![](media/image1.wmf){width="0.8243055555555555in"
height="0.6888888888888889in"} **Procurement Information**

National Aeronautics and **Circular**

Space Administration

Washington, DC 20546

**PIC 04-13**

##  September 2, 2004

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## SOURCE SELECTION FLEXIBILITIES FOR NEGOTIATED ACQUISITIONS LESS THAN \$50M

***PURPOSE:*** To provide guidance on the use of alternative source
selection approaches and rating methods currently available within the
flexibilities of the FAR for negotiated acquisitions less than \$50M.

***BACKGROUND:*** The Office of Federal Procurement Policy (OFPP)
approved a test of NASA\'s MidRange Procurement Procedures in 1993. The
objective of the test was to reduce the leadtime and effort associated
with the conduct of acquisitions between \$25,000 (the small purchase
threshold at that time) and \$500,000. OFPP test approval was needed to
utilize electronic commerce to publicize and post solicitations along
with a waiver to the publicizing/response times required by the FAR.
Subsequent changes to the test program increased the threshold to
\$10,000,000 for non-commercial items and \$25,000,000 for commercial
items. The test portion of MidRange procedures (waiver of
publicizing/response times) expired in 1997. The MidRange procedures are
no longer considered unique and all the source selection methodologies
under NFS 1871, MidRange Procurement Procedures, are directly traceable
to FAR Parts 12, 14, and 15. Therefore, treating MidRange acquisitions
as a separate category of acquisitions is no longer necessary.

Procurement Notice (PN) 97-103 removed Part 1871, MidRange Procurement
Procedures, from the NASA FAR Supplement. PN 97-103 also made the
following changes:

\(a\) Increased the threshold for written acquisition plans from \$5M to
\$10M consistent with the exemption for Mid Range acquisitions.

\(b\) Increased the threshold for issuance of draft RFPs from \$1M to
\$10M consistent with the existing exemption for MidRange acquisitions.

\(c\) Retained the Source Evaluation Board (SEB) threshold of \$50M as
the common threshold for the mandatory use of a Mission Suitability
Factor with numerical weighting and scoring of subfactors for negotiated
acquisitions.

\(d\) Provided that for negotiated acquisitions less than \$50M, the
contracting officer can use any source selection approach and rating
method (including weighting and scoring of subfactors) that will result
in the selection of the offer providing the best value to the Government
consistent with the source selection requirements of FAR Subpart 15.3.

\(e\) Required contracting officers to document as part of the planning
process the source selection approach and the rating method to be used,
how it will be used, and how these will result in the selection of the
offer representing the best value to NASA.

The following guidance is being provided in concert with the removal of
MidRange Procurement Procedures from the NFS.

***GUIDANCE:*** The FAR provides contracting officers with broad
discretion and flexibility in the source selection process in order to
achieve a best value outcome.

**FAR Flexibility in the Source Selection Process:**

The objective of every source selection is to select the proposal which
represents the best value. FAR Part 2 defines "Best value" as "the
expected outcome of an acquisition that in the Government's estimation,
provides the greatest overall benefit in response to the requirement."

The FAR indicates that best value in negotiated acquisitions can be
achieved through a variety of source selection approaches or a
combination of approaches such as lowest priced technical acceptable and
trade-off between cost or price and non-cost related factors. Trade-offs
are used when it is in the Government's best interest to consider award
to other than the lowest priced offeror or other than the highest
technically ranked offeror.

**Determining the Source Selection Approach:**

The source selection process considers cost or price, technical
acceptability (quality), and past performance (unless waived). One of
the first steps in designing an acquisition strategy is to determine the
source selection approach or combination of approaches that will be used
to obtain the best value. For negotiated acquisitions, at either end of
the best value source selection continuum, are the tradeoff process and
the lowest price technically acceptable process. The approach for
evaluating the technical factor can range from as simple as meets or
fails to meet the technical requirement, to using the adjectival
ratings, definitions, and percentile ranges prescribed in NFS 1815.305.

