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the structure. The best opportunity for increasing efficiency and effectiveness of a facil ity and for minimizing life-cycle costs clearly occurs during the initial planning and design phases.

A-E services are usually purchased on the basis of a negotiated, fixed, lump-sum fee. The A-E's fee or total compensation consists of salaries, payroll costs, general and administrative costs, overhead, other direct costs, and profit. The A-E fee thus differs from the concept of fee as used in cost-plus-fee contracts, in which the fee paid is primarily profit. This type of contract is not normally used for A-E services.

In 1965, the General Accounting Office (GAO) reported 3 to the Congress that the A-E fee paid by the National Aeronautics and Space Administration (NASA) for the design of a facility in Nevada exceeded the applicable six-percent limit.* Thereafter, NASA proposed that the National Aeronautics and Space Act of 1958 be amended to permit NASA, in certain circumstances, to pay higher A-E fees. As a result of this proposal, the conference committee, in its report 5 on the fiscal 1967 NASA authorization bill, requested GAO to undertake a Government-wide analysis of the interpretation and application of the statutory fee limitation and submit a report to Congress as a basis for legislative action.

The resulting GAO report,submitted in April 1967, concluded that the six-percent limit was impractical and unsound and should be repealed. The report noted, however, that reasonable A-E fees could be assured through use of competitive negotiation and the submission and certification of cost or pricing data under Public Law 87–653, the Truth in Negotiations Act.? The most controversial issue in the GAO

report centered on its interpretation that the competitive negotiation requirements of the act, codified as subsection 2304(g) of the Armed Services Procurement Act, were applicable to A-E contracts. This subsection provides that in negotiated procurements over $2,500, discussions shall be held with all responsible offerors who submit proposals within a competitive range, price and other factors considered. Under this interpretation, the GAO report concluded that an A-E award should be made to the offeror whose total proposal was most advantageous to the Government, price and other factors considered.

The GAO report recommended, in view of past agency practice in the selection of A-Es, (1) that Congress clarify its intent as to whether the competitive pricing negotiation requirements of the law apply to procurement of A-E services or, in the absence of clarification of congressional intent, (2) that applicable Government regulations be modified to comply with the GAO interpretation of Public Law 87-653.

Congress responded to this GAO recommendation by enacting Public Law 92–582 % in October 1972. The statute, which amends the Federal Property and Administrative Services Act, requires:

• Public announcement of all requirements for A-E services • Discussion with three or more firms “regarding anticipated concepts and the relative utility of alternate methods of approach"

• Establishment and publication of criteria for ranking the firms

• Ranking of three firms in order of preference • Negotiations, with the A-E firm considered to be most qualified, of a satisfactory contract at a compensation which is fair and reasonable to the Government.

Congress was aware at the time it enacted Public Law 92–582 that this Commission was studying and expected to make recommendations concerning the requirements and pro

U.S. Comptroller General, B-164031 (3), Study of Health Facilities Construction Costa, Report to Congress, Nov. 20, 1972.

• U.S. Comptroller General, B-152306, Non-Compliance with Statutory Limitation on Amount Allowable for ArchitecturalEngineering Services for the Design of a Facility at the Nuclear Rocket Development Station, Nevada, June 16, 1965.

NASA procurement of A-E services is subject to the Armed Services Procurement Act, 10 U.S.C. 2306(b).

SH. Rept. 1748, 89th Cong., 2d sess.

* U.S. Comptroller General, B-152306, Government-wide Review of the Administration of Certain Statutory and Regulatory Requirements Relating to Architect-Engineer Fees, Report to the Congress, Apr. 20, 1967, p. 16.

See Part J for a discussion of this law. Althrough it applies to only the military agencies, NASA, and the Coast Guard, its provisions have been largely adopted for the civilian agencies in the Federal Procurement Regulations.

8 Signed into law by the President on Oct. 27, 1972. This statute, which adds a new Title to the Federal Property and Administrative Services Act, is discussed below and set forth in Appendix A to this part.

