2. •U.S. federal government contracts fall into three main types:
•fixed price, cost reimbursement, and time and materials.
You can choose any federal government contract type, depending
on the nature of your business. The focus should be mutual
financial performance, both for the contractor and for the federal
government. Even though the profit margin of contracting with the
federal government can be lower than contracting with private
business, the payoff in terms of consistency is high. Work is
consistently available and if the contractor's record, service and
integrity are above reproach, contracts are continually refreshed.
3. Fixed Price
• The fixed-price contract allows a contractor to provide services for a
non-negotiable price. Usually this type of contract is not adjusted
unless provisions such as change in contract, economic, or
defective pricing are stipulated in the agreement.
• The government only negotiates fixed-price contracts when
reasonably accurate specifications and accurate cost estimations
are available. When the federal government enters into a fixed-price
contract, the contractor has to bear any risks that arise from
escalating costs. Fixed-price contracts separate cost and revenue.
4. Cost Reimbursement
• A cost reimbursement contract allows the reimbursement
of certain costs incurred by a contractor while performing
the contract. The reimbursed costs depend on the
specific terms stipulated in the contract. Unlike fixed-
price contract, cost reimbursement contracts directly link
cost and revenue. The contractor will need to maintain
accounts of all costs incurred during the execution of the
project. The federal government provides specific forms
in which costs and reasons for incurring them are
maintained by contractors.
5. Time and Materials
The time and materials contract allows the federal government to
purchase the contractor's direct labor itself, instead of purchasing the
result of such labor. This translates to the actual hours that the
contractor puts into the contracted service. The time and materials
contract poses the lowest risk on the government, when compared to
the other two contract types. If the contractor is capable of providing the
required skills at the agreed upon rate, only then the contract is in
effect.
The contractor cannot invoice the government during any interruptions
to the contracted project, which results in loss of revenue for the
contractor. Possible loss of revenue is a downside that a contractor has
to face while signing the time and materials contract with the federal
government.
6. Sealed Bidding
• Once a federal agency identifies a need, and decides to proceed
with an acquisition, it must solicit sealed bids if (1) time permits the
solicitation, submission and evaluation of sealed bids; (2) the award
will be made on the basis of price and other price-related factors; (3)
it is not necessary to conduct discussions with the responding
offerors about their bids; and (4) there is a reasonable expectation of
receiving more than one sealed bid. FAR 6.401(a).
• The agency's Contracting Officer (CO) initiates a sealed bidding
acquisition by issuance of an Invitation for Bids (IFB). The IFB must
describe the Government's requirements clearly, accurately and
completely. The FAR and case law prohibit the use of unnecessarily
restrictive specifications that might unduly limit the number of
bidders.
7. Sealed Bid
• The agency publicizes the IFB through display in a public place,
announcement in newspapers or trade journals, publication in the
federal government's Commerce Business Daily (CBD), and by
mailing the IFB to those commercial organizations (contractors) on
the agency's solicitation mailing list. FAR 14.204; FAR 14.205.
• It is critical that contractors submit their bids by the deadline stated
in the IFB. A late bid will not be considered for award except where:
(1) the bid was sent to the CO by registered or certified mail at least
five days before the bid receipt date; (2) the Government
mishandled the bid after receipt; (3) the bid was sent to the CO by
"Postal Service Next Day Service" two days prior to the bid receipt
date; or (4) the bid was transmitted electronically and received by
5:00 p.m. one working day prior to the bid receipt date. FAR 14.304-
1 (a).
8. Sealed Bid
• All bids received by the time and at the place set for opening are
publicly opened and read aloud by the CO. The bids are then
recorded on an "Abstract of Offers" (Standard Form 1049) and
examined for mistakes. If no mistakes are found, after certain other
administrative steps, the CO awards the contract to that responsible
bidder who submitted the lowest responsive bid. A responsive bid is
one that contains a definite, unqualified offer to meet the material
terms of the IFB. FAR 14.301(a). Conditions, informalities, or defects
in the bid that affect the price, quantity, quality, or delivery of the
items being acquired by the agency will result in rejection of the bid.
