Policy

Overview

FAR 37.102 establishes the foundational policies for federal service contracting, mandating performance-based acquisition (PBA) as the preferred method to ensure accountability and measurable outcomes. It sets strict priorities for contract types and outlines agency responsibilities regarding oversight, competition, and the prohibition of contracting inherently governmental functions.

Key Rules

• Performance-Based Acquisition (PBA) Priority: PBA is mandatory to the "maximum extent practicable," except for architect-engineer services, construction, utility services, or services incidental to supply purchases.
• Order of Precedence: Agencies must follow a specific hierarchy when selecting contract types:
  1. Firm-fixed price performance-based contracts.
  2. Non-firm-fixed price performance-based contracts.
  3. Non-performance-based contracts.
• Inherently Governmental Functions: Agencies are strictly prohibited from awarding contracts for functions that must be performed by government employees.
• Private Sector Reliance: Following OMB Circular A-76, agencies should generally rely on the private sector for commercial services rather than performing them in-house.
• Requirement Definition: Program officials hold the primary responsibility for accurately describing needs using PBA methods to ensure contractor understanding and prevent performance failures.
• Oversight and Training: Agencies must ensure that contract administration is handled by sufficiently trained and experienced officials to prevent fraud, waste, and abuse.
• LPTA Limitations: Non-DoD agencies must adhere to specific restrictions when using the Lowest Price Technically Acceptable (LPTA) source selection process for service contracts.

Practical Implications

• Justification Requirements: Contracting Officers and program offices must be prepared to justify the use of any contract type or methodology that deviates from the preferred firm-fixed price performance-based model.
• Collaborative Drafting: The policy necessitates early and continuous collaboration between program managers (who define the need) and contracting officers (who ensure the description meets FAR standards) to avoid vague Statements of Work (SOWs).
• Risk Management: By emphasizing non-personal services and prohibiting inherently governmental functions, the policy protects the government from "de facto" employee relationships and legal challenges regarding the exercise of sovereign authority.