Commercial Items Contract or Not? Unilateral or Bilateral?

My apologies I should have addressed each of your questions.  I got caught up in the confusing details.   So here you go.

1.  The details you have provided make one wonder if commercial or not.   The agency might have named it such but one does wonder.  Related and to your final question "What are you missing?" this thought came to mind.   You might be missing the market research prepared by the agency that provides they could both tailor the IDIQ as well as individual Task Orders.  For reference read in full FAR subpart 12.3.  And I might add the conclusion by the agency that as Task Orders the procurement made by each is predominantly a service.

2. TO's. Whether commerical item or not the terms of an IDIQ contract allow the government the right to issue TO's unilaterally.  I am confused about your refereence to the Changes clause to do so.   See clauses 52.216-18 and 52.216-22 that are hopefully in the contract that provide for the unilateral orders.

2a. TO Mods.  Without FAR clause 52.212-4 in the contract it does not apply which is the clause at paragraph (c) that requires for bilateral changes to a commercial item contract.  With 52.243-1 in the contract it becomes the governing clause under which changes to the parent contract and the TO's are modified.  See paragraph (b) of 52.216-18 if in the contract that provides that the parent contract clauses apply to TO/DO's.

The initial solicitation for the parent IDIQ would be a very interesting read.

How is a contract or task order when acquiring products or services priced as cost reimbursement or cost reimbursement with fixed fee a FAR commercial product/service contract?

” 12.207 Contract type.

(a) Except as provided in paragraph (b) of this section, agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial products or commercial services.”

(b)  

(1) A time-and-materials contract or labor-hour contract (see  subpart  16.6) may be used for the acquisition of commercial services when…”

@ShaunaMSACM

The term "commercial item" is no longer in use. The appropriate terms are "commercial product" and "commercial service".

Commercial product and commercial service are defined in FAR 2.101.

It appears that you are asking whether the procurement is legitimately for a commercial service.

The only description of what is being procured that you have provided is as follows:

ShaunaMSACM said:

SOW Summary: i. commercial vehicle purchase services; ii. perform minor modifications to purchased vehicles to meet agency requirements; and iii. maintain the vehicles

That is not enough information for me to determine whether or not the service is commercial.

Can you provide more details?

All, my apologies for the delayed response.  I am very grateful for your insight and assistance!

Several hours after I posted the above, I took a rather nasty fall in my house. In addition to my pride being hurt, I broke multiple fingers.  I'm wearing a cast and I'm having to hunt and peck and my hand is tired. I will post addtl info in the next several days.  

Thank you again for your insight and understanding.  It really sucks getting older sometimes!☹️

ShaunaMSACM said:

It really sucks getting older sometimes!

Truer words were never written. I just got my first hearing aids.

I hope the fingers don't hurt too much.

Shauna, whether the contract is for commercial products/services or not, from the information you provided in the Background, in my opinion the agency really screwed up in the way it wrote the contract.

ShaunaMSACM said:

It really sucks getting older sometimes!☹️

Vern Edwards said:

Truer words were never written. I just got my first hearing aids.

I hope the fingers don't hurt too much.

Ditto.  There are days when I wonder about Del Webb coining the "golden years".

Just as I wonder about the example of a Commercial Product/Service Contract described in this thread.

On 9/27/2024 at 2:30 PM, Retreadfed said:

Shauna, whether the contract is for commercial products/services or not, from the information you provided in the Background, in my opinion the agency really screwed up in the way it wrote the contract.

Yeah; I'm not sure how that would work. Does the contract have both commercial and non-commercial clauses?

On 9/27/2024 at 11:30 AM, Retreadfed said:

...in my opinion the agency really screwed up in the way it wrote the contract.

@Retreadfed, just trying to learn more about government interaction between an agency and the contracting officer. Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency? Why is the "agency" called out as the party that "screwed up" vs "the government?" In my contractor world we would say the company screwed up, not the program office or contracts office or supplier management (ok maybe if we knew, internally we might pin it on one of the acting participants in the contract.) Not picking on you. Have heard this said before about "agencies" and have always wondered about it. Thanks!

Neil Roberts said:

@Retreadfed, just trying to learn more about government interaction between an agency and the contracting officer. Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency? Why is the "agency" called out as the party that "screwed up" vs "the government?" In my contractor world we would say the company screwed up, not the program office or contracts office or supplier management (ok maybe if we knew, internally we might pin it on one of the acting participants in the contract.) Not picking on you. Have heard this said before about "agencies" and have always wondered about it. Thanks!

The “agency” includes the KO, too. There is an acquisition team.

