2

Planning and Preparation

It is essential to plan and prepare the description of the requirements carefully if they are to be translated successfully into an effective statement of work (SOW). Writing an SOW is not simply a matter of drafting a memo saying “I want what I want when I want it.” The government’s needs must be analyzed, the work requirements identified, the marketplace researched, and the requirements described in contractual language.

Today’s marketplace is dominated by technological advances and innovations that make planning and preparation more important than ever to ensure that government acquisitions take full advantage of what the marketplace has to offer. Two key elements of planning and preparation are acquisition planning and market research. Acquisition planning identifies the agency requirement and its initial description and is accomplished before the statement of work or performance work statement is developed. Market research develops information about marketplace capabilities and processes and refines the description of the requirement by correlating the government need with what industry can provide. Market research takes place both before and during the preparation of the statement of work or performance work statement.

ACQUISITION PLANNING

“Acquisition planning should begin as soon as the agency need is identified, preferably well in advance of the fiscal year in which contract award or order placement is necessary.”¹ To accomplish this goal, a planner is needed. The FAR defines a planner as “the designated person or office responsible for developing and maintaining a written plan, or for the planning function in those acquisitions not requiring a written plan.”² Depending on the size or importance of a pending acquisition, an individual may be specifically appointed as the planner, or the function may be assumed to be part of a person’s job description.

Generally, the planner is a technical person in the office or program generating the requirement. There are, however, a number of other persons whose expertise will be required during the course of the acquisition, such as contracting, fiscal, and legal personnel. Consideration should also be given to consulting users (personnel who will be using the product or receiving the services resulting from the acquisition) as well as other technical personnel, from within the agency or from other agencies with similar requirements, who can provide necessary expertise.

Acquisition planning is best accomplished using a team approach, either formally or informally. Major acquisitions are planned using a formal approach with appointed members and a structured approach. Less-than-major acquisitions are generally planned informally using an ad hoc approach. While the term “team approach” brings to mind an image of endless meetings, this need not be the case. The planner should be the coordinator and information gatherer, interfacing with the other personnel as needed to gather the information necessary to put together an initial picture of the pending acquisition. Generally meetings are needed only when decisions must be made.

To plan an acquisition, certain questions must be addressed initially:

• What is the real requirement, and when is it needed?

• What results are required, and how will success be measured or determined?

• What is it likely to cost, and what funds are available?

What Is the Real Requirement, and When Is It Needed?

Generally, when acquiring equipment, supplies, or other hardware items, the requirement is readily apparent, but this is not always the case. When what you want is what you bought before, the requirement is easily defined, but consideration should always be given to whether you really need something better, different, or more refined. Consider the effect of technology changes since the previous procurement as well as the possibility that the utilization of the product has changed. User input can be important to the determination of the real requirement.

When acquiring services, the need to carefully consider the real requirement is even greater, because how the requirement is stated can affect how offerors respond. For example, stating a services requirement as a requirement for information technology (IT) resources instead of describing the requirement in terms of what those resources are expected to do can limit offerors to responding in terms of bodies rather than technology.

Do not automatically use the same description of the requirement that was used on a previous acquisition. Even if it appears that the agency’s requirement has not changed, technological advances or innovations may have changed how that requirement can be met. Using the previous description of the requirement may inhibit offerors from proposing the latest advances. Proper planning and preparation will ensure that the description of the requirement is flexible enough to take advantage of what the marketplace has to offer.

To obtain the best results from a “team” approach, the planner should query those who would be involved in both the procurement and the resulting contract to get their concept of what the requirement is and the results intended. These varying concepts can then be brought to the table for a common resolution.

Initially, acquisition planners must ensure that they have accurately identified both the need to be satisfied by the acquisition and what must be acquired to meet that need. Except when necessary for program purposes, planners should identify the requirement in terms of the required results rather than how the work is to be accomplished.

The planners must also determine when the users need the requirement and the projected term of the contract. This is necessary for developing a timeline for accomplishing the various tasks necessary to complete the acquisition, such as conducting market research, developing a description of the requirement (e.g., a statement of work, performance work statement), conducting the competition, source selection, and contract award.

How Will Success Be Measured or Determined?

Acquisition planning must include a determination of how contract success will be measured. Specifics are not necessary in the initial acquisition planning, but the required capabilities or performance characteristics of equipment or supplies should be determined. When acquiring services, advance planning should identify the broad performance standards of the services being acquired and whether or not performance-based contracting methods will be used. The initial determinations will be enhanced by the results of market research before development of the SOW or performance work statement (PWS).

What Is It Likely to Cost, and What Funds Are Available?

Once the requirement is identified, the planners must develop an estimate of what it might cost. This cost estimate must then be reconciled with the agency’s projected budget to determine what funds are likely to be available when the requirement enters the procurement process. During the planning process, cost estimates are adjusted frequently to reflect budget fluctuations and refined as the requirement itself is more clearly defined. The availability of funds may require an adjustment to the requirement, but it is better to make such adjustments after the requirement is fully defined rather than try to build a requirement to a projected budget figure.

The answers to these questions will form a basis for the acquisition planning. Acquisition planning is not done overnight. It is a step-by-step process that takes time to accomplish. FAR Part 7 provides guidance on what areas should be considered and what should be in a written acquisition plan. Most agencies have adopted local procedures to implement FAR Part 7; however, FAR Part 7 is only part of the picture. FAR 7.102 states that agencies shall perform acquisition planning and conduct market research for all acquisitions. Market research is addressed in FAR Part 10, but it is an integral part of the acquisition planning process.

MARKET RESEARCH

Market research is the process of collecting and analyzing information about commercial capabilities and practices to determine the capability of the marketplace to satisfy agency needs. Generally, market research is conducted before developing new requirements documents and soliciting offers for acquisitions in excess of the simplified acquisition threshold of $150,000, and for acquisitions of less than $150,000 when adequate information is not available and the circumstances justify the cost.³ Market research may also be conducted on an ongoing basis within a segment of industry. This is done to keep up with changes in the marketplace that might affect future agency requirements and not as part of a specific acquisition plan.

