37.102 Policy
Source: FAR 37.102 on acquisition.gov
Performance-based acquisition is the preferred and required method for federal service contracts, with strict rules to ensure cost-effectiveness, competition, and proper oversight.
Overview
FAR 37.102 establishes the core policy for acquiring services in federal contracting, emphasizing performance-based acquisition as the preferred method. Agencies must use performance-based methods to the maximum extent practicable, except for specific exclusions such as architect-engineer services, construction, utility services, and services incidental to supply purchases. The regulation sets an order of precedence for contract types, prioritizing firm-fixed price, performance-based contracts. Agencies are generally expected to rely on the private sector for commercial services and are prohibited from contracting for inherently governmental functions. The section also mandates accurate requirements descriptions, effective management practices to prevent fraud and waste, cost-effectiveness, open competition, and avoidance of conflicts of interest. Agencies must ensure trained personnel are available for contract administration and that service contracts involving products comply with environmental and sustainability requirements. Additional limitations apply to the use of lowest price technically acceptable (LPTA) source selection for certain services, except for DoD.
Key Rules
- Performance-Based Acquisition Preferred
- Agencies must use performance-based acquisition methods for services whenever practicable, with specific exceptions.
- Order of Precedence for Contract Types
- Firm-fixed price, performance-based contracts are preferred, followed by other performance-based and then non-performance-based contracts.
- Private Sector Reliance
- Agencies should generally obtain commercial services from the private sector.
- Prohibition on Inherently Governmental Functions
- Contracts cannot be awarded for inherently governmental functions.
- Requirements Definition and Management
- Program officials must accurately describe service needs and use performance-based methods where possible, with support from contracting officials.
- Management Practices and Oversight
- Agencies must implement practices to prevent fraud, waste, and abuse, and ensure trained staff for contract administration.
- Cost-Effectiveness and Competition
- Services must be acquired cost-effectively, competitively, and without conflicts of interest.
- Product Requirements in Service Contracts
- Service contracts involving products must comply with environmental and sustainability requirements.
- LPTA Limitations
- Restrictions on LPTA source selection for certain services (except DoD).
Responsibilities
- Contracting Officers: Ensure use of performance-based methods, proper contract type selection, compliance with exclusions, and oversight of contract administration.
- Contractors: Respond to clearly defined, performance-based requirements and avoid conflicts of interest.
- Agencies: Maintain effective management practices, ensure trained staff, prevent fraud/waste, and comply with environmental and competition requirements.
Practical Implications
- This section ensures service acquisitions are results-oriented, cost-effective, and competitive, reducing risk of waste and abuse. Contractors must be prepared for performance-based requirements and clear deliverables. Agencies must avoid contracting for inherently governmental functions and ensure robust oversight, which can impact solicitation and contract administration processes.
(a) Performance-based acquisition (see subpart 37.6) is the preferred method for acquiring services (Public Law106-398, section 821). When acquiring services, including those acquired under supply contracts or orders, agencies must-
(1) Use performance-based acquisition methods to the maximum extent practicable, except for-
(i) Architect-engineer services acquired in accordance with http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title40-section1101&num=0&edition=prelim" target="_blank">40 U.S.C. 1101 et seq.;
(ii) Construction (see part 36);
(iii) Utility services (see part 41); or
(iv) Services that are incidental to supply purchases; and
(2) Use the following order of precedence (Public Law106-398, section 821(a));
(i) A firm-fixed price performance-based contract or task order.
(ii) A performance-based contract or task order that is not firm-fixed price.
(iii) A contract or task order that is not performance-based.
(b) Agencies shall generally rely on the private sector for commercial services (see OMB Circular No. A-76, Performance of Commercial Activities and subpart 7.3).
(c) Agencies shall not award a contract for the performance of an inherently governmental function (see subpart 7.5).
(d) Non-personal service contracts are proper under general contracting authority.
(e) Agency program officials are responsible for accurately describing the need to be filled, or problem to be resolved, through service contracting in a manner that ensures full understanding and responsive performance by contractors and, in so doing, should obtain assistance from contracting officials, as needed. To the maximum extent practicable, the program officials shall describe the need to be filled using performance-based acquisition methods.
(f) Agencies shall establish effective management practices in accordance with Office of Federal Procurement Policy (OFPP) Policy Letter 93-1, Management Oversight of Service Contracting, to prevent fraud, waste, and abuse in service contracting.
(g) Services are to be obtained in the most cost-effective manner, without barriers to full and open competition, and free of any potential conflicts of interest.
(h) Agencies shall ensure that sufficiently trained and experienced officials are available within the agency to manage and oversee the contract administration function.
(i) Agencies shall ensure that service contracts that require the delivery, use, or furnishing of products are consistent with subpart 23.1 (see 23.103(c)).
(j) Except for DoD, see 15.101-2(d) for limitations on the use of the lowest price technically acceptable source selection process to acquire certain services.