Federal Acquisition Regulation - Research Paper Example

?Law College: FAR, Default and Dispute Federal Acquisition Regulation (FAR) is a principle set of rules and regulations that are applied by the federal government of the United States to align the acquisition process and to settle disputes that may arise between the government and contractors. The government engages in contracts to accomplish procurement requirements. These regulations were started to streamline the government purchases of goods and services by ensuring that the process of procurement is flawless and economical to for effective government budget utilization. Despite the establishment of these laws, it is common that disputes arise in the process contracting leading to termination of contracts through a legal process. This paper will examine the FAR process of acquisition, settling disputes that arise within the acquisition process and the available mechanisms through which these disputes can be settled. By considering the acquisition plan that is used by the government, this paper will provide various recommendations that can be sued in to improve the government procurement procedures. FAR provides two mechanisms through which the government can terminate contracts they have entered with suppliers. Either termination for default or termination for convenience can be applied depending on the situation that arises during the contract period. Termination of contracts is one of the strategies that the government employs to streamline its operations with the supply chain and network to ensure that the procurement process is effective and within the allocated budgets and to accommodate changes that may arise during the procurement process. Termination of contracts has become a major issue due to the complexity of the supply chains and networks that are governed by varying market conditions and the inability of the government or the contractor to anticipate, plan and prepare for changes that are likely to arise within the contract period (Keyes, 2003). Therefore, FAR provides a legal platform where the government and the contractors can settle their disputes as they arise within the period that they are bonded. Termination for default is the process by which a contract is dissolved after the contractor fails to deliver as expected by the rules of the bond and the government is unsatisfied. Termination by default takes a legal procedure in-court where the two parties in the contract are required to provide a tangible evidence to prove the authenticity of termination by default. If the government intends to follow this route, then it must prove in a court of law that the contract failed to deliver goods and services with respect to the terms of the contract concerning the quality, quantity, schedule or any other issues states implicitly or explicitly in the bond. The contractor is required to prove to the court of law that the omissions or defiance of the contract terms was excusable or outside the contract agreement. The court judgment is delivered after the enough evidence is tabled by both parties, enough to form a basis for a court ruling. As the number of government contracts increases, cases involving termination of contract for default have become more common. However, the contractor is allowed to appeal if they feel that the termination for default was not a fair part of the contract (Keyes, 2003). Numerous cases have emerged during the government procurement process that has led the government to resort to termination for default. For instance, the government of US terminated a contract for default after a contractor failed to deliver goods that included wire rope terminals and the court upheld the case. In addition, the government demanded a compensation of $14, 457 for goods that were rejected within a warranty period for on the ground that the contractor failed to meet the quality requirements of the contract (Keyes, 2003). The court ruled in favor of the government after assessing the evidence that proved that the contractor had failed to uphold the terms and conditions of the contract. However, there have been situations when the termination for default has been overruled in a court of law in occasions when the government failed to prove that the contractor breached the contract for inexcusable reasons. For instance, the US government resorted to termination for default after the contractor discontinued its services due to delay of the government to release monthly funds. In this case, the court overruled the request of the government on the ground that the government failed to deliver to the terms of the contract that provided a schedule for monthly payments to the contractor. Termination for convenience occurs when the government decides to terminate whole or part of the contract after the requirements stated in the terms of contract are no longer needed, shortage of funds or even the obsoleteness of goods stated in the contract (Keyes, 2003). These cases are occur frequently with the government acquisition process and any company that enters into a contract must be adequately prepared to handle such issues while they arise. The frequency of this kind of termination procedures has become an issue of concern and modern contracts require that before signing the bond, the contractor establishes the terms that go along with such contract dissolution. The legal agreement should include a clause to protect the welfare of the contractor if such a situation arises during the period of the contract. In the termination for default procedure, the contractor loses the right to proceed with the contract, and is required to compensate the government for any losses that may due to their failure to honor the terms and conditions established in the contract. Although the contractor has the right to appeal, when effected the contractor is bound to lose a lot from the dissolution of the bond. On the other hand, the Termination for convenience is often a fair deal and several actions may be taken depending on the stage of the contract. If the contract had barely begun, then it is considered that the contractor is capable of re-gathering their resources without any loss whatsoever. Consequently, the contract may be dissolved without any form of compensation. However, if termination of the contract will read to losses on the part of the contractor, the government is required to re-imburse them for any losses whatsoever (Keyes, 2003). However, legal actions are taken in most cases to establish the amount of re-imbursement that the contracting company should get after termination of the contract. FAR provides that should a contractor breach their duties, they should compensate the government for failing to deliver to the expectation of the established contract. If the government has to re-procure the same services that were stated in the contract, the contracts should fund this extra cost. In this case the government is required to prove beyond doubt that the goods or services re-procured are similar to those stated in the breached contract. The government remedy in this case is to file a claim that will see the contractor pay for the extra cost. Secondly, the FAR has a clause to allow the government to claim liquidated damages for the loss that results after the contractor breaches the contract. However, payment of liquidated damages is subject to the terms laid down in the FAR regarding qualification of liquidated damages. The policy states that liquidated damages may