Neil Roberts said:

[J]ust trying to learn more about government interaction between an agency and the contracting officer. Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency? Why is the "agency" called out as the party that "screwed up" vs "the government?"

Think of two functional groups within an agency. There are the people who do the agency's work and need products or services in order to do it. They are the "requiring activity". Then there are the people who buy what the the requiring activity needs. They are the "contracting activity".

Sometimes the two activities are part of one and the same office within an agency—a program or project office—and work for the same boss. But sometimes the two activities are in separate offices or even separate agencies and work for separate bosses. Sometimes the two activities are in the same building and sometimes they are distant from one another, even in separate states.

In order to buy what the requiring activity needs the contracting office asks for a "procurement package" which contains information and documentation necessary to conduct the procurement. In an ideal situation the two activities work together to develop an acquisition strategy and plan. Based on the acquisition plan the contracting activity prepares a solicitation, announces it to the public and, working with the requiring activity, selects a contractor and prepares a contract.

According to FAR 1.602-2: "Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment." Contracting officers prepare solicitations and contracts, but they must rely on technical information and specifications or statements of work provided by the requiring activity, and they rely on the requiring activity for advice and assistance during the contractor selection process.

Contracting officers are rarely truly independent. In my last contracting officer job my office was in one state and the requiring office was in another, but both offices worked for the same senior official. In one procurement we disagreed on contract type. The requiring activity complained about me to the Big Boss and even went underground to industry, which complained to a U.S. Senator about me. The Big Boss convened a meeting and he listened to both sides. Then he said, "Vern's the contracting officer. It's his decision." And that was that. I worried that the requiring activity would try to sabotage the contract, but they didn't, God bless them, and the contract was a great success. But I supervised that contract like it was a prize racehorse.

When a procurement goes wrong it may be due to poor work by the requiring activity, poor work by the contracting activity, or poor work by both. But when people say that a contract is a mess they usually blame the contracting activity.

@Vern Edwards, thank you so much for this detailed summary and the anecdote. It was exactly what I was looking for to help me better understand the situation between contracting officer and Agency.

@Neil Roberts  As I follow the thread I have this thought. 

A contractor should shoulder some part of the poor work, especially in any negotiated procurement.  I do not know all the facts but if the OP is correct and the discussion is with regard to "contract" I would offer that the contractor might have been foolish to accept the award of the contract.  The contractor enhanced the mess!

"You made your bed, now lie in it"

On 10/4/2024 at 11:46 PM, Neil Roberts said:

Does a contracting officer yield any authority to establish or approve contract language or do they just administer a contract that is given to them by an agency?

Contracting means purchasing, renting, leasing, or otherwise obtaining supplies or services from nonfederal sources. Contracting includes description (but not determination) of supplies and services required, selection and solicitation of sources, preparation and award of contracts, and all phases of contract administration. FAR 2.101.

To Vern’s point, I think of three groups within an agency: (1) the requiring activity (source of bona fide need); (2) the comptroller (source of funding authority); and (3) contracting officer (source of contracting authority). You must have all three - need, money, authority to contract.

On 10/4/2024 at 11:46 PM, Neil Roberts said:

Why is the "agency" called out as the party that "screwed up" vs "the government?"

This depends on the context. For example, agency can be used to reference a specific executive agency rather than the broader government. Consider the GAO protest system. Parties may protest a federal agency’s procurement action. The term agency is more specific.

The Congress, the courts, agencies, and the public use GAO decisions for various reasons. Note that ‘the public’ is broader than a ‘contractor’ or a ‘seller.’ All three are within the public, but a contractor could be distinguished as having a contract and a seller is merely competing for a contract. Again, I think the phrasing is made relevant by the greater context.

On 9/25/2024 at 3:04 PM, ShaunaMSACM said:

The IDIQ contract allows for CR, CPFF and FFP task orders and the government intends for the contract to be used for commercial and non-commercial purchases

@ShaunaMSACM by your summary, it appears to be a mixed contract type. I would make sure the company has 3 different charge number for work performed (CR, CPFF and FFP {and, did you mean CR no fee?]). I would go through all the terms and conditions and determine which apply to each contract type and product or service thereunder and act accordingly. If I received a unilateral change to a commercial product or service, I would thank the customer and then submit a claim. I would discuss the entire contract with the contracting officer, present my view and see what can be worked out.

All, thank you again for your patience while I am on the mend from the fall.  In addition to breaking fingers, the doctor thinks that I also dislocated others, so my recovery is moving slower than I had hoped.

