National Academies Press: OpenBook

Procurement of Airport Development and Planning Contracts (2012)

Chapter: V. Perform Cost Analysis (Compliance with Cost Principles)

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Suggested Citation:"V. Perform Cost Analysis (Compliance with Cost Principles) ." National Academies of Sciences, Engineering, and Medicine. 2012. Procurement of Airport Development and Planning Contracts. Washington, DC: The National Academies Press. doi: 10.17226/22712.
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13 the ranking to the airport Board of Directors. Once the most qualified firm is officially identified by the airport, the contract price and terms are negotiated. See FAA Advisory Circular 150/5100-14D, Sections 2-11 through 2-14. If negotiations with the top-ranked firm fail, nego- tiations can begin with the second-ranked firm. Simul- taneously negotiating with two or more firms is not allowed. The price does not have to be the lowest, but it has to be “competitive,” meaning that the price can be documented as fair and reasonable. The goal is not the lowest price. The goal is to obtain the most advanta- geous contract (or best value), which assumes that more-qualified firms may demand higher compensation compared to their lesser-qualified competition. The chart located at Appendix B identifies various state statutes applicable to the procurement of profes- sional services. Virtually every state has some form of statute that allows for QBS procurement of professional services. Some QBS procedures set forth mandatory or preferred qualifications, such as requiring a certain number of similar projects in the last few years and experience with a similar scope, size, complexity, and dollar value to the procurement at issue. As explained above, each statute should be carefully examined to determine whether it applies to any given airport pro- ject. Some apply to state agencies only (e.g., state de- partment of transportation), while others apply to every public procurement. Appendix E depicts a simplified QBS process. See also FAA Advisory Circular 150/5100-14D, Section 2-8. E. Limited Competition and Noncompetitive Procurements Under the following circumstances, airports are typi- cally excused from the federal competitive procurement requirements; however, prior approval by the federal agency may be required: • The item is only available from a single source (e.g., when there is a justifiable operational require- ment, when the product is unique, or patent rights, copyrights, secret processes, or control of certain mate- rials or components provide superior use that cannot be obtained from similar products). • Emergency situations (e.g., emergency roofing re- pairs). • When competition is deemed inadequate (e.g., only one bid received and survey reveals there is no further interest in the procurement). • Other instances when the federal agency allows noncompetitive awards. In addition, for small purchases of less than $100,000 (e.g., minor maintenance issues), 49 C.F.R. § 18.36 requires only “limited competition” from an ade- quate number of qualified sources, meaning that quotes are obtained without public advertisement. See 49 C.F.R. § 18.36(d)(1); FAA AIP Handbook, Section 904(c). Many states also follow this limited competition ap- proach to small procurements. The last column of Ap- pendix B identifies various state laws that allow excep- tions from competition, including state statutes that allow certain contracts to be procured with limited competition. In some states, the statutory framework provides for different levels of competition depending upon the estimated cost of the project. For example, informal bids may be allowed for projects estimated to cost less than the threshold, and there may be three or more different approaches, with competition being ex- cused when the cost is relatively minor. Some states have other specific exceptions from competition that may not be used on federal grant-funded projects unless the federal agency gives prior approval. See, e.g., Assoc. Builders and Contractors, Inc., v. Tri-County Metro. Transp. Dist. of Oregon, 12 P.3d 62 (Oregon App. 2000) (upholding a sole source contract for light rail at the Portland International Airport because it met the re- quirements of state law, such as representing a signifi- cant cost savings to the public). A recent question has arisen as to whether procure- ments that involve sensitive security information or have important security implications can be procured with limited competition. This type of procurement may fall within the “other” category requiring preapproval by the federal agency. Although normally bids and pro- posals must be publicly solicited, there may be suffi- cient justification for deviating from this requirement in the context of certain security projects. When a con- struction project, such as installation of security cam- eras, falls within this arena of sensitive security infor- mation (SSI), deviations from the requirement for publicly advertised sealed bids may be allowed by the FAA or TSA because limiting public dissemination of security information is generally considered to be a more important goal than obtaining the lowest price.10 V. PERFORM COST ANALYSIS (COMPLIANCE WITH COST PRINCIPLES) Cost or price analysis must be performed on every project using grant funds. See 49 C.F.R. § 18.36(f) and (d)(4)(ii). Essentially, the costs must be reasonable, al- lowable, and necessary to accomplish the project, and within the scope of the approved grant agreement and associated documents. When a contract exceeds $100,000, an independent estimate must be obtained. See 49 C.F.R. § 18.22 and 48 C.F.R. § 31 for contract cost principles and procedures. Although a detailed discussion of cost compliance is beyond the scope of this digest, when grant funds are used for a project, airports must comply with the follow- ing OMB circulars: 1. A-87, Cost Principles for State, Local and Indian Tribal Governments. 2. A-102, Grants and Cooperative Agreements With State and Local Governments. 10 See 49 C.F.R. Pt. 1520 for the different categories of in- formation that can constitute SSI.

Next: VII. Consequences for Noncompliance »
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TRB’s Airport Cooperative Research Program (ACRP) Legal Research Digest 16: Procurement of Airport Development and Planning Contracts provides guidance on how to determine which requirements apply to any given procurement process.

The report also includes an overview of the consequences for noncompliance with procurement laws or regulations in order to help airports better understand the inherent risks associated with various funding sources.

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