FAR Part 10 – Market Research FAR Part 11 – Describing Agency Needs FAR Part 12 – Commercial Items Flashcards
Overview Concepts 1
Market research needs spec. clarity and 12 is not a ACQ Method
Market research is designed to ensure that the government gets the best deal within the defined market
Clarity of specification will avoid ALL of the significant performance problems
FAR Part 12 is NOT an acquisition method
Overview Concepts2
13,14,15 ACQ METHODS 12 SIMPLIFIES
Only FAR Parts 13, 14, and 15 constitute “acquisition methods”
Part 12 principles are used with one of the acquisition methods to simplify the process
Market Research (FAR Part 10)
needs are identified and tradeoffs evaluated to acquire items that meet those needs
required to conduct market research appropriate to the circumstances BEFORE: NEW ACQ, AND NEW ACQ IN EXCESS OF SAP soliciting offers for acquisitions with an estimated value less than the simplified acquisition threshold when adequate information
Policy (FAR 10.001)
Agencies are required (“must”) to ensure that legitimate needs are identified and tradeoffs evaluated to acquire items that meet those needs; Agencies are further required to conduct market research appropriate to the circumstances before: developing new requirements documents for an acquisition by that agency; soliciting offers for acquisitions with an estimated value in excess of the simplified acquisition threshold; or
soliciting offers for acquisitions with an estimated value less than the simplified acquisition threshold when adequate information is not available and circumstances justify its cost, and before soliciting offers for acquisitions that could lead to a bundled contract.
Market Research (FAR Part 10) 2
commercially available market research methods
SMALL AND NEW BUSINESS ENTRANTS FOR NBC AND RADIO
Agencies shall conduct market research on an ongoing basis, and take advantage to the maximum extent practicable of commercially available market research methods, to identify effectively the capabilities, including the capabilities of small businesses and new entrants into Federal contracting, that are available in the marketplace for meeting the requirements of the agency in furtherance of defense against or recovery from terrorism or nuclear, biological, chemical or radiological attack.
USE THE DATA 1
SOURCE CAN DO THE WORK
MEET THE NEED OR BE MODIFIED
Agencies are then required to use the results of market research to determine:
if sources capable of satisfying the agency’s requirements exist;
the extent to which commercial items or non-developmental items could either meet the need or be modified to meet the need or if the agency’s need can be reasonably modified to enable use of non-developmental items;
USE THE DATA 2
commercial or nondevelopmental AT COMPONENT LEVEL
producing, distributing, and supporting commercial items;
to ensure maximum practicable use of recovered materials; and to promote energy conservation and efficiency and
extent to whether commercial or nondevelopmental items could be incorporated at
the component level;
the practices of firms engaged in producing, distributing, and supporting commercial items;
to ensure maximum practicable use of recovered materials; and to promote energy conservation and efficiency and
determine whether bundling is necessary and justified.
How Much is Enough?
urgency, estimated dollar value, complexity, and past experience.
The extent of the market research you conduct will vary, depending on such factors as urgency, estimated dollar value, complexity, and past experience.
Let’s take a look at the recommended techniques for conducting market research.
Techniques 1
Contacting knowledgeable individuals Reviewing the results of recent market research
RFI
Contacting knowledgeable individuals in Government and industry regarding market
capabilities to meet requirements
Reviewing the results of recent market research undertaken to meet similar or identical requirements
Publishing formal requests for information
Techniques 2
GOV DATABASES
ONLINE COM WITH SIEMENS
SOURCE LIST FROM AGENCY OR ACTIVITIES
Querying Government data bases that provide information relevant to agency acquisitions
Communicating online with industry, acquisition personnel, and customers
Obtaining source lists of similar items from other contracting activities or agencies
Techniques 3
CATALOGS
PRESOLICITATION CONFERENCE
Viewing catalogs and other generally available product literature published by manufacturers, distributors, and dealers or available online
Conducting interchange meetings or holding presolicitation conferences
What the Results Indicate
agencies are required to reevaluate the need and determine whether the need can be restated to permit commercial or non-developmenta
If market research indicates commercial or non-developmental items might not be available to satisfy agency needs, agencies are required to reevaluate the need and determine whether the need can be restated to permit commercial or non-developmental items to satisfy their need.
