[House Report 114-691]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-691
======================================================================
CONSTRUCTION CONSENSUS PROCUREMENT IMPROVEMENT ACT OF 2016
_______
July 14, 2016.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Chaffetz, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
[To accompany H.R. 5199]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom
was referred the bill (H.R. 5199) to amend title 41, United
States Code, to improve the manner in which Federal contracts
for construction and design services are awarded, and to
prohibit the use of reverse auctions for design and
construction services procurements, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
Committee Statement and Views.................................... 2
Section-by-Section............................................... 4
Explanation of Amendments........................................ 6
Committee Consideration.......................................... 6
Roll Call Votes.................................................. 6
Application of Law to the Legislative Branch..................... 6
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 6
Statement of General Performance Goals and Objectives............ 6
Duplication of Federal Programs.................................. 7
Disclosure of Directed Rule Makings.............................. 7
Federal Advisory Committee Act................................... 7
Unfunded Mandate Statement....................................... 7
Earmark Identification........................................... 7
Committee Estimate............................................... 7
Budget Authority and Congressional Budget Office Cost Estimate... 7
Changes in Existing Law Made by the Bill, as Reported............ 9
The amendment is as follows:
In section 3, in the matter proposed to be inserted by subsection
(a)(1), strike ``$750,000'' each place it appears (including any
headings) and insert ``$3,000,000''.
Committee Statement and Views
PURPOSE AND SUMMARY
H.R. 5199, the Construction Consensus Procurement
Improvement Act of 2016, was introduced to encourage
competition and reduce the costs of bidding for federal
construction contracts. The bill encourages the use of the two-
step bid and proposal process for design-build construction
contracts in order to reduce the costs of competing in the
government marketplace, and reduce the time contracting
officers must spend reviewing numerous complicated design
proposals in the one-step process.
BACKGROUND AND NEED FOR LEGISLATION
The federal government spent $439 billion in fiscal year
(FY) 2015 on contracts for goods and services. Approximately
$21.4 billion (or five percent) of this amount was spent on
federal construction and architect and engineering (A&E)
projects. Small business prime contractors received
approximately $7.4 billion (or 35 percent) of this spending.\1\
Construction contracting would benefit from a streamlining of
the procurement process to ensure robust small business
participation on design-build proposal teams.
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\1\Data source is the Federal Procurement Data Systems-Next
Generation (FPDS-NG) available at: http://www.fpds.gov.
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Typically, the federal government uses one of two processes
for buying construction and A&E services. First, under the
``design-bid-build'' process, design and construction are
treated as two separate requirements and contracts are awarded
sequentially and separately. Under the second ``design-build''
process design and construction are combined into a single
requirement with a single contract awarded to one company
(which is often a team) responsible for both the design and
construction.\2\
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\2\41 U.S.C. Sec. 3309.
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There are two source selection processes for design-build
contracts.\3\ There is the single-step design-build selection
process where all construction and design teams must submit
detailed and costly full proposals up front. The procuring
agency then evaluates all proposals and selects an awardee.
There is also a two-phase design-build selection process.\4\
Under this process, teams submit information related to
experience and past performance in phase one. The procuring
agency then selects a limited number of the most qualified
offerors (generally three to five) to advance to phase two of
the competition. During phase two, these offerors submit
detailed price and technical proposals that the procuring
agency evaluates in order to make an award decision.
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\3\The federal government has used this design-build method since
the late 1980s and early 1990s. Ralph C. Nash & John Cibinic, Design-
Build Contracting: Can the Federal Government Use This Technique
Effectively? No. 12 Nash & Cibinic Rep. 68 (1994).
\4\48 C.F.R. Sec. 36.303.
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Encouraging the use of the two-step design-build process
There are recognized benefits to design-build contracting
that include having a single accountable prime contractor.
However, this process also requires highly complicated and
often costly proposals. Experts have said that in order to
develop accurate construction cost proposals, bidders must
complete up to 80 percent of the design work and determine
detailed space and material needs.\5\ Current law encourages
the use of a two-step process for design-build contracts and
the selection of no more than two to five firms for phase two
in order to encourage selection of the most qualified firms and
limit the cost burden of these types of proposals.\6\
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\5\Assessing Government's Use of Design-Build Contracts: Hearing
before the Subcomm. on Federal Workforce, US Postal Service and the
Census of the H. Comm. on Oversight and Gov't Reform, 113th Cong.
(2013) (statement of Charles D. Dalluge on behalf of the American
Institute of Architects).
