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Cover March 2014
PROFESSIONAL
SERVICES
AGREEMENT
(PSA)
MANUAL
NOTICE TO USERS:
Before using this Manual for any procurement, check with your Contracts Officer (CO). This
Manual is routinely updated and any copy you retain may not be current. DOT&PF Contracts
Officers are:
Vanda Randolph, DOT&PF Southeast Region CO, Juneau .......................... 465-4489
Barbara Tanner, P.E., DOT&PF Northern Region CO, Fairbanks ................. 451-3057
Emily Nelson, DOT&PF Central Region CO, Anchorage ............................... 269-0403
Comments or proposed modifications relating to the content of this manual shall be made in
writing to the Chief Contracts Officer, Commissioner's Office, DOT&PF (MS 2500)
PSA Manual Table of Contents
Contents Page 1 of 1 March 2014
TABLE OF CONTENTS
Subject Current Date
Introduction ..................................................................................................................................... March 2014
Chapter 1 Small Procurements ($10,000 or less) .............................................................. March 2014
Chapter 2 Small Procurements ($200,000 or less) ............................................................ March 2014
*NOTE: FAA & FTA Small Procurement Limit is $100,000; FHWA Small Procurement Limit is $150,000
Chapter 3 Competitive Sealed Proposals ........................................................................... March 2014
Chapter 4 Emergency Procurements ................................................................................. March 2014
Chapter 5 Single Source and Limited Competition Procurements ..................................... March 2014
Chapter 6 Term Agreements .............................................................................................. March 2014
Chapter 7 Statement of Services and Price Estimate (Activity #1) ................................. March 2014
Chapter 8 Technical and Cost or Price Analysis (Activity #7) .......................................... March 2014
8.1 Technical Analysis ............................................................................................. March 2014
8.2 Cost Standards .................................................................................................. March 2014
8.3 Price ................................................................................................................... March 2014
8.4 Accounting Terminology ................................................................................... March 2014
8.5 Cost or Price Analysis ........................................................................................ March 2014
8.6 Labor (Direct or Indirect) ................................................................................... March 2014
8.7 Direct Cost of Direct Labor (DCDL) ................................................................. March 2014
8.8 Indirect Costs (IDC) - Fringe (Payroll) Benefits & Overhead ............................. March 2014
8.9 Other Direct Costs (ODC) - Subcontracts & Expenses ..................................... March 2014
8.10 Fee (Profit) ......................................................................................................... March 2014
8.11 Methods of Payment (Contract Types) .............................................................. March 2014
8.12 Comparison of Methods of Payment ................................................................. March 2014
Chapter 9 Negotiations (Activity #8) .................................................................................. March 2014
Chapter 10 Protests and Appeals (Activity #10) ................................................................... March 2014
Chapter 11 Record of Negotiation and Selection (RONS) (Activity #11) ............................. March 2014
Chapter 12 Professional Service Agreement (PSA) (Activity #12) ...................................... March 2014
Chapter 13 Contract Records (Activity #13) ......................................................................... March 2014
Chapter 14 Encumbrances (Activity #14) ............................................................................. March 2014
Chapter 15 Contract Management (Activity #15) ................................................................. March 2014
Chapter 16 Amendments (Activity #16) ................................................................................ March 2014
Chapter 17 Contract Close-Out (Activity #17) ...................................................................... March 2014
Chapter 18 Alphabetical List of Files .................................................................................... March 2014
EXHIBITS
Exhibit 6-1 Employee or Contractor? ................................................................................... March 2014
Exhibit 7-1 Estimating Consultant's Billing Rates ................................................................ March 2014
Exhibit 7-2 Sample - Presolicitation Price Estimate ............................................................. March 2014
Exhibit 8-1 Sample - Price Proposal .................................................................................... March 2014
Exhibit 8-2 Calculation of Overtime Rates ........................................................................... March 2014
Exhibit 8-3 Sample - Fee Objective Worksheet ................................................................... March 2014
Exhibit 8-4 Methods of Payment Comparison ..................................................................... March 2014
Exhibit 9-1 Sample - Negotiation Objectives ....................................................................... March 2014
Exhibit 10-1 Chart of Protest/Appeal Activities ...................................................................... March 2014
Exhibit 15-1 Sample - Monthly Progress Report .................................................................. March 2014
APPENDICES
Appendix A Waiver Request For Procurement .................................................................... March 2014
Appendix B Index and Partial Collection of Regulatory Documents ..................................... March 2014
PSA Manual Introduction
intro Page 1 of 2 March 2014
INTRODUCTION
PURPOSE
This manual provides procurement instructions for
"construction related" Professional Services
Agreements (PSA)s defined by AS 36.30.990 as
follows:
* "construction" means the process of building,
altering, repairing, maintaining, improving, or
demolishing a public highway, structure, building,
or other public improvement of any kind to real
property other than privately owned real property
leased for the use of agencies; it includes services
and professional services relating to planning and
design required for the construction; it does not
include the routine operation of a public
improvement to real property nor does it include
the construction of public housing.
* "professional services" means professional,
technical, or consultant's services that are
predominantly intellectual in character, result in the
production of a report or the completion of a task,
and include analysis, evaluation, prediction,
planning, or recommendation.
This manual augments Department of Transportation
and Public Facilities (DOT&PF) policy and procedure
for "construction related" Professional Services
Agreements.Personnel in DOT&PF and other
departments and/or agencies holding a Delegation of
(Construction) Authority granted by the Commissioner
of DOT&PF shall utilize this manual in the procurement
of "construction related" professional services. It may
also be of use to other State and local agencies.
Note: The process for procuring professional
services that are not "construction related" is
governed by Sections 81 and 82 of the State
Administrative Manual as published by the Division
of General Services and Supply, Department of
Administration.
COMPULSORY
VERSUS SUGGESTED PROCEDURES
Of primary concern is that professional services are
obtained in the fairest, most expedient manner possible
without violating law or regulation. Accordingly, the
typeface in this manual is used to define compulsory
versus suggested procedures as follows:
* All text in "boldface" is based on State
and/or Federal law or regulation and therefore it
shall be followed as written without any deviation.
* All text in "italics" is DOT&PF policy and it shall be
followed exactly as written - except as may be
otherwise and specifically approved by the Chief
Contracts Officer.
* Text in "regular typeface" is provided as guidance
and should be followed unless a reasonable and
appropriate option is chosen, documented and
approved by a Contracting Officer.
CHANGES AND COMMENTS
This manual is subject to frequent updating. If you are
not routinely (at least monthly) involved with
Professional Services procurement, contact your
Professional Service Coordinator (PSC) before using a
personal copy and confirm that your copy includes any
changes. If your PSC is unavailable, contact one of the
other individuals named on the cover page of this
manual.
This manual provides a concise source of information
for an often cumbersome task, especially for the
inexperienced. Your comments and suggestions will be
appreciated. Any proposed modifications shall be
submitted for approval to the DOT&PF Chief Contracts
Officer through your Region’s Contracts Officer -
following review by a DOT&PF Professional Services
Coordinator. Changes shall be made in accordance
with DPDR 10.02.010, "Procedures for Solicitation and
Administration of Construction Related Professional
Services Agreements".
HOW TO USE THIS MANUAL
All methods for obtaining professional services are
described within Chapters 1 through 6. Subsequent
chapters provide detailed information for particular
activities.
Request for Proposals & Professional Services
Agreements (RFP&PSA) files are referenced
throughout the manual and they are listed
alphabetically in Chapter 18. The file name extension
indicates which software is used. Some offices may
install the RFP&PSA Files on network drives.
The RFP & PSA files are not static. They often are
changed. Always check the date contained in the footer
of the current file in the manual before using a copy of
the file that you made at a prior time. Use the version
with the most current date. Note that the forms
contained in the RFP&PSA Files are subject to
DOT&PF forms control policies and they shall not be
modified (other than for required entries) except as may
be approved in writing by the Chief Contracts Officer.
Some files contain instructions. You are encouraged to
read the files: "aa-intro" and "instruct" before you
attempt to use the RFP&PSA files. The "instruct" file
contains group listings of the files according to major
procurement activities (e.g., "Pre-Solicitation Activities")
with a brief description of each. The other instructional
files can be identified by "ins" at the beginning of the file
name.
PSA Manual Introduction
intro Page 2 of 2 March 2014
PROCUREMENT OPTIONS
The seven procurement processes that are used for
obtaining Professional services are briefly described as
follows:
1. Small Procurement ($10,000 or less): Minimum
requirements include obtaining an adequate
number of oral responses; generally, no written
solicitation or standard Agreement is required.
However, there must be some written authorization
from the Contracting Officer and a letter,
acknowledged in writing by both parties, which
describes the services, period of performance and
compensation is recommended.
2. Small Procurement ($200,000 or less for State
funded, $150,000 or less for FHWA funded, and
$100,000 or less for FAA or FTA funded): Minimum
requirement is to advertise on the DOT&PF Internet
RFP Home Page. Requires use of the DOT&PF
RFP&PSA Small Procurement files: "spdocs-a" (RFP),
"spdocs-b" (Proposal Form), "sp-adend" (Addendum),
and "spdocs-c" (Contract Award & NTP), and a
standard evaluation and selection process.
3. Competitive Sealed Proposals (no dollar limit):
Requires posting on the State of Alaska’s Online
Public Notice website and the DOT&PF (or
respective Agency’s) Procurement website, written
RFP), committee evaluation of proposals, and
standard written Agreement.
4. Emergency (no dollar limit): Generally requires
prior approval from the Commissioner of DOT&PF
on (waiver), competition that is "practicable" under
the circumstances, a scope that is focused on
resolving the emergency conditions, and
procurement reporting. In the case of a true
emergency, any agency official at the site of an
emergency may make a written determination of a
construction related emergency and proceed with
the necessary procurement, if the conditions
outlined in Chapter Four exist.
5. Limited Competition ($100,000 limit for
construction): Requires prior approval on (waiver),
competition that is "practicable", and a written
Agreement. Shall not be used for architecture,
engineering or land surveying which must be
performed by registered professionals.
6. Single Source (no dollar limit): Requires prior
approval (waiver) and procurement reporting. Shall
be used when only one Contractor exists or is
suitable or acceptable to provide the required
services.
7. Notice to Proceed (NTP) under an existing Term
Contract: (see Chapter Six for specific requirements
and allowable uses).
CAUTION
SERVICES WITHOUT AN AGREEMENT
(References: AS 36.30.930, Article 12 of the Labor
Agreement for the Supervisory Unit, and Article 36 of
the Labor Agreement for the General Government
Unit.)
The State of Alaska, or any agency thereof, is not
bound by an Agreement until it is fully executed.
Any employee that authorizes a Contractor to
perform services without an executed Agreement
for such services could be held pecuniary liable.
Approval for compensation could be withheld or
may not be possible to give. The Contractor's legal
recourse could be against the employee. On
Federal-Aid projects, payment for such services
would be non-participating.
Amendments to an Agreement must be made prior to
executing a Release from Agreement or before the end
date for the period of performance expressed in the
Agreement or any ensuing Amendments, which ever
occurs first. Services performed beyond the end date of
an Agreement, or not within the Agreement scope,
constitute services without an Agreement.
Employees are reminded that the State of Alaska
has no obligation or liability to defend in court an
employee who has engaged in conduct beyond
his/her scope of authority or which constitutes
willful misconduct or gross negligence in
performance of duties.
PSA Manual Chapter 1 - Small Procurement < $ 10k
chap-01 Page 1 of 2 March 2014
Chapter 1
SMALL PROCUREMENTS ($10,000 OR LESS)
Prior to using this procurement process, read the Introduction to this Manual.
1 DEFINE SERVICES, SCHEDULE AND
ESTIMATED PRICE
Develop a written Statement of Services and a Price
Estimate for the proposed contract (see Chapter 7 for
guidance). These are the most significant tasks to be
accomplished in the procurement process. The Price
Estimate must be prepared without input from any
Contractor which may be later considered for the
contract and prior to obtaining proposals.
* If your price estimate is more than $8,000,
consider using the process in Chapter 2. A low
estimate can result in loss of time, money and effort if
a contract can't be awarded because the negotiated
price exceeds $10,000 or if the price cannot be later
increased above $10,000 for a necessary and
warranted change in services or effort.
2 AUTHORITY AND FUNDING SOURCE
Orally confirm your authority to solicit proposals.
Identify the funding source. Is funding provided
through State appropriations to your Agency,
Reimbursable Services Agreement (RSA) from
another agency, or by Federal participation (FHWA,
FAA, other Federal Agency)? Become familiar with
funding sources, amount(s) and applicable constraints.
Identify AKSAS Collocation and Ledger Codes and if a
CIP Project, AKSAS Project Number.
Ascertain if there are any requirements for
coordination with funding agency(s), e.g., if an RSA,
does the granting agency need to be involved in the
procurement process? If FHWA Planning or
Research (HPR, PL or PR) funding, you must have
FHWA's prior, written approval of services. If an
FAA project, orally check with FAA before
proceeding, as FAA concurrence will be required
after contract negotiations and prior to award.
3 OBTAIN PROPOSALS
Oral solicitation is sufficient. Use adequate and
reasonable procedures. If proposals are easy to
obtain and require only minimal amounts of time and
effort, then three proposals would be reasonable.
However, as the value of the time and effort spent in
obtaining proposals begins to approach (or exceed)
the value of the ensuing contract, then soliciting for
three proposals may become overly zealous (i.e.,
unreasonable) and not warranted. Contracts of a lower
dollar value require less solicitation effort than those
approaching the $10,000 plateau.
When contracting in the amount of $10,000 or less for
additional professional services that expand upon or
modify work products provided by a particular firm or
individual, it may not be practical or reasonable to
require other Contractors to compete with the original
provider.
* Caution: Direct negotiation with an original
provider would be valid only if compelling reasons
exist: e.g., modifications to work products must be
certified by the registered engineer who prepared the
originals, or the cost to familiarize another Contractor
with the original work products might exceed the value
of the changes required. Regardless, multiple Small
Procurement awards in this fashion to the same
Contractor would be in violation of law. (A Single
Source procurement might be appropriate.)
The choice of which Contractors to "solicit" is
unrestricted; however, if there are many qualified
Contractors for the type of services required, do not
always choose the same firms for each solicitation you
may do. You may select from the telephone directory
or whatever source you have available.
Small Procurements generally requires price
(adjusted by applicable "Alaska bidder or product"
preferences) to be a selection factor. But, the
statute covering Competitive Sealed Proposals (AS
36.30.270) exempts Offerors from submitting
competitive price proposals when Architecture,
Engineering and Land Surveying (A/E and LS) must
be performed by a registered professional. Thus,
solicitations for "licensed" A/E or LS services need not
include price as a selection factor. Use your best
judgment. A very specific Statement of Services is
needed for A/E or LS price proposals (not "bids") and if
they are obtained, they are best evaluated by a
registered professional.
* Note: FAA will not participate in contracts
whenever costs (total costs, hourly rates, man-
hour estimates, etc.) are a selection factor -
reference 49 CFR 18.36(t).
Keep a record (handwritten acceptable) of all your
discussions with Contractors to ensure that each
receives the same information and that you obtain
required information from each Contractor.
PSA Manual Chapter 1 - Small Procurement < $ 10k
chap-01 Page 2 of 2 March 2014
4 EVALUATE PROPOSALS
Select the Contractor offering the proposal most
advantageous to the State, not necessarily the lowest
offer.
5 TECHNICAL AND PRICE ANALYSIS
Generally review the selected Contractor's proposal to
ensure it addresses all required services and that the
price is fair and reasonable only for necessary labor
effort and related expenses.
Individuals and firms without current Alaska
licenses for the services they propose (business,
occupational or corporate) will not be used for the
contract (see file: "psa-e").
6 NEGOTIATION
Negotiate final statement of services, price and
method of payment with Contractor.
7 SUMMARY OF SELECTION AND
NEGOTIATION
2 AAC 12.400(a) requires records to facilitate
auditing of Small Procurements. The file: "rons" or
another document that contains similar information
may be used for this record.
8 WRITTEN CONTRACT
Generally, no written solicitation or standard
Agreement is required. However, there must be
some written authorization from the Contracting
Officer and a letter, acknowledged in writing by both
parties, which describes the services, period of
performance and compensation is recommended.
9 ISSUE NOTICE OF AWARD
In writing or by fax or other electronic means, notify
each Offeror of the Contractor to which the Award was
made.
10 PROTESTS AND APPEALS
If there are any protests, see Chapter 10.
11 PROCUREMENT RECORDS
The following documents must be kept in project
files:
* Records to facilitate auditing of the
procurement.
* Contracting Officer's written approval.
* Coded invoice approved for payment.
12 ENCUMBER FUNDS
Funds do not have to be encumbered for agreements
under $5,000; however, you may do so if the small
dollar value of this contract may significantly affect the
project budget. For agreements over $5,000, funds
must be encumbered. (see file: "Encumber" and
Chapter 14).
13 CONTRACT MANAGEMENT
Give Contractor oral or written authorization to
proceed with work.
The Project Manager may negotiate and orally direct
changes in scope, schedule and price without any
written documentation, except for acknowledgment of
changes in price and completion date on the
appropriate invoices - except that no such changes
shall cause the price to exceed the $10,000 Small
Procurement limit for the process described in this
Chapter.
When billing is received, and after work has been
accepted, send coded and approved invoice to
Finance section for payment.
NOTE: Since these invoices will not be submitted on
the usual NTP/Invoice forms used for PSA exceeding
$10,000, the Project Manager may be required by the
servicing finance section to provide the certifying
statement which appears on the NTP/Invoice forms,
before an invoice is paid.
PSA Manual Chapter 2 - Small Procurement < $ 100k, $150k, $200k
chap-02 Page 1 of 3 March 2014
Chapter 2
SMALL PROCUREMENTS (> $10,000 < $200,000*)
*NOTE: FAA & FTA Small Procurement Limit is $100,000; FHWA Small Procurement Limit is $150,000
Prior to using this procurement process, read the Introduction to this Manual.
1 DEFINE SERVICES, SCHEDULE AND
ESTIMATED PRICE
Develop a written Statement of Services and a Price
Estimate for the proposed contract (see Chapter 7 for
guidance). These are the most significant tasks to be
accomplished in the procurement process. The Price
Estimate must be prepared without input from any
Contractor, which may be later considered for the
contract and prior to obtaining proposals.
*If your price estimate is within 20% of the upper dollar
limit for your funding source (see Note above),
consider using the process in Chapter 3. A low
estimate can result in loss of time, money and effort if
a contract can't be awarded because the negotiated
price exceeds your funding source’s Small
Procurement Limit or if the price cannot be later
increased above the Small Procurement limit for a
necessary and warranted change in services or effort.
2 AUTHORITY AND FUNDING SOURCE
Orally confirm your authority to solicit proposals.
Identify the funding source. Is funding provided
through State appropriations to your Agency,
Reimbursable Services Agreement (RSA) from
another agency, or by Federal participation (FHWA,
FAA, other Federal Agency)? Become familiar with
funding sources, amount(s) and applicable constraints.
Identify AKSAS Collocation and Ledger Codes and if a
CIP Project, AKSAS Project Number.
Ascertain if there are any requirements for
coordination with funding agency(s), e.g., if an RSA,
does the granting agency need to be involved in the
procurement process? If FHWA Planning or
Research (HPR, PL or PR) funding, you must have
FHWA's prior, written approval of services. If an
FAA project, orally check with FAA before
proceeding, as FAA concurrence will be required
after contract negotiations and prior to award.
3 OBTAIN PROPOSALS
All Small Procurement Requests for Proposals (RFPs)
will be advertised on the DOT&PF Internet Home
Page.
Access for posting to the DOT&PF RFP Home Page is
restricted to the Departments’ Contracts Officers
(named on the cover of this Manual). They will assign
a unique RFP/PSA Number to your RFP when posting
it. Contact one of them to add your RFP to the listings.
Ask your Contracts Officer for a printout of the RFP
Home Page Introduction -- or for the Internet address
so that you may obtain it yourself. Become familiar
with the introduction and in particular the requirements
for Addenda and Submittals. Examine the contents to
ensure that the RFP Home Page does not conflict with
requirements in this Manual or your particular RFP.
Discuss any problems/questions with your Contracts
Officer.
Public Notice may also be advertised in newspapers of
local circulation where the services may be performed
or be given directly to potential Offerors known to be
qualified for the services required.
For DOT&PF solicitations, newspaper advertisement is
not required and is not used unless the DOT&PF Chief
Contracts Officer has given prior approval.
Generally, the Public Notice should be posted to the
Internet at least five days - but no less than three days
- prior to the date proposals are due. For contracts
approaching the maximum Small Procurement Limit,
more than a five day notice should be considered. The
notice will provide a brief description of the services
required, deadline for proposals, and information as to
how the RFP may be obtained by electronic media, or
in person.
For Small Procurements exceeding $50,000, the
offeror must certify that all services provided by
the Contractor and all subcontractors shall be
performed in the United States. For small
procurements over $50,000, if the Offeror cannot
certify that all work is being performed in the
United States, the Offeror must contact the
Contracts Officer to request a waiver at least 24
hours prior to proposal deadline. (P&P 10.02.060)
If FHWA or FAA funding, at least one certified
Disadvantaged Business Enterprise (DBE) - if a
DBE is reasonably available and certified by
DOT&PF for the required work - must be solicited
for a proposal. The DOT&PF Civil Rights Office
(telephone 269-0851) publishes a directory of Certified
Disadvantaged Business Enterprises which can be
used to identify DBEs. The directory can be found on
the internet at http://www.dot.state.ak.us/.
Small Procurement Request for Proposals (RFPs) may
be obtained by electronic media or in person at the
Contracting Agency's offices. The Contracting Agency
is not obligated to mail or use other "hard copy"
delivery services for Small Procurements.
PSA Manual Chapter 2 - Small Procurement < $ 100k, $150k, $200k
chap-02 Page 2 of 3 March 2014
Use the Small Procurement document files: "spdocs-a"
(RFP), "spdocs-b" (Proposal Form), "sp-adend"
(Addendum), and "spdocs-c" (Contract Award & NTP).
These documents are designed for electronic
transmission and an expedited contract Award.
* The Small Procurement RFP (file: "spdocs-a") has
provisions for an optional evaluation criterion (#5). A
geographic location preference or another criterion of
your choosing might be used.
Price is generally required to be a selection factor
for Small Procurements. But, the statute (AS
36.30.270) for the major procurement process
addressed in Chapter 3 of this Manual -
Competitive Sealed Proposals - exempts
Architects, Engineers and Land Surveyors (A/E
and LS) from submitting price proposals during
selection for services that must be performed by a
registered professional, except under very limited
conditions. (Read about "Price Competition" in
paragraph 9 under NOTICES in Part A of the
Competitive Sealed Proposals RFP Package, file: "rfp-
a"). Consequently, price competition will not be used in
Small Procurement for A/E and LS services without
prior written approval of a Contracts Officer. If price
proposals (not "bids") are obtained during selection for
A/E and LS services, they will be evaluated by a
registered professional.
FWHA and FAA require that all engineering and
design related services directly related to a
construction project be procured using a qualifications
based selection process (Brooks Act). Price may not
be considered as part of the scoring process when
selecting the most qualified firm. (Environmental
services are not covered by the Brooks Act.)
* FAA will not participate in contracts whenever
costs (total costs, hourly rates, man-hour
estimates, etc.) are a selection factor - reference 49
CFR 18.36(t), AC 150/5100-14D and 23 CFR.
Since we are now using the Internet to advertise all
Small Procurement RFPs exceeding $10,000,
maintaining a list of RFP recipients (for Small
Procurements) is not required. All changes to an RFP
will be announced by a consecutively numbered
Addendum for each RFP. Contact the Department's
Contracts Officer to post the Addendum to the Internet.
* Procedures for Addenda and also for Offeror's
Submittals are described in the Introduction to the
Internet RFP Home Page and in the Small
Procurement RFP files. Do not assume any
responsibility for assuring that any Offeror's proposal
will be timely delivered.
4 EVALUATE PROPOSALS
The Evaluator (Contract Manager or other person
conducting the Small Procurement) will read all
proposals received.
For all contracts, the Evaluator will select three of the
Offerors that are among the best qualified to provide
the services required. If less than three Offerors are
selected - clearly not the desired case - the Evaluator
will include a detailed, objective, written explanation in
the Evaluation Report (discussed below).
If the Evaluator is not generally familiar with an
Offerors' or a proposed Subcontractors' prior work
experience and performance, the Evaluator will
informally investigate experience and credentials,
performance for similar projects, available written
evaluations, and may contact persons knowledgeable
of an Offeror's or a Subcontractor's responsibility.
Factors such as overall experience relative to the
proposed contract, quality of work, control of cost, and
ability to meet schedules may be addressed.
An Evaluation Report (memorandum addressed to the
Contracts Officer) must be prepared by the Evaluator
for all Small Procurements that may exceed $10,000.
The report will summarize evaluation activities and
shall identify the 3 Offerors from which the selection
would be made, any of which would be suitable for
performance of the contract. The Evaluation Report
shall include factual information, both positive and
negative, gleaned from all proposals received for use
by the Contracting Officer as a summary of the
proposals. In unusual situations where three Offerors
are not recommended, the Evaluation Report will
provide an explanation.
The Contracts Officer will review the proposals and
Evaluation Report. If any discrepancies are identified,
they will be appropriately addressed with any action
taken documented with a written explanation for the
procurement file.
The Contracts Officer will provide the names of the
three qualified Offerors and copies of their proposals -
including the Evaluation Report - to the Contracting
Officer who will select one Offeror for contract
negotiation. The Contracting Officer will use discretion
in selecting the Offeror most advantageous to the
Purchasing Agency and in the best interests of the
state. Additional information which the Contracts
Officer deems necessary to make a decision, will be
obtained only through the Contracting Officer.
5 TECHNICAL AND PRICE ANALYSIS
Obtain a price proposal from the selected Contractor if
price was not a selection factor. Perform a technical
and cost or price analysis (see Chapter 8) of the
proposal and then develop negotiation objectives.
Insurance requirements may be waived as
appropriate, if the conditions described in page 2, of
the file: "psa-d" are applicable.
PSA Manual Chapter 2 - Small Procurement < $ 100k, $150k, $200k
chap-02 Page 3 of 3 March 2014
6 NEGOTIATION
Negotiate final statement of services, price and
method of payment with Contractor (see Chapter 9).
The file: “rons” or another document that contains
similar information may be used for this record.
7 SUMMARY OF SELECTION AND
NEGOTIATION
2 AAC 12.400(d) requires a summary of the
responses (proposals received) and a justification
for the award signed by the Contracting Officer.
8 WRITTEN CONTRACT
Use the file "spdocs-c," and complete it as indicated.
Transmit a complete set of contract records per the
file: "clst-sp," to your Professional Services
Coordinator. Keep a copy of all materials for your
project files (see Chapter 13).
* Your Contracts Officer will at this time review the
contract records and, if there are no deficiencies,
obtain the Contracting Officer's signature on the
Contract Award (and a copy of the RONS, if used).
Any deficiencies will be discussed with the Contract
Manager and resolved prior to forwarding for
signature. The Contracts Officer will then obtain the
Contractor's acknowledgment and signature (usually
by fax) on a copy of the Contract Award.
The Contracting Officer will provide a copy of the final
Contract Award with all signatures to the Agency's
Contract Manager for project files and keep all the
other documents for the "official" procurement records
required by statute and regulations.
9 ISSUE NOTICE OF AWARD
As soon as possible after Contracting Officer signs
spdocs-c, request that your Contracts Officer notify
each Offeror which firm has been awarded the
Contract. Notice of Award may be issued in writing or
by fax or other electronic means.
10 PROTESTS AND APPEALS
If there are any protests, see Chapter 10.
