shall be included in all advertised and negotiated procurements as required by and in accordance with the guidelines in Order IM-4435.2, unless it is determined that the value engineering offers no potential for cost reduction, as for example, where a particular contract or class of contracts is of insufficient duration to allow value engineering proposals to be processed, or where the item or class of items being procured is a commercial product whose design and cost are controlled by the commercial market.

(b) The contract clause providing for value engineering incentive is set forth in § 2-7.150-21 of this chapter.

(c) The precise extent to which the contractor should share in cost reductions must be tailored to the particular procurement. For advertised contracts, the percentage of contractor sharing shall be stated in the "Value Engineering Incentive" clause in the invitation for bids. For negotiated contracts the percentage of contractor sharing shall be stated in the solicitation although this percentage may be a subject of negotiation prior to award. In two-step formal advertising, although discussion of the appropriate percentage of contractor sharing is permissible in connection with the first step, a single percentage shall be stipulated in the invitation for bids that is issued at the beginning of the second step. In the case of firm fixed-price contracts, fixed-price contracts providing for escalation and fixed-price contracts providing for prospective redetermination, the contractor's share in any cost reduction normally should be 50 percent and in no event greater than 75 percent. However, if such contracts are not awarded on the basis of adequate price competition, a contractor's share of less than 50 percent may be appropriate. In the case of an incentive type contract, if it is determined that reasonable certainty exists that cost savings can be accurately estimated the contractor's share may be up to 50 percent; if such a certainty does not exist, his share should be in accordance with the maximum overall incentive pattern of the contract.

(d) When a value engineering incentive is to be included in a contract that also will include performance incentives that might be affected by changed specifications resulting from value engineering, the contract should include an appropriate provision to permit equitable revisions to the performance incentive provisions in the event that a cost-reduction proposal is adopted which affects the basis for computing the performance incentive so substantially that the performance incentive provisions would be rendered fundamentally unreasonable, or entirely beyond that contemplated by the parties at the time the contract was entered into.

(e) Since the value engineering incentive clause does not require the contractor to perform value engineering, it is intended that the inclusion of the value engineering incentive clause in itself will not increase costs to the Government beyond those considered reasonable for the contract of the contractor's business or the performance of the contract. Where cost analysis is required, cost allowability will be determined in accordance with normal application of the principles and the procedures provided in Parts 1-15 of this title and 2-15 of this chapter. Accordingly, where a contractor already has a value engineering program, the Government will bear a reasonable and allocable share of the cost of this program, but inordinate value engineering cost increases incurred solely because of inclusion of the clause shall not be allowed. Similarly, where a contractor does not have a value engineering program in existence, proper allocable cost of instituting a reasonable value engineering program is allowable.

§ 2-1.5602-3 Limitations.

Formal advertising is by statute the basic and preferred method of procuring supplies and services. Formal advertising has two basic objectives. One is to gain for the Government the benefits of full and free competition. The other is to afford all qualified sources the same opportunity to bid competitively. Since the procedures of formal advertising are established by law and regulation, in general, they cannot be deviated from. However, this does not mean that the contracting officer cannot exercise a certain amount of judgment and discretion. Therefore, he must not only be completely familiar with the rules and procedures that apply, but he must also understand the reasons for them. § 2-2.102

Policy.

(a) The basic law applicable to FAA procurement is the Federal Property and Administrative Services Act of 1949, section 302 (c) thereof provides that:

All purchases and contracts for property and services shall be made by advertising as provided in section 303, except that such purchases and contracts may be negotiated if (This section of the Act then cites the 15 circumstances permitting negotiation.) Section 303 of the Act provides:

When advertising is required-(a) The advertisement for bids shall be made in a sufficient time previous to the purchase or contract, and specifications and invitations for bids shall permit such full and free competition as is consistent with the procurement of types of property and services necessary to meet the requirements of the Agency concerned. (b) All bids shall be publicly opened at the time and place stated in the advertisement. Award shall be made with reasonable promptness by written notice to that responsible bidder whose bid, conforming to the invitations for bids, will

be most advantageous to the Government, price and other factors considered: Provided, That all bids may be rejected when the agency head determines that it is in the public interest to do so.

The law makes it clear that the circumstances of each procurement determine the purchase method. Negotiation may be used if it is determined formal advertising cannot be used and that a specific negotiation exception applies. Some factors applicable in deciding whether to use formally advertised procurement are as follows:

(1) Mere lack of time will not exclude the formal advertising method in a particular case. There must be a compelling urgency for the supplies or services to justify the use of negotiation under exception 302 (c) (2) in lieu of formal advertising.

