FAR 13 fair and reasonable

Didn't the justification include a determination that fair and reasonable prices could be determined? Whatever method went into that justification should be followed afterwards. I think you need more than competing distributers (no value add) - perhaps a comparison to prior sales (perhaps prior sales that were made competitively.

CharterParty said:

Would quotes from two different authorized distributors for the same BN/OEM item be sufficient price analysis to meet the threshold of FAR 13.106-3(a)(1)?

It depends entirely on who is writing the statement and what facts they have.

CharterParty said:

Would quotes from two different authorized distributors for the same BN/OEM item be sufficient price analysis to meet the threshold of FAR 13.106-3(a)(1)?

Maybe...FAR 15.404-1(b)(2)(i) states "Normally, adequate price competition establishes a fair and reasonable price" (emphasis added...you can reference the definition for adequate price competition at FAR 15.403-1( c )(1)).

I add the emphasis because there are situations where adequate price competition would not result in a fair and reasonable price - for example, let's imagine a requirement for widgets that has a Government estimate, based on market research, of $50k.  The requirement is solicited via a RFQ for 3 days and results in 2 offers for $100k and $150k (let's assume we meet the definition of adequate price competition mentioned previously).  Now ask yourself, is $100k a fair and reasonable price?  Maybe, maybe not.  Any good contracting officer/professional would need to consider the totality of the circumstances and then do some thinking to make the proper determination.  Consider the following:

• The prices quoted are inconsistent with the Government estimate...why is that?
• The prices quote by the offerors are 40% different...why is that?
• Why did the Government receive only two quotes?  Did market research indicate a large number of potential suppliers for the requirement or a few?  Or, did the short solicitation response time limit other offerors' abilities to participate?
• Was the requirement clearly explained in the solicitation and adequate understood by the offerors?

I could go on and on.  Point being, Vern is absolutely right when he states "it depends."

Final point - you stated you're doing reviews.  It sounds like this may be a case of a poorly documented contract file.  I'd stress the importance of making sure that individuals document their business judgment (even if it seems apparent) for this very reason - a decision needs to be able to be readily understood and needs to be reasonable...even for SAP purchases.

CharterParty,

Aparently, the contracting officer was satisfied, and that is what matters.  Are you doing a review of file documentation, or are you really thinking that money is being wasted?  If the first, remember that FAR Part 13 is supposed to be simplified, faster, and so forth than Part 15.  If the second, share your superior knowledge with the contracting officer for his or her learning.

I've done this before and here's what we advise our clients when this comes up:

If the offerors were notified in the solicitation that it was a competitive procurement, and if bidders acted independently, and if there was nothing that otherwise suggested an invalid competition (i.e. competitive range considerations) then the competition can be accepted as valid.  Based upon the criteria stated, one can be reasonably assured that market forces are present which result in reasonable pricing.  

While admittedly a special case, competing among distributors does not in and of itself invalidate a competition.

ji20874 said:

Aparently, the contracting officer was satisfied, and that is what matters.

I disagree - if a contracting officer made an unreasonable determination, or no determination at all, that matters.

There is nothing in the original posting to suggest that the contracting officer made an unreasonable determination.  Let's not assume the worst.

There is no reason to assume anything, best or worst. Instead of assuming, read the CO's statement and decide whether he or she has made a sound argument.

I think ji20874 is highlighting the fact that FAR 13.106-3 only requires statements (documentation) of price reasonableness under certain circumstances. In context, documentation requirements for determinations (not D&Fs) and statements appear different.

This still leaves FAR 4.801 to deal with.

I agree with Vern please don’t assume either the best or the worst.  This is an intellectual question, not a questions of particular facts.  

Here is language from the NAVSUP 4200.85D:

“FAIR AND REASONABLE PRICE DETERMINATION

Ref: Purchase Request/Solicitation Number_____________________

1. I am recommending award to XXXXXXX. I used one or more of the following price analysis techniques compared to the quoted price of $____________. The quoted price was similar enough to the comparative price(s) to conclude that the quoted price is determined fair and reasonable.

a. Adequate Price Competition. XX vendors were solicited and XX quotes were received. After comparing the quoted prices, I consider the quotes to be competitive. See the Simplified Acquisition Worksheet or other record of price quotes received.” Page 6-12.

I have seen similar templates before in several offices.  These are template documents that have check boxes. The contracting officer makes an assertion (Box check or otherwise like above) that the price is fair and reasonable based on competitive quotes and then two or more quotes are in the file to review.

I don’t like this template’s use of the term “Adequate Price Competition”. As far as I can tell “Adequate Price Competition” is a term of art to describing procedures laid out in FAR 15. 

I have seen these templates in several offices and this question is one that always comes up.  FAR 13.106-3(a) has only three options for price fair and reasonableness (1), (2), or (3).  (1) leads with “ (1) Whenever possible, base price reasonableness on competitive quotations or offers. “ then (2) states “ (2) If only one response is received, include a statement of price reasonableness in the contract file. The contracting officer may base the statement on— (i) Market research; (ii) Comparison of the proposed price with prices found reasonable on previous purchases; (iii) Current price lists, catalogs, or advertisements. However, inclusion of a price in a price list, catalog, or advertisement does not, in and of itself, establish fairness and reasonableness of the price; (iv) A comparison with similar items in a related industry; (v) The contracting officer’s personal knowledge of the item being purchased; (vi) Comparison to an independent Government estimate; or (vii) Any other reasonable basis.” 

