Small Business Innovation Research (SBIR) Small Business Technology Transfer (STTR)

Desk Reference

IX. Contract Administration

  • Contract Administration Office

    Contract administration may be performed by the Contract Administration Office (CAO) in order to provide for specialized assistance through field offices located near the contractor's establishment. Assignment of contract administration responsibility automatically carries with it the authority to perform all of the normal functions listed at FAR 42.302(a). However, the Contracting officer may retain certain of these functions.

  • An executed copy of the contract should be provided to the contractor with a cover letter signed by the contracting officer.

    The letter should include any attachments required to be furnished to the contractor, such as the poster entitled "equal employment opportunity is the law" required by FAR 22.805(b). The letter could also address the initial telephone kick-off meeting as discussed in C. below. Section 8. G of the SBIR Policy Directive states: "Congress intends that the awardee of a funding agreement under the SBIR Program should, when purchasing any equipment or a product with funds provided through the funding agreement, purchase only American-made equipment and products, to the extent possible in keeping with the overall purpose of the Program. Each SBIR Agency must provide each awardee a notice of this requirement." This notice requirement could be met by putting it in the cover letter. A suggested cover letter, which can be modified as necessary, is provided."

  • A telephonic post-award orientation is recommended, particularly if the contractor has little or no experience in government contracting.

    This meeting should be conducted within the first two weeks after award of the contract. FAR 42.502 lists a number of things that the contracting officer should consider when deciding whether a post-award orientation is necessary. This list should also be considered to help determine participants. For example, if the contract involves hazardous materials or operations, a safety expert may need to participate. The accounting system could also be discussed at this meeting.

  • A new contractor may not have a Commercial and Government Entity (CAGE) Code. If the contractor does not have a CAGE code, the contracting officer may use the procedures outlined at DFARS 204.7202-1

    Cage code search information is available at: http://www.dlis.dla.mil/cage_welcome.aspExternal Link