@C Culham  FAR 52.216-18, 52.216-22 and 52.243-1 are in the IDIQ contract.  You mentioned that the initial solicitation for the parent IDIQ would be a very interesting read.  Here is a link to it on SAM.gov: https://sam.gov/opp/25276e239dad42e6b6b3b1a5d459a1c4/view.  You will not be disappointed.  It is unlike any contract I've supported in 20+ years.

@joel hoffman Please see Sections B & C in the solicitation.  Nearly all services and products under this contract meet the definitions of "Commercial Services" and "Commercial Products".  The services in this contract are core to my company; we sell them to commercial customers across the globe.

@Vern Edwards Thank you for your input on this thread and I appreciate the bonus learning opportunity re: agency relationships.  I always learn something new in your posts!

On 10/5/2024 at 2:47 PM, Neil Roberts said:

It was exactly what I was looking for to help me better understand the situation between contracting officer and Agency.

Being a little late on this topic, if you really want to complicate things, consider Foreign Military Sales and Foreign Funded contract actions where the requiring activity is a foreign government but the contracting officer is a U.S. government employee.

You aren't kidding - what a minefield to navigate!

@ShaunaMSACM  Thank you!  I took a quick look and I have some thoughts but I want to look in a little more detail before I give a conclusion.  Stay tuned.

Thank you!

On 10/10/2024 at 10:19 AM, ShaunaMSACM said:

All, thank you again for your patience while I am on the mend from the fall.  In addition to breaking fingers, the doctor thinks that I also dislocated others, so my recovery is moving slower than I had hoped.

@C Culham  FAR 52.216-18, 52.216-22 and 52.243-1 are in the IDIQ contract.  You mentioned that the initial solicitation for the parent IDIQ would be a very interesting read.  Here is a link to it on SAM.gov: https://sam.gov/opp/25276e239dad42e6b6b3b1a5d459a1c4/view.  You will not be disappointed.  It is unlike any contract I've supported in 20+ years.

@joel hoffman Please see Sections B & C in the solicitation.  Nearly all services and products under this contract meet the definitions of "Commercial Services" and "Commercial Products".  The services in this contract are core to my company; we sell them to commercial customers across the globe.

@Vern Edwards Thank you for your input on this thread and I appreciate the bonus learning opportunity re: agency relationships.  I always learn something new in your posts!

@shaunaMSACM, thanks for the link. I’m out of town and it’s very difficult to try to read the solicitation on my cell phone where I am. I read the description of the intended services but will read the details later. However, my original post asked how a commercial products or commercial services contract for inspecting and refurbishing a ship can be priced as cost reimbursement? And the change clause cited is for fixed-price (task orders).   I’ll read the details…

On 9/25/2024 at 3:04 PM, ShaunaMSACM said:

BLUF:

1. Is this a Commercial Items contract (or not)?

2. If it is a Commercial Items contract, how is the agency permitted to only award new task orders/task order mods unilaterally?

@ShaunaMSACM The contract is for vessel acquisition management (VAM) services.  In order to answer your first question, I read parts of the SAM documentation at the link that you provided. Keep in mind that I have read only parts of the SAM documentation.

In answer to your question, I could not find a FAR commercial clause in the contract. Thus, I assume the contract is not a "commercial item" contract. However, a search of the internet indicates that vessel acquisition is done commercially. Here is a link to a commercial vessel acquisition agreement. https://www.lawinsider.com/contracts/4LXjfRXHHn9#administrative-agent.

It looks like the contractor 𑁋 the vessel acquisition manager (VAM) 𑁋 will act as an agent of the federal government in the search, inspection, selection, and purchase of used ships, a kind of contracting officer: From the Statement of Objectives SOO):

Quote

MARAD (Department of Transportation, Maritime Administration) will acquire replacement vessels through a contract with a Vessel Acquisition Manager (VAM), an entity which has experience procuring, reflagging, re-classifying, and modernizing vessel(s). The contractor will not sell the vessels to the government, but buy the vessels on behalf of the government.

In short, the VAM will act as a contracting activity. I don't know all of the legal background, but this appears to be perfectly legitimate government practice. (So you old timers, please don't start squawking about whether this is legal. Read the SAM post documentation.)

The government will purchase the vessel from the seller, a subcontractor of the VAM, through the VAM. I don't know all the details. The VAM will conduct the purchase and prepare the commercial sale document in accordance with commercial practices. The vessels will be delivered to the government.

There is more to it, but that's the essence.

@ShaunaMSACMAs to your second question:

Quote

If it is a Commercial Items contract, how is the agency permitted to only award new task orders/task order mods unilaterally?

