J13 - SubContract Policies.docx

Attachment J-13 Subcontracting Purchasing Policies Attachments:

Integrated Management of Licensed Activities

0. Subcontract Purchasing Policies The purpose of this instruction is to establish policies and procedures for:

· Review and approval of the Contractor’s commercial purchasing procedures (CPP), and

· Consent to subcontract and review/advance notification of subcontracts.

The Requirements stated in this attachment are based on the FAR Part 44, though, because this contract does not approach the total dollar threshold of $25 million established by the FAR Part 44,the intent is to use Part 44 for surveillance and review guidance of the Contractor’s CPP.

Commercial Purchasing Procedures In order to minimize acquisition lead-time and administrative costs of purchasing, the Contractor shall obtain and maintain MARAD approval for Commercial Purchasing Procedures (CPP). Until approval has been received, the Contractor shall submit all sub-contracting actions to the CO and COR to review for compliance with the provisions of these policies as outlined in J-13.3.2.2.

Contractor Deliverable If the Contractor did not submit their CPP as part of their proposal, they shall submit their CPP to the Contracting Officer (CO) (or designated representative, hereby referred to as the CO throughout this policy) within 90 days of NTP. However, the Contractor is encouraged to provide the deliverable early to enable the review process to be completed in a timely manner.

Note: This is a deliverable. Failure to perform will be cause for termination.

Contractors with CPPs previously approved by MARAD or other Government agencies shall provide a copy of the approval documentation for those procedures to the CO with a copy of those procedures and any revisions or addendums for review, with the submittal of their proposal.

CPP Approval – General The review and approval of a Contractor’s commercial purchasing procedures will be done in two steps . First, is the approval of the Contractor’s written procedures ; Second , surveillance and approval of actual purchasing operation. The surveillance will be conducted after a sufficient quantity of procurements have been processed using the contractor’s procedures to provides a sample base Commercial Purchasing Procedure Requirements The CPP shall address, but not limited to, the following items:

Best Value practices and procedures consistent with the Federal Acquisitions Regulation (FAR) which defines “BEST VALUE” as the expected outcome of an acquisition that provides the greatest overall benefit in response to the requirement. For example, in acquisitions where the requirement is clearly definable and the risk of an unsuccessful contract performance is minimal, cost or price may play a dominant role of source selection. The less definitive the requirement, the more development work is required or the greater the performance risk, the more technical or past performance consideration may play a dominant role in the selection.

Methodology and approach to ensure that Ethical and Professional Standards are maintained to the highest standard throughout the life of the contract.

Methodology for the acquisition of quality products and services at fair and reasonable prices.

Procedures to identify capable and reliable contractors who have successful past performance records and who can demonstrate a current ability to perform.

Demonstration of effective competitive techniques. This contract requires that subcontractors be selected on a competitive basis to the maximum extent practical.

Methodology for the minimization of acquisition lead-time and administrative cost of procurement Methodology for self-assessment to support continuous improvements in purchasing procedures.

Maintenance of complete subcontract documentation (Section J-13.4.3).

Use of electronic commerce to the maximum extent practicable, for transmission, processing, invoicing and storing data associated with the Contractor contract.

Procedures for inclusion of appropriate, current flow-down clauses, terms and conditions (Section J-13.4.6).

Contract Oversight The MARAD CO and COR will provide performance oversight to ensure Contractor compliance with the approved CPP.

MARAD Review of CPP MARAD review and approval of the CPP will include an initial review and approval. Following the Initial Review, Periodic Reviews and Audits will be conducted as specified below. If there are deficiencies, findings or recommendations identified during any review or audit process conducted throughout the performance contract, the Contractor shall reply within 15 calendar days with a response to address or incorporate said deficiencies, findings, or recommendations.

