Solicitation_AID-621-13-00002_final.pdf

sscott-vargas Typewritten Text X 18

USAID/Tanzania Solicitation AID-621-13-00002 Commercial Recruiting Services for SAGCOT Catalytic Fund Trust November 5, 2012

COMBINED SYNOPSIS/SOLICITATION:

This is a combined synopsis/solicitation for a Commercial Services fixed price contract prepared in accordance with the format in FAR Subpart 12.6 as supplemented with additional information included in this notice. This announcement constitutes the only solicitation. Proposals are being requested and a written solicitation will not be issued.

This solicitation is issued as a Request for Proposals. Submit written proposals (technical proposal, budget and budget notes) referencing USAID/Tanzania AID-SOL-621-13-00002.

(1) Action Code USAID/Tanzania AID-SOL-621-13-00002

(2) Date November 5

(3) Year. 2012

(4) Contracting Office Zip Code. Dar Es Salaam, Tanzania

(5) Classification Code. R – Professional, Administrative and Management Support Services

(6) NAICS Codes 523991 – Trust, Fiduciary, and Custody Activities 561312 – Executive Search Services 541990 – All Other Professional, Scientific And Technical Services

(7) Order of Magnitude Threshold (Estimated) Between $50,000 and $80,000

(8) Competition Level Full and Open

(9) Subject Commercial Recruitment Services in Support of the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) Catalytic Trust Fund

(10) Place of Contract Performance Dar Es Salaam, Tanzania

(11) Set-aside Status Full and Open

(13) Solicitation Number USAID/Tanzania AID-SOL-621-13-00002

(14) Closing Response Date November 23, 2012, 1400 Local Time Dar Es Salaam, Tanzania

(15) Contracting Office Address Email: usaidtzco@usaid.gov

US address:

USAID/Tanzania 2140 Dar Es Salaam Place Dulles, VA 20189-2140

Local address:

USAID/Tanzania 686 Old Bagamoyo Road, Msasani P.O. Box 9130 Dar Es Salaam, Tanzania

(16) Contact Point or Contracting Officer. Susan Scott-Vargas, Contracting Officer usaidtzco@USAID.GOV

(17) Contract Award and Solicitation Number TBD/AID-621-13-00002

(18) Contract Award Dollar Amount TBD

(19) Contract Line Item Number TBD

(20) Contract Estimated Award Date On or about December 31, 2012

(21) Contract Estimated End Date On or about May 1, 2013

(22) Contractor TBD

(23) Description:

Statement of Work

Commercial Recruiting Services

In support of the Southern Agricultural Growth Corridor of Tanzania (SAGCOT)

Catalytic Trust Fund

Purpose

The Southern Agricultural Growth Corridor of Tanzania (SAGCOT) is an international public-private partnership launched at the World Economic Forum on Africa in May 2010 in Dar es Salaam, Tanzania.

As part of the development support to SAGCOT, USAID is providing technical support to its Catalytic Trust Fund (CTF) as it moves forward to become a cohesive working unit that provides financial resources and guidance for the international public-private partnership. The purpose of this call for proposals is to provide commercial recruiting services to the CTF. Those services include two activities:

1. To provide international recruiting services that will help the CTF identify, vet and present a slate of candidates to the current Board of Trustees to approve and seat (three trustees and one board chairman); and,

2. To provide international recruiting services to the CTF that will help identify, vet and present a slate of candidate organizations that can perform professional Fund Management for the CTF.

USAID will award entertain proposals from recruiting firms that address both activities in a single proposal and/or one activity with demonstrated expertise in that field. USAID reserves the right to award a single contract or up to two contracts under this solicitation.

I. Background: The SAGCOT concept and approach

The mandate for the SAGCOT is to mobilize private sector agribusiness investments, in linkage with public sector commitments, to achieve rapid and sustainable agricultural growth in the southern corridor of Tanzania. Tanzania’s southern corridor links the port of Dar es Salaam to Malawi, Zambia and the Democratic Republic of Congo. This area presently benefits from a reasonable ‘backbone’ infrastructure (including road, rail and power) and passes through some of the richest farmland in Africa.