It's not a "commercial item" (FAR Part 12) contract.

It is a single-award indefinite-delivery indefinite-quantity (task order) contract. Unilateral orders is standard practice permitted by FAR Subpart 16.5.

@ShaunaMSACMAs to your third question:

Quote

What am I missing here?

This acquisition is of one of those specialized kinds that most contract specialists never see. (Including me.) You have to have worked in and been trained in an office that does this kind of thing in order to understand it. In short, there are more kinds of acquisitions in heaven and earth than most contracting people ever dream of. This is over the head of most 1102s. (Including me.)

Vern Edwards said:

@ShaunaMSACM

It looks like the contractor 𑁋 the vessel acquisition manager (VAM) 𑁋 will act as an agent of the federal government in the search, inspection, selection, and purchase of used ships, a kind of contracting officer: From the Statement of Objectives SOO):

In short, the VAM will act as a contracting activity. I don't know all of the legal background, but this appears to be perfectly legitimate government practice. (So you old timers, please don't start squawking about whether this is legal. Read the SAM post documentation.)

The government will purchase the vessel from the seller, a subcontractor of the VAM, through the VAM. I don't know all the details. The VAM will conduct the purchase and prepare the commercial sale document in accordance with commercial practices. The vessels will be delivered to the government.

There is more to it, but that's the essence.  

@ShaunaMSACM

As an old timer, I can attest this is a perfectly legal action.  40 years ago we did a contract for an IT facility manager.  The contractor acquired a large mainframe computer system for the government which became government property.  The contractor acquired space, installed the computer system, and ran it using their own staff and subcontractors.

We placed orders under the contract using a mix of fixed price, LH, and cost reimbursement types.

Anyone who would like to read up on this acquisition method should go to Google Books and search for: "Review of Fiscal Year 2025 Maritime Transportation Budget Requests, Pt. 1: Maritime Administration and Federal Maritime Commission: (118-55) Hearing Before the Subcommittee on Coast Guard and Maritime Transportation of the Committee on Transportation and Infrastructure, House of Representatives, One Hundred Eighteenth Congress, Second Session".

Quote

MARAD is working to advance the urgent recapitalization of the RRF (Ready Reserve Force) with the limited authorities provided. MARAD is making use of the authority Congress provided to purchase vessels for RRF through a contracted Vessel Acquisition Manager (VAM). This innovative process allowed MARAD to efficiently purchase the first two ships in FY 2022. In Q2 FY 2023, the VAM completed purchase of three more extremely capable ships including one that is 10 and two that are 11 years old. These ships were purchased for approximately $90 million per ship.

See H. Rept. 116-617 1784 (2020-12-03) WILLIAM M. (MAC) THORNBERRY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2021, page 1738:

Quote

The conferees direct the Secretary of the Navy to conduct a business case analysis of acquisition strategies for the new U.S.- built sealift ship program described in section 2218(f)(3)(E) of title 10, United States Code, and submit such analysis and the Secretary's intended course of action to the congressional defense committees not later than July 1, 2021.

In conducting this business case analysis, the Secretary shall consider, at a minimum, the following options and associated acquisition strategies: (1) Current Navy acquisition processes for acquiring Combat Logistics Force ships; (2) The use of a commercial executive agent or vessel acquisition manager, similar to the acquisition of the National Security Multi-Mission Vessel; and (3) A commercial-government hybrid acquisition biased toward maximum commerciality in both specifications and process.

Emphasis added.

Contracting out contracting. Who knew?

@ShaunaMSACM I am really late with this yet in promising some thoughts I have decided to post away.  I tried applying my old experience/habit as a internal process reviewer as I read through the solicitation.

• What a challenging and interesting acquisition.
• Structured as the agency did in the solicitation it did not result in commercial services contract.   As noted no FAR part 12 clauses, use of the SF-33 as the cover document and incorporation of clauses that generally apply to other than commercial services. The references to commercial found throughout the solicitation for the most part apply to subcontracts.  Without in depth market research on my part but in a very simple view, if me, I might have deferred to a commercial service contract based on the the paragraphs (1), (1)(i) and (1)(ii) of the FAR part 2 definition of "Commercial service"  but acknowledge such a conclusion could be debated.  Maybe an anomaly like construction when it comes to applying the FAR? 
• The challenge appears to then to have created a dilemma in how to describe the parent contract and task orders in FPDS reporting.  At face have it look like a duck but when reporting it is not, confusing.  A catch all phrase buried within the what are probably millions of words of the contract that says  "Supplies/services ordered by MARAD are considered commercial items unless otherwise stated on the TO."  adds to the confusion.   You have a parent IDIQ that is not commercial, carries no FAR part 12 clauses, but then you have task orders that are?  This seems especially confusing when you consider the FAR 52.216-1 clause as stated in the solicitation and its paragraph (b) that reverts a conflict to the wording to the parent contract. 
• The inclusion of clause 52.213-4 is mind boogling as well.  Was intent to have it apply to some task orders?    I note this as the 52.213-4 clause does address inspection, termination matters and warranty yet there are other clauses in the parent that address these same matters.  And then trying to wrestle with the aforementioned clause 52.216-1 again.

