Government procurement in the United States


The processes of government procurement in the United States enable federal, state and local government bodies in the United States to acquire goods, services, and interests in real property.
In fiscal year 2019, the US Federal Government spent $597bn on contracts. The market for state, local, and education contracts is thought to be worth $1.5 trillion. Contracts for federal government procurement usually involve appropriated funds spent on supplies, services, and interests in real property by and for the use of the Federal Government through purchase or lease, whether the supplies, services, or interests are already in existence or must be created, developed, demonstrated, and evaluated. Federal Government contracting has the same legal elements as contracting between private parties: a lawful purpose, competent contracting parties, an offer, an acceptance that complies with the terms of the offer, mutuality of obligation, and consideration. However, federal procurement is much more heavily regulated, subject to volumes of statutes dealing with Federal contracts and the Federal contracting process, mostly in Titles 10, 31, 40, and 41 of the United States Code.

Value of government procurement

In fiscal year 2019, the US Federal Government spent $597bn on contracts. This compares with $442bn in fiscal year 2015 and $461bn in 2016. Federal Procurement Reports provide contract data which may be used for geographical, market, and socio-economic analysis, as well as for measuring and assessing the impact of acquisition policy and management improvements.
In Fiscal Year 2010, the top five departments by dollars obligated were:
The Top 100 Contractors Report for Fiscal Year 2009 lists contracts totalling $294.6 billion, the top five comprising aerospace and defense contractors:
In the same period, small business contracts totalled $96.8 billion.

Law

The Federal Government's authority to enter into contracts derives from the U.S. Constitution, which defines its powers. The Federal Government acts through legislation, treaties, implementing regulations, and the exercise of those authorities. The Federal Government's power to contract is not set forth expressly and specifically in the U.S. Constitution, but Article 6 appears to assume the continued vitality of "Engagements" entered into under the preceding Articles of Confederation. Moreover, the power to contract was and is regarded at law as necessarily incidental to the Federal Government's execution of its other powers. An early Supreme Court case, United States v. Thomas Tingey, recognized that the United States Government has a right to enter into a contract. It is an incident to the general right of sovereignty, and the United States may, within the sphere of the constitutional powers confided to it and through the instrumentality of the proper department to which those powers are confided, enter into contracts not prohibited by law and appropriate to the just exercise of those powers. Scores of statutes now also expressly authorize departments and agencies to enter into contracts. The U.S. Congress passes legislation that defines the process and additional legislation that provides the funds.

Contract law

Private parties entering into a contract with one another have more freedom to establish a broad range of contract terms by mutual consent compared to a private party entering into a contract with the Federal Government. Each private party represents its own interests and can obligate itself in any lawful manner. Federal Government contracts allow for the creation of contract terms by mutual consent of the parties, but many areas addressed by mutual consent in commercial contracts are controlled by law in federal contracting and legally require use of prescribed provisions and clauses. In commercial contracting, where one or both parties may be represented by agents whose authority is controlled by the law of agency, the agent is usually allowed to form a contract only with reference to accepted notions of commercial reasonableness and perhaps a few unique statutes which apply. In Federal Government contracting, specific regulatory authority is required for the Government's agent to enter into the contract, and that agent's bargaining authority is strictly controlled by statutes and regulations reflecting national policy choices and prudential limitations on the right of federal employees to obligate federal funds. By contrast, in commercial contracting, the law allows each side to rely on the other's authority to make a binding contract on mutually agreeable terms. Executive branch agencies enter into the contracts and expend the funds to achieve their Congressionally defined missions. When disputes arise, administrative processes within the agencies may resolve them, or the contractor can appeal to the courts.
The procurement process for executive branch agencies is governed primarily by the Armed Services Procurement Act and the Federal Property and Administrative Services Act. To address the many rules imposed by Congress and the courts, a body of administrative law has been developed through the Federal Acquisition Regulation. This 53-part regulation defines the procurement process, including special preference programs, and includes the specific language of many clauses mandated for inclusion within Government contracts. Most agencies also have supplemental regulatory coverage contained in what are known as FAR Supplements. These supplements appear within the Code of Federal Regulations volumes of the respective agencies. For example, the Department of Defense FAR Supplement can be found at 10 CFR.
Government contracts are governed by federal common law, a body of law which is separate and distinct from the bodies of law applying to most businesses—the Uniform Commercial Code and the general law of contracts. The UCC applies to contracts for the purchase and sale of goods, and to contracts granting a security interest in property other than land. The UCC is a body of law passed by the U.S. state legislatures and is generally uniform among the states. The general law of contracts, which applies when the UCC does not, is mostly common law, and is also similar across the states, whose courts look to each other's decisions when there is no in-state precedent.
Contracts directly between the Government and its contractors are governed by the federal common law. Contracts between the prime contractor and its subcontractors are governed by the contract law of the respective states. Differences between those legal frameworks can put pressure on a prime contractor.