It is important that all market research activity be documented and maintained in the acquisition file. Agencies should document the results of market research in a manner that is appropriate to the size and complexity of the acquisition being performed.⁴ This will permit easy access when planning future acquisitions and by other agency personnel with similar acquisition requirements.

Market research is most effective when conducted after the agency has made an initial determination of what it needs, when it needs it, how the agency will define contract success, and roughly how much it might cost. This information provides direction to the researchers regarding what to look for in the marketplace. Generally, market research is done during the initial stages of acquisition planning or, if this is not possible, at least before a final statement of work or performance work statement is developed.

Market research is conducted to obtain information about what the marketplace has to offer—its capabilities, practices, and pricing policies. The results of market research are used to enhance the final description of the agency requirement.

When acquiring equipment or supplies, market research information includes who manufactures or can otherwise provide the required items, if there have been technological or other changes in how the items are manufactured or utilized, and if such changes would affect how the current requirements are described. It may also indicate that the current items are obsolete and that something new or different would better serve to meet current requirements.

When acquiring services, the key concerns are how the same or similar commercial services are organized and staffed, the work outputs or products, performance indicators, performance standards, acceptable quality levels, and if technological advances and other innovations have changed how the services are performed.

The first step, however, is to conduct a desk audit, which is essentially a review of the information available in-house, and a literature search of appropriate trade publications and contractor marketing literature. A request for information (RFI) or a sources-sought synopsis may also be used in conjunction with the initial market research.

It is not unusual for an agency to revise its initial description of the requirement as a result of market research. Effective use of market research will allow the planners to meld agency requirements with industry capabilities and practices to produce a statement of work or performance work statement that permits industry the greatest flexibility to provide innovative solutions to meet the agency’s requirements.

The FAR does not address who should conduct market research. While technical and program personnel continually do informal market research through their professional reading and contacts with their industry counterparts, this information is rarely recorded and much of its value as market research is typically lost. Successful market research requires that the information be recorded and made available to others. This is why market research should be conducted as part of acquisition planning and based on the contributions and participation of the pertinent planning team members.

For example, the technical or program personnel need to know about the technical aspects of how industry goes about providing the goods or services in question, such as technological advances, innovative processes or practices, and performance metrics and measurements. Contracting personnel need to know about pricing, warranties, and other commercial terms and conditions that might affect how the goods or services are to be procured. Users will have their own set of concerns related to the practical use of the goods or services. These varying concerns must be coordinated as part of the planning process before actually conducting the market research so that all members of the acquisition planning team understand what the market research is to accomplish.

FAR 10.002(b)(2) suggests how market research might be conducted, identifying the following techniques:

• Contacting knowledgeable individuals in government and industry regarding market capabilities to meet requirements

• Reviewing the results of recent market research undertaken to meet similar or identical requirements

• Publishing formal requests for information in appropriate technical or scientific journals or business publications

• Querying government databases that provide information relevant to agency acquisition

• Participating in interactive, online communications among industry, acquisition personnel, and customers

• Obtaining source lists of similar items from other contracting activities or agencies, trade associations, or other sources

• Reviewing catalogs and other generally available product literature published by manufacturers, distributors, and dealers or available online

• Conducting interchange meetings or holding presolicitation conferences to involve potential offerors early in the acquisition process.

FAR Part 10 is not the only reference to market research techniques. FAR 5.205(a) addresses the use of R&D advance notices (“Research and Development Sources Sought”) to obtain information about the capabilities of R&D firms, and FAR 5.205(c) states that contracting officers may transmit to the government-wide point of entry (GPE) special notices of procurement matters such as business fairs, long-range procurement estimates, pre-bid or pre-proposal conferences, meetings, and the availability of draft solicitations or draft specifications for review.

In addition, FAR 15.201(c) identifies the following techniques to promote early exchange of information:

• Industry or small business conferences

• Public hearings

• Market research, as described in Part 10

• One-on-one meetings with potential offerors

• Presolicitation notices

• Draft RFPs

• RFIs

• Presolicitation or preproposal conferences

• Site visits.

These techniques should all be considered, used as appropriate, and documented as market research. There is no single way to conduct market research. It is a continuing process, starting during acquisition planning and continuing until the solicitation is released.

After conducting a desk audit and literature search, the next step is to do basic research about the marketplace related to your requirement (e.g., who are the likely sources and what is known about their capabilities) using a combination of the techniques listed in FAR 10.002(b)(2). Then contact the likely sources to request information about their capabilities to meet your requirements.

Keep in mind that market research is a presolicitation activity. Your requirement is not yet defined sufficiently to begin the solicitation process. Market research can be conducted through telephone calls, letters, questionnaires, and personal contacts, as appropriate. Develop a list of questions to be asked before making any contacts and document the answers received.

When your likely sources are contacted, the requirement should be described in general terms, such as a need to improve the capabilities of a particular piece of equipment or services to accomplish certain types of tasks. The description should provide enough information for the sources to decide if they are interested in pursuing the matter. Your initial query (generally by letter) should ask for an expression of interest and identification of the respondent’s capabilities to meet the requirements. Depending on the responses, you may want to pursue more information using some of the techniques identified in FAR 15.201(c).

The most effective method to elicit information about a firm’s capabilities is through one-on-one meetings between the agency’s technical or program personnel and their counterparts in the firm (marketing or sales personnel not included). This can be done after an initial contact has established that the firm is interested and has the capabilities to meet the requirement. The primary purpose of these meetings is to discuss the firm’s capabilities to meet the requirements as outlined in the initial contact letter and to learn more about the firm’s procedures, processes, and policies.

Later, more definitive information can be obtained by using a draft SOW or RFP where the firm is asked to comment on the draft with the assurance that its comments will not be made available to other firms. These methods are effective because they ensure confidentiality; thus, the firm is free to talk about its technical and business practices without fear of compromising its market position. When using a draft SOW or RFP, ensure that respondents are told that the draft is subject to change and that comments on different or innovative approaches are encouraged.

