Government Contacting - FAR Part 34 - Major System Acquisition

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Susan Warshaw Ebner, Esq.
Stinson LLP
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FAR PART 34
Major System Acquisition
Link:
https://acquisition.gov/content/part-34-major-system-acquisition
August 14, 2020

FAR PART 34 MAJOR SYSTEM ACQUISITION
• What is a Major System?
• Acquisition of a Major System Acquisition
• Use of Title III Defense Production Act Testing and Qualification
• Earned Value Management System

WHAT IS A MAJOR SYSTEM?
• Combination of elements that will function together to produce the
capabilities required to fulfill a mission need
• May include hardware, equipment, software, or a combination
• Excludes construction or other improvements to real property
F-15 (https://www.google.com/search?q=f-15+&tbm=isch&ved=2ahUKEwjF2M-V8L7qAhWIUawKHS03ALUQ2-cCegQIABAA&oq=f-
15+&gs_lcp=CgNpbWcQAzIECAAQQzIECAAQQzICCAAyAggAMgQIABBDMgIIADICCAAyAggAMgIIADIECAAQQ1D2b1j2b2CZcmgAcAB4AIABRIgBRJIBATGYAQCgAQGqAQtnd3Mtd2l6LWltZw&sclient=img&ei=wl8GX8XvN4ijsQWt7oCoCw&bih=679&
biw=1224&rlz=1C1GCEA_enUS906US906#imgrc=WnOownKnabnorM); JDAM (https://www.defencetalk.com/military/photos/usaf-gbu-38-jdam-gps-guided-bomb.50831/);
Comercial satellite (https://defensesystems.com/articles/2015/07/22/goa-warns-dod-of-fragmented-satellite-acquisition.aspx)

WHAT IS A MAJOR SYSTEM (continued)
• If the DoD is responsible for the system –
• Research, development, test, and evaluation estimated to exceed $185M or
• Eventual total expenditure for acquisition exceeds $835M
• Based on FY 14 constant dollars
• If a civilian agency is responsible for the system –
• Total expenditures for system estimated to exceed $2M, or the dollar threshold for a
“major system” established by agency pursuant to OMB Circular A-109
• The system is designated a “major system” by the head of the agency
responsible for the system.

ACQUIRING A MAJOR SYSTEM
• Develop acquisition strategy tailored to particular program
• E.g., DoDD 5000.01 and DoDD 5000.02
• Contract type selected based on program risk
• Cost, Fixed Price, Incentive
• Complexity and technical challenges
• Document basis for selection

Acquiring a Major System
https://www.dau.edu/training/career-development/program-management/blog/Update-DoD-Acquisition-Life-Cycle-Wall-Chart

REQUIREMENTS OF A MAJOR SYSTEM
• Concept Exploration Contracts – Focus on refining proposed concept, short periods of
time, and reduce technical uncertainties
• Demonstration Contracts – Contractors submit priced proposals, completely funded by
the government for full-scale development
• Full-scale Development Contracts – Contractors submit priced proposals for production
based on the latest quantity, schedule, and logistics requirements
• Full Production Contracts – Major systems that are already successful, awarded by
agency-head based on mission need and program objectives
• Subsystem or component Contracts – May mandate specification or standards

ACQUIRING A MAJOR SYSTEM
• Promote full and open competition, as long as economically beneficial
and practicable
• Mission-oriented Solicitation
• Focusing on the end user’s needs
• Pilot programs, training systems, military personnel, base employees
• Publicizing through the Governmentwide Point of Entry (GPE)
• www.beta.SAM.gov (formerly www.fbo.gov)

REQUIREMENTS OF A MAJOR SYSTEM
• Broad Agency Announcement, Request for Information
• Pre-solicitation Conference or Industry Day
• Questions and Answers
• Full and Open Competition or Sole Source
• Solicitation/Request for Proposals
• Different stages of the procurement
• Contract Award
• Protest?
• Performance Life Cycle, etc.

