AFFARS Part 5317

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PART 5317-SPECIAL CONTRACTING METHODS

SUBPART 5317.1-MULTIYEAR CONTRACTING

"Classic Intermediate Multiyear Contract" means a multiyear contract that contains no economic order quantity advance procurement effort, contains an unfunded contingent liability greater than $20 million in one or more contract years, and the contract value is less than $500 million. These contracts allow only the amortization of tooling and other non-recurring start-up costs over the contract term to be included in the cancellation ceiling. Advance procurement funding lines are not required for this type of multiyear contract.

"Classic Small Multiyear Contract" means a multiyear contract that contains no economic order quantity advance procurement effort, contains an unfunded contingent liability no more than $20 million in one or more contract years, and the contract value is less than $500 million. These contracts allow only the amortization of tooling and other non-recurring start-up costs over the contract term to be included in the cancellation ceiling. Advance procurement funding lines are not required for this type of multiyear contract.

"Contingent Liability" means an annual not-to-exceed amount which defines the limit of the Government's liability in the event of the cancellation of a multiyear contract. This liability may be funded or unfunded. As used here, this term is synonymous with cancellation ceiling.

"Economic Order Quantity (EOQ)" means, in conjunction with multiyear procurement, the procurement of material or labor for future-year production quantities that is not required by procurement leadtimes but is desirable for economic reasons. The costs are sometimes characterized as recurring costs. Funding for EOQ procurement shall be included in an advance procurement line item. The advance procurement line items for an EOQ procurement shall cover the estimated annual termination liability of the EOQ effort unless full funding of the EOQ is desired.

"Expanded Intermediate Multiyear Contract" means any multiyear contract with EOQ effort of more than $20 million for any contract year or an unfunded contingent liability greater than $20 million and the total contract is less than $500 million.

"Expanded Multiyear Contract" means a multiyear contract that contains economic order quantities (EOQ) for the acquisition of material or labor for future year production quantities that are not required by acquisition leadtimes but are desirable for economic reasons. These contracts contain recurring costs in the cancellation ceilings.

"Expanded Small Multiyear Contract" means any multiyear contract with EOQ effort of $20 million or less for each contract year and an unfunded contingent liability less than $20 million and the total contract is less than $500 million.

"Major Multiyear Contract" means any multiyear contract (classic or expanded) greater than $500 million. These contracts require specific approval in a DOD Appropriation Act.

"Multiyear Exhibit" means one of five separate exhibits prescribed in AFI 65-601, Budget Guidance and Procedures, and DOD 7000.14-R, DOD Financial Management Regulation, to support requests for multiyear contracts.

Commands are encouraged to aggressively explore multiyear contracting (MYC) opportunities and to take advantage of their overall reduced administrative burden and potential savings. However, before entering into any multiyear contract, the contracting officer shall review current congressional language for potential restrictions. SAF/AQCS is available to provide advice in this area. AFI 65-601 contains the exhibit package used in supporting multiyear candidates.

(a) Criteria. See Attachments 5317-1 through 5317-4 for multiyear contracting guidance. A written determination by the Assistant Secretary of the Air Force for Acquisition is required for any multiyear contract over $500 million for systems, and any multiyear contract for property for which the cancellation ceiling is estimated to exceed $100 million. The HCA, with power of redelegation, may make written determinations for multiyear contracts with a face value under $500 million for property when the cancellation ceiling is under $100 million. Forward requests for Secretarial determinations to SAF/AQCS.

(b) Limitations.

SUBPART 5317.2-OPTIONS

When options are used in service contracts, use separate contract line items for the basic and each option period. Normally, obtain priced options for two, one-year periods.

(e) The chief of the contracting office making the award may approve total contract periods in excess of five years on a case-by-case basis. This authority shall not be delegated.

(a) When the contractor has been notified of the Air Force's intent to exercise an option, a presolicitation notice shall not be placed in the Commerce Business Daily.

(c) Before exercising an option, the contracting officer shall determine if the contractor's performance is satisfactory.(d)(2) The following factors should be considered in the informal analysis of prices and the market:

SUBPART 5317.5-INTERAGENCY ACQUISITIONS UNDER THE ECONOMY ACT

(a) The Economy Act permits a Federal Agency to order supplies and services from another Federal Agency under certain conditions. The Act was designed to promote economy in Government operations by permitting efficient use of Government resources, even though they may be in another agency. This eliminates duplication of effort to build expertise in several agencies and allows a Federal Agency to take advantage of another Federal Agency's substantial experience in a specific area. The Economy Act also promotes the economy that results from consolidating requirements (i.e., quantity discounts and other tangible or intangible benefits).

