APM 2011-02, “HHS’ Prospective Service Acquisition Reviews”
June 3, 2011
To: Heads of Contracting Activity Service Acquisition Initiative Focal Points
From: Angela Billups, Ph.D. /s/
Senior Procurement Executive
Subject: HHS’ Prospective Service Acquisition Reviews
Effective Date: Immediately
The purpose of this Acquisition Policy Memorandum (APM) is to establish guidelines for the prospective review of designated Department of Health and Human Services’ (HHS or the Department) service acquisitions -- see Sections 3 and 4 of this APM. These reviews comprise one part of the Department’s overall strategy to: (a) evaluate our service acquisition portfolio; and (b) build a more comprehensive acquisition enhancement program that will encompass reviews of not only significant service contracts but also high-dollar value and high-risk information technology, research and development, and construction contracts.
This APM complements the February 24, 2011 memorandum from Assistant Secretary for Financial Resources (ASFR) Ellen Murray, which requires a retrospective review of the Department’s fiscal year (FY) 2010 service contract inventory and application of those review findings to FY 2011 acquisitions.
This effort is intended to ensure that HHS’ planned service acquisitions meeting specified dollar thresholds or qualitative criteria receive the necessary cross-functional (e.g., program, budget, finance, human resource, information technology, legal, and contracting) oversight. The goal of such oversight is to ensure that our service acquisitions: (a) meet mission needs in a cost-effective manner; (b) comply with all relevant statutory and regulatory requirements; and (c) support the efficient and effective use of resources -- including the identification of potential strategic sourcing opportunities.
As a decentralized Department with numerous acquisition offices, HHS has historically allowed OPDIVs [including Office of the Secretary’s (OS) Staff Divisions] to conduct their acquisition processes within a broad policy framework. However, in recent years, HHS’ service acquisition budget has increased, along with increasing responsibilities for performing highly important, complex, and politically visible services – thus, demanding a broader, enterprise-wide look at our service acquisition processes, controls, and results.
In addition, the Office of Management and Budget’s (OMB) Office of Federal Procurement Policy (OFPP) has initiated several acquisition initiatives related to strategic sourcing, competition, and the preferred use of fixed-price (rather than cost-reimbursement, time-and-material, or labor-hour) contracts. More recently, per the direction of Congress, OFPP has begun focusing specifically on the use and nature of service contracts government-wide.
In FY 2010, HHS awarded 57,000 service contract transactions with a combined value of $13.1 billion, representing 70 percent of HHS’ total contract spend. Section 743 of Division C of the FY 2010 Consolidated Appropriations Act (Public Law 222-117) and OFPP’s November 5, 2010 memorandum, “Service Contract Inventories” (OFPP memorandum) (http://www.whitehouse.gov/omb/procurement_index_memo), requires HHS to: establish service contract inventories ; and perform a retrospective analysis of FY 2010 service contracts. To achieve these public policy objectives, HHS must also institute a prospective review process.
To support the required retrospective analysis, the Office of the Assistant Secretary for Financial Resources (ASFR) and the OPDIVs, are now:
- establishing cross-functional teams at the OPDIV level and within OS;
- determining review methodologies, including as appropriate: (1) interviews of budget managers, program managers, contracting officers’ technical representatives, and contracting officers; (2) use of data mining; and (3) reviews of a sample of contract files;
- developing review timelines; and
- preparing review guidelines, including a common reporting template.
As a result, the retrospective review process is not addressed in detail in this APM. It will move on a track parallel to the prospective (transactional) reviews required by this APM. However, the results of our retrospective reviews may trigger further refinements to this APM.
Prospective reviews of planned acquisitions are a critical part of the overall service acquisition management strategy. While the entire HHS service acquisition portfolio is potentially subject to enhanced oversight, prospective reviews will initially focus on a unique subset -- advisory and assistance services (A&AS) . Our focus on A&AS is warranted because this category of services is often closely related to inherently governmental functions, or can otherwise be subject to misuse or abuse. Examples of A&AS include legal services, management support services, and financial accounting/auditing services. In FY 2010, HHS awarded $3.8 billion for A&AS representing 19 percent of HHS’ total contract spend and 27 percent of HHS’ total service contract spend.
3. Prospective Review of Designated Service Acquisitions:
The requirements of this APM pertain not only to the product and service (P&S) codes for “special interest functions” cited in the OFPP memorandum, but also to P&S codes for A&AS we have identified for HHS. For example, we have included P&S codes for services involving “studies and evaluations,” which we believe pose a certain level of risk, e.g., not clearly spelling out deliverables that benefit the Department. This set of P&S codes is provided below in Table 1.