(2) The effective use of formal advertising depends on adequate competition. There should be at least two qualified firms available and interested in bidding.

(3) Specifications are a critical factor in use of formal advertising procedures. If the qualitative requirements of the desired item or services are not defined well enough to permit all bidders to bid on the same basis, formal advertising is impracticable. Thus, much research and development effort cannot be formally advertised since it cannot be described in specifications, However, once the production stage is reached there must be stronger justification for not advertising. Consideration should be given at that stage to the use of two-step advertising discussed in Subparts 1-2.5 of this title and 2-2.5 of this part. Thus, the contracting officer's decision as to whether specifications will allow straight formal advertising, two-step advertising or require the use of negotiation procedures depends mainly on sound procurement judgment.

(b) a contractor or subcontractor shall be required to submit cost or pricing data for certain contract modifications, and shall be required to certify that, to the best of his knowledge and belief, the cost or pricing data he submitted was accurate, complete, and current. insure compliance with this requirement, contracting officers shall follow the instructions set forth in §§ 1-3.807-3 of this title and 2-3.807-3 and 2-56.539 of this chapter.

ΤΟ

§ 2-2.105

Solicitation for informational

or planning purposes.

Formal solicitation of bids and competitive bid procedures should not be used on a "exploratory" basis for the purpose of testing the market. This does not mean that bids may not be rejected on the basis of an administrative determination that rejection is in the public interest. Technical data, information on new and improved products and price and delivery information will frequently be required for planning and budgetary purposes. Such information may be solicited from commercial concerns on the basis of an informal inquiry, stating the purpose for which the information is desired and clearly indicating that the reply will not be considered as a binding offer to sell. Price and availability information secured on this basis should not be disclosed to potential competitors. (See § 1-1.314 of this title.)

Subpart 2-2.2-Solicitation of Bids § 2-2.201 Preparation of invitation for bids.

Prior to the preparation of the invitation it is critical that an analysis be made of the procurement request. Instructions concerning the processing and analysis of procurement requests are contained in Subpart 2-1.52 of this chapter.

(a) Forms. (1) The contract forms for formal advertising are set forth in Subparts 1-16.1 and 1-16.4 of this title and § 2-16.150 of this chapter. Pen and ink entries, deletions, or alterations shall not be made in an invitation for bids after it has been prepared for distribution.

(2) Where the invitation will be evaluated pursuant to § 2-2.407-5(a), the following clause shall be included in the invitation:

MULTIPLE AWARD EVALUATION

In addition to other factors, bids will be evaluated on the basis of advantage or disadvantages to the Government that might result from making multiple awards. For the purpose of making this evaluation, a factor of $50 will be applied as the administrative cost to the Government for issuing each contract awarded under this invitation. (b) Description of requirement. General: Each item in the schedule of the invitation will contain a brief description setting forth a summary of the essential characteristics thereof. Ordinarily, the

(1)

description of each item in the procurement request will be sufficient for this purpose. However, reference to Federal stock numbers alone will not be considered sufficiently descriptive. For an item which has not applicable specifications, the item description may include a reference to applicable manufacturer's brand names with the words "or equal." When the item description is so limited to brand names or equal, a space will be provided under each item for bidders to specify the material offered. (See §§ 1-1.307-4 through 1-1.307-7 of this title and § 2-1.307-4 of this chapter for guidance concerning brand name products or equal.)

(2) Providing for alternate bids: An alternate bid is one that offers a suitable substitute for the requirement set forth in the invitation. The Government can accept an alternate only when the invitation specifically allows it. In deciding whether to grant such permission, the contracting officer must weigh the advantages against the drawbacks in each particular case. Allowing them may make the evaluation process more difficult. The basic rule is that the alternate must be described as precisely as the requirement itself to assure that the same degree of competition is obtainable on the alternate bids as is obtainable on the basic items described. Otherwise, bidders might protest that they were not bidding the same basis.

(3) Specifications: It is the responsibility of originators of procurement requests to reference applicable specifications, plans, and drawings, and, when none are available, nor required, to prepare an appropriate purchase description. However, contracting officers have the following responsibilities with respect to specifications, plans, and drawings or purchase descriptions applicable to purchases within their cognizance: (See § 2-1.305 of this chapter for guidance concerning specifications.)

