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8 12–1.5402 Telewriting equipment
and office copying machines. Guidelines for making lease/purchase determinations in the acquisition of telewriting equipment and office copying machines are specified in the Federal Property Management Regulations (FPMR), Subpart 10125.5.
8 12-1.5302 Solicited refunds.
Voluntary refunds may be requested during or after contract performance. They shall be requested only when it is considered that, the Government was overcharged under a contract or was inadequately compensated for the use of Government-owned property, or in the disposition of contractor inventory, retention by the contractor or subcontractor of the amount in question would be contrary to good conscience and equity. Generally, retention by the contractor or subcontractor shall not be considered contrary to good conscience and equity, and thus a voluntary refund shall not be requested unless the overcharged or inadequate compensation was due, at least in part, to the fault of the contractor or subcontractor. The decision to solicit a voluntary refund shall be made by the head of the procuring activity.
& 12-1.5403 Automatic data processing
equipment. See FPMR Part 101-32 (referred to in FPR Subpart 1-4.1).
§ 12-1.5303 Disposition of voluntary re
funds. (a) If a refund is offered prior to final payment, it is preferable that the contract price be appropriately modified to reflect the refund. In such a case, the amount of the refund shall be credited to the applicable appropriation cited in the contract.
(b) In cases where the refund is to be made by check rather than by an adjustment in the contract price, the check shall be made payable to the Treasurer of the United States, and shall be forwarded in accordance with the procedures of each Administration.
8 12–1.5404 Lease/purchase determina
tions. (a) Whenever procurement is to be made of items of equipment normally available for both lease and purchase, a determination shall be made as to whether acquisition by lease, purchase, or lease with option to purchase is most advantageous to the Government. The determination shall be supported by comparisons of costs of the various acquisition alternatives. The extent of the cost comparison required to support the determination will be a matter of judgment, depending primarily on the estimated cost of the equipment.
(b) For equipments of relatively high dollar values, considerations shall be given to including the following cost elements in the cost comparison:
(1) Purchase price delivered to the point of installation.
(2) Leasing cost including delivery charges to the Department and cost of return to the vendor.
(3) Present value of money to be used in the acquisition of the equipment. The present value computation is applicable to all costs over the life of the equipment.
(4) Maintenance costs to the Government under lease and under purchase. When maintenance is to be performed by the Government, these costs would include:
(i) Cost of direct labor.
(ii) Cost of parts and supplies, including investment costs and warehousing and distribution costs.
(iii) Cost of additional tools and repair equipment needed for maintenance of the equipment.
of Equipment by Lease, Purchase, or Lease With Option To Purchase
8 12-1.5401 General.
This subpart prescribes DOT policy and procedures with respect to determination of whether to lease, purchase, or lease with option to purchase, when acquiring equipment for Department use, where these options are available.
(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 detergram.
mined that a short period of oper(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
$ 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- § 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 quanti
ties and total cost not in excess of method begins to provide a cost advantage. The possibility that future tech
planned requirements for 5 years set
forth in approved programs, even nological advances would make the selected equipment comparatively less
though the total funds ultimately to
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. This procedure provides for solicitation of prices based either on award of the current 1-year program quantity only, or, in the alternative, on the total multi-year quantities. Award is made on whichever of these two alternative bases reflects the lowest unit prices to the Government. If award is made on the multi-year basis, funds are obligated only for the first year's quantity, with succeeding years' contract quantities funded annually thereafter. In the event funds are not made available to support one or more succeeding year's quantities, cancellation is effected. The contractor is protected against loss resulting from cancellation by contract provisions allowing reimbursement of unrecovered nonrecurring costs included in prices for canceled items.
(a) Nonrecurring costs are distributed over a larger number of units, thus narrowing any price advantage of a firm already in production;
(b) There is greater assurance of depreciation recovery for capital investment; and
(c) The competitive base is broadened with better prospects for lower prices, where firms otherwise might be unwilling or unable to compete.
