Ala. Admin. Code r. 355-4-3-.13

Current through Register Vol. 43, No. 1, October 31, 2024

Section 355-4-3-.13 - Types Of Contracts

(1) Prohibition of Cost-Plus-a-Percentage-of-Cost Contracting. Except for a cost-plus-a-percentage-of-cost contract, which is prohibited by Code of Ala. 1975, § 41-4-143, the use of any type of contract is permissible. Questions of whether a contract type is permitted or prohibited will be determined by the Chief Procurement Officer and such determinations are not subject to review. Permitted contract types include, but are not limited to, the following:

(a) Fixed price contracts (with contract specified adjustments);

(b) Firm fixed-price contracts;

(c) Fixed-price contracts with price adjustment;

(d) Cost-reimbursement contracts;

(e) Allowable Cost Contracts;

(f) Cost-Plus-Fixed Fee Contracts;

(g) Cost Incentive Contracts;

(h) Fixed-Price Cost Incentive Contracts;

(i) Cost-Reimbursement Contracts with Cost

(j) Incentive Fee;

(k) Performance Incentive contracts;

(l) Time and Materials Contracts;

(m) Labor Hour Contracts;

(n) Definite Quantity contracts;

(o) Indefinite Quantity contracts;

(p) Requirements Contracts;

(q) Leases;

(r) Lease with Purchase Option.

(2) Option Provisions.

(a) Contract Provision. When a contract is to contain an option for renewal, extension, or purchase, notice of such provision shall be included in the solicitation. Exercise of the option is always at the State's discretion only, and not subject to agreement or acceptance by the contractor.

(b) Exercise of Option. Before exercising any option for renewal, extension, or purchase, the Procurement Officer should attempt to ascertain whether a competitive procurement is practical, in terms of pertinent competitive and cost factors, and would be more advantageous to the State than renewal or extension of the existing contract.

(c) Lease with Purchase Option. A purchase option in a lease for supplies may be exercised only if the lease containing the purchase option was awarded under competitive sealed bidding or competitive sealed proposals, or the leased supply is the only supply that can meet the State's requirements, as determined in writing by an officer above the level of the Procurement Officer. Before exercising such an option, the Procurement Officer shall:

1. investigate alternative means of procuring comparable supplies, and

2. compare estimated costs and benefits associated with the alternative means and the exercise of such option, for example, the benefit of buying new state-of-the-art equipment compared to the estimated, initial savings associated with exercise of a purchase option.

(3) Policy Regarding Selection of Contract Types.

(a) General. The selection of an appropriate contract type depends on factors such as the nature of the supplies or services to be procured, the uncertainties which may be involved in contract performance, and the extent to which the State or the contractor is to assume the risk of the cost of performance of the contract. Contract types differ in the degree of responsibility assumed by the contractor. Among the factors that may be considered in selecting any type of contract are:

1. the type and complexity of the supply or service being procured:

2. the difficulty of estimating performance costs such as the inability of the State to develop definitive specifications, to identify the risks to contractor inherent in the nature of the work to be performed, or otherwise to clearly establish the requirements of the contract;

3. the administrative costs to both parties; the degree to which the State must provide technical

4. coordination during the performance of the contract;

5. the effect of the choice of the type of contract on the amount of competition to be expected;

6. the stability of material or commodity market prices or wage levels;

7. the urgency of the requirement; and

8. the length of contract performance.

Ala. Admin. Code r. 355-4-3-.13

Adopted by Alabama Administrative Monthly Volume XL, Issue No. 09, June 30, 2022, eff. 8/14/2022; operative 10/1/2022.

Amended by Alabama Administrative Monthly Volume XLI, Issue No. 06, March 31, 2023, eff. 5/15/2023.

Renumbered from 355-4-3-.12

Author: Department of Finance, Legal Division

Statutory Authority:Code of Ala. 1975, § 41-4-143.