the form of a statement of work,

purchase description, or specification. A statement is to be included

to explain whether the acquisition is an entity in itself, whether it

is one in a series, or part of a related group of acquisitions.

(c) Each JOFOC shall conclude with at least signature lines for the

project officer, project officer's immediate supervisor, contracting

officer, and approving official.

306.304 Approval of the Justification.

(a)(2) The competition advocates are listed in 306.501. This

authority is not delegable.

(3) The competition advocate shall exercise this approval

authority, except where the individual designated as the competition

advocate does not meet the requirements of FAR 6.304(a)(3)(ii). This

authority is not delegable.

(4) The senior procurement executive of the Department is the

Assistant Secretary for Management and Budget.

(c) A class justification shall be processed the same as an

individual justification.

Subpart 306.5--Competition Advocates

306.501 Requirement.

The Department's competition advocate is the Deputy Assistant

Secretary for Grants and Acquisition Management. The competition

advocates for the Department's primary contracting officers are as

follows:

ACF--Director, Office of Management Services

HCFA--Associate Administrator for Operations and Resource Management

OS--Deputy Assistant Secretary for Grants and Acquisition Management

PSC--Director, Administrative Services Center

AHCPR--Executive Officer

CDCP--Director, Office of Program Support

FDA--Associate Commissioner for Management

HRSA--Associate Administrator for Operations and Management

IHS--Associate Director, Office of Administration and Management

NIH--(R&D)--Associate Director for Extramural Affairs (Other than

R&D)--Associate Director for Intramural Affairs

SAMHSA--Associate Administrator for Management

PART 307--ACQUISITION PLANNING

Subpart 307.1--Acquisition Plans

Sec.

307.104 General procedures.

307.105 Contents of written acquisition plans.

307.170 Program training requirements.

307.170-1 Policy exceptions.

307.170-2 Training course prerequisites.

Subpart 307.3--Contractor Versus Government Performance

307.302 General.

307.303 Determining availability of private commercial sources.

307.304 Procedures.

307.307 Appeals.

Subpart 307.70--Considerations in Selecting an Award Instrument

307.7000 Scope of subpart.

307.7001 Distinction between acquisition and assistance.

307.7002 Procedures.

Subpart 307.71--Requests for Contract

307.7100 Scope of subpart.

307.7101 General.

307.7102 Procedures.

307.7103 Responsibilities.

307.7104 Transmittal.

307.7105 Format and content.

307.7106 Statement of work.

307.7107 Review.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 307.1--Acquisition Planning

307.104 General procedures.

(c) If use of other than full and open competition is anticipated,

see 307.104(h).

(d) Each contracting activity shall prepare an Annual Acquisition

Plan (AAP). The AAP is a macro plan, containing a list of anticipated

contract actions over the simplified acquisition threshold and their

associated funding, as well as the aggregate planned dollars for

simplified acquisitions by quarter, developed for each fiscal year. The

AAP shall conform to reasonable budget expectations and shall be

reviewed at least quarterly and modified as appropriate. The chief of

the contracting office (CCO) shall obtain this information from the

program planning/budget office of the contracting activity and use the

AAP to provide necessary reports and monitor the workload of the

contracting office. For contract actions, the plan shall contain, at a

minimum:

(1) A brief description (descriptive title, perhaps one or two

sentences if necessary);

(2) Estimated award amount;

(3) Requested award date;

(4) Name and phone number of contact person (usually the project

officer);

(5) Other information required for OPDIV needs.

(e) Once the AAP is obtained, the contracting officer/contract

specialist shall initiate discussions with the assigned project officer

for each planned negotiated acquisition over $100,000 except for:

(1) Acquisitions made under interagency agreements, and

(2) Contract modifications which exercise options, make changes

authorized by the Changes clause, or add funds to an incrementally

funded contract. (The HCA may prescribe procedures for contract actions

not covered by this subpart.)

(f) The purpose of the discussions between the contracting and

project officers is to develop an individual acquisition planning

schedule and to address the things that will need to be covered in the

request for contract (RFC), including clearances, acquisition strategy,

sources, etc. The project officer must either have a statement of work

(SOW) ready at this time or must discuss in more detail the nature of

the services/supplies that will be required.

(g) Standard lead-times for processing various types of

acquisitions and deadlines for submission of acceptable RFCs (that is,

RFCs which include all

[[Page 1351]]

required elements such as clearances, funding documents, and an

acceptable SOW) for award in a given fiscal year shall be established

by the HCA or designee not lower that the CCO.

(h) The outcome of the discussions referenced in 307.104 (f)

between the project officer and the contracting officer/contracting

specialist will be an agreement concerning the dates of significant

transaction-specific acquisition milestones, including the date of

submission of the RFC to the contracting officer. This milestone

schedule document will be prepared with those dates and will be signed

by the project officer and the contracting officer. The milestones

cannot be revised except by mutual agreement of these same individuals.

If the planning schedule indicates the need to obtain approval of a

Justification for Other than Full and Open Competition, the CCO must

sign the milestone agreement. This document shall be retained in the

contract file. All other considerations that will affect the

acquisition (technical, business, management) shall be addressed in the

RFC (see 307.71).

(A) RFCs submitted after the established deadline in paragraph (g)

of this section or the agreed-upon milestone for RFC submission in

paragraph (h) of this section will be accepted for processing on a

case-by-case basis.

307.105 Contents of written acquisition plans.

The written acquisition plan required by FAR 7.105 is contained in

the request for contract, as specified in Subpart 307.71, and is the

final product of the planning process.

307.170 Program training requirements.

(a) All program personnel selected to serve as project officer for

an HHS contract shall have successfully completed either the

Department's appropriate ``Basic Project Officer'' course, or an

equivalent course (see paragraph (c) of this section).

(b) At least fifty percent of the HHS program personnel performing

the function of technical proposal evaluator on a technical evaluation

team or panel for any competitively solicited HHS contract shall have

successfully completed the appropriate ``Basic Project Officer''

course, or an equivalent course (see paragraph (c) of this section).

This requirement applies to the initial technical proposal evaluation

and any subsequent technical evaluations that may be required.

(c) Determination of course equivalency shall be made by the HCA

(not delegable) of the cognizant contracting activity. The contracting

officer is responsible for ensuring that the project officer and

technical proposal evaluators have successfully completed the required

training discussed in 307.170-2.

307.170-1 Policy exceptions.

In the event there is an urgent requirement for a specific

individual to serve as a project officer and that individual has not

successfully completed the prerequisite training course, the HCA (not

delegable) may waive the training requirement and authorize the

individual to perform the project duties, provided that:

(a) The individual first meets with the cognizant contracting

officer to review the ``DHHS Project Officers' Contracting Handbook,''

and to discuss the important aspects of the contracting--program office

relationship as appropriate to the circumstances; and

(b) The individual attends the next scheduled and appropriate

``Basic Project Officer'' course.

307.170-2 Training course prerequisites.

(a) Project officers. (1) Newly appointed project officers, and

project officers with less than three years experience and no previous

related training, are required to take the appropriate ``Basic Project

Officer'' course. (The grade level for project officers attending the

course should be GS-7 and above.) All project officers are encouraged

to take the appropriate ``Writing Statements of Work'' course.

(2) Project officers with more than three years experience, and

project officers with less than three years experience who have

successfully completed the appropriate basic course, are qualified (and

encouraged) to take the ``Advanced Project Officer'' course.

(3) Additional information on prerequisites for attendance of these

courses may be found in the ``DHHS Acquisition Training and

Certification Handbook.''

(b) Technical proposal evaluators. Technical proposal evaluators,

regardless of experience, are required to take the appropriate ``Basic

Project Officer'' course. Upon successful completion of the basic

course, it is recommended that they take the appropriate ``Advanced

Project Officer'' course.

Subpart 307.3--Contractor Versus Government Performance

307.302 General.

(a) GAM Chapter 18-10, Commercial-Industrial Activities of the

Department of Health and Human Services Providing Products or Services

for Government Use, assigns responsibilities for making method-of-

performance decisions (contract vs. in-house performance) to various

management levels within the Department depending on the dollar amount

of capital investment or annual operating costs. It also requires that

each operating division (OPDIV) and staff division (STAFFDIV) designate

a ``Commercial-Industrial Control Officer'' (CICO) to be responsible

for ensuring compliance with the requirements of the Chapter.

(d) Besides contracts with annual operating costs under $100,000,

contracts with annual operating costs under an authorized acquisition

set-aside for small business concerns and contracts made pursuant to

section 8(a) of the Small Business Act are exempted from the

requirements of FAR Subpart 7.3, GAM Chapter 18-10, and OMB Circular

No. A-76.

307.303 Determining availability of private commercial sources.

In accordance with the provisions of GAM Chapter 18-10, OPDIVs and

STAFFDIVs must prepare and maintain a complete inventory of all

individual commercial or industrial activities, including those

conducted under contracts in excess of $100,000 annually. They must

also conduct periodic reviews of each activity and contract in the

inventory to determine if the existing performance, in-house or by

contract, continues to be in accordance with the policy guidelines of

GAM Chapter 18-10.

307.304 Procedures.

Contracting officers shall ensure that no acquisition action

involving a commercial-industrial activity is initiated unless it is in

compliance with the requirements of GAM Chapter 18-10. The contracting

officer must check each request for contract expected to result in a

contract in excess of $100,000 to ensure that it contains a statement

as to whether the proposed contract is or is not subject to review

under GAM Chapter 18-10 requirements. If the contracting officer has

any questions regarding the determination of applicability or

nonapplicability, or if the required statement is missing, the program

office submitting the request for contract should be contacted and the

situation rectified. If the issue cannot be resolved with the program

office, the contracting office shall refer the matter to the CICO for a

final determination. The HCA is responsible for ensuring that

contracting activities are in full compliance with FAR Subpart 7.3.

[[Page 1352]]

307.307 Appeals.

The review and appeals procedure discussed in FAR 7.307 are

addressed in GAM Chapter 18-10.

Subpart 307.70--Considerations in Selecting an Award Instrument

307.7000 Scope of subpart.

This subpart provides guidance on the appropriate selection of

award instruments consistent with the Federal Grant and Cooperative

Agreement Act of 1977 (41 U.S.C. 501). This subpart explains the use of

the contract as the award instrument for acquisition relationships, and

the grant or cooperative agreement as the instrument for assistance

relationships. This subpart provides guidance for determining whether

to use the acquisition or assistance process to fulfill program needs.

Detailed guidance on assistance instruments may be found in Chapter 1-

02 of the Grants Administration Manual.

307.7001 Distinction between acquisition and assistance.

(a) The Federal Grant and Cooperative Agreement Act of 1977

requires the use of contracts to acquire property or services for the

direct benefit or use of the Government and grants or cooperative

agreements to transfer money, property, services, or anything of value

to recipients to accomplish a public purpose of support or stimulation

authorized by Federal statute.

(b) A contract is to be used as the legal instrument to reflect a

relationship between the Federal Government and a recipient whenever:

(1) The principal purpose of the instrument is the acquisition, by

purchase, lease, or barter, of property or services for the direct

benefit or use of the Federal Government; or

(2) The Department determines in a specific instance that the use

of a type of contract is appropriate. That is, it is determined in a

certain situation that specific needs can be satisfied best by using

the acquisition process. However, this authority does not permit

circumventing the criteria for use of acquisition or assistance

instruments. Use of this authority is restricted to extraordinary

circumstances and only with the prior approval of the Deputy Assistant

Secretary for Grants and Acquisition Management (DASGAM).