  • Incremental Funding
    1. The funding schedule for incrementally funded contracts is discussed at SubPart VI. C. It is important to follow the anticipated schedule for funding as determined during negotiations. The anticipated schedule must be included in incrementally funded fixed-price contracts (DFARS 252.232-7007). Modifications adding funds to the contract should clearly indicate the completion schedule for the increments being funded.
    2. Fixed-Price contracts must be fully funded as soon as practicable after funding is available (see DFARS 232.703-1(2)). Upon receipt of contractors' funding notices required by the Limitation of Funds clause in cost-reimbursement contracts, or Limitation of Government's Obligation clause under fixed-price contracts, the contracting officer should promptly provide written notice to the contractor of the government's plan for further funding.
    3. Any delay in funding is likely to result in significant hardship for the small SBIR contractor. If work is delayed or stopped while waiting for additional funding, that contractor must still meet its payroll. A key employee may be assigned primarily to one SBIR contract, and the contractor may have no alternative work for that employee. If funding schedules are not met, the contractor may be forced to continue the work at risk, or continue paying the employee even though adequate hours cannot be applied to the contract. A third choice would be to release the employee. If the employee is a "key person," termination of that employee would not be a satisfactory solution because the contractor has agreed to use certain "key personnel" to perform the contract.
  • Withholding of Funds
    1. The clause at FAR 52.232-9, Limitation on Withholding of Payments, provides that the total of the amounts withheld at any one time shall not exceed the greatest amount under any one clause or schedule term. This clause is required when the contract includes two or more terms authorizing the withholding of amounts otherwise payable to the contractor.
    2. Withholding clauses are based upon a limit that may be withheld. A lesser amount should be withheld if that amount would reasonably protect the government's interest. A common withholding clause for SBIR contracts is at DFARS 252.227-7030, which allows the contracting officer to withhold payment of up to ten percent of the contract price until technical data are delivered as specified in the contract. Cost-plus-fixed-fee contracts would also contain the fixed-fee clause at FAR 52.216-8, which provides that after payment of 85 percent of the fee, the contracting officer may withhold further payment of fee until a reserve is set aside "in an amount that the contracting officer considers necessary to protect the government's interest." Withholding amounts should not automatically be the maximum allowed under a clause, but should be limited to what is necessary to protect the government's interest. Also, withholdings are "temporary," and should not be for a period of time longer than is reasonably necessary to protect the government's interest. A good practice is to document the reason for any withholding under an SBIR contract.
  • Contract Modifications
    1. Contractors are expected to complete their contracts within the period of performance stated in the contract; however, contracts should be extended when in the government's interest. One example is when a critical test needs to be repeated and the contractor wishes to extend the completion date in order to repeat the test at no increase in contract price. The extension would result in a better final report. However, if the test could be completed soon after the completion date, the work could continue without modification. In that case, the administrative cost of a contract modification would probably not be justified.
    2. It may be in the government's interest to increase the effort, period of performance, and funding for an ongoing Phase II contract. One example would be when a significant increase in the potential for commercialization and dual use has been realized during Phase II, and "X" Corporation (or a government agency) has agreed to commit non-SBIR funds for additional work. However, that commitment is contingent upon further funding under the current Phase II contract. The Phase II contract is progressing well and is expected to meet the objectives as presently funded; but to take advantage of the increased potential for dual-use and enhance the agency's applications, additional work will be required. A reasonable position would be that anything that could have been negotiated into the contract at time of award can be negotiated and included by modification under the statutory authority of the SBIR Program (Public Law 97-219, Public Law 99-443, and Public Law 102-564). If the additional effort to be provided under the modification would assure or greatly increase the potential for commercialization of the technology and enhance the agency's applications, it also makes good business sense. It would also improve the ratio of SBIR funds expended to total commercialization as measured in dollars.
    3. Continuity between all Phase I and Phase II contracts is the ideal. Any delay in work between Phase I and II is inefficient. It impacts the contractor financially, delays commercialization, and makes it difficult for the contractor to maintain key personnel to develop the technology. If the contractor qualifies for the Fast Track, as described in Part IV, interim funding is required in most cases. Continuity will not always be achieved, but there are a number of things that the contracting officer and the technical monitor can do to shorten the gap between Phase I and Phase II. Some suggestions are:
      • Continuity should be discussed with the contractor during performance of Phase I. If Phase I is going well, suggest ways the contractor may address interim funding in the Phase II proposal. For example, discuss what work or task will be performed during the interim funding period, and how that work would be of benefit to the government even if the Phase II effort is not funded.
      • Interim funding should be considered even if it is not addressed in the Phase II proposal. If it is in the government's interest, the statement of work and cost for a continuity effort could still be negotiated and the Phase I contract modified accordingly.
      • If an optional task is in the Phase I contract, the technical monitor and the contractor should review that task prior to exercising the option and consider making any necessary modifications. Work completed during the first few months of Phase I may indicate that the task description, as originally proposed to move the effort into Phase II, could be improved. Also, receipt of matching funds under the Fast Track may require a change in the work for the optional task. If a modification to the optional task would be beneficial to the government, and the contractor agrees, the change could be accomplished contractually at the time the option is exercised.
  • Termination
    1. A decision to terminate or to stop funding an SBIR contract should be made only after considering the potential for dual-use, other military applications, and commercialization. An SBIR proposal is selected for award base on the potential for commercial applications and dual-use, among other things. For that reason, it may not always be in the government's interests to terminate a contract, even if the program it was intended to support is canceled. The effort could possibly be redirected, within the original scope, to fit other applications. Termination decisions will depend to some extent upon the type of contract, as discussed at a. and b. below.
      • Incrementally funded fixed-price contracts require the clause at DFARS 252.232-7007, which provides that if the government does not allot additional funds by a date shown in the contract or an agreed substitute date, the contracting officer will terminate any item(s) for which additional funds have not been allotted.
      • Incrementally funded cost-reimbursement contracts require the clause at FAR 52.232-22, which provides that if the government does not allot additional funds the contracting officer will terminate the contract upon the contractor's written request.
    2. The prime contractor may receive assistance from the Termination Contracting Officer (TCO) in the termination of a sub-contract. FAR 49.108-6 and FAR 49.108-7 provide information regarding TCO assistance in termination of subcontracts.
  • Levies on Payments to Contractors
    1. Contracting officers should make their SBIR contractors aware of the notification requirements of DFARS clause 252.232-7010, Levies on Payments to Contractors. It is important that contractors promptly notify the PCO whenever contract performance is jeopardized by IRS levies against payments. This task could be accomplished during the post-award orientation meeting.
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Last Updated: Monday, 22-Aug-2011 09:49:08 EDT