I appreciate the look see.   It is interesting and I guess in the end it might not be so much letting the confusions stand in the way of making such a anomally work within the contract as written.

Thank you!  This contract has been very challenging and I find myself scratching my head sometimes. I greatly appreciate your insight and guidance!

On 10/15/2024 at 7:45 AM, C Culham said:

Structured as the agency did in the solicitation it did not result in [Part 12]* commercial services contract.

*Added by me. 
Perhaps the reason for not using a Part 12/13 Commercial Services format here are the prohibitions at FAR 16.301-3 (b) and FAR 12.207 (a) against using such format for acquisition of commercial products or services priced as cost reimbursement.

I mentioned the FAR 12.207 (a) prohibition early on in this thread but it wasn’t acknowledged or challenged. Instead, everyone here seems to wonder why it isn’t structured as a Part 12/13 commercial item contract.

 16.301-3 (b)  “The use of cost-reimbursement contracts is prohibited for the acquisition of commercial products and commercial services (see  parts  2 and  12)“

“12.207 Contract type.

(a) Except as provided in paragraph (b)* of this section, agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial products or commercial services.”
* discusses conditions for use of  time and materials contracts for acquiring commercial items and services.

As another example, most of the products commonly incorporated into most construction contract building or horizontal utility projects are “commercial” products (as opposed to Federal Spec specific items for instance). There used to be “Federal Specifications” (FEDSPECs) and/or Military Specs (MILSPECs) for almost anything back in the day before commercial specs were widely standardized**. That doesn’t make a construction contract a commercial product or services acquisition, because of many other factors that affect the cost or price of the acquisition.

So why can’t you have a service contract for such services when the Part 12 formats aren’t applicable due to the type of pricing used.? Yes, you can use a non Part 12 service contract for cost reimbursable services. Non Part 12 service contracts were used for decades before Part 12 was developed. Part 12 commercial item contracts accommodate simpler means to acquire common industry standard products and services (when priced as FFP or certain T&M) , as opposed to requiring government specific,  specified products and services.

** I remember reviewing product submittals for toilet partitions that had specific Federal Specifications or Military Specs, comprising several pages of detail. Heck, there were FED or MIL specs for screws and nails, even!  We also had Federal Specs for almost any kind of soil tests, Portland Cement Concrete, Asphalt Cement and Coal Tar Cement paving materials and mixtures, density testing services and many other services. Now the industry standard specs are usually adequate.

joel hoffman said:

So why can’t you have a service contract for such services when the Part 12 formats aren’t applicable due to the type of pricing used.? Such contracts were used for decades before Part 12 was developed. Part 12 commercial item contracts accommodate simpler means to acquire common industry standard products and services - as opposed to government specific specified products and services.

Well you can but by FAR definition and application such a contract is not for "commercial services".  The quick reference is FAR 12.102(a).

Further it seems the FPDS supports this view.  Reference excerpt from The FPDS Government Users Manual at section 4.11.11  "This designates whether the solicitation used the special requirements for the acquisition of commercial items or other supplies or services authorized to use commercial item procedures intended to more closely resemble those customarily used in the commercial marketplace as defined by FAR Part 12. Select the appropriate value from the drop down menu. See Data Dictionary Element 10H Use Case for appropriate data entry requirements. 61 ..."

Your thoughts provoked a new thought of my own as I do understand the dilemma so to speak.  Maybe the CO should have sought a one time deviation for the action so they could not only call it a duck as he/she has apparently done but format the parent contract and its Task Orders as ducks?

Considering the further information posted by Vern Edwards it seems a deviation would have been an easy sell to the agency head.   Of course dependent on a fact that cost contracts are not preclude by the statute that caused the addition of FAR part 12, something I did not research.

Too late now!

C Culham said:

f course dependent on a fact that cost contracts are not preclude by the statute that caused the addition of FAR part 12, something I did not research.

The use of cost reimbursement contracts to acquire commercial products/services is prohibited by statute.