SAGCOT is a centrepiece of the Tanzania’s “Kilimo Kwanza” strategy for pursuing food security, poverty reduction and reduced vulnerability to climate change with its members drawn from the Tanzanian government, global business, the Tanzanian and international private sectors, farmers, foundations and donor institutions. The SAGCOT partnership has as its core representatives from the "pillar” stakeholders including: - 1) the international and domestic private sectors, 2) the Government of Tanzania, 3) development partners, and 4) representation from local farmer organizations.

These pillars are a unique component of the overall CTF structure, in that their oversight represents the unique public-private partnership alignment that has a broad vision of the SAGCOT’s development.

The CTF is a financing vehicle for SAGCOT that was created in response to the challenges of catalyzing private sector investment in commercially and financially viable agribusinesses. The overall objective is to provide funds that address the initial costs and financing challenges of developing commercially viable agricultural businesses that incorporate smallholders. The objectives of the CTF combine high developmental impacts with commercial viability in an effort to leverage private sector investment. The funding provided will serve to complement market forces, not as a substitute for them. The role of CTF funds is to catalyze the development of agribusinesses by pioneering inclusive business models that are intended to be commercially viable and to grow in scale. The CTF’s purpose is to fill financing gaps that exist in supporting early stage and higher risk investments in order to incentivize private sector activity. The CTF is comprised of two activities: the Matching Grants Facility (MGF) and the Social Venture Capital Fund (SVCF). Both share the goal of supporting the development of small and medium agribusinesses. The MGF will provide large corporations matching grants to facilitate outgrower schemes which target smallholder farmers. The SVCF will make investments in small and medium agribusinesses and will help these businesses become investment ready by providing business development services both pre and post investment. This will help the business obtain additional financing from private sources.

The detailed objectives and other operative provisions of the CTF are set out in the Trust Deed, a draft document that is expected to be finalized in September, 2012.

II. Activity 1: Identification of Candidates for Three Trustee Positions and the Chairperson of the Board

The Recruiting Service will present a work plan and full list of criteria for the international search prior to moving forward. The Trust Fund’s Selection Panel must approve the work plan and full list of criteria for the search.

The Recruiting Service will provide all pre-procurement search services and verify information about each candidate and statements made by candidates that respond to the initial search.

The Recruiting Service will derive the criteria for identifying suitable candidates for the CTF Trustees from CTF Trust Deed Annex 9 and candidate(s) for CTF Board Chairman from the CTF Trust Deed Annex 8. These criteria will be published in the advertisement. The Recruiting Service will work closely with the Selection Panel to understand and incorporate the expectations of all the stakeholders of the CTF in the search process. The Selection Panel encompasses representatives of the: Government of Tanzania, Domestic Private Sector, International Private Sector, Donors and the Agribusiness community.

Task 1: Advertise for Candidates

The Commercial Recruiting Firm will – in accordance with its mandate and on behalf of the CTF

– undertake a search to identify Tanzanian and international candidates to fill positions for three trustees and a chairperson of the board. This activity will include publishing advertisement(s) in appropriate international, regional and Tanzania publication(s) and requesting expressions of interest from all candidates.

The advertisement(s) will include the terms of reference for Trustees and Chairperson found in Trust Deed (Attachment 1 to this RFP).

