1. pwc NDIA Annual Educational Seminar Contracting for Services March 31, 2008

2. Cost Accounting Systems and Financial Reporting Considerations pwc 2 Contracting for Services Discussion Topics Procurement Methods Terms and Conditions Challenging Areas

3. Cost Accounting Systems and Financial Reporting Considerations pwc 3 Procurement Methods and Contract Types FAR Part 37 - service contract is a “…contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply” May be either non-personal services or personal services –Non-personal services contract – personnel rendering the services are not subject, either by contract terms or manner of administration, to the supervision and control usually prevailing in relationships between the government and its employees –Personal services contract – characterized by employer-employee relationship; under supervision and control of government officer or employee Areas which service contracts are found include: –Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, modification of supplies, systems, or equipment –Routine recurring maintenance of real property –Housekeeping and base services –Advisory and assistance services –Operation of government-owned equipment, property, and systems –Communications services –Architect and engineering (FAR Subpart 36.6) –Transportation and related services (FAR Part 47) –Research and development (FAR Part 35)

4. Cost Accounting Systems and Financial Reporting Considerations pwc 4 Procurement Methods and Contract Types Performance-based acquisition preferred Agencies shall generally rely on private sector for commercial services Non-personal service contracts are proper under general contracting authority Agency program officials responsible for accurately describing need Services obtained in most cost effective manner Sufficiently trained and experienced Agency officials to manage and oversee the contract administration function CO determines whether service is for personal or non-personal services

5. Cost Accounting Systems and Financial Reporting Considerations pwc 5 Procurement Methods and Contract Types Competition - sealed bidding preferred Awards are not necessarily limited to price competition Contract types include fixed price, T&M, and cost reimbursement; subject to specific restrictions, the contracting officer has discretion over type Contract Term –Funded by annual appropriations; not extend past appropriation year –Multi-Year Contracts are permitted; basic and options should not exceed 5 years (FAR Subpart 17.1 and 17.2) –Extensions permitted to avoid Anti-Deficiency Act; option may be exercised more than once; total extension cannot exceed 6 months FAR Part 12 commercial services are limited to FFP and FP/EPA

6. Cost Accounting Systems and Financial Reporting Considerations pwc 6 Contract Terms and Conditions Government prepared Performance Work Statement or Statement of Objectives Measurable performance standards and method of assessing performance Performance incentives; innovation and cost-effectiveness Service Contract Act (FAR Subpart 22.10) –Wage determinations; prevailing rates, collective bargaining agreements –Fair Labor Standards Act minimum wage Inspection of services/Quality assurance surveillance Uncompensated overtime –Not encouraged –CO must evaluate the use uncompensated overtime so as to not degrade level of technical expertise for competitive negotiations unrealistically low rates may result in quality or service shortfalls unbalanced distribution among skill sets and use in key technical positions Subcontracting plan is not required for personal services contracts

7. Cost Accounting Systems and Financial Reporting Considerations pwc 7 Challenging Areas Service Contract Act –Applicability –Exemptions –Labor categories Bundling of supplies and services Labor categories Contract Types Personal services vs. Non-personal services Government-wide contracts

8. pwc Wrap-up and Q&A Questions/Comments Mark Dostal 312-298-2330 mark.s.dostal@us.pwc.com