A Quick Reference Guide to FAR 2.101 – Definitions

As any good contracting professional will tell you, you have to read the federal acquisition regulations in order to interpret them, because the definition of each word matters. While the FAR is primarily guidance, it does have rules (a search for the word “shall” in our platform returns over 40 pages of results) and understanding the intent of the rules means that FAR language must be taken literally.

Words and concepts are explained throughout the FAR, and a good place to start is in FAR 2.101 Definitions where words are listed in alphabetical order. But that’s not the only place to check for definitions. Each individual FAR Part can provide its own definition of a term. In cases where a part provides a definition to a term otherwise defined in Section 2.101, federal contracting professionals are directed to apply it to “that part, subpart, or section applies to the word or term when used in that part, subpart, or section.”

Breaking Down Important FAR Definitions

It is easy to reference FAR definitions; just look up the word in FAR 2.101. If it isn’t listed there, look at the Table of Contents for the part of the FAR you’re currently reading. If it has a definitions section, it will be listed as the first section after the scope.

An image of FAR Part 15 - Table of Contents
If a FAR part has a Definitions section, it will be the first section under scope.

Coming Soon: Our Downloadable Guide to Navigating the FAR

As we mention above, if a word is defined in a FAR part, that definition applies whenever the word is used in that part. So remember the order of precedence for defining a term:

  1. Search FAR 2.101 first
  2. Search your current FAR part and if the term is defined,
  3. Apply that definition for matters pertaining to that FAR part

What are some of the more confusing FAR definitions?

Anyone who has worked in government contracting knows that there are some concepts you just can’t keep straight. It’s like that simple-ish word you can never remember to spell, or a recipe that befuddles you no matter how many times you cook it. Here’s our list of the 15 most confusing definitions in the FAR.

1. Assisted acquisition

This is a type of interagency acquisition where a servicing agency performs acquisition activities on a requesting agency’s behalf, such as awarding and administering a contract, task order, or delivery order. In exchange, the servicing agency typically charges a fee for their contracting services. Nothing is free, afterall.

2. Bundling

This is a concept that every acquisition professional encounters when they’re trying to complete a market research report. Bundling is a form of contract consolidation that, when used, may take opportunities away from the small business community. It occurs when “two or more requirements for supplies or services, previously provided or performed under separate smaller contracts (see paragraph (2) of this definition)”, are combined “into a solicitation for a single contract, a multiple-award contract, or a task or delivery order.”

However, there are several additional qualifications to this definition, which should be read entirely for a complete understanding of bundling.

3. Commercially available off-the-shelf item (COTS)

Commercial items are simply those which are customarily used by the general public or by non-governmental entities. An automobile is a good example, as cars are used to transport both private citizens and government officials. But COTS products are a bit different. To qualify as COTS, the item must also 1) be sold in substantial quantities on the commercial market and 2) be offered to the government in the same form that it is sold commercially.

4. Cost or pricing data

Simply put, cost or pricing data represent all the “facts” that a “prudent buyer” would reasonably expect to affect price negotiations “significantly.” And that’s about as simple as it gets. The definition itself is one of the longer and more qualified in federal acquisition, with cost and price analysis having its own dedicated curricula in the realm of public contract training.

5. Delivery vs. task order

Delivery orders are traditionally used for physical products while task orders are used for services. They represent the funding orders issued under a parent vehicle like an Indefinite-Delivery, Indefinite-Quantity contract. When a TO or DO is issued, it constitutes a purchase of goods (delivery) or services (task) from the contractor(s) who hold(s) the master contract. They can also be issued for purchases under simplified acquisition methods like Blanket Purchase Agreements.

6. Discussions vs. exchanges

Discussions are communications that occur with prospective offerors BEFORE proposals have been submitted. Exchanges are communications that occur AFTER proposals have been received. It is crucial to understand this very important distinction within FAR 15 – Contracting By Negotiation which occupies its own place in the CON course cannon. Don’t take it lightly.

7. FOB destination vs FOB origin

An important concept to understand when you are designing contracts for physical goods. The distinction defines who is liable for the condition of a shipment, the seller or the buyer. FOB stands for “freight on board”; origin and destination refer to where the seller’s liability for the condition of the product ends.

In FOB origin, a seller is only responsible for the items until they leave their warehouse or distribution center. In these cases, the buyer is typically providing their own shipping company, making them liable (along with their contracted logistics provider) for the condition of the goods once they are loaded onto the shipper. In FOB destination, the seller is responsible for the products up to the point where they are unloaded to the buyer’s delivery destination. In these cases, the seller is also responsible for shipping the product.

8. GWACs vs. MACs

All government-wide acquisition contracts (GWACs) are multi-agency contracts (MACs), but not all MACs are GWACs. This is due to another nuance of Interagency Acquisition.

