Major Capability Acquisition (MCA)

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Production Contracts

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Each page in this pathway presents a wealth of curated knowledge from acquisition policies, guides, templates, training, reports, websites, case studies, and other resources. It also provides a framework for functional experts and practitioners across DoD to contribute to the collective knowledge base. This site aggregates official DoD policies, guides, references, and more.

DoD and Service policy is indicated by a BLUE vertical line.

Directly quoted material is preceeded with a link to the Reference Source.

Reference Source: FAR 34.005-6

Contracts for full production of successfully tested major systems selected from the full-scale development phase may be awarded if the agency head:

Reaffirms the mission need and program objectives; and
Grants approval to proceed with production

Contracting Strategies

Reference Source: Contracting Cone

The Contracting Cone presents the full spectrum of FAR and non-FAR based contracting solutions available for consideration.

The contracting strategies highlighted below may be particularly well-suited for production activities for Major Defense Acquisition Program (MDAP) systems or subsystems.

Contracting by Negotiation (FAR Part 15)

Reference Source: Contracting Cone - Contracting by Negotiation (FAR Part 15)

FAR Part 15 describes the procedures for competitive and non-competitive open market acquisitions exceeding the Simplified Acquisition Threshold (SAT). Open market is defined as products or services not available from required sources of supply, such as GSA schedule contracts, outlined in FAR Part 8.

Restrictions

Requirement not met through FAR Part 8 Federal Supply Schedules or existing contract vehicle

See additional references and resources for this strategy in the Contracting Cone - Contracting by Negotiation (FAR Part 15).

IDIQ/MAC/GWAC Contracts (FAR Part 16.5)

Reference Source: Contracting Cone – IDIQ (FAR Part 16.5)

IDIQ contracts provide a method to order from existing agency indefinite-delivery contracts as well as contracts awarded by another agency (i.e. Government-wide Acquisition Contracts (GWAC) and Multi-Agency Contracts (MAC)).

Restrictions

Scope determination required (work, period of performance, and ceiling)
Fair opportunity required for a delivery-order or task-order exceeding micro-purchase threshold unless one of the following statutory exceptions applies:
- The agency need for the supplies or services is so urgent that providing a fair opportunity would result in unacceptable delays
- Only one awardee is capable of providing the supplies or services required at the level of quality required because the supplies or services ordered are unique or highly specialized
- The order must be issued on a sole-source basis in the interest of economy and efficiency because it is a logical follow-on to an order already issued under the contract, provided that all awardees were given a fair opportunity to be considered for the original order
- It is necessary to place an order to satisfy a minimum guarantee
- For orders exceeding the simplified acquisition threshold, a statute expressly authorizes or requires that the purchase be made from a specified source
- In accordance with section 1331 of Public Law 111-240 (15 U.S.C. §644(r)), contracting officers may, at their discretion, set aside orders for any of the small business concerns identified in FAR Part 19.000(a)(3). When setting aside orders for small business concerns, the specific small business program eligibility requirements identified in FAR Part 19 apply.

See additional references and resources for this strategy in the Contracting Cone – IDIQ.

OT for Production, IF a follow-on a to Prototype OT

Reference Source: Contracting Cone – Prototype OTs

Prototype OTs (10 USC 2371b)

Prototype OTs are appropriate for research and development and prototyping activities to enhance mission effectiveness of military personnel and supporting platforms, systems, components, or materials. Prototype OTs may be used to acquire a reasonable number of prototypes to test in the field before making a decision to purchase in quantity. Prototype OTs provide a streamlined path to award a non-competitive follow-on Production OT or FAR contract.

Follow-on Production OT Criteria

The following conditions must be met in order to award a non-competitive follow-on Production OT or FAR contract:

Competitive procedures were used to award the Prototype OT, and
The prototype project in the transaction was “successfully completed”

“Successful completion” of a prototype project requires written determination of the responsible approving official stating the efforts under a Prototype OT:

(1) Met the key technical goals of a project;
(2) Satisfied success metrics incorporated into the Prototype OT; or
(3) Accomplished a particularly favorable or unexpected result that justifies the transition to production

Successful completion can occur prior to the conclusion of a prototype project to allow the government to transition any aspect of the prototype project determined to provide utility into production, while other aspects of the prototype project have yet to be completed. Prototype OTs shall contain a provision that sets forth the conditions for the prototype agreement to be successfully completed.