United States Constitution

The authority to purchase is not one of the explicitly enumerated powers given to the Federal Government by Section 8 of Article One of the United States Constitution, but courts found that power implicit in the Constitutional power to make laws that are necessary and proper for executing its specifically granted powers, such as the powers to establish post offices, post roads, banks, an army, a navy, or militias.

Statutes

Behind any Federal Government acquisition is legislation that permits it and provided money for it. These are normally covered in authorization and appropriation legislation. Generally, this legislation does not affect the acquisition process itself, although the appropriation process has been used to amend procurement laws, notably with the Federal Acquisition Reform Act and the Federal Acquisitions Streamlining Act. Other relevant laws include the Federal Property and Administrative Services Act of 1949, the Armed Services Procurement Act and the Antideficiency Act.

Antideficiency Act

U.S. Federal fiscal law is about Congressional oversight of the Executive Branch, not principally toward getting the mission accomplished nor getting a good deal for the Government. Fiscal law frequently prevents Government agencies from signing agreements that commercial entities would sign. Therefore, fiscal law can constrain a Federal agency from the quickest, easiest, or cheapest way to accomplish its mission. This Constitutionally mandated oversight of the use of public funds is associated with the principle of checks and balances. A good working relationship and robust communication between the Executive and Legislative branches is the key to avoiding problems in this area.
The teeth for fiscal law comes from the Antideficiency Act, which provides that no one can obligate the Government to make payments for which money has not already been appropriated. The ADA also prohibits the Government from receiving gratuitous services without explicit statutory authority. In particular, an ADA violation occurs when a Federal agency uses appropriated funds for a different purpose than is specified in the appropriations act which provided the funds to the agency. The ADA is directly connected to several other fiscal laws, namely the Purpose Act and the Bona Fide Needs Rule.
Money appropriated for one purpose cannot be used for a different purpose, according to the Purpose Act. The annual DoD appropriations acts include approximately 100 different appropriations, and by this rule operations and maintenance funds may not be used to buy weapons. Even an expenditure within the apparent scope of one appropriation may not be permissible if there is a more specific appropriation or the agency has made a previous funds election contrary to the proposed use of funds. For example, O&M fund can be used for purchasing repair parts, but if the parts are required to effect a major service life extension that is no longer repair but replacement – procurement funds must be used if the total cost is more than $250,000 or another procurement appropriation is available such as the armored vehicle or weapons appropriation.
An Antideficiency Act violation can also occur when a contract uses funds in a period that falls outside of the time period the funds are authorized for use under what is known as the Bona Fide Needs rule, which provides: "The balance of a fixed-term appropriation is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period."
The Bona Fide Need Rule is a fundamental principle of appropriations law addressing the availability as to time of an agency's appropriation. 73 Comp. Gen. 77, 79 ; 64 Comp. Gen. 410, 414-15. The rule establishes that an appropriation is available for obligation only to fulfill a genuine or bona fide need of the period of availability for which it was made. 73 Comp. Gen. 77, 79. It applies to all Federal Government activities carried out with appropriated funds, including contract, grant, and cooperative agreement transactions. 73 Comp. Gen. 77, 78-79. An agency's compliance with the bona fide need rule is measured at the time the agency incurs an obligation, and depends on the purpose of the transaction and the nature of the obligation being entered into. 61 Comp. Gen. 184, 186 . In the grant context, the obligation occurs at the time of award. 31 Comp. Gen. 608. See also 31 U.S.C. Sec. 1501. Simply put, this rule states that the Executive Branch may only use current funds for current needs – they cannot buy items which benefit future year appropriation periods without a specific exemption. The net result of this rule is funds expire after the end date for which Congress has specified their availability. For example, a single year fund expires on 1 October of the year following their appropriation.
For example, operations and maintenance funds generally cannot be used to purchase supplies after 30 September of the year they are appropriated within with several exceptions – 1) the severable services exemption under 10 USC 2410 and Office of Management and Budget Authorized stockage level exceptions and 3) long lead time exception. The Government Accounting Office Principles of Federal Appropriations Law has a detailed discussion of these fiscal law rules which directly impact on the ability of a Federal agency to contract with the private sector.