(c) A grant or cooperative agreement is to be used as the legal

instrument to reflect a relationship between the Federal Government and

a recipient whenever the principal purpose of the relationship is the

transfer of money, property, services, or anything of value to the

recipient to accomplish a public purpose of support or stimulation

authorized by Federal statute.

(1) A grant is the legal instrument to be used when no substantial

involvement is anticipated between the Department and the recipient

during performance of the contemplated activity.

(2) A cooperative agreement is the legal instrument to be used when

substantial involvement is anticipated between the Department and the

recipient during performance of the contemplated activity.

(d) As a general rule, contracts are to be used for the following

purposes:

(1) Evaluation (including research of an evaluative nature) of the

performance of Government programs or projects or grantee activity

initiated by the funding agency for its direct benefit or use.

(2) Technical assistance rendered to the Government, or on behalf

of the Government, to any third party, including those receiving grants

or cooperative agreements.

(3) Surveys, studies, and research which provide specific

information desired by the Government for its direct activities, or for

dissemination to the public.

(4) Consulting services or professional services of all kinds if

provided to the Government or, on behalf of the Government, to any

third party.

(5) Training projects where the Government selects the individuals

or specific groups whose members are to be trained or specifies the

content of the curriculum (not applicable to fellowship awards.)

(6) Planning for Government use.

(7) Production of publications or audiovisual materials required

primarily for the conduct of the direct operations of the Government.

(8) Design or development of items for Government use or pursuant

to agency definition or specifications.

(9) Conferences conducted on behalf of the Government.

(10) Generation of management information or other data for

Government use.

307.7002 Procedures.

(a) OPDIV program officials should use existing budget and program

planning procedures to propose new activities and major changes in

ongoing programs. It is the responsibility of these program officials

to meet with the HCA and the principal grants management official, or

their designees, to distinguish the relationships and determine whether

award is to be made through the acquisition process or assistance

process. This determination should be made prior to the time when the

annual acquisition plan is reviewed and approved so that the plan will

reflect all known proposed contract actions. The cognizant contracting

officer will confirm the appropriateness of the use of the contract

instrument when reviewing the request for contract.

(b) Shifts from one award instrument to another must be fully

documented in the appropriate files to show a fundamental change in

program purpose that unequivocally justifies the rationale for the

shift.

(c) OPDIVs must ensure that the choice of instrument is determined

in accordance with the Federal Grant and Cooperative Agreement Act of

1977 and applicable departmental policies. If, however, there are major

individual transactions or programs which contain elements of both

acquisition and assistance in such a way that they cannot be

characterized as having a principal purpose of one or the other,

guidance should be obtained from the DASGAM, through normal channels,

before proceeding with a determination.

(d) Any public notice, program announcement, solicitation, or

request for applications or proposals must indicate whether the

intended relationship will be one of acquisition or assistance and

specify the award instrument to be used.

Subpart 307.71--Requests for Contract

307.7100 Scope of subpart.

This subpart prescribes the format and contents of the request for

contract (RFC) and provides procedures for its preparation and

submission.

307.7101 General.

The program office's preparation of the RFC and submission to the

contracting office completes the presolicitation phase of the

acquisition planning process and commences the solicitation phase. The

RFC is the formal document which initiates the preparation of the

request for proposals (RFP) by the contracting office and sets the

acquisition process in motion. It is the result of the planning by the

project officer and contracting officer and contains much of the

pertinent information necessary for the development of a sound,

comprehensive RFP.

307.7102 Procedures.

The program office should submit the RFC to the contracting office

no later than the date agreed to by the contracting officer and the

project officer in the milestone schedule (see

[[Page 1353]]

307.104(h)), unless a revised due date has been established by mutual

agreement.

307.7103 Responsibilities.

(a) It is the responsibility of the project officer to prepare the

RFC so that it complies with the requirements of this subpart and any

OPDIV guidance issued in accordance with this subpart.

(b) Prior to the submission of the RFC to the contracting office,

the head of the program office sponsoring the project shall review the

RFC to ensure that all required information is provided in the

prescribed format, and a technical review of the statement of work has

been made. The level and extent of the technical review is to be

commensurate with the estimated cost, importance, and complexity of the

proposed acquisition, and must be thorough enough to ensure that vague

and ambiguous language is eliminated, the statement of work is

structured by phases or tasks, if appropriate, and methods are

available for assessing the contractor's technical, cost, and delivery

performance.

307.7104 Transmittal.

The RFC must be conveyed to the contracting office by use of a

covering memorandum or other form of transmittal. The transmittal

document must be signed by the head of the sponsoring program office

and include both a statement attesting to the conclusiveness of the

review described in 307.7103(b) and a list identifying all attachments

to the RFC.

307.7105 Format and content.

The Department does not prescribe a standard format for the RFC. A

format similar to what is in this section is recommended. However, any

document or group of documents will be acceptable as an RFC as long as

all of the required information (paragraph (a) of this section), and as

much of the optional information (paragraph (b) of this section) as is

relevant, is included.

(a) The RFC must include:

(1) Purpose of the contract. A brief, general description of the

requirement, including the citation of the legislation which authorizes

the program or project, and a statement as to the intended purpose/use

of the proposed contract.

(2) Period of performance. The number of months (or other time

period) required for total performance and, if applicable, for each

phase of work indicated in the statement of work, as well as the

proposed starting date.

(3) Estimated cost and funds citation. An estimate of the total

cost of the proposed contract and, if applicable, the estimate for each

phase indicated in the statement of work. The project officer must

provide a cost breakdown of all contributing cost factors, an estimate

of the technical staff hours, direct material, subcontracting, travel,

etc., and may consult with contracting and cost advisory personnel in

developing this information. This section must include the

certification of funds availability for the proposed acquisition, along

with the appropriation and accounting information citations. When funds

for the proposed acquisition are not currently available for obligation

but are anticipated, a statement of intent to commit funds from the

financial management officer shall be included in lieu of the

certification of funds availability. (Contracts cannot be awarded

unless funds are available, but see FAR 32.703-2).

(4) Specification, purchase description, or statement or work. A

description of the work to be performed that may be in the form of a

specification, purchase description, or statement of work. Guidance

concerning the statement of work and its contents is contained in

307.7106. Specifications and purchase descriptions are not used to a

great extent in this Department. Use of the specification is primarily

limited to supply or service contracts where the material end item or

service to be delivered is well defined by the Government.

(5) Schedule of deliverables/reporting requirements. A description

of what is to be delivered, including, if applicable, technical and

financial progress reports and any final report, and the required date

of delivery for each deliverable. Reporting requirements should be

tailored to the instant acquisition and should not be unnecessarily

extensive or detailed. All delivery and reporting requirements shall

include the quantities, the place of delivery, and time of delivery.

(6) Sources for solicitation. A list of known potential sources by

name and mailing address. The project officer is encouraged to use

trade and professional journals and publications to identify new

prospective sources to supplement the list of known sources. Efforts to

identify set-aside possibilities, i.e., small disadvantaged, and women-

owned small businesses must be explained.

(7) Project officer and alternate. The project officer's name,

title, organization, mailing address, and telephone number, along with

the same data for the project officer's alternate, and a statement that

these individuals have completed the Department's project officer

training course (see 307.170)

(b) The RFC must include, if applicable to the acquisition:

(1) Background and need. The background, history, and necessity for

the proposed contract. This section is to include prior, present, and

planned efforts by the program office in the same or related areas, and

a description of efforts by other departmental activities and Federal

agencies in the same or related program areas, if known. In addition,

specific project information, such as the relevance or contribution to

overall program objectives, reasons for the need, priority, and project

overlap are to be provided.

(2) Reference materials. A list, by title and description, of study

reports, plans, drawings, and other data to be made available to

prospective offerors for use in preparation of proposals and/or the

contractor for use in performance of the contract. The project officer

must indicate whether this material is currently available or when it

will be available.

(3) Technical evaluation criteria and instructions. Technical

evaluation criteria, which have been developed based on the

requirements of the specific project, and any instructions and

information which will assist in the preparation of prospective

offerors' technical proposals. Evaluation factors may include

understanding of the problem, technical approach, experience,

personnel, facilities, etc. Criteria areas discussed in the statement

of work and the relative order of importance or weights assigned to

each of these areas for technical evaluation purposes must be

identified.

(4) Special program clearances or approvals. Any required clearance

or approval. The following special program clearances or approvals

should be reviewed for applicability to each acquisition. The ones

which are applicable should be addressed during the planning

discussions between the project officer and contracting officer/

contract specialist (see 307.104(f)) and immediate action should be

initiated by the project officer to obtain the necessary clearances or

approvals. Comprehensive checklists of these and any OPDIV special

approvals, clearances, and requirements shall be provided for reference

purposes to program offices by the servicing contracting activity. If

the approval or clearance has been requested and is being processed at

the time of RFC submission, a footnote to this effect, including all

pertinent details, must be included in this section.

[[Page 1354]]

(i) Commercial activities. (OMB Circular No. A-76). A request for

contract (RFC) must contain a statement as to whether the proposed

solicitation is or is not to be used as part of an OMB Circular No. A-

76 cost comparison. (See General Administrative Manual (GAM) Chapter

18-10; FAR Subpart 7.3, Subpart 307.3; OMB Circular No. A-76.)

(ii) Printing. The acquisition of printing and high volume

duplicating by contract is prohibited unless it is authorized by the

Joint Committee on Printing of the U.S. Congress. Procedures to be

followed are contained in the ``Government Printing and Binding

Regulations'' and the HHS Printing Management Manual and FAR Subpart

8.8.

(iii) Paperwork Reduction Act. Under the Paperwork Reduction Act of

1995, a Federal agency shall not collect information or sponsor the

collection of information from ten or more persons (other than Federal

employees acting within the scope of their employment) unless, in

advance, the agency has submitted a request for Office of Management

and Budget (OMB) review, to the OMB, and the OMB has approved the

proposed collection of information. Procedures for the approval may be

obtained by contacting the OPDIV reports clearance officer. (See Title

5 CFR Part 1320).

(iv) Publications. All projects that will result in contracts which

include more than one publication require review and approval by the

Office of the Assistant Secretary for Public Affairs (OASPA). Form HHS-

524, Request for Communications Contract Clearance, should be forwarded

to OASPA through the OPDIV public affairs officer. Publications are

defined in Chapter 5-00-15 of the Public Affairs Management Manual.

(v) Public affairs services. Projects for the acquisition of public

affairs services in excess of $5,000 require review and approval by the

Office of the Assistant Secretary for Public Affairs (OASPA). Form HHS-

524, Request for Communications Contract Clearance, should be forwarded

to OASPA through the OPDIV public affairs officer. Public affairs

services are defined in Chapter 8-00-20 of the Public Affairs

Management Manual.

(vi) Audiovisual. Any proposed acquisition of an audiovisual

production requires the submission of a Standard Form 282, Mandatory

Title Check, to the National Audiovisual Center (NAC). When the results

of this title check have been reviewed by the project office and if a

determination is made that existing materials are not adequate to

fulfill the requirements, a statement to that effect shall be prepared

by the project office. Audiovisuals are defined in Chapter 6-00-15 of

the Public Affairs Management Manual. For acquisitions in excess of

$5,000, a copy of that statement and Form HHS-524A, Audiovisual

Clearance Request, shall be submitted through the OPDIV public affairs

officer to the Office of the Assistant Secretary for Public Affairs

(OASPA) for review and approval. An approval copy of the Form HHS-524A

will be returned to the OPDIV for transmission to the contract

negotiator.

