some methods of contracting require more time than others

Cancellation charge means the amount of unrecovered costs which would have been recouped through amortization over the full term of the contract, including the term canceled. B). (3) (b) When leader company contracting is used, the Government shall reserve the right to approve subcontracts between the leader company and the follower(s). (2) Modify as necessary or terminate contracts not so identified and authorized, except that any contract with less than 4 years remaining as of the effective date of this regulation need not be terminated, nor need it be identified, modified, or authorized unless it is renewed or its terms are substantially renegotiated. 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. (B) The servicing agency has the capability or expertise to enter into a contract for such supplies or services that is not available within the requesting agency. Use of multi-year contracting is encouraged to take advantage of one or more of the following: (b) Value-eroding friction and shading occur because one or both parties feel unfairly treated. 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. Kim Kerrone, of Island Health, described how the vested methodology broke the impasse. Cancellation ceilings and dates may be revised after issuing the solicitation if necessary. (2) Orders of $600,000 or less issued against Federal Supply Schedules. (a) 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. Gone were the battles of not in scope; instead, there was a spirit of how can we accommodate this new reality given our statement of intent?. (See 17.208.). (2) An agency uses another agency to provide acquisition assistance, such as awarding and administering a contract, a task order, or delivery order. Companies have traditionally used contracts as protection against the possibility that one party will abuse its power to extract benefits at the expense of the otherfor example, by unilaterally raising or lowering prices, changing delivery dates, or requiring more-onerous employment terms. We argue that the remedy is to adopt a totally different kind of arrangement: a formal relational contract that specifies mutual goals and establishes governance structures to keep the parties expectations and interests aligned over the long term. (g) (c) Benefits may accrue by including options in a multi-year contract. If a third party is proposed, consent of the third party should be obtained in writing. A 60-day termination for convenience translates to a 60-day contract, one CFO at a supplier told us. Accordingly, for multi-year contracts, the agency head may authorize modification of the requirements of this subpart and the clause at 52.217-2, Cancellation Under Multi-year Contracts. (a) Participation by subcontractors, suppliers, and vendors. When using sealed bidding, the contracting officer shall make a written determination that there is a reasonable likelihood that the options will be exercised before including the provision at 52.217-5, Evaluation of Options, in the solicitation. Cancellation or termination for insufficient funding. (5) The estimates of both the cost of the contract and the cost avoidance through the use of a multi-year contract are realistic. Buyers must consider three key factors when deciding what type of contracting arrangement is right for each supplier relationship. (3) A specified limitation on the total duration of the contract. This subpart prescribes policies and procedures specific to acquisitions of supplies and services by nondefense agencies on behalf of the Department of Defense (DoD). So the sustainability team came up with a pilot project to address how to fairly add the additional scope of work and new role for health care providers to the hospitalists schedule and pricing model. (a) Multi-year contracting; (c) Leader company contracting. (a) When exercising an option, the contracting officer shall provide written notice to the contractor within the time period specified in the contract. (Its called vested because the parties have a vested interest in each others success.) (b) Solicitations containing option provisions shall state the basis of evaluation, either exclusive or inclusive of the option and, when appropriate, shall inform offerors that it is anticipated that the Government may exercise the option at time of award. (3) Additional numbered line items identified as the option. The extent to which cancellation terms are used in multi-year contracts will depend on the unique circumstances of each contract. Nor should they. 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. It is a description of a task, subtask, activity, and/or deliverable; and reflects corresponding pricing assumptions proposed and accepted by the client. Does the buyer benefit from access to the suppliers criticalsystems and processes (and vice versa)? The contracting officer shall limit the Governments payment obligation to an amount available for contract performance. They often undermine the partnerlike relationships and trust needed to cope with external uncertainty. (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. Nonrecurring costs means those costs which are generally incurred on a one-time basis and include such costs as plant or equipment relocation, plant rearrangement, special tooling and special test equipment, preproduction engineering, initial spoilage and rework, and specialized work force training. (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. They agonize over every conceivable scenario and then try to put everything in black-and-white. Cancellation ceiling means the maximum cancellation charge that the contractor can receive in the event of cancellation. The key distinguishing difference between multi-year contracts and multiple year contracts is that multi-year contracts, defined in the statutes cited at 17.101, buy more than 1 years requirement (of a product or service) without establishing and having to exercise an option for each program year after the first. 