What the Results Indicate
commercial item,
the contracting officer must solicit and award any
resultant contract in accordance with FAR Part 12.
If market research establishes that the Government’s need may be met by a type of item or service customarily available in the commercial marketplace that would meet the definition of a
commercial item, the contracting officer must solicit and award any
resultant contract in accordance with FAR Part 12.
If market research establishes that the Government’s need cannot be met by a type of item or service customarily available in the marketplace, FAR Part 12 shall not to be used.
Describing Agency Needs 1
market research in a manner designed to promote full and open competition (see Part 6) using simplified acquisition procedures
include restrictive provisions or conditions to the extent necessary to satisfy the needs of the agency or as authorized by law.
Agencies shall specify needs using market research in a manner designed to promote full and open competition (see Part 6), or maximum practicable competition when using simplified acquisition procedures, with due regard to the nature of the supplies or services to be acquired; and only include restrictive provisions or conditions to the extent necessary to satisfy the needs of the agency or as authorized by law.
Describing Agency Needs 2
Functions to be performed;
Performance required; or
Essential physical characteristics;
Acquisition officials should state requirements with respect to an acquisition of supplies or services in terms of-- Functions to be performed; Performance required; or Essential physical characteristics; FAR 11.002
Preference for Commercial Items 1
enable and encourage offerors to supply commercial items
agency’s needs are not available, nondevelopmental items, in response to the agency solicitations.
Acquisition officials should define requirements in terms that enable and encourage offerors to supply commercial items, or, to the extent that commercial items suitable to meet the agency’s needs are not available, nondevelopmental items, in response to the agency solicitations.
Preference for Commercial Items 2
Prime contractors and subcontractors at all tiers should be required to incorporate commercial items or nondevelopmental items as components of items supplied to the agency
Offerors of commercial items and nondevelopmental items should be provided an opportunity to compete in any acquisition to fill such requirements. Prime contractors and subcontractors at all tiers should be required to incorporate commercial items or nondevelopmental items as components of items supplied to the agency. Requirements (in appropriate cases) should be modified to ensure that they can be met by commercial items or, to the extent that commercial items suitable to meet the agency‘s needs are not available, nondevelopmental items.
Delivery or Performance Schedules (FAR 11.4) 1
Time of delivery/performance must be realistic and clearly stated
Time of delivery/performance must be realistic and clearly stated
within the solicitation.
Unreasonable delivery or performance schedules are inconsistent with small business policy, may restrict competition, and may result in higher contract prices. Factors to be considered in establishing schedules are listed in FAR 11.402.
Delivery or Performance Schedules (FAR 11.4) 2
CALENDAR DATES SPECIFIC PERIODS FROM DATE OF CONTRACT OR DATE OF RECEIPT
Specific time for delivery after receipt by the contractor of each individual order issued under the contract.
Contract delivery or performance may be expressed in terms of specific calendar dates; specific periods from the date of the contract or from the date of receipt by the contractor of the notice of award or acceptance by the Government; or specific time for delivery after receipt by the contractor of each individual order issued under the contract.
FAR 11.4
Liquidated Damages 1
This subpart does not apply to liquidated damages for subcontracting plans (see 19.705-7) or liquidated damages related to the Contract Work Hours and Safety Standards Act (see Subpart 22.3).
FAR 11.500, Scope, prescribes policies and procedures for using liquidated damages clauses in solicitations and contracts for supplies, services, research and development, and construction. This subpart does not apply to liquidated damages for subcontracting plans (see 19.705-7) or liquidated damages related to the Contract Work Hours and Safety Standards Act (see Subpart 22.3).
Liquidated Damages 2
This subpart does not apply to liquidated damages for subcontracting plans (see 19.705-7) or liquidated damages related to the Contract Work Hours and Safety Standards Act (see Subpart 22.3).
The contracting officer must consider the potential impact on pricing, competition, and contract administration before using a liquidated damages clause. This subpart does not apply to liquidated damages for subcontracting plans (see 19.705-7) or liquidated damages related to the Contract Work Hours and Safety Standards Act (see Subpart 22.3).
the extent or amount of such damage would be difficult or impossible to estimate accurately or prove.