(b) Orders to purchase supplies or services under contracts entered into or administered by another agency (or for supplies/services produced in-house by the servicing agency), may be placed with other agencies under the Economy Act only if:

(c) The Air Force shall not place an order with another agency unless adequate supporting documentation, including a Determination and Findings (D&F), is prepared. This supporting documentation shall be prepared and developed by the requiring activity. Supporting documentation and general information about the servicing agency's contract will be used in the preparation of the Determination and Findings described in 5317.503-90.

(d) Interagency acquisitions are entered into by mutual agreement between the requesting agency and the servicing agency. If a requesting agency's order will interfere with the servicing agency's ability to meet its mission, the servicing agency may reject the order. The servicing agency can also reject the order if the requested supply or service is not within the scope of activities normally performed by the agency, within the scope of work of a particular contract, or if the order lacks adequate funding or required supporting data.

(e) The Economy Act may not be used to circumvent the conditions and limitations imposed on the use of Government funds appropriated for the procurement (i.e., expiration of funds at the end of a fiscal year). This applies to conditions and limitations affecting either the requesting or the servicing agency.

(f) Orders for supplies or services may also be placed with other agencies under authorities other than the Economy Act. Orders placed under these authorities are not subject to the requirements of the Economy Act. These additional authorities include:

(a) The decision by an Air Force activity to place an interagency order under the Economy Act with an agency outside the DOD, instead of contracting directly with a private source, shall be documented in a written Determination and Findings. The requiring activity shall prepare the D&F for approval at a level no lower than SES/Flag/General Officer in the requesting activity's chain of command. If an SES/Flag/General Officer in the requesting activity's chain of command is not available at the installation, the D&F will be approved by the wing or installation commander.

(b) The D&F shall be reviewed by the Air Force contracting officer who would normally have procured the requirement. The contracting officer will review the proposed D&F and supporting documentation as a "business advisor" to the approval authority. The content of the D&F will be consistent with the policies and procedures contained in the FAR. The ability of the local contracting office to procure the requirement under an Air Force contract will also be considered. Written comments will be provided to the approval authority to help in the decision to place the order with an agency outside the DOD.

(c) When assessing the cost of obtaining the supplies or services through an interagency agreement, the Air Force shall consider any administrative fees charged by the servicing agency as part of the total cost of the order. In accordance with Section 844 of the National Defense Authorization Act for fiscal year 1994, fees paid to the servicing agency shall not exceed the actual cost or, if actual costs are unknown, the estimated costs of entering into and administering the contract or other agreement under which the order is filled. The administrative cost of providing the supplies or services by normal Air Force contracting procedures shall also be considered.

(d) The requiring activity shall include with the Military Interdepartmental Procurement Request (MIPR) any documentation required to support the D&F. Examples include independent cost estimates and documentation of urgency of need. Copies of the documentation shall be retained with the requiring activity's file copy of the MIPR and provided to the servicing agency upon their request.

(e) If the work was previously performed by Government personnel and will now be performed by a contractor under a servicing agency's contract (or if the work was previously performed under a contract and will now be performed in-house by the servicing agency), the requiring activity must have complied with the requirements of FAR Subpart 7.3. This shall be documented in the D&F.

(f) The contracting office shall retain a record copy of each Economy Act D&F in a central file.

(g) The requiring activity shall prepare a D&F substantially the same as the model shown below. The D&F may be tailored to appropriately address the instant requirement.

MODEL DETERMINATION AND FINDINGS

1. I have reviewed the requirement for [insert description of supply or service to be procured] that [insert Air Force requiring activity] intends to place with [insert agency] as an interagency order under the Economy Act. My review produced the following findings:
a. The proposed acquisition is authorized under the authority of the Economy Act;

b. The Air Force is legally authorized to acquire the supplies or services;

c. Adequate funds are available;

d. The action does not conflict with any other agency's authority or responsibility (see FAR Part 8);

e. The supplies or services cannot be provided as conveniently and more economically by private contractors under an Air Force contract;

f. The servicing agency has unique expertise or ability not available within the Department of Defense;

g. The servicing agency will accept the order and can satisfy the requirement;

