Special procedures applicable to DoD, NASA, and the Coast Guard
Multi-year contracts for DoD, NASA, and the Coast Guard must promote broad supplier participation, ensure prompt payments, and follow strict rules on contract types, pricing, and cancellation.
Overview
FAR 17.106-3 outlines special procedures for multi-year contracting specifically applicable to the Department of Defense (DoD), NASA, and the Coast Guard. The section emphasizes broadening the defense industrial base by encouraging participation from subcontractors, suppliers, and vendors, and mandates prompt payment to these entities. It also protects the agencies' authority to terminate contracts for deficient performance, requires cancellation or termination if funding lapses, and restricts contract types to firm-fixed-price, fixed-price with economic price adjustment, or fixed-price incentive. The regulation addresses the inclusion of recurring costs in cancellation ceilings, the solicitation of both annual and multi-year proposals, and the use of level or variable unit pricing, with specific approvals required for exceptions. The procedures are designed to ensure fairness, efficiency, and fiscal responsibility in multi-year acquisitions for these agencies.
Key Rules
- Participation by Subcontractors, Suppliers, and Vendors
- Multi-year contracts must promote and retain the involvement of these entities, with prompt delivery of payments or benefits.
- Protection of Termination Authority
- Agencies must retain the ability to terminate contracts for cost, quality, or schedule deficiencies.
- Cancellation for Insufficient Funding
- Contracts must be canceled or terminated if continued funding is not available.
- Permitted Contract Types
- Only firm-fixed-price, fixed-price with economic price adjustment, or fixed-price incentive contracts are allowed.
- Recurring Costs in Cancellation Ceilings
- Including recurring costs in cancellation ceilings requires agency head approval.
- Annual and Multi-Year Proposals
- Both types of proposals may be solicited unless the head of contracting activity authorizes otherwise.
- Level Unit Prices
- Level unit pricing is standard, but variable pricing may be approved if justified and evaluable.
Responsibilities
- Contracting Officers: Ensure compliance with multi-year contracting procedures, obtain necessary approvals, and manage solicitations and pricing structures appropriately.
- Contractors: Submit proposals as required, comply with payment and pricing provisions, and understand contract cancellation risks.
- Agencies: Oversee adherence to procedures, approve exceptions, and ensure prompt payment to subcontractors and suppliers.
Practical Implications
- This section ensures multi-year contracts are managed to support a broad industrial base, maintain flexibility for contract termination, and safeguard government interests. Contractors must be aware of payment timelines, contract types, and the potential for contract cancellation due to funding. Agencies must balance administrative workload with the benefits of dual proposals and ensure proper approvals for exceptions.