The source selection processes must be designed to fit the particular
acquisition. The process can be tailored to combine elements of the two
extreme approaches. (See Enclosure.)

  -----------------------------------------------------------------------
  BEST VALUE SOURCE SELECTION CONTINUM

  Lowest Priced Technically Acceptable

  Lowest Priced Technically Acceptable with Past Performance Considered

  Combination of Lowest Priced Technically Acceptable and Trade-Off of
  Other Non-Cost Related Factor(s) and Cost or Price

  Trade-Off between Non-Cost Related Factors and Cost or Price
  -----------------------------------------------------------------------

*Lowest Price Technically Acceptable Process:*

In some situations, simply comparing the cost or price of proposals
meeting or exceeding the solicitation's requirements for acceptability
can be expected to result in the best value. In such cases, cost/price
is the overriding consideration. While there may be a need for
discussions there is no need to make tradeoffs.

The lowest price technically acceptable process is similar to a sealed
bid approach in that award is made to the acceptable offeror with the
lowest evaluated cost or price. The major difference is that discussions
can be held with offerors prior to source selection to ensure offerors
understand the requirements and to determine acceptability. Tradeoffs
are not permitted and no additional credit is given for exceeding
acceptability. However, proposals are evaluated to determine whether
they meet the acceptability levels established in the solicitation for
each non-cost evaluation factor and subfactor when used. The lowest
price technically acceptable approach may be appropriate where the
requirement is well defined and technical and performance risks are
minimal.

Generally, past performance is considered in all source selections
unless waived in accordance with FAR 15.304(c)(3)(iv). In its simplest
form, lowest price technically acceptable might not include past
performance as an evaluation factor and only technical acceptability and
price or cost are considered.

*Lowest Price Technically Acceptable with Past Performance Considered:*

If past performance may be a discriminator under a lowest price
technically acceptable approach, then the solicitation must advise
offerors that past performance will be evaluated on an
acceptable/unacceptable basis and must state the criteria that will be
used.

*Combination of Source Selection Strategies:*

Strategies that combine the lowest price technically acceptable and a
tradeoff process(es) can be used. For example, technical proposals could
be evaluated on a pass/fail basis while the final selection decision is
based on a tradeoff between past performance and cost/price.

Another mixed approach could be to state NASA's requirement in terms of
a baseline requirement and have predefined objective performance
requirements or characteristics beyond the baseline that have value to
NASA, such as, improved reliability, higher speeds, enhanced
capabilities, etc. The solicitation must advise offerors of how the
value analysis will be performed, comparing the benefit to NASA against
associated cost or price. This approach may not be suitable for cost
reimbursement service contracts, since objective performance
requirements beyond the baseline may be difficult to define and
evaluate. This approach is similar to MidRange's Best Value Selection
(BVS) using qualitative criteria. In this approach, predefined objective
performance requirements above the baseline must not have the effect of
specifying the product of a single contractor. Additionally, these
predefined objective performance measures shall not merely be a
re-characterization of areas that have traditionally been considered
subfactors under Mission Suitability, e.g., management plan, key
personnel, etc.

*Trade-Off Process:*

If simply comparing the cost or price of proposals meeting or exceeding
the solicitation's requirements for acceptability will not result in the
best value to NASA, then a trade-off process should be used. The
trade-off process provides the source selection authority (SSA) the
flexibility to select the offer providing the best value that may not be
the lowest price or the highest technically rated offeror.

While cost or price is always an evaluation factor in any source
selection, many times other factors such as technical and management
capabilities, qualifications, or experience that a low cost/price
offeror may not possess should be considered. Although these factors may
or may not be more important than cost/price, they do have a strong
bearing on the source selection decision. The source selection decision
will involve a comparison of the combination of non-cost strengths,
weaknesses, risks, cost/price offered in each proposal, and judgment as
to which provides the best combination. The cost/technical tradeoff and
the source selection decision, which must be consistent with the
solicitation, require that the SSA exercise reasonable business judgment
in selecting the offeror for contract award.