11 PROCUREMENT RECORDS
Assemble copies of the following items as
required by 2 AAC 12.400(d):
* Public Notice (e.g., screen print of Internet
posting)
* Copies of all responses (proposals received).
* RONS
or
* a written summary of all proposals.
* a written justification for the award.
* A list of RFP recipients is NOT required since we
use the Internet for Public Notice and distribution
of Small Procurement RFPs.
12 ENCUMBER FUNDS
Funds for the contract must be encumbered (see file:
"encumber" and Chapter 14).
13 CONTRACT MANAGEMENT
Provide a signed copy of the PSA to the Contractor
and manage the contract (Chapter 15).
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Chapter 3
COMPETITIVE SEALED PROPOSALS
Prior to using this procurement process, read the Introduction to this Manual.
The "one step" solicitation/proposal process described in this chapter is generally used for obtaining Professional
Services over the Small Procurement Limit for your funding source. You may consider using the "Multi-step Sealed
Proposals" process described in AS 36.30.265 to first obtain various conceptual or technical offers; or, if you plan a
Design-Build project, obtain prior approval from the Chief Contracts Officer in accordance with Policy & Procedure
10.02.020 dated 9/1/06. "Multi-step" procurements generally follow the procedures in this Chapter; however they must
be carefully crafted and specifically prepared for each contract.
THE RFP&PSA FILE: "ACT-CLST" IS A TWO-PAGE CHECKLIST FOR THIS CHAPTER. YOU
MAY WANT TO PRINT AND USE A COPY OF THE FILE FOR EACH PROCUREMENT.
1 DEFINE SERVICES, SCHEDULE AND
ESTIMATED PRICE (see Chapter 7)
Develop a written Statement of Services and a
Price Estimate for the proposed contract (see
Chapter 7 and the files: "ins-sos" and "ins-est" for
guidance). These are the most significant tasks to be
accomplished in the procurement process. The Price
Estimate must be prepared without input from any
Contractor which may be later considered for the
contract and prior to obtaining proposals.
2 AUTHORITY AND FUNDING SOURCE
Investigate your need for the services and
authority to solicit proposals for a Professional
Services Agreement. Determine the following and
complete an “Authority to Seek Professional Services”
form:
* Are qualified personnel available within your
agency? If not, can another agency complete the
work? If so, a Reimbursable Service Agreement (RSA)
may be the "contract" process.
* Identify the funding source. Is funding provided
through State appropriations to your Agency,
Reimbursable Services Agreement (RSA) from
another agency, or by Federal participation (FHWA,
FAA, other Federal Agency)? Become familiar with
funding sources, amount(s) and applicable constraints.
Identify AKSAS Collocation and Ledger Codes and if a
CIP Project, AKSAS Project Number.
* Ascertain if there are any requirements for
coordination with funding agency(s), e.g., if an RSA,
does the granting agency need to be involved in the
procurement process? If FHWA Planning or
Research (HPR, PL or PR) funding, you must have
FHWA's prior, written approval of services. If an
FAA project, orally check with FAA before
proceeding, as FAA concurrence will be required
after contract negotiations and prior to award.
If you desire to shorten the advertising period, you
must first obtain written approval from the
Contracting Officer. If you wish to modify any
other aspect (emergency/single source), you must
first obtain written approval from the
Commissioner of DOT&PF or his designee using
the Waiver Request for Construction Related
Procurement (file: "waiver"). Follow the Waiver
instructions in Appendix A of this Manual.
Evaluation committees shall consist of at least
three state employees or public officials. If the
procurement is for Architecture, Engineering or
Land Surveying, a majority of the committee must
be state employees well qualified in Architecture,
Engineering or Land Surveying, as appropriate. If
price is an evaluation criterion (State funded
project), a majority of the committee must be
registered.
Identity of the Evaluation Committee members shall
not be made public information prior to Intent to
Award.
For Federally funded RFPs, consider the types of firms
qualified to perform the services and determine if any
of the work could be done by a subcontractor. If there
are subcontractable items in your scope of services,
check the box for subcontractable work and be sure to
indicate the DBE goals in RFP, Part A 15.2 and add
weight to the DBE goals in Part C, Criterion 10.
Prepare and obtain Contracting Officer's signature on
an Authority to Seek Professional Services (file:
"asps"). Follow instructions with the form and answer
all questions briefly but precisely.
3 OBTAIN PROPOSALS
Prepare a Request for Proposal (RFP) Package. The
file: "ins-rfp" contains assembly instructions for the
RFP Package.
* Note: The RFP Package was developed to
conform with Alaska Statutes and Administrative
Code. The Assembly Instructions for preparation of the
RFP package must be followed to the letter. Any
changes to the text of the forms shall be submitted for
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approval to the DOT&PF Chief Contracts Officer
through your Contracts Officer. Some changes may
require a written waiver from the Commissioner of
DOT&PF prior to issuance of the RFP.
The statute (AS 36.30.270), exempts Architects,
Engineers and Land Surveyors (A/E and LS) from
submitting price proposals during selection for
services that must be performed by a registered
professional, except under very limited conditions.
(Read about "Price Competition" in paragraph 9 under
NOTICES in Part A of the Competitive Sealed
Proposals RFP Package, file: "rfp-a"). Consequently,
price competition will not be used in Procurement for
A/E and LS services without prior written approval of a
Contracts Officer. If price proposals (not "bids") are
obtained during selection for A/E and LS services, they
will be evaluated by a registered professional.
FWHA and FAA require that all engineering and
design related services directly related to a
construction project be procured using a qualifications
based selection process (Brooks Act). Price may not
be considered as part of the scoring process when
selecting the most qualified firm. (Environmental
services are not covered by the Brooks Act.)
* FAA will not participate in contracts whenever
costs (total costs, hourly rates, man-hour
estimates, etc.) are a selection factor - reference 49
CFR 18.36(t), AC 150/5100-14D and 23 CFR.
All Requests for Proposals (RFPs) will be advertised
on the Department’s Internet Home Page and on the
On-Line Public Notice page.
Ask your Contracts Officer for a printout of the RFP
Home Page Introduction -- or for the Internet address
so that you may obtain it yourself. Become familiar
with the introduction and in particular the requirements
for Addenda and Submittals. Examine the contents to
ensure that the RFP Home Page does not conflict with
requirements in this Manual or your particular RFP.
Discuss any problems/questions with your Contracts
Officer.
AS 36.30.130 requires that public notice must
appear in the State’s Online Public Notices. In
addition to posting on the State’s Online Public Notice,
a Departmental Public Notice soliciting proposals shall
be posted on the Department’s (or respective
Agency’s) procurement web site. In the absence of an
Agency web site, one or more of the five posting
requirements listed in 2 AAC 12.130(a) must be used.
For DOT&PF solicitations, newspaper advertisement is
not required and is not used unless the DOT&PF Chief
Contracts Officer has given prior approval.
The first notice must be published at least 21
calendar days before the date for submission of
proposals.
The file: "adver" contains all requirements to be
included in the notice. Format and type of notice
(e.g. legal or display advertisement) is your choice.
Remember that the point of advertising is to gather a
wide variety of proposals in order to increase agency
choices and improve the quality of services obtained.
If the proposed Agreement involves federal funds,
solicitations will not exclude or restrict proposals
from out-of-state Contractors. However, such
Contractors must comply with Alaska laws and
regulations regarding business, occupational,
corporate, and other licensing requirements.
The offeror must certify that all services provided
by the Contractor and all subcontractors shall be
performed in the United States. If the Offeror
cannot certify that all work is being performed in
the United States, the Offeror must contact the
Contracts Officer to request a waiver at least 10
days prior to proposal deadline. (P&P 10.02.060)
Maintain a record of RFP holders to be used if any
addenda must be issued. Mark the envelope of
each submittal as received with date, time and
initials of recipient. Maintain a Register of
Proposals listing the name and address of all
respondents.
When inquiries from Contractors are received it is
important that they are all told the same thing
regarding the RFP. Ensure that discussion with
Contractors does not result in any unfair advantage or
premature commitment. Answers to any substantive
questions must be provided in writing to all RFP
holders of record. If changes are required to the RFP
Package during the solicitation period, prepare and
issue consecutively numbered and dated addendum
(file: "addendum"). Use FAX to distribute to all
registered holders of the RFP package and upload the
addendum onto the internet. Ensure sufficient time
between Contractor's receipt of Addendum and the
Submittal Deadline -- such that Offerors have an
appropriate amount of time to respond (generally at
least 48 hours); extend the deadline if necessary.
Retain fax confirmation for file.
Ensure that proposals are not opened until after
the submittal deadline and that when opened, the
process avoids disclosure of contents to
competing respondents during the negotiation
process and until after a Notice of Intent to Award
(not Intent to Negotiate) is issued.
Within DOT&PF an informational copy of all RFP
Packages must be provided to the regional Plans
Room. The Plans Room should also be advised of the
date the RFP was first advertised. If requested by a
Contract Manager, the Plans Room will handle
reproduction and distribution of RFPs and Addenda to
Contractors. On the day following the Submittal
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Deadline, the Plans Room will provide a log that lists
the name, address, contact person and telephone
number for each Contractor who received a copy of
the RFP Package and any Addenda. DOT&PF
Systems and headquarters sections and other
departments and agencies shall establish similar,
written procedures.
Hint: If an out-of-town/state firm complains that it
cannot meet a deadline, suggest that they may
electronically transmit their proposal to a personal
representative who may reproduce a hard copy of it
and deliver it "in person" to the submittal address prior
to the deadline. Do not assume any responsibility for
assuring that any Offeror's proposal will be timely
delivered.
If proposal is received after submittal deadline, keep
unopened in the procurement file until time for filing a
protest has expired. After the protest period has
ended, open the proposal package and retain one
copy of the proposal per 36.30.510(2). All other copies
of the non-responsive proposal may be returned.
4 EVALUATE PROPOSALS
The Evaluation Instructions for Chairperson (file: "ins-
char") and the Evaluation Instructions for Committee
(file: "ins-comm") contain step by step procedures for
the evaluation and scoring of proposals received. This
is the most critical phase of the procurement process
and the one most vulnerable to error and Contractor
protest. Strict adherence to the procedure is necessary
to maintain an equitable and consistent selection
process.
5 CONTRACTOR SELECTED FOR
NEGOTIATION
Issue a Notice of Intent to Negotiate (file: "itn") the
proposed agreement, signed by a Contracting Officer
or written designee, to all respondents to the
solicitation. The ranking of Offerors must be held
confidential until after the Intent to Negotiate is signed.
* Note: All proposals and related information
must be held confidential until after the Notice of
Intent to Award is issued (AS 36.30.230). Offerors
requesting a debriefing shall not be allowed to
review competitors proposals - and thereby
provide a possible negotiation advantage - until
after a Notice of Intent to Award (Activity #9) is
completed.
6 AUDIT OF CONTRACTOR'S RECORDS
For FAA agreements, the Contractor should be
prepared to validate the overhead costs with a certified
statement from the sponsor’s auditor, state’s auditor,
or consultant’s accountant. If the consulting firm has
been audited by an agency of the Federal Government
within the previous 12 months, the overhead rate
determined by this audit may be used.
The three primary purposes of prenegotiation
audits are:
* Assure that the Contractor has, and uses, an
acceptable accounting system that provides
adequate and proper justification for price
proposals and contract billings.
* Assist Agency negotiators to establish fair and
reasonable labor rates, Indirect Cost Rate (IDCR),
equipment rates and unit prices; with adequate
and proper justification.
* Assure that the Contractor is aware of cost
eligibility and documentation requirements.
PSA VALUED BETWEEN THE SMALL
PROCUREMENT LIMITS AND $250,000
For contracts or subcontracts valued between the
small procurement limits and $250,000, prenegotiation
audits are not required, if all four of the following
conditions are met.
1) A reliable Price Estimate is prepared or obtained
prior to any discussions with any Contractor who may
perform work under the contract.
2) The Price Estimate accurately establishes a fair
and reasonable value of the services required --
regardless of who might perform the contract. Further,
the Price Estimate must include a complete
explanation of how it was derived and provide (or
reference) factual, historical or other data which
support the labor rates, unit prices, profit
determinations, etc. as utilized in the estimate.
3) Price Analysis (see Chapter 8, Sec. 8.5.1) is used
to establish the Contract Price.
4) Method of Payment (see Chapter 8) is a form of:
FIXED PRICE (FP)
and the contract price is in reasonable agreement with
the agency's Price Estimate.
OR
COST REIMBURSEMENT (CR)
and the maximum amount payable under the contract
reasonably agrees with the Price Estimate and all of
the following:
a) The DOT&PF Internal Review Section has issued
an audit report for the Contractor that is current (within
the last two years) - OR the Contractor provides a
certified statement from an independent CPA -
attesting to the sufficiency of the Contractor's
accounting system to reliably accumulate costs for
individual contracts and includes an audit of the
Indirect Cost Rate.
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b) The Contractor certifies that no significant
changes were made in the accounting system since
the DOT&PF or independent CPA audit.
c) The contract contains provisions which cap the
Contractor's total hourly billing rates (Direct Labor Cost
+ Indirect Cost + Fee) to approximately the Direct
Labor Rates paid to state employees for similar work
times a reasonable multiplier for Indirect Cost and Fee,
or to market labor rates that are based on identified,
reliable and factual, historical or other data.
* Note: A "reasonable" multiplier might be 2.8,
wherein the IDCR is 150% and the Fee is 12%. A
more appropriate multiplier for the specific type of
services required might be available from the DOT&PF
auditors based on analysis of data derived from recent
contractor audits and other pertinent sources.
d) The contract shall contain a fixed price or a "not to
exceed price" of $250,000 or less. If any amendment
will cause the price to exceed $250,000, the DOT&PF
office of Internal Review should be consulted for audit
recommendations prior to executing the amendment.
If any of the above conditions are not met for contracts
or subcontracts valued between the Small
Procurement Limits and $250,000, then a Cost
Analysis (in lieu of Price Analysis) of the Contractors'
and Subcontractors' Price Proposals is required.
Internal Review should be consulted for audit
recommendations prior to Contract Price negotiations.
PSA VALUED AT MORE THAN $250,000
A prenegotiation audit review of Contractors' and
Subcontractors' accounting systems and business
records are required for all contracts and
subcontracts that may exceed $250,000.
Immediately following identification of a Contractor or
Subcontractor requiring an audit review, orally notify
the DOT&PF Regional Office of Internal Review. If
they do not have a current audit on file, insure that the
"Prenegotiation Requirements" Letter (file: "preneg"),
as discussed under activity #7 below, includes the
request for a completed Pre-Audit Statement (file:
"preaudit") from the Offeror and each Subcontractor
whose price may exceed $250,000.
* Note: The RFP Package contains a notice to
Offerors which allows for disqualifying an Offeror
which does not provide the Pre-Audit Statements in a
timely manner.
If an audit review is required, submit a Prenegotiation
Audit Request (file: "auditreq") to the Regional Internal
Review Office. Attach a copy of the pre-solicitation
Price Estimate for the contract and copies of the
Contractor and Subcontractors' completed Pre-Audit
Statements. If currently not available indicate a date
when each will be provided to Internal Review.
* Note: Completed Pre-Audit Statements and
attachments are proprietary information (AS
36.30.230) and are confidential. Originals must be
transmitted directly to Internal Review and no copies
shall be made.
Following receipt of completed Pre-Audit Statements,
the pre-solicitation Price Estimate, and Price
Proposals (if any), Internal Review staff will conduct a
limited review process and, if possible, quickly
determine an Indirect Cost Rate (IDCR) for each
Contractor and Subcontractor. If the limited review
does not allow for determination of an IDCR, an "on-
site" audit of the Contractor's/Subcontractor's
accounting system and business records may be
necessary. Because an on-site audit may take over
three weeks to complete, it is important to notify
Internal Review as soon as the Contractor and
Subcontractors are identified. In any case, services
and labor hour negotiations may proceed and Price
Proposals may be obtained prior to or concurrently
with audit activities. Cost and price discussions,
however, must be delayed until an audit
recommendation is provided.
* Note: When a prenegotiation audit is required, no
contract shall be executed prior to completion of the
audit and consideration of all applicable audit findings -
- except with express written acknowledgment of the
Contracts Officer.
7 TECHNICAL AND PRICE OR COST
ANALYSIS
Issue a Prenegotiation Requirements Letter (file:
"preneg") to the selected Contractor. Obtain and check
validity of the Contractor's responses before
proceeding with price negotiations. This is to ensure
that the Contractor and Subcontractors are
"responsible" per AS 36.30.360.
Review all proposals received. Extract any information
that may be used to improve upon the Statement of
Services distributed with the RFP package. Revise the
Statement of Services accordingly. Discuss the
services required with the selected Contractor to
ensure a common understanding of goals and then
obtain a detailed price proposal.
Perform a Technical and Price or Cost Analysis of
the price proposal in accordance with Chapter 8. A
Cost Analysis is required if the price will exceed
$250,000. Establish negotiation objectives for Direct
Cost of Direct Labor, Indirect Costs, Other Direct
Costs (Reimbursable Expenses and Subcontracts)
and Fee.
8 NEGOTIATION
Negotiate services, schedule, price and method(s)
of payment in accordance with Chapter 9.
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9 NOTICE OF INTENT TO AWARD
Following the conclusion of negotiations and
selection of a Contractor, a Notice of Intent to
Award (file: "ita") shall be sent to all respondents
to the RFP. The Notice must be issued at least five
days prior to execution of the Agreement (AS
36.30.365).
* Caution: Respondents have ten days following
issue of Notice of Intent to Award to file any
protest (AS 36.30.565), thus it may be best to delay
award for ten days after the notice.
* NOTE: If unsuccessful Offerors request a
debriefing, the Evaluation Committee Chairperson
should informally meet with the Offeror. Discussion
should focus on areas judged to be weak or deficient
and on whether the weaknesses or deficiencies were
factors in the Offeror not having been selected. It is not
appropriate to compare unsuccessful Offeror's
proposals with that of the successful Offeror except in
a general way. A point-by-point comparison, no matter
how objective, will invariably lead to disagreement. An
adequate debriefing, however, can provide the basis
for firms to improve future proposals and interviews.
The debriefing is an indication that the selection
process was handled fairly, equitably and in
accordance with applicable laws and regulations
governing the solicitation.
After the Notice of Intent to Award, all proposals and
Agency files (except for agreed upon specific
proprietary information) are public information.
10 PROTESTS AND APPEALS
If there are any protests, see Chapter 10.
11 SUMMARY OF SELECTION AND
NEGOTIATION
(See the file: "rons" and Chapter 11.)
12 WRITTEN CONTRACT
The standard written Professional Services
Agreement is required (see the file: "ins-psa" and
Chapter 12).
13 PROCUREMENT RECORDS
After RONS and PSA are prepared, assemble and
transmit a complete set of procurement documents as
instructed by the Documents Checklist -- Competitive
Sealed Proposals (file: "clst-csp") to your Contracts
Officer. Keep a copy of all materials for your project
files (see Chapter 13).
* Your Contracts Officer will at this time review the
contract records to identify any necessary revisions
that must be made. In general, the Contractor must
sign two copies of the PSA first. The Contracts Officer
will then obtain a Contracting Officer's signature on
both copies of the PSA and a copy of the RONS. One
of the originally signed copies of the PSA will be
returned to the Agency's Contract Manager to
reproduce for project files and to transmit to the
Contractor with a Notice to Proceed in accordance
with Chapter 15. The Contracts Officer will keep all the
other documents for the "official" procurement records
required by statute and regulations.
14 ENCUMBER FUNDS
Funds for the contract must be encumbered (see file:
"encumber" and Chapter 14).
15 CONTRACT MANAGEMENT
Provide one originally signed copy of the PSA to the
Contractor and manage the contract in accordance
with Chapter 15.
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Chapter 4
EMERGENCY PROCUREMENTS
This Chapter is for construction related professional services as defined by AS 36.30.990(6) & (17) - as quoted on
page I-1 of the Introduction to this Manual. Emergency Procurement of other construction related services,
commodities or construction must be done in accordance with other applicable DOT&PF procedures. Further, all
Emergency Procurements not within the purview of "construction" as defined in AS 36.30.990(6), shall be made in
accordance with the Alaska Administrative Manual, specifically section 81.070.
1 DEFINE SERVICES, SCHEDULE AND
ESTIMATED PRICE
Identify the type of services and time frame in which
needed. Emergency Procurements may be made when
there exists a threat to public health, welfare, or safety,
when a situation exists that makes a procurement
through competitive sealed bidding or competitive
sealed proposals impracticable or contrary to the public
interest, or to protect public or private property. Only
those services necessary to relieve an emergency
situation shall be obtained by Emergency
Procurement. Other professional services for repair,
construction, etc., shall be obtained under routine
procurement procedures.
2 AUTHORITY AND FUNDING SOURCE
A written Determination of Emergency is required. In
general, only the Commissioner of DOT&PF will make a
written determination of a construction-related
emergency. However, any Agency official at the site of
an emergency can (and is encouraged to) make the
written determination if the following conditions are true:
* the official believes emergency circumstances
exist,
* those circumstances could result in loss of life or
property damage, and
* action to resolve the emergency must begin in less
than 72 hours.
Emergencies frequently exist under any of the following
circumstances:
* fire, flood, earthquake or similar natural disasters,
* medical emergency, riots or similar man made
events,
* environmental accidents,
* equipment failure requiring timely repair; and
usually result in at least one of the following:
* a real threat to public health, welfare or safety,
* imminent loss of human life or property,
* essential need for a timely response.
CAUTION: Emergency Procurements that occur as a
result of an individual intentionally or knowingly acting
or failing to act responsibly, to avoid requirements of
normal procurement procedures, could result in
disciplinary action per AS 36.30.930.
The Determination of Emergency must be made
prior to obtaining any services, except when time
is of the essence and the loss of life or property
may be increased due to a delay - then the
determination can be made up to 48 hours after
the procurement.
Requests for a Determination of Emergency by the
Commissioner (or by a Regional or System Director if
cost will not exceed the Small Procurement limit) shall
be submitted on DOT&PF Waiver Request for
Construction Related Procurement (file: "waiver"). The
form shall be completed per Appendix A of this
Manual. Entries in PARTS 3 and 4 shall include
sufficient details and factual evidence to ensure that
an independent examination and verification of the
emergency can be made. The intended level or
manner of solicitation to be used in the Emergency
Procurement should also be described.
Generally, Part 5 of the waiver form (which constitutes
the written Determination of Emergency) and the
signature of approval will be rendered within two
workdays following receipt of a waiver request with
complete information. Incomplete information and
weekends or holidays will increase this period. If time
is truly of the essence, local officials should consider
making the written Determination of Emergency after -
if time permits - an oral discussion with the Chief
Contracts Officer.
If an agency official at the site of an emergency makes
the Determination of Emergency - usually in a
memorandum, then it shall latter be attached to the
waiver form and only the heading information and
PART 1 of the form must be completed. The
memorandum should depict the nature and
circumstances of the emergency, the effects if not
cured, and the professional services needed. The
memorandum must also report the basis for selection
of the particular contractor to provide the services.
(Often, the closest most available Contractor is
selected because time is of the essence.)
Aside from the written Determination of
Emergency, 2 AAC 12.450 (b) requires that, if
practical, approval by the Commissioner (or a
Regional or System Director if cost will not exceed
the Small Procurement limit) must be obtained
before an Emergency Procurement of $10,000 or
more is made. Oral approval is acceptable.
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chap-04 Page 2 of 2 March 2014
If possible, also identify funding source(s) and AKSAS
Collocation and Ledger Codes.
3 OBTAIN PROPOSALS
Emergency Procurements may be made by any
reasonable means and with competition that is
practicable under the circumstances, i.e., when
time permits, some degree of solicitation and price
competition is expected.
The offeror must certify that all services provided
by the Contractor and all subcontractors shall be
performed in the United States. If the Offeror
cannot certify that all work is being performed in
the United States, the Offeror must contact the
Contracts Officer to request a waiver at least 24
hours prior to proposal deadline unless modified by
the Contracts Officer. (P&P 10.02.060)
For Emergency Procurements that begin 72 hours after
the need is identified, either Parts 3 and 4 or Part 5
(recommendations) of the waiver form will specify the
solicitation process to be followed. Solicitation may
begin before the written Determination of Emergency, if
prior oral approval of the solicitation method is
approved by the DOT&PF Chief Contracts Officer (or a
Regional or System Director if cost will not exceed the
Small Procurement limit).
4 EVALUATE PROPOSALS
Select the Contractor offering the proposal most
advantageous to the State for resolving the emergency.
5 CONTRACTOR SELECTED FOR
NEGOTIATION
Orally notify all Offerors of the Contractor selected.
6 TECHNICAL AND PRICE ANALYSIS
Generally review the selected Contractor's proposal to
ensure it addresses required services and that the price
is fair and reasonable only for labor effort and related
expenses necessary to relieve the emergency situation.
7 NEGOTIATION
Establish the services to be provided (see file: "ins-
sos"), schedule for performance and a Fixed Price or
other payment terms. Obtain the Contractor's signature
on a copy of the Certification for Licenses & Insurance
(file: "psa-e") - a fax signature followed by a copy with
original signature is acceptable. Give Contractor oral
Notice to Proceed. (Written confirmation is discussed
below under Professional Services Agreement.)
8 PROTESTS AND APPEALS
If there are any protests, see Chapter 10.
9 SUMMARY OF SELECTION AND
NEGOTIATION
Within 15 days after award of the contract,
complete Part 6 of the DOT&PF waiver form that
was used for the Determination of Emergency and
submit it through your Contracts Officer to the
DOT&PF Headquarters Chief Contracts Officer.
When multiple contracts are awarded under an
Emergency Procurement, information pertaining to
all the contracts shall be attached to the waiver
form in the format shown in Part 6.
10 WRITTEN CONTRACT
Obtain a PSA Number from your Contracts Officer and
include it in whatever form of contract you use. (The
PSA Number is used to ensure that the procurement is
appropriately listed in the Agencies contract records.)
If time allows, use the standard PSA forms (Chapter
12); otherwise, issue a letter to the Contractor
confirming the agreed upon services, schedule and
method of payment. Be sure to obtain the Contractor's
signature of acceptance on the letter. When time is
extremely limited, handwritten communications are
acceptable.
11 PROCUREMENT RECORDS
Assemble and transmit a complete set of procurement
documents to your Contracts Officer as instructed by
the Emergency Procurement Documents Checklist
(file: "clst-emr").
Keep a copy of all materials for your project files.
12 ENCUMBER FUNDS
Funds for the contract must be encumbered if the
contract amount exceeds $5,000 (see file:
"encumber" and Chapter 14).
13 CONTRACT MANAGEMENT
(see Chapter 15). Records relating to the contract shall
be retained in such a manner that all actual costs to
the Contracting Agency can be easily determined.
PSA Handbook Chapter 5 - Single Source and Limited Competition Procurements
chap-05 Page 1 of 3 March 2014
Chapter 5
SINGLE SOURCE AND LIMITED COMPETITION
PROCUREMENTS
Prior to using this procurement process, read the Introduction to this Manual.
1 DEFINE SERVICES, SCHEDULE AND
ESTIMATED PRICE
Develop a written Statement of Services and a Price
Estimate for the proposed contract (see Chapter 7 and
the files: "ins-sos" and "ins-est" for guidance).
2 AUTHORITY AND FUNDING SOURCE
Determine the unique characteristics of the intended
procurement. If you do not know of a Contractor
qualified to perform the required services - or if you
know of only one Contractor - advertise in the relevant
geographical area announcing your intent to make a
procurement to determine what sources are available
or interested. The number and type of media
advertisements and length of solicitation period
(generally a few days) must be practical for the
situation.
Consider advertising on the DOT&PF Home Page.
Access for posting to electronic media is restricted to
the Department's Contracts Officer (named on the
cover of this Manual). Contact one of them for
assistance.