(vii) Privacy Act (Pub. L. 93-579). Whenever the Department

contracts for the design, development, operation, or maintenance of a

system of records on individuals on behalf of the Department to

accomplish a departmental function, the Privacy Act is applicable. The

program official, after consultation with the activity's Privacy Act

Coordinator and the Office of General Counsel, as necessary, shall

include a statement in the request for contract as to the applicability

of the Act. Whenever an acquisition is subject to the Act, the program

official prepares a ``system notice'' and has it published in the

Federal Register. (See HHS Privacy Act regulation, 45 CFR 5b; FAR

Subpart 24.1 and Subpart 324.1.)

(viii) Foreign research. All foreign research contract projects to

be conducted in a foreign country and financed by HHS funds (U.S.

dollars) must have clearance by the Department of State with respect to

consistency with foreign policy objectives. This clearance should be

obtained prior to negotiation. Procedures for obtaining this clearance

are set forth in the HHS General Administration Manual, Chapter 20-60.

(5) Identification and disposition of data. Identification of the

data expected to be generated by the acquisition and an indication of

whether the data are to be delivered to the Department or to be

retained by the contractor. The project officer must also include

information relative to the use, maintenance, disclosure, and

disposition of data. The project officer must include a statement as to

whether or not another acquisition, based upon the data generated by

the proposed acquisition, is anticipated.

(6) Government property. If known, the type of Government property,

individual items, and quantities of Government property to be furnished

to, or allowed to be acquired by, the resultant contractor. The project

officer must specify when the Government property is to be made

available. Refer to HHS Publication (OS) 686, ``Contractor's Guide for

Control of Government Property (1990).''

(7) Special terms and conditions. Any suggested special terms and

conditions not already covered in the statement of work or the

applicable contract general provisions.

(8) Justification for other than full and open competition. If the

proposed acquisition is to be awarded using other than full and open

competition, a justification prepared in accordance with FAR Subpart

6.3 and Subpart 306.3.

307.7106 Statement of work.

(a) General. A statement of work (SOW) differs from a

specifications and purchase description primarily in that it describes

work or services to be performed in reaching an end result rather than

a detailed, well defined description or specification of the end

product. The SOW may enumerate or describe the methods (statistical,

clinical, laboratory, etc.) that will be used. However, it is

preferable for the offeror to propose the method of performing the

work. The SOW should specify the desired results, functions, or end

items without telling the offeror what has to be done to accomplish

those results unless the method of performance is critical or required

for the successful performance of the contract. The SOW should be clear

and concise and must completely define the responsibilities of the

Government and the contractor. The SOW should be worded so as to make

more than one interpretation virtually impossible because it has to be

read and interpreted by persons of varied backgrounds, such as

attorneys, contracting personnel, cost estimators, accountants,

scientists, educators, functional specialists, etc. The SOW must

clearly define the obligations of both the contractor and the

Government so as to protect the interests of both. Ambiguous statements

of work can create unsatisfactory performance, delays, and disputes,

and can result in higher costs.

(b) Term (level of effort) vs. completion work statement. Careful

distinctions must be drawn between term (level of effort) SOWs, which

essentially require the furnishing of technical effort and a report

thereof, and completion type work statements, which require development

of tangible items designed to meet specific performance

characteristics. (See FAR 16.306(d) for distinction).

(1) Term (or level of effort). A term or level of effort type SOW

is appropriate to research where one seeks to discover the feasibility

of later development, or to gather general information. A term or level

of effort type SOW may only specify that some number of labor-hours

[[Page 1355]]

be expended on a particular course of research, or that a certain

number of tests be run, without reference to any intended conclusion.

(2) Completion. A completion type SOW is appropriate to development

work where the feasibility of producing an end item is already known. A

completion type SOW may describe what is to be achieved through the

contracted effort, such as development of new methods, new end items,

or other tangible results.

(c) Phasing. Individual research, development, or demonstration

projects frequently lie well beyond the present state of the art and

entail procedures and techniques of great complexity and difficulty.

Under these circumstances, a contractor, no matter how carefully

selected, may be unable to deliver the desired result. Moreover, the

job evaluating the contractor's progress is often difficult. Such a

contract is frequently phased and often divided into stages of

accomplishment, each of which must be completed and approved before the

contractor may proceed to the next. Phasing makes it necessary to

develop methods and controls, including reporting requirements for each

phase of the contract and criteria for evaluation of the report

submitted, that will provide, at the earliest possible time,

appropriate data for making decisions relative to future phases. A

phased contract may include stages of accomplishment such as research,

development, and demonstration. Within each phase, there may be a

number of tasks which should be included in the SOW. When phases of

work can be identified, the SOW will provide for phasing and the

request for proposals will require the submission of proposed costs by

phases. The resultant contract will reflect costs by phases, require

the contractor to identify incurred costs by phases, establish delivery

schedules by phase, and require the written acceptance of each phase.

The provisions of the Limitation of Cost clause shall apply to the

estimated cost of each phase. Contractors shall not be allowed to incur

costs for phases which are dependent upon successful completion of

earlier phases until written acceptance of the prior work is obtained

from the contracting officer.

(d) Elements of the SOW. The elements of the SOW will vary with the

objective, complexity, size, and nature of the acquisition. In general,

it should cover the following matters as appropriate.

(1) A general description of the required objectives and desired

results. Initially, a broad, nontechnical statement of the nature of

the work to be performed. This should summarize the actions to be

performed by the contractor and the results that the Government

expects.

(2) Background information helpful to a clear understanding of the

requirements and how they evolved. Include a brief historical summary

as appropriate and the relationship to overall program objectives.

(3) A detailed description of the technical requirements. A

comprehensive description of the work to be performed to provide

whatever details are necessary for prospective offerors to submit

meaningful proposals.

(4) Subordinate tasks or types of work. A listing of the various

tasks or types of work (it may be desirable in some cases to indicate

that this is not all-inclusive). The degree of task breakout is

directly dependent on the size and complexity of the work to be

performed and the logical groupings. A single cohesive task should not

be broken out merely to conform to a format. Indicate whether the tasks

are sequential or concurrent for offeror planning purposes.

(5) Reference material. All reference material to be used in the

conduct of the project that tells how the work is to be carried out

must be identified. Applicability should be explained, and a statement

made as to where the material can be obtained.

(6) Level of effort. When a level of effort is required, the number

and type of personnel required should be stated. If known, the type and

degree of expertise should be specified.

(7) Special requirements. (as applicable). An unusual or special

contractual requirement, which would impact on contract performance,

should be included as a separate section.

(8) Deliverables reporting requirements. All deliverables and/or

reports must be clearly and completely described.

307.7101 Review.

Upon receipt of the RFC, the contracting officer shall review its

contents to ensure that all pertinent information has been provided by

the program office and that it includes an acceptable SOW. If pertinent

information is missing or the SOW is inadequate, the contracting

officer shall obtain or clarify the information as soon as possible so

that the acquisition schedule can be met. If the program office delays

furnishing the information or clarification, the contracting officer

should notify the head of the sponsoring program office, in writing, of

the possible slippage in the acquisition schedule and the need for an

expeditious remedy. The contracting officer should also notify the

chief of the contracting office. A program office's or project

officer's continued failure to adhere to agreed on milestones should

also be reported to the head of the contracting activity.

PART 309--CONTRACTOR QUALIFICATIONS

Subpart 309.4--Debarment, Suspension, and Ineligibility

Sec.

309.403 Definitions.

309.404 List of parties excluded from Federal procurement and

nonprocurement programs.

309.405 Effect of listing.

309.406 Debarment.

309.406-3 Procedures.

309.407 Suspension.

309.407-3 Procedures.

309.470 Reporting of suspected causes of debarment, suspension, or

the taking of evasive actions.

309.470-1 Situations where reports are required.

309.470-2 Contents of reports.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 309.4--Debarment, Suspension, and Ineligibility

309.403 Definitions.

Acquiring agency's head or designee, as used in the FAR, shall

mean, unless otherwise stated in this subpart, the head of the

contracting activity. Acting in the capacity of the acquiring agency's

head, the head of the contracting activity may make the required

justifications or determinations, and take the necessary actions,

specified in FAR 9.405, 9.406 and 9.407 for his or her respective

activity, but only after obtaining the approval of the debarring or

suspending official, as the case may be.

Debarring official means the Assistant Secretary for Management and

Budget, or his/her designee.

Initiating official means either the contracting officer, the head

of the contracting activity, the Deputy Assistant Secretary for Grants

and Acquisition Management, or the Inspector General.

Suspending official means the Assistant Secretary for Management

and Budget, or his/her designee.

309.304 List of parties excluded from Federal procurement and

nonprocurement programs.

(c) The Office of Grants and Acquisition Management (OGAM) shall

perform the actions required by FAR 9.404(c).

(4) OGAM shall maintain all documentation submitted by the

[[Page 1356]]

initiating official recommending the debarment or suspension action and

all correspondence and other pertinent documentation generated during

the OGAM review.

309.405 Effect of listing.

(a) The head of the contracting activity (HCA) (not delegable) may,

with the concurrence of the debarring or suspending official, make the

determinations referenced in FAR 9.405(a), regarding contracts for

their respective activities.

(1) If a contracting officer considers it necessary to award a

contract, or consent to a subcontract with a debarred or suspended

contractor, the contracting officer shall prepare a determination,

including all pertinent documentation, and submit it through

acquisition channels to the head of the contracting activity. The

documentation must include the date by which approval is required and a

compelling reason for the proposed action. Some examples of

circumstances that may constitute a compelling reason for the award to,

or consent to a subcontract with, a debarred or suspended contractor

include:

(i) The property or services to be acquired are available only from

the listed contractor;

(ii) The urgency of the requirement dictates that the Department

deal with the listed contractor; or

(iii) There are other compelling reasons which require business

dealings with the listed contractor.

(2) If the HCA decides to approve the requested action, he/she

shall request the concurrence of the debarring or suspending official

and, if given, shall inform the contracting officer in writing of the

decision within the required time period.

309.406 Debarment.

309.406-3 Procedures.

(a) Investigation and referral. Whenever an apparent cause for

debarment becomes known to an initiating official, that person shall

prepare a report incorporating the information required by 309.470-2,

if known, and forward it through appropriate channels with a written

recommendation, to the debarring official. Contracting officers shall

forward their reports in accordance with 309.470-1. The debarring

official shall initiate an investigation through such means as he/she

deems appropriate.

(b) Decisionmaking process. The debarring official shall review the

results of the investigation, if any, and make a written determination

whether or not debarment procedures are to be commenced. A copy of the

determination shall be promptly sent through appropriate channels to

the initiating official, and the contracting officer, if necessary. If

the debarring official determines to commence debarment procedures, he/

she shall, after consultation with the Office of the General Counsel,

notify the contractor in accordance with FAR 9.406-3(c). If the

proposed action is not based on a conviction or judgement and the

contractor's submission in response to the notice raises a genuine

dispute over facts material to the proposed debarment, the debarring

official shall arrange for fact-finding hearings and take the necessary

action specified in FAR 406-3(b)(2). The debarring official shall also

ensure that written findings of facts are prepared, and shall base the

debarment decisions on the facts as found, after considering

information and argument submitted by the contractor and any other

information in the administrative record. The Office of the General

Counsel shall represent the Department at any fact-finding hearing and

may present witnesses for HHS and question any witnesses presented by

the contractor.

