Government Contracts: Overview of Acquisition Flexibilities Generally Available Under FAR 18.1 | Practical Law

Government Contracts: Overview of Acquisition Flexibilities Generally Available Under FAR 18.1 | Practical Law

A Practice Note providing an overview of the relevant laws and regulations for federal agencies when contracting for supplies or services in an emergency or disaster situation. This Note addresses acquisition flexibilities generally available to agencies at any time which allow the agency to find efficiencies in the acquisition process of the Federal Acquisition Regulation (FAR) 18.1.

Government Contracts: Overview of Acquisition Flexibilities Generally Available Under FAR 18.1

Practical Law Practice Note Overview w-021-4771 (Approx. 16 pages)

Government Contracts: Overview of Acquisition Flexibilities Generally Available Under FAR 18.1

by Practical Law Government Practice
Maintained • USA (National/Federal)
A Practice Note providing an overview of the relevant laws and regulations for federal agencies when contracting for supplies or services in an emergency or disaster situation. This Note addresses acquisition flexibilities generally available to agencies at any time which allow the agency to find efficiencies in the acquisition process of the Federal Acquisition Regulation (FAR) 18.1.
During emergency situations, the need to contract for services and supplies does not stop for federal agencies and the need to contract for services or supplies may surpass their current capabilities. Sometimes these operations create situations where there is little time to define requirements, plan the acquisition, and execute a procurement solicitation, evaluation, and award. Examples of these circumstances usually occur under urgent or compelling circumstances, such as unaccompanied children at the US border, or any other situation where an unexpected requirement demands create risk for operational failure. Emergency acquisitions are also often complex, fast-moving, and have tremendous consequences for federal agencies if done incorrectly.
Even as the operational speed increases, federal agencies must abide by the federal contracting process, codified in the Federal Acquisition Regulation (FAR), to support emergency and disaster operations. Failure to comply with these laws and regulations may result in the inability to support operations due to poor contractor performance or litigation.
Understanding what the available contracting flexibilities are and when they are available allows the agency to urgently procure something to support fast-moving operations while still compliant with federal laws and regulations.
This Note discusses the legal framework for acquisition flexibilities that are generally available during emergency situations.
For an overview of acquisition flexibilities available during certain circumstances, such as contingency operations or presidential declared disasters, please see Practice Note, Acquisition Flexibilities Available Under Certain Circumstances of FAR 18.2: Overview.
This Note only discusses emergency acquisitions for federal agencies.

Emergency Acquisitions Laws and Regulations

A federal agency will face two types of emergency situations:
  • Emergencies where federal laws allow for special procurement authority (for example, the Robert T. Stafford Act or 41 U.S.C. § 1903).
  • All other emergency situations.
Under any type of emergency situations, there are no general exceptions to the FAR for federal agencies to rely on during emergency acquisitions. Agencies must continue to comply with the FAR to provide and promote for full and open competition (FAR 6.1). The FAR does, however, contemplate exceptions to the general requirements of the contracting process when an agency believes it can articulate facts to support use of these flexibilities. Agencies can find acquisition flexibilities which are always available to a contracting officer (CO) of federal agencies in FAR 18.1.
These flexibilities allow the agency to find acquisition efficiencies in other FAR subparts (for example, FAR 6, 8.4, 13, 15, 16). Examples of when these flexibilities may be used are when certain conditions exist such as urgent and compelling circumstances or only one responsible source (see Practice Note, Acquisition Flexibilities Available Under Certain Circumstances of FAR 18.2: Overview). These flexibilities assist agencies in shortening the contracting process by foregoing certain required actions and limiting the contracting sources. An emergency declaration or designation of contingency operation is not necessary to employ these acquisition flexibilities.

Other Relevant Federal Acquisition Regulation Subparts

The most relevant subparts for emergency acquisitions are:
  • FAR 18.2. This subpart includes additional acquisition flexibilities that are available to an agency in certain specific situations, as authorized by 41 U.S.C. § 1903. These flexibilities mainly focus on raising the dollar thresholds for micropurchase and simplified acquisitions.
  • FAR 26.2. This subpart provides a preference for local organizations, firms, and individuals when contracting for major disaster or emergency assistance activities under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) (42 U.S.C. § 5150).
  • FAR 50.1. This subpart empowers the president to authorize certain agencies to enter into, amend, and modify contracts when the action would aid national defense exercising functions. Agencies may take contractual actions regardless of other provisions of law related to making, performing, amending, or modifying contracts. An example of the use of these authorities is when an agency agrees to indemnify a contractor when the contract performance may create unusual risk.
Generally, these other FAR subparts can only be used when specific authorization to use them is granted by a designated agency official. These subparts are discussed in more detail in Practice Note, Acquisition Flexibilities Available under Certain Circumstances of FAR 18.2: Overview.
Together, the FAR subparts provide some relief to agencies from normal acquisition requirements to address emergency and disaster contracting needs.