Competitive is not defined in FAR 2 or FAR 13 and I don’t know how you would apply the definition of adequate price competition to a FAR 13 procurement.    Do two tractor suppliers who sell you a computer for your tractor count as competition? These tractor suppliers are stuck buying the computer from tractor manufacturer who normally does not sell direct (even to the federal Government).  Don’t use the term tractor to confuse this question, it could equally be cell phone maker, engine manufacturer, software supplier.  I also suspect this will become more of an issue in the future as software makes more items unique and necessary to keep the whole package working.

CharterParty,

Are you asserting that the contracting officer failed to perform an adequate price reasonableness determination?  Or failed to adequately document it?  If so, what is the basis for your assertion of the contracting officer's failure?

Let's not make our FAR Part 13 buys harder than they have to be. From what you have written, I am unable to discern a failure.

When one has a sole source justification for the product of one manufacturer, and it is a commercial product, and two or more bona fide distributors submit quotations, and there is nothing else suggesting otherwise, I think the requirements of FAR Part 13 are satisfied.  

Yes, the contracting officer could have done more -- one can always do more -- but how much more is appropriate?  How about a five-week study of the marketplace?  How about setting the approval level for such a circumstance at the first flag officer/SES in the contracting officer's chain of command?  No, I think all is well, based on what you have written.  Academic curiosity and second-guessing can grind the purchasing process to a halt.

Jamaal Valentine said:

In context, documentation requirements for determinations and statements appear different.

I don't think so, and neither should you.

CharterParty said:

I don’t like this template’s use of the term “Adequate Price Competition”. As far as I can tell “Adequate Price Competition” is a term of art to describing procedures laid out in FAR 15.

I have seen these templates in several offices and this question is one that always comes up.  FAR 13.106-3(a) has only three options for price fair and reasonableness (1), (2), or (3).  (1) leads with “ (1) Whenever possible, base price reasonableness on competitive quotations or offers. “ then (2) states “ (2) If only one response is received, include a statement of price reasonableness in the contract file. The contracting officer may base the statement on— (i) Market research; (ii) Comparison of the proposed price with prices found reasonable on previous purchases; (iii) Current price lists, catalogs, or advertisements. However, inclusion of a price in a price list, catalog, or advertisement does not, in and of itself, establish fairness and reasonableness of the price; (iv) A comparison with similar items in a related industry; (v) The contracting officer’s personal knowledge of the item being purchased; (vi) Comparison to an independent Government estimate; or (vii) Any other reasonable basis.” 

Competitive is not defined in FAR 2 or FAR 13 and I don’t know how you would apply the definition of adequate price competition to a FAR 13 procurement.    Do two tractor suppliers who sell you a computer for your tractor count as competition? These tractor suppliers are stuck buying the computer from tractor manufacturer who normally does not sell direct (even to the federal Government).  Don’t use the term tractor to confuse this question, it could equally be cell phone maker, engine manufacturer, software supplier.  I also suspect this will become more of an issue in the future as software makes more items unique and necessary to keep the whole package working.

Great post, Charter Party! I agree about "adequate price competition." It's an official term associated with Truthful Cost or Pricing Data (formerly, Truth in Negotiations), which is a statute and a regulation that does not apply to simplified acquisition and a term that does not appear in Part 13.

However, FAR 6.302-1(c) clearly states that brand name acquisitions are not full and open competition regardless of the number of sources solicited. As such, I do not think it appropriate to make a price reasonableness statement in the file that says prices were determined reasonable based on competition.

FAR Part 6 does not apply to simplified acquisitions. See FAR 6.001(a).

Whynot said:

However, FAR 6.302-1(c) clearly states that brand name acquisitions are not full and open competition regardless of the number of sources solicited. As such, I do not think it appropriate to make a price reasonableness statement in the file that says prices were determined reasonable based on competition.

The lack "full and open competition" does not mean that you cannot determine a fair and reasonable price based on "competition."

Vern Edwards said:

Great post, Charter Party! I agree about "adequate price competition." It's an official term associated with Truthful Cost or Pricing Data (formerly, Truth in Negotiations), which is a statute and a regulation that does not apply to simplified acquisition and a term that does not appear in Part 13.

Vern,  I somewhat disagree.  The statement I quoted, FAR 15.404-1(b)(2)(i) uses the term "adequate price competition" in the context of price analysis (and then references you back to the definition of "adequate price competition" which is, admittedly, under the FAR section for Prohibition on Obtaining Certified Cost or Pricing Data).  Still, it's association with price analysis, the consistency between the price analysis techniques/standards at FAR 13.106-3(a) and FAR 15.404-1(a), and the statement in FAR Part 13 at FAR 13.003(g) which authorizes "any appropriate combination of procedures in Parts 13, 14, 15, 35, or 36..." leads me to conclude that if I'm trying to determine a fair and reasonable price based on competition IAW FAR 13.106-3(a), since FAR Part 13 does not provide an explicit standard for what meets that standard, it is appropriate to use the standard for "adequate price competition" from FAR Part 15.