If only one Contractor responds, choose Single
Source; otherwise, choose Limited Competition.
SINGLE SOURCE
(AS 36.30.300 & 2 AAC 12.410)
Only one Contractor exists or is suitable or
acceptable to provide the required services.
LIMITED COMPETITION
(AS 36.30.305 & 2 AC 12.430)
Competitive Sealed Bidding or Competitive Sealed
Proposals is impractical or contrary to public
interest. May not be used for architectural,
engineering or land surveying which must be
performed by a registered professional. A Single
Source contract may not be awarded under this
process.
Identify the funding source. Is funding provided
through State appropriations to your Agency,
Reimbursable Services Agreement (RSA) from
another agency, or by Federal participation (FHWA,
FAA, other Federal Agency)? Become familiar with
funding sources, amount(s) and applicable constraints.
Identify AKSAS Collocation and Ledger Codes and if a
CIP Project, AKSAS Project Number.
Ascertain if there are any requirements for
coordination with funding agency(s), e.g., if an RSA,
does the granting agency need to be involved in the
procurement process? If FHWA Planning or
Research (HPR, PL or PR) funding, you must have
FHWA's prior, written approval of services. If an
FAA project, orally check with FAA before
proceeding, as FAA concurrence will be required
after contract negotiations and prior to award.
Obtain a procurement waiver. Fully complete Parts 1
through 4 of DOT&PF Waiver Request For
Construction Related Procurement (file: "waiver").
Follow the waiver instructions in Appendix A. Obtain
written approval of the waiver prior to any further
activity. The justification must contain findings of
fact that support by clear and convincing
evidence, the need to use the selected
procurement method.
FAA approval is required for all Single Source and
Limited Competition procurements >$5,000.
The Contract file must contain documentation of this
approval.
3 OBTAIN PROPOSALS
Obtain a Single Source proposal, or Limited
Competition proposals, from the selected
Contractor(s). Follow any instructions contained in Part
5 of the approved waiver.
The offeror must certify that all services provided
by the Contractor and all subcontractors shall be
performed in the United States. If the Offeror
cannot certify that all work is being performed in
the United States, the Offeror must contact the
Contracts Officer to request a waiver. (P&P
10.02.060)
4 EVALUATE PROPOSALS
If using Limited Competition, select the Contractor
whose proposal is "most advantageous to the
State." Make sure that price, delivery and terms
are discussed equally with each potential
Contractor (2 AAC 12430(c)). If only one Contractor
responds to the advertisement for Limited
Competition and no other sources are known;
award may not be made to that Contractor without
another waiver for Single Source Procurement.
PSA Handbook Chapter 5 - Single Source and Limited Competition Procurements
chap-05 Page 2 of 3 March 2014
5 CONTRACTOR SELECTED FOR
NEGOTIATION
Orally notify all Offerors of Contractor selected.
6 AUDIT OF CONTRACTOR'S RECORDS
The three primary purposes of pre-negotiation
audits are:
* Assure that the Contractor has, and uses,
an acceptable accounting system that provides
adequate and proper justification for price
proposals and contract billings.
* Assist Agency negotiators to establish fair and
reasonable labor rates, indirect cost rates,
equipment rates and unit prices; with adequate
and proper justification.
* Assure that the Contractor is aware of cost
eligibility and documentation requirements.
PSA VALUED BETWEEN THE SMALL
PROCUREMENT LIMITS AND $250,000
For contracts or subcontracts valued between the
small procurement limits and $250,000, pre-
negotiation audits are not required, if all four of the
following conditions are met.
1) A reliable Price Estimate is prepared or obtained
prior to any discussions with any Contractor which
may perform work under the contract.
2) The Price Estimate accurately establishes a fair
and reasonable value of the services required --
regardless of who might perform the contract. Further,
the Price Estimate must include a complete
explanation of how it was derived and provide (or
reference) factual, historical or other data which
support the labor rates, unit prices, profit
determinations, etc. as utilized in the estimate.
3) Price Analysis (see Chapter 8, Sec. 8.5.1) is used
to establish the Contract Price.
4) Method of Payment (see Chapter 8) is a form of:
FIXED PRICE (FP)
and the contract price is in reasonable agreement with
the agency's Price Estimate.
OR
COST REIMBURSEMENT (CR)
and the maximum amount payable under the contract
reasonably agrees with the Price Estimate and all of
the following:
a) The DOT&PF Internal Review Section has issued
an audit report for the Contractor that is current (within
the last two years) - OR the Contractor provides a
certified statement from an independent CPA -
attesting to the sufficiency of the Contractor's
accounting system to reliably accumulate costs for
individual contracts and includes an audit of the
Contractor's Indirect Cost Rate.
b) The Contractor certifies that no significant
changes were made in the accounting system since
the DOT&PF or independent CPA audit.
c) The contract contains provisions which cap the
Contractor's total hourly billing rates (Direct Labor Cost
+ Indirect Cost + Fee) to approximately the Direct
Labor Rates paid to state employees for similar work
times a reasonable multiplier for Indirect Cost and Fee,
or to market labor rates that are based on identified,
reliable and factual, historical or other data.
* Note: A "reasonable" multiplier might be 2.8,
wherein the IDCR is 150% and the Fee is 12%. A
more appropriate multiplier for the specific type of
services required might be available from the DOT&PF
auditors based on analysis of data derived from recent
contractor audits and other pertinent sources.
d) The contract shall contain a Fixed Price or a "not
to exceed price" of $250,000 or less. If any
amendment will cause the price to exceed $250,000,
the DOT&PF office of Internal Review should be
consulted for audit recommendations prior to
executing the amendment.
If any of the above conditions are not met for contracts
or subcontracts valued between the Small
Procurement Limits and $250,000, then a Cost
Analysis (in lieu of Price Analysis) of the Contractors'
and Subcontractors' Price Proposals is required.
Internal Review should be consulted for audit
recommendations prior to Contract Price negotiations.
PSA VALUED AT MORE THAN $250,000
A pre-negotiation audit review of Contractors' and
Subcontractors' accounting systems and business
records are required for all contracts and
subcontracts that may exceed $250,000.
Immediately following identification of a Contractor or
Subcontractor requiring an audit review, orally notify
the DOT&PF Regional Office of Internal Review. If
they do not have a current audit on file, insure that the
"Pre-negotiation Requirements" Letter (file: "preneg"),
as discussed under activity #7 below, includes the
request for a completed Pre-Audit Statement (file:
"preaudit") from the Offeror and each Subcontractor
whose price may exceed $250,000.
If an audit review is required, submit a Pre-Negotiation
Audit Request (file: "auditreq") to the Regional Internal
Review Office. Attach a copy of the pre-solicitation
Price Estimate for the contract and copies of the
Contractor's and Subcontractors' completed Pre-Audit
Statements. If currently not available indicate a date
when each will be provided to Internal Review.
* Note: Completed Pre-Audit Statements are
proprietary information (AS 36.30.230) and are
PSA Handbook Chapter 5 - Single Source and Limited Competition Procurements
chap-05 Page 3 of 3 March 2014
confidential. Originals must be transmitted directly to
Internal Review and no copies shall be made.
Following receipt of the completed Pre-Audit
Statements, the pre-solicitation Price Estimate, and
Price Proposals (if any), Internal Review staff will
conduct a limited review process and, if possible,
quickly determine an Indirect Cost Rate (IDCR) for
each Contractor and Subcontractor. If the limited
review does not allow for determination of an IDCR, an
"on-site" audit of the Contractor's/Subcontractor's
accounting system and business records may be
necessary. Because an on-site audit may take over
three weeks to complete, it is important to notify
Internal Review as soon as the Contractor and
Subcontractors are identified. In any case, services
and labor hour negotiations may proceed and Price
Proposals may be obtained prior to or concurrently
with audit activities. Cost and price discussions,
however, must be delayed until an audit
recommendation is provided.
* Note: When a pre-negotiation audit is required, no
contract shall be executed prior to completion of the
audit and consideration of all applicable audit findings -
- except with express written Acknowledgement of the
Contracting Officer.
7 TECHNICAL AND PRICE OR COST
ANALYSIS
Issue a Pre-negotiation Requirements Letter (file:
"Preneg") to the selected Contractor. Obtain and
check validity of the Contractor's responses before
proceeding with price negotiations. This is to ensure
that the Contractor and Subcontractors are
"responsible" per AS 36.30.360.
Discuss the services required with the selected
Contractor to ensure a common understanding of
goals and then obtain a detailed price proposal.
Perform a Technical and Price or Cost Analysis of
the price proposal in accordance with Chapter 8. A
Cost Analysis is required if the price will exceed
$250,000. Establish negotiation objectives for Direct
Cost of Direct Labor, Indirect Costs, Other Direct
Costs (Reimbursable Expenses and Subcontracts)
and Fee.
8 NEGOTIATION
Negotiate services, schedule, price and method(s)
of payment in accordance with Chapter 9.
9 PROTESTS AND APPEALS
If there are any protests, see Chapter 10.
10 SUMMARY OF SELECTION AND
NEGOTIATION
(See the file: “rons” and Chapter 11.)
Within 15 days after award of the contract, complete
Part 6 of the approved DOT&PF Waiver Request for
Construction Related Procurement, and submit a copy
through your Contracts Officer to the Chief Contracts
Officer at the address shown on the form.
11 WRITTEN CONTRACT
The standard written Agreement is required (see
the file: "ins-psa" and Chapter 12).
12 PROCUREMENT RECORDS
After the PSA is prepared, assemble and transmit a
complete set of procurement documents as instructed
by the Documents Checklist -- Limited Competition,
and Single Source (file: "clst-lcs") to your Contracts
Officer. Keep a copy of all materials for your project
files (see Chapter 13).
* Your Contracts Officer will at this time review the
contract records to identify any necessary revisions
that must be made. In general, the Contractor must
sign two copies of the PSA first. The Contracts Officer
will then obtain a Contracting Officer's signature on
both copies of the PSA. One of the originally signed
copies of the PSA will be returned to the Agency's
Contract Manager to reproduce for project files and to
transmit to the Contractor with a Notice to Proceed in
accordance with Chapter 15. The Contracts Officer will
keep all the other documents for the "official"
procurement records required by statute and
regulations.
13 ENCUMBER FUNDS
Encumber funding if contract amount exceeds $5,000
(see file: "encumber" and Chapter 14).
14 CONTRACT MANAGEMENT
Provide one originally signed copy of the PSA to the
Contractor and manage the contract in accordance
with Chapter 15.
PSA Manual Chapter 6 - Term Agreements
chap-06 Page 1 of 2 March 2014
Chapter 6
TERM AGREEMENTS
All Term Agreements require DOCUMENTED concurrence from the Chief Contracts Officer
using the ASPS form. Generally, Term Agreements will not be approved for use when Small
Procurement is an option, because Term Agreements - while appropriate in some
circumstances - are somewhat restrictive of full, open competition.
PROCUREMENT PROCESS
6.1 Generally, Term Agreements (indefinite delivery
contracts) shall be awarded by Competitive Sealed
Proposals (Chapter 3).
PURPOSE
6.2 Term Agreements may be used:
6.2.1 To accomplish a small project, or task for a
large project.
6.2.2 To engage a firm that is the only suitable and
acceptable Contractor available to provide a
particular service, as needed and timely, during
a specific period, e.g., photogrammetry.
6.2.3 For other purposes approved in writing by the
Chief Contracts Officer.
CONDITIONS FOR USE
6.3 Each Term Agreement must contain a clear,
specific description of the services to be provided and
the specific purpose(s) for which they might be
rendered. A general reference to "planning" or
"electrical engineering" or "land surveying" would be
insufficient. A Statement of Services which identifies
only a profession rather than specific tasks to be
performed or which are otherwise ambiguous is
unacceptable (see file: "ins-sos"). This policy exists to
encourage competitive procurement based on specific
project services and thereby not unreasonably exclude
any Contractors through the use of very generalized
Term Agreements.
6.3.1 The Statement of Services will be prepared by
the Division or Section requiring them. Assistance from
the Contracts Officer may be provided.
6.3.2 Each Term Agreement must be written to insure
that an employer-employee relationship (reference
Exhibit 6-I) will not result.
6.4 Each Term Agreement must contain detailed and
specific terms and conditions for payment (see files:
"ins-psa" and "c1-pay"). Term Agreements which allow
for competition among Term Contractors are
acceptable only if the competition is based on such
factors as methods, labor effort, profit, etc. The contract
must contain unit prices or hourly labor rates (fixed total
billing rate or direct labor rate plus fixed indirect cost
rate) for ALL key personnel and the various job
classifications that might be employed under the
contract.
6.5 Subcontractors listed in a Term Agreement may
be replaced in accordance with AS 36.30.115; however,
no Subcontractors shall be added to a Term Agreement
to perform any services not specifically identified within
the original contract.
6.6 The original compensation specified in a Term
Agreement shall not be increased by Amendments,
unless otherwise approved in the ASPS.
6.7 Generally, the maximum period for issuing NTPs
under a Term Agreement shall not exceed five years;
however, additional years may be allowed for
completion of work assigned during the initial period.
6.8 Each Term Agreement must contain procedures
for authorizing work and for determining payments.
6.8.1 Every Notice to Proceed (NTP) issued under a
Term Agreement will define specific services and an
amount of compensation in accordance with the
method(s) of payment contained in the Agreement.
6.8.2 Every Notice to Proceed issued under a Term
Agreement shall be signed by the Contracting Officer
(or a designee authorized in accordance with
DOT&PF Policy #01.01.050).
USE
6.9 Project Managers desiring to use existing Term
Agreements must accomplish the following activities:
6.9.1 Obtain or prepare a written Statement of Services
and price estimate for the proposed work.
6.9.2 Orally confirm authority to solicit proposals.
* Identify the funding source. Is funding provided
through State appropriations to your Agency,
Reimbursable Services Agreement (RSA) from
another agency, or by Federal participation
(FHWA, FAA, other Federal Agency)? Become
familiar with funding sources, amount(s) and
applicable constraints. Identify AKSAS Collocation
and Ledger Codes and if a CIP Project, AKSAS
Project Number.
* Ascertain if there are any requirements for
coordination with funding agency(s), e.g., if an
RSA, does the granting agency need to be
involved in the procurement process? If FHWA
PSA Manual Chapter 6 - Term Agreements
chap-06 Page 2 of 2 March 2014
Planning or Research (HPR, PL or PR) funding,
you must have FHWA's prior, written approval
of services. If an FAA project, orally check with
FAA before proceeding, as FAA concurrence
will be required after contract negotiations and
prior to award.
6.9.3 Discuss the services required with the Contract
Manager for the Term Agreement and determine if it
may be used. If the services required fit within the
services described in the contract, the Contract
Manager will coordinate the selection of a particular
Contractor -- if more than one firm is under contract to
provide the services required. Generally, work
assignments will be made following competitive
solicitation among the Term Contractors, except when:
* there is only one Term Contractor for the services;
* one Term Contractor has prior significant project
involvement and/or it would be impractical to
award the work to another Contractor; or
* there exists an emergency or other circumstance
requiring a timely response and a particular Term
Contractor is in a best position to perform the
services required e.g., the Contractor already has
appropriately skilled personnel working in a
remote location where the services are needed.
6.9.4 The Contract and/or Project Manager will meet
with the Term Contractor to define the specific services
and/or work products required, the personnel and
equipment necessary and a schedule to complete the
assignment. Following this meeting the Contractor will
provide a written proposal for the work which must
name the personnel to be assigned and includes a
Statement of Services, Schedule for Completion and a
detailed Price Proposal. The Contract and/or Project
Manager must perform a Technical and Price (or Cost)
Analysis of the proposal (see Chapter 8) and negotiate
a final Statement of Services and Schedule with a Fixed
Price, Time and Expenses, Cost Plus Fixed Fee or
other Method of Payment, allowed by the Term
Agreement.
6.9.5 Following negotiations the Contract or the Project
Manager will prepare a Record of Negotiation and
Selection (file: "rons"). The Contract Manager will
assign a NTP Number for the particular Term Contract
and prepare the NTP/Invoice form (file: "c2-ntp").
Funding codes must be entered on the form before it is
issued. After the RONS and NTP are prepared,
assemble and transmit a complete set of procurement
documents to your Contracts Officer as instructed by
the Documents Checklist-NTP under Term Agreement
(file: "clst-ntp").
* Your Contracts Officer will then review the RONS,
NTP and other documents, and, if there are no
deficiencies, obtain the Contracting Officer's signature.
Any deficiencies will be discussed with the Term
Agreement Contract Manager and resolved prior to
forwarding to the Contracting Officer. The NTP, RONS
and other documents will be returned to the Term
Agreement Contract Manager for coordination with the
using Project Manager and administration and
management of the contract.
6.9.6 The Term Agreement Contract Manager will
ensure that the Contractor acknowledges receipt of the
NTP by signature under "NTP Accepted" on the form
and returns a copy with original signature.
* Note: Contractor must keep the original copy of the
NTP/Invoice form to make further copies for billing(s) as
directed in the "Contractor's Instructions" on the form.
6.9.7 If the NTP may exceed $5,000, the Project
Manager shall ensure encumbrance of funding for the
NTP (see file: "encumber" and Chapter 14).
6.9.8 The Project Manager shall administer the work
authorized by the NTP. If services or compensation of
an NTP is changed, the Project Manager shall
coordinate with the Term Agreement Contract Manager
for issue of a new NTP to replace the original. Billings
charged to the original NTP will be transferred to the
new NTP. Overrun of NTP amounts will not be paid
without a revised NTP. Oral authorization is not
acceptable, and the Project or Term Agreement
Contract Managers do not have the authority to
increase NTP amounts or change the Statement of
Services, without the written approval of a Contracting
Officer.
6.9.9 Project Manager will obtain invoices (monthly, if
work takes longer than a month), review and make any
necessary corrections, sign to recommend payment,
complete the performance evaluation on each, and
deliver the invoices to the Term Contract Manager for
processing.
CONTRACT RECORDS
6.10 The Term Agreement Contract Manager is
responsible for maintaining the organization's official
records concerning contract administration until the
Agreement is ended; after which the files will be
handled in accordance with the organization's file
retention policies.
PSA Manual Term Agreements
exh-6-1 Chapter 6 March 2014
Exhibit 6-I
EMPLOYEE OR CONTRACTOR?
AN AGREEMENT FOR PROFESSIONAL SERVICES MAY NOT BE EXECUTED WITH A
PERSON, WHO IN EFFECT, MAY BE A STATE EMPLOYEE.
Whenever the State has the right to exercise control of the performance of work to the extent of prescribing the
manner in which it will be done, the person doing the work is an employee. If the elements of control and direction do
not exist then the person is an independent contractor. A contractor is a person employed to perform a task without
being subject to control except as to the final results.
A person may be serving in an employee relationship even though s/he is a highly skilled professional and any
attempt by the State to exercise control over his work would not be well advised. It is the right to exercise direction
and control rather than the actual exercise of these factors that determines the existence of an employer-employee
relationship.
The following is a list of generally accepted determinants of an employer-employee relationship. If by applying several
of these criteria, a proposed Agreement would establish such an employer-employee relationship, then the
Agreement must not be executed:
1. A person who is required to comply with instructions about when, where and how s/he is to work is ordinarily an
employee.
2. Integration of a person's services into agency operations generally shows that s/he is subject to direction and
control.
3. The existence of a continuing relationship between an agency and a person who performs services is a factor
tending to indicate the existence of an employer-employee relationship.
4. If a person must devote full time to the business of an agency, rather than engaging in other gainful work, s/he
is probably an employee.
5. Doing work on the premises of an agency implies control, especially if the work is of such a nature that it could
be performed elsewhere.
6. Payment for work by the hour, week or month is usually the manner for compensating employees. Independent
contractors are customarily paid by the job or on a task-completed basis.
7. Payment of a person's business or traveling expenses may be a factor indicating control.
8. The furnishing of tools and materials by the State is indicative of control over an employee.
9. A significant investment by a person in facilities used by him to perform services for another tends to show an
independent contractor status.
10. A person who is in a position to realize a profit or suffer a loss as a result of the services is generally an
independent contractor.
11. The fact that a person makes his services available to the general public is usually indicative of an independent
contractor status.
12. An employee has the right to end a relationship with the employer at any time without incurring liability. An
independent contractor, on the other hand, cannot; nor can the Contractor be fired so long as s/he produces
results that measure up to contract specifications.
PSA Manual Chapter 7 - Statement of Services and Price Estimate
chap-07 Page 1 of 2 March 2014
Chapter 7
STATEMENT OF SERVICES AND PRICE ESTIMATE
ACTIVITY # 7
STATEMENT OF SERVICES
7.1 The Pre-Solicitation Statement of Services (SOS)
is the Agency's internal working document that initially
defines the services to be procured. It is the root from
which grows the final negotiated SOS to be included in
the contract. The Pre-Solicitation SOS should describe
as precisely as possible the tasks and services to be
procured. It should reflect a clear, accurate description
of the technical requirements for the services to be
rendered. Its significance towards the success of a
project cannot be overemphasized. Yet, too often we
rush to get a contract advertised and awarded.
7.1.1 The development of a poor SOS results in
difficulties and delays in contract negotiations,
substandard or incomplete work, schedule delays,
contract amendments, increased contract price and
administrative costs, and disputes between Contractor
and Agency. Such results occur because the solicitation
process, the estimated period of performance, the
schedule of deliverables, the estimated costs and the
contract method of payment are all developed in
relationship to the description of services required.
* Note: The SOS you include later with the Request
for Proposals (RFP) may be the Pre-Solicitation SOS or
it may be abbreviated, depending on the extent of
originality you desire in proposals. For instance, if a
contract is to obtain location and design services for
reconstruction of a federally funded road, you state the
established procedures and fixed design parameters
that must be followed to obtain design approval. Then
Offerors understand the services needed and proposals
should reflect the required skills and effort needed to
perform the contract. However, for design of a major
new bridge, the detailed Pre-solicitation SOS prepared
for Agency use might be abridged to provide only
general objectives of the contract in the RFP - to focus
proposals on conceptual design alternatives for Agency
consideration - rather than a detailed description of the
required services. In the latter case, the Pre-Solicitation
SOS is still required for discussion and negotiations
with the selected Offeror.
7.1.2 Prepare a SOS that first presents a clear and
concise overview that is easy to understand, then
proceed into technical aspects. Provide your Agency's
best definition of and schedule for the deliverable(s)
required. The file: "ins-sos" contains instructions and
guidance for preparing a SOS.
7.1.3 Break the work down into manageable tasks and
subtasks such that you can estimate the level of
expertise and the labor effort required for each. For
assistance, consult with personnel within your Agency
or other Agencies that have some background or
expertise similar to that required of the Contractor.
7.1.4 If you need creative approaches and/or are
unaware what services your project might entail, the
resulting "task definitions" may not be very detailed or
accurate. Hence you may wish to subdivide the
services into general project areas such as:
* Development of Objectives
* Data Collection or Preliminary Designs
* Data Analysis or Final Design
* Presentation of Results
* Project Management
7.1.5 If the services are difficult to analyze because
early tasks involve discovery or programming of project
requirements (e.g., scoping for an environmental study
or establishing client's needs for a new building),
consider phased contracts. The first contract could be
for scoping or programming with an Agency option to
negotiate further contracts for subsequent phases with
the same contractor (if appropriate) or following another
competitive procurement.
* Note: Any intent to use phased contracting must be
clearly explained in the RFP with cost ranges for the
first phase contract plus the total for all phases.
7.1.6 Contracting Officers keep lists of Professional
Services Agreements (PSAs) that may be reviewed to
identify prior contracts covering similar projects and/or
services. Wording in those contracts may be useful in
developing your particular SOS.
PRICE ESTIMATE
7.2 Along with the Pre-Solicitation Statement of
Services, you must prepare a Pre-Solicitation Price
Estimate for those Services. The Pre-Solicitation Price
Estimate must be thorough enough to adequately
determine the procurement process to be used, i.e.,
Small Procurement or Competitive Sealed Proposals. It
is preferable that the Pre-Solicitation Price Estimate be
as complete as possible such that little, if any,
additional estimating will be required when you are later
engaged in the solicitation and proposals evaluation
process.
The Pre-Solicitation Price Estimate is not the end of
estimating requirements. Prior to obtaining and
opening any Offeror's Price Proposals, an
INDEPENDENT Pre-Proposal estimate must be
prepared. This final Price Estimate must be as
thorough and detailed as if you were submitting a
Price Proposal for the contract. The estimate must
address labor costs, expenses, and profit. Chapter 8
provides an extensive discussion of the components of
price which are summarized below.
PSA Manual Chapter 7 - Statement of Services and Price Estimate
chap-07 Page 2 of 2 March 2014
DIRECT COST OF DIRECT LABOR
7.2.1 The more accurately you delineate project tasks,
the more precisely you can estimate the level of
expertise and hours required to complete each task.
From this, you may estimate the Direct Cost of Direct
Labor for the project. Typically, a Contractor will provide
the following personnel:
* Principal-in-Charge
* Contract Manager
* Project Manager
* Project Leader(s)
* Engineers, Designers, Planners or Investigators
* Technical Specialist(s)
* Computer Operators/Draftspersons
* Support Staff
After determining the levels of expertise which each
task or general area of the project requires, estimate
the time required to perform each task. Use best
judgement. Whenever possible, estimate the tasks by
hours rather than days. When your personal experience
is limited, seek assistance from others with background
or expertise similar to that required of the Contractor.
Without specific knowledge of the (base) hourly rates
an Offeror may likely propose, you will have to estimate
these costs. One method of roughly estimating the
Contractor's costs is to consider what the State of
Alaska would pay similarly qualified employees to do
the required work. Exhibit 7-1, Estimating Rate
Schedule for Consultants, at the end of this Chapter,
may be used.
INDIRECT COSTS
(Fringe or "payroll" Benefits plus Overhead)
7.2.2 Indirect Cost is calculated as a percentage of the
Direct Cost of Direct Labor. Unless you have special
knowledge of a likely Indirect Cost Rate (IDCR) which
Offerors would propose, use 150% (low 145, high 160)
for the Estimate.
OTHER DIRECT COSTS
(Subcontracts and Expenses)
7.2.3 Although Direct Cost of Direct Labor are the
primary direct costs incurred for Professional Services
Agreements, "Other Direct Costs" may be incurred
specifically for a Contract effort if they can be readily
identified and charged to it. In addition to Subcontracts
examples of Other Direct Costs include Expenses for:
* Transportation
* Food and Lodging
* Materials and Supplies
* Reproduction
* Laboratory Tests
* Computer Time
* Special Equipment: Purchase, Rental or Use
* Note: It is possible that some of the above items
may be included in an Offeror's Indirect Costs. Do not
assume that possibility in your estimate. List each
applicable item and its estimated cost. (Negotiations
with the selected Contractor will establish how the
Contractor will be compensated for such costs.)
Direct costs for Subcontracts and Expenses may vary
considerably with the Contractor selected. Subcontracts
and travel for example will depend heavily upon the
Contractor's team strategy and the geographic office
locations of the Contractor and Subcontractors. This
portion of the estimate should be based upon your
prediction of a "reasonable contractor strategy".
FEE
(including profit)
7.2.4 A method of estimating Fee is to use the Fee
Objective Worksheet (file: "feewksht"). It uses your
estimated amounts for Direct Cost of Direct Labor and
Other Direct Costs to calculate an appropriate Fee.
Follow instructions in the Worksheet. Generally, use of
the fee worksheet is not warranted for contracts less
than about $250,000. For such contracts a Fee equal to
about 10% - 12% of the sum of Direct Cost of Direct
Labor plus Indirect Cost could be used for an estimate.
