This Congressional report, issued December 27, 2022, provides a “discussion of acquisition flexibilities federal agencies may use to facilitate the government’s response to and recovery from disasters and emergencies.” The report explains the various types of flexibilities and some of the pros and cons of each. And it concludes by identifying several significant issues related to these acquisition flexibilities. Let’s take a look.
As the report states:
Federal procurement is an essential component of the federal government’s response to disasters, emergencies, and other types of incidents. Procurement data for federal government spending related to past hurricanes and wildfires and the COVID pandemic show that it has acquired a broad array of goods and services—from engineering and satellite services to office supplies and dump trucks—over the years to aid in response and recovery efforts.
The report explains that “there is no single acquisition method or process for buying goods and services[,]” and the selection of which method to use is typically left up to the contracting officer–so long as the contracting officer follows applicable statutes and regulations. The same goes for emergency acquisitions.
To assist contracting officers in making such decisions, in 2007, acquisition officials added a new Part 18 to the FAR, which is “a single reference to acquisition flexibilities that already exist in other parts of the FAR.” FAR subpart 18.1 lists the generally available acquisition flexibilities, which are not contingent on any executive action. And FAR subpart 18.2 lists the emergency acquisition flexibilities, which “may be used only when the appropriate official has made an emergency declaration or designation.”
There are, of course, many benefits to using the FAR Part 18 flexibilities, such as “acquiring goods and services in a more timely and efficient manner than might occur otherwise.” But there are also significant risks to doing so, such as potentially impaired accountability. According to the report, the hope is that the considerations of the benefits and risks “might prompt Congress to consider whether existing acquisition flexibilities are sufficient or how federal agencies could balance additional or enhanced acquisition flexibilities with the need to safeguard the government’s interests.”
Acquisition Flexibilities, An Overview
In its overview of acquisition flexibilities, the report explains that it is “[t]he absence of a standardized process coupled with the existence of acquisition flexibilities” that allow “contracting officers to adapt to the unique needs associated with each disaster or emergency.” And it is up to the contracting officers to determine which, if any, such acquisition flexibilities they will use in acquiring the goods or services needed to timely and efficiently fulfill the agency’s requirements.
The Government Accountability Office (GAO), in a report documenting the federal response to COVID-19, acknowledged the importance of procurement to the government’s response to the pandemic–while also addressing some of the challenges:
Our prior work has found that contracts play a key role in federal emergency response efforts, and that contracting during an emergency can present a unique set of challenges as officials can face a significant amount of pressure to provide critical goods and services as expeditiously and efficiently as possible.
These acquisition flexibilities no doubt enable agencies to provide goods and services in a timely and more efficient fashion than they may otherwise be able. But their use does not come without risk. As the report states:
Possible consequences include reduced transparency, less accountability, limited or no competition, and higher costs. For example, undefinitized contract actions, such as letter contracts, can be useful when an agency must move quickly to award a contract. Generally, it may take less time to draft a letter contract (or other types of undefinitized contracts) because these types of contractual agreements do not include all of the terms and conditions usually found in a procurement contract.
As GAO explained, the downside to using such undefinitized contract actions is that they can pose certain other risks to the government. For example, one such risk occurs when “contractors lack incentives to control costs before all contract terms and conditions are defined.” Indeed, GAO reported:
Undefinitized contracts transfer additional cost and performance risks from contractors to the government because contracting officers normally reimburse contractors for all allowable costs they incur. With all allowable costs covered, contractors bear less risk and have little incentive to control costs. The government also risks incurring unnecessary costs as requirements may change before the contract is definitized.
According to the report, the “extent of the risk to the federal government may depend, at least in part, on the specific circumstances surrounding the use of any acquisition flexibilities.” And as such, the report then takes a deeper dive into the two subparts of FAR Part 18, Generally Available Acquisition Flexibilities and Emergency Acquisition Flexibilities.
Generally Available Acquisition Flexibilities
There are 26 generally available acquisition flexibilities, again, set forth in FAR subpart 18.1. The report discussed a few of those, including Noncompetitive Procedures based on Unusual and Compelling Urgency. These noncompetitive procedures can be substituted for the generally required “full and open competition” requirements for seven different reasons. One of them is when the agency determines there is “unusual and compelling urgency.” This process allows the contracting officer to exclude certain sources from the procurement. And the rules also state that this process removes the requirement for the agency to post a synopsis of its proposed contract action. Additionally, where the agency asserts unusual and compelling urgency, it is not required to stay award or performance as a result of GAO protest. And finally, in using the unusual and compelling circumstances flexibility, the agency can waive certain SAM registration requirements.
Another general acquisition flexibility discussed in the report is Oral Requests for Proposals. Generally, FAR 5.201 requires solicitations be posted on SAM.gov when the value exceeds $25,000. But this exception in the rules allows an oral request for proposals when “processing a written solicitation would delay the acquisition of supplies or services to the detriment of the Government and a notice is not required under [FAR] 5.202 (e.g., perishable items and support of contingency or other emergency situations).”
Advanced Payments is another flexibility discussed by the report. FAR 32.405 allows designated agencies that take actions “to facilitate the national defense” to make advance payments under contracts awarded using sealed bidding procedures or negotiated contracting procedures. And the President may authorize such advance payments as well.