309.407 Suspension.

309.407-3 Procedures.

(a) Investigation and referral. Whenever an apparent cause for

suspension becomes known to an initiating official, that person shall

prepare a report incorporating the information required by 309.470-2,

if known, and forward it through appropriate channels, with a written

recommendation, to the suspending official. Contracting officers shall

forward their reports in accordance with 309.470-1. The suspending

official shall initiate an investigation through such means as he/she

deems appropriate.

(b) Decisionmaking process. The suspending official shall review

the results of the investigation, if any, and make a written

determination whether or not suspension should be imposed. A copy of

this determination shall be promptly sent through appropriate channels

to the initiating official and the contracting officer, if necessary.

If the suspending official determines to impose suspension, he/she

shall, after consultation with the Office of the General Counsel,

notify the contractor in accordance with FAR 9.407-3(c). If the action

is not based on an indictment, and, subject to the provisions of FAR

9.407-3(b)(2), the contractor's submission in response to the notice

raises a genuine dispute over facts material to the suspension, the

suspending official shall, after suspension has been imposed, arrange

for fact-finding hearings and take the necessary actions specified in

FAR 9.407-3(b)(2).

309.470 Reporting of suspected causes for debarment or suspension, or

the taking of evasive actions.

309.470-1 Situations where reports are required.

A report incorporating the information required by 309.470-2 shall

be forwarded, in duplicate, by the contracting officer through

acquisition channels to OGAM when:

(a) A contractor has committed, or is suspected of having

committed, any of the acts described in FAR 9.406-2 or FAR 9.407-2; or

(b) A contractor is suspected of attempting to evade the

prohibitions of debarment or suspension imposed under this regulation,

or any other comparable regulation, by changes of address, multiple

addresses, formation of new companies, or by other devices.

309.470-2 Contents of reports.

Each report prepared under 309.470-1 shall be coordinated with the

Office of the General Counsel and shall include the following

information, where available:

(a) Name and address of contractor.

(b) Name of the principal officers, partners, owners, or managers.

(c) All known affiliates, subsidiaries, or parent firms, and the

nature of the affiliation.

(d) Description of the contract or contracts concerned, including

the contract number, and office identifying numbers or symbols, the

amount of each contract, the amount paid the contractor and the amount

still due, and the percentage of work completed and to be completed.

(e) The status of vouchers.

(f) Whether contract funds have been assigned pursuant to the

Assignment of Claims Act, as amended, (31 U.S.C. 3727, 41 U.S.C. 15),

and, if so assigned, the name and address of the assignee and a copy of

the assignment.

(g) Whether any other contracts are outstanding with the contractor

or any affiliates, and, if so, the amount of the contracts, whether

these funds have been assigned pursuant to the Assignment of Claims

Act, as amended, (31 U.S.C. 3727, 41 U.S.C. 15), and the amounts paid

or due on the contracts.

(h) A complete summary of all available pertinent evidence.

(i) A recommendation as to the continuation of current contracts.

[[Page 1357]]

(j) An estimate of damages, if any, sustained by the Government as

a result of the action of the contractor, including an explanation of

the method used in making the estimate.

(k) The comments and recommendations of the contracting officer and

statements regarding whether the contractor should be suspended or

debarred, whether any limitations should be applied to the action, and

the period of any proposed debarment.

(l) As an enclosure, a copy of the contract(s) or pertinent

excerpts therefrom, appropriate exhibits, testimony or statements of

witnesses, copies of assignments, and other relevant documentation or a

written summary of any information for which documentation is not

available.

PART 313--SIMPLIFIED ACQUISITION PROCEDURES

Subpart 313.3--Simplified Acquisition Methods

Sec.

313.303 Blanket purchase agreements (BPAs).

313.303-5 Purchases under BPAs.

313.305 Imprest funds and third party drafts.

313.305-1 General.

313.306 SF 44, Purchase Order--Invoice--Voucher.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 313.3--Simplified Acquisition Methods.

313.303 Blanket Purchase Agreements (BPAs).

313.303-5 Purchase under BPAs.

(e)(5) Delivery documents, invoices, etc., signed by the Government

employee receiving the item or service will be forwarded to the fiscal

office or other paying office as designated by the OPDIV. Payment will

be made on the basis of the signed document, invoice, etc. Contracting

offices will ensure that established procedures allowing for

availability of funds are in effect prior to placement of orders.

313.305 Imprest funds and third party drafts.

313.305-1 General.

Requests to establish imprest funds shall be made to the

responsible fiscal office. At larger activities where the cashier may

not be conveniently located near the purchasing office, a Class C

Cashier may be installed in the purchasing office. Documentation of

cash purchases shall be in accordance with instructions contained in

the HHS Voucher Audit Manual Part 1, Chapter 1-10.

313.306 SF 44, Purchase Order--Invoice--Voucher.

(d) Since the Standard Form (SF) 44 is an accountable form, a

record shall be maintained of serial numbers of the form, to whom

issued, and date issued. SF 44's shall be kept under adequate lock and

key to prevent unauthorized use. A reservation of funds shall be

established to cover total anticipated expenditures prior to use of the

SF 44.

PART 314--SEALED BIDDING

Subpart 314.2--Solicitation of Bids

Sec.

314.202 General rules for solicitation of bids.

314.202-7 Facsimile bids.

314.213 Annual submission of representations and certifications.

Subpart 314.4--Opening of Bids and Award of Contract

314.404 Rejection of bids.

314.404-1 Cancellation of invitations after opening.

314.407 Mistakes in bids.

314.407-3 Other mistakes disclosed before award.

314.407-4 Mistakes after award.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

Subpart 314.2--Solicitation of Bids

314.202 General rules for solicitation of bids.

314.202-7 Facsimile bids.

If the head of the contracting activity (HCA) (not delegable) has

determined that the contracting activity will allow use of facsimile

bids and proposals, the HCA shall prescribe internal procedures, in

accordance with the FAR, to ensure uniform processing and control.

314.213 Annual submission of representations and certifications.

Each HCA (not delegable) shall determine whether the contracting

activity will allow use of the annual submission of representations and

certifications by bidders.

Subpart 314.4--Opening of Bids and Award of Contract

314.404 Rejection of bids.

314.404-1 Cancellation of invitations after opening.

(c) The chief of the contracting office (CCO) (not delegable) shall

make the determination required by FAR 14.404-1(c).

314.407 Mistakes in bids.

314.407-3 Other mistakes disclosed before award.

(e) Authority has been delegated to the Departmental Protest

Control Officer, Office of Acquisition Management, Office of Grants and

Acquisition Management to make administrative determinations in

connection with mistakes in bid alleged after opening and before award.

This authority may not be redelegated.

(f) Each proposed determination shall have the concurrence of the

Chief, Business Law Branch, Business and Administrative Law Division,

Office of General Counsel.

(i) Doubtful cases shall not be submitted by the contracting

officer directly to the Comptroller General, but shall be submitted to

the Departmental Protest Control Officer.

314.407-4 Mistakes after award.

(c) Authority has been delegated to the Departmental Protest

Control Officer to make administrative determinations in connection

with mistakes in bid alleged after award. This authority may not be

redelegated.

(d) Each proposed determination shall have the concurrence of the

Chief, Business Law Branch, Business and Administrative Law Division,

Office of General Counsel.

PART 315--CONTRACTING BY NEGOTIATION

Subpart 315.2--Solicitation and Receipt of Proposals and Information

Sec.

315.204 Contract format.

315.204-5 Part IV--Representations and instructions.

315.208 Submission, modification, revision, and withdrawal of

proposals.

315.209 Solicitation provisions and contract clauses.

Subpart 315.3--Source Selection

315.305 Proposal evaluation.

315.306 Exchanges with offerors after receipt of proposals.

315.307 Final proposal revisions.

315.370 Finalization of details with the selected source.

315.371 Contract preparation and award.

315.372 Preparation of negotiation memorandum.

Subpart 315.4--Contract Pricing

315.404 Proposal analysis.

315.404-2 Information to support proposal analysis.

315.404-4 Profit.

Subpart 315.6--Unsolicited Proposals

315.605 Content of unsolicited proposals.

315.606 Agency procedures.

315.606-1 Receipt and initial review.

315.609 Limited use of data.

Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

[[Page 1358]]

Subpart 315.2--Solicitation and Receipt of Proposals and

Information

315.204 Contract format.

315.204-5 Part IV--Representations and instructions.

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

statements of offerors.

(1) This section shall begin with the following and continue with

the applicable representations and certifications:

To Be Completed by the Offeror: (The Representations and

Certifications must be executed by an individual authorized to bind

the offeror.) The offeror makes the following Representations and

Certifications as part of its proposal (check or complete all

appropriate boxes or blanks on the following pages).

(Name of Offeror)------------------------------------------------------

(RFP No.)--------------------------------------------------------------

(Signature of Authorized Individual)-----------------------------------

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

(Date)-----------------------------------------------------------------

(Typed Name of Authorized Individual)----------------------------------

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

Note: The penalty for making false statements in offers is

prescribed in 18 U.S.C. 1001.

(c) Section M, Evaluation factors for award.

(1) General. (i) The evaluation criteria must be developed by the

project officer and submitted to the contracting officer in the request

for contract (RFC) for inclusion in the request for proposal (RFP).

Development of these criteria and the assignment of the relative

importance or weight to each criterion require the exercise of

judgement on a case-by-case basis because they must be tailored to the

requirements of the individual acquisition. Since the criteria will

serve as a standard against which all proposals will be evaluated, it

is imperative that they be chosen carefully to emphasize those factors

considered to be critical in the selection of a contractor.

(ii) The finalized evaluation criteria and indications of their

relative importance or weight, as included in the RFP, cannot be

changed except by a formal amendment to the RFP issued by the

contracting officer. No factors other than those set forth in the RFP

shall be used in the evaluation of proposals.

(2) Review of evaluation criteria.

(i) The evaluation criteria should be reviewed by the contracting

officer in terms of the work statement. This review is not intended to

dictate technical requirements to the program office or project

officer, but rather to ensure that the evaluation criteria are clear,

concise, and fair so that all potential offerors are fully aware of the

bases for proposal evaluation and are given an equal opportunity to

compete.

(ii) The project officer and the contracting officer should then

review the evaluation criteria together to ascertain the following:

(A) The criteria are described in sufficient detail to provide the

offerors (and evaluators) with a total understanding of the factors to

be involved in the evaluation process;

(B) The criteria address the key programmatic concerns which the

offerors must be aware of in preparing proposals;

(C) The criteria are specifically applicable to the instant

acquisition and are not merely restatements of criteria from previous

acquisitions which are not relevant to this acquisition; and

(D) The criteria are selected to represent only the significant

areas of importance which must be emphasized rather than a multitude of

factors. (All criteria tend to lose importance if too many are

included. Using too many criteria will prove as detrimental as using

too few.)

(3) Examples of topics that form a basis for evaluation criteria.