It is essential to document cost/technical tradeoff judgments with
detailed narrative explaining the relevant facts and supporting
rationale. Mere statements of conclusion based on ratings or scores
alone are not acceptable. The cost/technical tradeoff documentation must
explicitly give the reason for a price premium regardless of the
superiority of the selected proposal's technical or non-cost rating.
This justification is required even when the solicitation indicates that
non-cost factors are more important than cost/price. The justification
must clearly state what benefits or advantages the Government is getting
for the added cost/price and why it is in the Government's interest to
spend the additional funds. Similarly, where it is determined that the
non-cost benefits offered by the higher priced, technically superior
offeror are not worth the price premium, an explicit justification is
also necessary. In this case, the documentation must clearly show why it
is reasonable in light of the significance of the differences to pay
less money for a proposal of lesser technical merit.

Use the tradeoff process when it is essential to evaluate and compare
factors in addition to cost or price in order to select the most
advantageous proposal and obtain the best value. The tradeoff process is
appropriate where the Government's requirements are difficult to define
or complex; measurable differences in the design, performance, quality,
or reliability are expected; services are not clearly defined or highly
skilled personnel are required; and you are willing to pay extra for
capability, skills, reduced risk, or other non-cost factors, if the
added benefits are worth the premium.

## *Establishing a Rating Method:*

Any trade-off process requires evaluating and rating in some manner the
non-cost related factors. Evaluations may be conducted using any rating
method or combination of methods, including adjectival ratings,
numerical weights, and ordinal rankings. The rating method used is a
scale of indicators to denote the degree to which proposals meet the
standards for the noncost evaluation factors. Thus, a rating system
helps evaluators assess a proposal's merit with respect to the
evaluation factors and significant subfactors if used in the
solicitation. Each rating must have a definition so that evaluators have
a common understanding of how to apply the rating. The key in using any
rating system, is not the method or combination of methods used, but
rather the consistency with which the selected method is applied to all
competing proposals and the adequacy of the narrative used to support
the rating.

Adjectival: Adjectives (such as excellent, very good, good, fair, and
poor) are used to indicate the degree to which the offeror's proposal
has met the standard for each factor evaluated. Adjectival systems may
be employed independently or in connection with other rating systems.

Numerical: This system assigns point scores (such as 0-10 or 0-100) to
rate proposals. This rating system generally allows for more rating
levels and thus may appear to give more precise distinctions of merit.
Caution must be exercised when using a numerical rating system to ensure
that its apparent precision does not obscure the strengths, weaknesses,
and risks that support the numbers.

*Narrative*:

Narrative is used in conjunction with a rating system to indicate a
proposal's strengths, weaknesses, and risks. Adjectival and numerical
ratings must be supported with narrative statements. Narrative
statements can describe the proposals' relative strengths, weaknesses,
and risks to the SSA in a way that adjectives and numbers alone cannot.
A narrative is required when evaluation standards are being applied,
when a comparison of proposals is being made, and when a cost/technical
tradeoff is conducted. The narrative provides a reasonable and rational
basis for the selection decision.

The following is an example of ratings and descriptions that could be
used to evaluate the technical merit of each offeror's proposal. Use
only one method.

  ------------- -------------- ------------------------------------------
  NUMERICAL     ADJECTIVAL     DEFINITION

  91 -- 100     Excellent      A comprehensive and thorough proposal of
                               exceptional merit with one or more
                               significant strengths. No deficiency or
                               significant weakness exists.

  71 -- 90      Very Good      A proposal having no deficiency and which
                               demonstrates over-all competence. One or
                               more significant strengths have been
                               found, and strengths outbalance any
                               weaknesses that exist.

