and development and has little or no production or other service activities and is, therefore, not in a favorable position to make a cost contribution;

or

(d) Payment of the full cost of the project is necessary in order to obtain the services of the particular organization.

(ii) The Contracting Officer shall inIclude the substance of his determination in the negotiation summary. Contracts, except when cost-sharing is specifically directed by the Director, Office of Procurement and Contracts or voluntarily offered by the performing organization, for projects:

(a) Where a particular research objective or scope of effort is specified by HUD rather than proposed by the performing organization. This will usually include any formal solicitation for a specific contractual requirement.

(b) The principal purpose of which is the production of, or design, testing or improving of products, materials, devices, systems or methods.

(3) Guidelines for determining the amount of cost sharing:

(i) For educational institutions and other not-for-profit or non-profit organizations, cost sharing normally may vary from 1 percent to as much as 50 percent of the costs of the project. In some cases it may be appropriate for educational institutions to provide a higher degree of cost sharing, such as when the cost of the research consists primarily of the academic year salary of faculty members, or when the equipment acquired by the institution for the project will be of significant value to the institution in its educational activities.

(ii) The amount of cost participation by commercial or industrial organizations may vary from as little as 1 percent or less of the total project cost to more than 50 percent of total project cost, depending upon the extent to which the research effort is likely to enhance the performing organization's capability, expertise or competitive position and the value of such enhancement to the performing organization. It should be recognized that those organizations which are predominately engaged in research and development and have little or no production or

other service activities may not be in a favorable position to derive a monetary benefit from the research under Federal agreements.

(iii) A fee or profit will usually not be paid to the performing organization if the organization is to contribute to the cost of the research effort, but the amount of cost sharing may be reduced to reflect the fact that the organization is foregoing its normal fee or profit on the research. However, if the research is expected to be of only minor value to the performing organization and if cost sharing is not required by statute, it may be appropriate for the performer to make a contribution in the form of a reduced fee or profit, rather than sharing the costs of the project.

(iv) Each cost-sharing contract negotiated by the Department shall contain the clause included in HUDPR 24-7.5011.

§ 24-3.408 Letter contract.

A letter contract is a written preliminary contractual instrument which authorizes immediate commencement of performance. Where this action is determined to be necessary, the following will be observed:

(a) Application. A letter contract may be entered into when (1) the interests of the Department demand that the contractor be given a binding commitment so that work can commence immediately, and (2) negotiation of a definitive contract in sufficient time to meet the procurement need is not possible as, for example, when the nature of the work involved prevents the timely preparation of definitive requirements, specifications, or cost data.

(b) Limitations. (1) A letter contract shall be used only after a written determination is made by the head of the procuring activity that the factors described in paragraph (a) of this section exist and that no other type of contract is suitable.

(2) A letter contract shall not be entered into without competition when competition is practicable. Where a letter contract award is based on price competition, an overall price ceiling representing the maximum amount of

the definitized contract shall be included in the letter contract.

(3) A letter contract shall be superseded by a definitive contract at the earliest practicable date, but in no event beyond 90 calendar days after the date of the letter contract, unless the head of the procuring activity authorizes extension of the date for definitization.

(4) The maximum liability of the Government stated in the letter contract shall be limited to an amount determined to be essential to cover the contractor's requirements for funds up to the time the contract is definitized, but in no event shall exceed 50 percent of the estimated cost of the definitive contract.

(c) Content. Letter contracts shall be specifically negotiated and, as a minimum, shall include agreement as to the following:

(1) The immediate commencement of performance of the contract by the contractor, including procurement of necessary materials;

(2) The extent and method of payments in the event of termination either for the convenience of the Government or for default;

(3) That the contractor is not authorized to expend monies or incur obligations in excess of the maximum liability of the Government as stated in the letter contract;

(4) The type of definitive contract anticipated;

(5) As many definitive contract provisions as possible;

(6) The contractor's obligation to provide such price and cost information as may reasonably be required by the Contracting Officer; and

(7) The prompt entry into good faith negotiations by the contractor and the Government to reach agreement upon and execute a definitive contract.

Subpart 24-3.6-Small Purchases

§ 24-3.601. Non-construction contracts. The Department may use small purchase procedures in non-construction contracts when the aggregate amount involved in any one transaction does not exceed $10,000. Procedures used shall be in accordance with 41 CFR Subpart 1-3.6.

Subpart 24-3.7—Negotiated Overhead Rates

§ 24-3.702 General.

(a) When a contractor performs work in the same period under several contracts for one or more procurement activities or agencies, it may be desirable and appropriate, when mutually agreed to by the Department and the contractor, to negotiate uniform overhead rates for application to all such contracts in order to: (1) Effect uniformity of approach, (2) effect economy in administrative effort, and (93) Promote timely settlement of reimbursement claims.

