By Marie Salamone, Partner and Evan Slebrch, Senior Consultant

Overview

The U.S. Department of Health and Human Services (“HHS”), a federal agency created to enhance the health and well-being of all Americans, generally utilizes a Contracting Officer’s Authorization (“COA”) to grant pre-approval to the prime contractor to proceed with procuring and/or incurring certain costs expected under many contracts the agency issues to government contractors. A COA is written authority from the Contracting Officer (“CO”) to move forward with a function related to cost, which is typically required in a cost-reimbursement contract.

COA Contract Review and Approval Process

The COA contract review involves the contractor developing and submitting a request for COA approval, which includes the necessary documentation and justification for the costs involved. The COA approval process requires the Contracting Officer to assess the request and provide authorization before the contractor can proceed with the specified activities or expenditures.

HHS and its operating divisions provide many federal contract opportunities to companies/organizations to support the agency’s mission and programs through the award of contracts, grants, and other agreements. Award types include Other Transaction Authority (“OTA”), firm-fixed-price (“FFP”), time and material (“T&M”), and cost-reimbursement, as well as hybrid awards where multiple contract types are included. Maintaining compliance with federal awards is paramount for contract success; as such, when contracting with HHS or any other U.S. Federal agency, contractors are strongly advised to closely read the details of contract-specific requirements, including all Federal Acquisition Regulations (“FAR”) and supplemental agency regulation clauses.

COA Requirements

Similar to the advanced notification of intent to subcontract and consent to subcontract requirements found in FAR 52.244-2 Subcontracts, a COA is written authority from the CO to move forward with a  contract specified function or activity. Currently, the FAR does not contain a requirement specific to COAs; rather, contract-specific terms are used to require contractors to develop and submit requests for COAs. The COA requirement in a prime contract will define what functions or activities will require COA approval and at what thresholds, if necessary.

A COA contract review involves the contractor developing and submitting requests for COA approval, which outlines the specific costs and activities requiring authorization. The COA approval process necessitates the Contracting Officer's evaluation of these requests, ensuring that they meet all contractual and regulatory requirements before granting authorization.

Below is but one example of COA contract clause language that may be included in a contract with HHS:

The Contractor shall submit a Contracting Officer’s Authorization (COA) approval request, to the Contracting Officer for all subcontractors, consultants, and equipment purchases proposed during the course of this contract. COAs for subcontractors and consultant agreements shall be submitted when the potential subcontract is expected to exceed $250,000; for equipment purchases, when the unit price per item is expected to exceed $25,000. Sufficient time shall be provided for the Government to fully assess the transaction proposed.

Because COA requirements are contract-specific, the contractual language may be unique for each contract. Contract language and contract terms and conditions may vary, including COA requirements affecting COA triggers, documentation expectations, and process. Contractors are encouraged to read their contracts and create contract briefs, including any contract-specific COA requirements in such briefs.

Contractors should expect to see a requirement for a COA under HHS cost-reimbursable contracts. This requirement is imposed on the Contractor to formally submit documented requests for pre-approval for specific elements of costs prior to procuring and/or requesting reimbursement; and may be reserved for contracts with inadequate or unassessed Purchasing Systems. Typically, a contractor should expect a COA requirement in their prime contract with HHS for the following specifically-identified costs:

• Subcontract agreements;

    - Per FAR Part 44, the definition of a “subcontract” includes purchase orders and change orders

• Consultant agreements;

• Large equipment purchases;

• Foreign travel; and

• Extended domestic travel.

When a COA is contractually required, the Contractor must develop a formal written request for approval for the applicable costs via a COA request (“request” as used herein) submission. Contractors should include all information specified by the contract. The COA contract review and approval process will often require, without limitation, the following information:

• Competition activities, as well as technical and cost/price evaluation activities performed;

• Qualifications/capabilities statement as they pertain to the activities included in the proposed subcontract/agreement;

• Willingness to perform under the Contract (i.e., commitment letters/preliminary agreements), with a list of specific duties included in the proposed subcontract/agreement;

• The priority that the work will be given and how this work relates to the Prime Contractor’s Statement of Work (SOW);

• The amount of time required by the subcontractor, vendor, etc.[1], and the availability of facilities; and

• A complete cost proposal or quote, in similar format to the Contractor’s cost proposal.

We recommend developing a contract-specific COA template to facilitate documentation of unique COA-related requirements, associated compliance, and a streamlined review and authorization process by the CO.

Travel COA Requests

For travel-related COA requests (transportation, lodging, meals, and incidentals expenses), Contractors should provide a detailed breakdown of each trip’s estimated costs, and an explanation of why the trip is necessary. All travel incurred is subject to GSA Per Diem Rates (Per Diem Rates | GSA) and compliance with the Cost Principles in FAR Part 31. Importantly, travel requests must not include unallowable travel costs. When submitting a COA request for travel, details should include:

• Destination of trip;

• Purpose of the trip;

• Dates of travel;

• Number of travelers;

• Travelers’ names;

• Airfare cost;

• Lodging cost; and

• Total estimated travel costs.