Initial Review and Approval Review of the CPP may take upwards of 90 days and may include an on-site audit at the Contractor's facility. If deficiencies are found, the CO will advise the Contractor of the deficiencies and recommend the necessary steps the Contractor must take to gain approval. Upon receipt of a favorable review, the CO will issue notification of approval. MARAD CPP approval issued under a prior contract does not apply to the current Contractor contract.

Periodic Review The CO and the COR will conduct a Contract Administrative Review (CAR) on an annual basis to review compliance with the approved CPP procedures and contract requirements. These reviews will be held randomly without notice.

Audit / Review

1. Selection of product and or services is technically justified

2. Type of contract action is appropriate to the risk involved.

3. Compliance with the requirements of the flow-down clauses is evident

4. Adequate competition is obtained or proper justification for not competing or having adequate competition.

5. Evidence of cost or price analysis or price comparison were conducted

6. Basis for determining the responsibility of the sub-contractor

7. Evidence that the list of Debarred, Suspended or Ineligible contractors has been reviewed before awarding to a subcontractor.

Maintenance of CPP The Contractor shall advise the CO and COR of any change to its commercial procedures 14 calendar days prior to implementation throughout the performance period of the Contract.

The CO will monitor the Contractor purchasing program in accordance with J-13.2.1. CO review(s) may require on-site attendance at the Contractor's facility. The Contractor shall assist the CO by providing space, administrative support, and access to records/reference documents during these inspections.

In accordance with FAR 44.302, once initial approval has been given, at least every 3 years, the CO will determine whether a purchasing system review is necessary. The CO will provide CPP re-certifications. MARAD will conduct annual cost incurred financial audits on Contractor records utilizing the services of DCAA. If warranted, interim cost-incurred audits will be ordered.

Withdrawal of CPP Approval During the performance period of the Contract, the CO may lower the advance notification/consent thresholds, if there has been deterioration of the Contractor CPP or to protect the Government's interests. The CO will issue a deficiency report to the Contractor, with a copy to the COCO. The Contractor shall immediately conform to the CO's lower thresholds, and respond to the deficiency report within 15 days. If the CO finds the Contractor performance under the approved CPP unsatisfactory, the CO has the authority to require more stringent consent criteria. Such decision will be accompanied by a Deficiency Report to the Contractor. This is a citation indicating a lack of quality performance. The Contractor shall respond with a resolution of the deficiency in the time frame specified by the CO, but not later than 10 business days from receipt of the deficiency. The Contractor shall adhere to the revised consent criteria during the resolution of the deficiency.

Subcontract Reviews The Contractor shall provide subcontracts and documentation for review as follows:

Advance Notification Notification to CO prior to award, with copy of intended subcontract

The CO waives the requirement for advance notification of fixed price contracts.

Consent The Contractors request(s) for consent to subcontract shall be submitted to the CO and will be subject to whether or not the MARAD has approved the Contractor’s CPP.

With Approved CPP

Without Approved CPP

Consent to Subcontract Guidelines The request for consent to subcontract and supporting documentation shall be submitted to the CO electronically at least 10 working days prior to intended subcontract award date. The CO review will include the considerations listed in FAR 44.202-2 as well as consent limitations in 44.203. The Contractor request shall include all applicable informational elements listed in FAR 52.244-2, Subcontracts, subparagraph (f)(1). Additionally, the consent request shall include:

· A clear analysis of the award decision, including all factors considered

· Copy of proposals received and an abstract of proposals

· Copy of proposed subcontract, including any changes to terms and conditions

· Summary of negotiations, including explanation of variance between proposed and negotiated prices

· Separately priced bonds and insurance, if coverage exceeds specified insurance requirements (see Section H-10.2)

· Specific funding required for the basic subcontract, supplemental growth, options, and projected Contractor administrative costs

· Milestone schedule Additional Review Requirements COR/ACOR specification reviews are always required regardless of the level of subcontract review.