Task 2: Identification of Candidate Trustees and Chairperson from the Search

a. First Step: Those candidates that cannot meet the criteria will be set aside with comments by the Recruiting Service explaining why the candidacy was not considered viable. The Selection Panel will review the Recruiting Service’s recommendation on these candidates and the reasons for their non-inclusion and determine whether the exclusion is founded. The Trust Fund’s Selection Panel will then vote to confirm the exclusion of these candidates from further consideration.

b. Second Step: For candidates that were not excluded the Recruiting Service will conduct fit and proper tests in relation to each candidate. This includes, but is not limited to asset information and any actual or potential conflict of interest from each candidate. The Recruiting Service will ensure that each candidate is committed and has time available to devote to the job duties emphasising the anticipated on-going need for availability on short notice, particularly in the case of the appointee Chairperson of the Board. The Recruiting Service will present a second round list to the Selection Panel that notes qualified and unqualified candidates. The Selection Panel will then vote to confirm the exclusion of unqualified candidates from further consideration.

c. Third Step: The Recruiting Service will then prepare the slate of Board candidates and Board Chairperson candidates to the Selection Panel. It is hoped that between 7 and 10 viable candidates will be on the slate, including at least 2 that fulfill the required qualifications for the chairperson of the Board. Packets are requested for each candidate that includes: a detailed résumé, a detailed check of backgrounds, processing of references and written notes from possible interviews to provide further information. A final findings report for each candidate will be submitted to the Trust Fund’s Selection Panel. The Recruiting Service will assist the Selection Panel with arranging interviews with final candidates.

Task 3: The Commercial Recruiting Service will communicate the following to candidate Trustees and Candidate Chairpersons:

Trustee and chairperson of the Board selection (from Annex 12 in the Trust Deed):

a. The Trust Fund’s Selection Panel will consider all candidates. As part of its considerations, the Selection Panel will interview each final candidate. Preference will be given to physical interviews although video conference or telephonic interviews will be permitted. The Trust Fund’s Selection Panel may also undertake further due diligence investigations and fit and proper tests.

b. Candidates will be evaluated and measured on merit against the Criteria (Trustee), in the case of candidate Trustees, and against the Criteria (Board Chairperson), in the case of candidate chairpersons of the Board, and in accordance with the terms of the Trust Deed. The Trust Fund’s Selection Panel shall take care to ensure that appointees have enough time available to devote to the job, particularly in the case of the appointee chairperson of the Board. The emphasis will be on skills, diversity and experience. No member of the Selection Panel should be a friend of any candidate or have any other similar conflict of interest.

Formalization of appointments:

c. Once the Trust Fund’s Selection Panel has completed its interview process and any further due diligence and fit and proper testing, it will select and propose five Trustees, including one chairperson of the Board, for appointment to the Board of the CTF. The Trust Fund’s Partnership Council will then be required to confirm that it has no objection in relation to each proposed appointment.

d. Following the Partnership Council’s determination, successful candidates will be notified and in each case requested to enter into a service contract with the CTF for an initial term of up to three years. The Contractor will help the current Board of Trustees draw the service contract that will be signed by successful candidates.

e. Unsuccessful candidates will be notified in writing by the Contractor and no further correspondence will be entered into.

Following the first appointments, future appointments of replacement Trustees and of a replacement chairperson of the Board shall be staggered so as to ensure continuity.

Future appointments of replacement Trustees and of a replacement chairperson of the Board will be (i) made by the Board itself, applying the Criteria (Trustee), in the case of Trustees, or the Criteria (Board Chairperson), in the case of the chairperson of the Board.

f. The Recruiting Service will complete the above tasks within three months of the Firm’s appointment.

g. The Commercial Recruiting Service will support the Trust Fund’s Partnership Council and the Selection Panel in this process by scheduling meetings, drawing formalization documents, documenting interviews, and other administrative support if and when requested.

Part 2: Identify a Fund Manager

The SAGCOT Catalytic Fund Trust has two major funds that require management. Those funds are: the Matching Grants Facility (MGF), which is primarily funded by the World Bank and the Social Venture Capital Fund (SVCF), which is primarily funded by USAID and others. The Recruiting Service will advise the Board of Trustees on the feasibility of recruiting a single fund manager for both funds or whether two fund managers should be sought.

Task 1: Advertise for Fund Manager

The Recruiting Service will, in accordance with its mandate and on behalf of the CTF, undertake identifying candidate international and/or local organizations to serve as Fund Manager for the Catalytic Trust Fund. This will include publishing advertisements in appropriate international, regional and Tanzania publication(s) requesting expressions of interest from candidate organizations. The advertisement(s) will include the terms of reference for the Fund Manager found in the Trust Deed.