Techniques such as presolicitation or preproposal conferences, or any other meeting where a number of firms will be attending, are less effective because participants will be reluctant to talk about their firm’s innovations or unique capabilities due to the presence of their competitors. Such meetings do, however, tend to reveal weaknesses in the agency’s description of its requirements because the participants are not reluctant to point out such problems (unless they plan to take advantage of the weaknesses if they receive the contract award).

Chapter 4 addresses market research as it relates to the use of a statement of objectives (SOO). That discussion also applies to all market research, particularly with respect to information exchanges with industry before the receipt of proposals.

THINKING THE PROJECT THROUGH

Before starting to write the SOW (or PWS), it is important to think through the entire project, from solicitation and contract award through contract performance, delivery, acceptance, and use. What is required to initiate and sustain the contract effort? What is going to happen once the contract product is delivered and accepted? What is the intended end use of your product? What should be put in the SOW to ensure that the product is usable? When acquiring IT systems or software, for example, consider system or software maintenance for at least the first year of operation.

Planning and preparation are possibly the most important steps in the SOW process. It is essential not to be rushed and to get experienced help when necessary.

One approach to this planning process is to review the requirement as though you were going to do the work in-house and had all the necessary resources. Identify the key activities or tasks, and any related subtasks, on the basis of how you would organize the effort. Then determine the essential requirements, such as quantity, quality, capability, and any other salient characteristics that must be in the finished product or completed service. You also need to determine what must be accomplished during contract performance to produce the required end product and identify problems that are likely to be encountered.

Consider what information you have and what you will need from the contractor to describe your requirement. Some of the needed information can be obtained from market research, RFIs, draft RFPs, or direct contact with potential contractors. In some instances, you may want to request specific information in the proposal preparation instructions. Finally, you should develop an outline of the technical requirements by task. This is the foundation for your SOW.

Scope the requirement to your actual needs, not to your anticipated budget. The scope should allow for sufficient effort to address all project issues. If it turns out that the requirement exceeds the budget, you have a sound basis for requesting additional funds or for revising your requirement to bring it in line with the budget. If you initially scope the project to the anticipated budget, budget shortfalls may preclude accomplishing all of your project goals.

It is essential to ensure that the effort can be performed as described. Do not ask a contractor to take on a requirement that will exceed its capabilities or capacity. Consider breaking large or complex requirements into smaller packages that can be performed in phases or awarded to multiple contractors. If it appears that significant subcontracting will be required, consider indicating which efforts must be performed by the contractor and which may be subcontracted.

USING A WORK BREAKDOWN STRUCTURE

If the work requirements are complex, you can use a work breakdown structure (WBS) to model the requirement. The WBS can be developed manually or by using commercially available planning software.

To develop a WBS, each of the key activities or tasks to be performed must first be identified. Next, the related subactivities or subtasks within each key activity that are necessary for successful completion should be identified. This breakdown helps ensure that all activities within the technical requirement have been identified and described in the SOW. In most cases, you will not need to structure your WBS beyond the third level to describe your requirement adequately. The WBS also serves as the basis for developing the independent government cost estimate.

Generally, the WBS serves only as an internal planning document. Do not use the WBS in your SOW or anywhere else in the solicitation. Dictating a WBS in the SOW inhibits a contractor’s flexibility in developing its proposal because the contractor will assume that its proposal must conform to your WBS. This may preclude a proposal that sets forth a better way to do the job.

CHOOSING THE CONTRACT TYPE

Before deciding on the type of SOW you will write (functional, performance, or design), you need to consider the type of contractual pricing arrangement to be used. You must have a general idea of the contract type before beginning to write your SOW so that its contents will support your preference. The contracting officer will make the final decision regarding contract type but will usually follow your preference, as long as it makes sense.

Choosing the most effective contract type involves considering how the contract type will affect the description of your requirement. For each contract type, your SOW must be definitive enough to achieve the intended result.

Fixed-Price Contracts

In a fixed-price contract, the contract price is fixed at the time of contract award. This price cannot be changed unless the scope of work is changed, and the contractor is entitled to payment only if the contract is completed successfully. The contractor makes its profit by completing the work at a cost less than the fixed price.

Fixed-price contracts are used only when the SOW is definitive enough for the contractor to price the cost of contract performance accurately and have a high degree of confidence that the work can be completed within that price. Fixed-price contracts are generally used for commercial or commercial-like equipment or services available in the open market.

In a fixed-price contract the contractor guarantees performance at the fixed or ceiling price. If the contractor cannot complete performance at this price, the contractor must complete the work at its own expense. This puts a significant burden on the author of the SOW to ensure that a fixed-price SOW is definitive enough for the contractor to estimate accurately the costs of performance. For example, the following was taken from a fixed-price solicitation for training services:

The SOW did not provide any further discussion of new course development. The RFP required a fixed price for each line item. How can a contractor put a fixed-price on such an ill-defined requirement? This is not the way to describe a requirement for a fixed-price contract. Needless to say, this solicitation and the resulting contract had a lot of problems.

When you have a requirement that involves performance uncertainties or risks, a fixed-price contract is usually inappropriate. Performance uncertainties are present when you are uncertain about the final outcome or your requirement cannot be defined except through contract performance, as in a research and development effort. Performance uncertainties are also found in requirements for studies and analytic effort when you are uncertain as to the extent of effort required. Requirements for creative effort, such as the development of computer software, training courses, manuals, or handbooks, also involve performance uncertainties because creative efforts often require flexibility in the extent of effort required.

Fixed-priced contracts are inappropriate for efforts of this nature because the fixed price limits the extent of the contractor’s efforts. If performance proves to be more difficult or extensive than anticipated, and the contractor’s costs are approaching the fixed price, the contractor’s options are limited. The contractor can continue to strive for a quality product, at its own expense, or the contractor can cut corners and do whatever is necessary to finish the contract within the fixed price.

The first option is not popular with contractors—a contractor cannot stay in business for long unless it makes a profit. The second option is not popular with the government—cutting corners and taking other actions designed to “finish the contract” usually have an adverse effect on the quality of the final product. Problems such as these can be avoided by carefully assessing the performance uncertainties of your project and using a fixed-price contract only when performance uncertainties are minimal.