be used only the government anticipates suffering damages due to the contractor’s untimely delivery, and when it is unrealizable to estimate accurately the cost of damages that would occur after breach of contract (Keyes, 2003). It is recommended that the contractors take all possible prevention measures to avoid instances of liquidated damages. The Contract dispute Act provides guidelines for the right procedure that a contractor and the government must follow while settling a dispute the contract period. If the contractor has a claim against the government, they are supposed to submit their complains to the governments Contracting officer for a final decision. On the hand, complains from the federal government are forwarded to the companies contracting officer for review and action. The process of settling a dispute is lengthy and action is expected to be received within a period of not more than six years. In filing a claim, it must be reflected that the claim is in good faith and that the quantitative data provided as evidence reflects the true picture of the dispute. While claims under $100, 000 may be settled without any formal certificate, any amount above this value is claimed after a valid certificate is issued and signed by the two parties. If the two parties disagree in their attempt to settle the case externally, they are free to seek for a court decision in the federal or the supreme court of appeal. The procedures that are laid down aim at protecting the rights of both the contractor and the government to avoid instances of fraud of exploitation (Keyes, 2003). The FAR requirements are used in the court of law to defend the rights of each party while settling claims and disputes that arise. Acquisition planning is a critical tool for cost containment in government budget expenditures, especially when procuring goods and services from suppliers. The principle of government spending stipulates that the effective costing for quality services must be held while spending budgetary allocation. While considering viable contractors, it is vital to evaluate the authenticity of the potential suppliers from the complex supplier market chain. The increase in the number of suppliers in the market today has complicated the tendering process and the likelihood and the chances of entering into immature contracts have risen. Acquisition planning refers to the development of strategic schemes to integrate and co-ordinate the entire procurement process from an administration point of view (Hecker, 2001). The government economists have indicated that the government wastes a lot of money whenever a contract is terminated either for convenience or for default. Consequently, planning will ensure that the government loss arising from terminating contracts is eliminated. Cost containment refers to the strategy of the government to optimize their financial utilization by minimizing its input in the procurement process. The planning process requires that the government project planner assess the risks associated with the choice of any supplier. Critical parameters in the contracting process include technical, cost and schedule risks and the mechanisms that are available to mitigate the anticipated risks. It is important to consider the most cost company and its reliability and guarantee of service delivery. Another alternative would be to provide purchase off-shelf, which is recommended for expenditures under $100, 000. After selection of the best supplier, it is important to track the contract at the various stages of its development to ensure that it remains within the cost plan. Tracking also assists implementing flexibility within the procurement process by allowing for plan adjustment. Any unforeseen factors should be factored in to ensure that necessary adjustments are implemented within the drawn acquisition plan to ensure the prioritized goals are achieved at the end (Hecker, 2001). If proper planning is implemented in the acquisition process, cost reduction can be achieved and high quality services can be guaranteed. In the recent past, the number of terminated contracts has risen and the cost that comes along with it has been felt deeply by the governmental organizations. Although the government has clear procedures to select a valid contractor, the trends in contract breach sends signals that a lot has to be done to align the acquisition processes. One weakness that has been associated with government acquisition processes is the underestimation of risk factors associated with contractors. Consequently, many contracts end up in disputes and re-procurement process ends up being expensive and out of time schedule. This kind of inefficiency can only be eliminated if the risk factors are properly measured and weighed before selecting the best supplier. For instance, project coordinators may choose the cheapest supplier, which in the long run may end up being expensive if the contract is terminated midway (NASPO, 2007). Therefore, a careful evaluation is necessary if at all the end goals of the procurement process are to be achieved within the right time schedule. One of the strategies that the government can use to reduce their procurement cost is by employing the cost avoidance model of purchasing. In this method, a computational approach is used to select the best supplier by analyzing the baseline cost and the actual costs of the tender applicants. The actual cost refers to the least cost offered by the bidders while the baseline cost is the average cost of all the suppliers who submitted their tender applications. The aim of this procedure is to identify the contractor who offers the least cost and the least risk within the multiple applicants. The cost of buying is reduced while the cost associated with risk of termination is eliminated during the procurement process. Another strategy that would assist the government to improve its procurement process is by providing opportunities for more contractors to bid during the tendering period. This will provide a larger pool of suppliers and hence a thorough selection process will identify the best supplier fits their demands (NASPO, 2007). It is recommendable to select the supplier who can provide most of the supply demands of the government. In conclusion, the government acquisition process is sensitive to disputes and the consequences of contract termination draws a lot from the constrained government budgets. The Federal Acquisition requirement provides a platform for the government to terminate contracts that are unsatisfying and remedies for liquidated damage and extra re-procurement costs. However, contract termination is a sign of ineffective planning though in some occasion it is justifiable that the risks may have been unpredictable. Proper acquisition planning is the ultimate solution to the disputed associated with contracts and more so a good strategy to reduce unnecessary overhead costs. By encouraging tender applications, assessing contracting risks and adopting cost avoidance models, the government can improve the procurement process. References Hecker, E., (2001). Federal Procurement: Trends and Challenges in Contracting. USA: DIANE publishing. Keyes, W., (2003). Government Contracts Under the Federal Acquisition Regulation. USA: Thomson west. National Association of State Procurement Officials (NASPO), (2007). Benchmarking Cost Saving and Cost Avoidance. Retrieved from: < http://www.naspo.org/documents /Bench marking_ Cost_Savings__and_Cost_Avoidance.pdf> Read More