Carl, sorry, I should have clearly stated that,  yes- you can use a non- Part 12 service contract to acquire cost reimbursable services of the type that would otherwise be “commercial services” if priced as FFP.

Retreadfed said:

The use of cost reimbursement contracts to acquire commercial products/services is prohibited by statute.

Citation?

C Culham said:

Citation?

41 U.S.C. 3307(e)(4)

Retreadfed said:

41 U.S.C. 3307(e)(4)

Thank you

joel hoffman said:

Carl, sorry, I should have clearly stated that,  yes- you can use a non- Part 12 service contract to acquire cost reimbursable services of the type that would otherwise be “commercial services” if priced as FFP.

Joel, how do you square this statement with FAR 12.102 particularly (a) and (b)?

C Culham said:

Your thoughts provoked a new thought of my own as I do understand the dilemma so to speak.  Maybe the CO should have sought a one time deviation for the action so they could not only call it a duck as he/she has apparently done but format the parent contract and its Task Orders as ducks?

Considering the further information posted by Vern Edwards it seems a deviation would have been an easy sell to the agency head.   Of course dependent on a fact that cost contracts are not preclude by the statute that caused the addition of FAR part 12, something I did not research.

I just learned something new - I didn't know that a one time deviation was an option! Who would have thought that a contract like this one was even possible for that matter?  It definitely keeps me on my toes 😉

Retreadfed said:

Joel, how do you square this statement with FAR 12.102 particularly (a) and (b)?

As I previously said, it’s  not a commercial product or commercial service contract under FAR Part 12. Then, FAR Part 12 isn’t applicable to the contract described herein.

The services are of the type that would otherwise be “commercial services” if priced as FFP.

Screenshot from the Parent contract in FPDS.  

One more screenshot from the Parent contract in FPDS:

This is how the IDIQ level CLINs are structured

Thanks, Shauna. It appears to be inappropriate and/or contradictory. 

It also says that it is Performance Based Service acquisition (50% or more is PBA) Do you know which line items are applicable? 

Also said it was competitive, Best Value Tradeoff with four offers but Cost or Pricing Data were required???

ShaunaMSACM said:

I just learned something new - I didn't know that a one time deviation was an option! Who would have thought that a contract like this one was even possible for that matter?  It definitely keeps me on my toes 😉

A deviation here from applicable law isn’t an option. Anything is “possible” if the acquisition team ignores the Administrative Regulations and statutes.

Retreadfed said:

The use of cost reimbursement contracts to acquire commercial products/services is prohibited by statute.

The next questions are:

1. Can the agency legally issue cost reimbursement task orders for commercial products or services under this contract?

2. Can the contractor legally issue cost reimbursement subcontracts that would bind the government to reimburse the prime on a cost plus subcontract basis?

My answers would be apparently, no. I found no contradictions or exceptions to the prohibition in DFARs, either, if this is a DoD agency acquisition..  

Retreadfed said:

41 U.S.C. 3307(e)(4)

@ShaunaMSACM  My apologies for bringing deviation into the discussion for this instant matter.   I am in agreement it would not work as Federal Acquisition Streamlining Act (referenced USC already provided) provides the exception to use of cost type contracts.

Now to @joel hoffman

joel hoffman said:

if this is a DoD agency acquisition..

First things first but in reverse order.   This is US DOT Maritime Administration.

joel hoffman said:

2. Can the contractor legally issue cost reimbursement subcontracts that would bind the government to reimburse the prime on a cost plus subcontract basis?

You then provide a hard "No" to your own question.   As a hard and fast rule under the contract represented how so?

C Culham said:

@ShaunaMSACM  My apologies for bringing deviation into the discussion for this instant matter.   I am in agreement it would not work as Federal Acquisition Streamlining Act (referenced USC already provided) provides the exception to use of cost type contracts.

My misunderstanding - sorry!

C Culham said:

@ShaunaMSACM  My apologies for bringing deviation into the discussion for this instant matter.   I am in agreement it would not work as Federal Acquisition Streamlining Act (referenced USC already provided) provides the exception to use of cost type contracts.

Now to @joel hoffman

First things first but in reverse order.   This is US DOT Maritime Administration.

You then provide a hard "No" to your own question.   As a hard and fast rule under the contract represented how so?

Because the government would be purchasing commercial products or services using cost reimbursable pricing passed through the prime level to the government.

joel hoffman said:

Because the government would be purchasing commercial products or services using cost reimbursable pricing passed through the prime level to the government.

