Any company that does business with the Federal Government should be aware of the significant changes that are now being discussed in the area of negotiated procurements. In September, the FAR Council issued proposed regulations for Phase I of its Federal Acquisition Regulation ("FAR"), Part 15 rewrite. Public comments were due on November 26, 1996. As a participant in formulating the comments submitted by the American Bar Association, Section on Public Contract Law, I identified several issues in the proposed regulation that would be of particular concern to companies that do business with the Federal Government. Although these changes are of direct concern to prime contractors, subcontractors will also indirectly feel the impact of these regulatory changes. Lastly, it should be reiterated that these changes are only proposed changes to FAR Part 15. They are not yet final regulations and are unlikely to become final until this spring.

Summary of Changes
The proposed rules issued in September are the first phase of a complete rewrite of FAR Part 15. FAR Part 15 governs both sole source and competitive negotiated procurements. The Federal Government buys the vast majority of its supplies and services through this method of procurement. The significant changes in this phase of the rewrite relate to communications with offerors, elimination of the Best and Final Offer ("BAFO"), and competitive range determinations. These are all significant changes which will alter the way companies approach negotiated procurements.

Communications with Offerors
In the existing FAR Part 15, communications with offerors are carefully restricted and divided into two types; clarifications and discussions. The proposed FAR Part 15 greatly expands the allowable communication between the Contracting Officer and the Offerors and eliminates the term clarification. Communications with potential offerors during the procurement planning stage is encouraged by the proposed regulations. The proposed regulations even suggest one-on-one meetings with potential offerors and allow Government personnel to disclose general information about agency mission needs and future requirements. This would certainly open up presolicitation communications and provide offerors the information necessary to better prepare their initial proposal. As discussed below, initial proposals will take on greater importance under the proposed regulations.
     Communications after receipt of proposals, but before a competitive range determination is made are to be solely for the purpose of obtaining information that explains or resolves ambiguities or other concerns in regard to an offeror's proposal. These communications need not be held with all offerors. However, the information obtained in these communications may be used in proposal evaluation and/or to make a competitive range determination. Therefore, these early communications could be of critical importance to your company remaining in the competitive range, but the Contracting Officer is not required to talk with you. Communications after the competitive range determination, but before award are considered discussions. The Contracting Officer must conduct discussions at least once with each offeror in the competitive range. However, there is no requirement to have the same number of rounds of discussions with each offeror. Therefore, one offeror might have several rounds of discussions while another might have only one. Whether this is good or bad depends on your perspective. An offeror that has only one round of discussions may have a superior proposal that requires no additional rounds of discussions. Conversely, the offeror that has several rounds of discussions may not have as good an initial proposal, but now has more opportunity to improve its proposal and tailor it to the desires of the agency. If nothing else, a disparity in the number of discussion rounds creates a perception that one offeror is favored over another.
     The topics allowed for discussion have also been broadened. In the past, discussions in regard to prices and/or information about another offeror's technical solution were prohibited. However, the proposed regulations would allow the Contracting Officer to indicate to an offeror that its price is too high. The Contracting Officer may not disclose another offeror's price. However, when the Contracting Officer tells an offeror that its price is too high this is usually interpreted to mean that another offeror has a lower price. In addition, the present FAR provisions in regard to technical leveling have been removed. Instead, the Contracting Officer is instructed not to reveal an offeror's technical solution to another offeror. Whether individual parts of the technical solution or the concept of the technical solution could be revealed is an open question.

Elimination of BAFO
The proposed regulations eliminate the BAFO as we have known it. The Contracting Officer will have the power to request a proposal revision as often as needed during discussions. The Contracting Officer may establish a common cut off date for receipt of revisions, but is not required to do so. The proposed regulations specifically state that the Government may make an award without obtaining any further revisions. Therefore, every revision submitted becomes a potential BAFO, but not every offeror may submit its last revision at the same time. Obviously, the idea of holding back price reductions until the last submission becomes very risky, when every revision could be the last.

Competitive Range Determinations
The present version of FAR Part 15 provides that all proposals that have a "reasonable chance" of being selected for award must be put in the competitive range. If an offeror is not in the competitive range it is no longer eligible for award. The proposed regulations provide that only the proposals having the "greatest likelihood of award" must be put in the competitive range. This is a more restrictive competitive range that will result in some offerors being excluded from the competitive range which would have been kept in the competitive range under the existing regulations. The purpose of this proposed regulation is to reduce the costs that the Government and offerors incur in holding discussions with and evaluating BAFO's from offerors which have a very slim chance for award. This is a laudable goal and the redefinition of the competitive range is a good step. However, the FAR Council went beyond this goal when they included a proposed regulation that would allow the Contracting Officer to narrow the competitive range further if it is determined that the competitive range is too large to permit an efficient competition. In this case, the competitive range would comprise the greatest number of proposals that will permit an efficient competition among the "most highly rated" proposals. Therefore, even if a proposal is one of the group having the greatest likelihood of award it might be excluded from the competitive range if the Contracting Officer determines that there are too many in the competitive range and it is not one of the most highly rated proposals.
     The Contracting Officer may also decide before issuing the solicitation that too many proposals will be in the competitive range and provide in the solicitation that the competitive range will be limited to a set number of proposals. Setting this type of artificial limit before receiving any proposals has the potential for harming the Governments ability to obtain the best value and/or excluding new companies seeking to do business with the Government. This emphasis on narrowing the competitive range through a variety of methods is another reason that holding your best proposal until near the end of a procurement could be extremely risky.

Summary
The proposed changes to FAR Part 15 are designed to streamline the process of awarding procurements and to make Government contracting more like commercial contracting. However, they may also have the effect of reducing the real and perceived fairness of the Government procurement system. Nevertheless, I believe that most of the proposed regulations described above will become final with only minor modifications. Therefore, companies must be prepared to change the way they approach negotiated procurements.
     The most important changes must be in response to the Government's attempt to make the procurement process less formal and reduce the number of competitors. Companies that do business with the Government must change their procedures to take advantage of these changes. Opportunities to discuss solicitations with the Government before they are released are encouraged and should be pursued. This will allow the company to be further along in planning its proposal when the solicitation is issued. The emphasis on narrowing the competitive range makes the initial proposal much more important than in the past. Therefore, it needs to be well thought out and complete when it is submitted. The practice of submitting something mediocre with the idea of improving through discussions is risky at best. Likewise, saving the best price for BAFO will no longer be possible. A truly excellent initial proposal with good prices could result in award without discussions or at the very least serve to raise the threshold for others attempting to get into the more restrictive competitive range. These and other changes will be necessary if your company is to remain competitive in the Government marketplace.

If you would like a copy of the full text of the proposed regulations, or if you have any questions in regard to the proposed regulations or Government Contract Law in general, please call or e-mail me at Miller Mayer.