Criteria for Candidate Fund Managers:

The Recruiting Service will derive the criteria for identifying suitable candidate organizations for the Fund Manager from the Trust Deed Annex 11 of Trust Deed and will include these criteria in the advertisement. The recruitment service will work with the Trust Deed’s Selection Panel to finalize selection criteria in the event of revisions and other considerations in the Trust Deed.

The Recruiting Service will work closely with the Trust Fund’s Selection Panel (or members deemed appropriate by USAID and the SAGCOT Executive Committee) to understand and incorporate the expectations of all the stakeholders of the CTF in the search process.

Stakeholders include: Government of Tanzania, Domestic Private Sector, International Private Sector, Donors and the Agribusiness community.

Task 2: Identification of Candidate Fund Managers

The Recruiting Service will present to the Trust Fund’s Selection Panel a work plan and full list of criteria for the international search prior to moving forward. The Trust Fund’s Selection Panel must approve the work plan and full list of criteria for the search. The Recruiting Service will provide all pre-procurement service, search services and verify information about each candidate and statements made by candidates that respond to the initial search.

The Recruiting Service will work closely with the Trust Fund’s Selection Panel to develop a work plan and timeline for completion of this task.

There will be a two-stage selection and appointment process of the Fund Manager: the first stage being an expression of interest stage (EOI Stage) submitted as a five page concept paper and the second stage being a request for a full proposal (RFP Stage).

The Recruiting Service will work with the Trust Fund’s Selection Panel to manage the Expression of Interest stage and applicants will be shortlisted by the Trust Fund’s Selection Panel.

The Board will perform the detailed review of responses to the full RFP from shortlisted applicants and make the final decision as to the Fund Manager. The Recruiting Service may be asked to provide support to the Board during the RFP stage.

EOI Stage (see Trust Deed for requirements)

a. The Recruiting Service will, in accordance with its mandate and on behalf of the CTF, undertake a search to identify potential Fund Manager Applicants both in Tanzania and internationally, which will include publishing an advertisement in appropriate international publications requesting expressions of interest from potential fund manager applicants.

b. As part of its expression of interest, an applicant will be required to submit a response demonstrating compliance with the Criteria (Fund Manager) in Annex 14 of the Trust Deed. The objective of the EOI Stage is to identify those FM Applicants that have the qualifications required to be able to manage the relevant Fund and to meet the fiduciary requirements of the prospective Funders.

c. The Recruiting Service will score the applicants responses applying pre-determined weightings to the criteria. The Recruiting Service will then prepare a shortlist of applicants for each part of the Catalytic Trust Fund. Shortlisted responses will be submitted to the Trust Fund’s Selection Panel for review and approval. It is hoped that between 3 and 5 applicants will be shortlisted for each of the two sub-funds in the Catalytic Trust Fund. Applicants that meet the criteria can provide a response for each fund.

RFP Stage (see Trust Deed for requirements)

a. In the event that the Board has not already been reconstituted, the Trust Fund’s Selection Panel, acting on behalf of the CTF, will work with the Recruiting Service to send a written request for proposals to the shortlisted applicants. Shortlisted applicants wishing to respond will be required to submit a full proposal comprising a technical proposal and a financial proposal. The request issued will set out the content requirements of the proposal as well as the procedure for formal submission of proposals.

b. With input and advice from the Catalytic Trust Fund, the Recruiting Service will screen and rank all Technical Proposals for compliance with the stated requirements and will collate all compliant applications and present these to the Board of Trustees for consideration. Non-compliant Proposals will be rejected and will not participate further in the RFP Stage and selection process.

c. The Board will consider all compliant proposals in detail. As a first step, Technical Proposals will be scored in accordance with the weighted evaluation criteria and scoring mechanism set out in the Schedule hereto. The criteria are presented by major category, in descending order of importance, so that applicants will know which areas require emphasis in the preparation of Technical Proposals. Applicants Technical Proposals that do not meet the minimum qualifying mark will not have their Financial Proposals evaluated and will not participate any further in the RFP Stage and selection process.