  51 -- 70      Good           A proposal having no deficiency and which
                               shows a reasonably sound response. There
                               may be strengths or weaknesses, or both.
                               As a whole, weaknesses not off-set by
                               strengths do not significantly detract
                               from the offeror's response.

  31 -- 50      Fair           A proposal having no deficiency and which
                               has one or more weaknesses. Weaknesses
                               outbalance any strengths

  0 -- 30       Poor           A proposal that has one or more
                               deficiencies or significant weaknesses
                               that demonstrate a lack of overall
                               competence or would require a major
                               proposal revision to correct.
  ------------- -------------- ------------------------------------------

**Use of Factors and Subfactors:**

The FAR states that the award decision is based on evaluation factors
and significant subfactors that are tailored to the acquisition. All
factors and significant subfactors that will affect award and their
relative importance must be stated in the solicitation. While the FAR
provides broad discretion in the factors and significant subfactors that
can be used, it does require that:

(a) Price or cost be evaluated in every source selection;

\(b\) The quality of the product or service (technical acceptability) be
addressed in every source selection through consideration of one or more
non-cost related evaluation factors;

\(c\) Past performance be evaluated for every source selection unless
the contracting officer documents why it is not appropriate to evaluate
past performance;

\(d\) The extent of small disadvantaged business participation in
certain NAICS Industry Subsectors (FAR Subpart 19.12) be evaluated in
unrestricted acquisitions above \$500K (\$1M for construction); and

\(e\) For bundled acquisitions, with significant subcontracting
opportunities, the extent of small business participation in the
subcontracting plan and past performance in attaining small business
subcontracting plan goals be evaluated.

NFS Part 1815 does not vary from the FAR guidance. NFS 1815.304-70(a)
states that "typically, NASA establishes three evaluation factors:
Mission Suitability, Cost/Price, and Past Performance." Use of the word
"typically" is important, since it does not make "mission suitability"
mandatory. There may be situations where it is sufficient for the
evaluation factors to be Technical Acceptability, Price, and Past
Performance. Mission suitability is a NASA term appropriate for
characterizing the myriad of quality related considerations for complex
acquisitions.

