8 12-1.5302 Solicited refunds.

8 12–1.5402 Telewriting equipment and Voluntary refunds may be requested office copying machines. during or after contract performance. Guidelines for making lease/purThey shall be requested only when it chase determinations in the acquisiis considered that the Government tion of telewriting equipment and was overcharged under a contract or

office copying machines are specified was inadequately compensated for the

in the Federal Property Management use of Government-owned property, or

Regulations (FPMR), Subpart 101

25.5. in the disposition of contractor inventory, retention by the contractor or

8 12–1.5403 Automatic data processing subcontractor of the amount in ques

equipment. tion would be contrary to good con

See FPMR Part 101-32 (referred to science and equity. Generally, retention by the contractor or subcontrac

in FPR Subpart 1-4.1). tor shall not be considered contrary to

8 12–1.5404 Lease/purchase determinagood conscience and equity, and thus a

tions. voluntary refund shall not be request

(a) Whenever procurement is to be ed unless the overcharged or inad

made of items of equipment normally equate compensation was due, at least

available for both lease and purchase, in part, to the fault of the contractor

a determination shall be made as to or subcontractor. The decision to solic

whether acquisition by lease, purit a voluntary refund shall be made by

chase, or lease with option to purchase the head of the procuring activity.

is most advantageous to the Govern

ment. The determination shall be sup8 12–1.5303 Disposition of voluntary re

ported by comparisons of costs of the funds.

various acquisition alternatives. The (a) If a refund is offered prior to extent of the cost comparison required final payment, it is preferable that the to support the determination will be a contract price be appropriately modi- matter of judgment, depending prified to reflect the refund. In such a marily on the estimated cost of the case, the amount of the refund shall equipment. be credited to the applicable appro (b) For equipments of relatively priation cited in the contract.

high dollar values, considerations shall (b) In cases where the refund is to

be given to including the following be made by check rather than by an

cost elements in the cost comparison: adjustment in the contract price, the

(1) Purchase price delivered to the check shall be made payable to the

point of installation. Treasurer of the United States, and

(2) Leasing cost including delivery shall be forwarded in accordance with

charges to the Department and cost of the procedures of each Administra

return to the vendor.

(3) Present value of money to be tion.

used in the acquisition of the equip

ment. The present value computation Subpart 12-1.54—Acquisition of

is applicable to all costs over the life Equipment by Lease, Purchase, or of the equipment. Lease With Option To Purchase

(4) Maintenance costs to the Gov

ernment under lease and under pur§ 12-1.5401 General.

chase. When maintenance is to be perThis subpart prescribes DOT policy

formed by the Government, these and procedures with respect to deter

costs would include: mination of whether to lease, pur

(1) Cost of direct labor. chase, or lease with option to pur

(ii) Cost of parts and supplies, inchase, when acquiring equipment for

cluding investment costs and wareDepartment use, where these options

housing and distribution costs. are available.

(iil) Cost of additional tools and repair equipment needed for maintenance of the equipment.

(iv) Cost of training maintenance $12-1.5405–2 Lease-with-option-topersonnel.

purchase method. (v) Cost of repair manuals.

The lease-with-option-to-purchase (vi) Cost of any applicable overhead. method is preferred when it is reason

(5) Installation and dismantling ably anticipated that purchase may be costs.

justified, but it is desirable to defer (6) Residual value of equipment this decision temporarily because the after expected use period, including conditions necessary to indicate purpossible continued use by the Govern

chase are not fully satisfied. This situment in another application or pro

ation might arise when it is deter

mined that a short period of oper. gram. (7) Operating costs (exclusive of

ational experience is desirable to prove

the effectiveness of an equipment for maintenance costs) in those instances

which there is no previous experience, where, under the lease method, the

or where technical changes might subvendor would perform part or all of

stantially alter the requirements for the labor incident to the operation of

the equipment. the equipment. (c) For equipments of small dollar

8 12-1.5405-3 Lease method. value, the cost comparison can be lim

The lease method, without option to ited to the cost of purchase and an es

purchase, is indicated when it has timate of installation and maintenance

been established that neither the concost versus the cost of lease, as de

ditions in $ 12-1.5405-1 nor $ 12scribed in FPMR Subpart 101-25.5.