Matthew Fleharty said:

The statement I quoted, FAR 15.404-1(b)(2)(i) uses the term "adequate price competition" in the context of price analysis (and then references you back to the definition of "adequate price competition" which is, admittedly, under the FAR section for Prohibition on Obtaining Certified Cost or Pricing Data).  Still, it's association with price analysis, the consistency between the price analysis techniques/standards at FAR 13.106-3(a) and FAR FAR 15.404-1(a), and the statement in FAR Part 13 at FAR 13.003(g) which authorizes "any appropriate combination of procedures in Parts 13, 14, 15, 35, or 36..." leads me to conclude that if I'm trying to determine a fair and reasonable price based on competition IAW FAR 13.106-3(a), since FAR Part 13 does not provide an explicit standard for what meets that standard, it is appropriate to use the standard for "adequate price competition" from FAR Part 15.

That kind of thing is why I have long said that the rules and guidance for conducting simplified acquisitions should be removed from FAR and placed in a separate publication. If I were running a contracting shop doing simplified acquisitions, I would forbid my buyers from ever looking at FAR Part 15 in connection with simplified acquisitions. Anyone caught looking at FAR Part 15 in connection with a simplified acquisition would spend the rest of their life assigned exclusively to doing contract closeouts. I would not want buyers wasting time with concepts like adequate price competition and trying to apply the criteria in 15.403-1(c)(1) to simplified acquisitions. I can hear them now, arguing if you could ever have adequate price competition based on quotes, since 15.403-1(c)(1) mentions only offers, and FAR 2.101 makes a distinction between offers and quotes.

FAR Part 15 was written by Satan.

Here's the original question:

On August 16, 2016 at 5:19 AM, CharterParty said:

Would quotes from two different authorized distributors for the same BN/OEM item be sufficient price analysis to meet the threshold of FAR 13.106-3(a)(1)?

In simplified acquisition, the adequacy of a CO's determination of fairness and reasonableness depends on the argument the CO makes in his statement (it could be as brief as three sentences) and the facts on which the argument is based. (For instance--were the quotes from the different distributors the same? Were the quotes for identical items? Were the distributors in close geographical proximity? Did the CO bargain for better prices than originally quoted? Did the CO get a better price from either distributor?)

The answer does not depend on FAR terminology or rules in Part 6 and Part 15.

Teach people doing simplifieds to be BUYERS, not regulation hounds.

Doesn't FAR 13.501 bring in FAR Part 6? At any rate, this section clearly states that brand name acquisitions are sole source acquisitions. I do not know how you reconcile sole source and competition.

Whynot said:

Doesn't FAR 13.501 bring in FAR Part 6? At any rate, this section clearly states that brand name acquisitions are sole source acquisitions. I do not know how you reconcile sole source and competition.

No. It merely refers to the use of a format. Didn't you read 6.001(a)? It's short. Didn't you understand it?

The issue in this thread is fairness and reasonableness of price, not competition. Competition is not essential to getting a fair and reasonable price, and competition does not guarantee a fair and reasonable price. You can get a fair and reasonable price from a sole source. COs do it all the time (or claim they do).

And people wonder why contracting is such a mess.

Vern Edwards said:

I can hear them now, arguing if you could ever have adequate price competition based on quotes, since 15.403-1(c)(1) mentions only offers.

Fair point Vern, I withdraw my disagreement regarding the application of the standard for "adequate price competition" to simplified acquisitions; however, in that case, should there be a definition in FAR 2.101 for "adequate price competition" that captures both quotes and offers?

I hope if you were my boss you wouldn't assign me to working contract closeouts...

Matthew Fleharty said:

hould there be a definition in FAR 2.101 for "adequate price competition" that captures both quotes and offers?

It depends on what the policy makers want to do. Remember that adequate price competition is a statutory term that was adopted by the ASPR, then the DAR, and now the FAR in order to implement TINA. The statute does not define the term or provide criteria for determining its existence.

Historically, agencies did not solicit quotes in large acquisitions. They solicited proposals (meaning offers). Quotes were sought primarily in simplified acquisitions, and Congress never meant to apply TINA to simplified acquisitions (which used to be called "small purchases"). Thus, it did not make sense to include quotes in the criteria for adequate price competition. I doubt that the term was even discussed when the regulations first fleshed out the concept of adequate price competition.

Of course, careless usage of legal terminology, a trait of our profession (think of "scope"), has led people to talk of adequate price competition in simplified acquisitions, although the term does not appear in Part 13. A cursory check of the Contract Pricing Reference Guides, Volume I, Price Analysis, shows that adequate price competition is discussed only with reference to cost or pricing data, and no mention is made of it in the context of simplified acquisitions.

A careful reading of FAR 15.403-1(c)(1) suggests that there is a legitimate issue whether you can have adequate price competition, in the sense in which that term is used in FAR, based on quotes, since the FAR refers to adequate price competition expressly and solely in the context of offers and FAR Part 2 makes a clear distinction between offers and quotes. Moreover, if I rightly recall, the only mention of adequate price competition in FAR 15.404-1 is in a single sentence in subparagraph (b)(2)(i), which is a rather weak basis for applying it to simplified acquisitions, which, I believe, are not mentioned anywhere in 15.404. Not once.