***EFFECTIVE DATE:*** This PIC is effective as dated, shall remain in
effect until cancelled or superseded.

***HEADQUARTERS CONTACT:*** Celeste M. Dalton, Code HK, (202) 358-1645,
Celeste.M.Dalton@nasa.gov.

James A. Balinskas

Director, Contract Management Division

Enclosure

**DISTRIBUTION:**

**PIC List**

+-------------+-------------+-------------------+---------------------+
| # SOURCE S  |             |                   |                     |
| ELECTION CO |             |                   |                     |
| NTINUUM - N |             |                   |                     |
| EGOTIATED P |             |                   |                     |
| ROCUREMENTS |             |                   |                     |
|             |             |                   |                     |
| **MOST      |             |                   |                     |
| OBJECTIVE** |             |                   |                     |
| MOST        |             |                   |                     |
| SUBJECTIVE  |             |                   |                     |
+-------------+-------------+-------------------+---------------------+
| **Lowest    | **Past      | **Combination of  | **Trade-Off Between |
| Priced      | Performance | the Two Ends of   | All Non-Cost        |
| Technically | and the     | the Negotiated    | Related Factors and |
| A           | Lowest      | Source Selection  | Cost or Price**     |
| cceptable** | Priced      | Continuum**       |                     |
|             | Technically |                   |                     |
|             | A           |                   |                     |
|             | cceptable** |                   |                     |
+-------------+-------------+-------------------+---------------------+
| No          | No          | Combination of    | The source          |
| trade-off   | trade-off   | technically       | selection decision  |
|             |             | acceptable and    | will involve a      |
| No          | No          | trade-off of      | comparison of the   |
| additional  | additional  | other non-cost    | combination of      |
| credit for  | credit for  | related factor(s) | non-cost strengths, |
| exceeding   | exceeding   | and/or predefined | weaknesses, and     |
| ac          | ac          | qualitative       | risks and           |
| ceptability | ceptability | characteristics   | cost/price offered  |
|             |             | or features which | in each proposal    |
|             |             | exceed a stated   | and judgment as to  |
|             |             | threshold and     | which provides the  |
|             |             | cost or price     | best combination.   |
+-------------+-------------+-------------------+---------------------+
| Past        | Past        | Past Performance  | Past Performance    |
| Performance | Performance | Evaluated and     | Evaluated and Rated |
| Not         | Evaluated   | Rated             |                     |
| Evaluated   | on          |                   |                     |
| (Requires   | Acceptable  |                   |                     |
| Waiver --   | or          |                   |                     |
| see FAR     | U           |                   |                     |
| 15.30       | nacceptable |                   |                     |
| 4(c)(3)(iv) | Basis       |                   |                     |
| )           |             |                   |                     |
+-------------+-------------+-------------------+---------------------+
| Proposal    | Proposal    | Proposal          | The tradeoff        |
| evaluated   | evaluated   | evaluated to      | process is          |
| to          | to          | determine whether | appropriate for use |
| determine   | determine   | it meets the      | when it is          |
| whether it  | whether it  | acceptability     | essential to        |
| meets the   | meets the   | levels stated in  | evaluate and        |
| ac          | ac          | solicitation for  | compare factors in  |
| ceptability | ceptability | the technical     | addition to cost or |
| levels      | levels      | factor and final  | price in order to   |
| stated in   | stated in   | selection is made | select the most     |
| s           | s           | based on a        | advantageous        |
| olicitation | olicitation | trade-off between | proposal and obtain |
| for each    | for each    | cost or price and | the best value.     |
| non-cost    | non-cost    | one or more rated |                     |
| evaluation  | evaluation  | non-cost related  |                     |
| factor or   | factor or   | evaluation        |                     |
| subfactor   | subfactor   | factor(s) (e.g.   |                     |
|             |             | past performance, |                     |
|             |             | safety and        |                     |
|             |             | health) or        |                     |
|             |             | predefined        |                     |
|             |             | qualitative       |                     |
|             |             | criteria (desired |                     |
|             |             | feature \-- e.g., |                     |
|             |             | optical           |                     |
|             |             | resolution)       |                     |
+-------------+-------------+-------------------+---------------------+
| Appropriate | Appropriate | Appropriate for   | Appropriate if the  |
| for use     | for use     | use when the      | requirement is      |
| when        | under the   | requirement is    | difficult to        |
| requirement | same        | not complex,      | define, complex, or |
| is not      | conditions  | technical risks   | historically        |
| complex and | as lowest   | are minimal, and  | troublesome;        |
| technical   | priced      | performance under | measurable          |
| and         | technically | another non-cost  | differences in the  |
| performance | acceptable  | related factor or | design,             |
| risks are   | and past    | qualitative       | performance,        |
| minimal,    | performance | characteristics   | quality, or         |
| such as     | is          | or features is    | reliability are     |
| a           | considered  | important enough  | expected; services  |
| cquisitions | a           | to do a trade-off | are not clearly     |
| where       | dis         | between this      | defined or highly   |
| service or  | criminator; | other factor or   | skilled personnel   |
| supply      | and having  | characteristic    | are required; you   |
| r           | an          | and the           | are willing to pay  |
| equirements | acceptable  | cost/price        | extra for           |
| are well    | performance | factor.           | capability, skills, |
| defined but | record is   |                   | reduced risk, or    |
| where       | sufficient. |                   | other non-cost      |
| discussions |             |                   | factors, if the     |
| may be      |             |                   | added benefits are  |
| needed.     |             |                   | worth the premium.  |
+-------------+-------------+-------------------+---------------------+