What prohibits this although it would be stupid to enter into a cost reimbursement subcontract under an FFP prime contract.

joel hoffman said:

Because the government would be purchasing commercial products or services using cost reimbursable pricing passed through the prime level to the government.

Joel, would this be applicable?

201.104 Applicability.
(a) Applicable statutes, the FAR, 48 CFR chapter 1, and the TAR, in this chapter, apply to all
acquisitions within the Department unless otherwise specifically excluded by statute, the FAR, or the
TAR.
(b) The following order of precedence applies to resolve any question of applicability concerning an
acquisition regulation or a procedure found within the TAR, or the TAM which comprises the
Department's internal operating procedures and guidance—
(1) U.S. Statutes;
(2) The FAR;
(3) The TAR;
(4) DOT Orders; and
(5) The TAM.
(c) The Maritime Administration may depart from the requirements of the FAR and TAR as
authorized by 40 U.S.C. 113(e)(15), but shall adhere to those regulations to the maximum extent
practicable. Deviations from the FAR or TAR requirements shall be documented according to
Maritime Administration procedures or in each contract file, as appropriate.

@joel hoffman @Neil Roberts

First, I am not so sure the statement by Joel that follows in quotes is an appropriate statement.  I hate to see folks be left with the thought that a cost subcontract by a prime holding a commercial service contract can not be done.

"Because the government would be purchasing commercial products or services using cost reimbursable pricing passed through the prime level to the government."

Reference the following WIFCON thread.  As noted from its discussion a cost subcontract could be appropriate under a commercial service prime contract.  The very reason I questioned Joel's hard no.

As to the "find" by Neil I would have to study it a little further but it does bring in new information, especially the US Code referenced in the quote, that might have allowed for the parent IDIQ to be done as is with both FFP and cost CLINS and still fit the definition of "commercial services" and more closely follow FAR part 12.   Please note I said "might".

As it goes I am resigned to think that the government was challenged and created a procurement the best they could and the OP in winning the contract now better understands the challenge and anomalies and together with the government do the best they both can with the contract vehicle in hand. 

The discussion is great for the future!

C Culham said:

As to the "find" by Neil I would have to study it a little further but it does bring in new information, especially the US Code referenced in the quote, that might have allowed for the parent IDIQ to be done as is with both FFP and cost CLINS and still fit the definition of "commercial services"

I have looked at that Code section and can find nothing in it that relates to using cost reimbursement contracts to acquire commercial products/services.

C Culham said:

@joel hoffman @Neil Roberts

As it goes I am resigned to think that the government was challenged and created a procurement the best they could and the OP in winning the contract now better understands the challenge and anomalies and together with the government do the best they both can with the contract vehicle in hand.

Carl, you just beat me to it.  I started to post something similar.

The SOW and overall objectives of this effort are clearer once someone takes the time to read and understand.   A shortcut on what’s involved is looking at the CLIN descriptions.  I think the problem we all had here arises from a lack of clarity on the overall objectives and what you concluded by saying “the government was challenged and created a procurement the best they could.”  This seems like the contracting people not really understanding technically what’s needed and vice versa.

There are probably several ways to structure this contract and likely none are perfect.  The issue really is about how to contractually acquire commercial vessels and support services and make it fit within contracting boundaries.  If the solicitation provided a better explanation upfront, it would be easier to grasp.  Also explaining the rational for both fixed price and cost reimbursable orders is beneficial along with grouping associated applicability of clauses - these clauses are applicable to FFP orders and these clauses are applicable to cost reimbursement orders. In the most simplistic terms, the government is acquiring marine vessels through a contractor and requires a variety of support services including maintenance, repairs, and alterations.  What’s needed is a clear strategy that best communicates and accomplishes that for both government and industry.  This example falls a little short in understanding at least.

Retreadfed said:

I have looked at that Code section and can find nothing in it that relates to using cost reimbursement contracts to acquire commercial products/services.

I don't think it has to have that exact language. Maritime could argue that per 113 (a), it is not subject to FAR cost reimbursement bar in this situation (if there is such a bar), because it is inconsistent with Maritime 113 (e)(15) purposes of its program and the effective, efficient conduct of its activities to administer this program.

C Culham said:

You then provide a hard "No" to your own question.   As a hard and fast rule under the contract represented how so?

It wasn’t a “hard No”. If a FFP or task order has already been priced and awarded and the prime awards a  cost reimbursement subcontract that doesn’t affect the price the government pays, then it might be okay for the government. Maybe not so for the prime.

The reason I say that is I’ve dealt with a VERY large, Union prime contractor that couldn’t find a FFP electrical subcontractor for a huge, complex FFP construction project.