SPECIAL CASES
7.3 Occasionally you may encounter situations where
labor, equipment and materials costs are so
intermingled, that attempts to separate the cost data
primarily on the basis of labor hours as described
above may not be worth the effort. Consequently, if -
after coordinating with the Audit staff - a common rate
structure or other reasonable basis cannot be found to
develop a reliable cost estimate for some activity, then
the best approach may be to require Contractors to
submit the results of separate Competitive Bids for the
activity with their proposals for the entire contract.
Geotechnical drilling programs are a special case
example. Because of the variables involved in drilling
efforts, e.g., topographic location, soil conditions, depth,
type of casings, mobilization and demobilization, etc.,
jobs are seldom similar and a common basis for
estimating that applies to all of the potential Alaskan
Contractors is a daunting task that we have not yet
achieved.
SAMPLE ESTIMATE
7.4 Exhibit 7-2 is an example of a Pre-Solicitation
Price Estimate.
PSA Manual Statement of Services and Price Estimate
exh-7-1 Chapter 7 March 2014
Exhibit 7-1
ESTIMATING CONTRACTOR'S BILLING RATES
The table below shows one method of estimating hourly Billing Rates for Consultant Services. On the left side of the
page are listed 7/1/13 Anchorage Area (Schedule 100) State Pay Rates (without Indirect Cost or Fee (profit), and on
the right side the same rates are increased by a typical Contractor’s Indirect Cost Rate of 170% and a Fee of 10%
(which equates to a multiplier of 2.97). (State rates for Fairbanks and other areas may be different due to cost of
living adjustments.)
STATE & ESTIMATED CONTRACTOR
DIRECT LABOR RATES
(without Indirect Costs or Fee)
EQUIVALENT
CONTRACTOR BILLING RATES
(with Indirect Costs and Fee)
Pay Range
State Contractor
Position & (Range) 1 Year (Step A) 5 Year (Step E) Low High Position
Office Assistant II
(GGU 10) $ 16.76 $ 18.89 $ 49.78 $ 56.10 Secretary I
Drafting Tech II
(GGU 13) 20.11 22.95 59.73 68.16 Draftsperson
Drafting Tech III
(GGU 15) 22.95 26.40 68.16 78.41 Basic Technician I
Engineering Asst I
(GGU 17) 26.40 30.42 78.41 90.35 Basic Technician II
Engineering Asst II
(GGU 19) 30.42 34.78 90.35 103.35 Basic Technician III
Engineering Asst III
(GGU 21) 34.78 39.72 103.30 117.97 Sub-Professional
No Registration
Engineer I
(GGU 22) 37.15 42.52 110.34 126.28 Professional
Recent Registration
Engineer II
(GGU 23) 39.72 45.56 117.97 135.31 Professional
Registration < 5 yrs
5 Year (Step F) 9 Year (Step K)
Technical Engineer I
(GGU 24) 42.52 48.87 126.28 145.14 Professional
Registration > 5 yrs
Technical Engineer II
(GGU 25) 45.56 52.39 135.31 155.60 Leader/Sr Technician
< 5 years with firm
Section Chief
(SU 26) 49.11 50.76 145.86 167.51 Principal
< 5 years with firm
Branch Chief
(SU 27) 50.76 54.38 150.76 173.54 Leader/Sr Technician
> 5 years with firm
Director
(EX 28) 52.73 56.40 156.61 180.93 Principal
> 5 years with firm
PSA Manual Statement of Services and Price Estimate
exh-7-2 Chapter 7 March 2014
Exhibit 7-2
SAMPLE - PRESOLICITATION PRICE ESTIMATE
This exhibit is a very simplified sample. For most contracts with multiple tasks and subtasks, the estimate would likely
be a collection of spreadsheets for the Prime Contractor and each Subcontractor separately showing the labor cost,
markup for employee benefits and company overhead, expenses and profit for each firm and for each task/subtask to
be accomplished. See the files: "estimate.xls" and "ins-est" for further guidance.
Boondocks International Airport
Project # 78-93
DIRECT COST OF DIRECT LABOR (DCDL)
Job Classification Hours $/Hour Estimated Cost
Project Manager (3 days/week - Range 22) 1728 31.72 $ 54,812
Designer (full time, 18 months - Range 21) 2880 29.69 85,507
Draftsperson (2 days/week - Range 13) 1152 17.18 19,791
Total DCDL = $ 160,110
INDIRECT COST (IDC)
Indirect Cost Rate (IDCR) = 150% of Direct Cost of Direct Labor IDC Amount = $ 240,165
Subtotal for DCDL+IDC = $ 400,275
OTHER DIRECT COST (ODC)
Subcontracts Estimated Cost
Subcontract for Photogrammetric Mapping $ 7,500
Subcontract for Financial/Bond Specialist 12,000
Subtotal for Subcontracts = $ 19,500
Expenses
Reproduction (200 pages x 2 (draft+final) 4,000
x 10 copies x $1.00/page) Subtotal for Expenses = $ 4,000
Total ODC = $ 23,500
TOTAL ESTIMATED COST (Sum of DCDL+IDC+ODC) = $ 423,775
FEE (Assume about 10% of DCDL+IDC) = $ 40,028
TOTAL ESTIMATED PRICE = $ 463,803
Prepared By:
Perry Mason Date
PSA Manual Chapter 8 - Technical and Cost or Price Analysis
chap-08 Page 1 of 11 March 2014
Chapter 8
TECHNICAL AND COST OR PRICE ANALYSIS
ACTIVITY # 8
Contract Managers are encouraged to read this chapter carefully. Address any questions or comments to your
Contracts Officer. Past audits of our contracting activities suggest that improvements can be made in the areas of cost
standards application, Technical Analysis, Cost Analysis and Fee determinations.
CHAPTER INDEX
8.1 Technical Analysis
8.2 Cost Standards
8.3 Price
8.4 Accounting Terminology
8.5 Cost or Price Analysis
8.6 Labor
8.7 Direct Cost of Direct Labor (DCDL)
8.8 Indirect Cost (IDC)
8.9 Other Direct Cost (ODC)
8.10 Fee (Profit)
8.11 Methods of Payment
TECHNICAL ANALYSIS
8.1 Technical Analysis is the review of proposed
tasks, schedule, skill levels, labor effort, equipment and
material to determine adequacy and appropriateness
for accomplishing contract objectives. It is often
intermingled with Cost Analysis.
8.1.1 A thorough Technical Analysis first makes a
comparison of all received proposals against the
Contracting Agency's Pre-Solicitation Statement of
Services. This review may identify cost-effective
methods or elements of work that were not considered
by the Agency, and which should be incorporated into a
revised Statement of Services.
8.1.2 Next, the content of the selected proposal should
be reviewed for "completeness" to determine if the
Contractor needs to resubmit all or part of the proposal.
The review should also identify any unnecessary or
questionable items to be addressed during
negotiations. When your personal experience is limited,
seek assistance from others with backgrounds or
expertise similar to that of the selected Contractor.
8.1.3 Review each task to identify incomplete task
descriptions or misinterpretations concerning scope
and/or level of expertise and effort. Compare the
Contractor's allocation of personnel and level of
expertise to your labor estimate. Keep in mind,
however, that the logic, by which the Contractor
assigned personnel, may be different from your own.
You must make objective judgments on the merits of
the technical proposal. Examine the skills proposed,
hours per task, subcontracts, transportation, food and
lodging, computer time, equipment, specific materials
and supplies, etc. Ensure that any critical milestones for
contract performance are stated. Review the proposal
to determine if the Contractor has duplicated any
services or items that will be provided by the Contracting
Agency. Consider that "management time" may be as
high as 10% of total employee time (or 1 hour of
supervision per 8 hours of employee labor). Also, you
might convert 10% of proposed subcontract costs for
Direct Cost of Direct Labor plus Indirect Cost, to hours
for the Prime Contractor's supervision.
COST STANDARDS
8.2 To comply with Alaska Statute (AS 36.30.480),
the Alaska Administrative Code (2 AAC 12.560), and
federal funding regulations, DOT&PF has adopted
the contract cost principles (standards) set out in
Title 48 of the Code of Federal Regulations, Part 31
(48 CFR Part 31) -- exclusive of any references in
Part 31 to other parts of 48 CFR, for determining the
reasonableness and allowability of contract costs.
Title 48 is also known as the Federal Acquisition
Regulations (FAR).
PRICE
8.3 "Price" is defined as: Cost + Fee = Price
8.3.1 "Cost" is defined as the allowable "out of
pocket" expenses a Contractor will incur in
performing contract work. The term "cost" is often
used when "price" is really meant.
8.3.2 "Fee" is defined as the sum of Profit plus any
costs not allocable to a contract. Notice the
distinction between Fee and Profit wherein the
Contractor's Profit is reduced by the amount of
costs not allocable to a contract.
ACCOUNTING TERMINOLOGY
8.4 The accounting terms described in the following
paragraphs provide minimal essential information
necessary to perform a Cost Analysis for Professional
Services Agreements.
8.4.1 "Cost Accounting" is a procedure that enables
firms to keep track of costs for individual contracts or
specific tasks, and to estimate costs of future work. It is
not the same as "Financial Accounting" which is the
accumulation of information to determine a firm's total
costs and profit for a particular period of time. Financial
Accounting does not by itself identify costs and the profit
or loss for particular jobs.
8.4.2 A "Cost-Reimbursement" contract requires the
Contractor to have an acceptable cost accounting
PSA Manual Chapter 8 - Technical and Cost or Price Analysis
chap-08 Page 2 of 11 March 2014
system to ensure that costs billed are a direct outgrowth
of the costs incurred for that contract, and not mixed
with costs of other work. Within DOT&PF, the
acceptability of a firm's cost accounting system is
established during Pre-Negotiation audits performed by
Internal Review Section staff.
8.4.3 Even in the case of a "Fixed Price" contract, the
Contractor should have an adequate cost accounting
system to help assure that the Contractor's estimated
costs used to negotiate the Fixed Price are reasonable.
8.4.4 The three major classifications for costs used in
Cost Analysis are:
* Reasonable, Allowable, Allocable
* Fixed, Variable, Semi-variable
* Direct and Indirect
8.4.5 Reasonable, Allowable and Allocable Costs
8.4.5.1 "Reasonable Costs" by their nature and amount
do not exceed that which would be incurred by a
prudent person in the conduct of a competitive
business.
* The nature of a cost may make it unreasonable;
e.g., although air travel may be appropriate, first
class is normally considered to be unreasonable.
The use of very high quality materials when
materials meeting lesser standards would be
acceptable is another example of
unreasonableness due to the nature of the cost.
* The amount of a cost may be unreasonable, even
though the nature of the cost is acceptable; e.g.,
the proposed cost for an item of necessary
equipment may be too high.
* A prudent (careful) person does not spend money
unnecessarily "in a competitive business," because
of the prospect that customers might go to a
competitor if a price is too high. However, if there is
little or no competition, there is no strong incentive
to save on costs, which are merely passed to
customers as a part of the overall price.
8.4.5.2 "Allowable Costs" are reasonable costs of
doing business. There are exceptions; e.g., the Federal
Acquisition Regulations (FAR) state that charitable
donations, considered by many firms to be an ordinary
and necessary business expense because they believe
they have an obligation to the public at large, are
unallowable. There are other costs which are flatly
unallowable and a considerable number of which may
or may not be allowable depending on prevailing
circumstances. Within DOT&PF the allowability of such
costs is generally determined by an audit of the
Contractor's accounting records performed by Internal
Review Section Staff.
8.4.5.3 "Allocable Costs" are assignable to one or
more cost objectives i.e., a proposed contract or an
Amendment, on the basis of relative benefit or other
equitable relationship. First, the costs have to be
reasonable and allowable; then, they are allocable if:
* The costs are incurred specifically for the contract.
Costs for labor, material and travel are examples.
* The costs benefit more than one contract and can
be reasonably divided among them. Supervisory
costs might be allocable.
* The costs are necessary to the overall operation of
the business. This rule applies even if a direct
relationship to a contract is not determined. Property
taxes, rent, top level management, accounting, and
personnel administration are examples.
8.4.6 Fixed, Variable and Semi-Variable Costs
8.4.6.1 Each incurred cost may also be classified in
terms of how it changes with the volume of a firm's
business. For example, if a firm's work force increases,
the cost of Fringe Benefits will also rise, generally in
proportion to the increase in Direct Cost of Direct Labor
(variable cost). Conversely, within reason, the cost of
building rent, property insurance and top level
supervision will remain pretty much the same regardless
of work force size or the volume of business (fixed cost).
Electricity is an example of a semi-variable cost because
it consists of a basic charge plus a variable rate based
on usage. The concepts of variable, semi-variable and
fixed costs are not exact but an understanding of the
general ideas may help in determining the validity of
price proposals.
8.4.7 Direct Costs and Indirect Costs
The distinction between Direct and Indirect Costs is the
most important of the cost classifications to understand.
Within a Contractor's accounting system, a particular
cost must be considered as one or the other; not a Direct
Cost part of the time and an Indirect Cost at other times.
8.4.7.1 A "Direct Cost" is any cost that can be identified
specifically with and charged to a given contract, e.g.,
the labor cost of engineers working day-to-day on a
contract are chargeable to that effort. It is fairly easy to
record the time they spend on the job and convert that
time to a dollar cost. Likewise, materials purchased and
used for that contract can easily be charged to it. Section
8.7 addresses Direct Cost of Direct Labor and Section
8.9 addresses Other Direct Costs.
8.4.7.2 "Indirect Cost" is any cost not directly identified
with or not chargeable to a single contract. Indirect Costs
apply across-the-board to large parts, or all, of the work
that a firm is doing. Most Indirect Costs are allocable.
Supervision is usually an Indirect Cost. Utility costs are
another example. Section 8.8 further addresses Indirect
Costs.
COST OR PRICE ANALYSIS
8.5 "Cost Analysis" is the element by element
comparison of the Agency's estimate of costs to the
PSA Manual Chapter 8 - Technical and Cost or Price Analysis
chap-08 Page 3 of 11 March 2014
Contractor's price proposal for estimated or actual
costs, to determine reasonableness. The term "Cost
Analysis" has come to mean the analysis of proposed
costs and Fee and that is the manner in which the term
is used in this handbook. Strictly speaking, the analysis
of a proposed Fee - to determine if it is reasonable -
would be called "Fee Analysis."
8.5.1 A Cost Analysis is required for all contracts
and subcontracts exceeding $250,000. For
contracts and subcontracts $250,000 and less,
"Price Analysis" may be used when a reliable pre-
proposal Price Estimate is prepared independent of
the Contractor or any Subcontractor involvement.
The estimate must accurately establish a fair and
reasonable value of the services required --
regardless of who might perform the contract. The
estimate shall also include a complete explanation of
how it was derived and provide (or reference) factual,
historical or other data which support the labor rates,
unit prices, Fee, etc. used in the estimate.
8.5.2 "Price Analysis" is the process of comparing the
"bottom line amounts" of the Agency's estimate and the
Contractor's proposed price -- without evaluating the
separate elements of costs and Fee. If the "bottom line
amounts" do not significantly differ, then the
Contractor's proposed price may be acceptable, thus
negating a need for a Cost Analysis. Price Analysis
may also be used to determine the reasonableness of
specific hourly rates or unit prices when the total price
for each specific service or product within a larger
contract does not exceed the statutory Small
Procurement limits.
* Note: While Price Analysis does not require specific
validation of each cost element of a proposal, more
scrutiny is warranted as the value of the contract
approaches $250,000. Proposed tasks, skills, skill
levels, subcontracts, equipment, travel, etc. should be
scanned to identify any items, rates, or prices that do
not appear to be appropriate or reasonable. These
should be addressed in negotiations even if the total
amount of the Price Proposal compares favorably with
a pre-proposal Price Estimate.
8.5.3 AS 36.30.400 requires Contractors to submit
cost and pricing data and to certify that the data is
accurate, complete and current, at the time
agreement is reached on price and will continue to
be accurate and complete during performance of
the contract. Under the state's "Competitive Sealed
Proposals" procurement method, the submission of
cost and pricing data in the form of a Price
Proposal is required from all Offerors except for
services which must be performed by licensed
Architects, Engineers or Land Surveyors (A/E or
LS) as defined in AS 36.30.270. When this exception
for "licensed" A/E or LS is applicable, only the
Offeror selected for contract negotiations must
submit the cost and pricing data.
* Note: If any audit discloses a "Significant Variance"
between Contractor payments and Contractor incurred
costs, there may exist a basis for recovery of such
amounts from the Contractor (reference AS 36.30.400),
regardless of the procedure used for contract award or
the Method of Payment used for the contract.
"Significant Variance" means that payments to a
Contractor for costs (exclusive of fair and reasonable
profit) exceed fifteen percent of Contractor incurred
costs for:
* any one contract; or
* the aggregate of payments for costs exclusive of fair
and reasonable profit and the aggregate of incurred
costs during a Contractor's fiscal year for all
contracts with the Contracting Agency.
8.5.4 Sections 8.7, 8.8 and 8.9 explain how to perform a
Cost Analysis for each of the principal components of
cost: Direct Cost of Direct Labor, Indirect Costs and
Other Direct Costs (including Subcontracts). Section
8.10 addresses Fee. When applying the techniques of
Cost Analysis, it is important to remember that Price
Proposals are usually based on estimates of future
costs. It is unreasonable to expect anyone to estimate
future costs with needle-point accuracy. The estimates
are a combination of presently known information and
judgments used to project expected costs from the
presently known information.
8.5.5 Exhibit 8-1 is a sample Price Proposal which is
used to demonstrate Cost Analysis in the following
sections.
LABOR
8.6 Labor may be divided into direct and indirect.
* Direct Labor is performed by people whose effort
can be specifically identified with and charged to a
contract. Examples include engineers, draftsmen,
computer operators, laboratory technicians, etc.
* Indirect Labor may be performed by people not
directly associated with a contract but whose labor
supports its performance. Examples include
maintenance personnel, bookkeepers, secretaries
and other general and administrative personnel.
8.6.1 The allocation of labor to direct or indirect is a
Contractor's choice. However, since it is possible to
change total contract costs by shifting people from direct
to indirect labor, or vice versa, Contractors must identify
how they choose to categorize their employees.
Investigating this allocation is a function of Audits. Some
types of labor fit into one category or the other with very
little room for argument. An engineer performing design
is certainly direct labor. Conversely, the efforts of a firm
president who works on a wide variety of contracts and
other tasks, is most often Indirect Cost.
8.6.2 Administration, management, general
supervision, secretarial, clerical, bookkeeping and
accounting are categories of labor, which can be
PSA Manual Chapter 8 - Technical and Cost or Price Analysis
chap-08 Page 4 of 11 March 2014
allocated as either direct labor or indirect. Inspection is
another example. Some firms assign their inspectors on
a job specific basis and most of the inspector's time is
spent on that job until it is finished. Other firms may
have their inspectors "rove" from job to job making it
very difficult to keep track of the time they spend on any
particular job. Labor associated with equipment
operation, travel, telephone, reproduction, subcontracts,
etc., may be included as either Direct Labor or Indirect
Labor. Both methods have advantages and
disadvantages.
DIRECT COST OF DIRECT LABOR
8.7 "Direct Cost of Direct Labor" for a specific
contract consist only of base pay for the direct labor
expended in the performance of the contract. Fringe or
"payroll" benefits and Overhead are considered Indirect
Costs (Section 8.8).
8.7.1 As stated earlier, Technical Analysis and Cost
Analysis are often intermingled. This is especially true
when examining labor costs. First examine the skills
proposed, if they appear to be reasonable, look at the
hours proposed. If the hours are reasonable, check the
labor rates. Determine if any rates are higher or lower
than those of comparably qualified persons. If the
individual elements look reasonable, you can conclude
that the total estimated Direct Cost of Direct Labor is
reasonable. If any element is suspect, discuss it with
the Contractor.
8.7.2 As an example of this process, consider Table
8A, below, which is excerpted from Exhibit 8-1, Sample
Price Proposal (at the end of this chapter). The
comments following the tables demonstrate the type of
analysis required.
TABLE 8A - DIRECT LABOR PROPOSAL
Job Class Employee Hours Rate
($/hr)
Estimated
Cost
Project Manager Buster
Brown 2,370 $28.00 $66,360.00
Designer Lana
Lang 3,550 $24.00 $85,200.00
Draftsperson 1,660 $16.75 $27,805.00
TOTALS 7,580 $179,365.00
* Regarding proposed skills, a Project Manager,
Designer and Draftspersons are appropriate for the
project.
* The Pre-Solicitation Estimate (Exhibit 7-2) assumed
a full-time design effort by the Contractor for about 18
months. Buster Brown, the proposed Project Manager,
is also the principal partner of Brown and Lang. The
technical proposal indicated that Brown would dedicate
about half of his time to the contract and that Lang, the
designer, would work full time on the contract. The firm
employs two other designers, one of whom is
completing the third year of a four-year project while the
other is working on several smaller projects that will be
completed in a few months. The firm also employs one
draftsperson plus a secretary/bookkeeper.
* The proposed hours do not check out. Using 2,080
work hours per year, the cost proposal indicated that
Brown will devote about 13.7 months [(2,370/2,080)x12
= 13.67] and Lang about 20.5 months [(3,550/2,080)x12
= 20.48] to the contract. Lang's time sets the length of
the contract at 2.5 months more than anticipated. And
Brown's time equates to 70% of Lang's time -- not the
50% stated in the proposal. Drafting time is about 9.5
months [(1,660)/(2,080)x12 = 9.58] which appears high,
particularly since the firm has proposed using Computer
Assisted Design Drafting (CADD) equipment.
* The proposal is incomplete because it does not
include back-up data to explain the hourly estimates.
Labor hours cannot be verified with the given
information. Bulk figures are rarely enough to
substantiate estimated Direct Cost of Direct Labor. A
detailed breakout of direct labor hours to show their
derivation and justification is essential for a proper cost
analysis.
8.7.3 Upon request, the Contractor responded with the
information in Table 8B and a statement that payroll
records on file in its accounting section would support
the hours for similar work done by the firm.
TABLE 8B - HOURS BY JOB CLASS & TASK
Job Class Task 1 Task 2 Task 3 Total
Project Manager 1,000 1,100 270 2,370
Designer 900 2,250 400 3,550
Draftsperson 450 1,030 180 1,660
TOTALS 2,350 4,380 850 7,580
* Assuming the break-out is not supported by
comparison with the Pre-Solicitation Price Estimate or a
technical review, consider visiting the Brown & Lang
office (with a DOT&PF Internal Review Auditor, if
available) to see payroll records used to prepare their
proposal.
8.7.4 A person not trained in the professional fields
required may need help from qualified technical people
to perform the cost analysis. A technical review will
usually result in modifications or questions to be
addressed during contract negotiations. Generally,
proposed labor rates and other costs should not be
divulged to technical people during their evaluations
because knowledge of proposed costs could introduce
unwanted bias. Some of the questions to be answered
by a technical review are:
Are the identified tasks appropriate for the project
and adequately described?
Do the proposed hours agree reasonably with the
proposed tasks and methods for performing the
contract?
PSA Manual Chapter 8 - Technical and Cost or Price Analysis
chap-08 Page 5 of 11 March 2014
Are the proposed skill levels in line with the work to
be done? (Do not pay professional-level rates for
low-skilled tasks.)
Do excessive contingencies appear to be built into
the hourly estimate?
8.7.5 Lastly, are proposed rates per hour for each skill
reasonable? Several points about rates per hour must
be understood:
8.7.5.1 Use of average rates: Except for key personnel
named in a proposal, average rates for each skill rather
than exact rates may be acceptable because individual
salaries may vary for the same type work based on
length of service, merit educational qualifications, etc.
Proposals generally do not name all support personnel
who will be put on the job. The Contractor may even
hire additional people. Generally, "average rates" for
other than named key personnel are adequate for
estimating as long as the spread between actual direct
labor rates do not exceed $10/hour.
8.7.5.2 Forecast for time of performance: Rates may
be a forecast of what the Contractor believes will be in
effect at the time the work starts and for the duration of
the work. The successful Offeror must divulge the
current rates and the basis for the forecasted rates
during negotiations.
8.7.5.3 Recent changes in labor force: Rates may vary
with the size of the labor force. If a firm is forced by a
reduction in work to let people go, it will likely retain the
most valuable people and let the marginal workers go.
It is generally not practical to reduce the pay levels of
these higher quality workers who remain. The overall
affect will be to raise the average pay rate to a level
above what would otherwise be expected. If the firm
later sees an improvement in its volume of business, it
will hire additional people, generally at lower pay levels
than apply to long term employees. This addition of
people will gradually cause the average rate per hour to
fall.
8.7.5.4 Method of calculating rate: Rates per hour may
also vary among firms for employees doing the same
type work because of differences in the way rates per
hour are calculated. Some firms may calculate rates per
hour without including Fringe Benefits in the rates.
Other firms include costs of Fringe Benefits with base
pay when calculating the rates per hour. The two
methods will produce very different results.
8.7.5.5 Overtime Rates: Payment on Overtime should
be controlled by specific provisions negotiated into a
Contract. Exhibit 8-2 (at the end of this Chapter)
demonstrates overtime rate calculations.
8.7.5.6 Principals may be included in the Direct Cost of
Direct Labor for any time they are productively engaged
in work necessary to fulfill the terms of the Contract,
provided this is the firm's normal practice and that their
labor is not also included in Indirect Costs. If principals
perform routine services, such as standard design and
drafting work, which could be performed by lesser-
salaried personnel, the hourly rates billed for these
services should not exceed those rates paid to
employees performing the same or similar work.
8.7.5.7 Aside from verification by audit, labor rates may
be checked for reasonableness by comparison to Alaska
Department of Labor prevailing rates for the area,
comparison to rates proposed by other firms for similar
skills, and comparison to Alaska State Employee labor
rates (see Exhibit 7-1 at the end of Chapter 7) for similar
skills. Firms are likely to pay their employees the usual
rate in the area for people of like skills and experience.
Some firms may pay slightly higher labor rates or incur
somewhat higher labor-related costs (e.g. fringe
benefits) to reduce employee turnover. This is generally
cheaper than incurring continuous training costs to orient
new employees to the job. It is very important to
compare "apples to apples". Differences in the basic
methods of calculating rates may cause comparisons to
be very misleading.
INDIRECT COSTS (IDC)
Fringe or "Payroll" Benefits plus Overhead
8.8 Indirect Costs are any costs that are not direct.
This statement may seem ridiculous but it is a good
definition. Indirect Costs are expenses that cannot be
directly identified with specific contracts or tasks. They
can loosely be described as "general operating
expenses". Even a paperboy has Indirect Costs;
consider shoes worn out delivering the papers.
8.8.1 Contractors recover Indirect Costs by spreading
the costs among all contracts in the form of an Indirect
Cost Rate. In this handbook, Indirect Costs are divided
into three categories: 1) Fringe or "payroll" benefits, 2)
Overhead (General and Administrative Expenses), and
3) allocated "Home Office" Overhead (if applicable).
Examples of Fringe Benefits include social security
taxes, medical insurance premiums, and vacation time.
Examples of Overhead include building rent,
depreciation, utilities and Indirect Labor. Some travel,
auto, computer, etc. costs may also be Overhead if not
specifically attributable to a contract.
* Note: As stated above, some firms do not include
Fringe Benefits in Indirect Cost but choose to combine it
with base pay for a total salary rate. This handbook
always considers Fringe Benefits in the Indirect Costs
component of price for the purposes of uniformity and
price comparisons.
8.8.2 Allocation divides Indirect Costs among contracts,
tasks or activities. There are many ways to allocate
Indirect Costs and a full discussion is beyond the scope
of this text. Generally, when labor is a predominant
factor, bases such as Direct Labor Hours or Direct Cost
of Direct Labor are used. When both labor and material
are heavy components, it is better to use a base that
takes both labor and material into consideration.
