Contracting Officer Warrant Thresholds: An Extensive Review

Contracting Officer Warrants: What You Need to Know

The contracting officer (CO) is the government employee with authority to enter into or sign contracts on behalf of a government entity and bind the government to performance under the contract. There are significant ramifications for an individual or company who provides services to the government under a contract with a CO who is not properly appointed, but this article does not discuss those circumstances or the potential legal ramifications. Rather, this article addresses the government’s practices of appointing COs and the "warrants" that are required.
The goal of implementing a warrant requirement is to ensure that only qualified and trained individuals have the authority to enter into binding contracts on behalf of the government. The government’s vast resources and obligations are entrusted to and handled by the CO. These responsibilities include ethical, representational , and financial duties. The proper use of contracting officers is essential to the procurement and government contracting process. The government’s success in achieving its mission is directly correlated with the ability of the government to maintain a population of competent COs; immaculate, accurate, and up-to-date execution and reporting of government policies, processes, and procedures; and support of all involved personnel. Because of the CO’s pivotal role, a wide range of personal attributes, education, experience, and competencies are required of the individual filling the role.
Department of Defense (DoD) established the contracting officer warrant program to ensure that contracting officers are not only individuals of the highest character but also individuals who have received the necessary training and education to perform the large volume of functions associated with the role.

How Warrant Thresholds are Defined

Contracting Officer Warrants are derived from federal regulations, and these regulations specifically define different contracting officer "warrant thresholds". The regulation is found at FAR 1.603-3 (a)(1), which indicates that the "agency head" shall designate "individuals as Contracting Officers only if they have received a warrant." The rest of the regulation sets forth the procedures for obtaining such a warrant, including the determination of the individual’s "qualifications" and formal requests from the "agency head" to the "head of the contracting activity". An important aspect of this regulation is the list of duties that can be done by a Procurement Agent, because that list of duties expressly excludes contracting functions (for example, the receipt of bids or proposals, or negotiation). This means that Procurement Agents do not have the same capabilities as Contracting Officers – and this is critical to the subsequent discussion of "warrant thresholds" and the "Competition in Contracting Act".
The FAR lists five categories of procurement thresholds, which are associated with a monetary value. There are levels for micro-purchases (under $3,000) small purchase (under $25,000), and simplified acquisition (under $150,000). These are known as the "micro-purchase," "small purchase," and "simplified acquisition" "warrant thresholds".
In general, the FAR also has a list of the "practical limits" to those thresholds, in FAR 1.603-4, which states:
"(b) The thresholds apply to the aggregate value of the contracts awarded for the individual requirement during the fiscal year."
The general rule is that a Contracting Officer can pursue contracts at value under those monetary thresholds, which in part means that the Contracting Officer has the authority to award those contracts without the need for an entity that has been awarded a contract at those levels to compete.
The details of that authority are found in the Competition in Contracting Act, which has the ultimate purpose of ensuring "full and open competition" in federal contracting. Competition can be defined at the "small-purchase", "simplified-acquisition", or "full-and-open competitive range" levels. For simplicity, let’s just call that the "competition thresholds". When the estimated value of proposed contracts exceed these thresholds for a particular requirement, the Contracting Officer must ensure that there is a competition.
This "competition" requirement means that procurements must be made as follows (the synopsis of the CICA is here):
Procurement without Competition "Full and Open" Procurement with Competition "Full and Open" with a limited exclusion ("Best Value")

Contracting Officer Warrant Factors

There are a variety of factors that influence the warranted thresholds for contracting officers. First, the type of acquisition can dictate the warranted threshold. For example, an acquisition for a commercial item (see our post from December 9, 2011) has a higher threshold than a non-commercial (see our post from January 19, 2012) item like defense equipment.
Second, even within commercial and non-commercial items, there is a dichotomy for acquisitions which are contract actions, versus those which are purchase orders. Contracting officers can be warranted at a higher level for the former versus the latter.
Third, complexity of the acquisition is another factor for determining warranted thresholds. An acquisition with multiple parts and contractors may dictate requiring a contracting officer to have a higher warrant and therefore having a higher warranted threshold for permitting contract formation.
Fourth, the element of risk involved in the contract can be a determinative factor in whether a contractor officer has a higher threshold or not. The larger the threshold, the higher the risk of the transaction. Contractors can well imagine a situation where a contracting officer with a low threshold agrees to a contract action which is much higher in value than his or her warranted threshold.
To help prevent this issue, the Government takes a variety of different factors into consideration when determining whether to grant a contract to a warranted contracting officer whose warranted threshold will allow the contract action.