Fiscal Considerations

Like the FAR, there are no general exceptions to fiscal and appropriation laws for federal agencies during emergency or disaster situations. As a result, agencies must plan to execute operations in support of these situations understanding and abiding by fiscal laws or risk running out of funding for contracts or violating laws and regulations.
Congress limits the authority of federal agencies to use appropriated funds using the three basic fiscal controls:
  • Purpose. Only use funds for objects for which Congress made the appropriations available for (31 U.S.C. § 1301). Most federal agencies have more than one funding type such as:
    • procurement;
    • construction;
    • operations and maintenance (O&M); or
    • research, development, test, and evaluation (RDT&E).
    Agencies must understand the purpose for each type of funding before using that funding for the contract action. If an agency uses funds for another or unauthorized purpose of the fund, then that use could be a violation of the purpose statute. If the funding is available, then the agency must determine whether the expense is a necessary expense for that purpose (see Necessary Expense Doctrine).
  • Time. Agencies can obligate available funds only within the specific period provided by Congress. In other words, agencies can only use current fiscal year (FY) funds for current, or bona fide, needs (31 U.S.C. § 1502).
  • Amount. Agencies can only spend the amount of funds that Congress gives each agency. Congress controls this through the Antideficiency Act (ADA) which prohibits a federal agency from:
    • obligating or spending money before Congress appropriates the funds;
    • obligating or expending funds in excess of a specific appropriation;
    • accepting voluntary services; and
    • employing personal services in excess of authorized amounts
    (31 U.S.C. §§ 1341, 1342, and 1501-1519.) Violations of the ADA can result in personal criminal liability to federal employees.
Agencies must abide by these fiscal controls when determining what funding is available for emergency contracts. Two of the most relevant fiscal concepts during an emergency are:

Necessary Expense Doctrine

Congress gives an agency discretion to use the funds to buy objects that are incidental to properly execute the overall statutory purpose. This discretion is known as the necessary expense doctrine.
When Congress appropriates funds to agencies, it will not specify all the expenses that an agency may have over that period of time. The agency can spend the funds for these related objects unless Congress otherwise prohibits the expenditure. Also, Congress often includes "necessary expenses" language to authorize the use of funds for carrying out the general statutory purpose. An appropriation will, instead, be more general stating the appropriation, such as:
"For salaries and expenses necessary for the United States Court of Appeals for the Armed Forces, $14,662,000, of which not to exceed $5,000 may be used for official representation purposes."
(See Department of Defense and Labor, Health And Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019.)
An expense is "necessary" when:
  • The expenditure is logically related to the broadly stated purpose of the appropriation. The expense must contribute to accomplishing the purpose of the appropriation that the agency seeks to charge. The expense cannot be too attenuated from the purpose that it does not fall within the agency's legitimate range of discretion.
  • The expenditure cannot be otherwise prohibited by law. If Congress statutorily prohibited the proposed expense, the necessary expense language cannot overcome that statute.
  • The expenditure cannot fall within the purpose of another appropriation. If Congress specifically provided for the expense in another statute, the expense cannot be funded by another less specific appropriation.

Bona Fide Needs Rule

Congress funds most agencies with budgets that are available for one fiscal year. This limitation requires agencies to use only the money they have asked for and been given by Congress. The way that agencies determine what funds are available for a purchase is called the bona fide needs rule.
The rule requires that agencies spend funds only for expenses that are needed in the period of availability of the funds. For example, if an agency has a need for purchasing a training session in the next fiscal year, it must wait until funding for that fiscal year is available before it can obligate funds.
For more discussion about fiscal and appropriations law, see Practice Note, Federal Appropriations: Overview and Practice Note, Federal Appropriations: Bona Fide Need Rule.