FAR 11.5
Priorities and Allocations 1
The Defense Priorities and Allocations System (DPAS) authorizes the use of priorities to require that contracts in support of the national defense be accepted and performed on a preferential or priority basis over all other contracts, and to allocate materials and facilities in such a manner as to promote the national defense.
Priorities and Allocations 2
“DO” and “DX”. DO rated orders have equal priority with each other and take preference over unrated orders. DX rated orders have equal priority with each other and take preference over both DO rated and unrated orders.
There are two levels of priority, identified by the rating symbols “DO” and “DX”. DO rated orders have equal priority with each other and take preference over unrated orders. DX rated orders have equal priority with each other and take preference over both DO rated and unrated orders.
FAR 11.6
Variation in Quantity
FP CONTRACT 10% VARIABILITY ALLOWED
The Government may authorize the acceptance of a variation in quantities delivered under a fixed-price supply contract. The variance amount should be based on normal commercial practices of a particular industry and generally should not exceed 10%.
FAR Part 12
Modifications that are uniquely “government” move the item away from “commercial item”
If a product or service fits the definition in 2.101
then the procurement IS a commercial purchase
Modifications allowed IF normal in the commercial
marketplace
Modifications that are uniquely “government” move the item away from “commercial item”
Primes are to follow FAR part 12 principles and use commercial items and services whenever possible
Current Regulations Commercial Item Defined
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
“Commercial item” means—
Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and—
Has been sold, leased, or licensed to the general public; or
Has been offered for sale, lease, or license to the general public;
Current Regulations Commercial Item Defined 2
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Any item that evolved from an item described in paragraph (1) of this definition through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Government solicitation;
Commercial Item Defined 3
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Any item that would satisfy a criterion expressed in paragraphs (1)
or (2) of this definition, but for—
Modifications of a type customarily available in the commercial marketplace; or
Commercial Item Defined 4
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. Factors to be considered in determining whether a modification is minor include the value and size of the modification and the comparative value and size of the final product. Dollar values and percentages may be used as guideposts, but are not conclusive evidence that a modification is minor;
Commercial Item Defined 5
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Any combination of items meeting the requirements of paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Commercial Item Defined 6
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Installation services, maintenance services, repair services, training services, and other services if—
Such services are procured for support of an item referred to in paragraph (1), (2), (3), or (4) of this definition, regardless of whether such
services are provided by the same source or at the same time as the item; and
The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;
Commercial Item Defined 7
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions. This does not include services that are sold based on hourly rates without an established catalog or market price for a specific service performed or a specific outcome to be achieved. For purposes of these services—
Commercial Item Defined 8
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer or vendor, is either published or otherwise available for inspection by customers, and states prices at which sales are currently, or were last, made to a significant number of buyers constituting the general public; and
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers free to bargain and that can be substantiated through competition or from sources independent of the offerors.
Commercial Item Defined 9
other than real property
not available in the commercial marketplace but will be
Modifications of a type customarily available in the commercial marketplace; or Minor modifications means do not significantly alter the nongovernmental function
paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;
Installation services, maintenance services, repair services, training services, and other services if—
established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions.not hourly
“Catalog price” means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer
“Market prices” means current prices that are established in the course of ordinary trade between buyers and sellers
, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item,sold to state and local govs
Any item, combination of items, or service referred to in paragraphs (1) through (6) of this definition, notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or
A nondevelopmental item, if the procuring agency determines the item was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments.
Implied Warranty of Merchantability
items must be of at least average, fair, or medium-grade quality.
For commercial items acquired by the Government there is an implied warranty of merchantability that the item is reasonably fit for ordinary purposes for which such items are used and the items must be of at least average, fair, or medium-grade quality.
Commercial Warranties
Government the same warranty terms offered to the general public.
Solicitations for commercial items shall require offerors to give offer the Government the same warranty terms offered to the general public.
What Drives Commercial Pricing? speed distro channel warranty seller liability limitations quantity and length of production run and .of performance performance reqs tech advance and r and d
Speed of delivery; distribution channels Length and extent of warranty Limitations of seller’s liability Quantities; economic production runs Length of performance period Specific performance requirements Technology advances; R&D spending
What is Commercial Price
Reasonableness?