TESTING, QUALIFICATION AND USE OF “INDUSTRIAL RESOURCES”
DEVELOPED UNDER TITLE III, DEFENSE PRODUCTION ACT (DPA)
• DPA may be used to ensure the vitality of the domestic industrial base to
supply materials and services for national defense
• Rated orders
• “Industrial Resources”
• What is a Title III “Industrial Resource”?
• Materials, services, processes, or manufacturing equipment established or
maintained under authority of Title III, Defense Production Act
• Includes processes, technologies, and ancillary services for the use of manufacturing
equipment

• Policies and procedures for testing, qualification, and use of industrial
resources manufactured or developed
• Title III authorizes various forms of Government assistance to encourage expansion
of production capacity and supply of industrial resources essential to national
defense
• Where a Title III Industrial Resource is identified, it is the policy of the Government
to pay for any testing and qualification required for use or incorporation

• What is a Title III Project Contractor –
• A contractor that has received assistance for the development or manufacture of an
industrial resource
• Refer request to Contracting Officer for testing and qualification of a Title III
industrial resource for approval
• Contracting Officer will modify the contract and make an equitable adjustment for
cost of testing and qualification
• Look for clause FAR 52.234-1 in all solicitations/contracts for major systems and items
of supply

Earned Value Management System (EVMS)
• Required for Major Acquisitions for Development
• OMB Circular A-11 Preparation, Submission, And Execution of the
Budget (Scoring, Budgeting, Funding, Color of Money)
• Required for cost or incentive contracts and subcontracts valued > $20M
• Tool used to assess contractor’s progress in comparison to budgeted cost
and schedule (Gold Card)
• Provisions included in solicitation where EVMS is required
• EVMS may also be required for other procurements

EVMS “Gold Card”*
• BCWS – Budgeted Cost for Work
Scheduled
• BCWP – Budgeted Cost for Work
Performed
• ACWP – Actual Cost of Work
Performed
• PMB – Performance Measurement
Baseline
• BAC – Budget At Completion
• TAB – Total Allocated Budget
• EAC – Estimate At Completion
*https://www.dau.edu/tools/Lists/DAUTools/Attachments/19/2
0180904-gold%20card%201%20sided.pdf

• DoD application of EVMS Cost or Incentive Contracts/Subcontracts less
than $20M
• EVMS is optional and risk-based decision
• Cost or Incentive Contracts/Subcontracts greater than $20M
• EVMS required, shall comply with ANSI/EIA-748 guidelines
• Cost or Incentive Contracts/Subcontracts greater than $50M
• EVMS required, shall have system determined by cognizant Federal agency to be in
compliance with ANSI/EIA-748 guidelines.
• Defense Contract Management Agency (DCMA) determines compliance for DoD.

INTEGRATED BASELINE REVIEW (IBR)
• Where EVMS is required, Government will conduct an IBR
• Assesses:
- Ability of technical plan to achieve scope of work
- Whether time allocated can achieve project schedule milestones
- Ability of Performance Management Baseline to execute the project and attain cost
of objectives
- Adequacy of personnel, facilities, and equipment to perform tasks, including major
subcontractors
- Effectiveness of management processes
• Pre-solicitation IBR may be required

EVMS SOLICITATION PROVISIONS AND CONTRACT CLAUSES
• 52.234-2, Notice of Earned Value Management System-Preaward
Integrated Baseline Review
• 52.234-3, Notice of Earned Value Management System-Postaward
Integrated Baseline Review
• 52.234-4, Earned Value Management System
• Other specific agency provisions, e.g.,
• DFARS 252.234-7001 Notice of Earned Value Management System
• DFARS 252.234-7002 Earned Value Management System

ACQUISITION OF MAJOR WEAPON SYSTEMS AS
COMMERCIAL ITEMS
• What is a commercial item?
• An item, other than real property, customarily used by general public
• Used for purposes other than governmental purposes
• Available (or will be) available in time for delivery in commercial marketplace
• Certain modifications to an item available in commercial marketplace
• Installation services, maintenance services, repair services, training services, and
other services
• SecDef/DepSecDef determines if system is a commercial item

Acquisition of Major Weapon Systems as Commercial Items
• SecDef or Deputy SecDef determines if “system” is a “commercial item”
• Major Weapon System, Subsystems, Components, or Spare Parts
• Treat as commercial item when system acquired under procedures for
commercial acquisition; OR
• Contracting Officer determines in writing it is a commercial item
• See, e.g., Department of Defense Guidebook for Acquiring Commercial
Items (Part A: Commercial Item Determination) (OSD (AT&L))

• Major System acquisitions may not be simple, or quick
• Many different personnel and programs may be involved in just one buy
• There are a lot of moving parts and approval processes
• Knowing the way the system works can only help!

Questions?

Thank You For Joining Us!
Susan Warshaw Ebner*
Stinson LLP
susan.ebner@stinson.com
(202) 572-9927
* Thanks to my summer associate Allison Kruse for her assistance!

Brought To You By:
JSchaus & Associates
Washington DC
PH: 202-365-0598
Hello@JenniferSchaus.com

Government Contacting - FAR Part 34 - Major System Acquisition

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