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Contracting with the federal has always been a highly regulated process right from formation through administration with traps along the way for the unsuspecting. Federal government contracting is not like commercial contracting that is generally governed by the Uniform Commercial Code and the common law, this process is governed by a number of statutes and regulations. These statutes and regulations dictate for instance, what process or method a party should use for soliciting a contract, how to negotiate or award a contract and in some instances determine what costs the government can reimburse and how the costs will be accounted for by a contractor. On top of this, the government contractor should always be aware that it is subject to the sovereign's policy dictates (USA, 2010). There are many obligations that the US government imposes through these contracts although in recent times the congress has tried to streamline the process to reduce the burdens on contractors. This is not enough and therefore any entity wishing to enter into government contract should tread carefully. This article will try to go through the federal contracting process.
Statutory and Regulatory Provisions
There are many statutes and regulations that the government uses in the contracting process. These include: the Federal Property and Administrative Services Act of 1949 (FPASA), The Armed Services Procurement Act (ASPA) of 1947, and the Competing in Contracting Act (CICA). These are the three statutory foundations of the federal acquisition process and the government contract law. The acquisition of all property with the exception of land, construction, and defense agencies' services, are governed by the ASPA (USA, 2010). Similar civilian acquisitions are governed by the FPASA, while the CICA which applies to both civilian and defense acquisitions, require that federal agencies seek and obtain open and full competition where it is possible in the process of contract awarding. A contract may be awarded by a federal agency using a sole source contractor other than full and open competition only in seven circumstances. The uniform policies and procedures for all federal agencies' acquisitions are contained in the Federal Acquisition Regulation (FAR) that is codified at Title 48 of the Code of Federal Regulations (USA, 2010). It addresses or implements almost every statute or executive policy related to procurement. In this way, the FAR makes sure that every stage in the acquisition process is reached.
The three statutory foundations, the ASPA, FPASA, and CICA put in place two methods of obtaining full and open competition. These are sealed bidding and competitive negotiation. Sealed bidding is characterized by a strict observance of formal procedures. The procedures aim at helping bidders get an opportunity to compete on an equal footing for the contracts. In this type of acquisition, the agency must award a contract to the responsible bidder, one that submits the lowest responsive bid. Contrastingly, competitive negotiation process is more flexible enabling an agency to carry out discussions, asses orders and award contracts basing on price and other important factors (Vacketta, 2010).
As soon as a need is identified by the federal agency, and a decision to go ahead with an acquisition made, the agency must then solicit the sealed bids if time permits for the solicitation, submission, and evaluation of the sealed bids, if the award will be made basing on price and other factors related to price, if conducting discussions with the offerors of bids is not necessary, and if there an expectation reasonable enough, of receiving more than just one sealed bid. After these, the contracting officer of the agency then initiates a sealed bidding acquisition by issuing Invitations for Bids (IFB). These must clearly, accurately and completely describe the government's requirements. At this stage, the FAR and the case law do not allow for the use of unnecessary restrictive specifications which may limit the number of those bidding. The IFB are then publicized through public displays, newspaper and journal announcements, federal government's Commerce Business Daily publications, and by mailing them to the contractors and other commercial organizations on the agency's solicitation list. When this is done, it now becomes the contractors obligation to submit the bids on time as the IFB states, because late bids may not be considered for award unless 1. The bid delayed in the process of mailing, this should be at least five days before the receipt date of the bid, 2. The bid was mishandled by the government after receipt, 3. The bid was sent to the contracting officer by Postal Next Day Service two days prior to the date of receipt of the bid, or 4. The bid was electronically transmitted and received 5.00 p.m one day prior to the receipt date of the bid. All those bids that are received at the required time and place set for their opening are opened and read publicly aloud by the contracting officer. They are then recorded on the Abstract of Offers (Standard Form 1049) and then carefully examined for any mistakes. If no mistake is detected and all administrative measures have been taken, the contracting officer awards the contract to the responsible bidder, one who submitted the lowest responsive bid (Stanberry, 2008). This bidder must also meet the following conditions: have enough financial resources to perform the contract; be in a position to comply with the delivery and performance schedule that is proposed; should have a performance record that is satisfactory; a satisfactory record of business ethics and integrity; and many other factors that come with contract performance.
If one does not meet the conditions of sealed bidding, then the contracting officer may award the bid using the competitive negotiation method. This allows for flexibility in contract awarding. Here the contracting officer is allowed to engage in discussions with offerors and also during evaluation he may consider factors not related to cost. The process starts with the issuance of a Request for Proposals (RFP) by the contracting officer. If the procurement exceeds $25,000, then the Contracting officer synopsizes a notice of the action of the proposed contract in the CBD just as in sealed bidding. RFB should at least state the need of the agency, anticipated conditions and terms of the contract, information that should be included in the proposal, and all the factors that the agency may consider in the evaluation of the proposal and awarding of the contract. After these, all the parties interested submit their proposals (O'Connor & Wangemann, 2009).
Evaluation involves assessing the proposal's relative qualities basing on the factors that the solicitation specified. In essence the contracting officer evaluates the cost or price proposal of the offeror, his or her past performance in previous commercial or government contracts, the technical approach, and any other factor that can be identified for award. Ambiguous proposals are also clarified at this stage (O'Connor & Wangemann, 2009). The contracting officer may then award a negotiated contract without any additional negotiations, what are famously called "discussions." But if the contracting officer wishes to go ahead with discussions, then he or she can identify those offerors falling within the competitive range to have discussions with and notify those who will not have qualified about it. This is necessary according to FAR to maximize the ability of the agency to get best value as required by the evaluation. Here care is taken by the contracting officer not to show favourism, reveal the technical solution and price of an offeror without permission, disclose names of those providing information about an offeror, or furnish information from sensitive sources. After discussions some more offerors may be eliminated and the remaining ones asked to revise their proposals to make clarifications and submit a final proposal (O'Connor & Wangemann, 2009). Following the procedures set by the RFP; the contracting officer analyzes the final offers and selects the qualified offeror, one that is advantageous to the government. The contracting officer has the discretion to award or not to award if he or she sees that the decision is in the government's best interest.