Does the government solicit quotes very often in acquisitions valued in excess of $750,000. I suspect not, but I don't know. I doubt it. If not, then why bother changing the criteria in 15.403-1(c)(1)?

Please ignore the strikethrough in my last post. Its occasional unbidden appearance is one of the mysteries of the software for this site. The post is too long for me to write again. I'm off to the county fair for the rest of the day.

I am not saying that competition is the only way to determine price reasonableness.

What I am saying is that you should not make a price reasonableness statement in the file that price reasonableness was determined for this brand name (sole source) simplified acquisition through a competition of the two distributer quotes.

We may not know what actually constitutes adequate price competition, but we know what it isn’t – and that is prices obtained through a sole source acquisition

Vern Edwards said:

Teach people doing simplifieds to be BUYERS, not regulation hounds.

Amen!

Whynot,

Your assertion is unsupported by anything in FAR Part 13 -- you have to reach to FAR Part 6 and Part 15 to support your argument, but it is unfair to make those reaches for a FAR Part 13 buy.

Vern Edwards said:

A careful reading of FAR 15.403-1(c)(1) suggests that there is a legitimate issue whether you can have adequate price competition, in the sense in which that term is used in FAR, based on quotes, since the FAR refers to adequate price competition expressly and solely in the context of offers and FAR Part 2 makes a clear distinction between offers and quotes. Moreover, if I rightly recall, the only mention of adequate price competition in FAR 15.404-1 is in a single sentence in subparagraph (b)(2)(i), which is a rather weak basis for applying it to simplified acquisitions, which, I believe, are not mentioned anywhere in 15.404. Not once.  

Does the government solicit quotes very often in acquisitions valued in excess of $750,000. I suspect not, but I don't know. I doubt it. If not, then why bother changing the criteria in 15.403-1(c)(1)?

Vern,

Since "adequate price competition" as a term is included under FAR 15.404-1(b)(2)(i), I'd argue that it is relevant even on FAR Part 15 acquisitions below $750,000 when performing price analysis and comparing proposed prices received in response to the solicitation.  If you don't meet the standards of adequate price competition, the use of that technique to determine price reasonableness would be improper. 

Quote

(1) Adequate price competition. A price is based on adequate price competition if --

     (i) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement and if --

          (A) Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a substantial factor in source selection; and

          (B) There is no finding that the price of the otherwise successful offeror is unreasonable. Any finding that the price is unreasonable must be supported by a statement of the facts and approved at a level above the contracting officer;

Outside of the FAR Part 15 specific language of "offers" and "source selection" (bolded and underlined above) the rest of the words/information contained in the standard for "adequate price competition" is quite useful in answering the question "When might the Government have a fair and reasonable price resulting from competition?"  Here's a partial breakdown as I see them:

• Two or more offerors that are:
• (a) Responsible
• (b) Competing independently
• (c) Satisfying the Government's expressed requirement
• Price is a substantial factor
• No finding that the price of the otherwise successful offeror is unreasonable.

Those are sound standards that could easily be applied to simplified acquisitions, but apparently should not (at least not by reliance on the FAR) due to the use of the word "offers," which you correctly pointed out, and the distinction between "offers" and "quotes" in FAR 13.004.  Now, as someone who stresses the importance of definitions, since "competition," "adequate price competition" or a similar term is not defined in FAR Part 13 or FAR 2.101, where should contracting professionals go when basing price reasonableness for simplified acquisitions off of competition to answer the question "when might the Government have a fair and reasonable price resulting from competition?"  Surely they can answer the question through reason, business judgment, and sound logic (and, in doing so, will likely make many of those same points bulleted above), but I think if a similar definition or standard existed that included quotes (or just didn't exclude them) that would be beneficial.

Hope you enjoyed the fair and, as always, thanks for an engaging and educational discussion.

Matthew Fleharty said:

Since "adequate price competition" as a term is included under FAR 15.404-1(b)(2)(i), I'd argue that it is relevant even on FAR Part 15 acquisitions below $750,000 when performing price analysis and comparing proposed prices received in response to the solicitation.

Matthew,

This thread is about FAR Part 13 acquisitions, not Part 15 acquisitions.

Isn't FAR 13.106-3(a) is all we need for FAR Part 13 acquisitions?

ji20874 said:

Matthew,

This thread is about FAR Part 13 acquisitions, not Part 15 acquisitions.

Isn't FAR 13.106-3(a) is all we need for FAR Part 13 acquisitions?

Forum discussions are about whatever is being discussed by the members at the time - I don't think my posts or questions have taken the original question and discussion to a point that is completely unrelated.

Is FAR 13.106-3(a) all you need for FAR Part 13 acquisitions?  "Whenever possible, base price reasonableness on competitive quotations or offers."  What are competitive quotations or offers?  Can you point me to a definition?  For example, if a requirement is solicited and only one quote is received, is that a competitive quotation that could serve as the basis for price reasonableness?  Why or why not?