d. Once the Board has completed its evaluation of all Technical Proposals, it will evaluate the Financial Proposals of applicants whose Technical Proposals secured the minimum qualifying mark. The Financial Proposals will be evaluated and ranked on the basis of cost realism, ability to allocate costs appropriately and the “allowability” of proposed costs.

e. As part of its evaluation and scoring of Technical Proposals and Financial Proposals, the

Board, with assistance from the Recruiting Service, may require an applicant to attend one or more interviews with the Board and/or the Funders on mutually convenient date(s). It may also require an applicant to submit to a review of its financial, procurement and human resources policies and procedures by the Funders. The Board may also undertake further due diligence, including:

i. site visits;

ii. review of constitutional and other material documents and agreements applicable to the FM Applicant, including applicable shareholders and subscription agreements; and

iii. anti-money laundering and know-your-customer checks.

f. Once the Board has completed its evaluation of all Financial Proposals and also completed any further screening and due diligence, it will determine the overall points score for each applicant. As soon as possible after the evaluation process, the FM applicant with the best overall value will be requested to enter into negotiations with the Board in relation to that Fund (relating, in particular, to costing and any changes to the Fund Management Services Agreement which may have been requested by the applicant in its Technical Proposal, or which may be requested by the Board.

g. Following successful completion of negotiations with the preferred applicant for a Fund, a formal letter of confirmation will be sent by the Board to that applicant, requesting it to enter into a Fund Management Services Agreement with the CTF in relation to the relevant Fund.

h. Unsuccessful FM Applicants will be notified in writing within 5 days and no further correspondence will be entered into.

III. Recruiting Service Evaluation

USAID and the SAGCOT Executive Committee will form a Trust Fund Selection Panel that will select and engage a Recruiting Service based on the evaluation criteria which will include the Recruiting Services’ respective expertise, experience, market knowledge and their price proposals. Interested firms should provide information demonstrating that they have the required qualifications and relevant experience to perform the Services.

(24) The government will award up to two contracts resulting from this solicitation to the responsible offeror(s) whose offer conforms to the solicitation and will be most advantageous to the Government based on the evaluation criteria.

While preference will be given an offeror whose proposals addresses the two areas of recruitment, USAID/Tanzania reserves the right to issue two contracts if proposals warrant. The two areas of recruitment are:

recruiting for international board of trustee members and chairperson for international organizations and recruiting up to two investment fund management organizations to manage the two separate Catalytic Trust Funds - the Matching Grants Facility (MGF) and the Social Venture Capital Fund (SVCF).

The contracting office must receive all proposals electronically at usaidtzco@usaid.gov by the solicitation close date of November 23, 2012 at 1400 hrs. Local Time (Dar Es Salaam, Tanzania). Upon receipt the Contracting Officer will review all proposals for responsiveness to this solicitation.

A technical evaluation committee will be appointed by the Contracting Officer to review and rate all proposals in accordance with the evaluation criteria contained in this solicitation.

Upon recommendation from the technical evaluation committee, Contracting officials will make a final determination of responsibility of the selected candidate(s) recommended by the technical evaluation committee prior to award issuance.

(25) Evaluation Criteria

All proposals will be rated on the following criteria:

Technical Approach (30%): Knowledge of emerging markets investment funds; experience recruiting for international board of trustee members for international organizations; executives for international organizations; and/or recruiting investment fund management organization for the emerging marketplace

Management and Key Personnel (25%) Ability for field a quality recruitment team and provide solid recruitment management with expertise working with financial institutions and/or fund management.

Past Performance (30%): Evidence of similar international recruitment and access to a broad international network to prepare a slate of potential board members. Clear track record of successfully identifying board members for funds, and/or African financial institutions.

Price (15%): Competitive budget for conducting the recruitment processes.