Based on the information provided, the CO will determine if the requested travel is necessary, why the work cannot be performed without the use of travel, and if the travel meets the requirements found in FAR 31.205-46 Travel Costs, as well as all regulation and applicable contract terms. If the Contractor’s request includes unallowable travel, the CO should notify the Contractor and request an updated COA free of unallowable costs. To reduce the risk of a COA request requiring a resubmission, Contractors should have well-established and compliant travel practices, as well as COA policies and procedures with clearly defined roles and responsibilities.

Process for Submitting COA Requests

Typically, the process for submitting COA requests is not defined in the contract; therefore, Contractors should expect each CO to communicate how requests should be submitted. We recommend working with the CO at contract kick-off to define the CO’s intended COA process and to follow-up in writing to memorialize the parties’ understanding.

In Capital Edge’s experience, requests are usually submitted via email or a government-provided portal. For example, when contracting with Biomedical Advanced Research and Development Authority (BARDA) (an HHS subagency), requests are provided via a secure submission using BARDA’s Collaborator Portal site (https://bdr.hhs.gov/). The CO will communicate if other HHS team members should be copied on the email submissions, and Capital Edge recommends that Contractors copy necessary internal stakeholders. Contractors should also establish who will be responsible for providing the requisite input when developing and submitting the COA, as HHS may limit the number of users who have access to government portals due to security concerns. Contractors should clarify with the CO to confirm how COA requests are to be submitted and how the CO should be notified of said submission.

We recommend retaining timestamped evidence of COA request submission to the Contractor’s contract administration file to demonstrate timeliness for auditability purposes later.

COA Approval

Once the COA request has been received, the CO will review the request for cost reasonableness. If necessary, the CO may reach out with questions or clarifications prior to providing approval. If this occurs, the Contractor should work with the internal stakeholders to provide prompt and accurate responses. Generally, the CO will provide COA approvals via email; however, Capital Edge has experienced situations in which Contractors receive verbal approval. Regardless of the form in which approval is provided, Contractors are advised to document and acknowledge these approvals in writing.

Similar to all COA-related documentation, approvals should be retained in the contract administration files and disseminated to appropriate stakeholders. Finally, once approval is received, the Contractor can continue with procurement of the approved cost item. Contractors should cite the applicable COA number on the associated purchase requisition for documentation purposes, and on the face of invoices subject to the COA when billing the costs to HHS.

Documented Contractor COA Request Policies and Procedures

To establish effective contracting practices related to COA requirements, Contractors should have a documented policy and procedure to clearly address the steps required for the preparation, review, submission and archiving of COA requests. This policy should include clear timelines/deadlines at each stage in the process, identification of proper management review and approval activities prior to submission, and specific roles and responsibilities of those involved in the process.

To enable compliance in practice to the COA-oriented policy and procedure, Capital Edge suggests that Contractors have a COA template(s) as noted above as well as a COA request checklist outlining the contract requirements, internal requirements, submission requirements, file documentation, and adequacy checks, which will help ensure all necessary due diligence is completed during the COA contract review and approval process.

Capital Edge also suggests development of a COA log to outline which requests have been approved, which have been submitted but are yet to be approved, request dates, approval dates, approval amounts, subcontract type, and any other information deemed necessary by the Contractor.

COA supporting files should be maintained and include the COA request, approval, and any other supporting documentation. The COA files should be managed and maintained in accordance with Contractor’s established policies and procedures.

Finally, we recommend including COA (policy, procedure and practice) as an element of Contractor’s purchasing system internal review program.

Takeaways

Although HHS contracts, grants, and other agreements may come with the additional burden of required prior authorization via COA requests, maintaining well-established practices and documented policies and procedures in your organization prior to receiving an HHS award will allow your team to masterfully navigate through such requirements with ease. The COA contract review and approval processes are critical for ensuring compliance and successful contract management.

Experienced Capital Edge experts can assist with existing processes or help to establish sound business practices to ensure compliance under your HHS prime contract using our proprietary tools, policies, and checklists.

[1] FAR 44.101 defines a subcontractor as “any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor,” HHS defines a subcontractor as “A person or entity that has a direct contract with the Contractor to perform any of the work at the site (Glossary | HHS.gov)."

Capital Edge Consulting is a professional services company comprised of adept problem solvers who deliver tangible results to address today’s most complex U.S. government contracting challenges. Capital Edge helps clients address the challenging regulatory, contractual, and compliance requirements of U.S. federal contracts and we have experience working with a wide variety of industries that provide goods or services to the federal government including industries such as biotech and healthcare, nuclear energy, education, information technology, non-profit, professional services, defense, and software.