h. The supplies or services are clearly within the scope of activities of [insert agency] and that agency normally contracts for (and/or produces in-house) those supplies or services for itself;

i. The cost to the Air Force for the requirement, including the administrative fees charged by [insert agency] appears to be reasonable. The fees proposed to be paid to the servicing agency do not exceed the servicing agency's actual cost (or estimated costs if actual costs are unknown) of entering into and administering the contract or other agreement under which the order is filled;

j. The contract administration procedures related to [insert agency]'s contract are adequate for Air Force requirements (or the order contains additional contract administration requirements that will result in contract administration procedures that comply with Air Force and DOD regulations and policies);

k. All approvals and authorizations required by Air Force and/or DOD policies for acquiring the supplies or services have been obtained;

l. The requirement is a bona fide need of the Air Force;

[Insert the following if the work will be performed by a Federally Funded Research and Development Center:]
m. The work will be performed by a Federally Funded Research and Development Center (FFRDC). Performance by the FFRDC will not place the servicing agency and its FFRDC in direct competition with private sources;

[Insert the following if the work was previously performed by Government personnel and will now be performed by a contractor under a servicing agency's contract (or if the work was previously performed under a contract:)]
n. The requiring activity has complied with the requirements of FAR Subpart 7.3.

2. Given the findings outlined above, I hereby determine that it is in the best interest of the Government to place an order for [insert requirement] with [insert agency] under the authority of the Economy Act.

(a) The Air Force shall include complete contract administration requirements and contract audit responsibilities appropriate for the type of contract and scope of work on all orders placed outside of the Department of Defense.

(b) If it is necessary for the servicing agency to award a contract or modify an existing contract to accommodate the Air Force's order, the Air Force requiring activity shall supply all supporting data necessary to prepare the required contract documentation.

(c) The Air Force requiring activity shall also provide special contract terms or other requirements applicable to Air Force funds. This includes information such as special funds tracking and reporting requirements, additional contract administration requirements, special delivery or packaging instructions, a copy of the executed determination, and other supporting documents.

(d) Additional D&Fs are not required to incrementally fund an existing order or to administratively modify an order, if the scope of work remains the same throughout the order's period of performance.

(e) The servicing agency is responsible for complying with the Competition in Contracting Act when it awards the original contract. Therefore, the requesting agency is not required to compete the requirement between potential servicing agencies.

(f) Relationships with a servicing agency can involve one order or many orders over a long period of time. When using the servicing agency's contract to place and administer direct orders with a vendor, the requirements of the Economy Act still apply. Where the Air Force desires to enter into a long term, continuing relationship by placing orders with a servicing agency under the authority of the Economy Act, the requiring activity should ensure that the resulting interagency agreement includes, in addition to any other requirements of this section, the following:

(g) The following policy applies to orders placed with the Air Force as a servicing agency under the Economy Act:

In accordance with Section 844 of the National Defense Authorization Act for fiscal year 1994, orders may not be placed with agencies not required to comply with the FAR unless the purchase is approved in advance by the Air Force Senior Ac-
quisition Executive (SAF/AQ). This approval authority has been delegated to the Air Force Deputy Assistant Secretary (Contracting), SAF/AQC. Approvals will be accomplished by forwarding the D&F (and necessary supporting documentation) through SAF/AQCO for endorsement by the Air Force Deputy Assistant Secretary (Contracting), SAF/AQC. Prior to submittal to SAF/AQCO, the D&F must be reviewed by an Air Force contracting officer and coordinated by the SES/Flag/General Officer in the requiring activity's chain of command (see 5317.503-90 (a)).

Non-FAR Covered Agencies

The following are some of the Federal Agencies not covered by the FAR:

Independent Establishments (Per 5 U.S.C. 104(1))

(a) U.S. Postal Service;

(b) Postal Rate Commission;

(c) Government corporations other than wholly owned Government corporations under 31 U.S.C. 9101(3) (i.e., mixed-ownership Government corporations under 31 U.S.C. 9101(2)):

Per the Federal Property and Administrative Services Act of 1949 (exemptions in accordance with 40 U.S.C. 474)

(a) The President under Philippine Property Act;

(b) The Resolution Trust Corporation;

(c) U.S. Postal Service;

(d) Central Intelligence Agency;

(e) Joint Committee on Printing;

(f) U.S. Information Agency (but USIA public affairs office says it complies with the FAR)

SUBPART 5317.74-UNDEFINITIZED CONTRACT ACTIONS

5317-7402 Reserved.

