Managing Federal Government Contracts: The Answer Book

Index

PREFACE

After more than 25 years of being actively involved in contract management, I spent the next 20 years training others in many areas dealing with federal government contracts. These two careers convinced me that to excel in the complex and often perplexing field of federal government contracting, one must be a perpetual student. Just when you think you know it all, you learn something new.

This answer book is designed to help my fellow perpetual students—program personnel, contracting personnel, contracting officer’s representatives, contractor employees, inspectors, and others involved in contract management—cope with the day-to-day issues and perhaps learn something new and potentially valuable about federal government contracting. The questions asked and answered in this book are based on the questions and observations of many students over many years, from virtually all federal government branches and agencies as well as the private sector.

The topics addressed cover the vast majority of contract situations the reader is apt to encounter. Much of the book deals with requirements of law and the Federal Acquisition Regulation (FAR). Although some agencies, such as the Federal Aviation Administration, are not required to follow the FAR, the contract management issues discussed in this answer book are the types of issues likely to be encountered in any government contracting agency.

Along that same line, individual agencies issue their own supplements to the FAR, and the reader is advised to refer to the appropriate supplement for any detailed procedural guidance unique to an agency. The examples included in the book come from a variety of government sources. They are intended as aids to understanding and should be viewed as examples rather than recommendations.

Contract management begins with planning and ends with closeout. In between, contract management issues arise in no particular order. For this reason, there is no flow chart or road map to follow for contract management. Those involved in federal government contract management have to find their own route through the course of the contract. This book is intended to give you information that will help you find your way.

As you read through the book, it will become clear that government contract management is not just about making good business decisions. And it is not just about laws and regulations. The key to success in contract management is making good business decisions within the boundaries of laws and regulations. It isn’t easy, but good people do it every day.

—Chuck Solloway

August 2012

CHAPTER

1

BASIC INFORMATION

FOR CONTRACT

MANAGERS

This chapter is devoted to questions and answers that involve the basics of contract management, and it defines the key players involved in the contract management process. This information is essential for those new to the field and can serve as a reminder for the rest of us.

1 What is known as the vision for the federal acquisition system?

Part 1 of the Federal Acquisition Regulation (FAR) describes this vision for the acquisition system:

•Participants in the process should work together as a team and be empowered to make decisions within their areas of responsibility. They should keep in mind that the system exists to serve the customer .

•The acquisition team includes representatives of the technical, supply, and procurement communities; the customers they serve; and the contractors that provide supplies and services.

It is important to keep the team approach in mind when involved in contract management or any other aspect of federal government acquisition.

2 What is contract management and how does it differ from contract administration?

Once a contract is awarded, it is monitored by both government and contractor personnel to determine compliance with the terms and conditions of the contract and to identify any remedial or other actions that should be taken. These contract management actions might include increases or decreases in cost or price, changes in terms and conditions, the execution of contract provisions that allow the ordering of additional supplies or services, and even termination of the contract. They might also include any steps needed to close out the contract once the contract requirements have been satisfied.

For the most part, contract administration and contract management are used as synonyms. Among some professionals, however, contract administration is viewed as simply monitoring performance and reacting when noncompliance occurs. Those professionals might view contract management as a proactive process whereby potential problems are identified early and management actions are taken to avoid or minimize contract noncompliance.

3 Who is involved in contract management?

From the government side, the contracting officer is definitely a key player, because only a duly constituted and appropriately assigned contracting officer has the authority to obligate the government in contractual matters.

Other government personnel involved in contract management can include the project or program managers who have overall responsibility for the contract requirement being procured, contract specialists, legal counsel, contracting officer’s representatives (CORs), contracting officer technical representatives (COTRs), quality assurance representatives (QARs), property administrators, small business advisors, and any of a host of other government functional specialists. All of these persons may advise and make recommendations to the contracting officer in matters involving contract performance.

From the contractor side, those involved in contract management include anyone who might be given real or implied authority for this purpose by the business owner(s) or corporation executives.

4 Is the contractor solely responsible for contract compliance?

No. The courts have consistently held that the government has a duty to cooperate in the fulfillment of the contract. This does not mean that the government cannot insist upon scrupulous compliance with the contract. But it does mean that the government must comply with any promises that it makes in the contract, such as the timely furnishing of government property, the sharing of needed information, and the timely inspection or review of contractor submissions.

The government is required to perform contract management functions without unduly impeding the contractor. For example, the courts have held the government monetarily liable for inspections that were too stringent and for unwarranted nitpicking during the course of the contract. What is too stringent or nitpicking is often in the eye of the beholder, but certainly nothing is gained by either party when it occurs—and it can ultimately cost time and money for everyone involved.

