CAPITAL PROGRAMMING GUIDE II. ACQUISITION PHASE
OMB Circular No. A–11 (2016) Page 29 of Capital Programming Guide
II.2.2 Using Competition and Financial Incentives
The effective use of competition and financial incentives is another means to reduce the risk to successful
contract completion. In the earliest stages of the
acquisition process, the agency should still be
looking for innovative solutions to meet its
needs. Advance Acquisition Planning (AAP)
should be used so that the contracting officer has
time to perform any necessary market surveys,
prepare a clear solicitation, and effectively
identify and use available resources. Given the
opportunity, industry can be helpful in
proposing innovative solutions. This is more
likely to be effective if sufficient time is given
for a thorough review of the requirement.
Requirements in solicitations should be written
not as detailed design specifications, but rather
as clear performance standards for asset function
and performance, including long term operation
and maintenance (O&M) costs, that allow
sources to propose various alternative solutions
for meeting the agency's needs. Additionally,
making effective use of competition and
financial incentives will help the agency obtain
better cost, schedule, and performance goals at contract inception.
A major barrier to taking advantage of the Nation's integrated industrial base can be the burdens and risks
imposed by the Government's demands, in order to ensure price reasonableness, for offerors to submit
certified cost data and/or to comply with the Government's cost accounting standards. Agencies can avoid
this problem by using acquisition strategies that rely on competition and fixed-price contracts to ensure that
reasonable value is received for the price paid.
Creating a monopoly can create problems far beyond an increased procurement price in the current
acquisition. Whenever the Government lacks viable alternative sources of supply the agency may lack a
realistic means of enforcing contract cost, schedule, and performance goals. Additionally, the lack of viable
alternative sources of supply increases the agency's risk of being unable to obtain spare parts and O & M
services at reasonable prices.
Agency acquisition plans should attempt to avoid monopolies through mitigation techniques such as multi-
sourcing and using commercial standards (e.g., interfaces and footprints that allow for the use of alternative
components). Sometimes (e.g., in an extremely large development effort) the nature of an acquisition
effectively precludes competition for the foreseeable future. In such circumstances, an agency must take
precautions to mitigate the negative effects of the monopoly (e.g.,
long term pricing arrangements for system upgrades and
maintenance with source code or technical data in escrow in case
of a violation). The use of Indefinite Delivery Indefinite Quantity
(IDIQ) contracts awarded to one contractor for a long term project
means that the task orders for future work when defined are
negotiated in a sole source environment, even though the FAR
classifies the contract as competitive.
Providing stipends to contractors to cover some or all of proposal
costs can provide an effective financial incentive to increase
competition.
Rationale for Providing Stipends
Proposal Development is
very costly;
Signals the intent that
owners are serious about
carrying the project
forward;
Improves the quality of firms
which are submitting; and
Encourages proposers to
give full effort.
The Pentagon Renovation Program was conducted
in stages relating to "wedges" in the building. The
first phase of the renovation did not use a
performance-based contract (PBC) and the design
plans included 2,600 pages of detailed design
specifications. The renovation of wedges 2 through
5 used a PBC and needed just 16 pages to
communicate performance-based requirements. For
this second part of the project, potential offerors
were encouraged to attend the Government's
requirements definitions meetings help identify
performance requirements, not detailed
specifications. For example, one of the sustainability
requirements for restrooms was that wall surfaces
should have a 50 year life. This resulted in Corian
being proposed in place of the traditional tile
because Corian was significantly less costly on a
life-cycle basis.