'N' represents links. If cancellation occurs, the Governments liability will be determined by the terms of the applicable contract. Last Updated Apr 24, 2023. (b) Because of the nature of the work, or because it is to be performed in Government facilities, the Government must maintain a special, close relationship with the contractor and the contractors personnel in various important areas (e.g., safety, security, cost control, site conditions). (1) A specific dollar amount; (2) An amount to be determined by applying provisions (or a formula) provided in the basic contract, but not including renegotiation of the price for work in a fixed-price type contract; (3) In the case of a cost-type contract, if-, (i) The option contains a fixed or maximum fee; or. Given the longer performance period associated with multi-year acquisition, consideration in pricing fixed-priced contracts should be given to the use of economic price adjustment terms and profit objectives commensurate with contractor risk and financing arrangements. (e) Insert a clause substantially the same as the clause at 52.217-7, Option for Increased Quantity-Separately Priced Line Item, 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 identified as a separately priced line item having the same nomenclature as a corresponding line item. In order to establish a multi-agency or governmentwide acquisition contract, a business-case analysis must be prepared by the servicing agency and approved in accordance with the OFPP business case guidance, available at 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 . (a) One objective, for example, called for improving physicians billing to the provincial Medical Services Plan (MSP) for cost recovery for the hospitalist fees. (c) An interagency acquisition is not exempt from the requirements of subpart 7.3, Contractor Versus Government Performance. Some relationships, such as those involving the purchase of commodity products and services, are truly transactional and only need traditional contracts. Again, its important to note that these guiding principles have teeth. The entities decided to explore relational contracting in 2016, two years after their conventional contract had expired and countless hours of contentious negotiations had failed to replace it. (1) The contracting officer shall insert the amount for the first program year in the contract upon award and modify it for successive program years upon availability of funds. (a) Insert a provision substantially the same as the provision at 52.217-3, Evaluation Exclusive of Options, in solicitations when the solicitation includes an option clause and does not include one of the provisions prescribed in paragraph (b) or (c) of this section. In some ways, they're similar to the prices of goods at the grocery store. (1) Percentage of specific line items, (2) Increase in specific line items; or. (ii) Complying fully with the competition requirements of part 6 (see 6.002). The contract may not be awarded until the thirty-firstday after the date of notification. These include complicated outsourcing and purchasing arrangements, strategic alliances, joint ventures, franchises, public-private partnerships, major construction projects, and collective bargaining agreements. Other contract types include incentive contracts, time-and-materials, labor-hour contracts, indefinite-delivery contracts, and letter contracts. In this article, we look at the theoretical underpinnings of formal relational contracts and lay out a five-step methodology for negotiating them. (b) Economic price adjustment clauses. For nearly a decade, FedEx met all its contractual obligationsbut neither party was happy in the relationship. (b) The contract shall state the period within which the option may be exercised. (b) The contracting officer shall ensure that any contract awarded under this arrangement contains a firm agreement regarding disclosure, if any, of contractor trade secrets, technical designs or concepts, and specific data, or software, of a proprietary nature. (c) The conduct of the work is wholly or at least substantially separate from the contractors other business, if any. This method may be used in sealed bidding or contracting by negotiation. (f) Avoidance of the need for establishing quality control techniques and procedures for a new contractor each year. At Island Health and South Island, the parties tossed out the old contract and chartered a team of 12 administrators and 12 hospitalists to design a formal relational contract. (f) Annual and multi-year proposals. Providing incentives to contractors to improve productivity through investment in capital facilities, equipment, and advanced technology. The contract may not be awarded until the thirty-firstday after the date of notification. Given the longer performance period associated with multi-year acquisition, consideration in pricing fixed-priced contracts should be given to the use of economic price adjustment terms and profit objectives commensurate with contractor risk and financing arrangements. (2) The requesting agency shall also be responsible for furnishing other assistance that may be necessary, such as providing information or special