Acquisition Flexibilities Always Available to Agencies

During any situation that requires an agency to quickly acquire services or supplies, there are acquisition flexibilities available to the agency if the circumstances justify their use (FAR 18.1). These flexibilities either:
  • Create efficiencies in the procurement process.
  • Ensure contractor performance during the emergent circumstances.
These flexibilities are specific techniques or procedures that may be used to streamline the standard acquisition process. These techniques are available:
  • Under the CO authority.
  • When the conditions meet certain requirements.
The acquisition flexibilities are never exempt from any requirements and limitations relevant to improper business practices and personal conflicts of interests in FAR Part 3.
Sometimes agencies will provide additional flexibilities through their agency supplement to the FAR.
The flexibilities reflect some of the discrete phases of the acquisition cycle, including:

Limiting Competition and Sources

The FAR provides acquisition flexibilities which allow agencies to limit the general requirement of full and open competition. These flexibilities include:
By providing flexibilities to limit competition and sources, agencies can shorten the procurement process by hours and days.

Unusual and Compelling Urgency: FAR 18.104

An agency may limit the number of sources and provide less than full and open competition if it has urgent requirements (FAR 6.302-2). Specifically, an agency may limit competition and sources where:
  • An unusual and compelling urgency precludes full and open competition.
  • A delay in awarding a contract would result in serious injury, financial or other, to the government.
(FAR 6.302(b).)
Although the FAR does not define what "urgent" is, it does specify that urgent requirements cannot be created by a lack of advance planning or a concern about expiring funds (FAR 6.301(c)).
A CO's written determination serves as approval of the justification unless the agency established other approval levels through policy (see, for example, Air Force Federal Acquisition Regulation Supplement (AFFARS) 5306.304).

Use of Other Agency Ordering Vehicles: FAR 18.105

An agency must provide and promote full and open competition. However, an agency may take advantage of Federal Supply Schedules (FSSs), multi-agency blanket purchase agreements (BPAs), and multi-agency indefinite delivery contracts to meet the competition requirements for procurements, while limiting sources (FAR 6.102) and taking advantage of streamlined ordering procedures (FAR 8.404, 8.405, and 16.505).

Acquisitions from Federal Prison Industries: FAR 18.106

The FAR requires an agency to purchase supplies from Federal Prison Industries, Inc. (FPI) if it:
  • Is comparable to supplies available from the private sector.
  • Best meets the agency's needs in terms of price, quality, and time of delivery.
If, however, a public exigency exists and requires immediate delivery or performance, purchase from FPI is not mandatory, and the FAR does not require a waiver (FAR 8.605(b)). An agency must still use the acquisition process set out in FAR 8.602(a)(4).

AbilityOne Specification Changes: FAR 18.107

Agencies must purchase supplies or services on the "procurement list" if they are available within the period required (FAR 8.705). A committee establishes the procurement list and prices (41 U.S.C. §§ 8501 to 8506).
An agency must give 90-day notice to the committee and the central nonprofit agency before it takes actions that affect supplies on the procurement list. If, however, an agency has emergency needs and it cannot meet the 90-day notice period, it may, at the time it places the order or change notice, give notice in writing of the reasons that it cannot meet the 90-day notification requirement. (FAR 8.712(d).)

Priorities and Allocations: FAR 18.109

The Defense Priorities and Allocation System (DPAS) ensures timely availability of industrial resources to meet national defense requirements and provides a framework for rapidly expanding industrial resources in a national emergency. The Department of Commerce (DoC) is the civilian agency that sets regulations supporting DPAS (15 C.F.R. § 700.2). Under this program, an agency may place a rated order under the DPAS to facilitate the rapid industrial mobilization in case of a national emergency (FAR 11.603). A rated order will have preferential acceptance and performance of contracts and orders over all unrated orders.
COs should be aware of what agency contracts have rated orders under DPAS and what the requirements are in using a rated order (FAR 11.602 and FAR 11.603).

Soliciting from a Single Source: FAR 18.110

Normally for acquisitions under the simplified acquisition threshold ($250,000), an agency must:
  • Follow the simplified acquisition procedures.
  • Promote competition to the maximum extent practicable to obtain supplies and services from the source whose offer is the most advantageous to the government. This usually entails soliciting proposals from at least three vendors (FAR 13.104.)
However, an agency may solicit from only one source if the CO determines that:
  • There is only one source reasonably available (for example urgency, exclusive licensing agreements, brand-name, or industrial mobilization) for the service or supply.
  • The purchase does not exceed the simplified acquisition threshold.
(FAR 13.106-1(b).)

