Conform Civilian Requirements to Defense Agencies

Conform Certain Statutory Requirements for Civilian Agencies to Those of
Defense Agencies

Background

Three statutory requirements formerly applied governmentwide have been
repealed or amended only for defenserelated agencies. They are:

-- The requirement to obtain commercial pricing certificates when other
than full and open competition is used.  The law requires that offerors
certify that prices offered for parts or components are not more than
their lowest commercial prices, or submit a written statement specifying
the amount of the difference between their lowest commercial price for
the parts of components and the prices offered.1

-- The limitation on accepting an initial offer and awarding a contract
to other than the offeror submitting the lowest priced offer.2

-- The requirement to obtain certified cost or pricing data before
awarding a negotiated contract that exceeds $100,000.

In addition, DOD has been given authority to enter into cooperative
agreements to conduct advanced research projects, primarily through the
Advanced Research Projects Agency, but civilian agencies have not been
given similar authority.  Procurement contracts are often not well
suited for research and development projects because they involve
support, stimulation, and cooperation. Cooperative agreements provide
the flexibility and innovation required. In research and development,
government funding is often more like an investment.

Need for Change

The DOD Inspector General found that the commercial pricing certificate
was not costeffective because the government was paying the lowest
commercial price for items of supply procured even when the certificate
was not obtained. Its continued use imposed a burden on the procurement
process without a beneficial return. As a result, Congress repealed the
requirement.3 This should be logically extended governmentwide.

DOD may make contract awards to other than the lowest priced acceptable
offeror based on an initial offer without discussions.  When an offeror
who is not the low offeror clearly provides the best technical proposal
at a reasonable price, it may be in the government's best interest to
award to that offeror without discussions. Award without discussions is
appropriate in this circumstance when neither technical nor price
improvements are expected to result from a round of discussions with
offerors and when a superior proposal will not be significantly
improved. This avoids unnecessary administrative costs for the offerors
and the government.

The threshold for obtaining cost and pricing data was increased to
$500,000 for DOD, NASA, and the Coast Guard, but kept at $100,000 for
civilian agencies. The current statute provides that the $500,000
threshold will be reduced to $100,000 for contracts or subcontracts
awarded, or modifications made, after December 31, 1995. In addition,
defense agencies have statutory authority to levy penalties on
contractors who knowingly submit defective pricing, whereas civilian
agencies may not take such punitive action.4

The $100,000 threshold for submission of certified cost or pricing data,
which was established in 1962, equates to $520,000 in 1992 dollars when
adjusted for inflation. Raising the threshold for civilian agencies and
maintaining the $500,000 for defense agencies will significantly reduce
the paperwork burden on the government and contractors and will make the
threshold consistent with the threshold for the Cost Accounting
Standards, which was raised to $500,000 in 1988.

The Acquisition Law Advisory Panel to the United States Congress on
Streamlining Defense Acquisition Law (Section 800 Panel) recommended
that the $500,000 threshold be maintained for DOD. In making its
recommendation, the panel stressed that the $500,000 threshold takes
into account inflation, since the threshold was originally established
in 1962.5

Civilian agencies that conduct advanced research projects have a need
for the same flexibility as DOD.6 The additional flexibility will
provide for more supportive and innovative arrangements for research.

In order to maintain a common governmentwide approach to the acquisition
of property and services, statutory changes must be made to ensure
consistency in the requirements for civilian and defense agencies. The
current inconsistency in the statutory requirements causes inconsistent
governmentwide application.7

f Defense.

Endnotes

1. 41 U.S.C. 253e.

2. 40 U.S.C. 253b.

3. National Defense Authorization Act, Fiscal Year 1990.

4. Truth in Negotiations Act (10 U.S.C. 2306a).

5. Acquisition Law Advisory Panel to the United States Congress,
Streamlining Defense Acquisition Law, Executive Summary (January 1993),
p. 42.

6. 10 U.S.C. 2371.

7. Truth in Negotiations Act, 1962.