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procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.

(10) Grantees and subgrantees will use time and material type contracts only

(i) After a determination that no other contract is suitable, and

(ii) If the contract includes a ceiling price that the contractor exceeds at its own risk.

(11) Grantees and subgrantees alone will be responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to source evaluation, protests, disputes, and claims. These standards do not relieve the grantee or subgrantee of any contractual responsibilities under its contracts. Federal agencies will not substitute their judgment for that of the grantee or subgrantee unless the matter is primarily a Federal concern. Violations of law will be referred to the local, State, or Federal authority having proper jurisdiction.

(12) Grantees and subgrantees will have protest procedures to handle and resolve disputes relating to their procurements and shall in all instances disclose information regarding the protest to the awarding agency. A protestor must exhaust all administrative remedies with the grantee and subgrantee before pursuing a protest with the Federal agency. Reviews of protests by the Federal agency will be limited to:

(1) Violations of Federal law or regulations and the standards of this section (violations of State or local law will be under the jurisdiction of State or local authorities) and

(ii) Violations of the grantee's or subgrantee's protest procedures for failure to review a complaint or protest. Protests received by the Federal agency other than those specified above will be referred to the grantee or subgrantee.

(c) Competition. (1) All procurement transactions will be conducted in a manner providing full and open competition consistent with the standards of $18.36. Some of the situations considered to be restrictive of competition include but are not limited to:

(i) Placing unreasonable requirements on firms in order for them to qualify to do business,

(ii) Requiring unnecessary experience and excessive bonding,

(iii) Noncompetitive pricing practices between firms or between affiliated companies,

(iv) Noncompetitive awards to consultants that are on retainer contracts,

(v) Organizational conflicts of interest,

(vi) Specifying only a "brand name” product instead of allowing “an equal” product to be offered and describing the performance of other relevant requirements of the procurement, and

(vii) Any arbitrary action in the procurement process.

(2) Grantees and subgrantees will conduct procurements in a

a manner that prohibits the use of statutorily or administratively imposed in-State or local geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. Nothing in this section preempts State licensing laws. When contracting for architectural and engineering (A/E) services, geographic location may be a selection criteria provided its application leaves an appropriate number of qualified firms, given the nature and size of the project, to compete for the contract.

(3) Grantees will have written selection procedures for procurement transactions. These procedures will ensure that all solicitations:

(i) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description shall not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured, and when necessary, shall set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Detailed product specifications should be avoided if at all possible. When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a "brand name or equal" description may be used as a means to define the performance or other salient requirements of a procurement. The specific features of the named brand which must be met by offerors shall be clearly stated; and

(ii) Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals.

(4) Grantees and subgrantees will ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and

and include enough qualified sources to ensure maximum open and free competition. Also, grantees and subgrantees will not preclude potential bidders from qualifying during the solicitation period.

(d) Methods of procurement to be followed-(1) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the simplified acquisition threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000). If small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources.

(2) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in $18.36(d)(2)(i) apply. (i) In order for sealed bidding to be

1) feasible, the following conditions should be present:

(A) A complete, adequate, and realistic specification or purchase description is available;

(B) Two or more responsible bidders are willing and able to compete effectively and for the business; and

(C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price.

(ii) If sealed bids are used, the following requirements apply:

(A) The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time prior to the date set for opening the bids;

(B) The invitation for bids, which will include any specifications and pertinent attachments, shall define the items or services in order for the bidder to properly respond;

(C) All bids will be publicly opened at the time and place prescribed in the invitation for bids;

(D) A firm fixed-price contract award will be made in writing to the lowest responsive and

responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs shall be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and

(E) Any or all bids may be rejected if there is a sound documented reason.

(3) Procurement by competitive proposals. The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed-price or costreimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, the following requirements apply:

(i) Requests for proposals will be publicized and identify all evaluation factors and their relative importance. Any response to publicized requests for proposals shall be honored to the maximum extent practical; (ii) Proposals will be solicited from

adequate number of qualified sources;

(iii) Grantees and subgrantees will have a method for conducting technical evaluations of the proposals received and for selecting awardees;

(iv) Awards will be made to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and

(v) Grantees and subgrantees may use competitive proposal procedures for qualifications-based procurement of


architectural/engineering (AVE) professional services whereby competitors' qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.