(i) To have knowledge of the provisions thereof;

(ii) To reference or otherwise incorporate applicable specifications, plans, and drawings or purchase descriptions in the schedule of the invitation;

(iii) To insure that all provisions of the invitation and the applicable specifications, plans, and drawings or purchase descriptions are consistent;

(iv) To include in the schedule of the invitations any clauses required to implement or supplement provisions of applicable specifications, plans, and drawings or purchase descriptions.

(4) Insuring against restrictive conditions: It is critically important to remove from specifications all conditions that unnecessarily restrict competition and to avoid other restrictive conditions unless they are required by law or regulation.

(5) In certain instances, where special skill or experience is clearly required for a project, the Comptroller General has permitted some minimum qualifications to be stated in the invitation. These include years of experience, previous successful installation of like equipment, and so on. Such qualifications must be necessary to the specific definable needs of the procurement. Otherwise, they restrict competition unduly and the invitation may be canceled. Whenever qualifications of this sort are deemed necessary, the contracting officer should have the qualification requirement reviewed by counsel prior to issu(See § 2-1.5205-1 of this chapter on restrictive specifications.)

ance.

this Invitation for Bid; must include the item or subitems, quantities, and unit prices for which the bid is submitted and the time and place of delivery; and must contain all the representation and other information required by the Invitation for Bids together with a statement that the bidder agrees to all the terms, conditions, and provisions of the invitation. Failure to furnish, in the telegraphic bid, the representations and information required by the Invitation for Bids may necessitate rejection of the bid. Signed copies of the Invitation for Bids must be furnished in confirmation of the telegraphic bids.

§ 2-2.202-4 Bid samples.

(a) Policy. In exceptional cases bid samples and descriptive literature may be required from the bidders. Here, the provisions of §§ 1-2.202-4 and 1-2.202-5 of this title are important. Thus, if samples are to be asked for, the invitation should clearly state the number, size, and quantity needed; why they are needed; and how they will be evaluated. It should also include a clause like the one in § 1-2.202-4 of this title, which states that a bid will be rejected if a sample does not conform and that a late sample will be handled like a late bid. If the product has been procured or tested before, the procuring activity may not need a sample. In this case § 12.202-4(b) of this title provides that the matter may be waived. An unasked-for sample may simply be disregarded.

But

if the bidder indicates that he intends it to qualify his bid, it must be considered. (b) Handling of bid samples. Samples, if not destroyed in testing, shall be returned to bidders at their request and expense, unless otherwise specified in the invitation for bids. See paragraph 3(b) of the Bidding Instructions, Terms, and Conditions (Supply Contract) (Standard Form 33-A). When samples are no longer required, disposition instructions shall be requested from the bidder and the samples disposed of accordingly. If disposition instructions are not received within 30 days, samples will be returned collect to the address from which received. Samples that are to be retained for inspection purposes in connection with deliveries shall be transmitted to the inspecting activity concerned, with instructions to retain the sample until completion of the contract or until disposition instructions are furnished by the contracting officer. Samples that are consumed or the usefulness of which is

otherwise impaired by tests conducted to determine compliance with specifications will be disposed of as scrap unless the supplier requests their return.

§ 2-2.202-5 Descriptive literature.

When literature as defined in § 1-2.205-5 of this title is required, the invitation should specify exactly what should be submitted and how it will be evaluated and used. It shall also inIclude the clause set forth in § 1-2.202-5 of this title, which states unless the descriptive literature discloses that the product offered satisfies the requirements set forth in the invitation, the bid will be rejected. The clause also provides that "Failure to furnish the descriptive literature by the time specified in the Invitation for Bids will require rejection of the bid, except that if the material is transmitted by mail and is received late, it may be considered under the provisions for considering late bids, as set forth elsewhere in this Invitation for Bids."

§ 2-2.202-6 Bid envelopes.

Postage, or envelopes bearing "Postage and Fees Paid" indicia shall not be distributed with the Invitation for Bids or otherwise supplied to prospective bidders. To provide for ready identification and proper handling of bids, Optional Form 17, "Sealed Bid Label," obtained from the General Services Administration, may be furnished with each bid set to provide the bidder with a means of specifically identifying his bid (see § 1-16.805 of this title).

(a) Copies of invitations may be furnished for informational purposes to other nongovernmental organizations such as trade associations, and bidding informational services, provided they lend some assistance in advertising the requirements. The extent to which supporting papers (drawings, specifications, and general provisions) are furnished will depend on how the organizations intend to use the material. If they merely prepare a synopsis of bid solicitations for distributions to their members or subscribers, the invitation itself should suffice. If, however, they provide a reading room service (such as various trade associations do for construction proj