Typical examples of topics that form a basis for the development of

evaluation criteria are listed in the following paragraphs. These

examples are intended to assist in the development of actual evaluation

criteria for a specific acquisition and should only be used if they are

applicable to that acquisition. They are not to be construed as actual

examples of evaluation criteria to be included in the RFP.

(i) Understanding of the problem and statement of work;

(ii) Method of accomplishing the objectives and intent of the

statement of work;

(iii) Soundness of the scientific or technical approach for

executing the requirements of the statement of work (to include, when

applicable, preliminary layouts, sketches, diagrams, other graphic

representations, calculations, curves, and other data necessary for

presentation, substantiation, justification, or understanding of the

approach);

(iv) Special technical factors, such as experience or pertinent

novel ideas in the specific branch of science or technology involved;

(v) Feasibility and/or practicality of successfully accomplishing

the requirements (to include a statement and discussion of anticipated

major difficulties and problem areas and recommended approaches for

their resolution);

(vi) Availability of required special research, test, and other

equipment or facilities;

(vii) Managerial capability (ability to achieve delivery or

performance requirements as demonstrated by the proposed use of

management and other personnel resources, and to successfully manage

the project, including subcontractor and/or consultant efforts, if

applicable, as evidenced by the management plan and demonstrated by

previous experience);

(viii) Availability, qualifications, experience, education, and

competence of professional, technical, and other personnel, to include

proposed subcontractors and consultants (as evidenced by resumes,

endorsements, and explanations of previous efforts); and

(ix) Soundness of the proposed staff time or labor hours, propriety

of personnel classifications (professional, technical, others),

necessity for type and quantity of material and facilities proposed,

validity of proposed subcontracting, and necessity of proposed travel.

(4) Relative importance or weight.

(i) A statement or indication of the relative importance or weight

must be assigned to each evaluation criterion (significant factor) to

inform prospective offerors (and evaluators) of the specific

significance of each criterion in comparison to the other criteria.

Similarly, if a criterion (factor) is subdivided into parts, each of

the parts (subfactors) must be assigned a statement or indication of

the relative importance or weight.

(ii) Cost or price is not generally included as one of the

evaluation criteria and is not assigned an indication of relative

importance or weight. However, a statement must be included in the RFP

to reflect the relationship of cost or price in comparison to the other

criteria. (See FAR 15.304(e)). The contracting officer and project

officer should work together in arriving at the final determination

regarding the relationship.

315.208 Submission, modification, revision, and withdrawal of

proposals.

(b) When the head of the contracting activity (HCA) for a health

agency determines that certain classes of biomedical or behavioral

research and development acquisitions should be subject to conditions

other than those specified in FAR 52.215-1(c)(3), the HCA may authorize

the use of the provision at 352.215-70 in addition to the provision at

FAR 52.215-1.

(2) When the provision at 352.215-70 is included in the

solicitation and a

[[Page 1359]]

proposal is received after the exact time specified for receipt, the

contracting officer, with the assistance of cost and technical

personnel, shall make a written determination as to whether the

proposal meets the requirements of the provision at 352.215-70 and,

therefore, can be considered.

315.209 Solicitation provisions and contract clauses.

(a) Paragraph (e) of the provision at 352.215-1 shall be used in

place of that specified at FAR 52.215-1(e).

(g) If the head of the contracting activity (HCA)(not delegable)

has determined that the contracting activity will allow the use of the

annual submission of representations and certifications by offerors,

the provisions of FAR 14.213 shall be followed.

Subpart 315.3--Source Selection

315.305 Proposal evaluation.

(a) (1) Cost or price evaluation. The contracting officer shall

evaluate business proposals adhering to the requirements for cost or

price analysis included in FAR 15.404. The contracting officer must

determine the extent of analysis in each case depending on the amount

of the proposal, the technical complexity and related cost or price,

and cost realism. The contracting officer should request the project

officer to analyze items such as the number of labor hours proposed for

various labor categories; the mix of labor hours and categories of

labor in relation to the technical requirements of the project; the

kinds and quantities of material, equipment, and supplies; types,

numbers and hours/days of proposed consultants; logic of proposed

subcontracting; analysis of the travel proposed including number of

trips, locations, purpose, and travelers; and kinds and quantities of

data processing. The project officer shall provide his/her opinion as

to whether these elements are necessary and reasonable for efficient

contract performance. Exceptions to proposed elements shall be

supported by adequate rationale to allow for effective negotiations or

award if discussions are not conducted. The contracting officer should

also request the assistance of a cost/price analyst when considered

necessary. In all cases, the negotiation memorandum must include the

rationale used in determining that the price or cost is fair and

reasonable.

(3) Technical evaluation.

(i) Technical evaluation plan.

(A) A technical evaluation plan may be required by the contracting

officer, at his/her discretion, when an acquisition is sufficiently

complex as to warrant a formal plan.

(B) The technical evaluation plan should include at least the

following:

(1) A list of recommended technical evaluation panel members, their

organizations, a list of their major consulting clients (if

applicable), their qualifications, and curricula vitae (if applicable);

(2) A justification for using non-Government technical evaluation

panel members. (Justification is not required if non-Government

evaluators will be used in accordance with standard contracting

activity procedures or policies);

(3) A statement that there is no apparent or actual conflict of

interest regarding any recommended panel member;

(4) A copy of each rating sheet, approved by the contracting

officer, to be used to assure consistency with the evaluation criteria;

and

(5) A brief description of the general evaluation approach.

(C) The technical evaluation plan must be signed by an official

within the program office in a position at least one level above the

project officer, or in accordance with contracting activity procedures.

(D) The technical evaluation plan should be submitted to the

contracting officer for review and approval before the solicitation is

issued. The contracting officer shall make sure that the principal

factors relating to the evaluation are reflected in the evaluation

criteria when conducting the review of the plan.

(ii) Technical evaluation panel.

(A) General. (1) A technical evaluation panel is required for all

acquisitions applicable to this subpart which are expected to exceed

$500,000 and in which technical evaluation is considered a key element

in the determination of making an award . The contracting officer has

the discretion to require a technical evaluation panel for acquisitions

not exceeding $500,000 based on the complexity of the acquisition.

(2) The technical evaluation process requires careful consideration

regarding the size, composition, expertise, and function of the

technical evaluation panel. The efforts of the panel can result in the

success or failure of the acquisition.

(B) Role of the project officer. (1) The project officer is the

contracting officer's technical representative for the acquisition

action. The project officer may be a voting member of the technical

evaluation panel, and may also serve as the chairperson of the panel,

unless he/she is prohibited by law or contracting activity procedures

to do so.

(2) The project officer is responsible for recommending panel

members who are knowledgeable in the technical aspects of the

acquisition and who are competent to identify strengths and weaknesses

of the various proposals. The program training requirements specified

in 307.170 must be adhered to when selecting prospective panel members

(government employees).

(3) The project officer shall ensure that persons possessing

expertise and experience in addressing issues relative to sex, race,

national origin, and handicapped discrimination be included as panel

members in acquisitions which address those issues. The intent is to

balance the composition of the panel so that qualified and concerned

individuals may provide insight to other panel members regarding ideas

and approaches to be taken in the evaluation of proposals.

(4) The project officer is to submit the recommended list of panel

members to an official within the program office in a position at least

one level above the project officer, or in accordance with contracting

activity procedures. This official will review the recommendations and

select the chairperson.

(5) The project officer shall arrange for adequate and secure

working space for the panel.

(C) Role of the contracting officer. (1) The term ``contracting

officer,'' as used in this subpart, may be the contracting officer or

his/her designated representative within the contracting office.

(2) The contracting officer shall not serve as a member of the

technical evaluation panel but should be available to:

(i) Address the initial meeting of the technical evaluation panel;

(ii) Provide assistance to the evaluators as required; and

(iii) Ensure that the scores adequately reflect the written

technical report comments.

(D) Conflict of interest. (1) If a panel member has an actual or

apparent conflict of interest related to a proposal under evaluation,

he/she shall be removed from the panel and replaced with another

evaluator. If a suitable replacement is not available, the panel shall

perform the review without a replacement.

(2) For the purposes of this subpart, conflicts of interest are

defined in the Standards of Ethical Conduct for Employees of the

Executive Branch (5 CFR 2635), Supplemental Standards of Ethical

Conduct for Employees of the

[[Page 1360]]

Department of Health and Human Services (5 CFR Part 5501), and the

Procurement Integrity Act. For outside evaluators serving on the

technical evaluation panel, see paragraph (F), (315.305(a)(3)(ii)(F)).

(E) Continuity of evaluation process. (1) The technical evaluation

panel is responsible for evaluating the original proposals, making

recommendations to the chairperson regarding weaknesses and

deficiencies of proposals, and, if required by the contracting officer,

assisting the contracting officer during communications and

discussions, and reviewing supplemental, revised and/or final proposal

revisions. To the extent possible, the same evaluators should be

available throughout the entire evaluation and selection process to

ensure continuity and consistency in the treatment of proposals. The

following are examples of circumstances when it would not be necessary

for the technical evaluation panel to evaluate revised proposals

submitted during the acquisition:

(i) The answers to questions do not have a substantial impact on

the proposal;

(ii) Final proposal revisions are not materially different from the

original proposals; or

(iii) The rankings of the offerors are not affected because the

revisions to the proposals are relatively minor.

(2) The chairperson, with the concurrence of the contracting

officer, may decide not to have the panel evaluate the revised

proposals. Whenever this decision is made, it must be fully documented

by the chairperson and approved by the contracting officer.

(3) When technical evaluation panel meetings are considered

necessary by the contracting officer, the attendance of evaluators is

mandatory. When the chairperson determines that an evaluator's failure

to attend the meetings is prejudicial to the evaluation, the

chairperson shall remove and/or replace the individual after discussing

the situation with the contracting officer and obtaining his/her

concurrence and the approval of the official responsible for appointing

the panel members.

(4) Whenever continuity of the evaluation process is not possible,

and either new evaluators are selected or a reduced panel is decided

upon, each proposal which is being reviewed at any stage of the

acquisition shall be reviewed at that stage by all members of the

revised panel unless it is impractical to do so because of the receipt

of an unusually large number of proposals.

(F) Use of outside evaluators. (1) The National Institutes of

Health (NIH) and the Substance Abuse and Mental Health Services

Administration (SAMHSA) are required to have a peer review of research

and development contracts in accordance with Public Law (Pub. L.) 93-

352 as amended by Pub. L. 94-63; 42 U.S.C. 289 1-4. This legislation

requires peer review of projects and proposals, and not more than one-

fourth of the members of a peer review group may be officers or

employees of the United States. NIH and SAMHSA are therefore exempt

from the provisions of 315.305(a)(3)(ii) to the extent that 42 U.S.C.

289 1-4 applies. Conflicts of interest are addressed in the Scientific

Peer Review of Research Grant Applications and Research and Development

Contract Projects (42 CFR Part 52 h).

(2) In general, decisions to disclose proposals outside the

Government for evaluation purposes shall be made by the official

responsible for appointing panel members for the acquisition, after

consultation with the contracting officer and in accordance with

operating division procedures. The decision to disclose either a

solicited or unsolicited proposal outside the Government for the

purpose of obtaining an evaluation shall take into consideration the

avoidance of organizational conflicts of interest and any competitive

relationship between the submitter of the proposal and the prospective

evaluator(s).