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8.8.2.1 Because this handbook applies to Professional
Services, only the allocation of Indirect Cost based on
Direct Cost of Direct Labor is described for estimating
and analyzing contract costs. Professional Services
contracts are usually very labor intensive and Indirect
Costs can be allocated fairly among all contracts on the
basis of incurred Direct Cost of Direct Labor.
Occasionally, the use of a Direct Labor base may
distort total or unit costs for a particular service, product
or item of equipment. In such cases, an auditor should
be consulted to resolve the matter, perhaps with a
separate allocation method or negotiated unit price or a
fixed price.
8.8.2.2 Allocation of Indirect Cost using a Direct Cost
of Direct Labor base is accomplished as follows:
(Total IDC for FY) x 100 = IDCR %
(Total DCDL for FY)
If the Indirect Cost Rate (IDCR) is 150%, this means
that for every $1.00 of Direct Labor that is estimated or
incurred for a contract the maximum Indirect Cost the
Contracting Agency may agree to pay is an additional
150% or 1.5 times the Direct Cost of Direct Labor for a
total of $2.50. The IDCR provides a simple means for
estimating Indirect Cost for any contract. In Exhibit 8-1,
Brown & Lang estimated Direct Cost of Direct Labor at
$179,365. The Firm proposed an IDCR of 152% and
accordingly estimated $272,635 for Indirect Costs. This
example demonstrates the fact that Indirect Costs
typically exceed (and are sometimes more than double)
the amount of Direct Cost of Direct Labor.
8.8.3 Indirect Cost Rates (IDCR) can be applied in
several ways, as follows:
* Fixed (F) - IDCR is fixed for the duration of an
agreement.
* Fixed/Provisional (F/P) - IDCR is fixed for a specific
period after which it becomes a provisional rate
until an audit is completed and used to establish a
revised fixed rate.
* Provisional (P) - IDCR is provisional until
completion of a post performance audit to establish
the actual incurred rate which is used to establish a
final IDCR for the period covered by the audit. Post
performance audits may be done each fiscal year
or once after the completion of a multi-year
contract.
8.8.4 The Indirect Cost Rate (IDCR) is not negotiable;
however, the Contractor may request to be reimbursed
for a rate that is lower than the audited rate. The size of
a firm and its accounting practices can dramatically
affect its IDCR. Changes in a firm's management
objectives can affect the actual IDCR, e.g. decreasing
marketing emphasis and increasing emphasis on
reducing cost. The actual IDCR is not a static number.
Contractors are concerned that the IDCR allow them to
recover all costs associated with a Contract. The
Contracting Agency is concerned that we participate only
in an amount of Indirect Costs which results in a price
that is reasonable in light of prevailing market conditions
and which is not established solely on the basis of the
proposed Contractor's individual business situation.
8.8.5 Within DOT&PF when a pre-negotiation audit is
required, the analysis of Indirect Costs is accomplished
by the Internal Review Section. Internal Review Auditors
can ascertain the Contractor's accounting policies to
ensure that costs are allocated only once, and on only
one basis, to any contract. The complexities of cost
standards for negotiated contracts are considerable and
often a subtle issue can result in significant profit or loss
for the Contractor or Contracting Agency. For federally
supported contracts, some costs may be non-
participating. The Internal Review Audit Report
establishes an IDCR to be used for a designated period
in all contracts between DOT&PF and the Contractor.
8.8.5.1 When the Internal Review Section conducts pre-
negotiation audits, the audit staff confers with the
Contracts Officer or other appropriate staff prior to
releasing audit results to the Contractor. Allocation of
questionable indirect costs that do not benefit all
contractors in Alaska may be disallowed -- especially if
the proposed or audited IDCR is higher than the industry
norm for other acceptably qualified contractors. The
involved staff then meets with the Contractor to establish
a Fixed/Provisional IDCR to be applied to all DOT&PF
contracts statewide. The Fixed/Provisional IDCR is fixed
for the last six months of the Contractor's current fiscal
year plus the first six months of the Contractor's next
fiscal year, after which it becomes Provisional until
another audit is completed and a new Fixed/Provisional
rate is negotiated.
* In certain cases, when a Contractor's actual annual
audited IDCR fluctuates significantly (e.g., 15% or
more), a Provisional IDCR may be necessary in lieu
of a Fixed/Provisional rate.
8.8.6 In federally assisted contracts, the amount of
federal funding participation for Indirect Costs is
limited by the IDCR established in the Contracting
Agency's approved Audit Report. If payments to a
Contractor exceed the amount calculated using the
established rate, the amount in excess may be non-
participating.
OTHER DIRECT COSTS (ODC)
8.9 Although Direct Costs of Direct Labor are the
primary direct costs incurred for Professional Services
Agreements, "Other Direct Costs" may be incurred
specifically for a contract and readily charged to it.
Examples include Subcontracts and Expenses for the
following:
* Transportation
* Food and lodging
* Materials and supplies
* Reproduction
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* Laboratory tests
* Computer time
* Special equipment (purchase, rental or use)
8.9.1 Pre-Solicitation and/or Pre-Proposal Estimates do
not usually include a list of all direct cost items which
may be necessary for performance of the contract,
although some major items may be identified. In fact,
an Offeror's proposed direct expenses may vary greatly
from Agency estimates, based on the Offeror's
organization and approach to performing the contract.
For example, out-of-town contractors will have differing
transportation costs; "high-technology" firms may have
low direct labor coupled with high computer usage.
Specialized engineering firms may subcontract for
some disciplines that are provided "in-house" by other
firms. As described in the section on Indirect Cost,
some firms may include all non-labor costs in their
IDCR - others may prefer a low IDCR and keep
meticulous records for direct cost accounting - while
others may choose some intermediate level of direct
cost accounting. Thus, the first task when analyzing
Other Direct Costs, is to "flag" those items which may
be duplicated in the Indirect Costs. Discussion with a
Contracts Officer or Auditor may help with this task.
8.9.2 The analysis of Other Direct Costs is done
essentially the same way as for Direct Cost of Direct
Labor -- i.e., examination of each line item and quantity
for applicability to the contract, followed by examination
of cost and Fee for each item. The following general
comments may be useful:
* Travel Costs: If you contract with a local firm you
may receive more labor hours for the same amount
of money than if you contract with an out-of-town
firm. You must decide if the qualifications of a non-
local firm warrant the travel costs.
* Transportation: Rented vehicles should be
economy rates. Airfare should be coach class.
Charter flights only if absolutely necessary.
* Food/Lodging: Generally limit amounts to the
appropriate Alaska State Employees per diem
schedule, unless circumstances (identified in
writing) warrant higher rates.
* Equipment, Materials and Supplies: Are they
necessary? If so, are the proposed costs
reasonable? Rates for materials, vehicle and
equipment time, computer time, laboratory tests,
reproduction, etc., can result in an unreasonable
profit if they are not based on actual Contractor
costs (purchase price, operational and
maintenance expense, depreciation and
technological obsolescence, etc.). If not included in
Indirect Costs, allowable equipment expenses are
generally limited to a direct cost rate based on IRS
code useful life criteria and a minimum 240 day
annual usage. Profit is determined separately
(Section 8.10).
* Unit pricing without cost analysis may be used
only when a proposed price is established
practice with the primary vendor and it is based
on non-discounted price lists available to the
general public. Also, there must exist substantial
(exceeding 60%) demonstrable sales history to
non-government clients if the total price for all
units of an item may exceed the statutory Small
Procurement limit.
* Note: Comparison to "market rates" is not an
acceptable measure of contractor costs when the total
price for all units of an item may exceed the statutory
Small Procurement limit. The difference between a
"market rate" and Contractor cost is Profit.
* Subcontracts: Consider the Offeror's procurement
procedures (e.g., negotiated or bid) and control
exercised over Subcontract cost (Subcontract
"Price" is a "Direct Cost" to the Offeror). Each
Subcontract exceeding $250,000 must be
subjected to a Cost Analysis and audit. Be alert
to possible pyramiding of costs and profits by
agreements between divisions, plants or
subsidiaries of a firm or between Subcontractors and
lower tier Subcontractors. These possibilities require
extra scrutiny. Proposed prices should be on the
basis of cost incurred.
* E & O Insurance Premiums for some policies of
Professional Liability Insurance for Errors and
Omissions coverage are based on a formula which
involves a percentage of the insured firm's annual
gross cash flow. In such cases, a contract that
includes a substantial amount for Subcontracts
could significantly increase a firm's E & O Insurance
Premiums for a future policy period. Accordingly, it
may be reasonable to negotiate a special allowance
for E & O Insurance premiums.
8.9.3 Lastly, consider if the line item costs and total for
Other Direct Costs are reasonable for the Statement of
Services. This is generally a subjective decision based
on the Contractor's comprehension of the scope and
overall approach to performing the contract.
8.9.4 As an example of this process for analysis of
Other Direct Costs, consider Table 8C, below, which is
excerpted from Exhibit 8-1, Sample Price Proposal (at
the end of this Chapter). The "#s", shown in the right
column, are keyed to the comments that follow the table
and demonstrate the type of analysis required. The
Contractor was asked for additional information, which is
included in the analyst's comments.
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TABLE 8C - OTHER DIRECT COSTS PROPOSAL
Item Under Analysis Proposed
Amount
Negotia
Obj #
Subcontracts
Photogrammetric Cross Sect
Repro: 20 CPS, 400 Dwgs
$5,036
18,000
$5,036
7,500
1
2
Firm Owned Equipment
CADD
Van 4X4
83,000
16,800
0
12,000
3
4
Travel
ANC/FAI, 2 trips, 3 days, 2 pers
ANC/JNO, 2 trips, 3 days, 2 pers
3,400
3,900
1,175
0
5
6
TOTALS $130,136 $25,711
Comment #1: Proposed Subcontract in the amount of
$5,036 for photogrammetric cross sections is
acceptable. The amount is reasonable and it is based
on adequate competition since the Contractor obtained
three proposals for the work as shown in Table 8D.
TABLE 8D - PHOTOGRAMMETRIC CROSS SECT
Larry's Air Photo Services $4,985 16 work days
Curly Photogrammetry Co. $5,490 15 work days
Moe's Mapping $5,036 10 work days
* Moe's Mapping was selected based on second low
offer and ten workdays versus 16 workdays for the
lowest offer.
Comment #2: Subcontractor charges $2.25/drawing for
color reproduction. Only 10 copies will be needed of
any drawings thus estimate may be cut in half. Check
print shops for costs. Also consider black and white
reproductions for some of the drawings. Also how were
number of drawings estimated?
Comment #3: Computer Assisted Design Drafting
equipment is the largest cost item. Contractor's
estimate is based on $50/hour standard billing rate,
which includes operator. Since the CADD estimate of
1,660 hours includes operator, why does the Direct
Cost of Direct Labor estimate include 1,660 hours for
draftspersons at $16.75/hour?
It appears that the CADD operator hours are double
counted in the estimate. Subtracting the operator costs
($16.75 x 2.52 = $42.21) from the proposed $50/hr rate
leaves $7.99/hr for equipment costs. The Internal
Review Audit Report states that all equipment
expenses (including CADD) are included in the IDC
Factor -- thus no separate equipment rate charges are
allowed. The Auditor reviewed accounting data and
established that 3.5% of the 172.5% can be attributed
to CADD expenses. Change estimate for CADD to
zero.
Comment #4: Contractor estimated use of the firm's
van based on 40 hours/week for 84 weeks at $5/hour or
$16,800. This represents $40/day or $200/week, which
appears reasonable; however it is doubtful that the van
would be used only for this project. Also, is the van a
personal employee vehicle? Leased van might cost
$6,000/year. Two years = $12,000.
Comment #5: Trips to Fairbanks and Juneau proposed
for familiarization with functional requirements and
operations. One trip to Fairbanks appears reasonable.
Juneau Airport is not state owned and its geographical
conditions are not at all similar to those at FIA, AIA or
the project site. Agency staff can coordinate with Juneau
Airport for any necessary information. Food and lodging
should not exceed state per diem rates unless specific
reasons are cited during negotiations. A revised travel
cost estimate is presented in Table 8E:
TABLE 8E - FAIRBANKS TRIP
Expenses Proposed Negotiation Obj
Airfare 2RT @ $250 = $500 2RT @ $250 = $500
Food & Lodging 6 days @ $150 = $900 6 days @ $85 = $510
Car Rental 3 days @ $100 = $300 3 days @ $55 = $165
Cost for 1 Trip $1,700 $1,175
Cost for 2 Trips $3,400 $0
Comment #6: Juneau trips deleted per Comment #5.
FEE
(Profit)
8.10 Profit is the basic motive of business enterprise.
Simply put, it is the amount left after all costs of doing
business are paid. Contractors desire to maximize profit.
Maximum Profit (Price - Cost)
The Contracting Agency seeks to pay no more than a
fair and reasonable price, wherein the exact amount of
profit that a Contractor makes depends on the
Contractor's initiative in controlling its costs.
Fair Price (Cost + Profit)
The motivations of the Contractor and Contracting
Agency are not the same.
* Note: See paragraph 8.3.2 for an explanation of
Profit verses Fee. The term "Fee" will be used
hereafter.
8.10.1 When negotiating Fee, a common
misconception is that the negotiated Fee is what the
Contractor will actually net after costs are paid. Analysis
of a Contractor's Price Proposal results in setting
negotiation objectives for Cost and Fee. This enables
the Contracting Agency to enter price discussions with
goals for Cost and Fee to be achieved if reasonably
possible. As noted above, the Contractor enters price
discussions with a different focus. When an agreement
is reached on estimated Cost and Fee or on a Fixed
Price and a contract is executed, it does not guarantee
that the Contractor will actually make the negotiated
amount for Fee. The Price Proposal, Cost Analysis and
negotiation process is based on estimates of future costs
and a reasonable Fee based on those estimated costs.
Actual costs will rise and fall because of factors beyond
precise control by either party and/or factors that cannot
be anticipated. The chances of actual cost coinciding
exactly with the negotiated amount are slight; and so the
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same with Fee. This is true even in a cost
reimbursement contract; if the Contractor incurs some
costs that are disallowed, it takes a loss on those costs
which reduce its Fee.
8.10.2 There is no single formula for determining a
reasonable Fee. Some Contractors set Fee goals, e.g.
20% of costs. If a Contractor does not make its goal on
one contract, it will try to make up the difference on
another contract. Contractors are not required to submit
a detailed computation to support their proposed Fee,
and they seldom do so. Many government agencies
use "Structured Fee" systems to calculate a "Fee
Objective" based on the Cost Objectives determined for
a contract. The sum of Fee Objectives and Cost
Objectives yields in a systematic way, a fair and
reasonable Price in which Fee is a function of risk,
effort, skills, etc. required for a contract. An explanation
of how to calculate the Fee Objectives for each Cost
Component is contained in the Instructions with the file:
"feewksht".
8.10.3 A Fee Objective Worksheet should be
completed for each Contract, Subcontract and any
change to a Contract or Subcontract, which exceeds
$250,000. While it is possible to manipulate the
calculation to arrive at a pre-determined amount of Fee,
it (aside from being a ridiculous effort) would be a
violation of these procedures to do so. Preconceived
notions of what a "proper" Fee is (generally in terms of
a percent of cost) shall not be used in structured Fee
determinations.
* Caution: The Fee Worksheet provides an
"objective", not a mandate. Fee is a small amount of
total contract Price. Keep it in perspective. The real
opportunities for Price savings generally result from
Cost, not Fee, negotiations.
8.10.4 Lastly, while proposed contract Costs and Fee
may be reasonable for a specific contractor, this does
not guarantee that the proposed Price is reasonable, if
it is higher than what other firms with similar
qualifications and abilities might charge.
METHODS OF PAYMENT
(Contract Types)
8.11 Methods of Payment are grouped into two broad
categories: "Fixed Price" and "Cost Reimbursement".
The most significant difference between these
categories is the Contractor's obligations to complete all
necessary services and the Contractor's degree of
responsibility for cost control.
8.11.1 "Fixed Price Methods" require the Contractor to
complete the contract, regardless of cost, for the
amount of a Firm Fixed Price specified in the contract.
Fixed Price methods are preferred for use and should
be used when the extent and type of work necessary to
meet contract requirements can be reasonably
specified and the cost can be reasonably estimated.
With this method, the Contractor's ability to make a
profit is directly related to the Contractor's control of
performance costs. However, when risks are unknown or
not readily measurable in terms of cost, the use of Fixed
Price contracts can result in inflated prices, poor
performance, disputes, and claims when performance
proves difficult; or excessive profits when anticipated
contingencies do not occur.
8.11.2 Cost Reimbursement Methods require the
Contractor to perform as specified in the Contract until it
is completed or until incurred costs reach a specified
Ceiling Cost, whichever occurs first. The Contractor may
complete the contract for less than the Ceiling Cost, in
which case the Contracting Agency obtains a price
savings over the contract estimate; or, the Contractor
may fail to finish the work within the Ceiling Cost. In the
latter case, the Contracting Agency may (1) modify the
contract to increase the Ceiling Cost or (2) terminate the
contract and accept whatever work has been completed.
The Contractor may not exceed the Ceiling Cost (except
at its own expenses) without prior approval and a
contract amendment executed by both parties.
8.11.2.1 The Contracting Agency assumes all, or
essentially all cost risk under a Cost Reimbursement
method of payment and pays, in addition to costs, a Fee
as specified in the contract.
8.11.2.2 Cost Reimbursement is appropriate when the
uncertainties involved in contract performance are of
such magnitude that the cost of contract performance
cannot be estimated with sufficient certainty. Cost
Reimbursement methods require close monitoring of the
Contractor's performance to ensure that the objectives of
the contract are being met without excessive costs.
8.11.3 The objective when selecting a Method of
Payment is to obtain the best value on services in the
time required and at the lowest price to the Contracting
Agency. To achieve this objective, the elements of cost,
time, risk, and profit incentives bearing on the
performance must be evaluated. Among the factors to
consider are:
* Type and complexity of the services to be procured.
* Difficulty of estimating performance costs such as
the inability of the Contracting Agency to develop
definitive specifications to identify the risks to the
Contractor inherent in the nature of the work to be
performed, or otherwise to establish clearly the
requirements of the contract.
* Administrative costs to both parties.
* Degree to which the Contracting Agency must
provide technical coordination during the
performance of the contract.
* Stability of wage levels.
* Urgency of the requirement.
* Length of contract performance.
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8.11.3.1 Final selection of method is a matter for
contract negotiations because Method of Payment and
Price are interrelated. Also, during negotiations, the
extent and nature of uncertainties involved in contract
performance are identified as well as their impact on
price. The negotiation process is presented in Chapter
9.
8.11.3.2 It is self-defeating for the Contracting Agency
to agree to a Method of Payment that would place an
unreasonable economic risk on the Contractor since
such action may jeopardize satisfactory performance of
contract.
8.11.4 Specific Methods of Payment range from "Firm
Fixed Price", in which the Contractor must complete all
services required and the Contractor has full
responsibility for performance costs and resulting profit
(or loss); to "Time & Expenses", in which the Contractor
serves as needed with little, if any responsibility for
performance cost. In between are various methods that
are tailored to the degree of performance uncertainties,
cost responsibility and the opportunity for profit.
8.11.4.1 Methods used for Professional Services
Agreements are generally those described in this
Chapter. Other methods - except Cost Plus a
Percentage of Cost - may be used if the Contracting
Officer makes a written determination that such method
is in the best interest of the Contracting Agency and if
all funding entities concur.
8.11.4.2 For a more extensive discussion of
Methods of Payment ("Types of Contracts") see 48
CFR 1, Subpart 16, and the ABA Model
Procurement Code (1980) Chapter 3, Regulation 3-
501.
8.11.4.3 In accordance with AS 36.30.370 and 48
CFR 1, Subpart 16.301-2(C), a Cost Reimbursement
method may be used only if the Contracting Officer
determines in writing that:
Such a contract is likely to be less costly to the
Contracting Agency than any other type or that
it is impracticable to obtain otherwise the
supplies, services, or construction.
The Contractor's accounting system will permit
timely development of all necessary cost data
in the form required by the specific contract
type contemplated.
The Contractor's accounting system is
adequate to allocate costs in accordance with
48 CFR Part 31.
Contracting Agency personnel will be assigned
to closely monitor performance of the work by
the Contractor.
FIRM FIXED PRICE (FFP)
8.11.5 The Firm Fixed Price method provides a price
that is not subject to adjustment because of variations in
the Contractor's cost of performing the work specified in
the contract. The Fixed Price, once negotiated, may be
adjusted only as a result of subsequent changes in the
services. Fixed Price, when appropriately applied, places
maximum risk upon the Contractor. Because the
Contractor assumes full responsibility, in the form of
profits or losses, for all costs under or over the Firm
Fixed Price, the Contractor has a maximum profit
incentive for effective cost control and contract
performance. Use of Firm Fixed Price imposes a
minimum administrative burden on the contracting
parties. Firm Fixed Price is suitable for use when
reasonably finite design or performance specifications
are available and when a fair and reasonable price can
be established at the outset. Such as when:
Adequate competition has made initial proposals
effective
There are reasonable price comparisons with prior
purchases of the same or similar services which
were made on a competitive basis or supported by
valid cost or pricing data
Cost information is available permitting the
development of independent estimates of the
probable costs of performance
The uncertainties involved in contract performance
can be identified and reasonable estimates of their
possible impact on costs made, and the Contractor
is willing to accept a Firm Fixed Price at a level
which represents assumption of a reasonable
proportion of the risks involved
8.11.5.1 Payments of a Firm Fixed Price may be "Lump
Sum" or monthly "Progress Payments".
8.11.5.1 A form of Firm Fixed Price is Unit Prices in
which specific, all-inclusive rates of payment for items of
work, such as reproduction, printing, computer time, and
standard materials testing (laboratory and field) are
established. Unit Prices require constant and direct
control by the Contracting Agency and should not be
used without an audit if the total amount of a unit priced
item in a Contract or Subcontract exceeds the statutory
Small Procurement limits.
FIXED PRICE PLUS EXPENSES (FPPE)
8.11.6 The Fixed Price Plus Expenses method provides
for reimbursement of particular Direct Expenses that are
not included within the Fixed Price. FPPE reduces
Contractor risk for the particular expenses cited in the
Contract. It provides some flexibility when a Fixed Price
for Direct Cost of Direct Labor, Indirect Costs and Fee
can be negotiated, but Other Direct Costs, e.g.
transportation, materials, laboratory test, subcontracts,
etc., may vary considerably dependent on need, quantity
or other factors. In addition to the Fixed Price, the
Contractor is reimbursed for the particular expenses not
to exceed an established Ceiling Price.
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COST PLUS FIXED FEE (CPFF)
8.11.7 The Cost Plus Fixed Fee method provides for
payment to the Contractor of an agreed Fixed Fee in
addition to reimbursement of allocable incurred costs,
not to exceed an established Ceiling Cost. The Fee
does not vary whether or not the actual cost of contract
performance is greater or less than the initial estimated
cost. Thus although the Fee is fixed, the price will
depend on the allocable costs reimbursed. The Fee is
subject to adjustment only if the contract is modified to
provide for an increase or decrease in the Statement of
Services specified in the contract.
8.11.7.1 The Statement of Services must clearly
define specific goals and specific end products
required. The Contractor must complete and deliver the
specified end-products as a condition for payment of
the entire Fixed-Fee and within the Target Ceiling Cost
if possible. In the event the work cannot be completed
within the Target Ceiling Cost, the Contracting Agency
can elect to require more work and effort from the
Contractor without any increase in Fee provided it
increases the Target Ceiling Cost.
8.11.7.2 CPFF provides the Contractor with only a
minimum incentive to control costs. Conceptually, the
CPFF method, wherein all costs risk is that of the
Contracting Agency, is the exact opposite of a Firm
Fixed Price, wherein all cost risk is that of the
Contractor. CPFF is suitable for use when the extent of
labor and expense cannot be accurately established or
when the level of effort required may vary with the
results of services provided. In such cases, a cost
underrun or overrun could result more from the
uncertainties than from the Contractor's effort, or lack of
effort, at Cost Control. However, because CPFF does
not recognize or encourage cost control measures, it is
a least desirable Method of Payment. Use of CPFF
imposes a major obligation on the Contracting Agency
to manage the contract effectively and efficiently as
possible.
TIME AND EXPENSES (T&E)
NOTE: The T&E Method of Payment is prohibited on
all FAA funded contracts for the Prime Contractor.
The T&E Method of Payment may be utilized for
subcontractors.
8.11.8 The T&E method of payment is used to obtain
labor at a fixed and specified hourly rate, (which includes
all base salary cost, indirect cost, and Fee) plus
expenses at cost, with a Target Ceiling Price. If
expenses are zero, this method may be referred to as
"Labor Hour". Another variation of the T&E method uses
a per diem rate in lieu of hourly rates. Such a method is
common for court appearances or other engagements in
which the Contractor appears as an expert. The per
diem charge is considered earned for each day,
although the Contractor may finish in a fraction of the
day.
8.11.8.1 T&E is used when it is not possible at the time
of contracting to estimate accurately the extent or
duration of the work or to anticipate costs with any
reasonable degree of confidence. For Construction
Related Professional Services contracts, the T&E
method should be used only for Small Procurements,
Subcontracts or elements within a contract, each not
exceeding the statutory Small Procurement limits.
Although it may be necessary, the use of T&E is not
favored because it provides no incentive for Contractor
cost control or labor efficiency. The Contracting Agency
must perform very close surveillance of the Contractor to
ensure that efficient methods and effective cost controls
are used.
8.11.8.2 The T&E Method of Payment is not
considered a "Cost plus Percent of Cost" contract
prohibited by AS 36.30.370 and federal regulations.
Under T&E, the Contractor's Profit is not determined as
a percentage of the total cost of a contract; rather profit
is a component of the "Unit Price(s)" for labor hours.
Expenses are reimbursed at Direct Cost and a Target
Ceiling Price for the total of labor and expenses is
established in each Contract. The Ceiling Price may only
be exceeded if a contract Amendment is executed.
8.12 Exhibit 8-4 presents a comparison of each Method
of Payment based on an estimated $650,000 contract.
PSA Manual Technical and Cost or Price Analysis
exh-8-1 Chapter 8 March 2014
Exhibit 8-1
SAMPLE - PRICE PROPOSAL
Note: For complicated or large projects with multiple tasks and subtasks, the sample price proposal shown here would
likely be a summary page attached to a collection of spreadsheets providing Direct Costs of Direct Labor, Other Direct
Costs and Fee for each task/subtask (See the file: "estimate.xls").
BROWN AND LANG INC. Boondocks International Airport
Project # 78-93
DIRECT COSTS OF DIRECT LABOR (DCDL)
Job Classification Name Hours $/Hour Estimated Cost
Project Manager Buster Brown 2370 28.00 $ 66,360
Designer Lana Lang 3550 24.00 85,200
Computer Operator --- 1660 16.75 27,805
Total DCDL = $ 179,365
INDIRECT COSTS (IDC)
Indirect Cost Rate (IDCR) = 152% of Direct Cost of Direct Labor IDC Amount = $ 272,635
OTHER DIRECT COSTS (ODC)
Subcontracts Quantity $/Unit Estimated Cost
Mo's Mapping - Subcontract for
Photogrammetric Cross Sections ----- ----- $ 5,036
Quick Print - Subcontract for
Reproduction, 200 cps of 400 dwgs ----- ----- 18,000
Subtotal for Subcontracts = $ 23,036
Expenses
CADD 1660 Hours 50.00 83,000
Van 4x4 3360 Hours 5.00 16,800
Travel ANC/FBX, 2 Trps, 3 Days, 2 Pers ----- ----- 3,400
Travel ANC/JNO, 2 Trps, 3 Days, 2 Pers ----- ----- 3,900
Subtotal for Expenses = $ 107,100
Total ODC = $ 130,136
TOTAL ESTIMATED COST (Sum of DCDL+IDC+ODC) = $ 582,136
FEE (Proposed AMOUNT) = $ 69,856
TOTAL PROPOSED PRICE $ 651,992
Prepared By:
Buster Brown Date
I-live-in-a-shoe
(907) 274-1722
PSA Manual Technical and Cost or Price Analysis
exh-8-2 Chapter 8 March 2014
Exhibit 8-2
CALCULATION OF OVERTIME RATES
B = Base, Hourly, Direct Labor Rate paid to employee
OH = Overhead Costs (facilities, utilities, Indirect Labor, Social Security, health plans, pensions, vacation/sick
leave, etc.)
