Other contract types include incentive contracts, time-and-materials, labor-hour contracts, indefinite-delivery contracts, and letter contracts. Fixed-price contracts, also known as firm-price or lump-sum contracts, are agreements in which the two parties state the goods or services one party will provide and establish the price the other party will pay for them. Administrators and hospitalists who had called their relationship broken, dysfunctional, and distrustful now describe it as collaborative, trusting, and supportive., Kerrone points to financial benefits as well. Recurring costs means costs that vary with the quantity being produced, such as labor and materials. Nonrecurring costs include such costs, where applicable, as plant or equipment relocation or rearrangement, special tooling and special test equipment, preproduction engineering, initial rework, initial spoilage, pilot runs, allocable portions of the costs of facilities to be acquired or established for the conduct of the work, costs incurred for the assembly, training, and transportation to and from the job site of a specialized work force, and unrealized labor learning. Tradeoff What does Best Value mean? Protection of existing authority. Solicitations for multi-year contracts shall reflect all the factors to be considered for evaluation, specifically including the following: (a) Now I have someone I know fairly well at a high level in administration. (a) This subpart prescribes policies and procedures applicable to all interagency acquisitions under any authority, except as provided for in paragraph (c) of this section. This is necessary for situations when exercise of the option would result in the obligation of funds that are not available in the fiscal year in which the contract would otherwise be completed. (b) This subpart applies to interagency acquisitions, see 2.101 for definition, when-, (1) An agency needing supplies or services obtains them using another agencys contract; or. (2) A multi-year contract will serve the best interests of the United States by encouraging full and open competition or promoting economy in administration, performance, and operation of the agencys programs. The estimates of both the cost of the contract and the cost avoidance through the use of a multi-year contract are realistic. In that event, contracting officers must follow the requirements of subpart 17.2. (b) Type of contract. When Dell and FedEx reached their breaking point, they chose to abandon their existing contracting process and create a formal relational contract that specified desired outcomes and defined relationship-management processes at the operational, management, and executive levels. The total estimate of the above costs must then be compared with the best estimate of the contract cost to arrive at a reasonable percentage or dollar figure. (ii) Each agencys file shall include the interagency agreement between the requesting and servicing agency, and shall include sufficient documentation to ensure an adequate audit consistent with 4.801(b). Designed from the outset to foster trust and collaboration, this legally enforceable contract is especially useful for highly complex relationships in which it is impossible to predict every what-if scenario. Cancellation results when the contracting officer-, (1) Notifies the contractor of nonavailability of funds for contract performance for any subsequent program year; or. But the process we have outlined should be part of the contracting tool kit to govern highly complex relationships that demand collaboration and flexibility. Subpart 17.7 - Interagency Acquisitions: Acquisitions by Nondefense Agencies on Behalf of the Department of Defense, This part prescribes policies and procedures for the acquisition of supplies and services through special contracting methods, including-. 17.208 Solicitation provisions and contract clauses. (1) The incumbent contractors overall performance, including, specifically, technical, administrative, and cost performance; (2) The potential impact of a change in contractors on program needs, including safety, national defense, and mobilization considerations; and. We not only came in under budget, we also increased our revenue by improving our MSP billing process. We were no longer interested in just developing a contract, recalled Jean Maskey, a hospitalist at South Island who coheaded the contracting team, but in building excellent relationships at multiple levels that would allow all of us to be leaders in Canadian health care, whether as administrators or hospitalists.. Benefits may accrue by including options in a multi-year contract. (c) The contracting officer shall not employ options if-. In determining cancellation ceilings, the contracting officer must estimate reasonable preproduction or startup, labor learning, and other nonrecurring costs to be incurred by an "average" prime contractor or subcontractor, which would be applicable to, and which normally would be amortized over, the items or services to be furnished under the multi-year requirements. However, statutes applicable to various classes of contracts, for example, the Service Contract Labor Standards statute (see 22.1002-1), may place additional restrictions on the length of contracts. In this article, we look at the theoretical underpinnings of formal relational contracts and lay out a five-step methodology for negotiating them. (f) Contracts may express options for increased quantities of supplies or services in terms of-. One objective, for example, called for improving physicians billing to the provincial Medical Services Plan (MSP) for cost recovery for the hospitalist fees. Cancellation ceiling means the maximum cancellation charge that the contractor can receive in the event of cancellation. Oliver and Moores expanded theory focuses on contracts as reference points, a new perspective that emphasizes the need for mechanisms to continually align expectationsor update reference pointsas unanticipated events occur and needs change over time. may not be awarded until the head of the agency gives written notification of the proposed contract and of the proposed cancellation ceiling for that contract to the committees on appropriations of the House of Representatives and Senate and the appropriate oversight committees of the House and Senate for the agency in question. To satisfy requirements of part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract, e.g.-. An example of a circumstance that may support a determination not to evaluate offers for option quantities is when there is a reasonable certainty that funds will be unavailable to permit exercise of the option. The Island Health and South Island team held a three-day off-site to craft their vision: Together, we are a team that celebrates and advances excellence in care for our patients and ourselves through shared responsibility, collaborative innovation, mutual understanding, and the courage to act, in a safe and supportive environment. They further established a set of four desired outcomes that flowed from the shared vision: About the art: Artist Cecil Touchons collages of sliced and rearranged letterforms create subliteral poems. In his Typographic Abstraction series, the compositions transform letters from a symbol of written language into a kind of visual architecture. Subpart 17.4 - Leader Company Contracting, Subpart 17.6 - Management and Operating Contracts. The benefits of informal handshake deals have been studied and promoted over the decades; legal scholars Stewart Macaulay and Ian Macneil were early advocates in the 1960s. (3) Follower company, obligating it to subcontract with a designated leader company for the required assistance. Formal relational contracts are built on a foundation of trust and are shaped by a shared vision and six universal guiding principles. This subpart implements 41 U.S.C. A 60-day termination for convenience translates to a 60-day contract, one CFO at a supplier told us. (2) A statement that an extension of the contract includes an extension of the option. In the event there are no agency unique requirements beyond the FAR, the requesting agency shall so inform the servicing agency contracting officer in writing. (d) The termination for convenience procedure may apply to any Government contract, including multiyear contracts. The extent to which cancellation terms are used in multi-year contracts will depend on the unique circumstances of each contract. Multi-year contract means a contract for the purchase of supplies or services for more than 1, but not more than 5, program years. The main advantage of using this method is avoiding the need to draft the subcontract from scratch and hopefully saving time negotiating it. (1) Shall add the clause at 52.222-43, Fair Labor Standards Act and Service Contract Labor Standards- Price Adjustment (Multiple Year and Option Contracts), when the contract includes the clause at 52.222-41, Service Contract Labor Standards; (2) May modify the clause at 52.222-43 in overseas contracts when laws, regulations, or international agreements require contractors to pay higher wage rates; or. (d) Glenn Gallins, the attorney representing South Island Hospitalists and a law professor at the University of Victoria, offers the following advice when it comes to embracing formal relational contracts: The focus on negotiating the foundation of the relationship first is brilliant. Nondefense agency contracting officers are responsible for ensuring support provided in response to DoDs request complies with paragraph (b) of this section. (b) Insert a provision substantially the same as the provision at 52.217-4, Evaluation of Options Exercised at Time of Contract Award, in solicitations when the solicitation includes an option clause, the contracting officer has determined that there is a reasonable likelihood that the option will be exercised, and the option may be exercised at the time of contract award. There is a reasonable expectation that, throughout the contemplated contract period, the head of the agency will request funding for the contract at a level to avoid contract cancellation; and. In the event there are no DoD-unique requirements beyond the FAR, the DoD acquisition official shall so inform the servicing nondefense agency contracting officer in writing. As contrasted with cancellation, termination