(4) Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate.

(i) Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids or competitive proposals and one of the following circumstances applies:

(A) The item is available only from a single source;

(B) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;

(C) The awarding agency authorizes noncompetitive proposals; or

(D) After solicitation of a number of sources, competition is determined inadequate.

(ii) Cost analysis, i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of costs and profits, is required.

(iii) Grantees and subgrantees may be required to submit the proposed procurement to the awarding agency for pre-award review in accordance with paragraph (g) of this section.

(e) Contracting with small and minority firms, women's business enterprise and labor surplus area firms. (1) The grantee and subgrantee will take all necessary affirmative steps to assure that minority firms, women's business enterprises, and labor surplus area firms are used when possible.

(2) Affirmative steps shall include:

(i) Placing qualified small and minority businesses and women's business enterprises on solicitation lists;

(ii) Assuring that small and minority businesses, and women's business enterprises are solicited whenever they are potential sources;

(iii) Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority business, and women's business enterprises;

(iv) Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority business, and women's business enterprises;

(v) Using the services and assistance of the Small Business Administration, and the Minority Business Development Agency of the Department of Commerce; and

(vi) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs (e)(2) (i) through (v) of this section.

(f) Contract cost and price. (1) Grantees and subgrantees must perform a cost or price analysis in connection with every procurement action including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, grantees must make independent estimates before receiving bids or proposals. A cost analysis must be performed when the offeror is required to submit the elements of his estimated cost, e.g., under professional, consulting, and architectural engineering services contracts. A cost analysis will be necessary when adequate price competition is lacking, and for sole source procurements, including contract modifications or change orders, unless price resonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or based on prices set by law or regulation. A price analysis will be used in all other instances to determine the reasonableness of the proposed contract price.

(2) Grantees and subgrantees will negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed.


To establish a fair and reasonable prof- tion threshold, specifies “brand it, consideration will be given to the name” product; or complexity of the work to be per- (iv) The proposed award is more than formed, the risk borne by the contrac- the simplified acquisition threshold tor, the contractor's investment, the and is to be awarded to other than the amount of subcontracting, the quality apparent low bidder under a sealed bid of its record of past performance, and procurement; or industry profit rates in the surround- (v) A proposed contract modification ing geographical area for similar work. changes the scope of a contract or in

(3) Costs or prices based on estimated creases the contract amount by more costs for contracts under grants will be than the simplified acquisition threshallowable only to the extent that costs old. incurred or cost estimates included in (3) A grantee or subgrantee will be negotiated prices are consistent with exempt from the pre-award review in Federal cost principles (see $18.22). paragraph (g)(2) of this section if the Grantees may reference their own cost awarding agency determines that its principles that comply with the appli- procurement systems comply with the cable Federal cost principles.

standards of this section. (4) The cost plus a percentage of cost (i) A grantee or subgrantee may reand percentage of construction cost quest that its procurement system be methods of contracting shall not be reviewed by the awarding agency to deused.

termine whether its system meets (g) Awarding agency review. (1) Grant- these standards in order for its system ees and subgrantees must make avail- to be certified. Generally, these reable, upon request of the awarding views shall occur where there is a conagency, technical specifications on pro- tinuous high-dollar funding, and thirdposed procurements where the award- party contracts are awarded on a reguing agency believes such review is lar basis. needed to ensure that the item and/or (ii) A grantee or subgrantee may selfservice specified is the one being pro- certify its procurement system. Such posed for purchase. This review gen- self-certification shall not limit the erally will take place prior to the time awarding agency's right to survey the the specification is incorporated into a system. Under a self-certification prosolicitation document. However, if the cedure, awarding agencies may wish to grantee or subgrantee desires to have rely on written assurances from the the review accomplished after a solici- grantee or subgrantee that it is comtation has been developed, the award- plying with these standards. A grantee ing agency may still review the speci- or subgrantee will cite specific procefications, with such review usually lim- dures, regulations, standards, etc., as ited to the technical aspects of the pro- being in compliance with these requireposed purchase.