5 Is there only one contracting officer for a contract?

There may be one or more than one. The contracting officer who awarded the contract, sometimes known as the principal contracting officer or procuring contracting officer (PCO), may delegate some or all of his or her contract management responsibilities to an administrative contracting officer (ACO). For example, a PCO could delegate all other contract monitoring functions to an ACO while retaining the sole right to issue contract changes. If a contract is terminated, the authority to reach a termination settlement may be delegated to a termination contracting officer (TCO), a contracting professional who specializes in that arena.

In the majority of cases, however, there is only one contracting officer—the PCO who performs both procuring and administrative functions.

6 What happens if the contracting officer retires or is otherwise no longer available?

The agency involved appoints a successor contracting officer.

7 Are contract administration offices established for providing contract management services to procuring contracting officers?

Yes. The Federal Directory of Contract Administrative Services Components identifies elements that are assigned contract administrative responsibilities for specific geographic areas and contractor plants. This directory is maintained by the Defense Contract Management Agency (DCMA) and can be accessed through www.dcma.mil. The components listed are most often called contract administration offices, and they may be used by any agency pursuant to an inter-agency agreement.

8 May an administrative contracting officer who has been delegated responsibility by a procuring contracting officer further assign administrative functions to a contract administration office?

Yes. FAR Part 42 permits this.

9 How does the contracting officer function as a team member in contract management?

The federal courts and federal regulations have always placed great emphasis on the independence of the contracting officer. Although contracting officers have a responsibility to seek out expert opinion, the decisions that they make must be their own. It is in seeking out expert opinion, making prudent business decisions, and working toward customer goals that the contracting officer functions within the team environment envisioned in the FAR.

While working within the team, the contracting officer is nonetheless held accountable for the following:

•Following laws and regulations

•Safeguarding government interests

•Treating contractors fairly.

10 Where can one go for additional guidance on contract management?

Government contracting is a complex and often changing business arena. To better understand and remain abreast of contract management requirements, government acquisition professionals and their private-sector counterparts normally rely on the following:

•The FAR

•Agency supplements to the FAR

•Agency manuals and guides on contract management

•The advice and counsel of agency or company personnel known to be expert in contract management matters

•Training courses offered by the government and private providers, such as the Defense Acquisition University, the VA University, Management Concepts Incorporated, and others

•Decisions of the boards of contract appeals or the federal courts regarding contractor claims (These decisions serve as precedent for the contracting officer and other acquisition team members when making future decisions involving comparable circumstances. A number of commercial publications that summarize and discuss many of these decisions are available.)

•Private publications such as this book and newsletters like the Federal Acquisition Report (published by Management Concepts Press).

11 Are there contractor equivalents of the contracting officer and the government project officer?

There is frequently a contractor employee who is given these types of responsibilities. This person may be called a contract manager, a project manager, a business manager, or by some other title. Generally, the responsibilities of such a person include the following:

•Serving as the primary point of contact with the government and as the middleman between contractor employees and the government

•Keeping records pertaining to the contract, including correspondence with the government and records of meetings with the customer

•Troubleshooting when contract issues arise

•Overseeing contractor compliance with the terms and conditions of the contract and associated factors such as Department of Labor and Environmental Protection Agency requirements

•Requesting contract changes, as appropriate, and negotiating any equitable adjustments made necessary by government-approved or government-initiated changes

•Any other assigned contract responsibilities.

Just as the contracting officer must consider both the interests of the government and the fair treatment of the contractor, the contractor’s contract manager must consider both the interests of the government and the interests of his or her employer.

12 What is the role of the project office or program office in contract management?

Contracts are normally entered into in support of a specific project or program or functional area. (For example, a contract might be for a new weapons system, a study of infectious diseases, or support of an agency’s information technology operations.) The project or program office acts as the sponsoring activity for the particular contract effort and is largely responsible for the much of the content of the government solicitation and resulting contract. Associated tasks would include developing statements of work, assisting in market research and the subsequent formulation of an acquisition strategy, establishing contract performance standards, and myriad other essential acquisition-related tasks. In most cases, the project or program office nominates the COR or COTR.

During the contract management phase, the project or program manager must work closely with the contracting officer and advise the contracting officer of the impact on the project or program involved when contract issues arise. The program manager also normally controls the purse strings and is the source of funds needed for contract management matters, including funding overruns on cost reimbursement contracts or paying the cost of any changes made to the contract.

The agency contracting officer (along with the user when the end user is an entity other than the program or project office) considers the program or project office the customer. Often it is a challenging task for the contracting officer to please the customer while still complying with laws, regulations, and policies.

13 What is the difference between a contracting officer’s representative and a contracting officer’s technical representative?