Procurement Integrity Act

The Procurement Integrity Act, introduced after a three-year FBI investigation launched in 1986 known as "Operation Ill Wind", applies to the personnel who engage in federal source selections and includes prohibitions on gifts being given to source selection personnel, restrictions on dissemination of procurement sensitive information and post Government employment restrictions.

Identical bids

's Executive Order 10936 of 24 April 1961 required federal agencies to investigate and report on identical bids received in connection with the procurement of goods or services. It was revoked by President Reagan in 1983 by Executive Order 12430.
Kennedy's order reflected concern that "the prevalence of identical bidding harmful to the effective functioning of a system of competitive bids" and that "identical bidding constitute evidence of the existence of conspiracies to monopolize or restrain trade or commerce". Reagan's order argued that the requirement had "proved ineffective" and "consume resources that could be employed in a more effective manner to prevent antitrust violations".

FASA

The procurement process is subject to legislation and regulation separate from the authorization and appropriation process. These regulations are included in the Code of Federal Regulations, the omnibus listing of Government regulations, as . Chapter 1 of Title 48 is commonly called the Federal Acquisition Regulation. The remaining chapters of Title 48 are supplements to the FAR for specific agencies.
The process for promulgating regulations including the Federal Acquisition Regulation includes publication of proposed rules in the Federal Register and receipt of comments from the public before issuing the regulation. Courts treat the FAR as having the "force and effect of law", and Contracting Officers do not have the authority to deviate from it. Supplements to the FAR have been issued following the same process, and have the same force and effect.
The FAR and its supplements permit a substantial variation from the purchases of paperclips to battleships. The Contracting Officer and the contractor must seek to achieve their sometimes conflicting goals while following the requirements of the regulations. As with any complex document, the FAR and its supplements can be interpreted differently by different people.

Trade-in or sales authority

40 USC 181 provides that "In acquiring personal property, any executive agency, under regulations to be prescribed by the Administrator, subject to regulations prescribed by the Administrator for Federal Procurement Policy pursuant to the Office of Federal Procurement Policy Act, may exchange or sell similar items and may apply the exchange allowance or proceeds of sale in such cases in whole or in part payment for the property acquired". The Federal Property and Administrative Services Act of 1949 gives agencies general authority to sell federal personal property and use the proceeds to replace similar property during the same fiscal year or the next one, like a used car trade-in.
The Miscellaneous Receipts Act mandates that funds received by the US Government must be deposited in the miscellaneous receipts account at the US Treasury unless a specific exemption was authorized by Congress. The Miscellaneous Receipts Act prevents the Executive Branch from financing itself except as specifically authorized by Congress. 40 USC 181 thus is necessary to ensure a command that essentially trades or sells items, frequently information technology equipment, can retain the receipts from the trade-in or sale and apply them to acquisition of replacement items.

Acquisition process

Generally, federal acquisitions begin with identification of a requirement by a specific Federal activity. A basic idea of what is needed and the problem statement are prepared and the requiring activity meets with an acquisition command having a Contracting Officer with an appropriate warrant issued by a specific acquisition activity. A contracting agency has the discretion to determine its own needs and the best method to accommodate them.

Contracting Officers

Each Contracting Officer has a specific warrant which states the conditions under which they are permitted to engage in Federal contracting as an agent of the Government. The authority of a Contracting Officer to contract on behalf of the Government is set forth in a public document which a person dealing with the Contracting Officer can review. The CO does not have authority to act outside this warrant or to deviate from the laws and regulations controlling Federal Government contracts. The private contracting party is held to know the limitations of the CO's authority, even if the CO does not. This makes contracting with the United States a more structured and restricted process than a commercial one.
Unless specifically prohibited by another provision of law, an agency's authority to contract is vested in the agency head, for example, the Secretary of the Air Force or the Administrator, National Aeronautics and Space Administration. Agency heads delegate their authority to Contracting Officers, who either hold their authority by virtue of their position or must be appointed in accordance with procedures set forth in the Federal Acquisition Regulation. Only Contracting Officers may sign Government contracts on behalf of the Government. A Contracting Officer has only the authority delegated pursuant to law and agency procedures.
Unlike in commercial contracting, there is no doctrine of apparent authority applicable to the Government. Any action taken by a Contracting Officer which exceeds their actual delegated authority is not binding on the Government, even if both the Contracting Officer and the contractor desire the action and the action benefits the Government. The contractor is presumed to know the scope of the Contracting Officer's authority and cannot rely on any action of Contracting Officers when it exceeds their authority.
Contracting Officers are assisted in their duties by Contracting Officer Representatives and Contracting Officer Technical Representatives, who usually do not have the authority of a Contracting Officer.