(3) When it is determined to disclose a solicited proposal outside

the Government for evaluation purposes, the following or similar

conditions shall be included in the written agreement with evaluator(s)

prior to disclosure:

Conditions for Evaluating Proposals

The evaluator agrees to use the data (trade secrets, business

data, and technical data) contained in the proposal only for

evaluation purposes.

The requirement does not apply to data obtained from another

source without restriction.

Any notice or legend placed on the proposal by either the

Department or the submitter of the proposal shall be applied to any

reproduction or abstract provided to the evaluator or made by the

evaluator. Upon completion of the evaluation, the evaluator shall

return the Government furnished copy of the proposal or abstract,

and all copies thereof, to the Departmental office which initially

furnished the proposal for evaluation.

Unless authorized by the Department's initiating office, the

evaluator shall not contact the submitter of the proposal concerning

any aspects of its contents.

The evaluator will be obligated to obtain commitments from its

employees and subcontractors, if any, to effect the purposes of

these conditions.

(iii) Receipt of proposals.

(A) After the closing date set by the solicitation for the receipt

of proposals, the contracting officer will use a transmittal memorandum

to forward the technical proposals to the project officer or

chairperson for evaluation. The business proposals will be retained by

the contracting officer for evaluation.

(B) The transmittal memorandum shall include at least the

following:

(1) A list of the names of the organizations submitting proposals;

(2) A reference to the need to preserve the integrity of the source

selection process;

(3) A statement that only the contracting officer is to conduct

discussions.

(4) A requirement for a technical evaluation report in accordance

with 315.305(a)(3)(vi); and

(5) The establishment of a date for receipt of the technical

evaluation report.

(iv) Convening the technical evaluation panel.

(A) Normally, the technical evaluation panel will convene to

evaluate the proposals. However, there may be situations when the

contracting officer determines that it is not feasible for the panel to

convene. Whenever this decision is made, care must be taken to assure

that the technical review is closely monitored to produce acceptable

results.

(B) When a panel is convened, the chairperson is responsible for

the control of the technical proposals provided to him/her by the

contracting officer for use during the evaluation process. The

chairperson will generally distribute the technical proposals prior to

the initial panel meeting and will establish procedures for securing

the proposals whenever they are not being evaluated to insure their

confidentiality. After the evaluation is complete, all proposals must

be returned to the contracting officer by the chairperson.

(C) The contracting officer shall address the initial meeting of

the panel and state the basic rules for conducting the evaluation. The

contracting officer shall provide written guidance to the panel if he/

she is unable to attend the initial panel meeting. The guidance should

include:

(1) Explanation of conflicts of interest;

(2) The necessity to read and understand the solicitation,

especially the statement of work and evaluation criteria, prior to

reading the proposals;

(3) The need for evaluators to restrict the review to only the

solicitation and the contents of the technical proposals;

(4) The need for each evaluator to review all the proposals;

[[Page 1361]]

(5) The need to watch for ambiguities, inconsistencies, errors, and

deficiencies which should be surfaced during the evaluation process;

(6) An explanation of the evaluation process and what will be

expected of the evaluators throughout the process;

(7) The need for the evaluators to be aware of the requirement to

have complete written documentation of the individual strengths and

weaknesses which affect the scoring of the proposals; and

(8) An instruction directing the evaluators that, until the award

is made, information concerning the acquisition must not be disclosed

to any person not directly involved in the evaluation process.

(v) Rating and ranking of proposals. The evaluators will

individually read each proposal, describe tentative strengths and

weaknesses, and develop preliminary scores in relation to each

evaluation criterion set forth in the solicitation. After this has been

accomplished, the evaluators shall discuss in detail the individual

strengths and weakness described by each evaluator and, if possible,

arrive at a common understanding of the major strengths and weaknesses

and the potential for correcting each offeror's weakness(es). Each

evaluator will score each proposal, and then the technical evaluation

panel will collectively rank the proposals. Generally, ranking will be

determined by adding the numerical scores assigned to the evaluation

criteria and finding the average for each offeror. The evaluators

should then identify whether each proposal is acceptable or

unacceptable. Predetermined cutoff scores shall not be employed.

(vi) Technical evaluation report. A technical evaluation report

shall be prepared and furnished to the contracting officer by the

chairperson and maintained as a permanent record in the contract file.

The report must reflect the ranking of the proposals and identify each

proposal as acceptable or unacceptable. The report must also include a

narrative evaluation specifying the strengths and weaknesses of each

proposal, a copy of each rating sheet, and any reservations,

qualifications, or areas to be addressed that might bear upon the

selection of sources for negotiation and award. Concrete technical

reasons supporting a determination of unacceptability with regard to

any proposal must be included. The report should also include specific

points and questions which are to be raised in discussions or

negotiations.

315.306 Exchanges with offerors after receipt of proposals.

(c) Competitive range. (1) Some of the factors which the

contracting officer should consider in determining the competitive

range are:

(i) The relative importance of cost or price as compared to

technical factors;

(ii) The susceptibility of significantly reducing a proposal with

an unreasonable high price or cost without undermining the technical

merit if the offeror otherwise has a reasonable chance to receive an

award; and

(iii) The likelihood of reducing cost or price of a proposal which

exceeds the Government's requirements.

(2) The contracting officer shall conduct a thorough review of the

technical evaluation report to be assured that:

(i) All determinations of unacceptability are supported by concrete

and comprehensive statements that are factual and convincing and are

consistent with the evaluation criteria set forth in the solicitation.

Every statement should be reviewed carefully to eliminate any doubts as

to the unacceptability of a proposal;

(ii) All recommendations to exclude proposals from the competitive

range are supported by persuasive rationale and sufficient facts to

substantiate a judgment that meaningful discussions are not possible or

there is no reasonable chance of the proposal being selected for award;

(iii) Those cases where only one organization is found to be

technically acceptable are fully scrutinized; and

(iv) Unacceptable proposals contain ``information'' deficiencies

which are so material as to preclude any possibility of upgrading the

proposal to a competitive level except through major revisions and

additions which would be tantamount to the submission of another

proposal.

(d) Exchanges with offerors after establishment of the competitive

range. The contracting officer and project officer should discuss the

uncertainties and/or deficiencies that are included in the technical

evaluation report for each proposal in the competitive range. Technical

questions should be developed by the project officer and/or the

technical evaluation panel and should be included in the technical

evaluation report. The management and cost or price questions should be

prepared by the contracting officer with assistance from the project

officer and/or panel as required. The method of requesting offerors in

the competitive range to submit the additional information will vary

depending on the complexity of the questions, the extent of additional

information requested, the time needed to analyze the responses, and

the time frame for making the award. However, to the extent

practicable, all questions and answers should be in writing. Each

offeror in the competitive range shall be given an equitable period of

time for preparation of responses to questions to the extent

practicable. The questions should be developed so as to disclose the

ambiguities, uncertainties, and deficiencies of the offeror.

315.307 Final proposal revisions.

(b) Final proposal revisions are subject to a final evaluation of

price or cost and other salient factors by the contracting officer and

project officer with assistance from a cost/price analyst, and an

evaluation of technical factors by the technical evaluation panel, as

necessary. Proposals may be technically rescored and reranked by the

technical evaluation panel and a technical evaluation report prepared.

To the extent practicable, the evaluation shall be performed by the

same evaluators who reviewed the original proposals.

315.370 Finalization of details with the selected source.

(a) After selection of the successful proposal, finalization of

details with the selected offeror may be conducted if deemed necessary.

However, no factor which could have any effect on the selection process

may be introduced after the common cutoff date for receipt of final

proposal revisions. The finalization process shall not in any way

prejudice the competitive interest or rights of the unsuccessful

offerors. Finalization of details with the selected offeror shall be

restricted to definitizing the final agreement on terms and conditions,

assuming none of these factors were involved in the selection process.

(b) Caution must be exercised by the contracting officer to insure

that the finalization process is not used to change the requirements

contained in the solicitation, nor to make any other changes which

would impact on the source selection decision. Whenever a material

change occurs in the requirements, the competition must be reopened and

all offerors submitting final proposal revisions must be given an

opportunity to resubmit proposals based on the revised requirements.

Whenever there is a question as to whether a change is material, the

contracting officer should obtain the advice of technical personnel and

legal counsel before reopening the competition. Significant changes in

the

[[Page 1362]]

offeror's cost proposal may also necessitate a reopening of competition

if the changes alter the factors involved in the original selection

process.

(c) Should finalization details beyond those specified in paragraph

(a) of this section be required for any reason, discussions must be

reopened with all offerors submitting final proposal revisions.

(d) Upon finalization of details, the contracting officer should

obtain a confirmation letter from the successful offeror which includes

any revisions to the technical proposal, the agreed to price or cost,

and, as applicable, a certificate of current cost or pricing data.

315.371 Contract preparation and award.

(a) The contracting officer must perform the following actions

after finalization details have been completed:

(1) Prepare the negotiation memorandum in accordance with 315.372;

(2) Prepare the contract containing all agreed to terms and

conditions and clauses required by law or regulation;

(3) Include in the contract file the pertinent documents referenced

in FAR 4.803; and

(4) Obtain the appropriate approval of the proposed contract

award(s) in accordance with Subpart 304.71 and contracting activity

procedures.

(b) After receiving the required approvals, the contract should be

transmitted to the prospective contractor for signature. The

prospective contractor must be informed that the contract is not

effective until accepted by the contracting officer.

(c) The contract shall not be issued until the finance office

certifies that the funds are available for obligation.

315.372 Preparation of negotiation memorandum.

The negotiation memorandum or summary of negotiations is a complete

record of all actions leading to award of a contract and is prepared by

the contract negotiator to support the source selection decision

discussed in FAR 15.308. It should be in sufficient detail to explain

and support the rationale, judgments, and authorities upon which all

actions were predicated. The memorandum will document the negotiation

process and reflect the negotiator's actions, skills, and judgments in

concluding a satisfactory agreement for the Government. Negotiation

memorandums shall contain discussion of the following or a statement of

nonapplicability; however, information already contained in the

contract file need not be reiterated. A reference to the document which

contains the required information is acceptable.

(a) Description of articles and services and period of performance.

A description of articles and services, quantity, unit price, total

contract amount, and period of contract performance should be set forth

( if Supplemental Agreement--show previous contract amount as revised,

as well as information with respect to the period of performance).

(b) Acquisition planning. Summarize or reference any acquisition

planning activities that have taken place.

(c) Synopsis of acquisition. A statement as to whether the

acquisition has or has not been publicized in accordance with FAR

Subpart 5.2. A brief statement of explanation should be included with

reference to the specific basis for exemption under the FAR, if

applicable.

(d) Contract type. Provide sufficient detail to support the type of

contractual instrument recommended for the acquisition. If the contract

is a cost-sharing type, explain the essential cost-sharing features.

(e) Extent of competition. The extent to which full and open

competition was solicited and obtained must be discussed. The

discussion shall include the date of solicitation, sources solicited,

and solicitation results. If a late proposal was received, discuss

whether or not the late proposal was evaluated and the rationale for

the decision.

(f) Technical evaluation. Summarize or reference the results

presented in the technical evaluation report.

(g) Business evaluation. Summarize or reference results presented

in the business report.

(h) Competitive range (if applicable). Describe how the zone of

consideration or competitive range was determined and state the

offerors who were included in the competitive range and the ones who

were not.