Usually they are synonyms. The FAR permits a contracting officer to appoint technical representatives for specific contracts. For many years, the FAR provided no particular title for these appointed persons. In recent years, in long-overdue recognition of the importance of the COR in contract management, the FAR has provided for appointment of a COR.

14 What is the FAR guidance with respect to the contracting officer’s representative?

The FAR

•Permits the contracting officer to retain duties normally given to a COR

•If COR duties are not retained, requires the contracting officer to appoint, in writing, a COR on all contracts and orders that are not firm-fixed price

•Permits the contracting officer to appoint a COR on fixed-price contracts, as appropriate

•Requires that the COR be a government employee

•Provides that the COR must obtain and maintain required COR certification

•Requires that the COR assist in the administration of the contract

•Requires that the COR have training and experience commensurate with his or her responsibilities

•Requires that the COR not be delegated responsibilities that have been delegated to a contract administration officer

•Requires that the COR maintain a file for each assigned contract that includes, as a minimum

–A copy of the contracting officer’s letter of designation and other documents describing the COR’s duties and responsibilities

–A copy of the contract administration functions delegated to a contract administration office that may not be delegated to the COR

–Documentation of COR actions taken in accordance with the delegation of authority.

15 Should the contracting officer’s representative file contain more than the FAR-required minimum?

Absolutely. The Office of Federal Procurement Policy, in a best practices guide, suggests that the COR maintain a file that includes all correspondence, inspections, memos, trip reports, records of conversations with contractor personnel, and invoices. The file should also include a copy of the contract, any modifications to the contract, and the COR appointment letter.

Some CORs maintain a daily diary of events—a good idea for both the individual and the contracting parties, since it might prove to be valuable later when the contracting parties are trying to accurately reconstruct events.

16 What is the normal agency process for appointing the contracting officer’s representative?

Standard practice is to appoint a single technical expert who is given the primary responsibility for day-to-day monitoring of the contract. CORs are appointed by a letter from the contracting officer that clearly delineates their contract responsibilities and the limitations on their authority. Many agencies furnish a copy of this letter to the contractor involved. Exhibit 1-1 is a sample of such a letter. It is also normal practice to furnish a copy of the letter to the functional supervisor of the COR, and some agencies require that the supervisor sign off on the letter to indicate concurrence in the assignment of this additional responsibility.

Usually the COR or COTR is chosen because of his or her technical expertise and is nominated by the project or program office. Although the titles COR or COTR have through practice become the norm for identifying this key individual, some agencies have used other titles such as government technical representative. Although relatively rare, some agencies have had both CORs and COTRs, one of whom might be subordinate to the other. Again in relatively rare cases, some contracting offices have CORs who are not technical experts but instead are employees of the government contracting office.

Because the FAR now specifically uses the title contracting officer’s representative (COR), a relatively recent occurrence, it is likely that other titles will disappear over time. In addition to appointing a COR, it is normal practice for the contracting officer to appoint an alternate who is authorized to act only in the absence of the COR.

17 What are the contract management duties of the contracting officer’s representative?

Usually a contract, or a task order of sufficient duration and complexity, has a COR to act as the eyes and ears of the contracting officer.

The specific duties of the COR are set forth in the appointment letter from the contracting officer and can include a wide variety of oversight and record-keeping duties. In some cases, the COR may be authorized to give technical direction to the contractor, although he or she is not allowed to change the contract.

It is important for the COR to realize that he or she is usually the face of the government to contractor employees, and contractor employees might erroneously assume that the COR has the full authority of the government. Accordingly, CORs must be sensitive to this perception and judicious in what they say or do in order to avoid inadvertently exceeding their authority.

While technically a COR is not appointed until there is a contract, it is normal practice to involve the presumptive COR at the early stages of acquisition planning.

18 What exactly is the relationship between the contracting officer’s representative and the contracting officer?

As stated previously, the COR acts as a representative of the contracting officer and is subordinate to the contracting officer with respect to contract-related activity. In most cases, however, especially where the COR is from a program or project office, the COR has a functional supervisor, other than the contracting officer, to whom the COR reports.

Exhibit 1-2, originally published in Contract Management magazine as a letter to the editor (May 1997: page 54), briefly outlines some of the challenges traditionally faced by the COR, including serving two masters.

19 What is the role of the contract specialist in contract management?

Contracting officers are often assisted in contract management matters by acquisition professionals known as contract specialists. As is the case with the contracting officer, they are expert in contracting processes, procedures, and policies. However, they do not have the authority to enter into a contract or change a contract.

Contract specialists typically do most of the routine tasks in the contracting office, such as preparing solicitations and contracts, preparing letters for the contracting officer’s signature, routinely communicating with the COR and other technical representatives, and communicating with the contractor on most routine matters.