Current Agency Procedures 10

cedures for the selection of A-E firms for Government work. The reports on Public Law 92–582 and the floor debates are clear that passage of this act was not intended to foreclose modification of this action in the light of recommendations expected to be forthcoming in our report to the Congress.o


Recommendation 1. Base procurement of architect-engineer services, so far as practicable, on competitive negotiations, taking into account the technical competence of the proposers, the proposed concept of the end product, and the estimated cost of the project, including fee. The Commission's support of competitive negotiations is based on the premise that the fee to be charged will not be the dominant factor in contracting for professional services. The primary factor should be the relative merits of proposals for the end product, including cost, sought by the Government, with fee becoming important only when technical proposals are equal. The practice of initially selecting one firm for negotiation should be discouraged, except in those rare instances when a single firm is uniquely qualified to fill an unusual need for professional services. Recommendation 2. Provide policy guidance, through the Office of Federal Procurement Policy, specifying that on projects with estimated costs in excess of $500,000 proposals for A-E contracts should include estimates of the total economic (life-cycle) cost of the project to the Government where it appears that realistic estimates are feasible. Exceptions to this policy should be provided by the agency head or his designee. Recommendation 3. Consider reimbursing A-Es for the costs incurred in submitting proposals in those instances where unusual design and engineering problems are involved and substantial work effort is necessary for A-Es to submit proposals.

Each Federal agency selects A-E firms on the basis of an agency evaluation of the technical competence of firms under consideration. The procedures for making this selection differ among agencies. They are alike in that no agency requests an estimate of the proposed A-E fee until one firm has been selected. Nor do the agencies normally solicit from possible contractors proposals with information as to concepts of the end product, the general approach to the design effort, estimated construction costs, or estimated total economic (life-cycle) costs. In short, with limited exceptions, A-E firms are not subjected to competition of the type generally used in selecting other contractors.

A-E firms interested in Federal projects file a Standard Form 251 (U.S. Government Architect-Engineer Questionnaire) with agencies for which they would like to work. The form includes information about the type of firm, locations, key personnel, number of professionals, projects in process or completed, and estimated construction cost of projects on which the firm was the architect or engineer of record. Firms are advised to update the forms periodically and to submit photographs of recent work and other descriptive material that may reflect their qualifications.

Generally, several A-Es are considered for a particular job on the basis of factors such as prior experience and performance, professional reputation, and proximity to the construction site. The A-Es are then rated and negotiations are held with the highest ranking firm. Solicitation of a price proposal and negotiations on price are not undertaken until after one firm has been selected for negotiation. If agreement is not reached with that firm, negotiations are terminated and new negotiations are commenced with a second firm.

Over a recent two-year period, in GSA, it was necessary to go beyond the first firm selected for negotiation in only 17 instances out of 227 procurements. Table 2 shows the reasons for the failure to reach agreement.

. See, for example, H. Rept. 92–1188, p. 7; S. Rept. 92–1219, p. 5; Congressional Record, Oct. 14, 1972, p. 918182.

•See Dissenting Position, infra.

10 The agencies subject to Public Law 92-682 have not had time to implement this new law. The following discussion of agency procedures reflects practices in use prior to implementation of the new statute.

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unsatisfactory, then the second-ranking firm is interviewed and negotiations begun.12

The General Services Administration (GSA) appoints private architect-engineers to an advisory board which recommends a small number of firms with their qualifications as evaluated by the board. To make this evaluation, GSA rates each considered firm as “excellent," "average,” or “poor” on 24 items ranging from the history of the firm to proximity of the firm to the geographical site of the project. Negotiations are begun with the firm selected by the Administrator or his designee as the best from the list. If negotiations with the first firm are unsuccessful, the second firm is invited to the negotiation table.

The Department of Health, Education, and Welfare and the Veterans Administration follow procedures similar to the GSA procedure, with some variations. 13

Public Law 92-582

Despite the general pattern of Government procurement of A-E services, there are some important differences in the selection process among the agencies. The Army and Navy scan their lists of firms to develop a "slating board” to narrow the list.11 Interviews are sometimes conducted during the actual selection process to determine a finalist. NASA performs a desk screening and negotiates with a preferred firm or, if unsuccessful, the next preferred firm.