\6\41 U.S.C. Sec. 3309(d).
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However, concerns have been expressed that agencies
awarding construction contracts (typically the General Services
Administration (GSA) and the U.S. Army Corps of Engineers
(USACE)) are overly reliant on one-step design-build
contractors. In addition, when the two-step process is used
there are concerns that these agencies may be allowing too many
offerors into phase two.\7\
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\7\Assessing Government's Use of Design-Build Contracts: Hearing
before the Subcomm. on Federal Workforce, US Postal Service and the
Census of the H. Comm. on Oversight and Gov't Reform, 113th Cong.
(2013) (statement of Charles D. Dalluge on behalf of the American
Institute of Architects); The Hill, A Better Way to Build More
Efficient Government by Helen Combs Dreiling (Oct. 4, 2014).
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While the one-step process can offer the advantage of speed
to the government, it can also be more expensive, burdensome
and time-consuming for potential contractors, who must make a
significant investment in proposal costs with limited chances
of being awarded the contract. This can discourage firms from
competing.
A 2012 survey by the American Institute of Architects found
that between 2007 and 2011, architecture firms spent a median
of $260,000 for each design-build project, which is a
significant investment, particularly for small businesses.\8\
Under the two-step process, there is a lower initial cost
because bidders' proposals are focused on demonstrating
experience and past performance qualifications. Then, as the
number of potential bidders decreases in phase two, bidders
have a greater chance of winning the award and therefore a
greater return on investment from their cost proposals. The
advantages of the two-step process are limited though when over
five bidders advance to phase two.
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\8\Assessing Government's Use of Design-Build Contracts: Hearing
before the Subcomm. on Federal Workforce, US Postal Service and the
Census of the H. Comm. on Oversight and Gov't Reform, 113th Cong.
(2013) (statement of Charles D. Dalluge on behalf of the American
Institute of Architects).
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This bill will encourage the use of the two-step process
for construction procurements. The two-step design-build
process can help to ensure that the most qualified bidders are
selected for phase two and that those firms have a greater
incentive to submit a competitive proposal because they will
have a greater chance of winning the award. Encouraging the use
of the two-step process for design and construction services
will reduce the costs of competing in the government
marketplace and reduce the time contracting officers must spend
reviewing numerous complicated design proposals.
Prohibiting the use of reverse auctions for design and construction
services
The term ``reverse auction'' is not defined in statute.
However, the Office of Management and Budget (OMB) has released
guidance on how to effectively use the reverse auctions.\9\
Reverse auctions provide a method for bidding down prices and
is a particularly useful tool for the purchase of commodities.
However, the reverse auction tool may not be appropriate for
the procurement of complicated design and construction
services.
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\9\OMB Memorandum on Effective Use of Reverse Auctions from Office
of Federal Procurement Administrator Anne E. Rung Memorandum for Chief
Acquisition Officers and Senior Procurement Executives (June 1, 2015).
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The USACE conducted a year-long study of reverse auctions
for construction services and found that it did not deliver the
promised savings in construction contracts. Specifically, the
USACE found that using reverse auctions for construction
projects did not provide ``any significant or even marginal
edge in savings'' and that construction was too variable a
service to be considered a commodity.\10\
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\10\USACE, Final Report Regarding the USACE Pilot Program on
Reverse Auctioning 11 (2004).
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This bill prohibits the use of reverse auctions as part of
the two-phase process for construction and design services.
LEGISLATIVE HISTORY
H.R. 5199, the Construction Consensus Procurement
Improvement Act of 2016, was introduced on May 11, 2016 by
Congressman Mark Meadows (R-NC) and referred to the Committee
on Oversight and Government Reform.
A companion bill, S. 1526, the Construction Consensus
Procurement Improvement Act of 2015, was introduced by Senator
Portman on June 8, 2015. On February 10, 2016, the Senate
Homeland Security and Governmental Affairs Committee ordered
the bill, as amended, favorably reported.
Two other related House bills were introduced in 2015,
including H.R. 1666, the Design-Build Efficiency and Jobs Act
of 2015, and H.R. 838, the Security in Bonding Act of 2015.
On December 12, 2014, in the 113th Congress, the House
Oversight and Government Reform Committee reported H.R. 2750,
the Design-Build Efficiency and Jobs Act of 2014.\11\ H.R. 2750
would have required a two-phase selection process for the award
of civilian and defense design and construction contracts
having a value of greater than $1.5 million, but did not
include language on reverse auctions.
