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Thursday, September 10, 2015

Competition for Subcontractors Included as Part of Proposal

With thanks to fabulous Babylonia Aziz for the great topic.

The question of the day is:

Do you have to conduct a full and open or, even, limited competition and therefore have on file a complete procurement package IF the subcontractor or vendor is being included in your (winning) proposal?


Much discussion about this and many diverse decisions by Contracting Officers and auditors make you wonder if there actually exists one correct answer.

I am here to tell you, modestly, yes, it does exist!

Regardless of whether you are a grantee issuing programmatic “contracting out of work” procurement contracts or a contractor issuing subcontracts, there are basically two certainties: 1) you need to follow the regs and your Procurement Policy and 2) you need to have USAID’s consent/approval.

Let’s start with the regulations and associated Procurement Policy:

For prime contractors:

FAR requires subcontracting to maximum practical extent (52.244-5 -- Competition in Subcontracting) and requires you to provide all kinds of information for subcontracts that require consent (fixed price over $150K or any value for any other type), including how it was competed, whether price/cost analysis was performed, what type of contract was being awarded etc. (44.202-2 – Considerations).  FAR does not currently dictate at what level you must have full and open competition, how you should conduct such completion or what supporting documentation format you must have. This is an internal control function of each contractor’s Procurement Policy.

As a Federal Contractor (or a sub), you are required to follow a written Procurement Policy which is supposed to take into consideration all of the above requirements, have considerations for competition, sole source justifications, socio-economic programs etc.

This means that even if you submitted the subcontractor as part of your winning proposal (with pictures and Facebook profiles of their key staff), and USAID provided its consent by including them as “approved subcontractors” by name in the contract, you will still be required to have a procurement file in accordance with your Procurement Policy, which covers competition, price analysis, basis for award or sole source procedure and limitations.  Why?  Because the eventual and inevitable auditors will be looking for it! Remember: USAID’s consent DOES NOT constitute a determination of the acceptability of the subcontract terms or price, or of the allowability of costs, unless the consent or approval specifies otherwise (FAR 44.203 Consent Limitations).

For grantees, life has recently gotten much stricter as the OMB super circular (codified at 2 CFR 200), which is applicable to all Recipients of Federal grants and cooperative agreements (and subs), adopted basically the same limitations and procurement standards that the Government uses when procuring goods and services directly.

2 CFR 200.317-326 lay out the minimum Procurement Standards which grantees must follow in order for their procurements to be allowable costs under Federal Grants & Cooperative Agreements. They are describing competition requirements (all above $3,000 must be competed), requirement for price/cost analysis, types of procurements, as well as stating, in no uncertain terms, when sole source procurements may be justified –
2 CFR 200.320(f):

(1) The item is available only from a single source;
(2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
(3) The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or
(4) After solicitation of a number of sources, competition is determined inadequate.

This means (as it does for contractors, above), that the grantees’ Procurement Policy must follow the standards in 2 CFR 200 and ALL procurements must follow the Procurement Policy.

So, as for contractors, above, this means that even if you submitted the contractor’s name and full technical purpose as part of your application, and USAID provided its approval pursuant to 2 CFR 200.308 (b)(6)t by including said contractor as an “approved contractor”, by name in the  award, you will still be required to have a procurement file in accordance with your Procurement Policy, which covers competition, price analysis, basis for award or sole source procedure and limitations.

Now, this is my (valuable) short–cut advice that may work:

I know that most times we team for strategic reasons in order to better our chances to win a contract or award, or to supplement our competencies, or to cover the services we have no legal way of performing through our own resources (security is a good example).  This is why I think it is important that any Procurement Policy lists "Strategic Teaming" as one of the unique and compelling reasons for sole source.  It will need to describe parameters of when such sole source justification is allowable: supplemental quals, unique capability, no other firm wants to work with us J (only one source is available), etc. 

Now it will probably work for the contractors, since FAR does not specify when sole source is specifically allowable, except to say that it must not be de-rigueur and must be justified.


For grantees, I would advise to include such justification in the award application or in a separate approval request, refer to your policy which includes “Strategic Teaming” and ask USAID to approve such sole source justification specifically in writing per 2 CFR 200.320 (f)(3).

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