Planning

The Contracting Officer and internal departments/end users ideally undertake a planning exercise in advance of procurement commencing. Acquisition planning is described in FAR Part 7, Acquisition Planning, and in agency supplements to the FAR, for example, Defense FAR Supplement 207, Acquisition Planning and the US Army's supplementary regulation, AFARS Part 7, Acquisition Planning.
Acquisition planning is frequently dependent on the circumstances. For example, during World War II, quantity was the key. As in the Civil War, the U.S. achieved victory due in large part to the industrial base in the northern states. A war of attrition requires massive quantities of material, but not necessarily of great quality. During the Cold War, quality was key. The United States may not have had as many pieces of equipment as their opposition, but that equipment could be more effective, efficient, or lethal, and offset the opposition's numerical advantage. Today, the military needs equipment that works where it is needed, is dependable, has a high degree of maintainability, has long-term reliability, is agile and versatile, and aims to avoid equipment choices which might result in political debate and partisan politics.
As part of the acquisition planning process, the Government must address its buying power leverage. Many Government acquisition commands write acquisitions solely based on haphazard acquisition strategies which are primarily directed toward avoiding bid protests. Thus, it is necessary to emphasize competition and understand the acquisition from the view point of the contractor; Government acquisition commands should ask what is to be achieved and whether or not the program is really in the best interest of the Government, specifying needs in a manner designed to achieve full and open competition and including restrictive requirements "only to the extent that they are necessary to satisfy the agency's legitimate needs".
Many federal acquisitions are rushed due to poor time management. In these cases, the tendency is to issue a sole-source contract to known vendors even though FAR Part 6 specifically forbids sole-source contracting when it is due to lack of advanced planning. There is also a high cost premium that is added to the cost of an acquisition when a buyer wants a supplier/vendor to rush to execute a contract or push their contract to the head of all other work the contractor/vendor is executing. It is often said that "if you want it bad, you get it bad". Accordingly, poor acquisition planning generally produces poor and unjustifiable acquisition outcomes. Thus, it is critical to understand the time resources required to properly plan and execute a federal acquisition: generally, the acquisition of moderate to complex requirements requires at least 120 days.