All new service acquisitions to be awarded in FY 2011, using the P&S codes cited in Table 1, must be reviewed prospectively either by: (a) the OPDIV Head of the Contracting Activity (HCA) (or designee); or (b) the OPDIV HCA (or designee) and ASFR’s Office of Grants and Acquisition Policy and Accountability (OGAPA), as indicated below. For purposes of this APM, new acquisitions include:
- commercial service contracts, including orders placed under the Federal Supply Schedule;
- definitive contracts for other than commercial services, (regardless of extent of competition or pricing arrangement);
- task orders – whether placed under OPDIV-awarded indefinite delivery/indefinite quantity contracts, blanket purchase agreements, or government-wide acquisition contracts;
- letter contracts; and
- assisted acquisitions under interagency agreements.
- Any planned FY 2011 award in the above-specified categories at or below $5 million must be reviewed by the HCA (or designee) , if the planned award is considered to be politically sensitive or otherwise important to management. Whether a planned acquisition falls within one of those categories should be jointly decided by the cognizant Program Manager (or Contracting Officer’s Technical Representative) and the HCA.
- Any planned FY 2011 award in the above-specified categories exceeding $5 million must be reviewed by the HCA (or designee).
- Any planned FY 2011 award in the above-specified categories exceeding $20 million must be reviewed by both the HCA (or designee) and ASFR/OGAPA. Please see Section 4, HCA Responsibiliites, for more information concerning any potential deviations.
- OGAPA may also request to review planned FY 2011 acquisitions at or below $20 million based upon:
- interest generated in a particular category of services;
- interest generated in contracts with a particular vendor;
- interest generated in a particular type or class of contracts (e.g., cost-reimbursement contracts, incrementally-funded contracts, noncompetitive contracts, or contracts to support a specific initiative);
- information available to the Senior Procurement Executive (e.g., complex or high-profile, multi-OPDIV initiatives; prior protests or claims, acquisitions in which interest has been expressed by the White House, Congress, the Office of Inspector General, or the Government Accountability Office); or
- any other criteria later identified, as deemed necessary and proper to uphold the integrity of our acquisition-related business processes and ensure the success of HHS’ mission objectives.
On average, the Department’s goal is to complete each of its reviews within five business days. However, the form, timing, extent and duration of ASFR/OGAPA’s participation in prospective FY 2011 reviews will be arranged individually with each OPDIV to integrate or harmonize the prospective review process as much as possible with pre-existing OPDIV acquisition review procedures. For example, our reviews may be completed concurrently with OPDIV reviews, or jointly as a participating member of an OPDIV review.
HCAs and ASFR/OGAPA should request reviews by Office of General Counsel (OGC) when potential legal issues arise, or for high dollar value/high risk acquisitions. To expedite any legal reviews, HCAs and ASFR/OGAPA should forward the results of their review findings and recommendations to OGC, along with all necessary pre-award documentation.
When applying dollar thresholds for prospective FY 2011 review purposes, OPDIVs shall use the total estimated price/cost of the award, including options. Following completion of the FY 2010 service contract inventory analysis, or as otherwise needed, OGAPA may add or refine review requirements.
For FY 2011, the HCA (or designee) should review: the draft Acquisition Plan (AP) (if it is required under HHSAR subpart 307.71); the draft solicitation; and the proposed contract. If a solicitation has already been issued for an award to be made in FY 2011, the required review must occur prior to award. FY 2011 OGAPA reviews should be performed prior to issuance of solicitations and, if requested by OGAPA, before award.
For FY 2012 planning purposes, unless different direction is provided in an updated APM, required OPDIV reviews should be undertaken as part of the process leading to development of an OPDIV’s Annual Acquisition Plan (see HHSAR 307.104) and at each subsequent major milestone for a particular acquisition, i.e., prior to completion of the AP (if applicable), prior to issuance of the solicitation, and before award. FY 2012 OGAPA reviews should be performed prior to issuance of solicitations and, if requested by OGAPA, before award.
The results of these reviews may require the cancellation or delay of a planned FY 2011/2012 acquisition, or a shorter period of performance. In all cases, review results shall be used to help plan future requirements.
