Sole Source Contracting
Publication: Leadership and Management in Engineering
Volume 8, Issue 4
Sole Source Contracting
There are several methods of contract delivery. When an agency requires specialized work, it may need to obtain a vendor with particular, unique expertise. One method of obtaining this service is to authorize sole source contracting.
Some agencies and owners may not have a tried and true procedure for sole source contracting. I present two case studies wherein not having an approved procedure in place requires that each time sole source contracting may be necessary, the agency must prove beyond any doubt that the individual contractor is uniquely qualified to perform the work. This causes unintended delays in awarding such contracts.
To expedite contracting through sole source procurement, a general policy could be adopted that would accomplish what is in the best interest of the agency.
Case Study One
Infrared Aircraft Deicing Facility at John F. Kennedy International Airport
The Port Authority of New York and New Jersey considered constructing one infrared aircraft deicing facility on a vacant parcel of land adjacent to hangar twelve at John F. Kennedy International Airport and authorized the executive director to award a design build operate and maintain (DBOM) contract for a total estimated cost of $9 million. The infrared system would be housed within one clamshell-type structure capable of deicing groups of three, four, and five aircraft. The project did not have the characteristics that required a formal National Environmental Policy Act environmental assessment nor did it contain the potential for causing an environmental impact.
The key elements of this project included:
•
Design, build, operate, and maintain contract for construction of one clamshell-type structure on a vacant parcel adjacent to hangar twelve.
•
Construction of gas pipeline at Keyspan’s cost.
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Construction of electric and communication lines.
Why Was the Work Needed?
This facility would provide airlines with a safe, convenient, centralized, and efficient location to deice aircraft. Temporary locations would be replaced by a permanent location. There would be less movement of equipment on the airside operating area during winter storms. There would be a reduction in conventional infrastructure such as glycol storage, trucking, and parking. This technique is an alternative to conventional glycol spraying, which is commonly used in the deicing process. It would result in a dramatic reduction in glycol use. There is a potential to reduce weather-related delays, cancellations, and airline costs. It is a year-round facility that may be used for light maintenance during the off-season.
Why Use Radiant Aviation Services, Inc.?
Radiant Aviation Services, Inc. (RAS) markets the InfraTek Infrared Aircraft Deicing System. They are the inventor and sole supplier of this ground deicing system. RAS holds patent protection for: “Method of, and apparatus for, deicing an aircraft by infrared radiation.” The InfraTek system is the only known radiant deicing system approved for use by the Federal Aviation Administration for deicing commercial aircraft. RAS completed the successful installation and operation of a single unit at Newark Airport for Continental Airlines.
Award of Sole Source Contract
The Port Authority of New York and New Jersey wished to consider awarding a sole source contract for radiant deicing without competitive bidding. This could be accomplished because the expertise, service, and product are unique. The proposed contract was in the best interests of the airline community.
Considerations:
•
A sole source contract with RAS has the potential to reduce delays, cancellations and improve slot management during inclement weather.
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The proposal would reduce glycol usage per aircraft. Elimination of glycol greatly reduces any future need to build or operate costly environmental mitigation infrastructure.
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The covered structure can be used year-round for a variety of nondeicing purposes.
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RAS’ technical approach and analysis would be essentially the same as the one used at Newark for Continental Airlines.
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The likelihood of implementing the proposal and starting work would be accomplished in less time than a typical port authority project proposal.
Effect of Not Having Sole Source Procedures
After approval, it took the better part of one year before a contract was in place to be signed by all parties because there was no established sole source procurement methodology in place. DBOM contracts had to be written, reviewed, and approved by multiple parties and several departments. As a contract employee, my opinion of effectively losing one year had the following results:
•
The cost of two major components, concrete and steel, rose approximately 39 percent. This had a direct result on the final project cost.
•
The airport community lost the benefit of having the use of this environmentally friendly technology for a year.
Case Study Two
Why Use Boeing as Sole Source for In-Line Baggage Screening?
Boeing had been involved with Transportation Security Administration (TSA) deployment since inception. Boeing evaluated the various alternatives for meeting the December 31, 2002, deadline for total baggage screening nationwide. They had the required terminal contacts at all port authority facilities to make the initial deployment of explosive detection and explosive trace detection devices. As a result, they were familiar with problems incurred at these locations, how those problems were solved, and how to apply those solutions if encountered at the same terminal facilities.