UCA approval authorities shall control the use of UCAs and ensure timely definitization. Air Force contracting offices shall track UCA status (number, value, and age).

Each issuance of a UCA requires approval at a level above the contracting officer. The level of approval shall be consistent with the total estimated dollar value of the action.

Each UCA shall contain a definitization schedule in the contract document. Before exceeding the definitization date, the contracting officer shall document in the contract file the reason(s) for the delay, remedial actions, and the revised definitization schedule. This documentation requires approval at a level no lower than the initial approval authority.

Obligations exceeding 50 percent of the NTE must be approved at a level no lower than the initial approval authority and documented in the contract file. Obligations for UCAs shall never exceed 75 percent of the NTE.

Perform profit assessments in accordance with DFARS 215.971-3 (d)(2).

SUBPART 5317.75-ACQUISITION OF REPLENISHMENT PARTS

HQ USAF/LGS is the Air Staff OPR for the DOD Replenishment Parts Breakout Program, and HQ AFMC is responsible for implementation of the program. In addition, surplus items shall be considered (see FAR Subpart 11.3). Finally, HQ AFMC/PK, in conjunction with the Command Competition Advocate, is responsible for implementing procedures for processing requests from sources seeking approval as a potential source for an item with a restrictive Acquisition Method Code (AMC).

SUBPART 5317.76-CONTRACTS WITH PROVISIONING REQUIREMENTS

Air Force provisioning activities shall authorize the ACO to deobligate excess provisioning funds (see FAR 42.302 (b)(4)). Such authorizations shall be in writing and shall identify the contract(s) involved and provide that:

SUBPART 5317.90-ESTABLISHING ADDITIONAL MANUFACTURING SOURCES

(a) In full-scale development and production solicitations and contracts, contracting officers shall insert an option that gives the Government the right to require the contractor to establish a second source for any component parts that are expected to require quantity manufacturing. See DFARS Appendix D for policy and procedures concerning component breakout during production.

(b) The option shall be appropriately addressed in the statement of work, contract line items, special provisions, and source selection criteria. The solicitation shall specify whether not-to-exceed prices or firm prices for the option(s) are required.

(c) The solicitation shall specify or describe criteria for identifying the component parts for which a second source is desired (e.g., the "X" number of highest procurement value replenishment parts, or all parts having only one known qualified source, having sufficient stability of design to warrant qualification of an additional source, and requiring qualification to produce).

(d) The solicitation shall provide sufficient detail by which a contractor can develop realistic prices, as follows:

(e) The solicitation shall require the offeror to provide cost and pricing information so that the Government can determine if it is cost effective to establish a second source, such as:

SUBPART 5317.91-CONTRACTING FOR LONG LEAD ITEMS INITIATED WITH ADVANCE PROCUREMENT FUNDS

This subpart prescribes polices and procedures for the acquisition of long lead items initiated with appropriated advance procurement funds to protect production end item delivery schedules. For long lead items procured with other than advance procurement funds, contracting officers should follow standard contracting procedures, including undefinitized contract action (UCA) procedures prescribed in DFARS Subpart 217.74.

"Advance procurement funds" means funds specifically authorized by Congress for the acquisition of long lead items and associated efforts or Economic Order Quantities (EOQ) of items in a fiscal year in advance of contracting for the production of the related end item(s). Advance procurement funds are an authorized exception to the full funding policy.

"Full production program release" means a point in time when both full funding and direction (i.e., Program Management Directive) for the fiscal year production buy are available to the program office.

"Long lead effort" means that portion of the total contract effort which is funded with advance procurement funds.

"Long lead items" means components, parts, material, and efforts whose leadtimes are significantly longer than other components of the system or subsystem, and, as a result, must be funded in advance of full production program release to protect the planned production schedule.

"Not-to-exceed (NTE)" means the maximum fixed-price, target price, or estimated cost the Government will be obligated to pay for the total contract effort or the long lead effort.

"Procurement funds" means funds which are appropriated for the production of specific systems or subsystems (i.e., 3010, 3020, 3080 funds).

"Rough Order of Magnitude (ROM) Estimate" means a price or cost estimate prepared by the contractor for contemplated work. This estimate is not contractually binding.

"Termination liability" means the maximum cost the Government would incur in the event a contract is terminated.