Implications of Warrant Thresholds in Procurement

The warrant threshold amounts impact the acquisition process for federal agencies and prime contractors in a number of ways. When the government agencies have different warrant threshold levels, it increases the time and cost that the government spends to acquire the same products and services on a regular basis.
For example, a mid-level manager for an agency with a $10,000 warrant threshold (e.g., the VA) would have to get approval by the next level of supervision if the agency needed to procure more than $10,000 worth of products or services. The same contract department/agency manager at the Department of Treasury – with a $250,000 warrant threshold – would not need any approval. As you can imagine, having many different warrant threshold levels can add considerable time and complexity to the government acquisition process.
Also, having different warrant levels can cause confusion among the ranks of government personnel. For example, if a contractor is providing $25,000 worth of goods to an agency with a $10,000 warrant threshold, he/she will have to be careful to get the right person to approve the spending and sign the contract. Conversely, what happens if the $25,000 contract is for a large acquisition involving several million dollars? Does the individual with a $10,000 warrant issue many smaller orders? Or does he/she get permission to issue a larger purchase order? How does the larger order get approved? These are all questions that contractors and agencies have to contemplate when there are different warrant thresholds at many different levels.
The disparity between the various agency/department warrant levels makes it difficult for contractors to know easily who to approach for bid approval without doing a considerable amount of homework. The use of blanket purchase agreements and other pre-approval methods can help alleviate this problem, but having so many different warrant levels still makes the government acquisition process more expensive and complicated.
It would appear to be more efficient for the government to use the highest warrant threshold amount when doing similar acquisitions. For example, the Department of Defense (with a $100,000 warrant threshold level) can do business with relatively small businesses for $100,000. However, a small business trying to do business with the NSA may have to deal with numerous individuals with low warrant threshold levels because the NSA has a very low warrant threshold ($5,000) to limit the amount of liability that a single government employee can undertake. The Department of Defense alone has 41 different major organizations with varying warrant threshold levels, which can add to the procurement processing time.
Most of the time and excessive manpower that is used for federal acquisitions seems to be devoted to speaking simply and not calling things by what they truly are. When the Department of Energy (with a $500,000 warrant threshold) tries to procure IT management services for $500,000, rather than simply using the same contract vehicle that they had used before for $500,000, they try to "bundle" the work and make it more complex in order to prevent a small business from bidding on it. So, rather than a straightforward $500,000 IT management contract, the $500,000 solicitation may be broken down into smaller pieces, with some of the work being awarded to the small business and some of the work being awarded through a federal small business set aside, and some of the work not being done at all. Certain items are carved out so that small businesses or individuals cannot bid on them, although they are critically needed for the completion of the entire contract.
But the system continues. Agencies pursue multiple contracts for certain items with different divisions of the same agency. Each agency/division divides the items into buckets that fit comfortably beneath their warrant levels, with each division ending up with less than the total contract could support, but all of the divisions seem to believe that they are following the law and nobody sees the overall picture. In addition, rather than award a single blanket purchase agreement for a large item that could simplify procurement, various divisions pursue multiple different vehicle approaches. Rather than simplifying the process for small or large businesses, they are making it more complex.
It would appear that the use of the highest warrant threshold for any complicated acquisition (or any acquisition that can support it) would tend to simplify procurement processes and eliminate unnecessary attorney and other costs for agency representatives and contractors. It would reduce the time and cost of the procurement process and would eliminate needless confusion and cost to everyone. The government would not have to try to re-invent the acquisition wheel every time it needed to procure a service or a product. It could do them through the same vehicle(s) that had been used before.

Training and Compliance Implications

In addition to satisfying minimum requirements for education and experience, contracting officers must also meet certain compliance requirements which vary depending on the applicable government agency. The preferences and requirements differ both within individual agencies as well as between them. The Army is subject to Army Federal Acquisition Regulation Supplement ("AFARS") 5101.602-2, which explains that "(a) The approval authority for contracting officer warrants in the Department of the Army is the Secretary of the Army. Delegation of the warranting authority has been made to the head of the contracting activity (HCA) and the head of the contract administration activity (HCA). The HCA may further delegate this authority." The Department of Defense is subject to Department of Defense Federal Acquisition Regulation Supplement ("DFARS") 201 . 601(a)(i), which explains that "(i) The Under Secretary of Defense for Acquisition, Technology, and Logistics (USD (AT&L)), the Deputy Assistant Secretary of Defense (DASD) for Acquisition and Procurement, and the Director, Defense Procurement and Acquisition Policy (DPAP), are the authorities for specifying warrant requirements and delegating warrant authority for contracting officers in the Department of Defense." Many warrant authorities also impose additional requirements for maintaining a properly issued warrant to ensure that officers are prepared to fulfill their responsibilities at all times. Such requirements vary among agencies, but may include demonstration of continuous eligibility in order to retain large and/or multiple warrants, limitations on multi-year contracts, requiring pre-approval for significant contracts, re-allocating warrants between officials, and more.
Training requirements for contracting officers also differ by agency, term, and level of authority. It may apply to only newly appointed officials or extend through the entire length of the appointment, which may be limited term or indefinite. In general, official compliance with training requirements is self-reporting.