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\11\House Report 113-668 (Dec. 12, 2014).
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Section-by-Section
Section 1. Short title; table of contents
Designates the bill as the ``Construction Consensus
Procurement Improvement Act of 2016.''
Section 2. Congressional findings
Makes six findings: (1) acquisition procedures that are
often used effectively to procure productions and other forms
of services are not always appropriate for procurement of
design and construction services; (2) federal procurement
officials often adopt contracting techniques from the private
sector and have used those techniques effectively to procure
products and services; (3) design-build is a procurement
technique federal officials have adopted from the private
sector that has worked well for procurement of design and
construction services; (4) the current statutory framework for
design-build could benefit from legislative refinement; (5)
reverse auctions are another procurement technique federal
officials have adopted from the private sector and used
successfully to award contracts for the purchase of products
that are commercially equivalent to commodities; and (6)
despite their success in other contexts, reverse auctions are
generally inappropriate for procurement of design and
construction services, given the unique nature of each such
project.
Section 3. Design-build construction process improvement
For civilian contracts for design and construction of a
public building, facility or work, the bill would require two-
phase selection procedures be used for contracts with a value
of $750,000 or greater.
For such contracts valued at less than $750,000, the bill
would require the contracting officer to make a determination
on whether to use two-phase selection procedures based on
consideration of several factors. The contracting officer would
be required to consider the following factors: (1) whether the
contracting officer anticipates three or more offers will be
received; (2) design work must be performed before an offeror
can develop a price or cost proposal; (3) whether the offeror
will incur a substantial amount of expense in preparing the
offer; and (4) other information including the: (i) extent to
which the project requirements have been adequately defined;
(ii) time constraints for delivery of the project; (iii)
capability and experience of potential customers; (iv)
suitability of the project for use of the two-phase selection
procedures; (v) capability of the agency to manage the two-
phase selection process; and (vi) other agency-established
criteria.
Requires annual agency reports on each instance by which
the agency awarded a design-build contract in which more than
five finalists were selected for phase-two requests for
proposals or the contract was awarded without using two-phase
selection procedures. OMB would be required to make the agency
reports publicly available.
Requires the Government Accountability Office to analyze
agency compliance with the requirements of this bill on design-
build contracts.
Section 4. Prohibition on the use of a reverse auction for the award of
a contract for design and construction services
States a finding that reverse auctions bid down the price
compared to traditional auctions where buyers bid up on the
price.
Requires the Federal Acquisition Regulatory Council in
consultation with the Administrator for Federal Procurement
Policy to amend the Federal Acquisition Regulation to prohibit
the use of reverse auctions as part of the two-phase selection
procedure for awarding contracts for construction and design
services.
Defines ``design and construction services'' as site
planning and landscape design, architectural and engineering
services (including surveying and mapping), interior design,
performance of substantial construction work for facility,
infrastructure, and environmental restoration projects,
delivery and supply of construction materials to construction
sites, or construction or substantial alteration of public
buildings or public works.
Defines ``reverse auction'' as a real-time auction
conducted through an electronic medium among two or more
offerors who compete by submitting bids for a supply or service
contract with the ability to submit revised lower bids at any
time before the closing of the auction; and the award of the
contract, delivery order, task order, or purchase order to the
offeror in whole or in part, based on the price obtained
through the auction process.
Explanation of Amendments
During Full Committee consideration of the bill, Ranking
Member Elijah Cummings (D-MD) offered an amendment on behalf of
Congressman Stephen Lynch (D-MA) that would raise the contract
value threshold from $750,000 to $3 million on the requirement
to use the two-phase selection procedure for design and
construction contracts. The amendment was adopted by voice
vote.
Committee Consideration
On May 17, 2016, the Committee met in open session and
ordered reported favorably the bill, H.R. 5199, as amended, by
voice vote, a quorum being present.
Roll Call Votes
No roll call votes were requested or conducted during Full
Committee consideration of H.R. 5199.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations.
This bill makes amendments to improve competition in the area
of federal construction contracting. As such this bill does not
relate to employment or access to public services and
accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the descriptive portions of
this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives of the bill are to improve the manner in
which Federal contracts for construction and design services
are awarded, and to prohibit the use of reverse auctions for
design and construction services procurements.