Yet another general acquisition flexibility covered by this report is Letter Contracts. Generally, contracting officers must use a uniform contract format outlined by the FAR. But FAR 16.603 explains that, in certain circumstances, such as disasters or emergencies, the contracting officer may instead use a letter contract, which is a “written preliminary contractual instrument that authorizes the contractor to begin immediately manufacturing supplies or performing services.” The letter contract is an undefinitized contract, often missing some of the terms and conditions usually included in a definitized contract. A letter contract may be used
when (1) the Government’s interests demand that the contractor be given a binding commitment so that work can start immediately and (2) negotiating a definitive contract is not possible in sufficient time to meet the requirement. However, a letter contract should be as complete and definite as feasible under the circumstances.
Interagency Acquisitions are discussed as an additional general flexibility. The FAR defines interagency acquisitions as follows:
means a procedure by which an agency needing supplies or services (the requesting agency) obtains them from another agency (the servicing agency), by an assisted acquisition or a direct acquisition. The term includes—(1) Acquisitions under the Economy Act (31 U.S.C. 1535); and (2) Non-Economy Act acquisitions completed under other statutory authorities, (e.g., General Services Administration, Federal Supply Schedules in subpart 8.4 [of the FAR] and Governmentwide acquisition contracts (GWACs)).
Essentially, one agency (the servicing agency) acts on behalf of the requesting agency in an assisted acquisition. The report explains that this could be a situation where a requesting agency places orders directly against the servicing agency’s procurement vehicle (i.e. GSA’s FSS, a multi-agency BPA, or a multi-agency IDIQ), while the servicing agency manages the vehicle.
The final general flexibility discussed in the report is Contracting with Certain Types of Small Businesses on a Sole Source Basis. This one is pretty self-explanatory, and it is often an attractive option during disasters and emergencies. When certain conditions are met, the contracting agency can make sole source awards to certain socioeconomic certified small businesses (i.e. HUBZone small businesses, SDVOSBs, etc.) before considering small business set asides. Per the FAR, awarding a contract on a sole source basis means “a contract for the purchase of supplies or services … is entered into or proposed to be entered into by an agency after soliciting and negotiating with only one source.”
That is all the report covered as far as generally acquisition flexibilities go. Remember those flexibilities, though often subject to specific terms and conditions, do not require an executive action to be invoked. The report next turned to the emergency acquisition flexibilities, which do require executive action to be invoked.
Emergency Acquisition Flexibilities
As the FAR explains, these emergency acquisition flexibilities are only available in specific circumstances. It says:
Emergency acquisition flexibilities, as used in this part, means flexibilities provided with respect to any acquisition of supplies or services by or for an executive agency that, as determined by the head of an executive agency, may be used –
(a) In support of a contingency operation as defined in 2.101;
(b) To facilitate the defense against or recovery from cyber, nuclear, biological, chemical, or radiological attack against the United States;
(c) In support of a request from the Secretary of State or the Administrator of the United States Agency for International Development to facilitate the provision of international disaster assistance; or
(d) When the President issues an emergency declaration, or a major disaster declaration.
And the report focused on two of these emergency acquisition flexibilities in its discussion. The first one is the Stafford Act Preference for Local Firms and Individuals. To use this flexibility, first, the President must declare a major disaster or emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). When that happens, agencies must “give a preference, ‘to the extent feasible and practicable,’ to local entities and individuals when contracting for supply distribution, debris clearance, reconstruction, and other types of major disaster or emergency assistance.” To enforce this, contracting officers may use local set-asides or an evaluation preference. And a justification must be provided whenever an emergency response contract is not awarded to a local entity or individual if this Act is invoked.
The other emergency acquisition flexibility discussed in the report is Increases in the Micro-Purchase Threshold and Simplified Acquisition Threshold. The FAR explains that these thresholds can be raised when
the head of the agency determines the supplies or services are to be used to facilitate defense against or recovery from cyber, nuclear, biological, chemical, or radiological attack; to facilitate provision of international disaster assistance; or to support response to an emergency or major disaster.
Once this finding is made: the micro-purchase threshold can be raised (from $10,000 to $20,000, for contracts awarded and performed in the U.S., and $30,000 for those outside the U.S.); the simplified acquisition threshold can be raised (from $250,000 to $800,000, for contracts awarded and performed in the U.S., and $1.5 million for those outside the U.S.); “contracting officers may treat any acquisition of supplies or services as an acquisition of commercial items.”; and the simplified acquisition threshold for purchases of commercial items increases from $7.5 million to $15 million.
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The report concludes by reiterating the federal government’s “significant role in helping individuals, communities, and regions respond to and recover from disasters and emergencies, [as] reflected in the amounts of funds it has spent on a broad variety of goods and services over the years.” But it also reiterates some of the risks involved in these acquisition flexibilities. And as such, it poses some important and insightful questions for consideration.
First, it asks whether these currently available acquisition flexibilities are “sufficient for procurement of essential goods and services during a disaster or emergency situation in a timely and efficient fashion[,]” and “[i]f not, what could be done differently?” It also asks if it would benefit the federal procurement world to have “a more detailed and/or prescriptive statutory and regulatory framework specific to disasters and emergencies[,]” and “under what circumstances would such a framework be activated?” As a third question, the report contemplates which “steps, if any, might the federal government take to balance the need to streamline the procurement process in the event of a disaster or an emergency with the need to safeguard the government’s interests and funding[,]” and in implementation of those steps, which tradeoffs should be considered acceptable. Finally, the report asks for ways in which the government might “boost transparency and accountability in emergency procurements without impeding agencies’ efforts to buy essential goods and services?”
These are all excellent questions that many contractors likely found themselves asking these last few years. We don’t have perfect answers at this time. But it is important to discuss the risks, benefits, and competing principles of emergency acquisitions to ensure our government’s goal of balancing these risks, benefits, and principles stays at the forefront.
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