Cost-Reimbursement Contracts

In a cost-reimbursement contract, the contractor is reimbursed for the costs it actually incurs. In addition, the contractor is usually paid a fee for contract performance. This fee may be fixed or variable. The maximum fee amount is fixed at the time of contract award and cannot be changed unless the scope of work is changed.

The contractor is required to expend its best efforts to complete the contract within the funds initially obligated. The contractor is not required—or expected—to complete the work at its own expense as in a fixed-price type contract. The contractor recovers its actual costs incurred regardless of contract performance. When it appears that the obligated funds are not sufficient to complete the contract effort, the contractor should notify the contracting officer and provide an estimate to complete the effort, indicating if, and how much, additional funding will be required. The contracting officer may or may not add the required funds, as appropriate. When the funds are fully expended, the contractor should stop work. Any continued work is at the contractor’s own expense, unless the contracting officer adds funds before all the originally allotted funds are expended.

Cost-reimbursement contracts are designed for efforts that contain performance uncertainties. This type of contract accommodates those uncertainties by basing the price on estimated costs (plus the fixed or variable fee) and permitting additional costs (but not fee) to be funded without the need for a corresponding change in the scope of work. Cost-reimbursement contracts are used when the work cannot be fully defined, the nature of the work is uncertain, or creative effort is required. Cost-reimbursement contracts are typically used in R&D, studies, analytic effort, and software development.

The funding flexibility in cost-reimbursement contracts, however, does not lessen the SOW requirements. An SOW for cost-reimbursement work must be as definitive as possible so that the contractor’s cost estimate is as accurate as possible. Otherwise, you will be creating a cost-overrun situation in your initial SOW. The SOW must be written to minimize overruns, not create them.

Time-and-Materials and Labor-Hour Contracts

In a time-and-materials (T&M) contract, the contractor is paid a fixed hourly rate for each labor category set forth in the contract. The fixed rate includes direct labor, overhead, general and administrative expenses, and profit. Materials used in contract performance are reimbursed at cost. The T&M contract has some characteristics similar to both cost-reimbursement and fixed-price contracts.

The T&M contract is worked on a best-efforts basis like the cost-reimbursement contract, but this is its only resemblance to a cost-reimbursement contract. The T&M contract has a price ceiling, but this is its only resemblance to a fixed-price contract. Payment is for the hours worked, not for the delivery of a specific product. The T&M contract is a fixed-rate contract, and the total amount paid depends on the number of hours worked plus material at cost. The labor-hour contract is exactly the same as a T&M contract, except that no materials are involved.

T&M contracts are used when it is not possible to estimate the extent or duration of the work or to anticipate the total costs, and the use of a cost-reimbursement contract is not feasible. T&M contracts are used for repair, maintenance, or emergency services requirements, or for service contracts with small businesses or individuals who lack an accounting systems sophisticated enough to use a cost-reimbursement contract.

The SOW for a T&M contract must be as definitive as possible. The overall effort is restricted by the ceiling price, which is usually the sum of the total estimated hours at the fixed rates plus materials at cost. The work requirements must be described in sufficient detail for the contractor to estimate accurately the extent of effort and the amount of materials required.

Indefinite-Delivery Contracts

Indefinite-delivery contracts are used when the exact time of delivery or the quantities of supplies or services to be delivered are not known at the time of award. In effect, the government uses the contractor as a warehouse, drawing the necessary supplies or services as the specific requirements develop. There are three types of indefinite-delivery contracts: definite-quantity, requirements, and indefinite-quantity contracts. Requirements contracts and indefinite-quantity contracts are also known as delivery-order contracts (for supplies) and task-order contracts (for services).

• Definite-quantity contracts. This arrangement provides for the delivery of a definite quantity of specific supplies or services for a fixed period, with deliveries or performance to be scheduled at designated locations upon order. Definite-quantity contracts are used when a definitive quantity of the supplies or services will be required during the contract period and are regularly available or will be available after a short lead time. Orders are placed for delivery or performance at the designated locations as the requirements develop during the contract term.

• Requirements contracts. This arrangement provides for the delivery of all actual requirements of specific supplies or services by designated government activities during a fixed period. Generally, the contract will state the maximum amount the contractor is required to deliver and, within that amount, that the government is required to purchase all of its actual requirements for the specified supplies or services from the contractor. Deliveries are ordered by issuing delivery or task orders when the supplies or services are needed. Under a requirements contract, the contractor is the sole source of supply during the term of the contract.

• Indefinite-quantity contracts. This arrangement provides for the delivery of an indefinite quantity, within stated limits, of supplies or services during a fixed period. Deliveries are ordered by issuing a delivery or task order when the supplies or services are needed. Under this arrangement, the government is required to order the minimum quantity stated in the contract, and the contractor is required to provide the maximum quantity stated in the contract, if ordered, at the stated price.

The basic difference between a requirements contract and an indefinite-quantity contract is that while the government must order all of its actual requirements from the contractor under a requirements contract, once the minimum quantity has been ordered under an indefinite-quantity contract, the government is not obligated to place further orders with the contractor and could, for example, place any further orders with another contractor offering lower prices. Once the maximum quantity has been ordered, the contractor may renegotiate the prices for any further orders.

The FAR⁵ states a preference for making multiple awards of indefinite-quantity contracts under a single solicitation for the same or similar supplies or services to two or more sources, but does permit single awards under certain circumstances. The decision whether or not to use multiple awards must be documented in the contract file. Generally, when multiple awards are made, the individual delivery or task orders must be competed among the awardees, but the FAR does allow orders to be placed on a sole-source basis under certain circumstances.

The FAR⁶ also states that performance-based work statements must be used to the maximum extent practicable when procuring services (see Chapter 3).

The primary characteristics of indefinite-delivery contracts are that government funds are obligated upon issuance of each delivery or task order rather than at contract award, and the government does not have to order the supplies or services until the actual requirement materializes.