On the other hand, the standard for "adequate price competition" (referenced in FAR 15.404-1(b)(2) price analysis techniques to determine a fair and reasonable price which are remarkably similar to your FAR 13.106-3(a) reference) actually sets standards that make sense (already explained in my previous post).  I've already conceded to Vern's point that because it states "offers" it should not be applied to simplified acquisitions when quotes are received...my point/question is shouldn't there be such a standard for "competition" that is consistent regardless of whether quotes or offers are solicited and why couldn't it be the one for "adequate price competition?"

Matthew:

We also have the Contract Pricing Reference Guide, Volume 1, Price Analysis as official guidance to supplement or compliment FAR 13.106-3.

What is important in price competition is comparing quotes or offers. Comparing them to each other, the IGE, the market, etc. Price competition or adequate price competition alone do not establish fair and reasonable prices … the price analysis does.

Vern:

Do you take exception to applying adequate price competition to FAR Part 13 RFPs?

Whynot said:

What I am saying is that you should not make a price reasonableness statement in the file that price reasonableness was determined for this brand name (sole source) simplified acquisition through a competition of the two distributer quotes.

We may not know what actually constitutes adequate price competition, but we know what it isn’t – and that is prices obtained through a sole source acquisition

You don't get it, and I'm not going to devote any more time to explaining to you.

Jamaal Valentine said:

Vern:

Do you take exception to applying adequate price competition to FAR Part 13 RFPs?

Jamal:

I think that the concept of adequate price competition does not apply to simplified acquisitions, whether conducted by RFP or RFQ, to acquisitions conducted by sealed bidding, or to acquisitions of commercial items.

The concept of adequate price competition applies only to acquisitions of noncommercial items valued at or above the threshold for the submission of certified cost or pricing data that are conducted by two-step sealed bidding or negotiation.

Jamaal Valentine said:

Matthew:

We also have the Contract Pricing Reference Guide, Volume 1, Price Analysis. Official guidance to supplement or compliment FAR 13.106-3.

What is important in price competition is comparing quotes or offers. Comparing them to each other, the IGE, the market, etc. Price competition or adequate price competition alone do not establish fair and reasonable prices … the price analysis does.

Completely understand that analysis is what drives the determination of fair and reasonable prices (refer to my first post in this thread) - I'm discussing the (or a potential) basis/standard for that determination.

Matthew Fleharty said:

What are competitive quotations or offers?  Can you point me to a definition?  For example, if a requirement is solicited and only one quote is received, is that a competitive quotation that could serve as the basis for price reasonableness?  Why or why not?

There is no official definition. However, ordinary usage suggests that competitive quotations or offers are those openly solicited from more than one source, i.e., those solicited from firms that know that other firms are being solicited, as well, and when all firms have been notifed of the basis on which the award will be made. See FAR 13.106-1.

Vern Edwards said:

There is no official definition. However, ordinary usage suggests that competitive quotations or offers are those openly solicited from more than one source, i.e., those solicited from firms that know that other firms are being solicited, as well.

That sounds a lot like FAR 15.403-1(c)(1)(ii)...

Quote

(ii) There was a reasonable expectation, based on market research or other assessment, that two or more responsible offerors, competing independently, would submit priced offers in response to the solicitation’s expressed requirement, even though only one offer is received from a responsible offeror and if --

    (A) Based on the offer received, the contracting officer can reasonably conclude that the offer was submitted with the expectation of competition, e.g., circumstances indicate that --

    (B) The determination that the proposed price is based on adequate price competition and is reasonable has been approved at a level above the contracting officer; or

• (1) The offeror believed that at least one other offeror was capable of submitting a meaningful offer; and

  (2) The offeror had no reason to believe that other potential offerors did not intend to submit an offer; and

Yeah. So? Adequate price competition has to do with the requirement to obtain certified cost or pricing data. Period. That requirement does not apply to simplified acquisitions, thus, neither does the concept of adequate price competition.

All you FAR Part 15 people who want to apply that concept to simplified acquisition have been led astray and become demented. Only your (hopefully) temporary insanity prevents me from prosecuting you for felony rule misapplication. However, you should be blocked from any contact with people charged with the conduct of SIMPLIFIED acquisition. Persistence will result in your banishment to Contract Closeout Land and to the hideous professional death that will almost certainly follow. 

Vern Edwards said:

Yeah. So? Adequate price competition has to do with the requirement to obtain certified cost or pricing data. Period. That requirement does not apply to simplified acquisitions.

All you FAR Part 15 people who want to apply that concept to simplified acquisition have been led astray and become demented.

Vern,

I'm definitely not a FAR Part 15 person - I cringe every time I see a commercial acquisition that meets the requirements of FAR 13.5 go the FAR Part 15 Source Selection route...

What I am is someone that likes to have a standard or definition to base a position on - I've agreed with you that the applicability is inappropriate as currently written; however, given what those standards state, I think they could potentially have use outside of the a prohibition on obtaining certified cost or pricing data.

We're talking simplified acquisition. Keep it simple.

Why add "adequate" to the phrase price competition and then apply a set of fixed standards for adequate instead of professional judgement? Why apply rules that do not state that they apply?