Table 1: Product and Service Codes for Prospective Review
|Product & Service Code||Description|
|B505||Cost benefit analysis|
|B506||Data analysis (other than scientific)|
|B513||Feasibility studies (non-construction)|
|B547||Accounting/financial management studies|
|B554||Acquisition policy/procedures Studies|
|B599||Other special studies and analyses|
|R406||Policy review/development services|
|R407||Program evaluation services|
|R408||Program management/support services|
|R409||Program review/ development services|
|R413||Specifications development services|
|R414||Systems engineering services|
|R425||Engineering and technical services|
|R497||Personal service contracts|
|R702||Data collection services|
|R707||Management services/contract & procurement support|
|R708||Public relations services, including event planning and management, media relations, and radio and television analysis|
|D302||ADP systems development services|
|D307||Automated information systems services|
|D314||ADP system acquisition support services|
|D310||ADP Backup and Security Services|
4. HCA Responsibilities:
In furtherance of the Department’s service acquisition review effort, HCAs are immediately required to issue guidance to their requiring activities to inform them of prospective review requirements -- specifying the types of acquisition planning or other documentation needed to perform prospective reviews.
HCAs shall also develop procedures to implement the prospective review process, consistent with the requirements of this (or a later version of this) APM. For example, such procedures should go beyond considerations normally applied to pre-solicitation and pre-award reviews and, at a minimum, address: availability of funds; severability of services; contract type; extent of competition; planned means of contract administration; and whether the planned acquisition: (a) is of a type that could be performed by federal personnel, (b) involves inherently governmental or closely related functions, (c) may involve personal services, and (d) may be a candidate for strategic sourcing. If there is a need to deviate from any HCA or OGAPA review requirements regarding thresholds, documents to be reviewed, or timing of reviews, HCAs must include a compelling, risk-based justification in their prospective review guidance/procedures. OGAPA will review such guidance/procedures to ensure the primary SAI objectives are met.
In addition, HCAs must take each of the following steps by their respective due dates:
- Prepare guidance/procedures to implement prospective review requirements -- submit to Terry.Frederick@hhs.gov by the 15th business day after issuance of this APM.
- Using the attached SAI Prospective Review Summary or equivalent MS Excel-compatible document, identify your plans for: (1) new FY 2011 and FY 2012 awards that will exceed $5 million; and (2) new FY 2011 and FY 2012 awards up to and including $5 million considered politically sensitive or important by management -- submit to Terry.Frederick@hhs.gov by the 30th calendar day after issuance of this APM.
[Please include accurate P&S code designations, as well as clear and concise service requirement descriptions -- to facilitate service acquisition planning, tracking, and reporting.]
- Update plans for new FY 2011 and FY 2012 awards monthly -- submit to Terry.Frederick@hhs.gov by the sixth business day of the following month.
5. Next Steps:
As this initiative evolves, OGAPA will refine this APM as needed, to address:
- Lessons learned in implementing this APM, including OPDIV feedback;
- Knowledge gained from our cross-functional, FY 2010 retrospective reviews;
- Relevant enhancements to HHS’ critical non-service acquisition portfolio;
- Successful business practices from other Federal agencies; and
- Any further guidance from OFPP.
2 FAR 2.101 defines A&AS, in part, as those services provided under contract by nongovernmental sources to support or improve: organizational policy development; decision-making; management and administration; program and/or project management and administration; or R&D activities. It can also mean the furnishing of professional advice or assistance rendered to improve the effectiveness of Federal management processes or procedures (including those of an engineering and technical nature). In rendering the foregoing services, outputs may take the form of information, advice, opinions, alternatives, analyses, evaluations, recommendations, training and the day-to-day aid of support personnel needed for the successful performance of ongoing Federal operations. All advisory and assistance services are classified in one of the following definitional subdivisions:
(1) Management and professional support services, i.e., contractual services that provide assistance, advice or training for the efficient and effective management and operation of organizations, activities (including management and support services for R&D activities), or systems. These services are normally closely related to the basic responsibilities and mission of the agency originating the requirement for the acquisition of services by contract. Included are efforts that support or contribute to improved organization of program management, logistics management, project monitoring and reporting, data collection, budgeting, accounting, performance auditing, and administrative technical support for conferences and training programs.
(2) Studies, analyses and evaluations, i.e., contracted services that provide organized, analytical assessments/evaluations in support of policy development, decision-making, management, or administration. Included are studies in support of R&D activities.
(3) Engineering and technical services, i.e., contractual services used to support the program office during the acquisition cycle by providing such services as systems engineering and technical direction (see 9.505-1(b)) to ensure the effective operation and maintenance of a weapon system or major system as defined in OMB Circular No. A-109.