For any subcontract requiring formal consent, the associated solicitation shall be submitted to the CO for pre-issuance review electronically at least 10 working days prior to intended issuance date. The solicitation package submitted shall include:

· Solicitation

· Documentation of specification review and approval by the COR/ACOR

· Source List

· Detailed estimate

· Basis for determination of liquidated damages, diversion/inter-port differentials, bonding, and insurance, if coverage exceeds H-10.2.2 requirements.

Thereafter, a copy of all changes or amendments to the solicitation will be provided to the CO and COR/ACOR concurrent with issuance.

Notwithstanding the established review thresholds, the CO may request a pre-award review of any complete subcontract, or part thereof (e.g., sole source, non-commercial items).

Procedures for Emergency Repairs The Contractor shall only purchase supplies or services authorized by a Task Order (TO) or TO modification except for emergency repairs described below:

An emergency is any action that is needed to protect or prevent the loss of life, limb, or property. The Contractor is authorized to take whatever action that is deemed necessary to protect or prevent the loss of life, limb, or property.

The Contractor shall notify the CO and COR/ACOR as soon as possible, after identifying the emergency, and at a minimum:

· Define the intended work in as much detail as possible.

· Develop an estimate of cost, and an initial not to exceed value.

· Make all attempts possible to obtain competition, given the circumstances.

· Obtain fixed price rates for subcontracted labor (to include straight time and overtime) fully burdened material, mutually acceptable terms and conditions.

· Recommend project start and completion dates.

· Obtain verbal authorization for emergency repairs from the CO as soon as practical. The CO will issue a written TO (or modification) confirming verbal authorizations as soon as practical.

All appropriate flow-down clauses shall be used, inclusive of Service Contract Act FAR-52.222-41.

MARAD Specific Subcontract Requirements Subcontract Funding MARAD may obligate funding for subcontracts on the initial TO, or may elect to obligate funding at a later date via TO modification. The Contractor is expected to execute the approved business plan in a timely manner by soliciting services or supplies "subject to the availability of funds;" however, the Contractor shall not sign a contract with a subcontractor and shall not incur a legal obligation without a funded TO.

Segregation and Monitoring of Funds The Contractor is responsible for performing the ordered work, by the required delivery date, and within the authorized funding levels for each CLIN of the TO. The Contractor shall segregate and monitor costs accordingly.

The Contractor must notify the CO in writing when 75% of the funds provided on the TO have been expended. Caution: This notification requirement applies to individual TOs even when multiple TOs are used on a project. Work Orders will be funded within the scope of the Task Order and are not subject to the reporting requirement. Further, the Contractor shall notify the COR/ACOR and CO at any point that it is determined that the ordered work cannot be accomplished within the required delivery and/or within the authorized funding.

Subcontract Requirement - Documentation For purposes of Government auditing, the Contractor shall establish and maintain an individual file for each subcontract, which may be in electronic format. The subcontract file shall contain the following, as a minimum:

The Contractor shall establish and maintain a file which documents each subcontract. The file shall be identified with a sequential number for tracking. The file shall be adequately documented to establish the propriety of the transaction and the price paid, and that the Contractor complied with its CPP. This documentation shall provide evidence that:

1. Quality products and services are being acquired at fair and reasonable prices.

2. File documentation is maintained appropriate to the price of the procurement and is adequate to establish the propriety of the transaction and the price paid. Appropriate close-out documentation shall include :

· Receipts

· Delivery manifest

· Acceptance and

· Final Payments

3. Documentation supporting approved appropriate funding

4. Evidence of competition for procurements in excess of $3,000.

5. Evaluation and justification of awards has been conducted in the case of procurement exceeding $3,000.

6. Mandatory flow-down clauses have been appropriately incorporated.

7. Documentation of Socioeconomic award to Small Business Programs.

Subcontractor Payments The Contractor shall encourage vendors to submit invoices promptly. Ideally, the Contractor should encourage the use of electronic invoicing from the subcontractor to achieve accurate, timely invoices for review and payment. Prompt submission of invoices can be a consideration for best value as it permits obligated funds to be liquidated and excess funds de-obligated.