Preparing a proposal

Frequently, contractor proposals in response to a Request for Proposals include an exact copy of the RFP's statement of work. An offeror's response usually indicates their approach to performing the statement of work, their approach to managing the program or project, and examples of past performance on projects similar in size, scope, and complexity.
;Responsible bidders and responsive bids
Potential vendors responding to RFPs may be characterised as "responsible" and/or "responsive". A "responsible bidder" is one who is qualified or capable of meeting the requirements set out by the government in its bid solicitation or RFP. Kate Manuel notes that the concept of responsibility on the part of a bidder "has been the federal government’s policy since its earliest days". James F. Nagle, in his History of Government Contracting, describes how Robert Morris made contract awards to the lowest-priced qualified responsible bidder in contracting for the U.S. Army during the Revolutionary War.
A "responsive bidder" is one who submits a "responsive bid", one which, if accepted by the government as submitted, will obligate the contractor to perform the exact thing being called for in the solicitation. FAR 14.301 states:
The Government Accountability Office has observed that "responsiveness is determined at the time of bid opening from the face of the bid documents", and that "unless something on the face of the bid, or specifically a part of it, limits, reduces or modifies the bidder's obligation to perform in accordance with the terms of the solicitation, the bid is responsive". Furthermore, "the required commitment to the terms of the invitation need not be made in the exact manner specified by the solicitation; all that is necessary is that the bidder, in some fashion, commit itself to the solicitation's material requirements". In general, failure of a bidder to include completed standard representations and certifications does not render the bid nonresponsive because it does not affect the bidder's material obligations.
;Evaluation
Evaluator scoring penalizes proposals that contain "fluff" or generic information that does not directly pertain to the specifics of the solicitation—the Government's need, source selection factors and work statement or performance specification. Charts and other infographics can help a proposal. Examples would be: a six-line chart of the most compelling credentials of contractor's key personnel, or including a picture of a uniformed security guard on the pages describing contractor's uniforms. Professional proposal writers often have graphic design experience.
A proposal can be too long, causing the Government's source selection authority to skim over it. The Government source selection team may not wish to spend much time on the acquisition source selection. Also, it is possible for vendors to put too much information into proposals which do not go to the heart of the acquisition, particularly information not related to the source selection criteria as well as the work statement.
For simple acquisitions, Government source selection authorities have responded favorably to proposals which emphasize experience with the specific requirement that the Government is seeking to source and information on how a product or service will meet the needs of the Government as stated in the source selection factors and the work statement.
Contractors must also be aware of whether or not price is more important than non-price factors. Where price is more important than non-price factors, then the lowest bidder who is technically acceptable in view of the source selection factors and work statement requirements will be selected. Where the solicitation indicates that the requirement is a best value acquisition, then a contractor must draft their proposal to emphasize how their proposed technical solution will meet each and every requirement and source selection factor.
For more complex acquisitions, source selection authorities will be interested in how the contractor will produce service or non-service deliverables. Thus, staffing plans, methodology to produce, past experience, ISO certifications, and other information which shows that risks to the Government acquisition have been identified and mitigated should be rated higher than other proposals which do not show such information. However, it is important that the proposal first and foremost address the solicitation's work statement or technical specifications and source selection factors.
Contractors must also be aware of the contract clauses in the contract to include requirements for specific standards which do not directly relate to the deliverables in question to include small business or minority set-aside requirements, Davis-Bacon, specific accounting standards, specific certifications, etc.
A variety of factors can affect the contracting process and the contract clauses that are used in a Federal acquisition, including:
An acquisition plan may have numerous elements as listed in FAR 7.105; depending upon the estimated cost of the acquisition, these elements include:
During the planning of an acquisition, several key aspects of the effort are decided, including:
Effective market research assists the Government in:
Lack of adequate market research often results in contracts that fail to achieve the customer's expectations. Requiring activities are sometimes asked to write work statements on subject matter with which they have little experience. Persons with little knowledge as to how to conduct market research must seek training or guidance or apply the same common sense they would use if they were buying a high value item for themselves.

Stripped Down Components

1. Work statement: Deliverable list with performance and objective specifications if not a service contract
2. CLINS matched tightly with work statement structure/outline
3. Source selection criteria