Interagency Acquisitions: FAR 18.113

An interagency acquisition is where 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 (FAR 2.101). An agency can use an interagency acquisition to limit competition and gain efficiencies in the acquisition process.
An agency can use an interagency acquisition when it:

Contracting with the Small Business Administration: FAR 18.114, 18.115, 18.116, and 18.117

An agency may award a sole-source or competitive contract to the Small Business Administration (SBA) for performance by either:
  • A sole-source, which includes:
    • an eligible 8(a);
    • a Historically Underutilized Business Zone (HUBZone); or
    • a Service-Disabled, Veteran-Owned Small Business (SDVOSB).
  • A competitive basis, which includes:
    • an eligible 8(a);
    • an Economically-Disadvantaged, Woman-Owned Small Business (EDWOSB); or
    • a Woman-Owned Small Business (WOSB)
(FAR 19.8, 19.1306, 19.1406, and 19.15.)

Solicitation

The FAR provides acquisition flexibilities which allow agencies to reduce the amount of procurement actions required during a procurement process. These flexibilities include:
These flexibilities shorten the procurement process on the front end by relaxing the solicitation procedures.

Synopses of Proposed Contract Actions: FAR 18.103

An agency must post a notice of certain proposed contract actions during the normal procurement process (FAR 5.101). An agency is exempt from these synopsis requirements if:
  • There is an unusual and compelling urgency.
  • The agency would be seriously injured if the agency complied with the notice time periods.

Oral Requests for Proposals: FAR 18.111

The FAR requires agencies to issue written requests for proposals or quotes during normal acquisition procedures (FAR 15.203). The FAR authorizes oral requests for proposals if processing a written solicitation:
  • Would delay the acquisition of supplies or services to the detriment of the government.
  • Is not required (FAR 5.202).
Issuing an oral request does not relieve the agency from complying with all other FAR requirements to include documenting the contract file (FAR 15.203(f)).

Evaluation and Award

The FAR provides acquisition flexibilities which relieve agencies of normal requirements to evaluate and award contracts. These flexibilities include:
By providing flexibilities in the evaluation and award of contracts, agencies can shorten the procurement process by hours and days.

System for Award Management: FAR 18.102

Generally, offerors and bidders for federal contracts must be registered in the System for Award Management (SAM) before contract award (FAR 4.1102). This requirement is not applicable for contracts or orders:
  • Awarded without providing for full and open competition due to unusual and compelling urgency (FAR 6.302-2).
  • Awarded by a CO deployed during military operations.
  • For performance in support of diplomatic or developmental operations:
    • in an area that has been designated by the Department of State as a danger pay post; or
    • located outside the US and its outlying areas.
  • In the conduct of emergency operations.
(FAR 18.102.)
However, contractors must be registered in SAM to gain access to the Disaster Response Registry (FAR 26.205).

Qualifications Requirements: FAR 18.108

Where an agency maintains a qualified products list (QPL), qualified bidders list (QBL), or a qualified manufacturers list (QML), requirements may not be waived unless the agency uses the appropriate procedures (FAR 9.202(b)).
If, however, an emergency exists, an agency may decide not to enforce qualification requirements (FAR 9.206-1(b)).

Letter Contracts: FAR 18.112

Generally, an agency must use acquisition procedures that afford appropriate full and open competition. The FAR allows exceptions for this requirement when an agency needs the contractor to begin immediately manufacturing supplies or performing services. A method for initiating the work quickly is for the agency to use a letter contract which provides a written document that authorizes the contractor, in the most general terms, to start contract performance. An agency may utilize a letter contract when it determines both that:
  • The contractor must be given a binding commitment so that work can start immediately.
  • There is not sufficient time to negotiate a definitive contract to meet the requirement.
Letter contracts must be definitized at a later date once when the agency and contractor have the opportunity to finalize contract terms. (FAR 16.603.)

Trade Agreements: FAR 18.119

Normally, agencies must follow the requirements established by US treaties. This includes requirements of free trade agreements for determining the origin of services by the country in which the firm providing the services (FAR 25.400). When an agency determines that a trade agreement applies, it must comply with additional requirements for the solicitation and during the period before award (FAR 25.408).
If, however, an agency does not award a contract under full and open competition, the policies and procedures of FAR 25.408 may not apply if:
  • FAR 6.2 or 6.3 authorizes the acquisition.
  • A sole-source acquisition is justified according to FAR 13.501(a).
  • Limiting of competition would preclude the use of the procedures of FAR 25.408.
  • An individual trade agreement applies.
(FAR 25.401(a)(5) and (6).)