So they entered into a cost reimbursement arrangement with a Hanford, Washington area firm with the Hanford Union workforce, hoping to closely manage the CP effort.

The result was a disaster for the prime. The electrical labor inefficiency (65+% overrun) affected the other craft labor trade productivity and the project schedule.

Neil Roberts said:

Joel, would this be applicable?

201.104 Applicability.
(a) Applicable statutes, the FAR, 48 CFR chapter 1, and the TAR, in this chapter, apply to all
acquisitions within the Department unless otherwise specifically excluded by statute, the FAR, or the
TAR.
(b) The following order of precedence applies to resolve any question of applicability concerning an
acquisition regulation or a procedure found within the TAR, or the TAM which comprises the
Department's internal operating procedures and guidance—
(1) U.S. Statutes;
(2) The FAR;
(3) The TAR;
(4) DOT Orders; and
(5) The TAM.
(c) The Maritime Administration may depart from the requirements of the FAR and TAR as
authorized by 40 U.S.C. 113(e)(15), but shall adhere to those regulations to the maximum extent
practicable. Deviations from the FAR or TAR requirements shall be documented according to
Maritime Administration procedures or in each contract file, as appropriate.

The TAR is a supplement to the FAR.
https://www.acquisition.gov/tar/part-1201—federal-acquisition-regulations-system#Subpart_1201_1_T48_5053521

I don’t know if the Title 41 USC prohibition Is an “applicable statute” to MARAD acquisition of commercial products and services. If it is, then MARAD departure from FAR/TAR described in (c) above doesn’t authorize departures from applicable Statutes.

I found no exception in TAR Part 1212 or other TAR parts.

Again, It’s not a commercial item or commercial services contract under Parts 12 or 13.

It has been described as a Part 15 trade off acquisition for acquiring and refurbishing and/or modifying vessels. I can’t review the solicitation in SAM.

C Culham said:

As it goes I am resigned to think that the government was challenged and created a procurement the best they could and the OP in winning the contract now better understands the challenge and anomalies and together with the government do the best they both can with the contract vehicle in hand.

@ Everyone

I have not read all of the recent posts in this thread. (I am in France and not inclined to think about government contracts.) But it seems that the recent focus has been on whether the contract is for a commercial product or services. Frankly, that is irrelevant, though not inconsequential, and not particularly interesting. If an issue comes up that becomes a dispute lawyers will resolve it by focusing on the text of the contract, not on the labels attributed to it by the parties. The contract says what is says.

It seems to me that all but one of you have largely failed to grasp the real lesson to be learned. The only one who seems to have grasped it (remember, I have admitted that I have not read all the posts) is Carl Culham:

C Culham said:

As it goes I am resigned to think that the government was challenged and created a procurement the best they could and the OP in winning the contract now better understands the challenge and anomalies and together with the government do the best they both can with the contract vehicle in hand.

Now, take a look at the RFP. The "Final" version was issued on February 21, 2020, and stated that proposals were due on March 20, 2020. I may have missed something, or misread it (remember, I'm in France) but the agency appears to have given offerors less than 30 days to read the 145-page RFP, including all of its attachments, and prepare a proposal. That is revelatory.

What sensible business persons would undertake such an unusual, important and, apparently, complex competitive acquisition in that way, strictly in writing, allowing insufficient time to read, think, propose, discuss, revise, discuss some more, and only THEN sign on the bottom line?

Who does that?

Competitive negotiation under the Federal Acquisition Regulation is, all too often, a clown show, with many missions and millions of dollars at stake, conducted by and participated in by people𑁋many with graduate "business" degrees𑁋who seem to have little understanding of the absurd rules and "case law" under which they must do business and of the right way to do that business under the circumstances.

The real lesson to be learned from this thread is that (1) our ambitious Federal executive branch is often incompetent, regardless of the politics of those historically and currently in charge, and that (2) we must urgently think about ways to fix it before it "fixes" all of us.

AND I AM NOT REFERRING TO THE CURRENTLY ONGOING, NEVER-ENDING PRESIDENTIAL CAMPAIGN. The problem of government incompetence transcends parties and candidates. And, as professionals, that is what should concern us.

And, as for contractors, if you decide to participate in an incompetently conducted clown show of a competition, be prepared to live with what you win.

What if anything can be done to fix this? What if anything can WE do to fix it?

joel hoffman said:

Again, It’s not a commercial item or commercial services contract under Parts 12 or 13.

Is it a valid contract if it was awarded contrary to statute?

Who knows? Depends on the statute, the argument, and the facts. Speculation is pointless.