(26) Proposal Submission

Offerors must submit their proposals via electronic email to USAIDtzco@usaid.gov. All proposals should be prepared as follows:

Typeface: Sans serif typeface (i.e. Arial, franklin gothic book, or other) Type size: 11 pt. for text, 12 pt. for headers Paper: 8-1/2 x 11 letter size with one-inch margins on all sides.

Technical Proposal Layout: Prepared in MSWord and submitted via email in Adobe .pdf format in no more than four electronic files. Not using this layout will deem the proposal as non-responsive to this solicitation. The files must be structured in the following order:

FILE #1

a. Executive Summary (up to 3 pages);

b. Proposal (up to 15 pages). Offerors will explain the technical approach and the management approach in this section, as well as identify Key Personnel positions and job descriptions needed to implement the award.

c. Past Performance (up to 5 pages) Proposals must include at least five points of contacts for a reference with name, position, email address, company/organization, company/organization address and summary of experience/work performed for the organization. Written letters of support may also be added by the Offeror.

FILE #2

a. Annexes (no page limit): Include CVs for all key personnel and other materials by the Offeror. Annex material will only be considered by the technical evaluation committee during review of the offerors proposals if it pertains to information listed in the technical proposal.

FILE #3

a. Price Proposal Layout: Prepared and submitted via email as an MS Excel

Spreadsheet. The budget must cover the following:

DIRECT COSTS

PERSONNEL and LABOR Salaries Fringe Benefits

CONSULTANTS

TRAVEL and PERDIEM

International In-Country (Tanzania Only) Transportation (Taxis, Cars) EQUIPMENT (Non-Expendable) SUPPLIES (Expendable)

INDIRECT COSTS

Indirect costs will only be considered if the Offeror holds a current NICRA with the US Government at this time. Please submit current NICRA letter with the Budget Notes.

FILE #4

Budget Notes: Prepare and submit Budget notes that support budget pricing where appropriate in an MSWord document For example, explain number of staff needed to support Key Personnel, etc. Also include US Government NICRA letter if claiming indirect costs in the budget.

USAID/Tanzania has determined that proposals will be accepted from an individual, an organization and/or contractor/subcontractor arrangement. All responsible sources may submit a proposal which shall be considered by the agency.

In a case where the Offerors can justify skill level in one activity area of the request, but not the other, USAID/Tanzania reserves the right to award in a single technical area of expertise. The two areas of recruitment expertise are:

Recruiting for international board of trustee members for international organizations and

Recruiting up to two investment fund management organizations to manage the two separate Catalytic Trust Funds - the Matching Grants Facility (MGF) and the Social Venture Capital Fund (SVCF).

(27) Destination information Offerors should note the percentages of work to be performed in Tanzania and at their base office in the budget notes.

(28) Delivery schedule. TBD

(29) Duration of the contract period. On or about 120 - 150 Days

(30) This Solicitation/Synopsis has been placed through https://www.fedbizopps.gov and Offerors should download all documents from that source.

(31) Questions for this solicitation should be sent to usaidtzco@usaid.gov prior to the Monday, November 12, 2012 prior to 2 p.m. local time. Questions may not be submitted through any other USAID office or employee. Any proposal sent to other USAID addresses will not be considered responsive to this solicitation. Answers to questions will be posted on FEDBIZOPPS.gov by November 14, 2012 prior to 5 p.m. local time.

(32) Proposals for this solicitation should be sent to usaidtzco@usaid.gov prior to the deadline date and time listed above. Proposals may not be submitted through any other USAID office or employee. Any proposal sent to other USAID addresses will not be considered responsive to this solicitation.