(b) When the Contracting Officer determines that the above conditions exist, he shall include the negotiated overhead rate clause set forth in

resolution to the head of the procuring activity with a statement of facts and the Contracting Officer's recommendations.

§ 24-3.802 Preparation for negotiation.

(a) Requests for proposals. This section is not applicable to solicitations issued on Standard Form 33.

(1) Careful drafting of the Request for Proposals (RFP) is essential to the success of the competitive process. The program and procurement offices shall coordinate their efforts to develop a solicitation package which is free of ambiguities and which will allow all offerors to propose on an equal basis.

(2) The RFP shall require that a proposal be submitted in two parts: A "Technical Proposal" and a "Business Proposal." Each of the parts shall be separate and complete in itself so that evaluation of one may be accomplished independently of and concurrently with evaluation of the other. The RFP shall provide that the technical proposal shall not contain any reference to cost. Resource information, such as data concerning labor hours and categories, materials, subcontracts, travel, computer time, etc., shall be included in the technical proposal so that the offeror's understanding of the scope of work may be evaluated.

(3) The instructions to the offerors concerning the business proposal shall require cost information in sufficient detail to allow a complete cost analysis. Categories and amounts of labor, materials, travel, computer time, as well as information with regard to contractor past performance, financial capacity, certifications and representations, and other pertinent administrative and business information should also be requested.

(4) The RFP shall contain factors for award which are tailored to the requirements of the particular procurement. Each technical factor and subfactor shall be assigned a numerical weight which shall appear in the RFP. These factors will serve as the standard against which all proposals will be evaluated.

(b) Selection of prospective sources. Proposals shall be invited from a sufficient number of competent potential

sources to insure adequate competition. Sources solicited should include those individuals and organizations (1) on the source list provided by the program office; (2) on the procurement office's bidders' mailing list; and (3) requesting RFPs as a result of publication of the requirement in the Commerce Business Daily. Each RFP shall be made available to all prospective offerors at the same time and no offeror shall be given the advantage of advance detailed information concerning the proposed procurement.

(c) Proposal preparation time. HUDPR 24-2.202-1 Bidding Time is applicable to negotiated procurement under this subpart.

§ 24-3.805 Selection of offerors for negotiation and award.

§ 24-3.805-1 Policy.

Those competitively negotiated procurements not expected to exceed $250,000 or those procurements over $250,000 which the head of the procuring activity approves for less formal negotiation procedures, shall be processed in accordance with HUDPR 24-3.805–2. All other competitively negotiated procurements expected to exceed $250,000 shall be processed in accordance with HUDPR 243.805-3. This section is not applicable to procurement of Architect-Engineer Services.

§ 24-3.805-2 Procurements not expected to exceed $250,000.

On procurements where the expected dollar amount will not exceed $250,000 the following will be observed:

(a) Forwarding proposals. After the deadline for receipt of offers, the Contracting Officer will forward five (5) copies of the technical portion of each proposal to the Technical Evaluation Panel (TEP) for evaluation. The TEP will be composed of one or more technical personnel designated by the program or initiating office prior to issuance of the solicitation. The business portions of each proposal will be retained by the Contracting Officer for subsequent evaluation. The Contracting Officer shall inform the TEP of proposals which contain major busi

ness deficiencies, including out-of-line cost proposals, which discussion with the offeror could not reasonably be expected to cure.

(b) Evaluation. The TEP will evaluate each proposal in strict conformity with the factors for award set forth in the RFP, and will assign each proposal a score on the basis of the factors for award. The TEP shall identify each proposal as being either acceptable or unacceptable. A proposal shall be considered unacceptable if it is so clearly deficient that it cannot be corrected through written or oral discussions. Predetermined cutoff scores designed for determining the threshold level of acceptablility of proposals shall not be employed.

(c) Report. A TEP report shall be prepared and signed by the technical evaluator(s), furnished to the Contracting Officer, and maintained as a permanent record in the official procurement file. The report shall reflect the scoring of each proposal and the rankings of the proposals, and shall identify each proposal as acceptable or unacceptable. The report shall also include a narrative evaluation specifying the strengths and weaknesses of each proposal, and any reservations qualifications that may bear upon the selection of sources for negotiation and award. Specific technical reasons supporting a determination of unacceptablity with regard to any proposal shall be included. Score sheets of all panel members shall be appended to the report.

or

(d) Review of report. After submission of the TEP report, the Contracting Officer and the TEP will evaluate the business portion of each proposal.