Risk

Contracting is all about risk allocation and minimizing risk to include cost, schedule and performance. The more vague the contract work statement, the more risk that the Government assumes.
Risk. A measure of the inability to achieve program objectives within defined cost and schedule constraints. Risk is associated with all aspects of the program, for example, threat, technology, design processes, Work breakdown structure elements, etc. It has two components, the probability of failing to achieve a particular outcome, and the consequences of failing to achieve that outcome.
Does this contract adequately describe all essential work / expectations, is there a schedule and is it enforceable? What are our remedies, if any?
Requiring activities and frequently contracting officers want to get an acquisition on contract as quickly as possible; sometimes too quickly. Thus, contracting officers and acquisition attorneys will frequently have to carefully review the overall acquisition to identify risks to cost, schedule and performance and recommend mitigation measures to decrease these risk areas.
What is my expected payoff? The larger the expected payoff, the larger the associated risk, and vice versa. An Investor, who is a shareholder in a contracting company, will seek to carefully balance the expected payoff with the associated risk, and he is incentivized to seek a large payoff, as long as the risk is acceptable. This perspective is unique in the sense that risk represents both opportunity and danger to the Investor, while it only represents danger to the Program Manager and the Lawyer.
In other words, there is a misalignment in the perception of risk between the Program Manager, the Lawyer, and the Investor. It is ultimately the Investor who owns the contracting company, and this misalignment will have an effect on the Investor's behavior and the stock's performance.
Requirement overbundling
Cost, schedule and performance risk can be increased by over-bundling of a requirement into a single acquisition exercise. Over-bundling dries up the possible vendor base that might otherwise compete for a requirement. Thus, it is critical that an evaluation of the potential vendors who might compete for the overall work statement / deliverables be accomplished. This analysis will frequently require splitting up a requirement into different components. The bundling of a requirement also has a detrimental effect on the SSCs and CLIN structure, making it difficult to use in source selection, price evaluation and contract administration. Northern Missouri congressman Sam Graves introduced draft legislation in 2014 intended to address some of the shortcomings of excessively bundled contracts.
Overbundled requirements frequently suffer from very vague requirements and work statements, particularly in service contracts. In service contracts, the CLIN structure is priced on a per person per hour basis rather than on the service work deliverables themselves. Government or contractor ability to prepare cost or price estimates for vague work statements is severely limited; accordingly, the Government will negotiate a labor rate, number of people and individual qualifications for the requirement given that is the only feasible way to get an idea of cost. However, use of per person/per hour pricing for services is a poor contracting practice given the Government retains virtually all performance, cost and schedule risk given the contractor has fully performed under the CLIN statement when they provide the qualified body, rather than providing the needed service. One could argue that a CLIN statement which overbundles work in even a well written work statement and prices the work on a per person/per hour basis with limits on the numbers of person and types of qualifications the contractor can use is in contradiction to the work statement given the means the Government has asked the contractor to price the contract bears no relationship to the actual work itself and the Government is directing the contractor on how to execute the requirement – thus interfering with contractor performance and a sign of an employee-employer relationship rather than an independent contracting relationship. Also, the CLIN structure which prices on a per person basis or per hour basis generally pays for such persons on an annual basis rather than merely for the service on an a la carte or as-needed basis, therefore driving up costs in many cases. Pricing on a per person or per hour basis is a sign that a contract likely also qualifies as a personal services contract under FAR Part 37 – technically violating at least the spirit, if not the letter, of the Classification Act and FAR Part 37 except in specific circumstances and with specific determinations and findings.
Use of prime integrators in overbundled contracts sometimes has led to poor results in a number of major systems acquisitions. For example, what would happen if say the US Navy went too far in allowing contractors to make choices that make economic sense in the specific acquisition but add cost to the overall Navy? Example is a prime integrator who gets a good deal on a specific radar system that is not used in any other ship system – makes this specific buy cheaper but overall this costs the Navy a great deal of money given a lack of interoperability that drives a need to stand up training schools, supply system, work force increase, etc.
Over-bundling makes it easy for contracting, but many times, especially for complex acquisitions, does not deliver the results expected by the customer or war fighter for complex acquisitions, especially acquisitions that the acquisition command in question has little experience with or has substantial turn over of personnel during the life of the acquisition.
Small business acquisitions have mandatory restrictions on over-bundling. However, non-small business acquisitions are not subject to the same rules.
Example of how over-bundling causes big problems : Lets say a requiring activity wants to get polling services. Acquisition planning reveals there are five polls in ten different regions. However, it turns out that the Government will only be ordering one of the five polls in any real numbers and that particular poll is much more expensive in actual cost than the other four. If a weighting scheme is not applied to this bundled requirement, a vendor can make the four lightly ordered polls very cheap in their offer and the high volume poll very expensive, based on their knowledge of the ordering patterns of the Government in past acquisitions. Thus, on its face, the overall price of a bid when each poll is added together to arrive at a total price would look attractive but in practice, the Government will burn through its budget very quickly given the vast majority of the actually ordered polls are extremely expensive. To avoid the headache of a weighting scheme, all five polls should be broken apart and contracted for separately so they can be judged on their merits. This is an example of what is frequently done on major indefinite duration, indefinite quantity contracts and explains why some acquisitions are appallingly expensive and require additional funding to achieve the requiring activity's objectives.

Statement of work

The statement of work is a formal document submitted along with the request for proposal to a vendor that defines the work to be performed, the location of the work, the deliverable schedule, applicable performance standards, any special requirements, and the period of performance.

Metrics/performance measures

A metric is a meaningful measurement taken over a period of time that communicates vital information about a process or activity, leading to fact-based decisions.
Focus on where things go bad – not resource effective to measure everything. Instead, select the critical few metrics for mission essential processes, process that have historically experienced chronic problems or process choke points and monitor them.

Contract administration

Contract administration tasks can include:
See the for more information on contract administration.