While any appropriate cost or pricing arrangement under FAR Part 16 may be used for indefinite-delivery contracts,⁷ delivery-order contracts (for supplies) are usually priced on the basis of a fixed price per line item, and task-order contracts (for services) are usually priced on a cost-reimbursement or time-and-materials basis. However, commercially available services with established pricing may be priced on a fixed-price basis.

When using a delivery-order contract, the SOW for the basic contract describes the specific supplies required. The delivery orders simply cite the contract line item numbers and the nomenclature of the supply item. Another complete SOW is not required.

Under a task-order contract, multiple SOWs are usually required. An SOW is required for the basic contract, and another SOW is required for each task order issued. The contract SOW describes the general nature of each task but not the specific work requirements (which are not usually known at the time of contracting). The contract SOW describes the general nature of the tasks required, describes the required resources and facilities, and provides an estimate of the required level-of-effort for each general task. The contract SOW must describe the tasks sufficiently for the contractor to estimate the extent of effort required and provide an overall price estimate. The basic contract is negotiated and priced based on the contractor’s response to the contract SOW.

As each specific work requirement is known, a task-order SOW is required. Each task-order SOW must describe the specific work requirement in sufficient detail for the contractor to submit a priced proposal. This must be a complete SOW, as though it were the SOW for a contract. Keep in mind that the contract SOW is very general in nature. If you want to hold the contractor to your work requirements, the task-order SOW must adequately express these requirements.

Inadequate task-order SOWs are a common problem. Task-order SOWs are often written with the assumption that the basic contract SOW adequately covers the work. This is not the case. The basic contract SOW provides only a general description; it is the task-order SOW that provides the details. If the task-order SOW is not complete, it is likely that the work will also be incomplete or otherwise unsatisfactory. The contractor is required to submit a priced proposal in response to the task-order SOW. Once the price and technical details are negotiated, the task order is issued.

When writing an indefinite-quantity contract, you must explain how the delivery or task orders will be handled. The FAR clauses that are used are general in nature and must be supported by either language in the SOW or a locally developed clause that provides the specific details. Addressing these details in the SOW permits you to tailor the ordering procedures to your specific needs. Locally developed clauses tend to get out of date and are often too generalized for specific needs, so they must be examined in each instance and tailored as required.

CHOOSING THE SOW TYPE

There are a number of ways to write an SOW. You can write an SOW in terms of a functional description, a performance description, or a design description. You can write a stand-alone SOW or one that contemplates the incorporation of all or part of the contractor’s proposal into the final SOW. If you are using a cost-reimbursement contract, you can describe your requirement as a level-of-effort (LOE) or a completion effort. Regardless of the approach you choose, to ensure consistency in your writing techniques, you should make your choice before you start writing the SOW.

Functional Descriptions

The FAR⁸ states that requirements are to be expressed in terms of the functions to be performed, performance required, or essential physical characteristics. A functional description addresses what is to be done rather than how it is to be done. It specifies what the contractor is to accomplish, such as collecting data and performing an analysis, but does not get into the precise details of how to collect the data and perform the analysis.

Generally, a functional SOW describes the required effort in terms of what, when, where, how many, and how well the work must be performed, without describing exactly how to perform the work. A functional description can best be developed as an extension of the WBS. The WBS graphically displays the activities to be performed (the what), but to ensure an accurate work description, the functional description must describe each task and subtask in terms of the following:

• Work Input—Determine what activity triggers initiation of the work effort. This could be the submission of a request, the issuance of a task order, the occurrence of a particular event, or any other activity that authorizes the contractor to begin work. Also identify any physical items (government forms, documents, reports, etc.) used to signal the contractor’s authority to begin. These may be items provided by the government or a third party, or work products previously produced by the contractor.

• Work Effort—Determine the steps required to perform the work, such as what has to be done to process particular documents, analyze specific input, or otherwise perform each task. Keep in mind, however, that these steps are described in terms of what must be done rather than how the work is to be accomplished. The description of the work effort would include, as applicable, where and when the work is to be performed.

• Work Output—Determine what is to be produced or provided by each task or subtask. The description of the work output should also address “how much” or “how many” are required as well as the criteria for determining whether the requirements are met.

Each task and subtask description should indicate what initiates the work effort, what effort must be undertaken, and what must be produced or provided by the work effort. The development of this information is similar to the job analysis performed when developing a performance work statement (PWS) for a service contract under the performance-based service contracting (PBSC) concept (see Chapter 3).

A purely functional description is rarely appropriate; usually, certain constraints must be described to ensure that the contractor produces a useful end product. These constraints can be physical characteristics, such as size or weight, or can relate to how the contractor performs, such as restrictions on the use of specific techniques. Only those constraints necessary to ensure contractor understanding of the complete requirement should be described. The use of a functional description permits the contractor to use its own approach as long as it is within the constraints you have established.

A functional description encourages contractor creativity and the use of innovative techniques or methodologies, allowing your project to benefit from the latest developments in the state-of-the-art. A functional description is also appropriate when several ways are available to perform the requirement and you do not want to dictate the approach used.

When a functional SOW is used, the contractor must respond with a technical proposal that shows how the work will be performed. This enhances your ability to evaluate the contractors’ expertise and understanding of the requirement and to make an award based on the best technical and price combination. By proposing how the work will be done, the contractor assumes responsibility that the proposed effort will produce an acceptable result.

Performance Descriptions

The SOW for a performance description is referred to as a performance work statement (PWS) and is used in conjunction with performance-based service contracting (PBSC) because performance descriptions are usually more appropriate for service contracts than supply contracts.

A performance description is similar to a functional description in that it describes the requirements in terms of “what” is to be required rather than “how” the work is to be accomplished, the number of personnel to be assigned, or the number of hours to be provided. As with the functional description, the performance description also contains the necessary design constraints to ensure an acceptable end product. The performance description, however, provides much greater detail as to the expected performance outcomes and how they are measured. The differences between the functional and performance descriptions are summarized in the following paragraphs and addressed in greater detail in Chapter 3. Despite the differences, the general concepts regarding the format and contents of the PWS and the functional SOW are the same (see Chapter 5).