can be effected at any time during the life of the contract (cancellation is effected between fiscal years) and can be for the total quantity or partial quantity (where as cancellation must be for all subsequent fiscal years quantities). Economic price adjustment clauses. However, the preparation and evaluation of dual offers may increase administrative costs and workload for both offerors and the Government, especially for large or complex acquisitions. (f) Contracts awarded under the multi-year procedure shall be firm-fixed-price, fixed-price with economic price adjustment, or fixed-price incentive. Participation by subcontractors, suppliers, and vendors. Some methods of contracting require more time than others. (2) The D&F shall be approved by a contracting officer of the requesting agency with authority to contract for the supplies or services to be ordered, or by another official designated by the agency head, except that, if the servicing agency is not covered by the FAR, approval of the D&F may not be delegated below the senior procurement executive of the requesting agency. In order to broaden the defense industrial base, to the maximum extent practicable-, (1) Multi-year contracting shall be used in such a manner as to seek, retain, and promote the use under such contracts of companies that are subcontractors, suppliers, and vendors; and. (4) In no event shall the servicing agency require, or the requesting agency pay, any fee or charge in excess of the actual cost (or estimated cost if the actual cost is not known) of entering into and administering the contract or other agreement under which the order is filled. The requesting agency shall provide to the servicing agency any unique terms, conditions, and applicable agency-specific statutes, regulations, directives, and other applicable requirements for incorporation into the order or contract. The total estimate of the above costs must then be compared with the best estimate of the contract cost to arrive at a reasonable percentage or dollar figure. This wide selection of contract types is available to the government and contractors to provide flexibility in acquiring the large variety and volume of supplies and services required by agencies. (1) However, if the servicing agency is not subject to the Federal Acquisition Regulation, the requesting agency shall verify that contracts utilized to meet its requirements contain provisions protecting the Government from inappropriate charges (for example, provisions mandated for FAR agencies by part 31), and that adequate contract administration will be provided. 3903 and 10 U.S.C. (b) An agency shall not use an interagency acquisition to circumvent conditions and limitations imposed on the use of funds. all of these are correct IDENTIFY THE VARIOUS METHODS OF CONTRACTING FOR A SUPPLY OR SERVICE:Some methods of contracting require more time than others. Examples of more specific authority are 40 U.S.C. (a) Written agreement on responsibility for management and administration. (a)Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award. Any competitive negotiated acquisition having a basis for award stating that factors in addition to cost/price will be considered in selecting the successful offeror (s) (b) Since issuance of an authorization under 17.602(a) is deemed sufficient proof of compliance with paragraph (a) immediately above, nothing in paragraph (a) immediately above shall affect the validity or legality of such an authorization. Cancellation procedures. For DoD, NASA, and the Coast Guard, the authorities cited in 17.101 do not apply to contracts for the purchase of supplies to which 40 U.S.C.759 applies (information resource management supply contracts). When contracting for services, the contracting officer-. (2) In determining cancellation ceilings, the contracting officer must estimate reasonable preproduction or startup, labor learning, and other nonrecurring costs to be incurred by an "average" prime contractor or subcontractor, which would be applicable to, and which normally would be amortized over, the items or services to be furnished under the multi-year requirements. (2) For special protection covering the orderly transition of personnel and work in the event of a change in contractors. The contracting officer shall insert the clause at 52.217-2, Cancellation Under Multi-year Contracts, in solicitations and contracts when a multi-year contract is contemplated. Buyers must consider three key factors when deciding what type of contracting arrangement is right for each supplier relationship. Which of the following is not a streamlined method of acquisition? Cancellation means the cancellation (within a contractually specified time) of the total requirements of all remaining program years. There is a stable design for the supplies to be acquired, and the technical risks associated with such supplies are not excessive; (4) If demand is lower during the term of the contract than the buyer stated in the RFP or the scope expands in an unanticipated area, the suppliers profit will take a hit. 10) Some methods of contracting require more time than others. Nondefense agency that is an element of