FAR Part 13, 14, or 15
The CO must establish price reasonableness in accordance with FAR Part 13, 14, or 15, as applicable.
The CO must be aware of customary commercial terms and conditions when pricing commercial items
The CO must ensure that contract terms, conditions, and prices are commensurate with the government’s needs
“Other than Cost or Pricing Data”
NOT certified in accordance with 15.406-2 and is necessary to determine price reasonableness or cost realism.
“Information other than cost or pricing data” means any type of information that is not required to be certified in accordance with 15.406-2 and is necessary to determine price reasonableness or cost realism. For example, such information may include pricing, sales, or cost information, and includes cost or pricing data for which certification is determined inapplicable after submission.
“Nondevelopmental item”
Any previously developed item of supply used exclusively for governmental purposes by GOVS AT ALL LEVELS
NDI) Any previously developed item of supply used exclusively for government purposes by a federal agency, a State or local government, or a foreign government with which the United States has a mutual defense cooperation agreement
“Nondevelopmental item” means—
Any previously developed item of supply used exclusively for governmental purposes by a Federal agency, a State or local government, or a foreign government with which the United States has a mutual defense cooperation agreement;
“Nondevelopmental item”
only minor modification or modifications of a type customarily available in the commercial marketplace
NDI) Any previously developed item of supply used exclusively for government purposes by a federal agency, a State or local government, or a foreign government with which the United States has a mutual defense cooperation agreement
Any item described in paragraph (1) of this definition that requires only minor modification or modifications of a type customarily available in the commercial marketplace in order to meet the requirements of the procuring department or agency; or
Any item of supply being produced that does not meet the requirements of paragraphs (1) or (2) solely because the item is not yet in use.
Contract Types
Firm-Fixed Price
Firm-Fixed Price with Economic Price Adjustment
Benefits EASY RFI OR RFP EASIER AND CHEAPER FOR VENDORS MORE SIEMENS TO COMPETE COMM INNOVATIONS
Not optional for commercial items
Greatly simplified RFQ/RFP
Simplifies vendor response (cheaper to them)
Government market is opened to more
suppliers
Commercial innovations are leveraged for use by the government
Benefits
DECREASE TOTAL OWNERSHIP COST
ENG AND DESIGN SETUP ALREADY
TESTED PRODUCTS BAD ONES WEEDED OUT
Lower total ownership costs
Design Engineering, developmental testing, and production line set-up are already completed
Products are already proven in service before program receives them – bad products and suppliers are already weeded out
Downsides NO TAILORING CHANGES HARDER OVERSIGHT DECREASE AND PRODUCT INSIGHT PMT ADVANCE ARE STANDARD
Not appropriate when extensive “tailoring” is
required
Less ability to demand needed changes
Less oversight of contractor
Less insight into product
Advanced payments are a Standard Commercial Practice in some industries
Critical Steps in the Process
RESEARCH
FAR PART12
PRICE NOT A FACTOR
Market Research
Using “other than cost or pricing data”
Recognizing that FAR part 12 does NOT require strict adherence to FAR Part 15 practices.
Price is not a factor in determining status as a
commercial item
Summary
12 NOT ACQ METHOD
FAR AND UCC NOT THE SAME
FAR Part 12 is NOT an “acquisition method”
The government benefits tremendously when it can use commercial practices and purchase “commercial items” or services
The FAR and the UCC will never be the same
Resources
DOD Commercial Item Handbook (2001)
- http://www.acq.osd.mil/dpap/cpic/draftcihandbook08012011.docx
Wrap-up
TREAT SIEMENS FAIRLY
RESEARCH HELPS GOVE
Market research is designed to help the buyer understand the market in which he or she is operating
More knowledge yields a better deal
Do not just go through the motions
Treat participants fairly or they will stop playing
Wrap-up (cont’d)
NEEDS STATED TO INCREASE COMPETITION
Agency needs must be stated in a manner that will maximize competition while meeting the agency’s legitimate needs.
– Goal is to use commercial items
Wrap-up (cont’d)
FAR PART 12
DOLLAR VALUE NOT IMPORTANT
Commercial purchases are driven by the
definition in FAR part 2
Dollar value is irrelevant
Great latitude is given to CO’s in adapting commercial practices