Differences between Functional and Performance Descriptions

The basic differences between functional and performance descriptions are in the level of specific detail provided. Functional descriptions are more generalized, and conformance to the requirements is usually measured by a subjective assessment of the contract monitors. Performance descriptions are more detailed and provide an objective means of measuring contract compliance. The specific differences are as follows:

• Statement of the required services in terms of output. Both the performance and the functional descriptions describe the requirements in terms of “what, when, where, how many, and how well” the work is to be performed rather than “how” the work is to be performed.

  The performance description, however, goes further and describes the work requirements, or outputs, in terms of specific performance indicators. The term “output” means an expression of the work requirements in terms of the results of the work (i.e., what the services are to produce or provide). Output is described in terms of objective, measurable performance indicators, such as rooms cleaned, equipment repaired, or requests processed.

  The functional description is less specific, usually describing the work in terms of what is to be accomplished or the functions or tasks to be performed, but not to the detail of specific, measurable performance indicators.

• Use of measurable performance standards for the required outputs. Both the performance descriptions and the functional descriptions must describe the criteria for determining whether the requirements are met. The performance description lays out such criteria in terms of performance standards. Performance standards are linked to the performance indicators and expressed in quantifiable terms, such as a rate of performance (e.g., x number per hour, x minutes per job), quantities, time, events, or any other terms that can be measured objectively.

  The functional description spells out the criteria for determining successful performance in terms of the characteristics or features of successful contract performance and indicates how they will be measured. While similar to the standards in the performance descriptions, these criteria are less specific, particularly in terms of how they will be measured.

• Use of acceptable quality levels (AQL) or allowable error rates. In addition to establishing measurable performance standards, a performance description must also establish an acceptable deviation from the standard (an AQL or allowable error rate) that will still result in an acceptable level of quality. It is not realistic to expect 100 percent compliance in all cases.

  A functional description rarely establishes an acceptable quality level except where it is necessary to set performance standards for certain tasks.

• Use of a quality assurance plan (QAP) and surveillance. In addition to the PWS, a performance description contains a QAP, which defines what the government will do to ensure that the contractor’s performance is in conformance with the established PWS standards. The QAP includes a surveillance schedule and must clearly state the methods of surveillance to be used. The QAP will be discussed in greater detail in Chapter 3.

  A functional description might address contract surveillance in the SOW, but not in the detail set forth in a QAP.

• Use of incentives. The PBSC concept encourages the use of incentives for all PBSC contracts (discussed in Chapter 3). Contracts using a functional SOW may, when appropriate, use incentives, such as cost-plus-award fee (CPAF) incentives in acquisitions of significant dollar value, but the use of incentives is not mandated.

Design Descriptions

A design description details exactly how the contractor must perform the work by providing precise details on materials, methods, processes, and procedures. In essence, all competing contractors are required to perform exactly the same effort. Deviations from the requirements of the design description are not normally permitted. Each contractor must provide a proposal demonstrating that it can do the work, with price being the primary consideration for award. Generally, a design description is appropriate only when the work must be performed in a particular manner.

When a design description is used, the government assumes responsibility that the work can be successfully performed as described. This is one of the primary differences between design descriptions and functional or performance descriptions. When functional or performance descriptions are used, the contractor assumes the responsibility that the work can be successfully performed as proposed. This is the reason that the use of design descriptions is not encouraged.

INCORPORATING A CONTRACTOR’S PROPOSAL BY REFERENCE

Some requirements are difficult to describe, for a variety of reasons. You may not know how to go about meeting the requirement because of its technical complexity (as in software development). You may not be sure that the requirement can be met (as in R&D) and part of the purpose of your requirement is to find out. A number of different ways to meet the requirement may be possible, and you are reluctant to predetermine the approach by writing the SOW around a particular method.

In such instances, the SOW should be treated as a two-part document. Use performance-based or functional terms to describe what the contract effort is to produce or accomplish in the initial SOW (in the RFP). At the same time, use the proposal preparation instructions to require offerors to explain how the work will be performed. The successful offeror’s proposal is then incorporated (in whole or in part) in the contract by reference and becomes part of the final, or contractual, SOW. This is done just prior to award by inserting a clause into the contract that identifies the successful offeror’s proposal and makes it a part of the contract.

You cannot, however, incorporate or otherwise use any portion of a proposal other than that of the successful offeror. You cannot use the “good” portions of an unsuccessful proposal to improve your SOW. To do so would invite protests from the unsuccessful offerors, and such protests are usually sustained.

Moreover, you cannot use this process to change your requirement. This process may be used only to incorporate those parts of a successful offeror’s proposal that amplify or provide greater detail on how your requirement will be met. A change in your requirement requires an amendment to your solicitation that is provided to all offerors in the competitive range.

Do not automatically incorporate the entire proposal by reference. Use only those parts pertinent to the performance of the work requirement as described in the SOW. The successful offeror’s proposal should be reviewed carefully and the offeror required to revise the wording as necessary to make it contractually acceptable. Agreement should be reached on the specific wording of those parts that are to be incorporated in your SOW before contract award. You do not want to incorporate loopholes or ambiguities into your SOW through the wording of the successful offeror’s proposal.

After contract award, those parts of the contractor’s proposal incorporated in the SOW become part of the government’s requirement. If a dispute arises over interpretation of the SOW, the government is responsible for any ambiguities or other problems. This responsibility cannot be avoided by using an “order of precedence” clause to resolve conflicts between the initial SOW and those parts incorporated by reference. The final SOW is totally the government’s responsibility.

You are not required to incorporate all or part of the successful offeror’s proposal in your SOW. This is a matter of choice. You should, however, make at least a tentative decision before writing your SOW. Your decision does not affect how the initial SOW is written, but it will affect how the proposal preparation instructions are written. If you are considering incorporating all or part of the successful offeror’s proposal in the SOW, ensure that the proposal preparation instructions require offerors to provide the necessary details.