CONTRACT CLAUSES

(1) 52.212-4, Contract Terms and Conditions -- Commercial Items, by reference

52. 202-1 Definitions 52.203-5 Covenant Against Contingent Fees 52-203-7 Anti-Kickback Procedures 52-203-8 Cancellation, Rescission and Recovery of Funds for Illegal or Improper Activity 52.203-10 Price or Fee Adjustment for Illegal or Improper Activity 52.212-2 Evaluation 52.212-3 Offeror Representation and Certifications 52.212-5 Contract Terms and Conditions Required to Implement Statues and Executive Orders 52.216-24 Limitation of Government Liability 52-216-25 Contract Definitization 52.217-8 Option to Extend the Term of the Contract 52.223-18 Encouraging Contractor Policies to Ban Text Messaging While Driving 52.225-13 Restrictions on Certain Foreign Purchases 52.225-25 Prohibition to Contracting with Entities Engaging in Sanctioned Activities

Relating to Iran – Representation and Certification 52.229-6 Taxes – Foreign Fixed-Price Contracts 52.232-25 Prompt Payment 52.232-33 Payment by Electronic Funds Transfer - Central Contractor Registration

52.233-2 Service of Protest 52.233-3 Protest After Award 52.244-6 Subcontracts for Commercial Items

52.247.63 Preference for US-Flag Air Carriers

Subpart 12.4 -- Unique Requirements Regarding Terms and Conditions for Commercial Items

12.401 -- General.

This subpart provides --

(a) Guidance regarding tailoring of the paragraphs in the clause at 52.212-4, Contract Terms and Conditions -- Commercial Items, when the paragraphs do not reflect the customary practice for a particular market; and

(b) Guidance on the administration of contracts for commercial items in those areas where the terms and conditions in 52.212-4 differ substantially from those contained elsewhere in the FAR.

12.402 -- Acceptance.

(a) The acceptance paragraph in 52.212-4 is based upon the assumption that the Government will rely on the contractor’s assurances that the commercial item tendered for acceptance conforms to the contract requirements. The Government inspection of commercial items will not prejudice its other rights under the acceptance paragraph. Additionally, although the paragraph does not address the issue of rejection, the Government always has the right to refuse acceptance of nonconforming items. This paragraph is generally appropriate when the Government is acquiring noncomplex commercial items.

(b) Other acceptance procedures may be more appropriate for the acquisition of complex commercial items or commercial items used in critical applications. In such cases, the contracting officer shall include alternative inspection procedure(s) in an addendum and ensure these procedures and the post award remedies adequately protect the interests of the Government. The contracting officer must carefully examine the terms and conditions of any express warranty with regard to the effect it may have on the Government’s available post award remedies (see 12.404).

(c) The acquisition of commercial items under other circumstances such as on an “as is” basis may also require acceptance procedures different from those contained in 52.212-4. The contracting officer should consider the effect the specific circumstances will have on the acceptance paragraph as well as other paragraphs of the clause.

12.403 -- Termination.

(a) General. The clause at 52.212-4 permits the Government to terminate a contract for commercial items either for the convenience of the Government or for cause. However, the paragraphs in 52.212-4 entitled “Termination for the Government’s Convenience” and “Termination for Cause” contain concepts which differ from those contained in the termination clauses prescribed in Part 49. Consequently, the requirements of Part 49 do not apply when terminating contracts for commercial items and contracting officers shall follow the procedures in this section. Contracting officers may continue to use Part 49 as guidance to the extent that Part 49 does not conflict with this section and the language of the termination paragraphs in 52.212-4.

(b) Policy. The contracting officer should exercise the Government’s right to terminate a contract for commercial items either for convenience or for cause only when such a termination would be in the best interests of the Government. The contracting officer should consult with counsel prior to terminating for cause.

(c) Termination for cause.

(1) The paragraph in 52.212-4 entitled “Excusable Delay” requires contractors notify the contracting officer as soon as possible after commencement of any excusable delay. In most situations, this requirement should eliminate the need for a show cause notice prior to terminating a contract. The contracting officer shall send a cure notice prior to terminating a contract for a reason other than late delivery.

(2) The Government’s rights after a termination for cause shall include all the remedies available to any buyer in the marketplace. The Government’s preferred remedy will be to acquire similar items from another contractor and to charge the defaulted contractor with any excess re-procurement costs together with any incidental or consequential damages incurred because of the termination.