FEE = Profit = (Price-Cost)
Regular Billing Rate
Regular Time billing Rates shall be the sum of the person’s actual Direct Labor Rate plus an allowance for Indirect
Cost at the then current Agency approved Indirect Cost Rate for the person’s employer (firm) plus a fee (profit) of ten
percent; e.g.: $25 + (1.5 x $25) + (.10 x [$25+(1.5 x $25)] = $68.75
If OH = 150%, and FEE = 10%, then:
Regular Billing Rate = (B + 150%B) x (1 + 10%) = 2.75 x B.
If B = $20/hour, then Rate = 2.75 x $20.00 = $55.00/hour.
Overtime (OT) Billing Rate
Overtime (OT) Billing Rates shall be the sum of the person’s actual direct labor rate times 1.5 plus an allowance for
Indirect Cost at the then current Agency approved Indirect Cost Rate for the person’s employer (firm) plus a fee
(profit) of ten percent; e.g.: ($25 x x1.5) + [$25 x 1.5) x 1.5] + (.10 x [$37.50 + (1.5 x $37.50)] = $103.13
Notes
(1) All percentages were assumed for this example. Actual percentages may vary for each Contractor and each
Contract.
(2) This example assumes all overtime costs of direct labor are included in the cost pools for Fringe Benefits and for
Direct Labor that are used to calculate the applicable Indirect Cost Rate (FB + OH).
(3) In a Cost Plus Fixed Fee contract, the Direct Labor Rate for Overtime Hours would = 1.5 x Regular Direct Labor
Rate, e.g. 1.5 x $20.00 = $30.00/hour.
(4) T&E – overtime will be calculated using 1.5 times the base rate (DL & IDCR) then the profit factor added.
PSA Manual Technical and Cost or Price Analysis
exh-8-3 Chapter 8 March 2014
Exhibit 8-3
DOT&PF FEE WORKSHEET
Confidential when completed by Agency personnel - Not for public disclosure until after contract award.
Prior to using this Worksheet, an Independent Cost Estimate or the Contractor's Price Proposal must be done to establish the
amounts for Direct Cost of Direct Labor, Subcontracts, and Special Expenses to be used.
Project Title:
Contractor or Subcontractor:
Prepared by & Date:
FEE FOR DIRECT COST OF DIRECT LABOR (DCDL)
ESTIMATED DIRECT COST OF DIRECT LABOR $0
BASE LEVEL 7.0%
CONSIDERATIONS
SCHEDULE (2% Maximum)
Typical Delivery = 0.0%
Aggressive Delivery = 1.0%
Very Aggressive Delivery = 2.0% 0%
SIZE (2% Maximum)
Less than $250,000 = 2.0%
$250,000 - $1,000,000 = 1.0%
More than $1,000,000 = 0.0% 0%
DURATION (2% Maximum)
Less than 1 year = 0.0%
1 to 2 years = 1.0%
More than 2 years = 2.0% 0%
COMPLEXITY (2% Maximum)
Low = 0.0%
Low to Mid = 0.5%
Mid = 1.0%
Mid to High = 1.5%
High = 2.0% 0.0%
OTHER / SPECIAL (+/- 2% Maximum)* 0.00%
DCDL - TOTAL FIXED FEE (Maximum 15%) 7.0% $0
FEE FOR INDIRECT COST (IDC) based on the Direct Labor Amount 1 15% $0
FEE FOR SUBCONTRACTS (Maximum 5%) $0 0.00% $0
TOTAL NEGOTIATED FEE $0
TOTAL FEE NEGOTIATION OBJECTIVE BASED ON Cost Plus Fixed Fee METHOD OF PAYMENT
* Explanation
1 - The Fee for Indirect Cost is calculated using 15% of the estimated Direct Labor amount - NOT OF THE INDIRECT COST
AMOUNT. This percentage is fixed for all contracts.
PSA Manual Technical and Cost or Price Analysis
exh-8-4 Chapter 8 March 2014
Exhibit 8-4
METHODS OF PAYMENT COMPARISON
CONTRACT ESTIMATE ACTUAL COSTS
COST COMPONENT AMOUNT LOW HIGH
Direct Labor $200,000 $150,000 $300,000
Indirect Cost (@ 150% of DL) $300,000 $225,000 $450,000
Expenses $100,000 $75,000 $150,000
Subtotal of Costs
$600,000
$450,000
$900,000
Fee (@ 25% of DL) $50,000
Total Estimated Price
$650,000
METHOD OF CONTRACT ACTUAL COST vs FINAL PAYMENT RESULTANT FEE **
PAYMENT PRICE LOW COST HIGH COST * LOW HIGH
Firm Fixed
Price $650,000 $450,000 vs $650,000 $900,000 vs $650,000 $200,000
53.3%
$(250,000)
loss
Fixed Price
Plus Expenses
$550,000
+< $100,000 $450,000 vs $625,000 $900,000 vs $700,000 $175,000
46.7%
$(200,000)
loss
Cost Plus
Fixed Fee
< $600,000
+ $50,000 $450,000 vs $500,000 $900,000 vs $950,000 $50,000
13.3%
$50,000
6.7%
Time and
Expenses *** < $650,000 $450,000 vs $487,500 $900,000 vs $975,000 $37,500
10.0%
$75,000
10.0%
* Final payments higher than the contract price assume that the Contractor timely notified the Contracting Agency
about potential overruns of reimbursable costs and that the Agency issued a contract amendment in order for the
Contractor to complete performance of the contract.
** Fee PERCENTAGES were calculated by dividing the amount of Resultant Fee by the sum of actual Direct Labor
Cost excluding Indirect Cost and Expenses.
*** The Fee AMOUNT for Time and Expenses was calculated at ten percent of the actual costs for Direct Labor plus
Indirect Cost. For a T&E contract, Fee is included in the hourly Billing Rates and would not be addressed
separately as is done in this table to compare it with the other Methods of Payment.
Clearly, when the Contractor and Contracting Agency are able to sufficiently define the services required such that a
Fixed Price contract results, then the Agency is more likely to benefit with a fair and reasonable final price within
budget and the Contractor has the greatest opportunity for profit (or loss).
A Time and Expenses contract; however, provides little restriction on the final price the Agency may be required to
pay for complete contract performance. It guarantees the Contractor a fixed percentage for profit with no incentive
for cost control. The more labor expended, the higher the price – and profit.
CAUTION: These examples are very generalized. Contracts should be negotiated with the intent of providing a fair
and reasonable profit. A Contractor's losses will most likely be reflected in quality of services, particularly in final work
products.
PSA Manual Chapter 9 - Negotiations
chap-09 Page 1 of 5 March 2014
Chapter 9
NEGOTIATIONS
ACTIVITY # 9
Text of this chapter has been specifically written for contracts exceeding $250,000; however, the concepts presented
apply to all negotiations regardless of contract size. Less "formality" is used for contracts under $250,000.
NEGOTIATION TEAM
9.1 For contracts in excess of $250,000 the Project
Manager and at least one other person shall be
appointed by the Contracting Officer to a negotiation
team. If more assistance is needed, additional
members who possess the range of disciplines and
skills appropriate to evaluate the services required may
be appointed. Characteristics that the team should
possess are: knowledge of negotiation techniques, a
willingness to listen effectively to a Contractor's
position, and the ability to craft responses which meet
Agency objectives. The individual best able to isolate
issues and communicate effectively should be the
principle negotiator. The team must decide how many
persons will represent the Agency at negotiation
meetings.
* Advantages to a sole negotiator include the
avoidance of any open disagreements among the
Agency team, and also a psychological advantage
of being able to put off some response to a
Contractor's proposals or inquiries until after private
consultation with the team. Disadvantages to a sole
negotiator include the need to be a master-at-
everything and the difficulty in keeping track of
overall negotiation progress while focusing on
specific issues.
* Advantages of team negotiations include greater
depth of discussion wherein important technical,
schedule or cost issues are less likely to be
overlooked. A greater source of facts and
experience is readily available.
NEGOTIATION OBJECTIVES
9.2 Successful negotiations derive from adequate
preparation.
9.2.1 First, a thorough understanding of the project,
priorities, problems, alternatives, and schedule, is
essential. During negotiation, the Contractor will
present a task breakdown which is its proposed
methodology for performing the contract. This proposal
must be analyzed for many parameters. Will it
accomplish the project goals? Does it use accepted
practices and procedures or is it suggesting innovative
methods? Contractors often attempt to market services
at this stage. They present a task breakdown that
includes services, although useful and perhaps
desirable, may not be absolutely necessary. Judgment
must be exercised to determine what services are
essential and what are window dressing. Then you
must convey your position to the Contractor - which
may require suggesting alternative methods or
reference to historical precedent to convince an
aggressive Contractor.
9.2.2 Secondly, negotiation centers around cost
estimates. Prior to obtaining and opening any
Offeror's Price Proposals, an INDEPENDENT Pre-
Proposal estimate must be prepared. This Estimate
must be as thorough and detailed as if you were
submitting a Price Proposal for the contract. It must
address labor, expenses, subcontracts and profit.
Chapter 8 provides a discussion of the components of
price (which are also summarized in Chapter 7).
9.2.3 Remember, however, that estimates are just that.
No one knows how much a job will actually cost. Yet
contracts must have a price attached. Contractors
present hourly breakdowns which must be analyzed in
detail. How much time is appropriate for development of
a base map? Or for development of a typical cross
section? If 100 hours are required, is it justified to have
a professional civil engineer at $100 an hour expend 60
hours and an engineering assistant at $45 an hour
expend 20 hours and a draftsperson at $35 an hour
expend 20 hours; or should it be an engineer for 35
hours, an assistant for 40 hours and a draftsperson for
25 hours? Your position must be supported based on
experience and other appropriate justification. For
example, how much work can an engineering assistant
perform in an hour? How many hours per task? Are
special analyses required or is available data sufficient?
Are site visits necessary or are "as-built" drawings
adequate to complete the service?
9.2.4 Develop negotiating positions regarding the
Contractor's proposal. Organize your analysis around
the following separate elements:
* Statement of Services (per Chapter 7) - Tasks,
Subtasks, Labor Effort, Equipment needed, and
Materials needed.
* Schedule.
* Costs (per Chapter 8) - Direct Cost of Direct Labor,
Indirect Cost (Fringe Benefits and Overhead) and
Other Direct Cost (Subcontractors, Equipment and
Reimbursable Expenses).
Fee - (For contracts over $250,000 use file;
"feewksht").
9.2.5 Prepare a list of Negotiation Objectives, which
should address at least the following:
* each issue to be negotiated.
PSA Manual Chapter 9 - Negotiations
chap-09 Page 2 of 5 March 2014
* a minimum and maximum position on each issue.
* the order in which issues will be presented to the
Contractor.
* Cost Objectives (minimum and maximum amounts)
for DCDL, IDC and ODC.
* Fee Objective (minimum and maximum amounts)
with consideration of the Method of Payment
desired and other methods which may be
acceptable.
* Total Price Objective (perhaps one for Fixed Price
and another for CPFF).
9.2.6 The fundamental objective of all negotiations is to
ensure a full understanding of each party's expectations
and obligations and to agree upon a Price that is
reasonable for the services provided and establish the
Contractor's Fee at an amount that is appropriate for
the effort expended. Rarely will you and the Contractor
fully agree on every point; however, both parties must
bargain with the understanding that compromise might
be necessary to achieve agreement. Exhibit 9-1 is an
example of Negotiation Objectives, based on the Brown
and Lang Price Proposal (Exhibit 8-1) used in Chapter
8 for demonstration of Cost analysis. It provides dollar
objectives and comments to explain them.
PREPARATION FOR NEGOTIATIONS
9.3. Develop an agenda for the negotiation - just a
few words for each item may be sufficient.
9.3.1 Items to consider include:
* Introduction of participants and identification of
team leaders for the Agency and the Contractor.
* Discussion of agenda.
* Discussion of Terms and Conditions for the
proposed contract (DOT&PF standard Agreement
package in Chapter 12). Should a Contractor
propose any changes to standard text, approval
from a Contracts Officer, and often the State
Attorney General's Office, is required before
changes may be accepted.
* Advise Contractor of Agency's Total Price
Objective.
* Review the Statement of Services. Identify any
changes to RFP services; discuss major tasks and
allocation of direct labor hours for each job
classification.
* Review items or services to be subcontracted,
equipment requirements, and expense items.
Identify those items that are acceptable and those
that are not.
* Discuss any major differences. Restate work items
to assure there is a clear understanding of services
(large differences are often the result of a
misunderstanding).
* Review the project schedule to assure all
milestones are understood. Restate completion
date for all work.
* If the DOT&PF Internal Review Section has not
established a current IDCR for the Contractor or a
Subcontractor, negotiate IDCRs and how they will
be applied (i.e., Rate used only to negotiate a Fixed
Price or, if a Cost Reimbursement contract, will the
IDCRs be Fixed, Fixed/Provisional or Provisional?)
(See Chapter 8 for explanation.)
* Negotiate any issues regarding subcontracts,
company owned equipment, unit priced items,
reimbursable expenses, etc.
* All subcontracts exceeding the statutory Small
Procurement limits should be examined in detail
(services, schedule, DCDL, IDC, ODC and Fee).
* Summarize in writing any understandings reached
that affect costs; e.g., the Contractor is advised to
use existing geotechnical data rather than do more
investigations now. If later work indicates need for
further geotechnical work, a Contract Amendment
would be required before work was performed.
* Negotiate final cost estimates, Fee, total Price, and
Method of Payment.
9.3.2 Consider a mock negotiation or a trial run for
large or complex contracts; or use one person as a
"devil's advocate" to challenge your negotiation
objectives. Talk with other Agency personnel who have
recently negotiated with the same Contractor to gain a
perspective of the Contractor's methods in negotiation.
Try to identify all assumptions you may be making and
then prepare responses should the Contractor not
conform to those assumptions.
9.3.3 Complete the following administrative tasks:
* Arrange for a suitable meeting room that is private
and will be free from interruptions and distractions.
(Usually an Agency location is best.)
* Notify the Contractor of location, time and number
of persons who will represent each party. Also
provide a copy of an agenda.
* For complicated or large contracts arrange for
someone to take minutes/notes during negotiations
(may be a non-participant in the negotiations).
NEGOTIATION STRATEGY
9.4 Agency Negotiators should keep the following
basic objectives in mind during negotiations:
* Establish a complete understanding by all parties,
both in mind and on paper, of the work to be done.
* Establish a positive working relationship with the
Contractor. The manner in which the negotiations
PSA Manual Chapter 9 - Negotiations
chap-09 Page 3 of 5 March 2014
are conducted will have a definite impact on the
success of the project. If the attitude is competent,
cooperative and professional, more than likely,
these attitudes will continue, on into the job and
conversely, if they are confrontational and
antagonistic, these attitudes are also likely to
continue and are difficult to overcome.
* Establish a contract Statement of Services that is
clearly defined, consistent and in sufficient detail to
minimize future changes and to assure that there
will be no claims resulting from the contract.
* Establish objectives and required schedules within
the contract that the Contractor is expected to
meet.
* Ascertain that the services shall be obtained at a
reasonable cost to the Agency and yet provide fair
compensation to the Contractor.
9.4.1 Negotiation involves offers and counter-offers.
Often the Contractor's Offer (Price Proposal) is greater
than the Agency's Price Objective. In such a situation,
your opening counter-offer (position) is usually less
than the Agency Price Objective, but it is based on a
demonstrable cost analysis. This position leaves room
to negotiate different concepts or perceptions of the
required services and effort as they evolve during
negotiations, yet still achieves the Agency Price
Objective. Changes in your opening position are
acceptable (and may even be anticipated) as long as
they are logical and based on facts or reasonable
assumptions. If you cannot negotiate within the Agency
Price Objective, adjournment may be appropriate to
allow for reassessment.
9.4.2 Strategy is the planning of your approach to
reach agreement. It involves various techniques to
convince the other party to see the logic of your point of
view and to agree with you. Some negotiation
techniques, which are used by both parties, include the
following:
* Combinations. One party introduces several points
into the discussion all at one time. In this way,
concessions can be made to some points and
gains can be made in others. Some of the issues
raised could be considered "throwaways" -- that is,
they are not too important and the one party had
every intention of conceding them to the other party
at some point in the negotiations. No issue should
be conceded without making certain the other party
knows it is getting a concession. This can then be
brought up later in the negotiations as a reminder
when bargaining on another topic.
* Coverage. One party may attempt to cover as large
an area as possible to achieve its goal in one or
more minor areas. For example, one party may
want to negotiate a contract on a total cost basis
rather than by cost element. The other party could
oppose this by insisting that each cost element be
considered separately. The first party preferring a
total basis, may assume that if each element were
discussed separately, major changes would take
place in the proposed price.
* Definite Action. This approach requires that you
take a definite position or action against the other
party, and then see what the other party does. For
example, one side could claim that under no
circumstances would a particular item be agreed to,
then move on to the next item. The other party
must then decide how important the point is and
accept an indefinite delay in trying to resolve it or
acquiesce and move on to the next item.
* Diversion. In this situation, one party acts as if it
has more information than it really possesses. It is
not exactly a bluff, but almost. You must take care
so as not to make unfounded claims, but
implications can be made, for example, about
knowledge of future costs, in hope that the other
party will come forth with additional information.
* Limits. These usually relate to limits placed on the
various members of the negotiating team. In this
way, the chief negotiator will always have the
option of agreeing or disagreeing with the direction
or trend a team member is taking.
* One Step at a Time. This is an effective strategy
whereby one minor point after another is
convincingly presented until a major concession is
won. Both parties must constantly be aware of the
status of the negotiation, keeping in mind the
Negotiation Objectives. Each concession must be
addressed to see how it fits into the overall picture.
* Participation. In this form of strategy, one party
attempts to narrow the involvement of the opposite
team members. For example, if an item is being
discussed and a deadlock appears inevitable, one
party may suggest that one member of each team
meet separately to try to reach agreement and then
bring that agreement back to the negotiating table.
* Patience. This approach involves delay,
suspending, or putting off answering a position at
the moment, thereby giving your team a chance to
think over the proposition. The other side has the
same opportunity and could change its offer after
further consideration, so no time is wasted
discussing a withdrawn or revised proposal. Also,
the side making the offer will feel that its proposal is
getting serious consideration and this is sure to
impress them. Further, a lull in conversation could
be meaningful, since knowing when to stop talking
could be just as important and effective as talking.
* Ploys. An initial tactic by an Offeror is to say: "I am
not authorized to negotiate a profit lower than x%"
or "I cannot negotiate lower than a price of
$______." These are devices to test the water.
PSA Manual Chapter 9 - Negotiations
chap-09 Page 4 of 5 March 2014
Counter with statements about negotiating in "good
faith," etc.
* Ranging. This is an approach whereby one party
starts negotiations by announcing that its proposal
is admittedly too high, but spends the entire
negotiation period arguing for a price almost equal
to its proposal. The other party must avoid joining
the game of helping the confessing party get most
of its costs accepted during negotiations. The other
party must acknowledge that the proposal is too
high and then present factual arguments developed
during the technical and cost analysis of the
proposal to make certain that proper reductions are
made.
* Separation. In some cases, a negotiator may allow
a team member to present an extreme position to
the other party to test the reaction. When the
negotiator senses strong opposition, he or she may
simply point out that the position being presented is
the team member's own argument and certainly the
negotiator does not expect the other party to agree
with all points being made. The separated team
member is used as a tactic, to test the waters. The
negotiator should arrange this approach in advance
with the affected team member.
* Surprise. This strategy involves a sudden shift in
position or approach. The change should be drastic
and dramatic. Sometimes appointing a new
discussion leader can make the point. The other
side may feel that they will have more success
reaching agreement with the new leader if they
perceive that person as being more reasonable.
* Withdrawal. This strategy is used to try to convince
the other party that a point under discussion is not
really very important. The first party might
innocently appear to lose interest in an item when,
in reality, that party has conceived of a method to
get its way later in the negotiation. This tactic
requires good memory and perhaps some acting
talent.
9.4.3 When planning your strategy, limit it to only a few
techniques. You must maintain your integrity.
Remember that the Contractor's objective is maximum
Profit (Price - Cost) and the Agency's Objective is a fair
and reasonable Price (Cost + Profit).
CONDUCT OF NEGOTIATION
9.5 Negotiation actually begins when an RFP is
issued. Any subsequent discussion of the RFP can
contribute to the negotiation. Members of the
negotiation team and all Agency personnel must be
cognizant that anything said may be used by the parties
in negotiation. Such discussion allows the parties to
probe for issues that will need attention in order to
reach a complete and mutual understanding of the
services required.
9.5.1 If properly prepared with Negotiation Objectives,
formal negotiation is a matter of adhering to your
agenda. When discussion drifts; refocus. Remain
cognizant of where you are in the bargaining process at
all times. Do not lose sight of your specific objectives
even when many interrelated issues may be addressed
at the same time. Use your planned strategies and be
prepared to use others. Recess if necessary to make
any significant adjustments to your position.
9.5.2 In addition to the use of strategy, the following
guidelines are suggested:
* recognize and take advantage of each opportunity
to bargain.
* obtain something in return for each concession.
* when you change a position, be sure that the new
position is acceptable.
* when stalemates occur, put the issue(s) aside for a
time; consider an independent expert (e.g. Auditor
or Engineer), or call a recess.
* remember that winning at negotiations does not
mean beating the price down to some
unreasonably low level. Such a price may result in
shoddy services. Also, if administration becomes
excessive, that cost may not appear in the contract,
but it will increase the Agency's overall cost.
9.5.3 After terms and conditions, services, effort,
schedule, work products and cost estimates are
decided; the last issue to negotiate is the Final Price
and Method of Payment. Negotiation of Price and
Method of Payment are closely related and should be
considered together. The objective is to negotiate a
contract that will result in reasonable contractor risk and
provide the contractor with the greatest incentive for
efficient and economical performance. Prior to
negotiation, when developing the Agency Fee Objective
(Chapter 8), you selected a preferred Method of
Payment. However, negotiations may have changed
your perception of the contract and a different Method
of Payment may now be more appropriate.
* Fixed Price Methods (FFP or FPPE) best utilize the
basic profit motive of business enterprise and
should be used when the risks and uncertainties
involved are minimal or can be predicted with an
acceptable degree of certainty.
* Cost Reimbursement methods (CPFF or T&E)
should be used when performance "uncertainties"
or the likelihood of changes makes it difficult to
estimate cost in advance. The method chosen
should place a reasonable cost responsibility on the
Contractor and appropriately tie Fee to Contractor
performance.
* For some contracts, circumstances may make
different methods of payment appropriate. A single
Method payment in each contract is the desirable
PSA Manual Chapter 9 - Negotiations
chap-09 Page 5 of 5 March 2014
objective; however, combinations of methods in
order to create a contract that best fits the
performance requirements, are allowable. For
example, design projects may be performed in
phases. The first phase of a project might cover the
development of program requirements and be paid
for under Cost Plus Fixed Fee. Then follow-up
design could be negotiated on the basis of
information developed in the first phase and might
be accomplished under a Firm Fixed Price.
Alternately, we might obtain a Fixed Price for some
work products or phases of a project, but settle on
a Cost Reimbursement Method for the remainder of
the contract. The inherent problem associated with
mixed methods of compensation within a single
contract is the possibility of double charges -- such
as when an expense for a Fixed Price work product
may be charged to a Cost Reimbursable work
product. When using mixed Methods of Payment
for different tasks, ensure that they will not be
performed concurrently, thereby reducing the
potential for "double charging". Such contracts
require very stringent review of billings and auditor
assurance that the Contractor's cost accounting
system is capable of segregating costs for the
different efforts.
9.5.4 Agency personnel and the Negotiation Team
must be vigilant to ensure that information derived
from competing proposals is not disclosed to
competing Offerors (AS 36.30.240) until after Notice
of Intent to Award (AS 36.30.365) is issued (AS
36.30.230).
9.5.5 Commonly, the first negotiation meeting will not
completely resolve all concerns or problems raised.
Prior to scheduling and conducting follow-up sessions,
a clear understanding of the items to be addressed by
each party must be reached. Contractor and Agency
preparation for succeeding sessions will depend on the
nature, magnitude and number of areas in question
after the first negotiation session. If there are significant
differences, a complete new proposal could be
requested. If the differences are isolated to specific
areas, just those areas would be revised and discussed
at a follow-up session.
9.5.6 If an agreement cannot be negotiated with the
first ranked Contractor, negotiations should be
terminated. Negotiations should then be initiated with
the next ranked Contractor and so on, until an
agreement is reached. Once negotiations have been
terminated with a firm and begun with another, they
cannot be reopened with the former firm. (Also see AC
150/5100-14D, para 2-13(d).)
COMMON DIFFICULTIES
9.6 Negotiators who are alert for the following
common difficulties in negotiations may be able to avoid
or minimize the disruption they cause.
* Defensiveness by either party about their proposals
or estimates when one or the other has identified
flaws or misunderstandings.
* Tendencies for negotiations to become a "design
session" rather than address the services required.
* Defense by "smoke screening" such as when the
Contractor may focus on sheet counts that support
unrealistic hour per sheet estimates or an attempt
to negotiate total price as a percentage of
estimated construction costs. Note that these and
other general guides may prove valuable for testing
the validity of estimates; however, they are not hard
and fast rules which support contract estimates.
* Inclusion of work not required. This most often
occurs when the Agency Statement of Services is
not clear.
* Unresolved questions about services and/or wide
differences in estimates of labor effort required.
* Contractor is unable or unwilling to negotiate
reasonable Subcontractor costs.
* Personality conflicts between negotiators.
* Lack of trust.
RECORD OF NEGOTIATIONS AND SELECTION
9.7 After negotiations are finished, the principal
negotiator must write a Record of Negotiation and
Selection (RONS) which explains: your pre-
solicitation concept of the services and pre-
proposal cost; what the Contractor proposed; what
you found out in analysis of the proposal; what
happened in negotiations, and why the price and
method of payment you agreed to is fair and
reasonable. Chapter 11 explains the RONS.
PSA Manual Negotiations
exh-9-1 (Page 1 of 3) Chapter 9 March 2014
Exhibit 9-I
SAMPLE - NEGOTIATION OBJECTIVES
Note: For large projects with multiple tasks and subtasks, the sample price proposal, negotiation objectives, and explanatory comments shown here would
likely be a summary page attached to a collection of spreadsheets providing Direct Costs of Direct Labor Costs, Other Direct Costs and Fee for each task/
subtask.