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Standard Terms and Conditions Unique To Government Contracts
Government contracts mostly have many standard terms and conditions that are commonly called clauses. On many occasions these clauses are by regulation non negotiable. Three of these common clauses unique to government contracts are: the termination for convenience clause; the changes clause; and the default clause (O'Connor & Wangemann, 2009).
Termination for Convenience Clause
This is contained in almost every government contract and allows the government to end a contract at any time without cause so long as it is in the government's best interest. This is provided for by the Standard FAR clause that is inserted in the fixed price supply contracts and also found in FAR 52.249-2. A contract can be terminated for government's convenience if a written notice of termination is issued. The notice must contain: a statement showing that the contract is being terminated for the government's convenience; the effective date of termination; the termination extent; special instructions if any; and steps to be taken by the contractor to minimize impact on personnel (Worthington, Goldsman, & Alston, 1998). After all these, the contract is then terminated as set forth in the standard Termination for Convenience clause. The contractor is entitled to cover any costs as stipulated by the FAR regulations and clauses.
This is the most powerful clause in the government's terms and conditions that enable the government to unilaterally make changes to contracts during performance provided the changes fall in the scope of the contract. The change should not necessarily work to the disadvantage of the contractor; he is entitled to an equitable adjustment. These changes can be informal or constructive (Vacketta, 2010). Failure to come to an agreement on the equitable adjustment will constitute a dispute as provided under the disputes act.
This resembles the termination for cause clause which is mostly used in the commercial market place. This allows the government to terminate a contract in a situation where the contractor has breached the contract. However the standard default clause excuses failure to perform if it arose from causes that are beyond control and without a contractor's fault or negligence. The standard default clause just like the cover right, entitles the government to reprocure services or supplies needed under the contract that is terminated and therefore charge the excess costs to the contractors who is terminated (Vacketta, 2010). According to FAR 52.249.8 (b), this is an additional right to other rights that the government may have at law or under the contract.
The Treatment of Costs/Pricing of Contracts
There are three most complicated and burdensome requirements found in the non-commercial item government contracts. These mandate one to comply with: FAR's cost principles; cost accounting standards; and the truth in negotiations act (Vacketta, 2010).
The Far Cost Principles
These are set out in part 31 and define the time and extent to what costs can be recovered in a government contract. If the principles apply before the contractor recovers a particular cost, it must be allowable, allocable, and reasonable. This part also establishes the general guidelines that are followed in the determination of the allocability and reasonableness of costs (Vacketta, 2010). A cost is allocable if it is chargeable or assignable to one or more cost objectives basing on relative benefits that are received or to any other equitable relationship.
Cost Accounting Standards
These standards dictate how a contractor should maintain its accountability system and also instruct the contractors on how to account some types of costs. These standards cover any negotiated contract that is over $500,000. This does not apply to the sealed bid contracts (Vacketta, 2010). They are in two categories, the modified coverage, and the full coverage.
Truth in Negotiation Act Requirements
Under this act, a government contractor or subcontractor is called upon to submit what is called cost or pricing data, this is if any modification, contract or subcontract is expected to go beyond $500,000. This allows the contracting officer to determine the reasonableness of prices that are offered. The data is to be certified that it is accurate, current, and complete by the contractor or subcontractor (Vacketta, 2010). If found out otherwise after a contract has been awarded, then the contract price may be reduced accordingly.
Government Contract Disputes Process
There is put in place a special process that is followed to solve disputes that arise under government contracts between a contractor and the government. This process was initially governed solely by a disputes clause that is found in about all government contracts but in 1978, the process was codified by the Contract Disputes Act (CDA), 41 U.S.C. §§ 601, et seq, a process that applies to all government disputes that arise in or relate to government contracts. The Contracts Disputes Act is implemented by the FAR through the standards disputes clause that defines the rights and duties that cover a contractor in dispute with the government (Sisk, Noone, Steadman, & Lester, 2006). It also allows a contractor to continue discharging his duties as he or she awaits the resolution of the dispute.
Presentation of a "claim"
A dispute process is initiated once a contractor presents a claim to the contracting officer. Under the disputes clause, a claim is defined as a written demand or assertion by one of the contracting parties that seek the payment of money in a certain sum, the interpretation or adjustment of terms of contract, or other reliefs that arise from the contract (Vacketta, 2010). If the claim under question exceeds $100,000, then it must be certified by the contractor according to FAR regulations 52.233-1(d) (2).
Contracting Officer's Decision
If it is possible for a resolution to be negotiated by the contractor and the government, the contracting officer must then issue a final decision. This is articulated in writing showing the agency's position in regard to the claim, then there follows litigation by a contractor (Kelleher, 2008). However if a final decision is not made in time, then the contractor can appeal the deemed denial of the claim to a US court of federal claims or to a board of contract appeals (Kelleher, 2008). There are eleven agency boards of contract appeals with the Armed Services Board of Contract Appeals being the largest of them.
Appeal to the U.S. Court of Federal Claims
A proceeding can be initiated by a contractor at the Court of Federal Claims by filing a compliant. This should be within one year after he or she receives the final decision from the contracting officer. Failure to do this will result in dismissal as this will have defeated the Court of Federal Claims' jurisdiction of hearing the case (Ralston, 2007). But if followed accordingly, then the government will have sixty days within which to file an answer to the complaint.
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