MACs as a category represent the Federal Supply Schedules that GSA, NASA, and VA hold for various goods and services. They are a form of Interagency Acquisition authorized by the Economy Act. GWACs, on the other hand, are just MACs for information technology products, but with a legislative distinction. As Public Spend Forum explains in it’s article, Demystifying Interagency Acquisitions, GWACs “are not governed by the Economy Act, rather they are governed by a more specific legislative authority called the Clinger-Cohen Act.”

Other than this nuance, they basically operate in the same way.

9. Inherently governmental functions

An inherently governmental function is defined as one that “is so intimately related to the public interest as to mandate performance by Government employees. This definition is a policy determination, not a legal determination. An inherently governmental function includes activities that require either the exercise of discretion in applying Government authority, or the making of value judgments in making decisions for the Government. Governmental functions normally fall into two categories: the act of governing, i.e., the discretionary exercise of Government authority, and monetary transactions and entitlements.”

It too occupies quite a bit of space in FAR 2.101 – Definitions, and is worth its own review.

10. Multi-year vs. multiple year contracting

This is an example of a complex concept that isn’t defined in Section 2.101. You have to look to another part of the FAR to learn, and in this case it’s FAR Part 17, Special Contracting Methods.

As defined in Section 17.104, “Multi-year contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to 5 years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award.”

Emphasis added to clarify the distinction between multi-year vs. multiple year contracting. In a multi-year contract, the period of performance can go beyond the traditional 12 month term, whereas a multiple year contract has the standard base plus option year annual renewal requirement. In the case of a multiple year contract, the option years are not funded, and therefore are not (in principle) guaranteed.

11. Organizational conflicts of interest (OCI)

Many contracting professionals are keen to this concept, whether it represents an internal concern for incumbent contractors or when using design-build specifications in Architect-Engineering services. Formally, the term means that “because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage.”

This especially matters when you are selecting source selection or evaluation team members, and especially inside and around the DC beltway. You never know who’s cousin or significant other works for which contractor or purchasing agency.

12. Statement of objectives (SOO)

Call us biased, but a Statement of Objectives is the pinnacle of federal contracting, especially for more complex items like digital services and developmental items. A SOO is a form of requirements document that states the overall performance objectives of a particular solicitation. Buyers should use a SOO whenever they want “to provide the maximum flexibility to each offeror to propose an innovative approach.”

13. Termination for convenience vs Termination for default (or cause)

This distinction comes down to fault, and is best explained in Section 12.403. By law, the government can terminate a contract whenever it wants, and for whatever reason it deems necessary. Termination for convenience, therefore, is one of the government’s unalienable rights when it comes to federal acquisition. When a termination for convenience does arise, the contractor is entitled to payment for work that has been completed. It may also file for expenses which they can demonstrate were a result of the government’s right to terminate for convenience.

A termination for default, on the other hand, commonly occurs because the contractor failed to deliver, and was unable to cure their deficiencies or show a cause for them. When termination for default (aka termination for cause) occurs, the terminated contractor may be responsible for any remedies the procuring agency decides to pursue.

14. Allowable vs. unallowable costs

As a matter of law and regulation, the federal government will not reimburse contractors for certain costs they may incur. If you are a contractor, you’ll probably want to pay attention to the distinction!

While FAR Section 31.205 – Selected Costs lists costs that are not reimbursed under federal law, the Defense Contract Audit Agency is widely considered the definitive source for allowable vs. unallowable costs. Since 1984 it has published the FAR Cost Principles Guide, a chronology of allowable vs. unallowable costs, which is used for audits of historical costs when necessary to adjudicate claims or resolve issues with payment and funds.

15. Unsolicited proposals

An unsolicited proposal is “a written proposal for a new or innovative idea that is submitted to an agency on the initiative of the offeror for the purpose of obtaining a contract with the Government, and that is not in response to a request for proposals, Broad Agency Announcement, Small Business Innovation Research topic, Small Business Technology Transfer Research topic, Program Research and Development Announcement, or any other Government-initiated solicitation or program.”

Unsolicited proposals are a cool way to involve emerging and non-traditional suppliers in your market research. As stated in FAR 15.602, the policy is to encourage their submission. But they have to meet certain standards; for instance, marketing material that doesn’t pertain to an anticipated government need would not qualify. One can understand the need for this clarification, as true unsolicited proposals take many hours to prepare, and many hours to evaluate by the government.

Be The Best Trusted Business Advisor You Can Be!

Take a minute to learn up on these FAR definitions and you’ll be in better shape when the time comes to represent procurement in an important conversation or meeting with a customer. Having an awareness of the more confusing concepts in federal acquisition will come in handy the next time someone asks a question (or shows their ignorance).

Did we leave any confusing concepts out? Leave us your suggestions in the comments section.

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