9. The FAR also requires an affirmative finding of responsibility
prior to awarding the contract to the lowest bidder. FAR 14.408-2.
To be determined responsible, the prospective awardee must have
the ability and capacity to perform the contract.
More specifically, the FAR requires a prospective contractor to
(1) have adequate financial resources to perform the contract;
(2) be able to comply with the required or proposed delivery or performance
schedule;
(3) have a satisfactory performance record;
(4) have a satisfactory record of integrity and business ethics;
(5) have the necessary organization, experience, accounting and operational
controls, and technical skills;
(6) have the necessary production, construction and technical equipment and
facilities; and
(7) be otherwise qualified and eligible to receive an award under applicable laws
and regulations. FAR 9.104-1.
10. Fixed Price Contracts
• Fixed-price types of contracts provide for a firm price or, in
appropriate cases, an adjustable price. Fixed-price contracts
providing for an adjustable price may include a ceiling price, a target
price (including target cost), or both. Unless otherwise specified in
the contract, the ceiling price or target price is subject to adjustment
only by operation of contract clauses providing for equitable
adjustment or other revision of the contract price under stated
circumstances. The contracting officer shall use firm-fixed-price or
fixed-price with economic price adjustment contracts when acquiring
commercial items.
11. Firm-fixed-price contracts
A firm-fixed-price contract provides for a price that is not subject to
any adjustment on the basis of the contractor’s cost experience in
performing the contract. This contract type places upon the
contractor maximum risk and full responsibility for all costs and
resulting profit or loss. It provides maximum incentive for the
contractor to control costs and perform effectively and imposes a
minimum administrative burden upon the contracting parties. The
contracting officer may use a firm-fixed-price contract in conjunction
with an award-fee incentive and performance or delivery incentives
when the award fee or incentive is based solely on factors other
than cost. The contract type remains firm-fixed-price when used with
these incentives.
12. A firm-fixed-price contract is suitable for acquiring commercial items
or for acquiring other supplies or services on the basis of reasonably
definite functional or detailed specifications when the contracting
officer can establish fair and reasonable prices at the outset, such
as when—
• (a) There is adequate price competition;
• (b) There are reasonable price comparisons with prior purchases of
the same or similar supplies or services made on a competitive
basis or supported by valid cost or pricing data;
• (c) Available cost or pricing information permits realistic estimates of
the probable costs of performance; or
• (d) Performance uncertainties can be identified and reasonable
estimates of their cost impact can be made, and the contractor is
willing to accept a firm fixed price representing assumption of the
risks involved.
13. Cost-Reimbursement
Contracts
Cost-reimbursement types of contracts provide for payment of
allowable incurred costs, to the extent prescribed in the contract.
These contracts establish an estimate of total cost for the purpose of
obligating funds and establishing a ceiling that the contractor may
not exceed (except at its own risk) without the approval of the
contracting officer.
Cost-reimbursement contracts are suitable for use only when
uncertainties involved in contract performance do not permit costs to
be estimated with sufficient accuracy to use any type of fixed-price
contract.
14. Cost-Reimbursement
Contracts
• Limitations.
• (a) A cost-reimbursement contract may be used only when—
(1) The contractor’s accounting system is adequate for determining
costs applicable to the contract; and
(2) Appropriate Government surveillance during performance will
provide reasonable assurance that efficient methods and effective cost
controls are used.
(b) The use of cost-reimbursement contracts is prohibited for the
acquisition of commercial items.
15. Indefinite-Delivery Contracts
• “Delivery order contract” means a contract for supplies that does not
procure or specify a firm quantity of supplies (other than a minimum
or maximum quantity) and that provides for the issuance of orders
for the delivery of supplies during the period of the contract.
• “Task order contract” means a contract for services that does not
procure or specify a firm quantity of services (other than a minimum
or maximum quantity) and that provides for the issuance of orders
for the performance of tasks during the period of the contract.
