While the government promotes full and open competition, and competition is the preferred method of subcontracting, there are situations where the contractor uses a “sole source” or a “single source” when awarding a subcontract/Purchase Order (PO). There is a difference between a sole source and a single source award.
FAR 2.101 defines a “sole source acquisition” as a contract for the purchase of supplies or services that is entered into or proposed to be entered into by an agency after soliciting and negotiating with only one source. FAR Part 2 definitions do not include a definition of a single source, however, a single source is where there is more than one source that can provide the supply or service, but the government/contractor has decided to purchase from a selected supplier.
FAR 52.244-5, Competition in Subcontracting, is included in most Government solicitations and contracts exceeding the simplified acquisition threshold (SAT) of $250,000. This FAR clause requires contractors to “select subcontractors (including suppliers) on a competitive basis to the maximum practical extent...” Therefore, contractors must have written explanation/justification documenting why they could not meet this requirement and are awarding a subcontract/PO using a sole/single source supplier.
Government Requirement – Sole/Single Source Documentation
FAR 6.302 requires the contracting officer to document a justification and approval (J&A) when using other than full and open competition. FAR 6.303-2 provides the minimum information that the Government is going to expect to see in the contractor’s written documentation:
- Nature/description of the action being approved.
- Description of the supplies or services required to meet the agency’s needs (including an estimated value).
- Statutory authority permitting other than full and open competition (see FAR 6-302-1).
- Demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition requires use of the authority cited.
- Description of efforts made to ensure that offers are solicited from as many potential sources as is practicable.
- Determination by the contracting officer that anticipated cost to the Government will be fair and reasonable.
- Description of market research conducted and results.
Contracting Purchasing System Review (CPSR) – Sole/Single Source Documentation
Additionally, this type of documentation is also required by a contractor as part of its purchasing system. The Contractor Purchasing System Administration clause at DFARS 252.244-7001 provides system criteria for an acceptable purchasing system. (9) of this clause includes the requirement for a management level justification and adequate cost or price analysis, as applicable, for any sole or single source award. Even though a company’s sales may not meet the threshold for a CPSR review, when purchasing a supply or service using single/sole source procedures on a government contract that exceeds the SAT, a written justification must be maintained in the file as it is expected and necessary to support compliance with FAR 52.244-5.
Use of a Standardized Form
Most contractors with substantial government sales use a standard form for documenting sole/single source justifications. While a standard form is not a requirement, it is a best practice. The form helps standardize the process, as well as include the documentation necessary to maintain in the subcontract/PO file. A standard form can be used to capture the criteria from the policies and procedures, promote consistency, and use as a guide when training so that the purchasing staff understands the requirements and the documentation necessary for a sole/single source justification. Once a practice or standard form is implemented, it should include the proper documentation and/or attachments to support the award. Sometimes when using standard forms, the preparer can become comfortable in checking boxes but leaving off the actual written documentation that supports the justification. This can especially occur when the contractor is purchasing the same item on subsequent contract modifications and believes they have already addressed this in a prior contract/PO file, so the documentation is abbreviated or missing. Each PO file must contain adequate documentation to support the decision for a sole/single source award.
A justification should indicate whether the item is sole source or single source, since different documentation may be necessary. The justification should include a description of the proposed supply or service and any unique qualifications. The preparer should perform market research and document whether other suppliers or vendors exist that can provide the item or service, how they were evaluated and why they were not selected (timing, compatibility, etc.). Market research should also be used to document whether the supply or service is only available from one source. The written justification, whether a standard form or a written document, must be signed by the individual completing the form and approved/signed by management. DCMA has been citing deficiencies when management has not approved a sole/single source justification.
End of Story
The Government clearly expects that when competition is not used, documentation of a sole/single source selection must be included in the subcontract/PO file and approved by management.
RGCI is available to assist contractor’s in reviewing their policies in this area. Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s expectations in reviewing policies, procedures, and practices in a purchasing system.