(i) Cost breakdown and analysis. Include a complete cost breakdown

together with the negotiator's analysis of the estimated cost by

individual cost elements. The negotiator's analysis should contain

information such as:

(1) A comparison of cost factors proposed in the instant case with

actual factors used in earlier contracts, using the same cost centers

of the same supplier or cost centers of other sources having recent

contracts for the same or similar item.

(2) Any pertinent Government-conducted audit of the proposed

contractor's record of any pertinent cost advisory report.

(3) Any pertinent technical evaluation inputs as to necessity,

allocability and reasonableness of labor, material and other direct

expenses.

(4) Any other pertinent information to fully support the basis for

and rationale of the cost analysis.

(5) If the contract is an incentive type, discuss all elements of

profit and fee structure.

(6) A justification of the reasonableness of the proposed

contractor's estimated profit or fixed fee, considering the

requirements of FAR 15.404-4 and HHSAR 315.404-4.

(j) Cost realism. Describe the cost realism analysis performed on

proposals.

(k) Government-furnished property and Government-provided

facilities. With respect to Government-furnished or Government-provided

facilities, equipment, tooling, or other property, include the

following:

(1) Where no property is to be provided, a statement to that

effect.

(2) Where property is to be provided, a full description, the

estimated dollar value, the basis of price comparison with competitors,

and the basis of rental charge, if rental is involved.

(3) Where the furnishing of any property or the extent has not been

determined and is left open for future resolution, a detailed

explanation.

(l) Negotiations. Include a statement as to the date and place

negotiations were conducted, and identify members of both the

Government and contractor negotiating teams by area of responsibility.

Include negotiation details relative to the statement of work, terms

and conditions, and special provisions. The results of cost or price

negotiations must include the information required by FAR 31.109 and

15.406-3. In addition, if cost or pricing data was required to be

submitted and certified, the negotiation record must also contain the

extent to which the contracting officer relied upon the factual cost or

pricing data submitted and used in negotiating the cost or price.

(m) Other considerations. Include coverage of areas such as:

(1) Financial data with respect to a contractor's capacity and

stability.

(2) Determination of contractor responsibility.

(3) Details as to why the method of payment, such as progress

payment, advance payment, etc., is necessary. Also cite any required D

& F's.

(4) Information with respect to obtaining of a certificate of

current cost or pricing data.

[[Page 1363]]

(5) Other required special approvals.

(6) If the contract represents an extension of previous work, the

status of funds and performance under the prior contract(s) should be

reflected. Also, a determination should be made that the Government has

obtained enough actual or potential value from the work previously

performed to warrant continuation with the same contractor. (Project

officer should furnish the necessary information.)

(7) If the contract was awarded by full and open competition, state

where the unsuccessful offerors' proposals are filed.

(8) State that equal opportunity provisions of the proposed

contract have been explained to the contractor, and it is aware of its

responsibilities. Also state whether or not a clearance is required.

(9) If the contract is for services, a statement must be made, in

accordance with FAR 37.103, that the services to be acquired are

nonpersonal in nature.

(n) Terms and conditions. Identify the general and special clauses

and conditions that are contained in the contract, such as option

arrangements, incremental funding, anticipatory costs, deviations from

standard clauses, etc. The basis and rationale for inclusion of any

special terms and conditions must be stated and, where applicable, the

document which granted approval for its use identified.

(o) Recommendation. A brief statement setting forth the

recommendations for award.

(p) Signature. The memorandum must be signed by the contract

negotiator who prepared the memorandum.

Subpart 315.4--Contract Pricing

315.404 Proposal analysis.

315.404-2 Information to support proposal analysis.

(a)(2) When some or all information sufficient to determine the

reasonableness of the proposed cost or price is already available or

can be obtained by phone from the cognizant audit agency, contracting

officers may request less-than-complete field pricing support

(specifying in the request the information needed) or may waive in

writing the requirement for audit and field pricing support by

documenting the file to indicate what information is to be used instead

of the audit report and the field pricing report.

(3) When initiating audit and field pricing support, the

contracting officer shall do so by sending a request to the cognizant

administrative contracting officer (ACO), with an information copy to

the cognizant audit office. When field pricing support is not

available, the contracting officer shall initiate an audit by sending,

in accordance with agency procedures, two (2) copies of the request to

the OIG Office of Audits' Regional Audit Director. In both cases, the

contracting officer shall, in the request:

(i) Prescribe the extent of the support needed;

(ii) State the specific areas for which input is required;

(iii) Include the information necessary to perform the review (such

as the offeror's proposal and the applicable portions of the

solicitation, particularly those describing requirements and delivery

schedules);

(iv) Provide the complete address of the location of the offeror's

financial records that support the proposal;

(v) Identify the office having audit responsibility if other than

the HHS Regional Audit Office; and

(vi) Specify a due date for receipt of a verbal report to be

followed by a written audit report. (If the time available is not

adequate to permit satisfactory coverage of the proposal, the auditor

shall so advise the contracting officer and indicate the additional

time needed.) One copy of the audit request letter that was submitted

to the Regional Audit Director and a complete copy of the contract

price proposal shall be submitted to OIG/OA/DAC. Whenever an audit

review has been conducted by the Office of Audits, two (2) copies of

the memorandum of negotiation shall be forwarded to OIG/OA/DAC by the

contracting officer.

315.404-4 Profit.

(b) Policy. (1) The structured approach for determining profit or

fee (hereafter referred to as profit) provides contracting officers

with a technique that will ensure consideration of the relative value

of the appropriate profit factors described in 315.404-4(d) in the

establishment of a profit objective for the conduct of negotiations.

The contracting officer's analysis of these profit factors is based on

information available to him/her prior to negotiations. The information

is furnished in proposals, audit data, assessment reports, preaward

surveys and the like. The structured approach also provides a basis for

documentation of this objective, including an explanation of any

significant departure from this objective in reaching an agreement. The

extent of documentation should be directly related to the dollar value

and complexity of the proposed acquisition. Additionally, the

negotiation process does not require agreement on either estimated cost

elements or profit elements. The profit objective is a part of an

overall negotiation objective which, as a going-in objective, bears a

distinct relationship to the cost objective and any proposed sharing

arrangement. Since profit is merely one of several interrelated

variables, the Government negotiator generally should not complete the

profit negotiation without simultaneously agreeing on the other

variables. Specific agreement on the exact weights or values of the

individual profit factors is not required and should not be attempted.

(ii) The profit-analysis factors set forth at FAR 15.404-4(d) shall

be used for establishing profit objectives under the following listed

circumstances. Generally, it is expected that this method will be

supported in a manner similar to that used in the structured approach

(profit factor breakdown and documentation of the profit objective);

however, factors within FAR 15.404-4(d) considered inapplicable to the

acquisition will be excluded from the profit objective.

(A) Contracts not expected to exceed $100,000;

(B) Architect-engineer contracts;

(C) Management contracts for operations and/or maintenance of

Government facilities;

(D) Construction contracts;

(E) Contracts primarily requiring delivery of material supplies by

subcontractors;

(F) Termination settlements; and

(G) Cost-plus-award-fee contracts (However, contracting officers

may find it advantageous to perform a structured profit analysis as an

aid in arriving at an appropriate fee arrangement). Other exceptions

may be made in the negotiation of contracts having unusual pricing

situations, but shall be justified in writing by the contracting

officer in situations where the structured approach is determined to be

unsuitable.

(c) Contracting officer responsibilities. A profit objective is

that part of the estimated contract price objective or value which, in

the judgment of the contracting officer, constitutes an appropriate

amount of profit for the acquisition being considered. This objective

should realistically reflect the total overall task to be performed and

the requirements placed on the contractor. Development of a profit

objective should not begin until a thorough review of proposed contract

work has been made; a review of all available knowledge regarding the

contractor pursuant to FAR Subpart 9.1, including audit data, preaward

survey reports and financial statements, as appropriate, has been

conducted; and an

[[Page 1364]]

analysis of the contractor's cost estimate and comparison with the

Government's estimate or projection of cost has been made.

(d) Profit--analysis factors--(1) Common factors. The following

factors shall be considered in all cases in which profit is to be

negotiated. The weight ranges listed after each factor shall be used in

all instances where the structured approach is used.

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

Profit factors Weight ranges (percent)

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

Contractor effort:

Material acquisition.................. 1 to 5.

Direct labor.......................... 4 to 15.

Overhead.............................. 4 to 9.

General management (G&A).............. 4 to 8.

Other costs........................... 1 to 5.

Other factors:

Cost risk............................. 0 to 7.

Investment............................ -2 to +2.

Performance........................... -1 to +1.

Socioeconomic programs................ -.5 to +.5.

Special situations....................

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

(i) Under the structured approach, the contracting officer shall

first measure ``Contractor Effort'' by the assignment of a profit

percentage within the designated weight ranges to each element of

contract cost recognized by the contracting officer. The amount

calculated for the cost of money for facilities capital is not to be

included for the computation of profit as part of the cost base. The

suggested categories under ``Contractor Effort'' are for reference

purposes only. Often individual proposals will be in a different

format, but since these categories are broad and basic, they provide

sufficient guidance to evaluate all other items of cost.

(ii) After computing a total dollar profit for ``Contractor

Effort,'' the contracting officer shall then calculate the specific

profit dollars assigned for cost risk, investment, performance,

socioeconomic programs, and special situations. This is accomplished by

multiplying the total Government Cost Objective, exclusive of any cost

of money for facilities capital, by the specific weight assigned to the

elements within the ``Other Factors'' category. Form HHS-674,

Structured Approach Profit/Fee Objective, should be used, as

appropriate, to facilitate the calculation of this profit objective.

Form HHS-674 is illustrated in 353.370-674.

(iii) In making a judgment of the value of each factor, the

contracting officer should be governed by the definition, description,

and purpose of the factors together with considerations for evaluating

them.

(iv) The structured approach was designed for arriving at profit

objectives for other than nonprofit organizations. However, if

appropriate adjustments are made to reflect differences between profit

and nonprofit organizations, the structured approach can be used as a

basis for arriving at profit objectives for nonprofit organizations.

Therefore, the structured approach, as modified in paragraph

(d)(1)(iv)(B) of this section, shall be used to establish profit

objectives for nonprofit organizations.

(A) For purposes of this section, nonprofit organizations are

defined as those business entities organized and operated exclusively

for charitable, scientific, or educational purposes, no part of the net

earnings of which inure to the benefit of any private shareholder or

individual, and which are exempt from Federal income taxation under

Section 501 of the Internal Revenue Code.

(B) For contracts with nonprofit organizations where profit is

involved, an adjustment of up to 3 percentage points will be subtracted

from the total profit objective percentage. In developing this

adjustment, it will be necessary to consider the following factors;

(1) Tax position benefits;

(2) Granting of financing through advance payments; and

(3) Other pertinent factors which may work to either the advantage

or disadvantage of the contractor in its position as a nonprofit

organization.