BROWN AND LANG INC. Boondocks International Airport
June 30, 2011 Project #78-93
NEGOTIATION OBJECTIVES
DIRECT COSTS OF DIRECT LABOR (DCDL) 1 2 LOW HIGH
Job Classification Name Hours 1562 $/Hour Estimated Cost
Project Manager Buster Brown 2370 2085 28.00 $ 66,360 $43,736 $66,360
Designer Lana Lang 3550 3125 24.00 6 85,200 75,000 85,200
Computer Operator --- 1660 1460 16.75 27,805 24,455 27,805
Total DCDL = $ 179,365 143,191 179,365
INDIRECT COSTS (IDC)
Indirect Cost Rate (IDCR) = 152% of Direct Cost of Direct Labor IDC Amount = $ 272,635 217,650 7 272,635
OTHER DIRECT COSTS (ODC) 222,662 10 278,912
Subcontracts Quantity $/Unit Estimated Cost
3 Mo's Mapping - Photogrammetric Cross Sections ---- $ 5,036 5,036 8 5,036
Quick Print - Reproduction, 200 copies of 400 drawings ---- 18,000 7,500 9 9,000
Subtotal for Subcontracts = $ 23,036
Expenses
4 CADD 1660 Hours 50.00 83,000 0 9 0
Van 4x4 3360 Hours 5.00 16,800 6,000 11 12,000
5 Travel ANC/FBX, 2 Trips, 3 Days, 2 Pers ---- ---- 3,400 1,175 12 2,350
Travel ANC/JNO, 2 Trips, 3 Days, 2 Pers ---- ---- 3,900 0 13 1,415
Subtotal for Expenses = $ 107,100
Total ODC = $ 130,136
TOTAL ESTIMATED COST (Sum of DCDL+IDC+ODC) = $ 582,136 380,552 481,801
FEE (Proposed AMOUNT) = $ 69,856 37,473 14 46,916
TOTAL PROPOSED PRICE = $ 651,992 481,025 528,717
385,564 488,801
49,394 10 61,847
434,958 549,925
PSA Manual Negotiations
exh-9-1 (Page 2 of 3) Chapter 9 March 2014
Exhibit 9-1 Continued (Comments for Negotiation Objectives)
SERVICES AND SCHEDULE
1 This sample assumes that the work plan, tasks, and work products as defined are acceptable. Schedule
appears a bit long. Labor hours proposed for Lana Lang, full time effort, set the contact length at 20.5 months;
2.5 months longer than Agency estimate. Buster Brown's time equates to 70% of Lang's time, not the 50% of
full time stated in the proposal. Computer (CADD) Operator hours are greater than the estimate. Reduce all
labor hours (20.5-18.0/20.5) = 12%.
2 Brown hours high and he will require more than 30% of his time to manage other projects. Reduce his hours to
50% of Lang's (full time) effort. 3125/2 = 1562.
3 Photogrammetry and Reproduction Subcontracts - OK.
4 CADD use OK. One reason why firm was selected. Van use is also OK.
5 Need to delete some travel. Trips to Fairbanks and Juneau proposed for familiarization with functional require-
ments and operations. One trip to Fairbanks appears reasonable. Juneau Airport is not state owned and its
geographical conditions are not at all similar to those at FIA, AIA or the project site. Agency staff can coordinate
with Juneau Airport for any necessary information.
COSTS
6 Rates OK – Brown @ $28/hr equates to a Technical Engineer, GGU Rge 21; Lang @ $24/hr equates to Civil
Engineer II, GGU Rge 20; Computer (CADD) Operations @ $16.75 equates to a Drafting Tech III, GGU Rge 14.
7 Indirect Cost - Contractor proposed 152% with CADD charged as a Direct Cost. Audit established a maximum
IDCR of 172.5%. The 152% rate is acceptable particularly since the Audit Report shows that 66.82% of the
audit IDCR is for Fringe Benefits. Usual Fringe Benefits for Contractors is about 30-40%. When questioned
about this, Auditors explained that Brown and Lang had a special retirement plan only for a few of its
employees. If we consider only 40% for Fringe Benefits, then the Audit IDCR would be reduced to 145%
(172.52 - 66.82 + 40).
8 Proposed Subcontract in the amount of $5,036 for photogrammetric costs is acceptable. The amount is
reasonable and it is based on adequate competition since the Contractor obtained 3 proposals for the work.
Moe's Mapping was selected based on second low offer and ten workdays versus 16 workdays for lowest offer.
Larry's Air Photo Services $4,985 16 Work Days
Curly Photogrammetry Co. $5,490 15 Calendar Days
Moe's Mapping $5,036 10 Work Days
9 Subcontractor charges $2.25/drawing for color reproduction. Only 10 copies will be needed of any drawings
thus estimate may be cut in half. Check print shops for costs. Also consider black and white reproductions for
some of the drawings. Also, how were number of drawings estimated? Counter with $7,500 low, $9,000 high.
10 Computer Assisted Design Drafting equipment is the largest cost item. Contractor's estimate is based on
$50/hour standard unit rate which includes operator. Since the CADD estimate of 1,660 includes operator, why
does the Direct Labor Cost estimate include 1,660 hours for a computer operator at $16.75/hour?
It appears that the CADD operator hours are double counted in the estimate. Subtracting the operator costs
($16.75 x [1+1.52] = $42.21) from the proposed $50/hr rate leaves $7.99/hr for equipment costs. The Audit
Report stated that all equipment expenses (including CADD) are included in the IDCR - thus no separate
equipment rate charges are allowed. The Audit Report also stated; however, that Brown & Lang's proposed
IDCR of 152% anticipated that the CADD rate would be approved.
The Audit IDCR is 172.52%, upon request; the Auditor reviewed the accounting data and established that 3.5%
of the 172.5% can be attributed to CADD Expenses. Change the proposed amount for CADD to zero. This
would increase Indirect Cost (based on the low estimate of labor) by (143.191) x (0.35) = $5,012 or
$5,012/1,660 hrs = $3.02/hr for CADD operator. Then the firm would receive the equivalent of 42.21 + 3.02 =
$45.23/hr which is close to the $50/hr proposed for CADD. Note: We can accept a lower IDC rate if the
Contractor offers the rate; however, this can not be a factor in negotiations.
PSA Manual Negotiations
exh-9-1 (Page 3 of 3) Chapter 9 March 2014
Exhibit 9-1 Continued (Comments for Negotiation Objectives)
11 Contractor estimated company van based on 40 hours/week for 84 weeks at $5/hr or $16,800. This represents
$40/day or $200/week, which appears reasonable; however, it is doubtful the van would be used only for this
project. Also, is the van a personal employee vehicle? Leased van might cost $6,000/year. Two years =
$12,000. Assume 50% use on the project for low = $6,000, high = $12,000.
12 Contractor proposed trips to Fairbanks and Juneau for familiarization with functional requirements and
operations. One trip to Fairbanks appears reasonable, Juneau Airport is not state owned and its geographical
conditions are not at all similar to those at FIA, AIA, or the project site. Agency staff can coordinate with Juneau
Airport for any necessary information. Food and lodging should not exceed state per diem rates unless specific
reasons are cited during negotiations. The costs for trips to Fairbanks are:
2 RT @ $250 = $500 (Check current airline fares)
6 days @ $85 = 510
3 days @ $55 = $165
One Trip = 1,175 low
Two Trips = $2,350 high
13 Trips to Juneau (probably not required per comment #12)
2 RT @ $325 = $650
6 days @ $100 = 600
3 days @ $55 = $165
One Trip = 1,415 high
No Trip = 0 low
FEE
14 Contractor proposed $69,856, which is 12% of total cost (DCDL + IDC + ODC). Applying the Fee percentages
shown in Exhibit 8-3, Sample - Fee Objective Worksheet, to the low/high cost Negotiation Objectives yields the
following Fee amounts:
Fee Percentage Fee Amount & % of total cost & % of DCDL+IDC
Low High
11.1% x DCDL = $15,894 $19,910
15.0% x DCDL = 21,478 26,905
2% x Map Sub = 101 101
$37,473 $46,916
= 9.85% of all costs = 9.74% of all costs
= 10.38% of DCDL+IDC = 10.38% of DCDL+IDC
OR, if we modify $15,894 $19,910
IDCR for CADD per 33,399 41,836
Comment # 10: 101 101
$49,394 $61,847
= 12.81% of all costs = 12.67% of all costs
= 13.50% of DCDL+IDC = 13.50% of DCDL+IDC
Contractor proposed a Fee of 12% of all costs. If Contractor accepts the changes for CADD, that
percentage will be exceeded.
METHOD OF PAYMENT
15 Because the scope of this contract involves a lot of investigation to determine requirements for the project, labor
effort required cannot be estimated with any reasonable degree of certainty. Thus, a Fixed Price contract is not
appropriate and a Cost Plus Fixed Fee contract as assumed in our estimate is the Method of Payment to use.
PSA Manual Chapter 10 - Protests and Appeals
chap-10 Page 1 of 3 March 2014
Chapter 10
PROTESTS & APPEALS
ACTIVITY # 10
Exhibit 10-1 at the end of this Chapter summarizes the Protest/Appeal process.
PROTESTS
10.1 AS 36.30.560 defines three areas where
protests concerning the award of a contract may
be filed:
* Proposed award of a contract.
* The award of a contract.
* Solicitation for Professional Services.
2AAC 12.615(b) allows for a protest of cancellation of
a solicitation.
PROTEST PERIOD
10.2 AS 36.30.565 defines the "protest period" for
award or a proposed award of a contract as ten
days. The method of computing the ten-day period
is that the first day of the protest period is the day
following the date a Notice of Intent to Award [FOR
SMALL PROCUREMENTS - THE DAY FOLLOWING
NOTICE OF AWARD] is dated and dispatched,
even though the first day may be a weekend or
holiday. Once the first day is identified, the rest of
the ten days are calendar days unless the tenth
day falls on a holiday or weekend, in which case
the close of the ten-day period is the close of
business of the work-day following the holiday or
weekend.
10.2.1 If a protest is filed concerning a contract
awarded by other than Competitive Sealed Proposals
(i.e. by the methods described in Chapters 1, 2, 4, or 5
which do not require a Notice of Intent to Award), the
ten day protest period should be considered to have
begun on the day following the date the Contractor has
been advised to proceed with performance under the
contract.
10.2.2 In considering whether a protest is filed on a
timely basis, the protest must be received within the
ten-day period. Protests mailed within the ten-day
period but not received within that time period should
be considered as untimely. If the protest is delayed by
actions of the Agency, so as not to be received within
the ten days, you may wish to consider the protest as
timely under AS 36.30.565(b). If the protest is
untimely, the protester should be notified by the
Contracting Officer that said protest is untimely and
explain why.
10.2.3 Protests pertaining to the contents of the
solicitation documents should be considered
timely if received in writing at least ten Agency
work days prior to the submittal deadline per 2 AS
36.30.565(a). [FOR SMALL PROCUREMENTS -
SUCH PROTESTS SHOULD BE CONSIDERED
TIMELY IF RECEIVED PRIOR TO THE DATE AND
TIME PROPOSALS ARE DUE per 2 AAC 12.695.]
This does not mean that a later protest that points out
a serious error should be ignored. In that case, the
opening date should be delayed and the error
corrected or the solicitation canceled, or whatever
appropriate action is warranted.
NOTICE OF PROTEST
10.3 Any protest received should be copied
immediately to the appropriate Contracting Officer,
who shall immediately give notice of the protest to
the Contractor, and all Offerors and other known
interested parties if the contract has not been
awarded (per AS 36.30.570). See the file: "protest".
CONTENTS OF THE PROTEST
10.4 All protests, regardless of the procurement
method used, must include the following
information:
* the name, address, and telephone number of
the protester;
* the signature of the protester or the protester's
representative;
* identification of the Contracting Agency and
the solicitation or contract at issue;
* a detailed statement of the legal and factual
grounds of the protest, including copies of
relevant documents; and
* the form of relief requested.
10.4.1 If the protest contains no grounds for the
protest, it should be rejected by the Contracting
Officer.
10.4.2 Protests received by a FAX machine bearing
a signature should be accepted (AS 36.30.560).
STAYING THE AWARD
10.5 Following receipt of a protest, the Contracting
Officer may, in consultation with the Office of the
Attorney General, proceed with the award after
considering a stay of award (AS36.30.575).
CONTRACTING OFFICER'S DECISION
10.6 The Contracting Officer shall issue a written
PSA Manual Chapter 10 - Protests and Appeals
chap-10 Page 2 of 3 March 2014
decision which explains the Agency's position
within 15 days after a protest has been filed. A
copy of the decision shall be furnished to the
protester by certified mail or other method that
provides evidence of receipt. The Commissioner of
DOT&PF may extend the time for the decision up
to 30 days for good cause. If an extension is
granted, the Contracting Officer shall notify the
protester in writing of the date the decision is due
(AS 36.30.580).
10.6.1 In preparing the decision (response to the
protest), as required by AS 36.30.580, be sure to
thoroughly research all points raised in the protest.
Protests will be received in a variety of formats and will
have been prepared by persons with a variety of
research and writing skills. Check on those matters
that are implied, even though not concisely stated.
10.6.2 If you are the person responsible for the
solicitation, against which the protest is filed, you may
become defensive when responding to the complaints.
Under these circumstances it is a natural tendency to
defend one's earlier actions rather than realistically
evaluate the points raised by the protest. Step back
and review the facts from the viewpoint of a neutral
third party. You may want to get input from other
individuals who have not been associated with the
procurement.
10.6.3 In preparing the response, speak only to those
points raised by the protest. Deal with the facts of the
matter as they exist, even if the facts do not support
the position you would like to take. It is important to be
accurate. It is more important that the decision is
reasonable. Be concise in writing the decision. Explain
it thoroughly, but avoid extra material or personal
philosophy. Do not provide new material with which
the protester can take issue.
10.6.4 If there was a flaw in the process, determine
the impact of that flaw. Did we fail to do something that
law or regulation requires? Is the flaw significant to the
overall result? Can or should the flaw be repaired or is
the flaw a fatal one (requiring the process or a phase
of the solicitation or evaluation process to be redone)?
Think about the impact that re-solicitation will have if
proposals have already been exposed to competitors.
10.6.5 If remedial action needs to be taken, admit the
fault and explain how you intend to remedy the
situation. In formulating a remedy, be fair - not just to
the protester - but to all Offerors. Be conservative; do
not overcompensate for the error to the detriment of
your department and competitors. Explain in your
decision the process by which the decision may be
appealed and what the appeal period is. Explain that
the Contracting Agency must receive any appeal
within the ten-day appeal period. The ten-day appeal
period is computed just like the protest period.
Although not required by statute or regulation, it is
good policy to send a copy of your decision to all
parties to whom you sent a copy of the protest.
10.6.6 The fifteen days you have to prepare and mail
(utilize registered mail and request a receipt of the
delivery date) the Contracting Officer's decision are
counted in the same manner as the protest period.
The date of receipt of the decision by the protester
determines the dates of the appeal period. Keep the
receipt. If the decision is appealed, you may be asked
to furnish the receipt.
PROTEST REMEDIES
10.7 In determining an appropriate remedy for a
sustained protest, the Contracting Officer shall
consider the circumstances surrounding the
solicitation or procurement including the
seriousness of the procurement deficiencies, the
degree of prejudice to other interested parties or
to the integrity of the procurement system, the
good faith of the parties, the extent the
procurement has been accomplished, costs to the
Agency and other impacts on the Agency of a
proposed remedy, or the urgency of the
procurement to the welfare of the state (AS
36.30.585(b)).
APPEAL OF A CONTRACTING OFFICER'S
DECISION REGARDING A PROTEST
10.8 [FOR SMALL PROCUREMENTS, THE
CONTRACTING OFFICER'S DECISION IS FINAL,
APPEALS SHALL NOT BE RECOGNIZED.]
10.9 Within ten days after the protester receives
the Contracting Officer’s decision, they may file an
appeal with the Commissioner of the DOT&PF. The
protester shall also file a copy of the appeal with
the Contracting Officer (AS 36.30.590).
10.9.1 The Contracting Officer shall immediately
give notice of an appeal to the Contractor if a
contract has been awarded or, if no award has
been made, to all Offerors and other known
interested parties as defined in 2 AAC 12.990(a)(7).
10.9.2 If a protest appeal is filed before a Contract
is awarded and the award was stayed under AS
36.30.575, the filing of the appeal automatically
continues the stay until the Commissioner makes
a written determination that the award of the
contract without further delay is necessary to
protect substantial interests of the state (AS
36.30.600).
PSA Manual Chapter 10 - Protests and Appeals
chap-10 Page 3 of 3 March 2014
PROTEST REPORT
10.10 The Contracting Officer shall file a
complete report on the protest and decision with
the Commissioner DOT&PF and the Chief
Contracting Officer within ten days after a Protest
Appeal is filed.
10.10.1 The Contracting Officer may request an
extension of time to prepare the protest report.
The request must be in writing listing the reasons
for the request and shall be directed to the office
of the Commissioner of DOT&PF (AS 36.30.605(b)).
10.10.2 The Contracting Officer shall furnish a
copy of the report to the protester and to any
interested parties that have requested a copy of
the appeal under AS 36.30.595(b) per (AS
36.30.605(a)).
ACTION ON APPEALS
10.11 Protest Appeals are administered by the office
of the Commissioner of DOT&PF in accordance with
AS 36.30. Further action at the DOT&PF Division or
section level or by other Agencies with DOT&PF
Delegation of Authority for construction procurement,
is not required and thus not addressed in this
handbook.
CONTRACT CONTROVERSIES
10.12 If a contract controversy asserted by a
Contractor cannot be resolved by agreement, the
Contracting Officer shall, after receiving a written
request by the Contractor for a decision, issue a
written decision within ninety (90) days after
receipt of all necessary information from the
Contractor. The Commissioner may extend this
time period. The Contracting Officer shall furnish a
copy of the decision to the Contractor by certified
mail or other method that provides evidence of
receipt. The decision shall include the
requirements of AS 36.30.620. If a controversy
cannot be resolved by agreement the matter shall
be immediately referred to the Commissioner of
DOT&PF (AS 36.30.620).
PSA Manual Protest and Appeals
exh-10-1 Chapter 10 March 2014
Exhibit 10-1
CHART OF PROTEST / APPEAL ACTIVITIES
Periods for "Contract Controversies" (Claims) are different from this table (per AS 36.30.620/.630).
If the last calendar day of a period listed in this chart falls on a weekend or holiday, the period will be extended to the
first workday following the weekend or holiday.
ACTIVITY TIME PERIOD
Protest of Requirements/Contents of
RFP
Ten (10) Agency workdays prior to the submittal deadline. [FOR SMALL
PROCUREMENTS - SUCH PROTESTS SHOULD BE CONSIDERED
TIMELY IF RECEIVED PRIOR TO THE DATE AND TIME PROPOSALS
ARE DUE.]
Protest of Award
Ten (10) days following date of issue of "Notice of Intent to Award," or
service in person, by FAX or other machine transmission. [FOR SMALL
PROCUREMENTS - THE DAY FOLLOWING NOTICE OF AWARD.]
Protest of Cancellation of RFP
Ten (10) days following date of issuance of “Cancellation of
Solicitation” by procurement officer.
Contracting Officer Decision (COD) Fifteen (15) days from receipt of protest-may be extended up to 30 days on
approval of Commissioner.
Appeal of COD Ten (10) days following date of receipt of Contracting Officer's Decision.
Contracting Officer's Protest Report Ten (10) days following receipt of Appeal.
Appellant Comments on Contracting
Officer's Protest Report
Ten (10) days following mailing of Contracting Officer's Protest Report.
Commissioner Acceptance of Appeal Fifteen (15) days from receipt of appellant comments or expiration of the
time to file comments.
Schedule Hearing No time limit.
Commissioner Issue Decision Twenty (20) days from the close of the hearing record.
PSA Manual Chapter 11 - Record of Negotiation and Selection (RONS)
chap-11 Page 1 of 1 March 2014
Chapter 11
RECORD OF NEGOTIATION AND SELECTION (RONS)
ACTIVITY # 11
11.1 The Record of Negotiations and Selection (file:
"rons") documents all actions and decisions made in
the Contractor selection and negotiation processes for
an Agreement or Amendment. It also fulfills
requirements of the following statutes and regulations.
* AS 36.30.250(a) - Basis for Award
* AS 36.30.362 - Basis for Award to Non-
Resident
* AS 36.30.510 - Summary of Contract File
* 2 AAC 12.300 - Basis of Selection Most
Advantageous to the State
* 2 AAC 12.400(a) & (d) - Records to Facilitate
Auditing of Small Procurements
* 49 CFR 18.36 (b) (9) - Record of Rationale for
Contract Type, Contractor Selection and Basis
of Price
* 23 CFR 172.7(a)(4)(iii) - Record of Negotiation
Activities and Resource Considered
* FAA AC 150/5100-14D, para 2-13(e) - Record of
Negotiation
The RONS explains the pre-solicitation concept and
price; what the Contractor proposed; what analysis of
the proposal produced; what happened in
negotiations; and, why the price and method of
payment is fair and reasonable.
11.2 For Small Procurements, 2 AAC 12.400(d)
requires a summary of the responses (proposals
received) and a justification for the award signed
by the Contracting Officer. The file: "rons" or another
document that contains similar information may be
used for this record.
11.3 A Record of Negotiations and Selection must
be prepared for each of the following "types of
procurement:"
* Competitive Sealed Proposals.
* Amendments to contracts awarded under
Small Procurements or Competitive Sealed
Proposals, if services or compensation is
changed in any manner.
* Notices to Proceed (NTP) issued under a Term
Agreement.
* Changes to the Period of Performance or to task's
schedules do not require a RONS.
* Changes to the Contractor's or any
Subcontractor's Indirect Cost Rates that occur in
accord with terms contained in Appendix C of a
contract requires an Amendment but not a RONS
unless the amendment is also adjusting the price
and/or cost estimate.
11.4 The file: "rons" requires a distinct, contract
specific response to each item. Instructions are
provided for the proper completion of each response
and to serve as a checklist for staff and Contracting
Officer review before approval and signature.
11.5 Second only to the Agreement itself, the RONS
is the most important document prepared for a
negotiated contract.
11.6 FAA Contracts:
AC 150/5100-14D Paragraph 2-13.h requires that
the record of negotiations and all attachments be
submitted to the FAA for a reasonableness of cost
determination.
The attachments per AC 150/5100-14D paragraph
2-13.e, are the scope of work, draft contract,
sponsor’s independent cost estimate, consultant’s
cost proposal with any revisions and detailed cost
analysis.
PSA Manual Chapter 12 - Professional Services Agreement (PSA)
chap-12 Page 1 of 2 March 2014
Chapter 12
PROFESSIONAL SERVICES AGREEMENTS (PSA)
ACTIVITY # 12
12.1 For Letter of Agreements no written
solicitation or standard Agreement is required.
However, there must be some written authorization
from the Contracting Officer and a letter,
acknowledged in writing by both parties, which
describes the services, period of performance and
compensation is recommended.
12.2 Small Procurement Agreements may consist
of the documents listed in paragraph 12.3, below -
OR - the following Small Procurements Documents
for Construction Related Professional Services
[RFP, Proposal & Award] that are designed for
electronic transmission. The Standard Provisions
Booklet listed below is an assembly - incorporated by
reference in the Small Procurement Documents - of
current materials used for contracts that exceed the
Small Procurement Limit.
* Small Procurements Documents, Part A - Request
for Proposals (file: "spdocs-a").
* Small Procurements Documents, Part B -
Proposal Form (file: "spdocs-b").
* Small Procurements Documents, Part Contract
Award & Notice to Proceed (file: "spdocs-c").
* Standard Provisions Booklet (file: "spspb").
12.3 Competitive Sealed Proposal Agreements
shall consist of the following documents (the file:
"ins-psa" provides detailed instructions for preparing
and assembling a Professional Services Agreement):
* Basic Agreement, DOT&PF Form 25A261 (file:
"psa").
* Appendix A, General Conditions for
Professional Service, DOT&PF Form 25A262
(file: "psa-a"). Page 7 of this form provides for
identification of any additional conditions
which may be necessary; however, such
additional conditions shall not diminish the
requirements of any Articles contained in the
form in any way, except as may be approved in
writing by the Department of Law (AS
36.30.340).
* Appendix B, Statement of Services, plus any
Exhibits (e.g., schedules, drawings), must be
prepared by the Contract Manager and shall
establish the various phases, tasks, or elements of
the services to be provided and must be written so
as to identify specific milestones which may be
used to schedule and manage contract
performance and on which compensation to the
contractor can be negotiated and paid. Chapter 7
and the file: "ins-sos", provide detailed information
about preparing a Statement of Services (SOS).
Your Contracts Officer may have some "standard"
types of SOS developed for services routinely
obtained and which are designed to be edited for
specific Agreements. A Contractor's proposal may
not be used as Appendix B.
* Appendix C, Basis of Compensation, DOT&PF
Form 25A280 (file: "psa-c"), plus the Exhibits
specifically prepared for each Agreement. See the
file: "ins-psa" for detailed instructions for preparing
and assembling Appendix C, Basis of
Compensation.
* Appendix D, Indemnification and Insurance,
DOT&PF Form 25A269 (file: "psa-d"), plus
Certificates of Insurance for all required
coverages.
* Appendix E, Certification of Compliance, Alaska
Licenses/Registrations and Insurance (file: "psa-
e").
* Additional Appendices as may be appropriate.
12.4 Read Article A16, Predominance of Documents,
contained in Appendix A, General Conditions before
preparing/writing the contract documents. Note that
Appendices which follow Appendix A cannot
change any of the provisions of the basic
Agreement or of Appendix A. Also note that any
modifications to the standard forms of the
Agreement must be approved by the state
Attorney General's Office.
12.5 Current Certificates of Insurance for the
prime Contractor shall be obtained prior to
contract execution from the insurance carriers
(ref.: AS 23.30.045(d)). Copies of the certificates shall
be attached to Appendix D of each contract to
document the required coverages (which are detailed
in Appendix D).
12.6 The requirements for insurance as indicated on
Form 25A269 may be modified if approved by the
Contracting Officer. Identification and justification of
changes to insurance requirements must be noted on
page 2 of the form with the Contracting Officer's
signature of approval at the bottom of the page. If
modifications are not based on one of the preprinted
certifications, an attached justification must fully and
clearly demonstrate that the Contracting Agency will
not incur any liability, or is at little risk of liability, as a
consequence of the Agreement. See the file: "ins-psa"
for instructions.
PSA Manual Chapter 12 - Professional Services Agreement (PSA)
chap-12 Page 2 of 2 March 2014
12.7 Agreement Documents shall be prepared and
executed as follows:
12.7.1 All agreements exceeding $10,000 require an
Agreement Number that shall be assigned by your
Contracts Officer following his/her review of the
Agreement package.
* Note: Procedures for the review process and
assignment of a number may vary in each DOT&PF
Region or System and other Agencies with DOT&PF
Delegation of Authority.
12.7.2 In most circumstances, two copies of the
Agreement should be first executed by the Contractor
and then they will be provided to your Contracts
Officer accompanied by the appropriate checklist and
other documents identified in Chapter 13 - Contract
Records.
12.7.3 The Contracts Officer shall submit both copies
of the Agreement and one copy of the Record of
Negotiations and Selection (RONS) to the Contracting
Officer for signature.
12.7.4 If the Contracting Officer does not execute and
return the Agreement and the RONS within one week
of the transmittal for signature, the Contracts Officer
will inquire regarding the document status and will
notify the Contract Manager of any delay and the
reason for it. The Contract Manager will notify the
Contractor immediately in writing if the contract will not
be executed.
12.8 Effective date of an Agreement is the last
date signed by any of its parties.
12.9 Following execution of an Agreement, the
Contract Manager will receive one originally signed
copy to be given to the Contractor. Photocopies of the
Agreement should be kept for project files.
PSA Manual Chapter 13 - Contract Records
chap-13 Page 1 of 1 March 2014
Chapter 13
CONTRACT RECORDS
ACTIVITY # 13
13.1 Agreements (exceeding $10,000) and
Amendments (regardless of amount) must be provided
to your Contracts Officer with a completed Documents
Checklist and copies of related procurement records,
prior to execution by the Contracting Officer.