8 12-1.5502 Policy.
$ 12–1.5502-1 Principal advantages.
Multi-year procurement shall be used to the maximum extent consistent with $$ 12-1.5502-4, 12-1.5503, and 12-1.5511. Advantages of this method include, for example:
(a) Lower costs; (b) Enhancement of standardization;
(c) Reduction of administrative burden in the placement and administration of contracts;
(d) Substantial continuity of production;
(e) Stabilization of work forces; and
(f) Broadening the competitive base with opportunity for participation by firms not otherwise willing or able to compete for lesser quantities, particularly in cases involving high startup costs.
8 12-1.5502-3 Cost savings factors to con
sider. Another major objective is to obtain lower prices in those procurements which do not necessarily involve high startup cost but which do provide opportunity for substantial cost savings and other advantages through assurance of continuity of production over longer periods of time. In determining whether substantial cost savings and related advantages can be realized, consideration may be given to whether:
(a) Production or performance closeout or shut-down costs, including employee severance pay, represent a substantial cost contingency in prices quoted on only 1 year's program;
(b) Stabilization of work forces will provide greater assurance of sustaining and improving production efficiency and quality;
(c) Substantial cost and quality advantage will accrue through avoidance of the possible need for establishing and “proving out” quality control techniques and procedures for a new contract each year;
(d) Costly preproduction or pilot testing will be avoided;
(e) The ability to recruit and retain highly skilled personnel will be enhanced through assurance to employees of longer periods of employment than would be the case in single-year procurement, thereby avoiding costs of repeated training of new personnel;
(f) The ability to vary production rates during peak and off-peak periods in each program year will result in economies; and
(g) Substantial in-house savings in maintenance and supply operations will accrue from standardization of supplies accomplished by procurement
8 12–1.5502-2 Principal objective.
The principal objective of the multiyear procedure is to generate realistic competition by minimizing competitive disadvantage and by increasing contractor interest in participating in procurements which involve high startup costs and make-ready expense and which also may require substantial capital investment by contractors for expansion of their facilities. Under this procedure:
from a single source throughout the multi-year period.
§ 12-1.5502-4 Set-asides.
Total small business set-asides are compatible with the multi-year method of procurement and may be used when both procedures are appropriate. Partial set-aside procedures (both small business and labor surplus area) generally are not compatible with the multi-year procedure when high startup costs are involved because of the potential duplication of such costs by the set-aside contractor and the non-set-aside contractor. However, when the multi-year procedure is based not on high startup costs but on the opportunity for cost savings through assurance of continuity of production over longer periods of time, partial set-aside procedures are compatible with the multi-year procedure. Furthermore, even where high startup costs are involved, use of partial setaside procedures together with the multi-year procedure may be appropriate in exceptional circumstances, such as where criteria for partial set-asides are met under FPR 1-1.7 or 1-1.8, and it is likely that broader or more realistic competition will result from a combination of both procedures, and this broader competition is likely to more than offset any duplication of startup costs. When reviewing a proposed procurement involving possible use of this procedure, in addition to consideration of the criteria established in this subpart, the contracting officer shall invite the advice and counsel of the activity's small business specialist and the SBA representative, if one is assigned to that activity, permitting either or both to review all pertinent facts and make recommendations thereon.
employ multi-year subcontracts selectively and only when:
(a) The subcontract item is of stable design and specification;
(b) The quantity required is known and firm;
(c) Effective competition is assured; and
(d) The use of multi-year subcontracts can reasonably be expected to result in reduced prices. In such cases, the prime contractor is adequately protected against cancellation since appropriate cancellation charges for such multi-year subcontractors are included within the cancellation charge of the multi-year prime contract. Multi-year subcontracts may be particularly desirable under a sole source multi-year prime contract since effective competition at the subcontract level may thereby be enhanced and the attendant cost reductions realized by the prime contractor and the Government.
§ 12–1.5503 Application-criteria.