ments and have its system available (2) Grantees and subgrantees must on for review. request make available for awarding (h) Bonding requirements. For conagency pre-award review procurement struction or facility improvement condocuments, such as requests for propos- tracts or subcontracts exceeding the als or invitations for bids, independent simplified acquisition threshold, the cost estimates, etc. when:

awarding agency may accept the bond(i) A grantee's or subgrantee's pro- ing policy and requirements of the curement procedures or operation fails grantee or subgrantee provided the to comply with the procurement stand- awarding agency has made a deterards in this section; or

mination that the awarding agency's (ii) The procurement is expected to interest is adequately protected. If exceed the simplified acquisition such a determination has not been threshold and is to be awarded without made, the minimum requirements shall competition or only one bid or offer is be as follows: received in response to a solicitation; (1) A bid guarantee from each bidder

equivalent to five percent of the bid price. (iii) The procurement, which is ex- The "bid guarantee" shall consist of a pected to exceed the simplified acquisi- firm commitment such as a bid bond,


certified check, or other negotiable in- (5) Compliance with the Davis-Bacon strument accompanying a bid as assur- Act (40 U.S.C. 276a to 276a-7) as suppleance that the bidder will, upon accept- mented by Department of Labor reguance of his bid, execute such contrac- lations (29 CFR part 5). (Construction tual documents as may be required contracts in excess of $2000 awarded by within the time specified.

grantees and subgrantees when re(2) A performance bond on the part of quired by Federal grant program legisthe contractor for 100 percent of the con- lation) tract price. A “performance bond” is

(6) Compliance with Sections 103 and one executed in connection with a con

107 of the Contract Work Hours and tract to secure fulfillment of all the

Safety Standards Act (40 U.S.C. 327-330) contractor's obligations under such

as supplemented by Department of contract.

Labor regulations (29 CFR part 5). (3) A payment bond on the part of the

(Construction contracts awarded by contractor for 100 percent of the contract

grantees and subgrantees in excess of price. A "payment bond" is one exe

$2000, and in excess of $2500 for other cuted in connection with a contract to

contracts which involve the employassure payment as required by law of

ment of mechanics or laborers) all persons supplying labor and mate

(7) Notice of awarding agency rerial in the execution of the work pro

quirements and regulations pertaining vided for in the contract.

to reporting (i) Contract provisions. A grantee's

(8) Notice of awarding agency reand subgrantee's contracts must con

quirements and regulations pertaining tain provisions in paragraph (i) of this

to patent rights with respect to any section. Federal agencies are permitted

discovery or invention which arises or to require changes, remedies, changed

is developed in the course of or under conditions, access and records reten

such contract. tion, suspension of work, and other clauses approved by the Office of Fed

(9) Awarding agency requirements eral Procurement Policy.

and regulations pertaining to copy(1) Administrative, contractual, or

rights and rights in data. legal remedies in instances where con

(10) Access by the grantee, the subtractors violate or breach contract

grantee, the Federal grantor agency, terms, and provide for such sanctions

the Comptroller General of the United and penalties as may be appropriate.

States, or any of their duly authorized (Contracts more than the simplified ac

representatives to any books, docuquisition threshold)

ments, papers, and records of the con(2) Termination for cause and for

tractor which are directly pertinent to convenience by the grantee or sub

that specific contract for the purpose grantee including the manner by which

of making audit, examination, exit will be effected and the basis for set

cerpts, and transcriptions. tlement. (All contracts in excess of

(11) Retention of all required records $10,000)

for three years after grantees or sub(3) Compliance with Executive Order grantees make final payments and all 11246 of September 24, 1965, entitled other pending matters are closed. “Equal Employment Opportunity," as (12) Compliance with all applicable amended by Executive Order 11375 of standards, orders,

requirements October 13, 1967, and as supplemented issued under section 306 of the Clean in Department of Labor regulations (41 Air Act (42 U.S.C. 1857(h)), section 508 CFR chapter 60). (All construction con- of the Clean Water Act (33 U.S.C. 1368), tracts awarded in excess of $10,000 by Executive Order 11738, and Environgrantees and their contractors or sub- mental Protection Agency regulations grantees)

(40 CFR part 15). (Contracts, sub(4) Compliance with the Copeland contracts, and subgrants of amounts in “Anti-Kickback" Act (18 U.S.C. 874) as excess of $100,000) supplemented in Department of Labor (13) Mandatory standards and policies regulations (29 CFR part 3). (All con- relating to energy efficiency which are tracts and subgrants for construction contained in the state energy conservaor repair)

tion plan issued in compliance with the


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