The Contractor is responsible to verify the validity and accuracy of all subcontractor invoices prior to forwarding them to MARAD for reimbursement. Repeated invoice inconsistencies and errors are a reflection of poor quality control processes and will impact the Contractor's performance assessment. MARAD will reclaim overpayments directly from Contractor. The Contractor shall submit invoices after receipt of supplies/services in accordance with Section G-5.

Subcontractor Claims and Disputes Subcontracts are between the Contractor and the subcontractor, and the Contractor is responsible for resolving subcontract disputes. The Contractor shall advise the CO and COR/ACOR of disputes, changes in status of disputes, and potential costs or delays in delivery or possible litigation. MARAD will not directly participate in disputes and/or settlement.

MARAD endorses and recommends the use of alternative disputes resolution (ADR) procedures. The Contractor is responsible for all administrative and legal costs associated with resolving such disputes, except when the government has authorized reimbursement by issuance of a TO. When private counsel has been authorized, the government will reimburse reasonable costs associated with such representation subject to the funding limitations of TO.

Payments of judgments or settlements resulting from this disputes resolution process are the responsibility of the Contractor, although the Contractor may request reimbursement provided that indemnification under Section H-10.3 does not apply. Contractor is cautioned to seek prior approval from the CO of settlements, which the Contractor intends to submit for reimbursement, in order that a reserve of appropriated funds can be made for the claim. The liability of the United States under this clause is subject to the availability of appropriated funds.

If a dispute is not settled between the Contractor and the subcontractor and the matter advances to a formal claim in the Courts, Section H-11 Claims and Litigation will apply.

General Subcontract Policies Competition All contract actions in excess of $3,000.00 are required to be competitively sought.

Flow Down Clauses The Contractor shall incorporate appropriate flow-down clauses in subcontracts. Flow-down clauses vary with the type of item, price, and place of purchase. The Contractor is responsible to select and apply the correct clauses to avoid unnecessary cost to the Government.

Commercial Items In accordance with FAR 44.402, all commercial item purchases shall include the flow-down clauses listed in FAR 52.244-6, Subcontracts for Commercial Items, and SCA, except for subcontracts obtained outside the United States. Supplies/services ordered by MARAD are considered commercial items unless otherwise stated on the TO.

Non Commercial Items Purchases for supplies and services that do not qualify as commercial items (as determined by the MARAD CO) shall include all appropriate clauses that flow-down from the Contractor Contract, including SCA.

Subcontract terms The subcontract shall not include any language implying or stating that it is an agent of the Federal Government, and the Contractor shall not sign as "agent" or 'Contractor for MARAD.” The subcontract shall not include terms that bind the Government to the results of arbitration, judicial determination, or voluntary settlement between the prime contractor and subcontractor.

Supplemental Material/Lower Tier Subcontract Markup The Contractor shall not include a percentage markup (i.e., material handling charge, burden rate) in its subcontracts for supplemental material or lower tier subcontracts. This type of arrangement is considered a Cost-Plus-A-Percentage-Of-Cost type contract, which is prohibited by FAR.

Subcontractor Screening The Contractor shall verify that no apparent conflict of interest/improper affiliations exist between the Contractor and subcontractors.

The Contractor shall verify that proposed subcontractors are not suspended and/or debarred by consulting the General Services Administration (GSA) List of Parties Excluded from Federal Procurement and Non-procurement Programs, website at https://www.epls.gov/. If the Contractor intends to subcontract with a party that is debarred, suspended, or proposed for debarment, notification to the CO is required in accordance with FAR 9.405-2.

Contractor shall evaluate subcontractor performance to establish qualified sources, and to be used as part of the evaluation of best value. The Contractor is expected to factor subcontractor past performance into its decision on award. The Contractor must support decisions not to award based on past performance.

[END OF ATTACHMENT J-13]

Original: 02-14-2011 Version: 00, 4/16/2012 14:274/16/2012 12:17