Duplication of Federal Programs
No provision of this bill establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
Disclosure of Directed Rule Makings
The Committee estimates that enacting this bill does not
direct the completion of any specific rule makings within the
meaning of 5 U.S.C. 551.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandate Reform Act, P.L. 104-4) requires a statement as to
whether the provisions of the report include unfunded mandates.
In compliance with this requirement the Committee has received
a letter from the Congressional Budget Office included herein.
Earmark Identification
This bill does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Committee Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
this bill. However, clause 3(d)(2)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for this bill from the Director of
Congressional Budget Office:
June 13, 2016.
Hon. Jason Chaffetz,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5199, the
Construction Consensus Procurement Improvement Act of 2016.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Keith Hall.
Enclosure.
H.R. 5199--Construction Consensus Procurement Improvement Act of 2016
H.R. 5199 would modify the federal government's procedures
for awarding design and construction contracts for federal
facilities and would prohibit the use of reverse auctions for
such awards. Specifically, the legislation would require a two-
phase selection process for designing and constructing any
federal facility with a cost of more than $3 million. In phase
one, firms would provide basic information on their experience
and past performance; agencies then would select a few firms
and invite them to submit a more detailed proposal in phase
two.
CBO reviewed information on the process of awarding
construction contracts by the Army Corps of Engineers (Corps)
and the General Services Administration (GSA), two agencies
that oversee construction of many federal facilities. Those
agencies often use a two-phase process to select firms for
construction projects but also use other acquisition strategies
to award contracts. On the basis of information from those
agencies, CBO estimates that implementing H.R. 5199 would cost
$3 million over the 2017-2021 period--about $600,000 a year--
because agencies that currently evaluate projects using a one-
phase process would incur somewhat higher costs to evaluate two
rounds of proposals before selecting a firm for each
construction project.
CBO also reviewed information on the use of reverse
auctions in government procurement contracts by the Corps and
GSA. Those agencies have found that using reverse auctions in
complex procurements does not consistently result in lower
procurement costs than would result from other methods such as
sealed bids or negotiated procurements. Those agencies
generally do not use reverse auctions to obtain such services.
On that basis, CBO estimates that implementing H.R. 5199 would
not result in a significant change in the government's bidding
practices and thus would not have a significant effect on the
federal budget.
Because enacting the bill could affect direct spending by
agencies not funded through annual appropriations, pay-as-you-
go procedures apply. CBO estimates, however, that any net
change in spending by those agencies would be negligible.
Enacting the bill would not affect revenues. CBO estimates that
enacting H.R. 5199 would not increase net direct spending or
on-budget deficits in any of the four consecutive 10-year
periods beginning in 2027.
H.R. 5199 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
On March 29, 2016, CBO transmitted a cost estimate for S.
1526, the Construction Consensus Procurement Improvement Act of
2015, as ordered reported by the Senate Committee on Homeland
Security and Governmental Affairs on February 10, 2016. S. 1526
and H.R. 5199 are similar, although H.R. 5199 would require
agencies to use a two-phase selection process for the design
and construction of facilities with a cost greater than $3
million. S. 1526 which would impose the process for facilities
with a cost greater than $750,000. CBO estimates that the
process imposed in H.R. 5199 would be less costly.
The CBO staff contacts for this estimate are Matthew
Pickford and Aurora Swanson. This estimate was approved by H.
Samuel Papenfuss, Deputy Assistant Director for Budget
Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
TITLE 41, UNITED STATES CODE
* * * * * * *
SUBTITLE I--FEDERAL PROCUREMENT POLICY
* * * * * * *
CHAPTER 33--PLANNING AND SOLICITATION
* * * * * * *
Sec. 3309. Design-build selection procedures
(a) Authorization.--Unless the traditional acquisition
approach of design-bid-build established under sections 1101 to
1104 of title 40 or another acquisition procedure authorized by
law is used, the head of an executive agency shall use the two-
phase selection procedures authorized in this section for
entering into a contract for the design and construction of a
public building, facility, or work when a determination is made
under subsection (b) that the procedures are appropriate for
use.
[(b) Criteria for Use.--A contracting officer shall make a
determination whether two-phase selection procedures are
appropriate for use for entering into a contract for the design
and construction of a public building, facility, or work when--
[(1) the contracting officer anticipates that 3 or
more offers will be received for the contract;
[(2) design work must be performed before an offeror
can develop a price or cost proposal for the contract;
[(3) the offeror will incur a substantial amount of
expense in preparing the offer; and
[(4) the contracting officer has considered
information such as the following:
[(A) The extent to which the project
requirements have been adequately defined.