Except as provided in DOTPR 121.5511 below, the multi-year procurement method should be used when all of the following criteria are present:
(a) Reduced unit prices can reasonably be anticipated over annual buys by reason of continuity of production or elimination of repetitive substantial startup costs, including such costs as preproduction engineering, special tooling, plant rearrangement, initial rework, initial spoilage, and pilot runs;
(b) There is reasonable expectation that effective competition can be obtained;
(c) There are known requirements for the quantities to be purchased under the multi-year contract;
(d) The design and specifications of the item are not expected to change to an extent that would involve a major impact on contract price; and
(e) The items being procured are not regularly manufactured and offered for sale in substantial quantities in the commercial market, except that (1) when quantities to be procured by the Government represent a substantial portion of the total market and would require special manufacturing runs for all or substantially all of the Govern
8 12-1.5502–5 Multi-year subcontracts.
The same benefits and advantages that are derived from multi-year prime contracts may frequently be increased by multi-year subcontracts thereunder. The prime contractor in the exercise of his management responsibilities must freely choose the subcontract types that best satisfy his needs. However, multi-year prime contractors should be encouraged to
ment's requirements and (2) significant cost savings would result from multi-year procurement, this procedure may be authorized by the head of the procuring activity or his designee with the procurement file fully documented as to reasons why the expected substantial savings are not obtainable under annual procurements.
& 12-1.5504 Method of solicitation.
Formal advertising, including twostep formal advertising, is the preferred method for use in multi-year procurement. In cases where the period of production is such that a contingency for labor and material costs is likely otherwise to be included in the multi-year contract price, the contracting officer should normally use a provision for price escalation.
$ 12-1.5505 Procedures.
Solicitations shall include the information described in $ $ 12-1.5505-1 through 12-1.5505-9, as appropriate.
§ 12-1.5505-3 No previous competition.
When there has been no previous competition for the production of the item:
(a) Include provisions that a price must be submitted for the total requirements of the first program year, that a price may be submitted for the total multi-year quantity, and that a bid or offer on the multi-year quantity only will be considered nonresponsive; and a provision that if only one responsive bid or offer on the multi-year requirements is received from a responsible bidder or offeror, the Government reserves the right to disregard the bid or offer on the multi-year quantity and to make an award only for the first program year requirements; or
(b) When competition in future procurements of the items would be impractical after award of a contract covering the first program year quantity alone and the head of the procuring activity determines that, in order to eliminate the possibility of a first program year "buy-in,” these provisions will be in the best interest of the Government:
(1) Include provisions that a price may be submitted only for the total multi-year quantity and that prices on a single-year basis will not be considered for any purpose, and
(2) A provision that if only one responsive bid or offer on the multi-year requirements is received rom a responsible bidder or offeror, the Government reserves the right to cancel the solicitation and resolicit on single-year basis by whatever procedures are then appropriate.
§ 12-1.5505-1 Requirements.
State the requirements, separately identified by a bid or proposal item in the schedule, for (a) the first program year; and (b) the multi-year procurement including the quantities for each program year thereunder.
8 12-1.5505-2 Previous competition.
When previous production procurements of the item have been made with competition:
(a) Include a provision that a price may be submitted for the total requirements of the first program year, or for the total multi-year requirements, or both, or
(b) When competition in future procurements of the items would be impracticable after award of a contract covering the first program year quantity alone and the head of the procuring activity determines that, in order to eliminate the possibility of a first program year "buy-in,” these provisions will be in the best interests of the Government–include provisions that a price may be submitted only for the total multi-year quantity and that prices on a single-year basis will not be considered for any purpose.
8 12-1.5505-4 Pricing-unit price.
Include a provision that the unit price of each item in the multi-year requirement shall be the same for all program years included therein.
8 12-1.5505-5 Comparison criteria.
Provide criteria for comparing the lowest evaluated submission on the first
program year's requirement against the lowest evaluated submission on the multi-year requirements.