RGCI - Sole Source and Single Source Justifications

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. Criteria (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.

Documentation

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.

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Written by Lynne Nalley

Lynne Nalley Lynne Nalley is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Items, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. She was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Lynne currently specializes in assisting companies with Business System Reviews and complex DCAA audit issues related to business systems and CAS. She also assists with prime contractor commercial item determinations and related support. Education Lynne earned a Bachelor of Science Degree in Accounting from University of Central Florida.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Cost-Type Contracts, Contractor Purchasing System Review (CPSR)