1.5405-2 prevail. 8 12-1.5405 Selecting the method of acqui. 8 12–1.5406 Periodic cost comparisons on sition.

leased equipment. 8 12-1.5405-1 Purchase method.

For equipment under lease, the con

tracting officer shall compute cost (a) The purchase method is pre

comparisons periodically (at least once ferred when all of the following condi

a year) to revalidate the original detertions exist:

mination that the lease method is (1) There is little or no doubt that

most advantageous to the Governthe equipment to be procured can be

ment. efficiently and effectively utilized, cost and other factors considered.

Subpart 12-1.55—Multi-year (2) A comparative cost analysis of

Procurement the alternative methods of acquisition indicates that a cost advantage will

8 12–1.5500 Scope of subpart. accrue over the anticipated useful life of the equipment by using the pur

This subpart contains the multi-year chase method.

method of procurement for supplies. (3) The capabilities of the equip

8 12–1.5501 Description of multi-year proment will continue to be needed and

cedure. will be sufficient to satisfy the requirements of the Government, current and

Multi-year procurement is a method projected, for a period beyond the

for competitive contracting for known point in time at which the purchase

requirements for supplies, in quantimethod begins to provide a cost advan

ties and total cost not in excess of tage. The possibility that future tech

planned requirements for 5 years set

forth in approved programs, even nological advances would make the se

though the total funds ultimately to lected equipment comparatively less

be obligated by the contract are not desirable before the cost advantage

available to the contracting officer at point is reached should not rule out

the time of entering into the contract. purchase if the selected equipment is

Under this method, contract quantiexpected to be able to satisfy the Gov- ties are budgeted for and financed in ernment's requirements economically accordance with the program year for which each quantity is authorized. (a) Nonrecurring costs are distributThis procedure provides for solicita ed over a larger number of units, thus tion of prices based either on award of narrowing any price advantage of a the current 1-year program quantity firm already in production; only, or, in the alternative, on the (b) There is greater assurance of detotal multi-year quantities. Award is preciation recovery for capital investmade on whichever of these two alter ment; and native bases reflects the lowest unit (c) The competitive base is broadprices to the Government. If award is

ened with better prospects for lower made on the multi-year basis, funds prices, where firms otherwise might be are obligated only for the first year's unwilling or unable to como quantity, with succeeding years' contract quantities funded annually 8 12-1.5502-3 Cost savings factors to conthereafter. In the event funds are not sider. made available to support one or more

Another major objective is to obtain succeeding year's quantities, cancella

lower prices in those procurements tion is effected. The contractor is pro

which do not necessarily involve high tected against loss resulting from can

startup cost but which do provide opcellation by contract provisions allow

portunity for substantial cost savings ing reimbursement of unrecovered

and other advantages through assurnonrecurring costs included in prices

ance of continuity of production over for canceled items.

longer periods of time. In determining $ 12-1.5502 Policy.

whether substantial cost savings and

related advantages can be realized, § 12-1.5502-1 Principal advantages.

consideration may be given to wheth

er: Multi-year procurement shall be

(a) Production or performance closeused to the maximum extent consist

out or shut-down costs, including ement with §§ 12-1.5502-4, 12–1.5503, and

ployee severance pay, represent a sub12-1.5511. Advantages of this method

stantial cost contingency in prices include, for example:

quoted on only 1 year's program; (a) Lower costs;

(b) Stabilization of work forces will (b) Enhancement of standardization; provide greater assurance of sustain

(c) Reduction of administrative ing and improving production efficienburden in the placement and adminis cy and quality; tration of contracts;

(c) Substantial cost and quality ad(d) Substantial continuity of produc vantage will accrue through avoidance tion;

of the possible need for establishing (e) Stabilization of work forces; and and “proving out" quality control