Why refuse to consider bids from distributors of brand names to be competitive if the facts show that they are different or that the distributors are willing to bargain independently? FAR Part 6 and 15.403-1 apply to noncommercial acquisitions using other than SAP and valued in excess of $750,000, but they do not apply to acquisitions properly conducted pursuant to FAR Part 13.

Granted, if the facts are that the distributors are forced to charge prices set by the manufacturer, then the prices are not competitive, although they might still be fair and reasonable. Why not reason and let the facts direct your thinking, instead of seeking to apply inapplicable fixed standards?

Are we thinking business people, or are we such rule-obsessed drones that we can't reason our way to a determination of fairness and reasonableness without the help (or constraint) of a regulatory standard?

Matthew Fleharty said:

Completely understand that analysis is what drives the determination of fair and reasonable prices (refer to my first post in this thread) - I'm discussing the (or a potential) basis/standard for that determination.

By no means was I implying that you didn't understand the concepts being discussed.

Competition and its derivatives if not defined in FAR are surely defined in a dictionary, which is where FAR 1.108 coventions lead us.

However, if the analysis drives the determination, wouldn't that be the basis/standard. The CPRG provides discreet steps, some of which I outlined in my post.

Vern Edwards said:

Are we thinking business people, or are we such rule-obsessed drones that we can't reason our way to a determination of fairness and reasonableness?

Unfortunately, much of this thread suggests the latter.

I think FAR 13.106-3(a) is entirely adequate for a thinking business person.

With SAP buys not requiring competition only that the buyer be able to determine price reasonableness, why is there a need for the buyer to ever follow sole source SAP procedures when non competitive SAP buys are otherwise permissible? What is the difference between a non competitive SAP buy and a sole source SAP buy? Where is the SAP sole source requirement coming from? The forum has made it clear that it (as well as any FAR Part 13) is not coming from FAR Parts 6 or 15

Whynot said:

With SAP buys not requiring competition only that the buyer be able to determine price reasonableness, why is there a need for the buyer to ever follow sole source SAP procedures when non competitive SAP buys are otherwise permissible?

SAP buys require that COs get competition "to the maximum extent practicable." See FAR 13.104. FAR 13.106-1 provides detailed guidance on when to get such competition and how much competition to get. This SAP requirement for competition "to the maximum extend practicable" is not the same as, or as compelling as, the requirement in FAR Part 6 for "full and open competition," under which there are only specific statutory exceptions.

Note that FAR 13.106 uses the term "single source," instead of "sole source." The standard in FAR 13.106-1(b) for soliciting from only a "single source" is much less stringent than the statutory tests in FAR Subpart 6.3 that a CO must pass before determining that only one responsible source exists or otherwise seeking less than "full and open" competition.

The only use of the term "sole source" in FAR Part 13 is in 13.501, which applies only to simplified acquisitions of commercial items valued at more than the simplified acquisition threshold but at or less than $7 million (or $13 million). In those procurements the CO need not meet the standards of FAR Subpart 6.3, but must prepare a justification using a modified version of the of the justification required by 6.303-2.

Quote

What is the difference between a non competitive SAP buy and a sole source SAP buy?

A noncompetitive SAP buy is not governed by the rules in FAR Subpart 6.3, except with regard to the use of a modified justification for simplified acquisitions of commercial items valued at more than the simplified acquisition threshold.

Quote

Where is the SAP sole source requirement coming from?

The only SAP "sole source requirement" is the one in FAR 13.501, which, as I explained above, applies only to simplified acquisitions valued at more than the simplified acquisition threshold.

Vern Edwards said:

Are we thinking business people, or are we such rule-obsessed drones that we can't reason our way to a determination of fairness and reasonableness without the help (or constraint) of a regulatory standard?

Fair enough, but one day I'd like to have an in depth conversation regarding when definitions/standards should be required and when they shouldn't.  As someone who has been through and watched this career field and the regulations governing it evolve, I think I could learn a lot if you could spare the time for discussion.

I think my final point is that when we're assessing whether competition was had or not, that reasoning seems to draw on similar criteria as contained in the definition of "adequate price competition."  Don't worry any further - I promise I won't point any buyers using simplified acquisition procedures to the "adequate price competition" standard, but many (if not all) of those components will come up while using business judgment to reason through the issue of whether competition could have resulted in a fair and reasonable price - I'll just find some business text instead.

Matthew,

Just use the FAR Part 13 standards.  It's so easy.  Forget all the FAR Part 6 and Part 15 mumbo-jumbo when you're in FAR Part 13.

FAR 13.104:  "The contracting officer must promote competition to the maximum extent practicable."  Use common dictionary definitions for maximum, extent, and practicable, and read these three words together to form a common sense whole.  It's easy!

FAR 13.106-1(b)(1)(i):  "Contracting officers may solicit from one source if the contracting officer determines that the circumstances of the contract action deem only one source reasonably available."  Use common common dictionary definitions for reasonably and available, and read these two words together to form a common sense whole.  It's easy!

FAR 13.106-3(a).  "Before making award, the contracting officer must determine that the proposed price is fair and reasonable."  Use common dictionary definitions for fair and reasonable, and read these two words together to form a common sense whole.  It's easy!  Sometimes, this determination can be made by checking a box -- sometimes, it might take a sentence or two.  Sometimes (very rarely?), it might take seven or eight sentences.

