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Federal government has always awarded various contractors based on financial bids as well as technical bids. This has seen lower bidders taking government projects. However, since federal government is ruled and controlled by the U.S. constitution, the same has created strict contracting regulations. These regulations dictate the actions that should be taken by the government contracting officers when negotiating a contract. As a result, it has complicated the contracting process due to the existence of non-pleasant threshold requirements that have adversely undermined the government in having long-term relationship with quality contractors. Factors such as acquisition costs and federal regulations have underpinned government’s effort towards contracting with performing contractors. It is in this regard that this paper discusses means by which the government can encourage performing contractors in complying with the contract requirements for a given complex acquisition.
Keywords: federal contracting, acquisition, contracts, performing contractors, requirements
In the United States, the government and private owners have often categorized contractors in terms of their capabilities and their previous performance record. These categories are usually considered in contract awarding and prequalification since it has been established that the fact that we have the lowest bidder does not necessary mean that the government will incur the lowest cost. As a result, the government as well as private owners has often awarded contracts based on financial as well as technical bid.
When Performance-Based Service Contracting was established by the U.S. Office of Management and Budget in 1998, it was meant to emphasize on all aspect of contract acquisition and awarding. It was noted that government contracts being awarded to bidders should consider the aim for the work done rather than the way of work performance. In so doing, this kind of approach provided contractors with freedom that allowed them meeting government’s performance objectives thereby achieving appropriate performance levels which were used in making payment for the contracts.
Contracting in Federal Government is similar to that done by private parties in terms of lawful purpose, the competency of contracting party, the compliance of contracting party with terms of the offer, and more so the mandated mutual obligation of the contract. However, the fact that Federal contracts and contracting process are guided by various statutes as stipulated in the United States Code has resulted in theoretical undermining of Federal contracting and contracting processes with associated contractors. This is due to the fact that Federal contracting is heavily regulated thereby reducing the terms of engagement between the Federal government and the contracting parties. This has especially been by complicating the awarding and conclusion of various contracts.
Unlike, when private parties get into contract with the Federal Government, when a contract is done between parties, they are able to establish effective contract terms through mutual consent. In so doing, it gives each contracting party an opportunity to represent its own interest in a lawful manner that also determines the performance of such contract. While the same mutual consent with parties in contract awarding and conclusion can also be envisaged by Federal Government, the existence of legal prescribed provisions and clauses makes it difficult to enhance mutual consent of a commercial contract.
For instance, in commercial contracting, normally, both parties are at times represented by parties whose authority in negotiation is usually controlled and determined by the law of agency with little application of statutes. This is different from what is in Federal Government contracting, where the representative agents’ authority to enter and award contracts is strictly controlled and determined by statutes and regulations. Therefore, by creating restriction that complicates acquisition process, the Federal Government will not be able to enter into contract with performing contractors. This reduces the operational efficiency and effectiveness of contracts. It is in this aspect that the Federal Government should undertake various approaches in encouraging a performing contractor to comply with the contract requirements for a given complex acquisition.
Since federal contract acquisition normally begins with the understanding of specific federal activity, preparing an effective problem statement or proposal can enable a performing contractor in acquiring such a contract. Normally, contractors do prepare their contract proposals based on the Request for Proposals (RFP) as included in government’s RFP (Oyer, Haugh & Vacketta, 2012). However, the problem with such responses is that the government is not usually told by the contractor how the latter will be able to perform services required for the project. In addition, by the fact that federal contracting officers have varying degree of experience and capabilities means that they can come up with contracting thresholds which may undermine how contractors may respond through proposals to such requirements.
As a result, awarding of the contract is based on lower rating that is provided by a particular contractor. This in turn can undermine the ability of a performing contractor with slightly higher rating in acquiring such contracts. Therefore, in order to ensure that only performing contractors acquire federal contracts, the government must involve source selection factors within the proposal. Such factors can objectively indicate which of the contractors will adequately and satisfactory perform the contract if they are awarded the same.
Consequently, the Federal Government can encourage performing contractors by utilizing performance-based service contracting in any of their contracting processes (PBSC). The performance-based service contracting means that contract acquisition is structured based on the purpose of the work to be performed rather than the ways in which the work is to be operated (OMB, 2006). This methodology has occasionally proven to be successful. However, it has not fully been implemented by Federal Government. This could be either due to cultural inertia of underpinning contracting regulations or inexperience by both parties in coming up with performance-based statement that can effectively work. However, this process best serves as an encouraging tool in ensuring that contracts by the Federal government are given to performing contractors.