(3) When a termination for cause is appropriate, the contracting officer shall send the contractor a written notification regarding the termination. At a minimum, this notification shall --

(i) Indicate the contract is terminated for cause;

(ii) Specify the reasons for the termination;

(iii) Indicate which remedies the Government intends to seek or provide a date by which the Government will inform the contractor of the remedy; and

(iv) State that the notice constitutes a final decision of the contracting officer and that the contractor has the right to appeal under the Disputes clause (see 33.211).

(4) The contracting officer, in accordance with agency procedures, shall ensure that information related to termination for cause notices and any amendments are reported.

In the event the termination for cause is subsequently converted to a termination for convenience, or is otherwise withdrawn, the contracting officer shall ensure that a notice of the conversion or withdrawal is reported. All reporting shall be in accordance with 42.1503(f).

(d) Termination for the Government’s convenience.

(1) When the contracting officer terminates a contract for commercial items for the Government’s convenience, the contractor shall be paid --

(i) (A) The percentage of the contract price reflecting the percentage of the work performed prior to the notice of the termination for fixed-price or fixed-price with economic price adjustment contracts, or

(B) An amount for direct labor hours (as defined in the Schedule of the contract) determined by multiplying the number of direct labor hours expended before the effective date of termination by the hourly rates(s) in the Schedule; and

(ii) Any charges the contractor can demonstrate directly resulted from the termination. The contractor may demonstrate such charges using its standard record keeping system and is not required to comply with the cost accounting standards or the contract cost principles in Part 31. The Government does not have any right to audit the contractor’s records solely because of the termination for convenience.

(2) Generally, the parties should mutually agree upon the requirements of the termination proposal. The parties must balance the Government’s need to obtain sufficient documentation to support payment to the contractor against the goal of having a simple and expeditious settlement.

12.404 -- Warranties.

(a) Implied warranties. The Government’s post award rights contained in 52.212-4 are the implied warranty of merchantability, the implied warranty of fitness for particular purpose and the remedies contained in the acceptance paragraph.

(1) The implied warranty of merchantability provides that an item is reasonably fit for the ordinary purposes for which such items are used. The items must be of at least average, fair or medium-grade quality and must be comparable in quality to those that will pass without objection in the trade or market for items of the same description.

(2) The implied warranty of fitness for a particular purpose provides that an item is fit for use for the particular purpose for which the Government will use the items. The Government can rely upon an implied warranty of fitness for particular purpose when--

(i) The seller knows the particular purpose for which the Government intends to use the item; and

(ii) The Government relied upon the contractor’s skill and judgment that the item would be appropriate for that particular purpose.

(3) Contracting officers should consult with legal counsel prior to asserting any claim for a breach of an implied warranty.

(b) Express warranties. The Federal Acquisition Streamlining Act of 1994 (41 U.S.C. 264 note) requires contracting officers to take advantage of commercial warranties. To the maximum extent practicable, solicitations for commercial items shall require offerors to offer the Government at least the same warranty terms, including offers of extended warranties, offered to the general public in customary commercial practice. Solicitations may specify minimum warranty terms, such as minimum duration, appropriate for the Government’s intended use of the item.

(1) Any express warranty the Government intends to rely upon must meet the needs of the Government. The contracting officer should analyze any commercial warranty to determine if --

(i) The warranty is adequate to protect the needs of the Government, e.g., items covered by the warranty and length of warranty;

(ii) The terms allow the Government effective post award administration of the warranty to include the identification of warranted items, procedures for the return of warranted items to the contractor for repair or replacement, and collection of product performance information; and

(iii) The warranty is cost-effective.

(2) In some markets, it may be customary commercial practice for contractors to exclude or limit the implied warranties contained in 52.212-4 in the provisions of an express warranty. In such cases, the contracting officer shall ensure that the express warranty provides for the repair or replacement of defective items discovered within a reasonable period of time after acceptance.

(3) Express warranties shall be included in the contract by addendum (see 12.302).