13.2 Checklists to be used are contained in the
following files:
* "clst-sp" Documents Checklist for Small
Procurement (>$10,000)
* "clst-csp" Documents Checklist for Competitive
Sealed Proposals
* "clst-emr" Documents Checklist for Emergency
Procurement
* "clst-lcs" Documents Checklist for Limited
Competition Procurement or Single
Source Procurement
* "clst-ntp" Documents Checklist for NTP under
Term PSA
* "clst-amd" Documents Checklist for Amendments
* "clst-end" Checklist for Closing out PSA
13.3 The Agency's master file of active Professional
Services Agreements, including an originally signed
copy of each Agreement and Amendment, will be
maintained by your Contracts Officer. Work copies
may be retained in project files for daily use. After a
contract is completed, the master files will be retained
in accordance with paragraph 13.4, below.
13.4 Records pertaining to 100% state funded
Agreements for Professional Services will be retained
in regional and systems contract files for a minimum of
three years after final payment to the Contractor.
Records pertaining to Agreements with any federal
funding will be retained for a minimum of three years
after the final voucher for federal aid reimbursement
has been paid by the federal funding agency.
PSA Manual Chapter 14 - Encumbrance
chap-14 Page 1 of 1 March 2014
Chapter 14
ENCUMBRANCE
ACTIVITY # 14
14.1 All Basic Agreements plus any Amendments,
which alone or together exceed $5,000, must be
encumbered (funding set-aside for the
Agreement). Each Term Agreement Notice to
Proceed that exceeds $5,000 must also be
encumbered.
14.2 The file: "encumber" is a sample memo for
requesting encumbrance.
14.3 In order for the encumbrance system to function
best, you should include the encumbrance number
with each invoice when submitting it to accounting for
payment.
PSA Manual Chapter 15 - Contract Management
chap-15 Page 1 of 3 March 2014
Chapter 15
CONTRACT MANAGEMENT
ACTIVITY # 15
15.1 Approved methods and techniques to manage
construction related Professional Services Agreements
(PSAs) and the Contractors who perform these services
are noted in the following discussion. While portions of
this Chapter are intended to serve as teaching aids,
those portions of the text which appear in bold or italic
print styles shall be followed without exception.
15.2 Management Methods: Limited to: a) in-house
management or b) the use of Contractors to manage
other Contractors under Agency direction.
15.2.1 In-house management provides direct Agency
control over a Contractor's activities. A single individual
can effectively manage agreements that have
straightforward scopes or are closely related to one
another. However, large scale, complex or long-term
construction projects, may necessitate that a Contract
Manager be assigned to only one such project.
In-house consultant management staff should consist of
experienced multi-disciplined personnel who are
knowledgeable about the Agency's methods,
standards, procedures, and organization.
15.2.2 The use of Contractors to manage other
Contractors (Management Contractors) allows state
agencies to respond quickly to large program increases
to provide both technical and administrative
management functions. This is particularly useful when
the Agency lacks sufficient qualified staff to manage
these functions for a large construction program.
Potential disadvantages are: higher costs, extended
Agency liability, reduced Agency control and the
increased possibility for misunderstandings.
* Note: Unless otherwise approved in writing by the
Commissioner of DOT&PF, construction contract
administration - other than site inspection, review of
shop drawings, materials inspection and acceptance,
and design clarifications - shall not be performed by the
Designer due to the potential for conflicts of interest.
The Designer shall not be used to effect construction
change orders or authorize payments to the
construction contractor.
15.3 Management Techniques: Contracting Agency
shall utilize techniques that will ensure adequate
oversight of the Contractor with respect to contractual
and project specific requirements.
15.3.1 Contractual: Contract Manager (who may also
be the Agency's Project Manager) is
responsible for administration and management
of the Agreement and to insure that services
provided are complete, accurate and consistent
with terms of the Agreement.
* Note: In this Chapter, references to specific
contractual requirements are designated by square
brackets [ ]. For example, Article A7.2, appearing in
Appendix A and pertaining to "authorization to proceed
with work", is referenced as [A7.2].
15.3.2 All contractual requirements governing the
Agreement are contained within the Appendices A
through E of the Agreement. Effective administration
requires a complete working knowledge of these
documents. As nearly every Agreement is unique to
itself, the Contract Manager must be familiar with the
specific requirements for that Agreement.
15.3.3 Work to be performed under an Agreement can
only be authorized by a written Notice to Proceed (NTP)
issued by the Contract Manager [A7.2]. NTPs may be
issued to authorize all services under an Agreement, or
several consecutive NTPs may be issued to establish
separate cost control for different phases. The files: ''c2-
ntp" or ''c3-crntp", or a similar form must be used. The
issued form is copied and submitted by the Contractor
with each invoice. Use of the form readily identifies the
Agreement, project, and funding information needed to
process the invoice.
* Note: Generally, only one Notice to Proceed should
be issued for Agreements less than $250,000 because
each NTP requires the Contractor to set up a separate
Cost Account for that NTP. For Agreements exceeding
$250,000, the number of NTPs should generally not
exceed six (see the files: "ins-psa" and "ins-est" for more
information). If the Contract Manager wants to further
control expenditures or performance of services under
the NTP, that may be done with separate
correspondence that instructs the Contractor
accordingly.
* Note: All prior NTP/Invoice Forms are being phased
out so as to provide uniformity in contract language
when referring to price, cost, and fee (profit). Any
questions concerning their use should be directed to
your Contracts Officer.
15.4 Project Specific Conditions: Contract Manager
responsibilities consist of the following:
* Establishing and adhering to an orderly system of
tracking and controlling the documentation required to
assure proper completion of the Agreement.
The Contracting Agency must maintain a contract file
available for inspection by authorized representatives of
the state, federal government and the Contractor for the
purpose of making audits, excerpts, transcriptions, or
examinations. This file is generally composed of a
combination of the Contracts Officer’s files and those
files maintained by the Contract Manager. In addition to
the documents transmitted to your Contracts Officer (as
PSA Manual Chapter 15 - Contract Management
chap-15 Page 2 of 3 March 2014
described in Chapters 1 through 5 and paragraph 6.9.5
in Chapter 6), the Contract Manager's file shall also
include:
a. correspondence, directives, and amendments,
b. meeting notes and progress (monitoring) reports,
c. local authority/jurisdiction resolutions,
d. performance evaluation reports, if prepared,
e. billings,
f. documents required by the contract provisions
(EEO certifications [A6.1], subcontracts [A19.1],
and so forth),
g. project related correspondence from the Internal
Review Section (exclusive of confidential material),
and
h. claims.
* Scheduling and attending progress meetings with
the Contractor. Monitoring work progress at least
monthly.
Regular meetings should be conducted with the
Contractor to assure the milestones established in the
contract Statement of Services and the performance
schedules are achieved. As necessary, additional
conferences between the Contractor, the Agency, and
other appropriate staff should be conducted.
* Obtaining Progress Reports from the Contractor,
evaluating them, and taking appropriate action. A
process for reporting status to upper management
should be a part of the system.
The Contractor should be required to submit written
Progress Reports, at least monthly, in an Agency
approved format. The reports should include at a
minimum: status of events and activities described in
the Agreement, summary of work performed during the
report period, discussion of any problems and how they
were - or will be - resolved, plans for the succeeding
period, and any deviation from estimated costs. Exhibit
15-1 is a sample format.
* Monitoring the qualifications and work assignments
of the Contractor's assigned staff. Recommending or
approving substitution of personnel [A19.1].
All services must be performed by or under the direct
supervision of the project staff named in the Agreement
or others approved by the Contracting Agency. Only
prior written approval from the Agency’s Contract
Manager shall allow replacement of, or addition to, the
named Project Staff. If the Contractor requests a
change in key personnel, the Contract Manager shall
review individual's qualifications and credentials and
ensure that they are sufficient.
* Visiting the project and/or Contractor's office on a
frequency that is commensurate with the magnitude,
complexity and type of work; monitoring the daily
activities and records of the Contractor [Article A9].
Visits to the Contractor’s office allow the Contract
Manager to become familiar with the firm and staff, and
to review and verify contract progress. This will foster
development of a good working relationship between the
Agency and Contractor. Such visits may be announced
or unannounced, but must be within normal business
hours [A10.1].
* Reviewing all work products and services for
conformance to the Agreement: general conditions,
services, schedule, and budget. The Contract Manager
is responsible for monitoring the performance
schedule - and if delays occur - ensuring that the
Agreement completion date is extended appropriately.
Agreements that are not extended PRIOR TO THEIR
EXPIRATION DATE are defunct and will require a Single
Source Waiver in order to be re-established.
Consider a system which will allow the Contract
Manager to track project status on a time-line format tied
to task completion, deliverables, and funding resources.
The system may be computerized to ensure timely
updates on an as needed basis.
* When services include the preparation of design
documents, ensuring that a comprehensive review of
drawings and specifications is accomplished. As
required under Chapter 4-60 of the Preconstruction
Manual, the Contract Manager shall certify, in writing
and prior to advertising the bid documents, that the
review was performed and that all revisions/actions
necessary to facilitate adjudication of review comments
were properly accomplished.
* Issuing timely clarification and instructions that
address discrepancies or omissions in the Agreement or
in the work products or services provided by the
Contractor. Negotiate and obtain execution of contract
Amendments (see Chapter 16) when changes are
necessary. Do not allow changes to accumulate such
that cost control for the changes may be lost. Any
change or revisions in the services, complexity,
character, duration of services or provisions of the
Agreement shall be documented with the standard
Amendment form (file: "amd"). Agreements that were
awarded based on Small Procurement Procedures may
not be increased above the statutory limits unless a
Single Source Waiver (see Appendix A) for the revised
total Agreement amount is approved.
* Coordinating post design activities and services
when required by the Agreement.
If required by the Agreement, the Contract Manager
must assure that the Designer will be available during
the construction phase to promptly answer questions
and address issues concerning the project design intent.
The Contract Manager should ensure that
communication between the Contractor, the Agency
Construction Manager, and construction staff is
facilitated. This will allow problems to be resolved quickly
and at the lowest possible level and at the least cost. If
the Agreement does not include provisions for the
Designer to review shop drawings and respond to design
PSA Manual Chapter 15 - Contract Management
chap-15 Page 3 of 3 March 2014
issues during construction, then a contract Amendment
to include these services should be considered.
* Reviewing and recommending (or approving if so
authorized) payment of Contractor's Invoices.
Review of billings should not simply be limited to the
Contractor's math skills. The Contractor's performance
should be compared against requirements of the
Agreement. Timeliness, degree of completion, and
quality of work, should be considered when determining
validity of the invoice and monetary amount of the
payment. See paragraph 15.4 for additional details.
Billings that are subject to review commensurate with
the completion of project "milestones" (e.g. facility
programming, final EIS, bid documents, etc.) may also
be subject to periodic performance evaluations (file:
''perf-evl"). Meetings regarding the Contractor's
performance should be held in connection with these
periodic written evaluations to provide constructive
feedback and encourage communications and
improvement.
* Following completion of the Agreement, a
Performance Evaluation (file: ''perf-evl") which is
substantive and fully addresses nonperformance or
other contractual problems may be prepared. If
prepared, a copy of the evaluation shall be sent to the
Contractor for review and/or comments. Any written
comments from the Contractor shall be attached to the
final evaluation.
Any final evaluation shall be based upon the periodic
evaluations provided at each milestone of the project. In
the absence of periodic evaluations the Contract
Manager may base the evaluation on correspondence
or other non-verbal communications to the Contractor.
Final evaluations, if prepared, which cannot be
substantiated by prior, written documentation, shall be
reviewed with the Contracting Officer or Regional
designee before issuance.
15.5 Payments shall be made in accordance with
AAM 38 (see Appendix B in this Manual) and the
Agreement provisions and shall be only for work
successfully completed. Prior to submitting an invoice
for payment, Contract Manager will ensure that costs
billed are consistent with the acceptability and progress
of the Contractor's work.
15.5.1 Contract Manager must perform an analysis of
the invoiced costs compared to the acceptability and
work progress/accomplishments during the invoiced
period. The following certification shall appear on all
approved payments: "I certify this invoice to be valid
and accurate and that services were performed
substantially in conformance with the Agreement
requirements and schedule." The Contract Manager will
sign the certification and affix the necessary accounting
codes. If the Contract Manager does not have authority
to approve invoices for payment, then another Agency
Official in the Manager's chain-of-command who has a
Delegation of Authority from the Contracting Officer must
also sign the invoice to approve its payment. (DOT&PF
Finance Offices maintain signature cards for Authorized
Agency Officials).
Additionally, it is recommended the Contract Manager
complete a brief Performance Evaluation for the work
included in the invoice when the covered work coincides
with the completion of a project milestone (see previous
discussions).
15.5.2 If a Contractor invoices for 25 percent of the
Agreement amount in the first billing period and has
completed only 10 percent of the services, you can
expect that the remainder of the services will receive
only 75 percent - rather than 90 percent - of the total
anticipated effort for the Agreement.
15.5.3 If the payment method is other than Fixed Price,
then work shall be reviewed when approximately 75%
complete to determine adequacy of the maximum
amount of compensation.
15.6. Contract Amendments, their applicability,
development and execution are covered in detail within
Chapter 16. The Contract Manager shall ensure that all
work is covered under the Agreement, be it in the
original Agreement or by Amendment. Invoiced work, not
authorized in writing, is ineligible for payment [Article 7].
15.6.1 Contract Amendments for overruns in the
estimated effort or costs of the work shall not warrant an
increase in the fee portion of a Cost Reimbursement
Agreement. Significant changes, however, to the
Agreement services may require adjustment by
Amendment of the Fee portion in a Cost Reimbursement
Agreement or in a Fixed Price Agreement. Amendments
may also be required to effect payment adjustments due
to changes in Indirect Cost Rates (IDCRs) in accordance
with the provisions of Appendix C in the Agreement.
15.6.2 The Contract Manager is responsible for
assuring that any work outside of the originally solicited
and intended "Statement of Services" is authorized in
accordance with the requirements of the State's
procurement code. Typically, such additional work
includes tasks that were not identified in the Request for
Proposals or documented in writing during the
negotiating process. This non-scoped work must be
handled as a Supplemental Agreement as noted in
Chapter 16. (See specifically section 16.1.3,
Unanticipated Amendments.)
15.7 Contract Closeout requirements are addressed in
Chapter 17.
PSA Manual Contract Management
exh-15-1 Chapter 15 March 2014
Exhibit 15-1
SAMPLE - MONTHLY PROGRESS REPORT
ATTENTION: (agency project manager; agency name)
FROM: (contractor's project manager; contractor's firm)
PROJECT: (project title) PROJECT NO(S):
AGREEMENT NO.:
PROGRESS REPORT NO.:
DATE:
1. SUMMARY OF WORK PERFORMED DURING THE REPORT PERIOD
2. CUMULATIVE PROGRESS TO DATE
3. PERCENTAGE COMPLETION OF TASKS (OR TASKS GROUPS) CONTAINED IN APPENDIX B,
STATEMENT OF SERVICES (OR IN APPENDIX C, COMPENSATION) IN THE AGREEMENT.
Tasks (or Tasks Group) % Completed
4. FINDINGS/RESULTS TO DATE
5. EXPENDITURES FOR REPORT PERIOD AND CUMULATIVELY TO DATE
(describe deviations from anticipated levels)
6. PLANS FOR SUCCEEDING PROJECT PERIOD
7. ANTICIPATED DELAYS/PROBLEMS
8. DIFFICULTIES DURING REPORT PERIOD
PSA Manual Chapter 16 - Amendments
chap-16 Page 1 of 1 March 2014
Chapter 16
AMENDMENTS
ACTIVITY # 16
16.1 Amendments can be divided into two basic
types: anticipated and unanticipated.
16.1.2 Anticipated amendments are planned at the
time of procurement. They are addressed in the RFP
and/or the executed Basic Agreement and in the
contract Record of Negotiations and Selection. Most
anticipated amendments involve contract time
extensions or phased project development. Reference
to potential amendments may not be written so as to
circumvent statutory requirements for competition.
16.1.3 Unanticipated amendments must meet the
following constraints:
Legitimacy: A legitimate change is due to
unforeseen circumstances or predicaments which
occur as work progresses and is not an effort to
evade the statutory requirement for competition or
other requirements.
Services: Must be within the intent and purpose of
the original contract and RFP.
Extent: No change may be made which alters the
essential identity or main purpose of the original
contract or is of such importance as to constitute a
new undertaking. Amendments that include
Supplemental Agreements (any change that is
outside the originally stated objectives of the Basic
Agreement, e.g., adds other project(s) or new
task(s) that are not logical and legitimate
consequences of the original agreement), or are of
such magnitude that they substantially change the
originally stated objectives of the Basic
Agreement, require a Waiver (Appendix A) by the
Commissioner.
16.2 Agreements which were awarded based on
Small Procurement Procedures may not be increased
above the statutory limits unless a Single Source
Waiver (see Appendix A) for the value of the additional
task is approved.
16.3 Activities that must be accomplished for each
Amendment include:
If a price increase, identify funding source(s),
AKSAS Ledger and Collocation Codes.
Prepare a written explanation of the change(s) --
may be done by either party.
Develop or obtain an Independent (not from the
Contractor) cost estimate.
Obtain a Price Proposal from the Contractor.
(Contractor's proposal preparation cost may be
charged to the contract if the cost is negotiated
into the amendment.)
Next perform a Cost Analysis and negotiate a fair
and reasonable price (Chapters 8 - 9).
Prepare Amendment (file: "amd"). If the total price
or any items of payment are changed (including
any "re-allocation" of funding), also prepare a
Record of Negotiations and Selection (file: "rons").
After RONS and amendment are prepared,
assemble and transmit a complete set of
procurement documents to your Contracts Officer
as instructed by the Documents Checklist for
Amendments (file: "clst-amd"). Keep a copy of all
materials for your project files (see Chapter 13).
* Note: Your Contracts Officer will at this time
review the RONS, Amendment and other Documents
to identify any necessary revisions that must be made.
If not already done, the Contractor must sign two
copies of the Amendment. The Contracts Officer will
then obtain a Contracting Officer's signature on both
copies of the Amendment and a copy of the RONS.
One of the originally signed copies of the Amendment
will be returned to the Agency's Contract Manager to
reproduce for project files and to transmit to the
Contractor with a Notice to Proceed in accordance
with Chapter 15.
Change the amount encumbered for the PSA to
include the Amendment.
PSA Manual Chapter 17 - Contract Close-Out
chap-17 Page 1 of 1 March 2014
Chapter 17
CONTRACT CLOSE-OUT
ACTIVITY # 17
This process is not required for Professional Services Agreements less than $10,000.
17.1 Within 90 days after final acceptance of all
services under the Agreement, the Contract Manager
will obtain the Contractor's final invoice and a Release
from Agreement (file: "release"), signed by the
Contractor pursuant to the Agreement. If the final
billing and release is not received within the 90-day
period, the Contract Manager shall provide the
Contractor with a Letter of Closeout (file: "ltr-clos").
* Note: The Release from Agreement form also
includes a DBE Certification of Completion which must
be completed if the Contractor proposed the use of
DBEs in their offer or if the Contractor actually utilized
a DBE even though the original proposal did not
indicate the use of DBEs.
17.2 Contract Manager may complete a Final
Performance Evaluation (file: "perf-evl") and provide a
copy to the Contractor. If the Contractor submits any
rebuttal, resolve any alleged factual discrepancies and
make appropriate changes in the Evaluation. Obtain
supervisor's signature on final report.
17.3 If any funds remain encumbered after final
payment is made, Contract Manager should request
that the accounting section release the remainder of
the encumbrance.
17.4 Within two weeks after execution of the Release
from Agreement or Letter of Closeout, provide a
completed copy of the Release from Agreement - or a
statement containing the DBE information required by
the form - to the Title VI Specialist in the DOT&PF Civil
Rights Office.
17.5 Within two weeks of execution of the Release
from Agreement or Letter of Closeout, transmit a set of
procurement documents to your Contracts Officer as
instructed by the Documents Checklist for PSA
Closeout (file: "clst-end"). Keep a copy of all material
for your project files.
PSA Manual Chapter 18 - Alphabetical List of Files
chap-18 Page 1 of 1 March 2014
Chapter 18
ALPHABETICAL LIST OF FILES
File Name File Description
aa-intro Introduction to RFP&PSA Files
act-clst Activity Checklist for Competitive Sealed Proposals (scoping thru contract award)
addendum Addendum to RFP Package
adver Advertisement for RFP Package
amd Amendment form
asps Authority to Seek Professional Services
auditreq Memo requesting pre-award Audit
c1-pay Exhibit C-1, Method(s) of Payment
c2-4-amd.xls Three forms in this Excel file for Cost Reimbursement > $250k:
[c2-crest] Exhibit C-2, CR Price Estimate
[c4-crbil] Exhibit C-4, CR Billing Detail Form
[c2-cramd] Revised Exhibit C-2, CR Price Estimate Amendment
c2-ntp Exhibit C-2, Notice to Proceed (NTP) & Invoice Summary for Fixed Price OR Cost Reimbursement < $250k
c3-crntp Exhibit C-3, CR NTP & Billing Summary for Cost Reimbursement > $250k
clst-amd List of Documents required for an Amendment file
clst-csp List of Documents required for a Competitive Sealed Proposals file
clst-emr List of Documents required for an Emergency Procurement file
clst-end List of Documents required for closing out a PSA
clst-lcs List of Documents required for a Limited Competition or Single Source Procurement file
clst-ntp List of Documents required for a Notice to Proceed under a Term Agreement
clst-sp List of Documents required for a Small Procurement
encumber Memo requesting encumbrance of contract funding
estimate.xls Two forms in this Excel file:
[estimate.tsk] Thirty Individual Task Estimate sheets
[estimate.sum] One Price per Task Summary sheet
evl-memo Memo to Evaluators
evl-rate Evaluator Rating Sheet (1 each Evaluator)
evl-rpt Committee Evaluation Report
evl-scor Committee Score Sheet (1 each Offeror)
feewksht Fee (profit) Worksheet
ins-char Instructions for Evaluation Committee Chairperson
ins-comm Instructions for Evaluation Committee
ins-est Instructions for Using Excel Price Estimate & PSA Appendix C Forms
ins-psa Instructions for Preparing a PSA
ins-rfp Instructions for Preparing RFP Package
ins-sos Instructions for preparing Statement of Services (SOS) - Appendix B in a PSA
instruct Instructions for Using RFP&PSA Files
ita Letter for Notice of Intent to Award
itn Letter for Notice of Intent to Negotiate
ltr-clos Letter for Closeout of PSA
perf-evl Performance Evaluation
preaudit Pre-Audit Statement
preneg Letter for Prenegotiation Requirements
protest Letter for Notice of Receipt of Protest
psa Professional Services Agreement (basic 2 page document)
psa-a PSA, Appendix A, General Conditions
psa-b PSA, Appendix B, Statement of Services
psa-c PSA, Appendix C, Compensation
psa-d PSA, Appendix D, Indemnification & Insurance
psa-e PSA, Appendix E, Certification for Licenses & Insurance
psa dbe 25A-326 Consultant’s Written DBE Commitment (Civil Rights – DBE Program)
psa dbe 25D-6 Consultant Registration (Civil Rights – DBE Program)
release Release from Agreement & DBE Certification of Completion
rfp-a RFP, Part A (RFP)
rfp-b RFP, Part B (Submittal Checklist)
rfp-c RFP, Part C (Evaluation Criteria)
rfp-d RFP, Part D (Proposal Form)
rons Record of Negotiation and Selection
sp-adend Small Procurement Addendum
spdocs-a Small Procurements Documents, Part A - Request for Proposals
spdocs-b Small Procurements Documents, Part B - Proposal Form
spdocs-c Small Procurements Documents, Part C - Contract Award, Notice to Proceed & Invoice Summary
spspb Small Procurements Standard Provisions Booklet (Cover Sheet and Index)
waiver Waiver Request
PSA Manual Appendix A - Waiver Request for Procurement
apx-a Page 1 of 1 March 2014
Appendix A
WAIVER REQUEST FOR PROCUREMENT
For PSAs less than the Small Procurement limits, waivers may be approved by DOT&PF Regional and Systems
Directors in accordance with DPOL 01.01.050, "Contracting Authority" (p. 3 of 3, Footnote #4). For other departments
and agencies having a DOT&PF delegation of authority for construction related procurement, the waiver requirements
for PSAs less than the Small Procurement limits may be approved by the Commissioner of the department or head of
the agency.
1. DOT&PF WAIVER FORM (file: "waiver"), shall be
used to request and document exemptions from
competitive solicitation requirements, e.g.:
* Emergency (Chapter 4)
* Single Source (Chapter 5)
* Limited Competition (Chapter 5)
* Use of Competitive Sealed Proposals in place of a
Competitive Sealed Bids {AS 36.30.200(b)}
* Other requirements of the procurement methods
specified in AS 36.30 and 2 AAC 12, or in this
handbook.
2. Contract Manager must prepare the heading
information plus PARTS 1 through 4, and obtain the
Contracts Officer's signature in the indicated block.
PARTS 3 and 4 must be very specific, i.e., why is this
important, what is the public necessity, what is the
expertise required, etc.? For federally funded projects,
the Contract Manager must, at a minimum, verbally
obtain Federal Agency concurrence before proceeding
further with the waiver process.
3. The form should then be given to the Contracts
Officer (or for other than DOT&PF, the agency Contact
Person) for review and processing with the DOT&PF
Chief Contracts Officer in the Commissioner's Office.
4. Within 15 days of executing the contract, the
Contract Manager must complete Part 6, Record of
Procurement, on the approved Waiver form and
submit a copy through the Contracts Officer (or agency
Contact Person) to the Chief Contracts Officer. When
multiple contracts are awarded under an Emergency
Procurement, information pertaining to all the contracts
shall be attached to the form in the format shown in
Part 6.
PSA Manual Appendix B - Index and Partial Collection of Regulatory Documents
apx-b March 2014
Appendix B
INDEX
AND PARTIAL COLLECTION OF REGULATORY
DOCUMENTS
DOT&PF Policy ............................... DPOL # 10.02.010 TITLE: Procurement and Property, CHAPTER: Contracting,
SUBJECT: Policy Pertaining to the Selection, Negotiation, Award and
Administration of Construction Related Professional Services Agreements.
DOT&PF Procedure........................ DPDR # 10.02.010 SUBJECT: Procedure for Solicitation and Administration of
Construction Related Professional Services Agreements.
DOT&PF Policy. .............................. DPOL # 01.01.050 TITLE: Office of the Commissioner, CHAPTER: Delegation
of Authority, SUBJECT: Contracting Authority
DOT&PF ......................................... AAM 30, 35, 38 SUBJECT: Encumbrances, Expenditures, Contract Payment
(AAM) Alaska Administrative Manual
TO REVIEW THE FOLLOWING DOCUMENTS, SEE YOUR CONTRACTS OFFICER.
AS 36.30 ......................................... State Procurement Code
2 AAC 12 ........................................ Procurement Regulations
48 CFR Part 31 ............................... "Contract Cost Principles and Procedures"
Federal Acquisition System
49 CFR 18.36 ................................. Uniform Administrative Requirements for Grants and Cooperative
Transportation Agreements to State and Local Governments, Section 36 -
Procurement (formerly Attachment "O" to OMB Circular A-102, "The Common
Rule").
23 CFR 172 .................................... "Administration of Engineering and Design Related Contracts"
Highways
23 CFR 420 .................................... Planning and Research Program Administration
23 CFR 450 .................................... Planning Assistance and Studies
49 CFR 26 ..................................... Participation by Disadvantaged Business Enterprises in Department of
Transportation Financial Assistance Programs
FAA AIP Handbook......................... Airport Improvement Program (AIP) Handbook, Department of Transportation,
Federal Aviation Administration.
FAA AC 150/5100-14D .................. Architectural, Engineering and Planning Consultant Services for Airport Grant
Projects.
FOR NON-CONSTRUCTION RELATED PROFESSIONAL SERVICES, SEE THE STATE ADMINISTRATIVE
MANUAL (AAM), SECTION 81 - GENERAL PROCUREMENT AND SECTION 82 - PROFESSIONAL SERVICES
CONTRACTS.