"Total contract effort" means the full scope of effort contemplated by the production contract (i.e., end item deliveries, software, data, warranties, etc.) and includes the long lead effort.

"Undefinitized long lead contract" means a unique, contracting approach using UCA-like procedures to initiate the long lead effort when definitive contracting procedures are not practicable.

This subpart applies to:

(a) The use of appropriated advance procurement funds authorized by Congress for acquiring long lead items prior to release of procurement funds when negotiating a definitive contract, for either the entire end item or for the long lead items, is not possible in sufficient time to meet operational requirements;

(b) The continuation of an undefinitized long lead contract effort with procurement funds to avoid a break in contract performance due to definitization delays caused by variations in the planned versus appropriated quantities, unavoidable delays in negotiations, and other limited circumstances where approved by the original approval authority for the undefinitized long lead contract; and

(c) The procurement of Foreign Military Sales (FMS) requirements using the procedures in this Supplement except for UCA reporting requirements.

(a) Contracting for long lead items using Congressionally appropriated advance procurement funds is a special contracting method used to protect planned production schedules for major system acquisitions. This approach provides Congress with the flexibility to make decisions on annual funding levels while providing a measure of program stability. Advance procurement funds must be included in the budget request. If authorized by Congress, funds are made available well in advance of full production program release.

(b) A definitive contract is preferred. When it is possible to award a definitive contract using advance procurement funds, the contracting officer shall follow normal contracting procedures for awarding a definitive contract.

(c) It is usually not practical to initiate the long lead effort using fully definitized contract procedures when final production quantities remain unknown. Therefore, procedures similar to those for a undefinitized contract action (UCA) are used to initiate the long lead effort. In recognition of this unique situation, Congress has exempt long lead efforts initiated with advance procurement funds from the requirements of 10 U.S.C. 2326 (see DFARS Subpart 217.74).

(d) After the award of the undefinitized long lead contract, the contracting officer shall make every effort to negotiate a definitive contract amount for the total contract effort based on the buy profile for which the advance procurement funds were authorized. The use of a flexible pricing approach such as pricing for a range in quantity or negotiating a pricing methodology that will allow for an extrapolation of a fixed-price is highly encouraged. These techniques greatly reduce reproposal activity and facilitate a quick reaction to variations in the related end item quantity between the planned and appropriated quantities. When this is not possible and delays in definitizing the contract result in termination liability exceeding the advance procurement funds, the use of procurement funds may be authorized to avoid production breaks. If procurement funds are added to the contract effort prior to definitization, the long lead effort is then treated as a part of the production effort and is subject to all the procedures and reporting requirements governing UCAs.

These procedures apply to contracting for long lead items initiated with advance procurement funds where the contract must be awarded on an undefinitized basis.

(a) When a definitive contract cannot be awarded, a separate undefinitized long lead contract shall be used for each production buy. Prior to the issuance of the undefinitized long lead contract, the contracting officer shall:

(a) The undefinitized long lead contract shall include:

(a) If the undefinitized long lead contract cannot be definitized before termination liability exceeds advance procurement funds, procurement funds may be obligated for the long lead effort. Prior to obligating any procurement funds the contracting officer shall:

Insert the clause at 5352.217-9000, Long Lead Limitation of Government Liability, in all long lead contracts initiated with advance procurement funds.

ATTACHMENT 5317-1 MYC QUICK REFERENCE GUIDE

Undisplayed Graphic

ATTACHMENT 5317-2 INITIAL MULTIYEAR CONTRACT (MYC) FINDING

I. General Requirements

SAMPLE

DEPARTMENT OF THE AIR FORCE

FINDINGS IN SUPPORT OF AUTHORIZATION TO MAKE MULTIYEAR CONTRACTS

Upon the basis of the following finding, which I hereby make [as/for] the agency head pursuant to 10 U.S.C. 2306b the contracts described below may be made on a multiyear basis provided appropriate Congressional approvals are obtained.

FINDINGS

__ Atch
_. _________ Exhibit Package*
dated _______ (__ pp)

* Exhibits not required for small classic multiyear contracts.

ATTACHMENT 5317-3 VALIDATION MULTIYEAR CONTRACT FINDINGS

I. General Requirements

ATTACHMENT 5317-4 CONGRESSIONAL NOTIFICATION REQUIREMENTS

I. This attachment explains the notification requirements legend depicted on Attachment 5317-1, MYC Quick Reference Guide.

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