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Principles of Federal R&D Contracting

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  1. Principles of FederalR&D Contracting June 14, 2005 1

  2. General Principles ofContracting 2

  3. An overview from 30,000 feet • What is a contract? • An Agreement between two or more persons or entities which creates a legal obligation to do or not to do a particular thing • Statute of Frauds 3

  4. An overview continued… • Essentials of a contract • Competent parties • Subject matter • Legal consideration-a peppercorn? • Mutuality of agreement--meeting of the minds • Mutuality of obligation--both parties are bound 4

  5. An overview continued… • The Federal Grant and Co-operative Agreement Act • A copy of the statute is included in the supplemental materials • Defines the primary determinants for the various types of agreement. • Makes selection of the type of agreement uniform among federal agencies 5

  6. An overview continued… • The Federal Grant and Co-operative Agreement Act continued • A procurement Contract is to be used when the purpose is to acquire property or service for the direct benefit or use of the government. 6

  7. An overview continued… • The Federal Grant and Co-operative Agreement Act continued • A grant is used when the purpose is to support or stimulate the carrying out of a public purpose and is not to acquire property or service for the direct benefit or use of the government 7

  8. An overview continued… • So is there a difference between a contract and a grant? • Both are legally contracts—you could actually call the document a wambat or any other title and if it met the definition of a contract, it’s a contract 8

  9. An overview continued… • However, within the federal scheme a contract is very different from a grant • More difficult to administer • Less flexible • More defined rules • The University becomes a seller of a product. 9

  10. An overview continued… • Is it appropriate for a university to become a seller of a product? • It depends….Is it consistent with the University’s mission and structure? 10

  11. An overview continued… • The Board of Regents adopted a mission for the University of Wisconsin which includes: “The mission of the [University] is … to discover and disseminate knowledge, to extend knowledge and its application beyond the boundaries of its campuses. Basic to every purpose of the System is the search for truth.” 11

  12. An overview continued… • Stated more simply, the mission of a university is to create and transmit knowledge 12

  13. An overview continued… • Structure of a university • It’s been described as a diverse group of individuals united only by a common complaint over central heating and parking. 13

  14. An overview continued… • Structure of a university continued • A kinder and more accurate description is that a university is an “association of individual scholars and supporting staff who are dedicated to the creation, integration, transfer and application of knowledge.” 14

  15. An overview continued… • Some contracts—those which involve basic research to allow the development of the product that is the subject of the agreement may be consistent with the mission 15

  16. An overview continued… • Is a contract which simply produces a product for the government consistent with the university mission? • Is a contract which prohibits publication of the results consistent? 16

  17. An overview continued… • Is a contract which requires a very specific product, produced on-time and on-spec consistent with the structure of the University? 17

  18. An overview continued… • Tax consequences of activity outside the mission • Unrelated business income • Tax exempt facilities • Loss of non-profit status 18

  19. Buying & Selling 19

  20. Definition Buyer: the purchaser of goods or services Seller: the provider of goods or services 20

  21. Shifting Roles Government Prime Contractor Subcontractor Second Tier Sub Second Tier Sub 21

  22. Partnership • The contract establishes a partnership • a relationship between the Buyer and the Seller(s) in which each has specific rights and responsibilities. 22

  23. Buyer Rights/Responsibilities • To represent the interests of its stakeholders • To prepare the Scope of Work • To issue the contract • To monitor the progress of the work • To accept or reject the goods or services 23

  24. Seller Rights/Responsibilities • To represent the interests of its stakeholders • To prepare a proposal within the SOW • To negotiate the contract • To implement the project according to the contract • To provide the promised goods or services 24

  25. The Simplified Process • Request • Offer • Acceptance • Performance • Exchange 25

  26. Contract Types 26

  27. Types of Contracts (FAR part 16) • Fixed-Price (16.2) • Cost-Reimbursement (16.3) • Indefinite Delivery Order (16.5) Competition is good, more is better 27

  28. Sealed Bidding (FAR part 14) • Only fixed price • Very specific and defined item • Based on price, not negotiation 28

  29. Commercial Items (FAR part 12) • Streamlined Procedures • Warranties • Off the shelf and easy to procure • Purchase order 29

  30. Contracting by Negotiation (FAR part 15) • Lowest price, best value • Objective criteria • Source selection • Negotiation expected but not required 30

  31. Other than Full & Open Competition (FAR PART 6.3) • Sole Source • One (or few) responsible sources • Unusual circumstances • Research Capability • International Agreement • Statue • National Security • Public Interest ** All Need to be justified ** 31

  32. Procurement Mechanisms (FAR Part 13.3) • Purchase Order • Credit Card • Unpriced Purchase order • Blanket Purchase order • Contracts (FAR 34-39) 32

  33. Types of Acquisitions • Major Systems (FAR 34) • Research and Development (FAR 35) • Architecture and Engineering (FAR 36) • Services (FAR 37) • Information Technology (FAR 39) 33

  34. Contract Fundamentals:What an AdministratorMay See…. 34

  35. Basic Ordering Agreements • Discussed at FAR 16.703 • Not a contract - no fiscal commitment • Terms and clauses applying to future orders between the parties during the term of the BOA 35

  36. Ordering Agreements Cont. Terms and Causes (continued): • A description of supplies or services to be provided; • Methods for pricing, issuing and delivering future orders under BOA 36

  37. Time & Materials/Labor Hour • Discussed at FAR 16.6 • Reimbursement of hours worked, not costs incurred • Fixed hourly rate that incorporates salary, fringe benefits, F&A, and fee • Rates invoiced must match proposed rates • CAS Disclosure Issues 37

  38. Other Transaction Agreement • DoD Authority: 10 US Code 2371 • Often used with consortia • Payments usually based upon achieving milestones • Neither assistance nor procurement • All terms negotiated for each OTA – Bayh-Dole does NOT apply 38

  39. Teaming Agreement • Often used for collaborations with industry: • Preparation of a collaborative proposal • Establishing a consortium under an OTA 39

  40. Teaming Agreement continued • Addresses common issues: • Membership in the collaboration • Intellectual Property sharing • Proprietary Information • Reporting • Payment 40

  41. Non-Disclosure Agreement • Addresses the confidentiality of information shared between parties • Potential Problems: • Often signed directly by PI, without knowledge of the institution • Excessive time requirements 41

  42. Material Transfer Agreement • Governs the transfer of biological or other materials between parties. • Usually addresses confidentiality and intellectual property rights • May also include payment for the cost of providing the material 42

  43. Memorandum of Understanding • Establishing an “understanding” between parties • Often used to establish the terms of an informal collaboration • May be legally binding, even if that is not the intent… 43

  44. Making the Decision to Compete 44

  45. Competitive Cycle • Solicitation • Pre-Bid Conference • Proposal • Transmittal • Proposal Review • Verification/Discussion/Negotiation • Best and Final Offer • Offer/Acceptance 45

  46. Competitive Cycle continued • Bridging • Modifications • Closeout or contract extension 46

  47. Pre-Proposal Activity • Identify your customers • Prepare a market assessment • Evaluate strengths and weaknesses • Review the RFP • Assess your past performance/current resources 47

  48. Pre-Proposal continued • Weigh the risks and opportunities. • Attend the pre-bid conference. Make the bid/no bid decision. 48

  49. Selection • Technical Expertise • Price • Management Plan • Implementation Schedule • Past Performance • Reputation 49

  50. The Typical Proposal 50