contract terms needed to comply with any condition or limitation applicable to the funds of the requesting agency. (3) The requesting agency shall furnish a copy of the D&F to the servicing agency with the request for order. (c) A provision that, if the Government determines before award that only the first program year requirements are needed, the Governments evaluation of the price or estimated cost and fee shall consider only the firstyear. An independent detailed assessment, developed by a government team member, which includes the cost to the government for services, The Independent Government Estimate includes only direct and indirect cost: . (1) Leader company, obligating it to subcontract a designated portion of the required end items to a specified follower company and to assist it to produce the required end items; (2) Leader company, for the required assistance to a follower company, and a prime contract to the follower for production of the items; or. (g) Broadening the competitive base with opportunity for participation by firms not otherwise willing or able to compete for lesser quantities, particularly in cases involving high startup costs. Crafting a formal relational contract involves five steps: laying the foundation, cocreating a shared vision and objectives, adopting guiding principles, aligning expectations and interests, and creating systems for staying aligned. 3) There are two basic contract types, cost reimbursement and fixed-price. The fact that virtually all contracts contain gaps, omissions, and ambiguitiesdespite companies best efforts to anticipate every scenarioonly exacerbates hold-up behavior. (a) In awarding the basic contract, the contracting officer shall, except as provided in paragraph (b) of this section, evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the Government is likely to exercise the options. (d) The contracting officer shall take into consideration such factors as market stability and comparison of the time since award with the usual duration of contracts for such supplies or services. ), (b) Inclusion of an option is normally not in the Governments interest when, in the judgment of the contracting officer-, (1) The foreseeable requirements involve-, (i) Minimum economic quantities (i.e., quantities large enough to permit the recovery of startup costs and the production of the required supplies at a reasonable price); and. (5) Acquisition authority as may be appropriate (see 17.503(d)). 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. (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. (a) 3501 The highlighted questions are the questions you have missed. And in a publicly funded health care environment, that is exactly what we need to be focusing on., The governance structure also helped the parties surmount the tricky problem of scope creep. The approach encourages trust and honesty between the two sides, said Ken Smith, a hospitalist at South Island. 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. (3) Whether it is likely that qualified offerors will compete for the contract. The contracting officer shall establish cancellation dates for each program years requirements regarding production lead time and the date by which funding for these requirements can reasonably be established. Participation by subcontractors, suppliers, and vendors. 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. (c) The period shall be set so as to provide the contractor adequate lead time to ensure continuous production. The main disadvantages are: they will not reflect project-specific risks or unusual provisions in the master contract; all of these are Contract terms commonly allow 30, 60, even 90 days or more to pay invoices. In that event, contracting officers must follow the requirements of subpart 17.2. refurbishing. Agency funding of multi-year contracts shall conform to the policies in OMB Circulars A-11 (Preparation and Submission of Budget Estimates) and A-34 (Instructions on Budget Execution) and other applicable guidance regarding the funding of multi-year contracts. Office of the Director of National Intelligence; Intelligence elements of the Federal Bureau of Investigation, Department of Energy, and Drug Enforcement Agency; Bureau of Intelligence and Research of the Department of State; Office of Intelligence and Analysis of the Department of the Treasury; The Office of Intelligence and Analysis of the Department of Homeland Security and the Office of Intelligence of the Coast Guard; and. 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. (1) The option cannot be evaluated under 17.206; or; (2) Future competition for the option is impracticable. Under the new pricing model, when the inpatient population is low, the hospitalists can opt to take time off and save Island Health money. The parties ultimately came up with an alternative to the standard fee-for-billable-hours method. (1) Functions involving the direction, supervision, or control of Government personnel, except for supervision incidental to training; (2) Functions involving the exercise of police or regulatory powers in the name of the Government, other than guard or plant protection services; (3) Functions of determining basic Government policies; (4) Day-to-day staff or management functions of the agency or of any of its elements; or. (a) Except for DoD, NASA, and the Coast Guard, a multi-year contract which includes a cancellation ceiling in excess of $15 million 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. (c) Cancellation or termination for insufficient funding.

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