Depending on the method of operation of the particular contracting office involved, the contract specialist might have an extraordinary range of contract management responsibility. For example, it might be a contract specialist who negotiates the cost and schedule impact of contract changes and who reaches a tentative agreement with the contractor. (The agreement is tentative pending concurrence of the contracting officer because only a contracting officer may obligate the government.) Since the contract specialist coordinates closely with the contracting officer while working on such matters, such tentative agreements are rarely changed.

20 What is the role of legal counsel in contract management?

Legal counsel for the government furnishes advice to the contracting officer as to possible contract remedial actions, the legal sufficiency of proposed contract management actions, and matters such as the following:

•Intellectual property rights

•Labor laws

•Ethical matters

•Contract interpretation

•Contractor claims

•The wording of correspondence and contract modifications

•Other matters brought to the attention of counsel by the contracting officer.

Legal counsel in the private sector furnishes equivalent services to contractor contract managers. The extent of involvement of legal counsel in the contracting process varies from agency to agency and from contractor to contractor.

Government and contractor attorneys, as members of the acquisition team, are most effective when they are mission-oriented and work closely with other members of the team in achieving acquisition goals in a manner that is effective and efficient while remaining compliant with laws and regulations.

21 What is the role of the government inspector in contract management?

This person, who is sometimes the COR and at other times is a separate person, performs the inspection and acceptance services set forth in the contract and in the quality assurance surveillance plan. As explained later in this text, this is an especially sensitive and critical part of contract management.

Often this individual is known as a QAR or by some similar title.

22 What is the role of the government property administrator in contract management?

This person, whose duties are also sometimes assumed by the COR, is responsible for overseeing the protection of and proper use of government-furnished property, including (in some cases) contractor-acquired property.

23 Are contract management issues the same regardless of the nature of the contract?

Contract management issues are the same only to the extent that contract management is always concerned with quality and delivery requirements. For example, the terms and conditions of commercial item contracts might be quite different from those in contracts for supplies built to government specifications. Cost-reimbursement contract clauses differ considerably from those in fixed-price contracts. Construction contract terms and conditions are quite different from contracts for research and development services and so on. These differences will become more apparent within the various chapters of this book. They must be accounted for in planning for and conducting contract management.

24 Is there a single format for contracts?

No. There are several formats. The two most used are the format for commercial item contracts (see FAR Part 12) and a uniform format used for most other contracts. The latter format is known as the Uniform Contract Format, and it is shown in Exhibit 1-3.

25 What is the most frequently asked question when contracting officer’s representatives and others participate in contract management training?

The most frequently asked contract management question is Can I be held personally liable if I make a mistake?

There is good news here if you are a government employee. In 1988, the government passed the Federal Employees Reform and Tort Compensation Act. This act gave immunity for any wrongful or negligent action that an employee commits while acting within the scope of his or her office or employment. The act does not apply to patently illegal activities or activities beyond the scope of one’s employment. And, of course, the government may still take whatever personnel action agency officials deem appropriate.

With respect to error or negligence on the part of contractor employees, the government normally holds the contractor liable. Whether the contractor holds the employee liable depends on the policy of the contractor and any applicable federal, state, or local laws.

26 If you had only one tip to give contract managers, what would it be?

Read the contract! Read all of it so that nothing is taken out of context. Make sure you understand it.

27 What about human factors in contract management?

Many people are involved in contract management, and ideally their efforts will be harmoniously blended. However, you might encounter people who are difficult to work with. It has been said that humans resemble the components of a snowstorm: They may often be flaky, and no two are exactly alike.

You have to do the best you can in interpersonal relationships and remain focused on the mission. In an intolerable situation, you might wish to consult with the cognizant contracting officer, your functional supervisor, or some other appropriate agency or contractor official.

EXHIBIT 1-1

Sample Contract Officer Representative (COR) Letter

Note: This is a sample of a COR appointment letter for a services contract as shown in the Department of Interior’s COR Manual. It was selected as an example here because of the wide range of issues it covers. COR letters are normally tailored to the contract involved and might be less inclusive than the one shown here.

You are hereby appointed to serve as Contracting Officer’s Representative for Contract No. [enter contract no.] awarded to [enter vendor name and address]. Your appointment will be in effect until final completion of the project, or until terminated or superseded by the Contracting Officer. By copy of this appointment, the contractor is being advised of your authority.

If potential for a conflict of interest with your appointment as a COR develops, you shall advise your supervisor and the Contracting Officer of the conflict so that appropriate actions may be taken. CORs shall avoid the appearance of a conflict of interests to maintain public confidence in the U.S. Government’s conduct of business with the private