Additionally, the government shall include notice of the possibility of a follow-on production award in both the Prototype OT solicitation and the Prototype OT agreement. This is especially relevant given the 2018 GAO ruling in favor of Oracle America Inc’s protest of the U.S. Army’s follow-on Production OT to REAN Cloud LLC.

Prototype OT and Follow-on Production OT Approval Authorities

The following approval authorities and dollar thresholds (per individual OT award) are applicable to Prototype and Production OTs. The approval authorities above $100 million are non-delegable. The value of each individual OT is considered separately for purposes of determining approval authority, rather than the total value of all OTs included in a prototype project or follow-on production effort. Any contractor cost sharing should be included in the OT value. Separate approvals are required for Prototype OTs and follow-on Production OTs.

	Value of Individual Transaction
Organization	Up to $100M	$100M to $500M	Over $500M
Commanding Officers of Combatant Commands (CCMD)	Commanding Officer	USD (R&E) or USD (A&S)	USD (R&E) or USD (A&S)*
Defense Agencies (DA) and Field Activities (FA) with contracting authority; Defense Innovation Unit (DIU)	Director	USD (R&E) or USD (A&S)	USD (R&E) or USD (A&S)*
Military Departments	Senior Procurement Executive	Senior Procurement Executive	USD (R&E) or USD (A&S)*
DARPA and Missile Defense Agency	Director	Director	USD (R&E) or USD (A&S)*
* An Under Secretary must also make a written determination in accordance with section 2371 b. Additionally, the Congress shall be notified at least 30 days before this authority is exercised The Office of the Under Secretary making the written determination is responsible for Congressional notification.

Restrictions

FAR/DFARS are not applicable
Agencies must be explicitly authorized by Congress to use OTs
Contracting Officer must have Agreement Officer authority to execute OTs
Cost sharing requirements apply if no significant participation by non-traditional defense contractors
Limited to requirements that have a prototyping element
OTs can only deliver limited quantities of prototypes
Prototype project must address anticipated follow-on activities, competitive procedures must be used to award prototype project, and successful completion of prototype project required to transition to follow-production vehicle
May not exceed $500M without USD R&E or USD A&S approval

See additional references and resources for this strategy in the Contracting Cone – Prototype OTs.

Contract Types

Reference Source: FAR 16.101

A wide selection of contract types is available to the Government and contractors in order to provide needed flexibility in acquiring the large variety and volume of supplies and services required by agencies. Contract types vary according to:

The degree and timing of the responsibility assumed by the contractor for the costs of performance; and
The amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.

The contract types are grouped into two broad categories: fixed-price contracts (see subpart 16.2) and cost-reimbursement contracts (see subpart 16.3). The specific contract types range from firm-fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit (or loss), to cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee (profit) is fixed. In between are the various incentive contracts (see subpart 16.4), in which the contractor’s responsibility for the performance costs and the profit or fee incentives offered are tailored to the uncertainties involved in contract performance.

Reference Source: FAR 16.601

A time-and-materials contract provides for acquiring supplies or services on the basis of direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and actual cost for materials (except as provided for in 31.205-26 (e) and (f)).

Reference Source: Contracting Cone

The Contracting Cone provides a Contract Type Matrix that maps the contract types that are allowed for each of the contract strategies outlined in the Contracting Cone. Note that non-FAR based, or Statutory Authority, contract strategies are executed via agreements vice contracts.

Contract Type Selection - P&D Phase

Reference Source: DAG CH 1–4.2.11.4 Contract Types

In Production and Deployment, programs contract for low-rate and full-rate production as well as initial sustainment. At this point in the program, requirements are usually well known and stable, and the design has been proven in testing. Under these circumstances the program risk is now low enough to use fixed-price type contracts.