Use of Patented Technology Under the United States–Mexico–Canada Agreement (USMCA): FAR 18.120

In 2022, the law changed to reflect that the North American Free Trade Agreement (NAFTA) was replaced the USMCA. Now, when agencies have questions arise regarding the use of patented technology, the contracting officer is advised to consult with legal counsel (FAR 27.204-1.)

Bid Guarantees: FAR 18.121

When a contract (usually a construction contract) requires a performance bond or a performance and payment bond, an agency will require a bid guarantee as well (FAR 28.101-1(a)). A bid guarantee is a firm commitment such as:
  • A bid bond supported by good and sufficient surety or sureties acceptable to the government.
  • A postal money order.
  • A certified check.
  • A cashier's check.
  • An irrevocable letter of credit.
  • Certain US bonds or notes.
During certain circumstances, including emergency acquisitions and sole-source contracts, an agency may waive the requirement for a bid bond if doing so is determined to be in the best interest of the government (FAR 28.101-1(c)).

Advance Payments: FAR 18.122

When purchasing commercial products or services, it is normally the contractor's responsibility to finance the contract (FAR 32.202-1(a)). Financing a contract with advance payment is the least preferred method of contract financing, especially if other types of financing are reasonably available to the contractor in adequate amounts (FAR 32.402(b)).
When using contracts to facilitate the national defense, however, agencies may authorize that advance payments be made at or after award of sealed bid and negotiated contracts (FAR 32.405).

Contract Administration

The FAR provides acquisition flexibilities which allow agencies to improve the efficiency of administering contracts. These flexibilities include:
By providing contract administration flexibilities, agencies can improve the performance of contractors on contracts.

Overtime Approvals: FAR 18.118

Generally, where the agency must approve overtime requests, such as in time-and-materials and labor-hour contracts, any approval must be prospective. However, if justified by emergency circumstances, an agency may approve overtime approvals retroactively (FAR 22.103-4(i)).

Assignment of Claims: FAR 18.123

When a contractor is indebted to the government, an agency may use a set-off provision in a current contract to reduce the indebtedness to the government (FAR 32.803(e)). An agency may insert a no-setoff provision in a contract to ensure contractor solvency if the contract facilitates the national defense in the event of a national emergency or natural disaster (FAR 32.803(d)).

Electronic Funds Transfer: FAR 18.124

An agency must provide all contract payments through an Electronic Funds Transfer (EFT) unless there is a specific exception (FAR 32.1103). An agency may waive this requirement if:
  • There is an unusual and compelling urgency for the need for supplies and services.
  • Payment by EFT would seriously injure the government.
(FAR 32.1103.)

Protest to the Government Accountability Office: FAR 18.125

If a party files a protest with the Government Accountability Office against an agency disagreeing with its acquisition decision, the contract may not be awarded or commence performance. An agency may override the stay of award or performance if:
  • Urgent and compelling circumstances exist which significantly affect the interest of the US.
  • Contract performance will be in the best interests of the US, if applicable.
(FAR 33.104(b), (c).)

Contractor Rent-Free Use of Government Property: FAR 18.126

Generally, an agency provides government property on a rent-free basis to contractors to perform their relevant contracts. In some circumstances, a CO may authorize rent-free use of property in the possession of nonprofit organizations when used for research, development, or educational work. To authorize the use of a non-profit entities property, the CO must find that:
  • The property use is in the national interest.
  • The property will not be used for the direct benefit of a profit-making organization.
  • The government receives some direct benefit, such as rights to use the results of the work without charge, from its use.
(FAR 45.301(c).)

Extraordinary Contractual Actions: FAR 18.127

In extraordinary situations, the president, and authorized heads of agencies, may take contractual action regardless of other provisions of law whenever that action would facilitate the national defense (50 U.S.C. §§ 1431 to 1434; E.O. 10789). Specifically, an agency may enter into, amend, or modify contracts to include:
  • Unilaterally amending contracts without compensation.
  • Correcting or mitigating mistakes in a contract.
  • Formalizing informal commitments.
(FAR 50.103-2.)
A recent example of the authorization of contractual actions under this law is the use of indemnification for contractors in the Ebola outbreak in 2014 (see White House: Presidential Memorandum -- Authorizing the Exercise of Authority Under Public Law 85-804).
Before taking a contractual action under this law, agencies should check with departmental policy or supplemental regulations to determine if there is an established process to follow (for example, see DFARS: PGI 250—Extraordinary Contractual Actions and the Safety Act).