Major Capability Acquisition (MCA)

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Sustainment 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: DAG CH 4-3.4.1.3 Sustainment Contracting

As systems are fielded and logistics demand can be reasonably forecasted, the PM may begin implementing performance-based arrangements. Initially, such arrangements may be short-term cost-type incentive arrangements until sufficient cost data and technical data on failure modes and rates and field reliability data are collected. Cost-type incentive contracts share cost risk between the government and the Product Support Provider (PSP), allowing for incremental transfer of risk to the Product Support Integrator (PSI) and/or PSP. Later arrangements may use a combination of fixed-price contracts with incentives and other consideration as the design stabilizes.

Contracting Strategies

Reference Source: Contracting Cone

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

Contracting Cone showing a spectrum of contracting strategies, which are categorized by FAR and Non-FAR/Statutory authorities.

 

The contracting strategies highlighted below may be particularly well-suited for sustainment activities.

Commercial Items (FAR Part 12)

Reference Source: Contracting Cone - Commercial Items (FAR Part 12)

Supplies and services that meet the definition of a commercial item at FAR Part 2.1 may be acquired using the streamlined procedures set forth in FAR Part 12. Non-Developmental Item (NDI) and Commercial Off-the-Shelf (COTS) are considered subsets of commercial items.

DFARS Part 212.102(a)(iii) further expands the application of commercial item procedures to supplies and services from nontraditional defense contractors and, when appropriate, from business segments of traditional contractors that meet the definition of nontraditional defense contractor, for purposes of enhancing defense innovation and investment and encouraging nontraditional vendors to do business with the government. A commercial item determination is not required when commercial item procedures are applied to procure supplies and services from nontraditional defense contractors, nor does applying commercial item procedures for such procurements mean an item is commercial.

As defined in 10 U.S.C. § 2302(9), a non-traditional defense contractor is an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the DoD for the procurement or transaction, any contract or subcontract for the DoD that is subject to full coverage under the cost accounting standards (CAS).

Many entities will find they qualify as nontraditional defense contractors because:

  • They are a small business exempt from CAS requirements
  • They exclusively perform contracts under commercial procedures
  • They exclusively perform under firm-fixed-price (FFP) contracts with adequate price competition
  • They performed less than $50 million in CAS covered efforts during the preceding cost accounting period

 

Restrictions

  • Commercial item determination required
  • Contract types limited to Firm-Fixed-Price (FFP), Fixed-Price with Economic Price Adjustment (FPEPA), and Time-and-Materials (T&M) (for services

 

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

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.

Small Business (FAR Part 19)

Reference Source: Contracting Cone - Small Business (FAR Part 19)

Small business set-asides are a method to reserve a total acquisition or a portion of an acquisition exclusively for small businesses. Qualifying small business concerns include one or more of the following categories:

  • Small Business
  • Service–Disabled Veteran-Owned Small Business
  • Historically Underutilized Business Zone (HUBZone) Small Business
  • Small Disadvantaged Business (8(a) Business Development Program
  • Women-Owned Small Business

There is no order of precedence among the 8(a) Program (subpart 19.8), HUBZone Program (subpart 19.13), Service-Disabled Veteran-Owned Small Business (SDVOSB) Procurement Program (subpart 19.14), or the Women-Owned Small Business (WOSB) Program (subpart 19.15). In determining which socioeconomic program to use, the contracting officer should consider:

  • Results of market research that was done to determine if there are socioeconomic firms capable of satisfying the agency’s requirement
  • Agency progress in fulfilling its small business goals

Restrictions

  • Acquisitions below the Simplified Acquisition Threshold must be reserved exclusively for small businesses unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery
  • Acquisitions over the Simplified Acquisition Threshold, must set aside if there are two or more small businesses that could do the work and award will be made at fair market prices

 

Direct 8(a) awards are a method to use sole source procedures to award to a single contractor under the 8(a) business development program if the following conditions apply:

  • Determination that the qualified small business is responsible
  • The resulting contract can be awarded at a fair market price
  • The anticipated total value of the contract doesn’t exceed the designated threshold for manufacturing requirements or threshold for all other requirements (There’s an exception to this rule for for an Indian tribe or an Alaska Native Corporation)

Restrictions

  • Requires Small Business Administration (SBA) approval
  • Justification & Approval required for sole source awards exceeding $100 million

 

See additional references and resources for this strategy in the Contracting Cone - Small Business.

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 - O&S Phase

Reference Source: DAU SAM: Logistics Management Services

Logistics Support Services

Logistics Support Services include Logistics Management Services:

  • Logistics Management Service contracts can include the following: Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment
  • Operation of Government-owned equipment, facilities and systems

The DoD intent is to use performance –based support, which includes, where it includes best long term value, using performance based contracts rather than transaction based contracts (i.e., buying Material Availability vice buying spares or support equipment).

Contracting for performance based logistics (PBL) is a multi-step process that can be applied to logistics support services of new, modified or legacy system. The pertinent DoD Product Support Strategy Process Model is detailed in the Product Support Manager’s Toolkit as a best practice. PBL can be applied at a platform, system, sub-system or component-level, according to the needs of the business and operational environment.

Performance Based Logistics (PBL) contracts are a type of Product Support Arrangement (PSA).  PBL PSAs are contracts, task orders or any type of other contractual agreement or non-contractual arrangement within the Federal Government, for the performance of sustainment or logistics support required for major weapon systems, sub-systems or components. Additionally, PBL contracts can utilize either Service or Supply-type contracting, depending on the needs of the Services. Overall information on PBL, to include information on non-contractual PSAs and Supply-type contracting, can be found on the PBL CoP.

Reference Source: FAR 37.102

Performance-based acquisition (see subpart 37.6) is the preferred method for acquiring services (Public Law106-398, section 821). When acquiring services, including those acquired under supply contracts or orders, agencies must:

  • Use performance-based acquisition methods to the maximum extent practicable, except for-

                (i) Architect-engineer services acquired in accordance with 40 U.S.C.1101 et seq.;

                (ii) Construction (see part 36);

                (iii) Utility services (see part 41); or

                (iv) Services that are incidental to supply purchases; and

  •  Use the following order of precedence (Public Law106-398, section 821(a));

                (i) A firm-fixed price performance-based contract or task order.

                (ii) A performance-based contract or task order that is not firm-fixed price.

                (iii) A contract or task order that is not performance–based.