the intelligence community means the agencies identified in 50 U.S.C. (a) Interagency acquisitions are commonly conducted through indefinite-delivery contracts, such as task- and delivery-order contracts. (3) May use an economic price adjustment clause authorized by 16.203, when potential fluctuations require coverage and are not included in cost contingencies provided for by the clause at 52.222-43. false. Unfortunately, this story is not unique. https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/assets/OMB/procurement/interagency_acq/iac_revised.pdf, https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/procurement/memo/development-review-and-approval-of-business-cases-for-certain-interagency-and-agency-specific-acquisitions-memo.pdf, http://www.acq.osd.mil/dpap/cpic/cp/interagency_acquisition.html, Civilian Agency Acquisition Council (CAAC), Interagency Suspension and Debarment Committee (ISDC). Early research by one of us (Oliver, who won the 2016 Nobel Prize in economics for his work on contracts) predicted that in response to the combined problems of hold-ups and incomplete contracts, companies are very likely to make distorted investments that produce poor outcomes. (See 17.200, 17.202, and 37.111.). (3) Benefits may accrue by including options in a multi-year contract. (b) Agencies may authorize management and operating contracts only in a manner consistent with the guidance of this subpart and only if they are consistent with the situations described in 17.604. (g) Payment limit. L. 110-181, section 801, as amended ( 10 U.S.C. (b) The contract shall state the period within which the option may be exercised. First program year; and. Under the new pricing model, when the inpatient population is low, the hospitalists can opt to take time off and save Island Health money. Obtaining both annual and multi-year offers provides reduced lead time for making an annual award in the event that the multi-year award is not in the Governments interest. (f) Insert a clause substantially the same as the clause at 52.217-8, Option to Extend Services, in solicitations and contracts for services when the inclusion of an option is appropriate. (2) (g) Insert a clause substantially the same as the clause at 52.217-9, Option to Extend the Term of the Contract, in solicitations and contracts when the inclusion of an option is appropriate (see 17.200 and 17.202) and it is necessary to include in the contract any or all of the following: (1) A requirement that the Government must give the contractor a preliminary written notice of its intent to extend the contract. (5) Document roles and responsibilities in the administration of the contract. (3) Because private enterprise is unable or unwilling to use its own facilities for the work. (b) The contracting officer shall review each management and operating contract, following agency procedures, at appropriate intervals and at least once every 5 years. It has been determined that the government and contractor personnel can be used interchangeably. This method may be used in sealed bidding or contracting by negotiation. This subpart implements 41 U.S.C. Having set the foundation for the relationship in the first three steps, parties hammer out the terms of the dealfor example, responsibilities, pricing, and metrics. The requesting agency administers the order; therefore, no written agreement with the servicing agency is required. Last Updated Apr 24, 2023. If cancellation occurs, the Governments liability will be determined by the terms of the applicable contract. 1. Every contract so authorized shall show its authorization upon its face. Cancellation ceilings and dates may be revised after issuing the solicitation if necessary. (1) (d) Insert a clause substantially the same as the clause at 52.217-6, Option for Increased Quantity, in solicitations and contracts, other than those for services, when the inclusion of an option is appropriate (see 17.200 and 17.202) and the option quantity is expressed as a percentage of the basic contract quantity or as an additional quantity of a specific line item. (2) An agency uses another agency to provide acquisition assistance, such as awarding and administering a contract, a task order, or delivery order. You need to ensure, Prior to certifying the Managing Accounting Billing Statement for contract payments by Governmentwide Commercial Purchase Card, the Approving/ Billing Official must do what two things? Both parties felt that the new model was a win-win solution that would have been unachievable under previous contracts. And South Islands less-than-optimal reporting processes meant inevitable bickering over billable hours. (ii) The fixed or maximum fee amount is determinable by applying a formula contained in the basic contract (but see 16.102(c)); (4) A specific price that is subject to an economic price adjustment provision; or. $15 million Dells attempts to lower costs, including bidding out the work three times during the eight-year relationship, ate into FedExs profits. (2) Each individual worked with a counterpart from the other organization to establish connections in key areas.
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