The Atomic Energy Commission (AEC) appears to have the most thorough procedure for ranking potential A-E contractors and selecting one for negotiation. Following an initial Form 251 screening, selected firms are invited to submit formal, unpriced, technical proposals for specific projects. The proposals contain considerable detail on proposed organization, key personnel to perform the project under consideration, and experience on similar work. After evaluating the proposals, the AEC evaluation team visits the firms which have submitted the most favorable proposals, usually the top three to five, to ascertain their capability. Although fee, as such, is not discussed during these interviews, AEC does often ascertain the billing rates, overhead rates, and travel and other prospective costs, as well as the estimated level of effort which the firms project. Subsequently, the evaluation team gives each firm a numerical ranking based on technical qualifications. A finalist is then selected by a technical proposal evaluation board. If negotiations with the finalist are

H.R. 16433, introduced in the 91st Congress, supported the “traditional” selection basis by providing that A-Es for Government projects would be selected on the basis of “demonstrated competence and qualification for the type of professional services required, and at fair and reasonable prices,” but without discussion of price with more than one firm. The bill was passed by the House and was reported out of Senate Committee but did not come to a vote on the Senate floor.

A modified bill, introduced as H.R. 12807 in the 92nd Congress, was passed by the House on July 27, 1972, and by the Senate on October 14, 1972. This act, Public Law 92–582, is set forth in Appendix A.


Uncertainty as to the legality of existing procedures for A-E selection stems from the GAO report discussed earlier, which raised

12 See AEC Procurement Instruction 9–56.202-5, 9–56.250 (a), (b), and (c).

13 Interesting discussions of the A-E selection procedures of several agencies, as viewed by the agencies and the profession, are included in the Consulting Engineer, Mar. 1972pp. 102-139.

11 ASPR, part 18. sets forth in some detail the procedures currently followed by defense agencies.

make any changes in their A-E selection procedures. Our studies reflect that many A-E selections are made under procedures which would not meet even the requirements of Public Law 92–582.

Thrust of Commission Recommendations

the issue whether the Truth in Negotiations Act required competitive negotiations and consideration of price in the selection. The Truth in Negotiations Act applies only to agencies subject to the Armed Services Procurement Act. The legislative history of Public Law 92–582 indicates that it is not applicable to agencies covered by the Armed Services Procurement Act. Accordingly, the issue of competitive negotiations is not fully resolved as regards agencies not covered by the law.15

Public Law 92–582 represents a modest step in the right direction, insofar as it requires discussions with more than one firm. But our study indicates that the A-E selection method provided by the new law would not provide for adequate competition. Frequent use of the term “traditional” in discussions of A-E selection has led to some confusion. As noted above, the basis for selection has been common among agencies. The procedures used vary widely. A number of agencies will need to modify their procedures immediately to conform to the provisions of Public Law 92–582. These implement. ing actions should be viewed as interim, and a longer term effort should be started to establish Government-wide policy guidelines for selection of A-E firms. These new statutory requirements for the selection of A-Es have many potentials for varying interpretations, divergent implementing regulations, and protests. We have observed that current agency procedures and practices for A-E selection are not uniform. We also have found there are significant differences in agency regulations implementing the procurement statutes. With this background, we have little reason to expect the new A-E selection requirements will be implemented in a consistent manner absent Government-wide guidelines. Some agencies may well interpret too broadly the repeated assertions expressed in the committee reports and floor debate that Public Law 92–582 was merely codifying existing policies and procedures, and conclude they are not required to

Throughout our report, we have sought to recommend ways to ensure that the procurement procedures used by the Government make use of the benefits of competition to the maximum extent possible. We have also recommended that, to the fullest extent practicable, agencies follow uniform policies and procedures in like situations. We have urged that Congress avoid freezing procurement procedures into a set pattern to be followed regardless of the circumstances at hand. Each of these principles is applicable to Government contracts for A-E services.

No one familiar with the nature of A-E services, and their importance in minimizing the costs of constructing, maintaining, and using a facility, advocates formal advertising for sealed bids to do A-E work; nor do we advocate competition on the basis of the fee charged. However, we believe that the architect-engineer fee is an appropriate factor for consideration in instances where competing A-E firms are otherwise equal.16 The legislative history of Public Law 92–582 shows a clear intent to prohibit in all cases consideration of fee as a selection factor.17

Competitive Negotiations

Many A-E contracts are relatively small in has chosen the basic construction concepts before seeking A-E services. Here, design concepts would often be of little interest, although the possibility of better ideas during the competition should not always be summarily dismissed.

