UNITED STATES DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration ACQUISITION AND GRANTS OFFICE

October 16, 2017

MEMORANDUM FOR: Deputy Assistant Administrat~

Staff Office Directorp~ ~

FROM: Jeffrey S. Thomas Acting Director ()

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SUBJECT: Acquisition Alert 18-02, Definitization ofUndefinitized Contract Actions and Unpriced Change Orders and Disposition of Requests for Equitable Adjustment

The purpose of this memorandum is to rescind Acquisition Alert (AA) 13-05 and issue a new AA to implement updated policy on the definitization of Unpriced Change Orders (UCOs), located at NOAA Acquisition Manual Subpart 1330-43.204. The AA also implements new policy on the timely disposition of Requests for Equitable Adjustment (REAs) and the definitization ofUndefinitized Contract Actions (UCAs).

On April 11 , 2013, as a result of Office oflnspector General (OIG) Final Report OJG-13-024-A , the Acquisition and Grants Office (AGO) developed and issued AA 13-05 entitled, Implementation of Policy for Definitization of Unpriced Change Orders, a policy for the management of UC Os and the definitization of change orders in the shortest practicable time. On February 2 , 2017, the OIG issued Final Report OJG-1 7-013-A . This final report recommended AGO develop a policy for the timely disposition ofUCOs and REAs and a mechanism to communicate the status ofREAs, UCOs, and UCAs that have not been resolved for over 6 months to the SBPO. AA 18-02 is being issued to address the OIG' s recommendations on REAs, UCOs, and UCAs.

Questions pertaining to the Acquisition Alert should be directed to Paula Hance, AGO Policy and Oversight Division, at Paula.Hance@noaa.gov, or by telephone at (816) 823-3836.

Attachment

Acquisition Alert 18-02, Definitization of Undefinitized Contract Actions and Unpriced Change Orders and Disposition of Requests for Equitable Adjustment

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October 16, 2017

ACQUISITION ALERT 18-02

Definitization of Undefinitized Contract Actions and Unpriced Change Orders and Disposition of Requests for Equitable Adjustment

This Acquisition Alert (AA) is being transmitted to all the NOAA Heads of Contracting Offices (HCOs) for dissemination within their respective Acquisition Divisions. 1. Purpose: The purpose of AA 18-02 is to rescind AA 13-05, i ssued on April 11, 2013, and

issue an updated policy for the definitization of Unpriced Change Orders (UCOs) and a new policy for the timely disposition of Requests for Equitable Adjustment (REAs). AA 18-02 also implements a policy for the definitization of Undefinitized Contract Actions (UCAs). The new policy establishes the requirements to include a ceiling price or a not-to-exceed amount and a definitization schedule for UCOs and UCAs; ensure the timely disposition of REAs; include the Solicitation and Contract Language under Attachment 1 entitled, Requests for Equitable Adjustment, in all solicitations and resulting contracts; and notify the Senior Bureau Procurement Official (SBPO) of all UCAs, UCOs, and REAs that remain unresolved for more than 6 months.

2. Background: On April 25, 2013, the Department of Commerce (DOC) Office of Inspector

General (OIG) issued Final Report OIG-13-024-A. This final report made the recommendation that the NOAA Acquisition and Grants Office (AGO) develop a policy to definitize change orders in the shortest practicable time. In addressing the OIG recommendation, AGO issued AA 13-05, Implementation of Policy for Definitization of Unpriced Change Orders, on April 11, 2013. On February 2, 2017, the OIG issued Final Report OIG-17-013-A. The final report recommended that AGO develop a policy for the timely disposition of REAs and develop a mechanism to communicate the status of UCOs, UCAs, and REAs that have not been resolved for over 6 months (180 days) to the SBPO. AA 18-02 is being issued to rescind AA 13-05 and address the OIG’s recommendations on REAs, UCOs, and UCAs.

3. Applicability: This acquisition policy is applicable to all NOAA Line and Staff Offices. 4. Definitions:

a. A UCA is a contract action for which the contract terms, specifications, or price are not agreed upon before performance commences. i. A UCA is used when the negotiations of a definitive contract action is not possible in

sufficient time to meet Government requirements, and Government interest demands that the contract action be initiated in order for contract performance to begin immediately.

ii. A UCA includes letter contracts; orders under a basic ordering agreement, bl anket

purchase agreement, or a Federal Supply Schedule; undefinitized task or delivery orders; or an undefinitized modification for additional supplies or services to an existing contract determined to be outside of the scope of the original contract. The policy for letter contracts is covered within the Federal Acquisition Regulation (FAR)

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16.603, Commerce Acquisition Regulation (CAR) 1316.603, Commerce Acquisition Manual (CAM) 1301.70, Delegation of Contracting Authority, and Acquisition Instruction 16-01, NOAA Acquisition Review and Approval Process.

iii. A UCA does not include a unilateral change under the Changes clause, administrative

changes, funding modifications, or any other modifications within scope under the terms of the contract.

iv. Submission of a qualifying proposal in accordance with the definitization schedule is

a material element of the contract.

b. A change order1 is a written order, signed by the contracting officer (CO), directing the contractor to make a c hange that the Changes clause authorizes the CO to order without the contractor’s consent (unilateral). i. A UCO is considered to be a unilateral change that is within the scope of the contract.