The concept of incorporating all or part of a contractor’s proposal by reference is commonly used in sole-source procurements when you want the contractor to discuss certain aspects of the requirement to fill out the details of your SOW. It is also used in competitive procurement, but not as often, because of the danger of inadvertently incorporating something that changes a key aspect of your requirement. There is a performance-based concept, however, in which a statement of objectives (SOO) is used in the solicitation instead of an SOW. Each offeror, in effect, writes the contractual SOW in its proposal and the successful offeror’s proposal is then incorporated by reference into the contract (see Chapter 4).

DISTINGUISHING BETWEEN LEVEL-OF-EFFORT (LOE) AND COMPLETION SOWS

Cost-reimbursement contracts are appropriate when it is not possible for the contractor to estimate accurately the costs of contract performance. This can occur, for example, when the contract product is uncertain (R&D), the amount of effort required is uncertain (technical support services), or creative effort is required (software development, studies, analytic effort). The cost-plus-fixed-fee (CPFF) contract is the most commonly used cost-reimbursement type contract. CPFF contracts have two forms, LOE and completion.

When writing an SOW for a CPFF contract, you must ensure that the requirement is precisely defined as either an LOE or a completion effort. LOE and completion efforts have different funding requirements and use different clauses; moreover, LOE efforts involve personal versus nonpersonal services considerations. The contracting officer must be able to distinguish between the two forms to construct the contract properly.

Level-of-Effort SOWs

The LOE form calls for the contractor’s services (time and effort) to perform a task. The purpose of the contract is to obtain the contractor’s time and effort rather than a concrete end product. The SOW describes the requirement and obligates the contractor to devote a specific level-of-effort for a stated time period. It describes the categories of personnel required, their expertise, and the specific tasks to be accomplished. When the level-of-effort form is used, the contractor is reimbursed its incurred costs and paid a fixed fee if the performance is deemed satisfactory. The level-of-effort form is appropriate, for example, for maintenance of IT software and equipment and ongoing technical support that cannot be specifically defined at the time of contracting.

If the specific tasks to be performed cannot be adequately described initially, which is often the case when procuring technical support services, a task order contract may be used.

Completion SOWs

The completion form calls for the contractor to provide a concrete end product rather than a level-of-effort. The SOW describes the work by stating a definite goal or target and specifying a product that demonstrates successful performance. The SOW describes the requirement in terms of the production or development of a deliverable product—something that will be used, as delivered, to meet the requirement. The contractor is reimbursed its incurred costs and paid a fixed fee if it delivers an acceptable end product (e.g., a final report). Use of the completion form is preferred because it gives the government greater control over the contractor’s efforts than an LOE form does.

The completion form is appropriate for studies, analytic efforts, IT equipment, and the development of software in which a concrete end product can be defined.

Distinguishing between the LOE and Completion Forms

Unless the SOW is written carefully, it is often difficult to distinguish between an LOE and a completion effort. In both cases, there is work to be completed and often a reported result. The basic difference between these forms lies in the purpose of the contract. If the contract is to buy a contractor’s time and effort to perform a single or multiple tasks and the government’s need will be met by the performance of that work, the level-of-effort form should be used. If the purpose of the contract is to buy a specific end product and the government’s need will not be satisfied until that product is delivered, the completion form should be used.

The SOW must clearly identify the purpose of the contract by the way in which the work is defined. A completion SOW must describe the requirement in terms of the completed end product, and a level-of-effort SOW must describe the requirement in terms of the services to be performed. The SOW should not be labeled as one form or the other and then the requirement described in a manner inconsistent with that label. The contracting officer must be able to identify the form readily to ensure that the appropriate contract clauses and funding provisions are used.

Providing a Basis of Estimate for LOE and Completion Requirements

The SOW must provide the contractor sufficient information on which to base the estimated cost of contract performance. A properly described completion requirement usually provides a sound basis for the contractor’s cost estimate because it describes the work in a manner that facilitates the contractor’s development of its WBS, around which the cost estimate can be built. However, some efforts (such as studies or analytic effort) are completion efforts only because the resulting report is the concrete end product. The description of such requirements often resembles a level-of-effort rather than a completion description. In such instances, a scope statement (see Chapter 5) should be used to provide the basis for an estimate.

A level-of-effort requirement, even when fully described, does not provide as sound a basis for an estimate as a completion description. For example, assume that the first contractor task is to gather data to serve as a database for the analytic effort to follow. This task is usually described by identifying the kind of data to be collected and, when appropriate, the sources to be used. The description of the data to be collected, no matter how detailed, does not provide much of a basis for the contractor to develop a cost estimate.

To estimate this effort the contractor must first develop its data collection methodology and sources, and then estimate the resources and materials required. This procedure can produce wide variances in cost estimates, depending on the data collection methodology and the sources selected by each contractor. When the work requirement can be described but the description cannot define the amount of effort required to accomplish the work, you must provide a scope statement that contains your estimate of the level of effort required to accomplish the work. This is normally described in terms of work days or work months, either for the total effort or for each task, whichever you deem appropriate.

The use of a scope statement provides the contractor with a basis for estimating, but also serves to define the extent or scope of the anticipated contractor effort. This information helps define the total effort and enhances the contractor’s understanding of the requirement. When it is applied to each individual task, it serves also to indicate the relative importance of each task with respect to the total effort. This indication of relative importance can be a significant benefit to both the contractor and the government when the work requirement contains tasks, such as data collection or database management, that could go on indefinitely if not limited.

To develop a scope statement, however, you need your own basis for estimating the amount of effort. Your best basis of estimate is what would be required to do the work in-house. Assume that the requisite expertise is available, determine how each task would be organized and staffed, and estimate how much effort is required to accomplish the task. Use the resulting figures in the scope statement.

Another method of estimating the scope is to examine similar efforts accomplished under previous contracts and use the level of effort actually experienced in the scope statement. A problem with this method is that contractors tend to work to the level permitted by the contract. If a contract permits the use of four people for five months, generally that is what the contractor provides. There is no direct relationship between the optimum level of effort necessary to accomplish the work and the level of effort actually expended.