Award of Sole Source Contract
The Port Authority of New York and New Jersey considered awarding a sole source contract to Boeing for in-line baggage screening without competitive bidding. Initially, Boeing would fund the entire project. When funds became available, TSA would reimburse the port authority who would, in turn, reimburse the airlines up to 90 percent of construction costs. The urgency of the need for the deliverable was such that a competitive bid solicitation would frustrate timely performance.
Considerations
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A sole source contract with Boeing would advance baggage screening from a temporary solution that met a deadline to a final in-line baggage screening solution that would provide benefits such as faster and more reliable baggage screening for the port authority’s clients.
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The proposal would be appropriate for the port authority’s security planning in the aftermath of September 11, 2001.
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Boeing’s technological approach, analysis, or process would be substantially the same as for their agreement with TSA, funded by the federal government.
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The likelihood of implementing the proposal and starting work would be accomplished in less time than required for a typical port authority project proposal.
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There was a financial risk to the port authority if TSA did not receive funding to reimburse the project and its shareholders.
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The proposal to perform the work would be consistent with the policies of the federal government, TSA, and the Federal Aviation Administration for in-line baggage screening.
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The project benefits the flying public because in my opinion, security trumps everything.
Recommended Procedure
To streamline the effort every time a sole source contract is anticipated, an agency should adopt the general procedure outlined below. An agency, at its sole discretion, should have the ability to go forward with a project if any of the following criteria are met:
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The proposed contract is in the best interest of the agency
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The cost is shown to be reasonable
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The expertise, service or product is unique
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The urgency of the need for the deliverable is such that competitive bid solicitation would frustrate timely performance
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The proposed contract funds the next phase of a multiphase project and the existing agreement is being performed satisfactorily. One would not wish to introduce a vendor whose materials, hardware, control systems, or software are incompatible with that which preceded it.
Introduction
Sole source awards can be made as follows: A single entity proposes on its own initiative or at the initiative of staff to deliver specified work. Staff may work with the entity to refine the proposal until a suitable submission is prepared. Awards may be in the form of a contract without competitive bidding or competitive negotiation. Sole source awards may take various forms, including but not limited to:
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Type of project such as those cited above.
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Organization of work
a.
Single project or program.
b.
Multiparty project or program.
c.
Program consisting of a group of projects.
d.
Consortium agreements.
e.
Type of agreement (either contract or grant).
Authorized Sole Source Proposals
When an agency program manager authorizes staff-initiated sole source proposals, staff contacts one source of expertise such as the sole-source provider of product and/or service and provides that potential applicant with information related to the type of work being sought. Information may include a description of the requirements, necessary qualifications, required schedule, and estimated budget. Staff works with the applicant to refine the draft proposal until a document for final submission is completed.
Format for Provision of Expertise
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Name and contact information.
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Description of the service to be provided.
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Skill and experience of company, and individuals with resumes.
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Hourly rates for each expertise.
Owner Requirements
As part of the contract, the owner may require a performance and payment bond.
“Bonds are not insurance. A surety bond is equivalent to a cosigned promissory note. The principal on a surety bond, as on a promissory note, is primarily liable to the obligee. The surety is liable only in the event that the principal fails to discharge the obligation undertaken.”
“The obligation undertaken in a contractor’s surety bond runs in favor of the owner and the owner alone is protected. The contractor, as principal, has no protection under a bond. On the contrary, the contractor is ultimately liable and fully obligated, not only to the owner, but also to the surety company that issued the bond.”
“If during the course of the work, the contractor defaults or becomes insolvent and is financially unable to carry on the work, the owner will require the surety to complete the work and to pay for labor, materials, and supplies.”
[Merritt, F. S., et al., eds. (1976). Construction management, standard handbook for civil engineers, 2nd Ed., McGraw-Hill, New York, pp. 4–20, 21.]
Summary
There are a number of circumstances within which it is recognized that sole source procurement is necessary and reasonable. The foregoing discussion lists the acceptable circumstances. The justification needed should be a simple memorandum in the contract file explaining the rationale for the procurement falling into one of the listed circumstances. Someone in authority who can certify to the relevant facts should sign the memo. Other applicable approval signatures should appear on the memo or be attached. If the agency has authorized the noncompetitive procurement, the request for agency approval and the agency’s response should be together in the contract file. All projects will continue to be subject to the same qualitative and quantitative analytical process to ensure that they meet the agency’s needs. Sole source contracting can be used to streamline procurement, save time and money.
Information & Authors
Information
Published In
Leadership and Management in Engineering
Volume 8 • Issue 4 • October 2008
Pages: 183 - 185
Copyright
© 2008 ASCE.
History
Published online: Oct 1, 2008
Published in print: Oct 2008
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Metrics & Citations
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