Requests for Equitable Adjustments

Requests for Equitable Adjustments are modifications of the contract that were not done formally or properly. REAs are frequently based on the changes clause. They typically occur when new work is added or a change in current work is ordered, perhaps by the contracting officer, without the required documentation. Changed circumstances and equity are possible justifications for a contractor to ask for a REA. Contractors can ask for delay damages arising from contract changes in REAs.
The burden of showing evidence of increased costs lies with the contractor. Special rules exist for entitlement to whether or not contractor is entitled to profit in addition to the actual costs they incurred, especially in the cases of leased equipment that was held over due to delays on the part of the Government or the Government's failure to properly integrate other contractors who then interfered with our contractor's work. Cases out there that say the Government can reduce profit if risk was reduced due to the change.
Can use the settlement procedures in FAR Part 49, per FAR 49.002 but be advised that this section is really written for terminations – you have to adapt the settlement procedures, probably for terminations for convenience, to the REA.
The Government should make sure there is a release of claims clause in the REA's contract modification – FAR / DFARS do not have a sample ROC clause. In the context of FAR Part 12 commercial items, the changes clause requires bilateral agreement.
A substantial number of Federal cases deal with REAs:
Two types of scope determinations in contracts. One is scope of the original contract – meaning, do we have to pay anything for this modification. The second one is whether or not the modification or change is within the scope of the original competition. The first issue comes up when a contractor demands more money ; the second issue comes up when the Government wishes to modify the contract and the contractor agrees, but another contractor objects to the failure to recompete the contract.
Modifications are governed by the changes clause in the contract. However, the question of competitive scope must be determined first to determine if there will be a Competition in Contracting Act violation first. As a collateral issue, the question of whether or not the modification is a good deal must be evaluated because any modification is inherently a sole source award to the incumbent contractor. Thus, there is no price competition for the modification. If the acquisition was done under FAR Part 12, Commercial Items, the Government has no ability to demand cost and pricing information from the Contractor to evaluate whether or not the contractor is ripping off the Government with inflated or padded charges.
With regard to competitive scope determinations, the GAO in American Air Filter Co., 57 Comp. Gen 567, 78–1, para 443, at 573, stated:
"The impact of any modification is in our view to be determined by examining whether the alteration is within the scope of the competition which was initially conducted. Ordinarily, a modification falls within the scope of the procurement provided that it is of a nature which potential offerors would have reasonably anticipated under the changes clause.
To determine what potential offerors would have reasonably expected, consideration should be given to the procurement format used, the history of the present and related past procurements, and the nature of the supplies or services sought. A variety of factors may be pertinent, including: whether the requirement was appropriate initially for an advertised or negotiated procurement; whether a standard off the shelf or similar item is sought; or whether, for example, the contract is one for research and development, suggesting that broad changes might be expected because the Government's requirement are at best only indefinite."
GAO issued a decision on 31 Jan 06 in DOR Biodefense Inc. and Emergent BioSolutions, B-296358.3 and B-296358.4 regarding whether a modification is within the scope of the original competition under the Competition In Contracting Act. Modifications outside the scope of the original competition must be competed or justified as sole source actions. Scope analysis is not mechanical, but requires an integrated assessment of multiple factors, including contract type, specification or statement of work, cost and performance period. Whether the modification requires competition also depends upon whether the original solicitation adequately advised offerors of the potential for that type of change, and thus whether the modification would have changed the field of competition. In Biodefense, the Army issued a single award ten year indefinite quantity contract for development and certification of vaccines for biological defense. The challenged modification was exercise of an optional CLIN for development of a type of vaccine not expressly listed in the solicitation's option that extended the performance period for the option by 8 years at a significant increase in cost. The GAO determined that this modification was, nevertheless, within the overall scope of the original competition based on the broad developmental purpose of the contract and the solicitation's express notice to offerors that additional vaccine types could be added after award and that changes in regulation may affect performance period and costs. The discussion of actions taken by the Army in the original solicitation to put competitors on notice of the potential for post-award modifications provides good practice insight.
See DOR Biodefense, Inc.; Emergent BioSolutions: http://www.gao.gov/decisions/bidpro/2963583.pdf
See DCMA's Contract Administration Handbook for more information: https://web.archive.org/web/20070807083159/http://guidebook.dcma.mil/15/instructions.htm

Claims

Release of a claim

Release of Claims
In consideration of the premises contained in contract modification number _______________ of contract number ______________________________, executed on _____________, and sum of $______________to be paid by the United States Government under the above noted contract, the undersigned contractor does release and discharge the Government, its officers, agents, and employees of, from all liabilities, obligations, and claims whatsoever in law and equity arising out of or by virtue of said contract, except as follows:

IN WITNESS WHEREOF, this release has been executed this ___ day of _________.
__________________________
 Contractor Signature

Contract Disputes Act

Contract claims are handled under the disputes clause in commercial items contracts or another clause in different types of contracts. The clause simply refers to another clause, the contract dispute clause. That clause invokes the Contract Disputes Act and specific procedures that must be followed.
The Government seeks to avoid treating requests for additional money or changes to the contract as a claim, for several reasons. For starters, the Government has to pay interest from the date of receipt to the date of payment. Second, if the amount is over a specified amount, then the claim must be certified. Certification is essentially a company swearing under pain of 18 USC false claims act penalties that they are not falsifying the claim.
Instead of dealing with it as a claim, the Government should deal with it as a REA; the contractor will have to decide what is more advantageous to it – a REA or CDA claim.