14 The military agencies, the Coast Guard, and NASA. 15 House Report 92-1188 on H.R. 12807, which became Public Law 92–582, states that the bill does not apply to "agencies falling within the jurisdiction of the Armed Services Procurement Act of 1947." See p. 9, H, Rept. 92-1188. An attempt on the House floor to extend the bill to those agencies was defeated. 118 Cong. Rec. H6898, daily record for July 26, 1972. But see S. Rept. 92–1219, accompanying H.R. 12807, p. 6, and section 704 of the Military Construction Authorization Acts for fiscal years 1971, 1972, and 1973.

16 We are aware of the opposition of many members of the A-E profession to estimating prices in a competitive environment. Only recently, as a result of suits brought by the Department of Justice under the antitrust laws, have the American Institute of Architects, the American Society of Civil Engineers, and other organizations dropped provisions restricting competition among their members from their canons of ethics. The Commission emphasizes at the same time that it does not favor "competitive fee bidding," a concern frequently expressed.

17 Both H, Rept. 92–1188, p. 10, and S. Rept. 92-1219, p. 8, state that in "no circumstances should the criteria . . . relating to the ranking of architects and engineers on the basis of their professional qualifications include or relate to the fee to be paid to the firm, either directly or indirectly."


size. Those estimated to fall below the ceiling on small purchase procedures 18 should be handled informally. For larger contracts, the Government should strive for more formal competition than is now normally obtained

Our primary recommendation is that the A-E firm be selected, where practicable, through competitive negotiations.19 With rare exceptions, more than one firm is qualified and available to design the facility. After such screening as the agency may use to narrow the list of potential competitors to manageable proportions, negotiations should be conducted with the remaining firms. In this process, technical competence in the areas considered by the agencies today should have major significance. For example, with all but the smallest firms and most routine design tasks, the plans of the A-E for assignment of individuals to the work are important.

In appropriate cases, the A-E concepts of the end product and their preliminary estimates of construction costs should be considered during the competition. The variety of facilities involved, differing practices in the timing of A-E selection, and varying degrees of agency in-house A-E competence make hard and fast rules impractical in this area. Artist's sketches and rough cost estimates would be of little use in selecting an A-E for most Government work. But in an era of rapidly changing construction techniques and escalating prices, competition frequently can be a useful tool in fostering innovation in design concepts, selection of basic construction methods or materials, and cost reduction. The weight given these factors should depend on the situation at hand. Some agencies contract with A-E firms for the development of initial construction cost estimates. Requiring cost estimates as a factor in the competition would not make sense in such cases. In other instances, the Government

The A-E firms selected for consideration should make known their estimated fees during the competitive negotiations. The price of the A-E contract is of relatively small importance in relation to the quality of the resulting design, since the design controls facility construction and maintenance and operation costs, which are many times the A-E cost. The proposed A-E fee should therefore be the determining factor in the selection process only when other factors are essentially equal. However, knowing and discussing the proposed fee can aid the selection process in other ways. Experience in contracting for other services, such as research, has shown that analysis of the proposed price of competing contractors can often lead to a better understanding of the efforts they intend to apply (whether too much or too little) and of their comprehension of the nature of the work required. In additior., competitive price analyses can lead to “tradeoffs” in final agency decisions on the scope of work desired.

It has been argued that disclosure of proposed fee during competition will lead ultimately to excessive haggling over price, pure price competition, and consequent degrading of the quality of services performed by A-E firms. There is no objective evidence to support such a conclusion. This has not resulted in other areas of competitive negotiation for Federal contracts of a similar nature, where price estimates are required. We do not see any reason to believe it would result in the A-E selection process.

19 Elsewhere, we recommend that this ceiling be set at $10,000, with provision for periodic adjustment.

19 Our Study Group on A-E services reported complaints that A-E projects were not uniformly announced in a timely manner. At present most agency selection procedures do not require any contact between agency officials and qualified A-E firms until one firm has been selected for negotiation of a contract. We believe that the provision in Public Law 92–582 for publicly announcing needs for A-E services and requiring discussions of anticipated concepts and the relative utility of alternative methods of approach with at least three firms is the first step in strengthening opportunities for broader participation in Government work, particularly by small firms and firms that have not been able to participate previously.


As the design job increases in size and cost, it is reasonable to expect competitors to expend more effort in submitting proposals.

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