16. Indefinite-Delivery Contracts
There are three types of indefinite- delivery contracts:
definite-quantity contracts, requirements contracts, and
indefinite-quantity contracts.
The appropriate type of indefinite-delivery contract
may be used to acquire supplies and/or services when
the exact times and/or exact quantities of future
deliveries are not known at the time of contract award.
17. Definite-quantity contracts
A definite-quantity contract provides for delivery of a definite
quantity of specific supplies or services for a fixed period, with
deliveries or performance to be scheduled at designated locations
upon order.
A definite-quantity contract may be used when it can be determined
in advance that—
(1) A definite quantity of supplies or services will be required during
the contract period; and
(2) The supplies or services are regularly available or will be
available after a short lead time.
18. Requirements contracts
A requirements contract provides for filling all actual purchase
requirements of designated Government activities for supplies or
services during a specified contract period, with deliveries or
performance to be scheduled by placing orders with the contractor.
A requirements contract may be appropriate for acquiring any
supplies or services when the Government anticipates recurring
requirements but cannot predetermine the precise quantities of
supplies or services that designated Government activities will need
during a definite period.
No requirements contract in an amount estimated to exceed $100
million (including all options) may be awarded to a single source
19. Indefinite-quantity contracts
• An indefinite-quantity contract provides for an indefinite quantity,
within stated limits, of supplies or services during a fixed period. The
Government places orders for individual requirements. Quantity
limits may be stated as number of units or as dollar values.
• A solicitation and contract for an indefinite quantity must—
• (1) Specify the period of the contract, including the number of
options and the period for which the Government may extend the
contract under each option;
• (2) Specify the total minimum and maximum quantity of supplies or
services the Government will acquire under the contract;
• (3) Include a statement of work, specifications, or other description,
that reasonably describes the general scope, nature, complexity,
and purpose of the supplies or services the Government will acquire
under the contract in a manner that will enable a prospective offeror
to decide whether to submit an offer
20. Multiple award preference
• Except for indefinite-quantity contracts for advisory and assistance
services, the contracting officer must, to the maximum extent
practicable, give preference to making multiple awards of indefinite-
quantity contracts under a single solicitation for the same or similar
supplies or services to two or more sources.
21. Time-and-materials contracts
• “Direct materials” means those materials that enter directly into the
end product, or that are used or consumed directly in connection
with the furnishing of the end product or service.
• “Hourly rate” means the rate(s) prescribed in the contract for
payment for labor that meets the labor category qualifications of a
labor category specified in the contract that are—
(1) Performed by the contractor;
(2) Performed by the subcontractors; or
(3) Transferred between divisions, subsidiaries, or affiliates of the
contractor under a common control.
22. Time-and-materials
contracts
• “Materials” means—
• (1) Direct materials, including supplies transferred between
divisions, subsidiaries, or affiliates of the contractor under a common
control;
• (2) Subcontracts for supplies and incidental services for which there
is not a labor category specified in the contract;
• (3) Other direct costs (e.g., incidental services for which there is not
a labor category specified in the contract, travel, computer usage
charges, etc.); and
• (4) Applicable indirect costs.
23. Time-and-materials
contract
• A time-and-materials contract provides for acquiring supplies or
services on the basis of—
(1) Direct labor hours at specified fixed hourly rates that include wages,
overhead, general and administrative expenses, and profit; and
(2) Actual cost for materials
24. Labor-hour contracts
A labor-hour contract is a variation of the time-and-
materials contract, differing only in that materials are not
supplied by the contractor
25. Letter contracts
• A letter contract is a written preliminary contractual instrument that
authorizes the contractor to begin immediately manufacturing
supplies or performing services.
• (a) A letter contract may be used when
(1) the Government’s interests demand that the contractor be given a
binding commitment so that work can start immediately and
(2) negotiating a definitive contract is not possible in sufficient time to
meet the requirement. However, a letter contract should be as
complete and definite as feasible under the circumstances.