[(B) The time constraints for delivery of the
project.
[(C) The capability and experience of
potential contractors.
[(D) The suitability of the project for use
of the two-phase selection procedures.
[(E) The capability of the agency to manage
the two-phase selection process.
[(F) Other criteria established by the
agency.]
(b) Criteria for Use.--
(1) Contracts with a value of at least $3,000,000.--
Two-phase selection procedures shall be used for
entering into a contract for the design and
construction of a public building, facility, or work
when a contracting officer determines that the project
has a value of $3,000,000 or greater, as adjusted for
inflation in accordance with section 1908 of this
title.
(2) Contracts with a value less than $3,000,000.--For
projects that a contracting officer determines have a
value of less than $3,000,000, the contracting officer
shall make a determination whether two-phase selection
procedures are appropriate for use for entering into a
contract for the design and construction of a public
building, facility, or work when--
(A) the contracting officer anticipates that
3 or more offers will be received for the
contract;
(B) design work must be performed before an
offeror can develop a price or cost proposal
for the contract;
(C) the offeror will incur a substantial
amount of expense in preparing the offer; and
(D) the contracting officer has considered
information such as--
(i) the extent to which the project
requirements have been adequately
defined;
(ii) the time constraints for
delivery of the project;
(iii) the capability and experience
of potential contractors;
(iv) the suitability of the project
for use of the two-phase selection
procedures;
(v) the capability of the agency to
manage the two-phase selection process;
and
(vi) other criteria established by
the agency.
(c) Procedures Described.--Two-phase selection procedures
consist of the following:
(1) Development of scope of work statement.--The
agency develops, either in-house or by contract, a
scope of work statement for inclusion in the
solicitation that defines the project and provides
prospective offerors with sufficient information
regarding the Federal Government's requirements (which
may include criteria and preliminary design, budget
parameters, and schedule or delivery requirements) to
enable the offerors to submit proposals that meet the
Federal Government's needs. If the agency contracts for
development of the scope of work statement, the agency
shall contract for architectural and engineering
services as defined by and in accordance with sections
1101 to 1104 of title 40.
(2) Solicitation of phase-one proposals.--The
contracting officer solicits phase-one proposals that--
(A) include information on the offeror's--
(i) technical approach; and
(ii) technical qualifications; and
(B) do not include--
(i) detailed design information; or
(ii) cost or price information.
(3) Evaluation factors.--The evaluation factors to be
used in evaluating phase-one proposals are stated in
the solicitation and include specialized experience and
technical competence, capability to perform, past
performance of the offeror's team (including the
architect-engineer and construction members of the
team), and other appropriate factors, except that cost-
related or price-related evaluation factors are not
permitted. Each solicitation establishes the relative
importance assigned to the evaluation factors and
subfactors that must be considered in the evaluation of
phase-one proposals. The agency evaluates phase-one
proposals on the basis of the phase-one evaluation
factors set forth in the solicitation.
(4) Selection by contracting officer.--
(A) Number of offerors selected and what is
to be evaluated.--
(i) the technical submission for the
proposal, including design concepts or
proposed solutions to requirements
addressed within the scope of work, or
both; and
(ii) the evaluation factors and
subfactors, including cost or price,
that must be considered in the
evaluations of proposals in accordance
with subsections (b) to (d) of section
3306 of this title.
(B) Separate evaluations.--The contracting
officer separately evaluates the submissions
described in clauses (i) and (ii) of
subparagraph (A).
(5) Awarding of contract.--The agency awards the
contract in accordance with chapter 37 of this title.
(d) Solicitation To State Number of Offerors To Be Selected
for Phase-Two Requests for Competitive Proposals.--A
solicitation issued pursuant to the procedures described in
subsection (c) shall state the maximum number of offerors that
are to be selected to submit competitive proposals pursuant to
subsection (c)(4). The maximum number specified in the
solicitation shall not exceed 5 unless the agency determines
with respect to an individual solicitation that a specified
number greater than 5 is in the Federal Government's interest
and is consistent with the purposes and objectives of the two-
phase selection process.
(e) Requirement for Guidance and Regulations.--The Federal
Acquisition Regulation shall include guidance--
(1) regarding the factors that may be considered in
determining whether the two-phase contracting
procedures authorized by subsection (a) are appropriate
for use in individual contracting situations;
(2) regarding the factors that may be used in
selecting contractors; and
(3) providing for a uniform approach to be used
Government-wide.
* * * * * * *
[all]