Cancellation of contract

Contractors are understandably quite upset when an awarded contract is cancelled before contract performance can begin. There is some authority for a contractor to recover bid preparation costs in very limited circumstances. Even so, a contracting agency need only establish a reasonable basis to support a decision to cancel an RFQ; in this regard, so long as there is a reasonable basis for doing so, an agency may cancel an RFQ no matter when the information precipitating the cancellation first arises, even if it is not until quotations have been submitted and evaluated. Quality Tech., Inc., B-292883.2, Jan. 21, 2004, 2004 CPD para. 29 at 2–3; Datatrak Consulting, Inc., B-292502 et al., September 26, 2003, 2003 CPD para. 169 at 5. It is well established that an agency's lack of funding for a procurement provides a reasonable basis for cancellation, as agencies cannot award contracts which exceed available funds. First Enter., B-221502.3, Mar. 24, 1986, 86-1 CPD para. 290 at 3. Procurement authorities are presumed to act in good faith and in order for GAO to conclude otherwise, the record must show that procuring officials intended to injure the protester. Cycad Corp., B‑255870, April 12, 1994, 94-1 CPD para. 253 at 5. A protester's mere inference of bad faith is insufficient.

Terminations

The Government may terminate a contract for cause, for default or for convenience. Terminations for commercial items contracts are governed by FAR 52.212-4 and, not the T4C or T4D clauses of FAR 52.249-x. FAR Part 49 prescribes T4D and T4C clauses in FAR Part 52 for non-commercial items related contracts. In particular, T4D is covered by FAR Subpart 49.4, Terminations for Default. T4C is covered by several sections of FAR Part 49.
Termination for default reviews can be done a variety of ways, however, one method is to start with what is the ACTUAL deliverable on the contract, not the one that the customer thought they had. Carefully track what the contractor's actual performance is against the specific language in the contract. If there has been verbal changes by the Government without going through the contracting officer, is there something that indicates the contractor consented to those changes? In writing? For example, the DFARS 252.212-4 clause section that deals with modifications states that mutual consent is required for all modifications. In this review, use the language from the contract and then see if you have adequate evidence from the Government documenting the actual performance. Ask if the Government COR has signed any receiving reports e.g., DD Form 250s accepting performance. Is there anything in the record that shows the Government placed the contractor on notice of their default or non conforming deliveries?
FAR Part 49 should be read that to get information on terminations including notice to cure and show cause notices. The more the Government tries to give the contractor chances to remedy their default, the more the Government bolsters its case that T4D is appropriate.
The various courts that review T4Ds have a high standard of review for T4Ds, so the Government should consider making sure the T4D is well supported and the Government has had little or no role in the contractors non-conforming performance as well as ensuring there is a clearly defined deliverable, several chances to cure and nothing in the record that indicates the Government failed to do something that was condition precedent to performance or the Government interfered with contract performance or failed to provide required cooperation/support. .
The key point for T4Ds is that it is the only way that a Government agency can use prior year single year appropriated funds, such as O&M or many types of procurement funds, for reprocurement of the item in question. Accordingly, it is very important the Agency get the acquisition right up front because bad work statements and poor contract administration destroy the Government's ability to T4D, thus keep their prior year funds to get a replacement contractor.
Defense Contract Management Agency has a which is very useful in dealing with terminations for convenience issues.

Real options analysis

One approach to analysing Government procurements of large systems, such as weapons systems, is to use real options analysis. Such procurements can be done in single annual lots, or, with Congressional approval, multi-year procurement contracts. Multi-year contracts generally lower the risk for the contractor, and thus the unit price paid by the Government. One way to look at this situation is that a multi-year contract contains a real option for the contractor to escape the uncertainty associated with a sequence of single-year contract negotiations. Real options analysis can give an estimate of the value to the contractor of transferring revenue risk to the Government as a function of the contract's size and the volatility of the contract's value, even though the option is not actively traded. The negotiated price is also influenced by the attitudes towards risk of the negotiating parties.