(e) Competitive range. unless it is determined pursuant to 41 CFR 1-3.8051(a)(5) that award shall be made on the basis of the most favorable initial proposal, the Contracting Officer will determine which offers are within the competitive range. A determination of the limits of the competitive range requires a comparison of the evaluation of each proposal against the evaluations of other proposals and therefore cannot be predetermined on the basis of a given number of or percentage of proposals. The competitive range shall include all proposals which have a rea

sonable chance of being selected for award.

(f) Conduct of discussions. The Contracting Officer, with the Technical Evaluation Panel, will conduct written or oral discussions of the work to be performed, the cost/price of the work, and other relevant points, with all those offerors within the competitive range. Discussions are not required if the conditions of 41 CFR 1-3.8051(a)(5) are applicable. The Contracting Officer shall point out to each offeror the ambiguities, uncertainties, and deficiencies, if any, in his proposal which can be corrected without major changes to the proposal. He shall give each offeror a reasonable opportunity (with a common cutoff date for all) to support, clarify, correct, improve, or revise his proposal. Discussions with an offeror should disclose deficiencies in the proposal but should not identify approaches or ideas through which another offeror has achieved a higher evaluation. No information will be revealed by the Government which could give one offeror an unfair competitive advantage over another. Cost estimates made by the Government will not be disclosed.

(g) Extent of discussions. Careful judgment will be exercised in determining the extent of discussions. In some cases, good business practice may require more than one round of discussions with proposers within the competitive range depending upon the time constraints, the expense, administrative limitations, and the overall significance of the procurement.

(h) Selection of contractor. (1) After the close of discussions and receipt of any revisions to proposals, the TEP shall perform a final evaluation and prepare its selection recommendation(s). The TEP shall then forward the recommendation(s) through the appropriate officials having a need to know, as designated by the Funding Assistant Secretary, to the Contracting Officer who shall select for final contract negotiation the offer containing the proposal which promises the greatest value to the Government in terms of cost or price, technical and other factors, including equal opportunity compliance.

(2) Cost and price shall be considered in the selection of a contractor. This is particularly true where more than one acceptable offer from technically qualified sources remains for consideration after conduct of negotiations. If a lower priced, lower scored offer meets the Government's needs, acceptance of a higher priced, higher scored offer shall be supported by a specific determination by the Contracting Officer, that the technical superiority of the higher priced offer warrants the additional cost involved in the award of a contract to that offeror. Offers exceeding the Government's needs are not a basis for technical superiority.

(i) Final negotiation and award. Under a negotiated procurement, selection of the source or sources marks only the first phase of negotiating a definitive contract. Final contract negotiation entails: (1) Reaching agreement with the selected source on the costing/pricing, technical, equal opportunity and other provisions that will condition his performance under the contract; (2) setting forth these terms in a mutually acceptable contractual document; and (3) having sound rationale and basis for results negotiated.

(i) Pre-negotiation conference. Prior to negotiations with the selected offeror, the Contracting Officer shall conduct a meeting with those members of the Government's team who will participate. The purpose of this meeting is to present the objectives to be sought and to establish negotiating positions.

(ii) Negotiation and award. The Contracting Officer will make arrangements for negotiations with the successful offeror. Negotiations may be held at the contractor's site, at a HUD facility, or by telephone, depending upon the complexity and magnitude of the proposed contract, economic and time considerations and past experience. The Contracting Officer in coordination with assisted and supported by technical, audit, and other personnel as needed, making up the Government's negotiation team. It is the responsibility of the Contracting Officer in coordination with the Office of General Counsel to ensure the integri

On those procurements where the expected dollar amount will exceed $250,000 the following will apply:

(a) Selection of the source or sources for final contract negotiations shall be made by the Contracting Officer, pursuant to his responsibilities under HUDPR 24-1.453, based upon the findings and recommendations of the Source Selection Official (SSO) who is the head of the funding office or his designee. To assist the SSO in evaluating proposals and making recommendations for selection, the SSO shall designate a Source Evaluation Board (SEB) composed of a chairman, voting members, and advisors.

(b) After the deadline for receipt of offers, the Contracting Officer will forward five (5) copies of the technical portion of each proposal to the SEB chairman or his designee, who shall be responsible for their custody throughout the evaluation process. The business portions of each proposal will be retained by the Contracting Officer pending initial technical evaluation by the SEB. The Contracting Officer shall inform the SEB of proposals which contain major business deficiencies, including out of line cost proposals, which discussion with the offeror could not reasonably be expected to

cure.

(c) The SEB will evaluate each proposal in strict conformance with the factors for award of the RFP, and will assign each proposal a score on the basis of the factors for award. The SEB shall identify each proposal as being either acceptable or unacceptable. A proposal should be considered unacceptable if its deficiencies cannot be corrected through written and oral discussions to the point of having a reasonable chance of being selected