(2) Contractor effort. Contractor effort is a measure of how much

the contractor is expected to contribute to the overall effort

necessary to meet the contract performance requirement in an efficient

manner. This factor, which is apart from the contractor's

responsibility for contract performance, takes into account what

resources are necessary and what the contractor must do to accomplish a

conversion of ideas and material into the final service or product

called for in the contract. This is a recognition that within a given

performance output, or within a given sales dollar figure, necessary

efforts on the part of individual contractors can vary widely in both

value and quantity, and that the profit objective should reflect the

extent and nature of the contractor's contribution to total

performance. A major consideration, particularly in connection with

experimental, developmental, or research work, is the difficulty or

complexity of the work to be performed, and the unusual demands of the

contract, such as whether the project involves a new approach unrelated

to existing technology and/or equipment or only refinements to these

items. The evaluation of this factor requires an analysis of the cost

content of the proposed contract as follows:

(i) Material acquisition. (Subcontracted items, purchased parts,

and other material.) Analysis of these cost items shall include an

evaluation of the managerial and technical effort necessary to obtain

the required subcontracted items, purchased parts, material or

services. The contracting officer shall determine whether the

contractor will obtain the items or services by routine order from

readily available sources or by detailed subcontracts for which the

prime contractor will be required to develop complex specifications.

Consideration shall also be given to the managerial and technical

efforts necessary for the prime contractor to select subcontractors and

to perform subcontract administration functions. In application of this

criterion, it should be recognized that the contribution of the prime

contractor to its purchasing program may be substantial. Normally, the

lowest unadjusted weight for direct material is 2 percent. A weighting

of less than 2 percent would be appropriate only in unusual

circumstances when there is a minimal contribution by the contractor.

(ii) Direct Labor. (Professional, service, manufacturing and other

labor). Analysis of the various labor categories of the cost content of

the contract should include evaluation of the comparative quality and

quantity of professional and semiprofessional talents, manufacturing

and service skills, and experience to be employed. In evaluating

professional and semiprofessional labor for the purpose of assigning

profit dollars, consideration should be given to the amount of notable

scientific talent or unusual or scarce talent needed in contrast to

nonprofessional effort. The assessment should consider the contribution

this talent will provide toward the achievement of contract objectives.

Since nonprofessional labor is relatively plentiful and rather easily

obtained by the contractor and is less critical to the successful

performance of contract objectives, it cannot be weighted nearly as

high as professional or semiprofessional labor. Service contract labor

should be evaluated in a like manner by assigning higher weights to

engineering or professional type skills required for contract

performance. Similarly, the variety of manufacturing and other

categories of labor skills required and the contractor's manpower

resources for meeting these requirements should be considered. For

purposes of evaluation, categories of labor (i.e., quality control,

receiving and

[[Page 1365]]

inspection, etc.) which do not fall within the definition for

professional, service or manufacturing labor may be categorized as

appropriate. However, the same evaluation considerations as outlined

above will be applied.

(iii) Overhead and general management (G&A). (A) Analysis of these

overhead items of cost should include the evaluation of the makeup of

these expenses and how much they contribute to contract performance. To

the extent practicable, analysis should include a determination of the

amount of labor within these overhead pools and how this labor should

be treated if it were considered as direct labor under the contract.

The allocable labor elements should be given the same profit

considerations that they would receive if they were treated as direct

labor. The other elements of these overhead pools should be evaluated

to determine whether they are routine expenses, such as utilities and

maintenance, and hence given lesser profit consideration, or whether

they are significant contributing elements. The composite of the

individual determinations in relation to the elements of the overhead

pools will be the profit consideration given the pools as a whole. The

procedure for assigning relative values to these overhead expenses

differs from the method used in assigning values of the direct labor.

The upper and lower limits assignable to the direct labor are absolute.

In the case of overhead expenses, individual expenses may be assigned

values outside the range as long as the composite ratio is within the

range.

(B) It is not necessary that the contractor's accounting system

break down overhead expenses within the classifications of research

overhead, other overhead pools, and general administrative expenses,

unless dictated otherwise by Cost Accounting Standards (CAS). The

contractor whose accounting system reflects only one overhead rate on

all direct labor need not change its system (if CAS exempt) to

correspond with the above classifications. The contracting officer, in

an evaluation of such a contractor's overhead rate, could break out the

applicable sections of the composite rate which could be classified as

research overhead, other overhead pools, and general and administrative

expenses, and follow the appropriate evaluation technique.

(C) Management problems surface in various degrees and the

management expertise exercised to solve them should be considered as an

element of profit. For example, a contract for a new program for

research or an item which is on the cutting edge of the state of the

art will cause more problems and require more managerial time and

abilities of a higher order than a follow-on contract. If new contracts

create more problems and require a higher profit weight, follow-ons

should be adjusted downward because many of the problems should have

been solved. In any event, an evaluation should be made of the

underlying managerial effort involved on a case-by-case basis.

(D) It may not be necessary for the contracting officer to make a

separate profit evaluation of overhead expenses in connection with each

acquisition action for substantially the same project with the same

contractor. Where an analysis of the profit weight to be assigned to

the overhead pool has been made, that weight assigned may be used for

future acquisitions with the same contractor until there is a change in

the cost composition of the overhead pool or the contract

circumstances, or the factors discussed in paragraph (d)(2)(iii)(C) of

this section are involved.

(iv) Other costs. Analysis of this factor should include all other

direct costs associated with contractor performance (e.g., travel and

relocation, direct support, and consultants). Analysis of these items

of cost should include, the significance of the cost of contract

performance, nature of the cost, and how much they contribute to

contract performance. Normally, travel costs require minimal

administrative effort by the contractor and, therefore, usually receive

a weight no greater than 1%. Also, the contractor may designate

individuals as ``consultants'' but in reality these individuals may be

obtained by the contractor to supplement its workforce in the

performance of routine duties required by contract. These costs would

normally receive a minimum weight. However, there will be instances

when the contractor may be required to locate and obtain the services

of consultants having expertise in fields such as medicine or human

services. In these instances, the contractor will be required to expend

greater managerial and technical effort to obtain these services and,

consequently, the costs should receive a much greater weight.

(3) Other factors--(i) Contract cost risk. The contract type

employed basically determines the degree of cost risk assumed by the

contractor. For example, where a portion of the risk has been shifted

to the Government through cost-reimbursement provisions, unusual

contingency provisions, or other risk-reducing measures, the amount of

profit should be less than where the contractor assumes all the risk.

(A) In developing the prenegotiation profit objective, the

contracting officer will need to consider the type of contract

anticipated to be negotiated and the contractor risk associated

therewith when selecting the position in the weight range for profit

that is appropriate for the risk to be borne by the contractor. This

factor should be one of the most important in arriving at

prenegotiation profit objective. Evaluation of this risk requires a

determination of the degree of cost responsibility the contractor

assumes; the reliability of the cost estimates in relation to the task

assumed; and the complexity of the task assumed by the contractor. This

factor is specifically limited to the risk of contract costs. Thus,

risks on the part of the contractor such as reputation, losing a

commercial market, risk of losing potential profits in other fields, or

any risk which falls on the contracting office, such as the risk of not

acquiring a satisfactory report, are not within the scope of this

factor.

(B) The first and basic determination of the degree of cost

responsibility assumed by the contractor is related to the sharing of

total risk of contract cost by the Government and the contractor

through the selection of contract type. The extremes are a cost-plus-a-

fixed-fee contract requiring the contractor to use its best efforts to

perform a task and a firm fixed-price contract for a service or a

complex item. A cost-plus-a-fixed-fee contract would reflect a minimum

assumption of cost responsibility, whereas a firm-fixed-price contract

would reflect a complete assumption of cost responsibility. Where

proper contract selection has been made, the regard for risk by

contract type would usually fall into the following percentage ranges:

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

Percent

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

Cost-reimbursement type contracts............................ 0-3

Fixed-price type contracts................................... 2-7

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

(C) The second determination is that of the reliability of the cost

estimates. Sound price negotiation requires well-defined contract

objectives and reliable cost estimates. Prior experience assists the

contractor in preparing reliable cost estimates on new acquisitions for

similar related efforts. An excessive cost estimate reduces the

possibility that the cost of performance will exceed the contract

price, thereby reducing the contractor's assumption of contract cost

risk.

(D) The third determination is that of the difficulty of the

contractor's task.

[[Page 1366]]

The contractor's task can be difficult or easy, regardless of the type

of contract.

(E) Contractors are likely to assume greater cost risk only if

contracting officers objectively analyze the risk incident to proposed

contracts and are willing to compensate contractors for it. Generally,

a cost-plus-fixed fee contract will not justify a reward for risk in

excess of 0.5 percent, nor will a firm fixed-price contract justify a

reward of less than the minimum in the structured approach. Where

proper contract-type selection has been made, the reward for risk, by

contract type, will usually fall into the following percentage ranges:

(1) Type of contract and percentage ranges for profit objectives

developed by using the structured approach for research and development

and manufacturing contracts:

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

Percent

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

Cost-plus-fixed fee........................ 0 to 0.5.

Cost-plus-incentive fee:

With cost incentive only............... 1 to 2.

With multiple incentives............... 1.5 to 3.

Fixed-price-incentive:

With cost incentive only............... 2 to 4.

With multiple incentives............... 3 to 5.

Prospective price redetermination...... 3 to 5.

Firm fixed-price....................... 5 to 7.

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

(2) Type of contract and percentage ranges for profit objectives

developed by using the structured approach for service contracts:

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

Percent

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

Cost-plus-fixed-fee........................ 0 to 0.5.

Cost-plus-incentive fee.................... 1 to 2

Fixed-price incentive...................... 2 to 3.

Firm fixed-price........................... 3 to 4.

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

(F) These ranges may not be appropriate for all acquisitions. For

instance, a fixed-price-incentive contract that is closely priced with

a low ceiling price and high incentive share may be tantamount to a

firm fixed-price contract. In this situation, the contracting officer

may determine that a basis exists for high confidence in the

reasonableness of the estimate and that little opportunity exists for

cost reduction without extraordinary efforts. On the other hand, a

contract with a high ceiling and low incentive formula can be

considered to contain cost-plus incentive-fee contract features. In

this situation, the contracting officer may determine that the

Government is retaining much of the contract cost responsibility and

that the risk assumed by the contractor is minimal. Similarly, if a

cost-plus-incentive-fee contract includes an unlimited downward

(negative) fee adjustment on cost control, it could be comparable to a

fixed-price-incentive contract. In such a pricing environment, the

contracting officer may determine that the Government has transferred a

greater amount of cost responsibility to the contractor than is typical

under a normal cost-plus-incentive-fee contract.

(G) The contractor's subcontracting program may have a significant

impact on the contractor's acceptance or risk under a contract form. It

could cause risk to increase or decrease in terms of both cost and

performance. This consideration should be a part of the contracting

officer's overall evaluation in selecting a factor to apply for cost

risk. It may be determined, for instance, that the prime contractor has

effectively transferred real cost risk to a subcontractor and the

contract cost risk evaluation may, as a result, be below the range

which would otherwise apply for the contract type being proposed. The

contract cost risk evaluation should not be lowered, however, merely on

the basis that a substantial portion of the contract costs represents

subcontracts without any substantial transfer of contractor's risk.

(H) In making a contract cost risk evaluation in an acquisition

action that involves definitization of a letter contract, unpriced

change orders, and unpriced orders under basic ordering agreements,

consideration should be given to the effect on total contract cost risk

as a result of having partial performance before definitization. Under

some circumstances it may be reasoned that the total amount of cost

risk has been effectively reduced. Under other circumstances it may be

apparent that the contractor's cost risk remained substantially

unchanged. To be equitable, the determination of profit weight for

application to the total of all recognized costs, both those incurred

and those yet to be expended, must be made wit

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