Reference Source: DFARS 234.004

In accordance with section 811 of the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112-239), the contracting officer shall—

Not use cost-reimbursement line items for the acquisition of production of major defense acquisition programs, unless the Under Secretary of Defense for Acquisition and Sustainment (USDA&S)), or the milestone decision authority when the milestone decision authority is the service acquisition executive of the military department that is managing the program, submits to the congressional defense committees—

(1) A written certification that the particular cost-reimbursement line items are needed to provide a required capability in a timely and cost effective manner; and

(2) An explanation of the steps taken to ensure that cost-reimbursement line items are used only to achieve the purposes of the exception; and

Include a copy of such congressional certification in the contract file.

See 216.301-3 for additional contract type approval requirements for cost-reimbursement contracts.

For fixed-price incentive (firm target) contracts, contracting officers shall comply with the guidance provided at PGI 216.403-1 (1)(ii)(B) and (C).

The contracting officer shall include in solicitations for contracts for the technical maturation and risk reduction phase, engineering and manufacturing development phase or production phase of a weapon system, including embedded software:

Clearly defined measurable criteria for engineering activities and design specifications for reliability and maintainability provided by the program manager, or the comparable requiring activity official performing program management responsibilities; or
Ensure a copy of the justification, executed by the program manager or the comparable requiring activity official performing program management responsibilities for the decision that engineering activities and design specifications for reliability and maintainability should not be a requirement, is included in the contract file (10 U.S.C. 2443).

Test & Evaluation Considerations for Contracts

Reference Source: DAG CH 8-3.12 Incorporating T&E into DoD Acquisition Contracts

Programs involve T&E personnel early and keep them involved with the PM, the KO, the SE, and the other program office leads throughout the contracting process, to ensure they understand, accept, and include T&E policies, practices, procedures, and requirements in the contract as necessary for program success. Inputs from the Chief Developmental Tester, advised by the Lead DT&E Organization and the T&E WIPT, inform the contracting process on:

The quantities, configurations, and types of deliverable test articles (expendable and non-expendable) and prototypes (if applicable) required for government T&E.
Required contractor investments, expenditures, and developments required to support government T&E; e.g., threat simulators, targets, instrumentation, logistics and transportation for test preparation and set-ups, training, documentation, and personnel to support test events.
Personnel and other support to T&E WIPT, integrated test teams.
Contractor generated data and test reports for inclusion in the Contract Data Requirements List (CDRL).

T&E Considerations

Reference Source: DAG CH 8-3.12 Incorporating T&E into DoD Acquisition Contracts

In the early phases of development, the contractor plans and executes the majority of design testing that transitions technology from science and technology efforts into functional capabilities desired by the military, as well as qualification testing of sub-component parts and products from vendors that makes up the system delivered to the military. The Lead DT&E Organization and Participating Test Organizations need to understand the contractor testing capabilities, processes, data collection, and analysis methods to assess the appropriate amount of visibility into those test activities as well as determine data collection and transfer benefiting government test organizations to avoid redundant or unnecessary testing. Government test organizations determine cost/benefit ratios with visibility into proprietary activity and data transfer to the government. In addition, consideration is given to near- and end-state evaluations during operational testing (OT).

The PM, combat developer, and appropriate T&E personnel collaboratively develop the acquisition and T&E strategies so that users’ capability-based operational requirements (i.e., CDD, Concept of Operations/Operational Mode Summary/Mission Profile (CONOPS/OMS/MP) are correctly translated into accurate contractual terms; and actions that give the highest probability of successful outcome for the government-contracted events provide for sufficient time to execute all regulatory and statutory T&E activities and reporting.

Incorporating T&E into DoD acquisition contracts is the test focus for the pre-RFP Review. It is essential that a good draft TEMP be available for the review and that the RFP adequately addresses the TEMP.

One key issue to remember: if the contract does not include a T&E item or requirement, do not expect it!

Additional Resources

FAR Part 34 – Major System Acquisition
DFARS Part 234 – Major System Acquisition
Contracting Subway Map
Contracting Pricing Reference Guides
Guidance on Using Incentive and Other Contract Types
DoDI 5010.44 Intellectual Property (IP) Acquisition and Licensing
DAU Functional Gateway: Contracting
DAU Functional Gateway: Contract Administration
DAU Functional Gateway: Small Business
DAU Community of Practice: Commercial-Off-the-Shelf Products and Commercial Services
DAU Community of Practice: Small Business
DAU Community of Practice: Other Transactions

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