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  • Question

    Is the requesting agency PCO required to do a price or cost analysis under the Economy Act for MIPRs in determining a fair and reasonable price or best value for services?


    Answer

    1.  There are two things worth examining 1) what do the regulations require when it comes to Economy Act transactions, and 2) who is responsible for making the determination of fair and reasonable prices.
     
    2.  The following documents were used as a reference in determining the response to this question:
    a. FAR 1.602-1, 2.101, 15.402, 15.404-3  and 17.502-2
    b. DoD Financial Management Regulation, DoD 7000.14-R, Volume 11A, Chapter 3 “Economy Act Orders”
    March 2012 http://iac.dtic.mil/support_docs/economy_act.pdf
    c.
    Department of Defense Instruction Number 4000.19 April 25, 2013,  Support Agreements  http://www.dtic.mil/whs/directives/corres/pdf/400019p.pdf
     
    3. Let’s start with FAR 2.101’s definition of interagency acquisition which states: “Interagency acquisition” 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 and Governmentwide acquisition contracts (GWACS)).

    4. This then takes us to FAR 17.502-2 “the Economy Act” paragraph (a) which tells us to refer to our own agency regulations if this is an intra-agency acquisition, which appears to be the case from the question posed. “The Economy Act also provides authority for placement of orders between major organizational units within an agency; procedures for such intra-agency transactions are addressed in agency regulations.”
    5. One of the applicable DoD regulations is DoD Financial Management Regulation, DoD 7000.14-R, Volume 11A, Chapter 3 “Economy Act Orders”
    March 2012 which provides the following:
    030103. D. Intra-agency Support. Transactions for goods or services within and between DoD and other DoD Components, also known as interservice support.

    030104. Legal Authority

    A. 31 U.S.C. §1535 establishes four (4) basic conditions on use of Economy Act authorities. In accordance with the statute, the head of an agency or major organizational unit within an agency may place an order with a major organizational unit within the same
    agency or another agency for goods or services if: 
     1. Funds are available; 
     2. The head of the requesting agency or unit decides the order is in the best interest of the United States (U.S.) Government; 
     3. The agency or unit to be asked to fill the order is able to provide or get by contract the ordered goods or services; and 
     4. The head of the requesting agency decides that ordered goods or services cannot be provided by contract as conveniently or  economically by a commercial enterprise. 
     
    0303 INITIATING AN ECONOMY ACT ORDER
    030301. An agency or unit head may initiate an Economy Act order provided that all the conditions specified in subparagraph 030103.A. are met. 
    030302. Determinations and Findings Requirements A. Each Economy Act order must be supported by a Determinations and Findings (D&F) that the use of interagency support capabilities are in the best interest of the government and that the required goods, supplies or services cannot be obtained as conveniently or economically by contracting directly with a private source. (Refer to FAR 17.502-2(c) for D&F requirements.
     

    6.  Another relevant document therefore becomes Department of Defense Instruction Number 4000.19 April 25, 2013, Support Agreements. A review of this document, does not indicate any requirement for the requesting agency to provide any D&F on fair and reasonable to the servicing agency.

    7. So this then leads us to consider who is responsible for the determination of fair and reasonable price.  Let’s start with 15.402 Pricing Policy which clearly indicates that it is the responsibility of the Contracting Officer:
     Contracting officers shall (a) Purchase supplies and services from responsible sources at fair and reasonable prices. In establishing the reasonableness of the offered prices, the contracting officer—
    An even clearer indication of responsibility appears under 15.404-3
    (a) The contracting officer is responsible for the determination of a fair and reasonable price for the prime contract, including subcontracting costs. 
    8. So who in this case is the Contracting Officer? Per FAR 2.101 “Contracting officer” means a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings. Therefore this cannot be the requesting organization’s Contracting Officer because they have no authority to enter into contracts or make related determinations and findings on behalf of the servicing organization. Only the Contracting Officer who will be signing the contract on behalf of the agency issuing the contract can make the determination of fair and reasonable price.  This is further emphasized by FAR 1.602-1 (b) which states No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met.

     
    9. In conclusion, the requesting agency contracting officer may be asked to provide support or information to the servicing agency contracting officer as a part of market research, but it is not the responsibility nor is it appropriate for the requesting agency contracting officer to make the actual determination of fair and reasonable price.


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