FAR 13.106-3(a)(1) and (2) are not the only possible methods -- but "whenever possible," we want to "base price reasonableness on competitive quotations or offers."  Use a common dictionary definition for competitive, and read it in context to make a common sense whole.  It's easy!  And if only one response is received, look at FAR 13.106-3(a)(2)(vii):  "[a]ny other reasonable basis."  It's easy!  And (v):  "[t]he contracting officer's personal knowledge of the item being purchased."  It's easy!  The contracting officer makes a business decision, and makes some minor effort to document his or her decision in light of FAR 13.106-3(b).  It's easy!

Let FAR Part 13 speak for itself -- it's easy!

----- ----- -----

Another thought -- FAR Part 13 acquistions are supposed to be done by GS-1105 purchasing agents, not GS-1102 contract specialists.  Knowledge of FAR Part 15 or FAR Part 6 is not required for successful simplified acquisitions.

Matthew Fleharty said:

[W]hen we're assessing whether competition was had or not, that reasoning seems to draw on similar criteria as contained in the definition of "adequate price competition."

I agree, but once you resort to an official phrase that is defined by regulated standards, any debate about the soundness of a judgment becomes entangled in debate about interpretation of the regulation. The very idea of simplified acquisition is to minimize those kinds of entanglements. Ask anyone who has been around in government contracting for a while, and they'll tell you that questions about whether there is adequate price competition has been the source of many a lengthy fight. See Nash, "Cost or Pricing Data in Competitive Negotiations: Overkill," The Nash & Cibinic Report, March 1987:

Quote

What steps can a competitor take when faced with a solicitation that is silent on the requirement for cost or pricing data, or requires its submission, and the competitor believes that adequate price competition exists? The first step would be to discuss the matter with the CO and give the CO information concerning the competitive market. If the CO is not familiar with the FAR requirements or does not understand them, the CO should be referred to the above decisions.

If the CO remains adamant on the requirement for the data, the only steps left for the competitor would be to seek relief from higher authority within the agency. But this is usually not a desirable avenue of relief because of the fear that it might cause bad customer relations. Neither is protest to one of the contract award controversy forums a realistic option, since the CO's decision is not likely to be overturned if there is the slightest doubt.

A competitor's main hope, therefore, is that the CO will listen to reason-- which will probably occur in most cases. However, competitors should not be placed in such a position. CO's supervisors should make certain that their COs are following both the spirit and the letter of the regulations. Of course, it would be helpful if the regulations were clarified.

See also United Technologies Corp. ASBCA 51410, 04-1 BCA ¶ 32556, Feb. 27, 2004, an Air Force case, one of the biggest defective pricing cases in history ($300 million) in which the board devoted several pages to the question of whether adequate price competition had existed in a competitive negotiation in which there were only two competitors and the government reserved the right to make multiple awards. Read this:

Quote

I. WHETHER THE CONTRACTING OFFICER LAWFULLY EXERCISED HIS DISCRETION TO OBTAIN CERTIFIED COST OR PRICING DATA

TINA requires a contractor to submit and to certify cost or pricing data prior to the award of any negotiated contract where the contract price is expected to exceed $500,000, and requires that the contract contain a provision providing for contract price adjustment in the event the contract price is increased due to the submission of data that was inaccurate, incomplete or noncurrent. The Act also provides for certain exemptions, i.e., “adequate price competition,” whereby the government may exercise its discretion not to obtain certified cost or pricing data.

The procurement regulations provide guidance as to how this discretion is to be exercised, explaining how the contracting officer is to determine the existence of price competition and whether the price competition is “adequate” under the circumstances so as to exempt the procurement from cost or pricing data requirements. United Technologies Corp., Pratt & Whitney, ASBCA No. 51410, 99-2 BCA ¶ 30,444. It is well settled that the application of this regulatory guidance to the facts of each case is committed to the sound discretion of the contracting officer. See Fraass Surgical Mfg. Co., Inc. v. United States, 571 F.2d 34, 39 (Ct. Cl. 1978); Cubic Defense Systems, B-229884, 88-1 CPD ¶ 395 at 8; see also Sperry Flight Systems Division of Sperry Rand Corp. v. United States, 548 F.2d 915 (Ct. Cl. 1977) (application of TINA exemptions committed to the sound discretion of the contracting officer); Honeywell Federal Systems, Inc., ASBCA No. 39974, 92-2 BCA ¶ 24,966 (whether to grant commerciality exemption is within the discretion of the contracting officer).

When a contracting officer is afforded discretion under the regulations, it is incumbent that said discretion not be abused. On the other hand, it is not our province to substitute our judgment for that of the contracting officer.

It is undisputed that this was a negotiated competitive procurement. The question is whether prior to award, the CO had reason to expect that price competition was “adequate” — as defined by the regulations — so as to exempt the offerors from furnishing certified cost or pricing data. Prior to award, the contracting officer was of the view that adequate price competition did not exist and that certified cost or pricing data were required. Based upon the governing factors in DAR 3-807.7(a)(1), Adequate Price Competition (finding 74), we believe that appellant has not shown any abuse of discretion.

