GSAR Case 2006-504; Rewrite of GSAR Part 516; Types of Contracts (Comment #2)

GSA needs to remind Contracting Officers (COs) under 516.2 that, in order for a contract to be procured on a firm-fixed price basis, the solicitation must be based on “reasonably definite functional or detailed specifications...when the contracting officer can establish fair and reasonable prices at the outset.” Conversely, “when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence”, COs should use a time-and-materials/labor-hour contract, which includes a “ceiling price” based on “fixed hourly rates,” if the required determination and findings is approved per FAR 16.601(d). In other words, GSA should require COs to include the fixed basis for the requirements (e.g. performance period, man-hours), in a solicitation/RFQ if it is to be awarded and reported as a fixed price contract. If COs can not include these definitive requirements in the solicitation or RFQ, expects to award the contract in a not-to- exceed/ceiling price amount, or expects offerors to ‘propose’ the number of hours, etc., the GSAM should forbid COs from procuring or reporting the action as a “fixed price” contract award. GSAM should also prohibit GSA COs from unilaterally reducing any hours or contract price on these 516.6 not-to-exceed contracts, or ‘deobligating’ awarded funds without a bilateral supplemental agreement. The GSAM should remind GSA COs that unilateral “administrative” modifications are appropriate only for actions that do not affect contract price/cost. Even a unilateral Change Order mod must be followed by a bilateral supplemental agreement mod to reflect the equitable adjustment amount pursuant to FAR 43.204(a). [It may be more appropriate to address this in GSAM 543, but the violations seem to occur only on not-to-exceed (labor hour/time-and-materials) contracts (that are being awarded and reported by GSA COs as fixed price contracts).] I would also like to recommend that GSA consider adding the word "Additional" at the beginning of the 516.603-70 title, "Limitations on the use of letter contracts for architect-engineer (A-E) services." This could serve as a simple reminder that there are other 'Limitations' that must be considered in accordance with FAR 16.603-3. In particular, based on my experience, the vast majority of COs fail to obtain the written Determination from the HCA, or designee, that "no other contract is suitable." I'd also like to question the restriction GSA has placed on contractors to submit a "price proposal…before the award" of a letter contract. FAR 16.603-3(c) requires COs to include in the mandated FAR 52.216-25 clause a 'definitization schedule' including "(1) dates for submission of the contractor’s price proposal…" Similarly, the FAR 52.216-25 clause itself includes notes to the CO to insert "dates for submission of proposal". So isn't this requirement inconsistent with the flexibilities demanded throughout FAR, especially in FAR part 1, in addition to the FAR 16.6 regulations? Ditto this concern with the prohibition placed on COs to "not authorize the A-E to begin the design effort before the letter contract is definitized." Doesn't this defeat the whole purpose of a letter contract which, according to FAR 16.603-1, is to authorize "the contractor to begin immediately … performing services"? If yes, then the Determination should support any decision to not award a letter contract if COs comply with FAR 16.603-3. Therefore, my recommendation would be for GSA to delete 516.703-70 in its entirety from the GSAM/GSAR. In the alternative, GSA should consider incorporating oversight requirements into this section to review all Determinations that authorize letter contracts to ensure decisions are being made appropriately. GSA should also consider auditing all unilateral/admin mods that involve any change in funding/costs. However, if GSA agrees to delete 516.703-70, GSA may still need to cross reference comment from above, regarding 516.2, to remind COs that any contract that is procured and awarded with a not-to-exceed/ceiling price falls under the prescription, and limitations, of FAR 16.6. Contracts awarded with a not-to- exceed/ceiling price can not be procured and/or reported as “fixed price” even though they are based on "fixed hourly rates".