(f) Broadening the competitive base techniques and procedures for a new with opportunity for participation by contract each year; firms not otherwise willing or able to (d) Costly preproduction or pilot compete for lesser quantities, particu- testing will be avoided; larly in cases involving high startup (e) The ability to recruit and retain costs.

highly skilled personnel will be en

hanced through assurance to employ. 8 12-1.5502-2 Principal objective.

ees of longer periods of employment The principal objective of the multi than would be the case in single-year year procedure is to generate realistic procurement, thereby avoiding costs competition by minimizing competitive of repeated training of new personnel; disadvantage and by increasing con. (f) The ability to vary production tractor interest in participating in pro- rates during peak and off-peak periods curements which involve high startup in each program year will result in costs and make-ready expense and economies; and which also may require substantial (g) Substantial in-house savings in capital investment by contractors for maintenance and supply operations expansion of their facilities. Under will accrue from standardization of this procedure:

supplies accomplished by procurement

re

from a single source throughout the employ multi-year subcontracts selecmulti-year period.

tively and only when:

(a) The subcontract item is of stable § 12-1.5502-4 Set-asides.

design and specification; Total small business set-asides are (b) The quantity required is known compatible with the multi-year and firm; method of procurement and may be (c) Effective competition is assured; used when both procedures are appro and priate. Partial set-aside procedures (d) The use of multi-year subcon(both small business and labor surplus

tracts can reasonably be expected to area) generally are not compatible with the multi-year procedure when high startup costs are involved be

In such cases, the prime contractor is cause of the potential duplication of adequately protected against cancellasuch costs by the set-aside contractor

tion since appropriate cancellation and the non-set-aside contractor. How

ntractor How. charges for such multi-year subconever, when the multi-year procedure is

tractors are included within the canbased not on high startup costs but on

cellation charge of the multi-year the opportunity for cost savings

prime contract. Multi-year subconthrough assurance of continuity of

tracts may be particularly desirable production over longer periods of time,

under a sole source multi-year prime partial set-aside procedures are com

contract since effective competition at patible with the multi-year procedure.

the subcontract level may thereby be Furthermore, even where high startup

enhanced and the attendant cost recosts are involved, use of partial set

ductions realized by the prime conaside procedures together with the

tractor and the Government. multi-year procedure may be appropriate in exceptional circumstances, such

§ 12-1.5503 Application-criteria. as where criteria for partial set-asides Except as provided in DOTPR 12are met under FPR 1-1.7 or 1-1.8, and 1.5511 below, the multi-year procureit is likely that broader or more realis- ment method should be used when all tic competition will result from a com- of the following criteria are present: bination of both procedures, and this (a) Reduced unit prices can reasonbroader competition is likely to more ably be anticipated over annual buys than offset any duplication of startup by reason of continuity of production costs. When reviewing a proposed pro- or elimination of repetitive substantial curement involving possible use of this startup costs, including such costs as procedure, in addition to consideration preproduction engineering, special of the criteria established in this sub- tooling, plant rearrangement, initial part, the contracting officer shall rework, initial spoilage, and pilot runs; invite the advice and counsel of the ac- (b) There is reasonable expectation tivity's small business specialist and that effective competition can be obthe SBA representative, if one is as tained; signed to that activity, permitting (c) There are known requirements either or both to review all pertinent for the quantities to be purchased facts and make recommendations under the multi-year contract; thereon.

(d) The design and specifications of

the item are not expected to change to 8 12–1.5502–5 Multi-year subcontracts. an extent that would involve a major

The same benefits and advantages impact on contract price; and that are derived from multi-year (e) The items being procured are not prime contracts may frequently be in regularly manufactured and offered creased by multi-year subcontracts for sale in substantial quantities in the thereunder. The prime contractor in commercial market, except that (1) the exercise of his management re- when quantities to be procured by the sponsibilities must freely choose the Government represent a substantial subcontract types that best satisfy his portion of the total market and would needs. However, multi-year prime con require special manufacturing runs for tractors should be encouraged to all or substantially all of the Govern.