17.106-3 Special procedures applicable to DoD, NASA, and the Coast Guard
Source: FAR 17.106-3 on acquisition.gov
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.
(a) Participation by subcontractors, suppliers, and vendors. In order to broaden the defense industrial base, to the maximum extent practicable-
(1) Multi-year contracting shall be used in such a manner as to seek, retain, and promote the use under such contracts of companies that are subcontractors, suppliers, and vendors; and
(2) Upon accrual of any payment or other benefit under such a multi-year contract to any subcontractor, supplier, or vendor company participating in such contract, such payment or benefit shall be delivered to such company in the most expeditious manner practicable.
(b) Protection of existing authority. To the extent practicable, multi-year contracting shall not be carried out in a manner to preclude or curtail the existing ability of the Department or agency to provide for termination of a prime contract, the performance of which is deficient with respect to cost, quality, or schedule.
(c) Cancellation or termination for insufficient funding. In the event funds are not made available for the continuation of a multi-year contract awarded using the procedures in this section, the contract shall be canceled or terminated.
(d) Contracts awarded under the multi-year procedure shall be firm-fixed-price, fixed-price with economic price adjustment, or fixed-price incentive.
(e) Recurring costs in cancellation ceiling. The inclusion of recurring costs in cancellation ceilings is an exception to normal contract financing arrangements and requires approval by the agency head.
(f) Annual and multi-year proposals. Obtaining both annual and multi-year offers provides reduced lead time for making an annual award in the event that the multi-year award is not in the Government’s interest. Obtaining both also provides a basis for the computation of savings and other benefits. However, the preparation and evaluation of dual offers may increase administrative costs and workload for both offerors and the Government, especially for large or complex acquisitions. The head of a contracting activity may authorize the use of a solicitation requesting only multi-year prices, provided it is found that such a solicitation is in the Government’s interest, and that dual proposals are not necessary to meet the objectives in 17.105-2.
(g) Level unit prices. Multi-year contract procedures provide for the amortization of certain costs over the entire contract quantity resulting in identical (level) unit prices (except when the economic price adjustment terms apply) for all items or services under the multi-year contract. If level unit pricing is not in the Government’s interest, the head of a contracting activity may approve the use of variable unit prices, provided that for competitive proposals there is a valid method of evaluation.