26. Source selection objective
• The objective of source selection is to select the proposal that
represents the best value.
• Agency heads are responsible for source selection. The contracting
officer is designated as the source selection authority, unless the
agency head appoints another individual for a particular acquisition
or group of acquisitions.
27. Source Selection
• Price or cost to the Government shall be evaluated in every source
selection
• The quality of the product or service shall be addressed in every
source selection through consideration of one or more non-cost
evaluation factors such as past performance, compliance with
solicitation requirements, technical excellence, management
capability, personnel qualifications, and prior experience
• The extent of participation of small disadvantaged business
concerns in performance of the contract shall be evaluated in
unrestricted acquisitions expected to exceed $550,000 ($1,000,000
for construction) subject to certain limitations
28. Simplified Acquisition Methods
• The Government wide commercial purchase card is authorized for
use in making and/or paying for purchases of supplies, services, or
construction
• The Government wide commercial purchase card may be used to—
• (1) Make micro-purchases;
• (2) Place a task or delivery order (if authorized in the basic contract,
basic ordering agreement, or blanket purchase agreement); or
• (3) Make payments, when the contractor agrees to accept payment
by the card
29. Purchase guidelines
Solicitation, evaluation of quotations, and award.
(1) To the extent practicable, micro-purchases shall be distributed
equitably among qualified suppliers.
(2) Micro-purchases may be awarded without soliciting competitive
quotations if the contracting officer considers the price to be
reasonable.
(3) The administrative cost of verifying the reasonableness of the price
for purchases may more than offset potential savings from detecting
instances of overpricing.
30. Blanket purchase agreements (BPAs)
• A blanket purchase agreement (BPA) is a simplified method of filling
anticipated repetitive needs for supplies or services by establishing
“charge accounts” with qualified sources of supply
BPAs should be established for use by an organization responsible
for providing supplies for its own operations or for other offices,
installations, projects, or functions. Such organizations, for example,
may be organized supply points, separate independent or detached
field parties, or one-person posts or activities.
The use of BPAs does not exempt an agency from the responsibility
for keeping obligations and expenditures within available funds.
31. Purchase priorities
• The Javits-Wagner-O’Day Act requires the Government to purchase
supplies or services on the Procurement List, at prices established by the
Committee, from AbilityOne participating nonprofit agencies if they are
available within the period required. When identical supplies or services are
on the Procurement List and the Schedule of Products issued by Federal
Prison Industries, Inc., ordering offices shall purchase supplies and services
in the following priorities:
• Supplies:
• (1) Federal Prison Industries, Inc.
• (2) AbilityOne participating nonprofit agencies.
• (3) Commercial sources.
• (2) Services:
• (1) AbilityOne participating nonprofit agencies.
• (2) Federal Prison Industries, Inc., or commercial sources
32. Federal Supply Schedules
The Federal Supply Schedule program is also known as the GSA
Schedules Program or the Multiple Award Schedule Program. The
Federal Supply Schedule program is directed and managed by GSA
and provides Federal agencies with a simplified process for
obtaining commercial supplies and services at prices associated
with volume buying. Indefinite delivery contracts are awarded to
provide supplies and services at stated prices for given periods of
time. GSA may delegate certain responsibilities to other agencies
( GSA has delegated authority to the VA to procure medical supplies
under the VA Federal Supply Schedules program).
GSA offers an on-line shopping service called “GSA Advantage!”
through which ordering activities may place orders against
Schedules
52. Opportunities
• Award Notice
– (https://www.fbo.gov/index?s=opportunity&mode=form&id=6fe8cc43
bbbcbc054f2ba9488a5decd2&tab=core&_cview=1)
53.
54. Contact Information
• Scott Dorney, Executive Director, 910-678-0190,
dorneys@ncmbc.us
• Bill Greuling, Business Development Manager, 910-578-
2626 (Durham), greulingb@ncmbc.us
• Diana Potts, Business Development Specialist, 910-678-
0192, pottsd@ncmbc.us