An examination of past contract files will show what was done, but not necessarily how well it was done. In addition, other unstated factors or requirements that are not evident in the written record may have affected the level of effort provided. Examination of previously accomplished effort is a valuable tool in the development of a scope statement, but it should not be relied on as the sole criterion.

PERSONAL VERSUS NONPERSONAL SERVICES

When acquiring services, you must consider the issue of personal versus nonpersonal services. The typical service contract is for nonpersonal services. The contractor is awarded the contract and provides the services. The SOW defines what services the contractor must perform, but the contractor is responsible for determining how to perform the services. Under a nonpersonal services contract, the contractor performs the work free of daily government supervision over its personnel.

Personal services contracts are different—they permit direct government supervision of the contractor’s employees. In fact, being able to supervise contractor employees is one of the primary reasons the government uses a personal services contract. Personal services contracts are characterized by the development of an employer-employee relationship between the government and the contractor’s personnel.⁹ The government treats contractor personnel as though they were federal employees, usually through the manner in which those personnel are supervised. Agencies must have specific statutory authority to use personal services contracts,¹⁰ and these contracts include special terms and conditions not found in nonpersonal services contracts.

If a nonpersonal services contract is found to be for personal services, the contract can be deemed illegal and can be voided. To avoid this problem, some federal agencies require that their personnel office write all personal services contracts and that their procurement office write all nonpersonal services contracts. Nevertheless, the problem persists: A nonpersonal services contract can inadvertently be turned into an improper personal services contract by the way the contract is written or managed. It is therefore essential to use care when writing an SOW for nonpersonal services to ensure that it is written properly.

It is often difficult to distinguish between personal and nonpersonal services contracts, particularly when contractor employees must work at a government facility. Mixing government and contractor employees makes it difficult to maintain the proper relationships. The main issue is government supervision of contractor employees. If a nonpersonal services SOW calls for contractor employees to work at a government facility—with their daily work assignments and supervision provided by government employees—the contract may be deemed an improper personal services contract. If the contract is silent on these matters, but during contract performance it is found that the government is providing daily supervision, the contract may be deemed an improper personal services contract.

The best way to avoid inadvertently creating an improper personal services requirement is to ensure that the SOW clearly indicates that the contractor must supervise its own employees. The SOW should be written so that it requires the contractor to: (1) provide an on-site supervisor and (2) ensure that, during contract performance, all government direction is provided through the on-site supervisor. The on-site supervisor is intended to inhibit the development of an employer-employee relationship between the government and the contractor’s personnel. It is necessary, however, to be vigilant in contract management to ensure that the SOW requirements are followed.

SOLE-SOURCE SOWS

Many government contracts are awarded on a sole-source basis, usually because of the contractor’s unique capabilities. Often, a sole-source RFP is not issued until after you and the contractor have discussed and mutually understood the requirement. In such instances, however, there is a tendency to write the SOW based on your mutual understanding rather than to write a complete description of the requirement. This often results in an inadequate SOW because details that have been discussed get left out of the SOW on the assumption that they are not needed.

There should be no difference between an SOW written for a competitive procurement and one written for a sole-source procurement. All SOWs must fully describe the work requirement, even if the procurement is sole-source. A complete description of the work requirement is necessary to protect the government’s legal right to enforce contract performance. When government or contractor personnel changes occur, previous “understandings” are not necessarily passed along to successor personnel. This leaves gaps in the SOW coverage that may lead to misunderstandings and disputes. The SOW, which describes the contract work requirements, must survive the personnel changes that may occur during the solicitation process or during contract performance. The contractor is required to do only what is written in the contractual SOW. Understandings not expressed in the SOW lack legal standing and are therefore usually unenforceable.

FOLLOW-ON EFFORTS AND OPTIONS

As part of thinking your way through the project, you should determine the likelihood of a follow-on effort resulting from the work performed under the proposed contract. A follow-on requirement can be either a continuation of the effort or an advancement to another stage of the project; it may be competitive or sole-source. If the follow-on effort will be competitive, planning should begin as soon as you can identify the requirement. A competitive follow-on requires a new solicitation and a new contract. Creating the necessary documentation and obtaining approvals takes time, so effective planning is necessary to avoid project delay at the end of the current contract.

If the follow-on effort is anticipated and is clearly sole-source, an option can be used to cover this effort. An option is a clause that obligates the contractor to provide the specified supplies or services if the contracting officer exercises the option within a stated time frame. Options provide an expeditious means to move on to additional or extended efforts.

Options are exercised by a unilateral modification of the current contract and are usually priced at the time the current contract is awarded. An unpriced option may be used if the option cannot be sufficiently described for pricing purposes at the time of original award. If the option is unpriced, the contractor is still obligated to perform, but only if a reasonable price can be negotiated. An unpriced option must establish how the option effort will be priced. For example, the option could require the contractor to submit a price proposal by a certain time; exercise of the option would be dependent on successful price negotiations. Do not use an option, however, unless there is a reasonable expectation that the option will be exercised.

If you fail to consider a follow-on option, you risk delaying the project at contract completion while a modification or new contract is processed. During this processing period the contractor may not be able to hold its project team together, and key personnel may be lost. When you know a follow-on effort is required and can describe it, you may create a follow-on option task to be exercised at some point before the end of the contract.

If you know a follow-on effort is required but cannot describe it, consider using an option to bridge the period between the end of the current contract and the beginning of the follow-on effort. It could, for example, require several months’ effort to develop an SOW or project plan for the follow-on effort. However, this is a valid procedure only if the follow-on effort is clearly sole-source. If the nature of the work permits, you may include an option that simply calls for a continuation of the effort. Be careful with options, however; it is not proper to create an imaginary or “make-work” option just to keep the contractor under contract. There must be a valid effort for the contractor to perform.

Once you have concluded your planning and preparation effort, you are ready to begin writing your SOW. Chapter 5 will provide a model SOW format and discuss what kind of information belongs in an SOW, where it goes, and why. But first, Chapter 3 discusses performance work statements used in performance-based service contracting, and Chapter 4 addresses an emerging concept: the use of a statement of objectives in lieu of a performance work statement.