First, the competition consisted of only two offerors, Pratt and GE. The regulations caution that “in making this [exemption] judgment, the smaller the number of offerors, the greater the need for close evaluation.” DAR 3-807.7(a)(1). Moreover, the regulation at DAR 3-807.7(a)(1)(iii) contemplates that a procurement with adequate price competition is one awarded to a “responsive and responsible offeror” (singular, not plural). In this procurement however, the AF reserved the right to award to all offerors, that is, to make a dual award, which in fact occurred under every option exercise of the contract. Subsection (iii) of the regulation also contemplated that a procurement with adequate price competition would be one awarded to the responsive and responsible offeror who submitted “the lowest evaluated price.” However, in this procurement the AF was not constrained to award at the lowest evaluated price, and in fact it did not do so (finding 23).6

For reasons stated, we conclude that the contracting officer did not abuse his discretion under the regulations or the statute by concluding, prior to award, that “adequate price competition” did not exist, thereby requiring the offerors to submit certified cost or pricing data under TINA.

Now, why bring that kind of b.s. into simplified acquisition when it does not apply by statute or regulation and was never meant to apply?

This business is complicated enough without us practitioners complicating it even more by misuse of terminology and misapplication of concepts and rules.

Matthew Fleharty said:

Fair enough, but one day I'd like to have an in depth conversation regarding when definitions/standards should be required and when they shouldn't.  As someone who has been through and watched this career field and the regulations governing it evolve, I think I could learn a lot if you could spare the time for discussion.

I think you know how to contact me. I travel often, but you can reach me by email to set up a talk time.

It looks like 13.106-1(b) also requires a justification. From the new case posted:

Accordingly, we find that the agency has failed to reasonably justify its determination to limit the competition to brand name items. See FAR § 13.106-1(b)(1). While there may be justifiable reasons for restricting this procurement to brand name only herbicides, the agency has not provided that justification here.  (Phoenix Environmental Design, Inc. B-413373: Oct 14, 2016)

On 8/18/2016 at 9:51 AM, Vern Edwards said:

SAP buys require that COs get competition "to the maximum extent practicable." See FAR 13.104.

Furthermore, why isn't full and open competition required for SAP? Why doesn't the Competition in Contracting Act (CICA) apply to SAP?

Because simplified acquisitions are a statutory carve-out, an exception, specifically designed to avoid the burden of full and open competition. Fellow frogs, please remember that important concept! See 41 U.S.C. 1901.

On 10/18/2016 at 10:08 AM, Whynot said:

It looks like 13.106-1(b) also requires a justification. From the new case posted:

The GAO said the following: "In a simplified acquisition, an agency is permitted to limit a solicitation to a brand name item when the contracting officer determines that the circumstances of the contract action deem only one source is reasonably available. FAR §§ 11.105(a)(2)(ii), 13.106-1(b)(1). In such cases, we review the decision to limit the procurement to a brand name for reasonableness. See Critical Process Filtration, Inc, B-400746 et al., Jan. 22, 2009, 2009 CPD ¶ 25 at 3."

Keep in mind the GAO found the "justification" or "reasoning" to be deficient or unreasonable. GAO criticized the substance, not the form.

PepeTheFrog suggested in a different thread:

"In the contract file, include a concise, written "determination" (not a full "determination and findings" AKA D&F) for your decision. This method satisfies FAR 13.106-1(b)(1)(i), 13.106-3(b)(3)(i), and 13.203(b). It also satisfies FAR 13.106-3(b)'s direction to "keep documentation to a minimum," and will cost you sixty seconds of your time."

If the "justification" or "reasoning" behind the written determination needs to be more complicated and thorough, take more than sixty seconds. Write a few paragraphs if necessary. But do not create various forms of documentation which apply to GSA orders, IDIQ orders, or FAR Part 15. Stay in your pond!

If this is a one-time buy, you don't need a justification. But if you're going to be buying more micro-purchases for the same item you'd better document the office files as to why you need the brand name item, why no other will do, and how you're going to consolidate requirements and seek competition for future buys. Trust me on this.

Another case setting minimum standards for "promoting competition to the maximum extent practicable":

leaving only two sources that could, does not meet the guideline of soliciting “at least three sources to promote competition to the maximum extent practicable.” FAR § 13.104; cf. Latvian Connection Gen. Trading & Constr., LLC, B‑409442, Apr. 25, 2014, 2014 CPD ¶ 135 at 2 (stating that soliciting three sources meets the requirements for conducting a simplified acquisition)

/legacy/a/92c9e1c12319a61d.pdf

Whynot:

On Monday, October 31, 2016 at 10:13 PM, Whynot said:

Another case setting minimum standards for "promoting competition to the maximum extent practicable":

leaving only two sources that could, does not meet the guideline of soliciting “at least three sources to promote competition to the maximum extent practicable.” FAR § 13.104; cf. Latvian Connection Gen. Trading & Constr., LLC, B‑409442, Apr. 25, 2014, 2014 CPD ¶ 135 at 2 (stating that soliciting three sources meets the requirements for conducting a simplified acquisition)

/legacy/a/92c9e1c12319a61d.pdf

What are you trying to convey, here? Thanks in advance.