The Latest Changes and Updates

To ensure that only the most qualified individuals are exercising government contract administration and certification duties, the government has instituted rules and regulations establishing necessary warrant threshold levels. These threshold levels-throughout recent years-have undergone a variety of changes that have brought with them many different implications to government contractors. A significant rule change that warrants discussion is the recently published interim rule by the Department of Defense, General Services Administration and National Aeronautics and Space Administration as an implementation of the Federal Acquisition Regulation (FAR) Council’s Contracting Officer Warrant Threshold study, which was published by former Administrator for the Office of Federal Procurement Policy, Anne Rung, in early 2014. After surveying all civilan agency contract spending from fiscal year 2009 through fiscal year 2013, the council made the decision to limit threshold exemption criteria to reduce the number of officials with warrant authority. The end result is a bump up in the dollar amount for certain employees that can issue noncompetitive orders, to $5 million from the previous level of $1 million.
Another popular example of a change in the contracting officer warrant threshold level came way of the Department of Defense (DoD). Back in September of 2010, prior to DoD published guidance to the services, contractors were being issued contracts with warrant levels that reached as high as $50,000,000. While this level may seem dramatically high, contractors were issued contracts of approximately $1,778,000,000. In contrast, that same ruling that was later put into effect through the Defense Federal Acquisition Regulation Supplement (DFARS) in 2011, limited the DoD organization to just a $10,000,000 threshold increase. Despite the fact that this threshold increase may seem extraordinarily low, the fact of the matter is that the vast majority of large procurements are awarded as a result of competitive procurement processes, meaning that the chances of any one contractor receiving a significant portion of these contracts are slim to none. Additionally, there was a well founded rationale behind the reduction in contract authority when it comes to interdisciplinary teams.

Management of Warrant Thresholds: What’s Best

Establishing a clear understanding of a contracting officer’s authority is crucial to effective contract management and regulatory compliance. The following are some best practices and strategies for contracting officers to maximize efficiency and ensure compliance, while minimizing risk.
Conduct Training on Warrant Thresholds
Once a contracting officer is appointed, it is important that they receive training on their particular category of warrant, including an understanding of what types of transactions their warrants cover. Additionally, training may be helpful in providing clarity on the policies and regulations that govern the use of contracts and orders.
Timely Review of Support
The FAR and agency supplements may vary on their requirements for review of the work of contracting officers. Generally, reviews are conducted by a higher level contracting officer, who is ensured sufficient time and resources to complete the review. To streamline the process and reduce the need for significant revisions, agencies can implement various strategies, such as providing more resources for timely reviews, and issuing better instructions on how to conduct reviews.
Verify Appropriate Acquisition Strategies
Contracting officer delegation is typically based on the premise that the contracting officer is able to make informed business decisions on behalf of the government. To ensure good decision-making, contracting officers should conduct annual reviews or assessments to verify that their acquisition strategies are appropriate, and adjust plans as necessary.
Make Sure Delegated Authority is Updated
A funded contract requires that the contracting officer have proper delegated authority at the time the procurement process starts. To prevent unnecessary delays and complications with contract award, ensure that delegated authority is current and regularly updated.
Update Warrant Authorities As Needed
Contracting officer’s warranties become obsolete when the contracting officer is promoted and receives a new warrant, and the former warrant is not updated or cancelled. Depending on the time that has lapsed since the contractor’s last contract award, a number of issues may arise.

Conclusions and Key Insights

In summary, contracting officer warrant thresholds exist to ensure that the proper authority is delegated to contracting officers throughout the government and that the delegated authority corresponds with the nature and complexity of the work being performed. In general, the thresholds outlined in the FAR and supplemented by agency-specific policies and regulations are only a floor, and differing rules may actually establish a ceiling as to the authority granted to the contracting officer in question. For example, small business set a sides/size standards or contract vehicle rules may actually limit the authority of an authorized contracting officer. With that being said , contracting officers must understand that their delegation of authority is a priviledge that they must preserve by ensuring compliance with the terms of the delegation provided. Compliance is required because contracting officers may be held personally liable if the contracting officer exceeds FAR delegation thresholds by entering into contracts on behalf of the government in excess of the threshold limits established by the FAR or in the case of a non-complying contract pursued outside the bounds of FAR guidelines. In general, the threshold limits will rarely affect day-to-day operations for a contracting officer. However, contracting officer should always keep threshold limitations in mind when issuing contract actions on behalf of the agency that employs them.