To ensure that performance-based service contracting is fully implemented, the government should utilize all conflict resolution mechanisms that would help in avoiding any dispute or protest that might arise during contract acquisition process. While performance analysis will outline performance requirements that should be undertaken by the government, the government must come up with specific performance standards that adequately allow the contractor to propose substantial levels of contracting services (OMB, 2006). In so doing, performing contractors will feel a sense of freedom in the contracting process. This will in turn encourage them to participate in such complicated contract acquisition environment.
The government must also examine the existence of cost threshold to ensure that they can increasingly alleviate the degree of complexity in the federal acquisition process (Oyer, Haugh & Vacketta, 2012). Some of the thresholds which range from those of micro-purchase and commercial to simplified acquisition have made it difficult for performing contractors to effectively acquire federal contracts. For example, currently, micro-purchase threshold is $3,000 while simplified acquisition threshold goes up to $100,000 (Oyer, Haugh & Vacketta, 2012). However, the cost complexity of federal acquisition process can be addressed if the government prescribes the award incentive in its contracting regulations.
The government should also seek to employ such useful award terms like “incentive” in its contracting process. Since its establishment in 1997, the award term “incentive” has not been incorporated in federal government’s acquisition regulation. The term is a methodology that was developed for rewarding contractor performance based upon some pre-determined plans (Harris, 2012). It is analogous to award-fee contracts but in the manner that instead of using money to award a performing contractor, the contractor is rewarded through extension of the contract term. This can see well performing contractors rewarded to a minimum extension of 3.5 years or a maximum of 12 years. In doing so, a performing contractor will see that as an opportunity to compensate for the huge amount of money spent during acquisition process thereby encouraging him or her to enter into federal contracting projects.
The importance of using award term incentive in federal contracting helps the government in maintaining mutual long-term relationship with a performing contractor. In addition, the concept can be used in acquiring commercial services thereby making it easier for related high performing contractors to enter into such contracts. However, the government must understand that this concept can prove to be very difficult in a multiple award situation, especially where the term of a certain contractor is extended while the same of another one is not. Moreover, the stipulated “Termination for Convenience” in award term incentive can significantly undermine the benefits anticipated by contractors as it can adversely affect the liability and the contract type and term (Harris, 2012). It therefore, requires adequate documentation to support its actions and early consideration of such a process.
On the other hand, the Federal Government must organize conferences and produce notices and letters or use any other form of communication for pre-award orientation with contractors especially in enhancing contract administration. According to Oyer, Haugh & Vacketta (2012), contract administration entails activities that are performed by government officials after the awarding of the contract in order to determine what both the government and the contractor can perform to meet the requirements of the contract. While legal requirements are usually determinative aspects of Federal Government contract and dictate the course of action of the government official during contracting process, educating contractors on what they expect after contract acquisition fairly allow them to know their roles.
In addition, organizing a communication process with performing contractors can help the government to achieve a clear and mutual understanding of contract requirements. Through conferencing, both parties will understand the specific responsibilities and restrictions that are associated with Federal contracting process. In turn, it would encourage performing contractors to enter into contacts with the government in future, as they are aware of their responsibilities and the underpinning nature of acquiring Federal contract.
In conclusion, acquisition of federal contracts by performing contractors has not been effective and successful because of the existing strict federal acquisition regulations. In addition, the higher threshold acquisition costs and failure by the government to access contractors’ competency before awarding contracts has continuously discouraged potential contractors. Therefore, the federal government should seek for ways of ensuring that performing contractors comply with contract requirements. This could be achieved by sensitizing them on the same through offering free pre- and post-awarding conference. More significantly, the Federal government should incorporate incentive drive plans in contracting to further encourage quality contractors to form mutual long-term relationship.
Harris, R. (2012). Award term incentive contracting: An investigation of United States Air Force strategic purchasing. New York: BilioBazaar. Print.
Oyer, D., Haugh, L., & Vacketta, C. (2012). Accounting for Government contracts: Federal acquisition regulation. New York: LexisNexis.
U.S Office of Management and Budget (OMB). (2006). A guide to best practices for performance-based service contracting. Retrieved 18 April, 2013 from http://www.whitehouse.gov/omb/procurement_guide_pbsc