Current through September 18, 2024
A. The selection of the appropriate type of
contract is a matter which requires the exercise of judgment in order to obtain
fair and reasonable prices in accordance with the circumstances of the
procurement.
B. In determining the
type of contract to be used, consideration shall be given but shall not be
limited to such factors as:
1. Type and
complexity of the item or scope of work to be performed;
2. Urgency of the requirement;
3. Prospective period of contract
performance;
4. Degree of
competition present;
5. Extent of
completion of baseline and detail design; which in turn may influence other
considerations as the adequacy and firmness of specifications, and the
availability of relevant historical pricing data and prior
experience;
6. Availability of
comparative price data, or lack of firm market prices or wage levels;
7. Prior experience with the
supplier;
8. Extent and nature of
subcontracting contemplated;
9.
Assumption of business risk;
10.
Vendor's technical capability and financial responsibility;
11. Administrative costs;
12. Adequacy of the vendor's accounting
system; and
13. Other concurrent
contracts.
C. Under R.I.
Gen. Laws §
37-2-32 Approval of Accounting System. - Except with respect to firm fixed price
contracts, no contract type shall be used unless it has been determined in
writing that the proposed contractor's accounting system will permit timely
development of all necessary cost data in the form required by the specific
contract type contemplated and that the contractor's accounting system is
adequate to allocate costs in accordance with generally accepted accounting
principles.
1. The firm fixed price contract
shall be used in applications and under limitations hereinafter set forth,
unless the use of another type of contract is more appropriate.
D. Under R.I. Gen. Laws §
37-2-31,
Subject to the limitations on entering into cost plus percentage of cost and
cost reimbursement contracts set forth herein, any type of contract which will
promote the best interests of the state may be used.
E. Cost Reimbursement Contracts.
1. Under R.I. Gen. Laws §
37-2-29,
The Cost Plus a Percentage of Cost (CPPC) contract is prohibited.
2. Under R.I. Gen. Laws §
37-2-30(1),
No contract providing for the reimbursement of the contractor's cost plus a
fixed fee (cost reimbursement) may be made through negotiation or in sole
source or emergency procurements unless it is determined in writing by the
Chief Purchasing Officer that such contract is likely to be less costly to the
state than any other type of contract, or that it is impracticable to obtain
supplies or service of the kind or quality required except under such a
contract.
3. Under R.I. Gen. Laws
§
37-2-30(2)
Each contractor under a cost reimbursement type contract shall obtain consent
from the Chief Purchasing Officer, as provided for in the contract, before
entering into:
a. a cost reimbursement
subcontract; or
b. any other type
of subcontract involving more than ten thousand ($10,000} or ten percent (10%)
of the estimated cost of the prime contract[whichever is greater].
4. Under R.I. Gen. Laws §
37-2-30(3),
All cost reimbursement contracts shall contain a provision that only costs
recognized as allowable, in accordance with cost principles set forth in
regulations issued by the Chief Purchasing Officer will be
reimbursed.
F. When a FP
W/EPA contract is employed, provisions shall be included for downward
adjustment of the contract price in those instances where the prices or rates
may be expected to fall below the base price agreed to by contract.
1. Types of economic adjustments shall
include but shall not be limited to:
a. Price
Adjustment - a modification of the base purchase order price on the basis of
increases or decreases in published or established prices of specific
items.
b. Labor and Material
Adjustment - a modification of the contract base price on the basis of
increases or decreases of wage rates, specific material costs, or both, using
agreed upon standards or indices.
2. This type of contract may be appropriate
where valid doubt exists as to the predictability of economic conditions which
will exist during a multi-year contract period. Price adjustment provisions
shall not be used to provide protection to contractors against contingencies
which arise from inaccurate estimates of the quantities of labor or materials
required for completion of a contract.
G. When PPR contracts are employed the basis
for adjustments shall be established when the contract is negotiated and a cost
baseline shall be established.
1. The
following data shall be secured from each source before placing a re-
determinable order: number of estimated hours and method used in arriving at
hours; direct labor rates per hour; material cost, including both quantities
and unit prices; overhead rates (categorized by element); profit, any other
data deemed pertinent for analysis of the prices quoted.
2. The establishment of a re-determinable
type of contract shall require the written authorization of the Chief
Purchasing Officer. Upon analysis conducted jointly by the user agency and the
Purchasing Agent, a request and justification for considering re-
determinable pricing provisions shall be submitted in writing by the Purchasing
Agent to the Chief Purchasing Officer.
H. When FPI contracts are employed:
1. There shall be an initially negotiated
firm target cost, a target profit, a price ceiling and a final profit and price
adjustment formula. After completion, a final cost shall be negotiated and a
final price established in accordance with the predetermined formula.
2. The circumstances must be such that
targets are reasonably free of contingencies and provided that a fair and
reasonable incentive formula can be established at the time of initial contract
negotiation and the contract is of sufficient duration to permit achievement of
substantial cost reductions.
3. The
same supplier cost data shall be required as for a re-determination
contract.
I. A CNF
contract may be used for research and development work - particularly with
nonprofit organizations and educational institutions.
J. A CS contract is suitable for:
1. Jointly sponsored research and development
with educational institutions or other nonprofit organizations or
2. Other research and development work where
the results of the contract may have commercial benefit to the
seller.
K. A CPFF
contract is suitable when:
1. The scope and
nature of work cannot be definitely specified.
2. Definite specifications exist but the
seller lacks a valid basis for estimating costs because the supplies called for
are not items regularly manufactured, or the services called for have not been
previously performed, or partial experience will not reveal a proper pricing
basis for the remainder of the contract.
3. Specifications are not complete or major
changes substantially affecting the scope of production or construction work
are expected.
4. Work is to be
performed in a state-owned facility with the use of state-owned equipment,
materials, or personnel.
L. A TIM contract shall include the
establishment of a cost limitation which the seller may not exceed (except at
his/her own risk). A TIM contract shall be used only in situations when:
1. It is not possible at the time of placing
the order to estimate the extent of the work or to anticipate final costs with
any reasonable degree of accuracy such as:
a.
engineering and design services,
b. certain repair, maintenance or overhaul
work,
c. emergencies.
2. Provision is made for
appropriate surveillance by state personnel during performance.
M. L/H contracts based solely on
labor hours shall be considered a subcategory of TIM contracts, subject to the
same restrictions as the TIM contract and shall be used only after the
Purchasing Agent has determined that no other type of contract is suitable for
meeting the needs of the requisitioner.
N. Employment of TBD contracts shall be
prohibited.
O. Considerations for
use of a MPA contract:
1. The MPA shall
specifically state the term and probable volume consideration of the
agreement.
2. The seller shall be
authorized to ship to the state only those items specified by a delivery
request (on a form to be provided) issued under the authority of the Master
Pricing Agreement. The state is obligated for payment only to the extent of the
specific quantities set forth in the delivery request or for express
considerations applicable to the contract itself.
3. The specific category of items to be
purchased may be listed in a catalog prepared specifically for the agreement, a
catalog of items offered for sale by a supplier, a national catalog published
by a catalog publishing firm, or such other lists of items as may, from time to
time, be determined as being a legally sufficient description of the item or
items being purchased.