ii. Under a UCO, the Government and contractor have not reached an agreement, i n

contract terms, on a n equitable adjustment.

c. An REA is a request submitted by the contractor for compensation to account for adjustments to the contract price, delivery terms, o r both. i. Equitable adjustment means that the contractor is entitled to its costs, plus reasonable

profit (except for suspensions and profit on uncompleted work with regard to termination for convenience), and overhead. The additional costs must be allowable, allocable, and reasonable.

ii. If the change(s) cause an increase or decrease in the cost of or the time required for

performance of any part of the work, the Contractor must assert its right to an equitable adjustment within 30 days after receipt of the order, by submitting to the CO a written statement describing the general nature and amount of the proposal, unless this period is extended by the Government.

iii. The equitable adjustments are negotiated and agreed upon by both parties in

accordance with FAR 43.103(a) and/or FAR 43.204. 5. Policy: NOAA AGO is issuing the following a cquisition policy establishing the requirements

for the definitization of all UCAs and UCOs.2

a. A UCA or UCO shall include a price ceiling3 or a not-to-exceed amount and a definitization schedule that provides for definitization by the earlier of:

i. The date that is 180 days from the date the action was issued; or

1 FAR 2.101 2 FAR 43.204(b)(3) requires contracting officers establish suspense systems adequate to ensure identification and prompt definitization of unpriced change orders. 3 The amount of available funding.

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ii. The date in which the funds obligation amount under the contract action reaches 50 percent of the price ceiling or the not-to-exceed price.

1. The Government shall not obligate more than 50 percent of the price ceiling or the

not-to-exceed price before definitization occurs.

2. However, if a contractor submits a qualifying proposal before 50 percent of the ceiling price or the not-to-exceed price has been obligated by the Government, then the limitation on obligations before definitization may be increased to no more than 75 percent of the ceiling price or the not-to-exceed price.

3. The CO may extend the period (180 days) or the amount (50 percent of the ceiling

price or the not-to-exceed price) for the definitization schedule, subject to the review and approval of the SBPO.

b. The definitization schedule for a UCA or UCO shall include:

i. A Milestone Plan, completed in collaboration with the contractor, that outlines the

definitization schedule for the UCA or UCO; and

ii. Evidence of an agreement on the Milestone Plan between the Program Office and the Acquisition Division.

c. All UCAs, UCOs, Letter Contracts, REAs, and resultant definitized actions and contracts

require legal review before being issued or finalized.4

d. A UCO or UCA cannot be definitized until negotiations for the REA have been completed. Negotiations for the REA shall be completed within 180 days of the issuance or receipt of the UCO or UCA.

i. The equitable adjustment agreed upon shall not exceed the ceiling price specified for

the UCO or UCA.

ii. Notification must be submitted to the responsible CO’s Division Director who will notify the SBPO of any REAs, UCOs, and UCAs where negotiations have not been completed within 180 days. The notification must include: 1. The reason for the extended time frame; 2. A plan for resolution; and 3. The estimated value of the equitable adjustment.

iii. The CO’s final resolution for each negotiated REA must be submitted to the SBPO,

who will review and submit the decision to the Senior Procurement Executive (SPE) for review in accordance with CAM 1301.70 Appendix B, Senior Procurement Executive Notifications, (d) Final Decision.

4 CAM 1301.71, Legal Review of Acquisition-Related Actions

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e. The Solicitation and Contract Language included under Attachment 1 entitled, Requests for Equitable Adjustment, shall be included in all solicitations and resulting contracts to appropriately address REAs resulting from UCOs or UCAs.

6. Point of Contact: Questions concerning this AA should be directed to Paula Hance, NOAA

AGO Policy and Oversight Division (POD), at Paula.Hance@noaa.gov, or by telephone at (816) 823-3836.

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(a) The amount of any request for equitable adjustment to contract terms shall accurately reflect

the contract adjustment for which the Contractor believes the Government is liable. The request shall include only costs for performing the change. All indirect costs included in the request shall be properly allocable to the change in accordance with applicable acquisition regulations.

(b) Any request for equitable adjustment to contract terms that exceeds the simplified acquisition threshold shall bear, at the time of submission, the following certificate executed by an individual authorized to certify the request on behalf of the Contractor:

I certify that the request is made in good faith, and that the supporting data are accurate and complete to the best of my knowledge and belief.

(Official’s Name)

(Title)

(c) The certification in paragraph (b) of this clause requires full disclosure of all relevant facts,

including:

(1) Certified cost or pricing data, if required, in accordance with subsection 15.403-4 of the Federal Acquisition Regulation (FAR); and

(2) Data other than certified cost or pricing data, in accordance with subsection 15.403-3 of the FAR, including actual cost data and data to support any estimated costs, even if certified cost or pricing data are not required.

(d) The certification requirement in paragraph (b) of this clause does not apply to:

(1) Requests for routine contract payments; for example, requests for payment for accepted supplies and services, routine vouchers under a cost-reimbursement type contract, or progress payment invoices; or

(2) Final adjustments under an incentive provision of the contract.

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Solicitation and Contract Language –Attachment 1

REQUESTS FOR EQUITABLE ADJUSTMENT (OCT 2017)

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