FedGovContracts.com

Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: December 29, 2000

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Regulation (FAR); Contract Types for Commercial Item Acquisitions

SOURCE: Federal Register, December 29, 2000, Vol. 65, No. 251, page 83291

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that the FAR be amended to clarify what contract-types are authorized for commercial item acquisitions.

DATES: Comments should be submitted on or before February 27, 2001.

ADDRESSES: Submit comments to General Services Administration, FAR Secretariat (MVR), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; e-mail: farcase.2000-013@gsa.gov. Cite FAR case 2000-013 in all correspondence related to this proposed rule.

FOR FURTHER INFORMATION CONTACT: Victoria Moss, Procurement Analyst, 202-501-4764.

SUPPLEMENTAL INFORMATION: Currently, FAR 12.207, Contract Type, states that "agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items." However, Section 8002 of the Federal Acquisition Streamlining Act (FASA) (Public Law 103-355), which addresses "regulations for acquisition of commercial items," states that the FAR "shall include for acquisitions of commercial items, a requirement that firm, fixed price contracts or fixed price with economic price adjustment contracts be used to the maximum extent practicable..."

Since the current FAR 12.207 does not reflect the somewhat more flexible language in the FASA, this proposed rule would make the following changes:

• The title of FAR 12.207 would be retained, but the text would be deleted. Two subsections would replace the text:
  
  
  • FAR 12.207-1, Authorized Contract Types, would require the use of firm-fixed-price or fixed-price with economic price adjustments "to the maximum extent practicable." In addition, it would authorize the use of these contract types "in conjunction with an award fee incentive and performance or delivery incentives when the award fee or incentive is based solely on factors other than cost (see [FAR] 16.202-1 and 16.203-1)."
    
    Also, it would permit agencies to use indefinite-delivery contracts when the task or delivery orders are issued "under one of the authorized contract types."
    
    Finally, it would reiterate the FASA prohibition against the use of "cost-type contracts or contracts with incentives based on cost".
    
    
  • FAR 12.207-2, Commercial Services Available on a Time-and-Material or Labor-Hour Basis, would permit contracting officers to acquire commercial services on a time-and material or labor-hour basis "by using the following pricing strategies when cost-effective and consistent with commercial practice: (a) an indefinite-delivery contract with established fixed hourly rates that permit negotiating orders (including any required material) under one of the authorized contract types in [FAR] 12.207-1; (b) sequential contract actions that acquire the requirement in modular components using the authorized contract types in [FAR] 12.207-1 (e.g., a preliminary firm-fixed-price "diagnostic" effort allowing the contractor to understand the scope of work sufficiently to propose the large requirement on a firm-fixed-price basis)."
  
  
• FAR 16.202-1, Description (which addresses firm-fixed-price contracts), and FAR 16.203-1, Description (which addresses fixed-price with economic price adjustment contracts), would have the following two sentences added: "The contracting officer may use a fixed-price contract [or "fixed-price contract with economic price adjustment"] in conjunction with an award-fee incentive (see [FAR] 16.404 [Fixed-Price Contracts with Award Fees]) and performance or delivery incentives (see [FAR] 16.402-2 [Performance Incentives] and [FAR] 16.402-3 [Delivery Incentives]) when the award fee or incentive is based solely on factors other that cost. The contract type remains firm-fixed-price [or "fixed-price with economic price adjustment"] when used with these incentives."

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

Return to the Dispatches Library.

Return to the Main Page.