Transcript FAR 15: Contracting by Negotiation

FAR 15:
Contracting by Negotiation
15.4
15.5
15.6
Contract Pricing
PreAward, Award, and Postaward Notification,
Protest and Mistakes
Unsolicited Proposals
Contract Pricing

Scope
◦ Cost / price negotiations for contracts and
subcontracts and contract modifications,
including sealed bid awards

Definitions
◦ Price = cost + fee or any profit
◦ Subcontract – includes commercial item
transfer between affiliates
15.400-15.401
Contract Pricing (cont.)

Policy
◦ Establish fair and reasonable price (FRP) by
requiring submission of certified cost or pricing
data (CC/PD), or data other than CC/PD
◦ Require only necessary data
◦ Contract priced separately
◦ Price evaluated without contingencies if
contract terms will allow for adjustment
15.402
Prohibition on Obtaining CC/PD
Not obtained for contracts≤ SAT
 Exceptions – CC/PD not required when:

◦ CO determines adequate competition
◦ Price based on law or regulation
◦ Commercial item acquired
◦ Waiver granted
◦ Modifying contract or subcontract for commercial items
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Other circumstances
◦ Exercise of option at price established at contract award
◦ Overrun funding or interim billing price adjustments
15.403-1, 15.403-2
Requiring Data Other Than CC/PD

Obtain from USG sources to determine FRP; if
unavailable, use:
◦ Offeror’s cost data; pricing data on same/similar items
◦ Contract Pricing Reference Guide
◦ Use offeror’s format; ensure data current or updated
◦ Contractor ineligible if data not provided, unless HCA
determines otherwise in best interest of USG

Commercial items
◦ Price analysis required
◦ Requests for sales data - limit to relevant time frame
15.403-3
Requiring CC/PD
Required if CO determines no exceptions apply
 Threshold: $700,000

CC/PD obtained before award of contract, subcontract or
modification exceeding the threshold
◦ Threshold amount includes both increases and
decreases in price adjustments
◦ Exception: HCA may authorize obtaining CC/PD for
contracts > SAT < CC/PD Threshold
 Required info

◦ CC/PD or other than CC/PD
◦ Certificate of CC/PD
15.403-4
Instructions for Submission

CO specifies in solicitation:
◦
◦
◦
◦
If CC/PD required
If Offeror may request exception
If data other than CC/PD required
If Pre- or post-award access to records
required
◦ What data format to use for CC/PD, other than
CC/PD, or forward pricing rate agreements
15.403-5
Proposal Analysis Techniques
Purpose: ensure final, agreed-to price is fair and
reasonable
 Techniques

◦ Price analysis – CC/PD not required (commercial)
◦ Cost analysis – CC/PD required + price analysis for
overall price
◦ Cost analysis – data other than CC/PD
◦ Cost realism – when FRP can’t be determined for
commercial or non-commercial items; CR contracts
◦ Expert advice as needed; conclusions not divulged to
offeror without CO concurrence
◦ Contract Pricing Reference Guides
15.404-1(a)
Price Analysis for Commercial and
Non-Commercial items

Evaluate price w/o separate cost elements or profits

If no exception, CO obtains data, without certification, on
prices for same or similar items
If FRP can’t be determined, get data other than CC/PD
 Compare proposed prices received*
 Compare historical prices - valid basis*
 Parametric estimates to reveal inconsistencies
 Competitive published prices vs independent USG
estimates
 Proposed prices compared to market research
 Analysis of data other than CC/PD
 Value analysis – relative worth

15.404-1(b)
Cost Analysis

Performed when CC/PD required
◦
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◦
Evaluate separate cost elements & fee
Verify cost or pricing data
Effect of current practices on future costs?
Compare of proposed costs
Verify costs comply with applicable cost
principles
◦ Determine whether pertinent data missing and
obtain from offeror
◦ When evaluating subcontracts, compare makeor-buy program reviews
15.404-1(c)
Cost Realism Analysis
Independently evaluate whether cost elements
realistic, USG requirements understood,
elements consistent with methods/materials in
proposal
 Performed on Cost Reimbursable contracts

◦ CO determines probable cost to add or reduce to
adjust offeror’s proposal to realistic levels
◦ May also be used on FPI or FP contracts if scope not
understood, quality concerns, or quality/service
shortfalls
◦ Offered price may not be adjusted after analysis
15.404-1(d)
Technical Analysis
Determines need for and reasonableness of
resources
 Performed by specialists at CO request
 At minimum, review types and quantity of
materials, labor hours, labor mix
 Analysis also used for evaluating prices of
“similar to” or commercial items “of a
type”, or items that require minor
modifications

15.404-1(e)
Unit Prices

Reflect intrinsic value proportional to base
cost, unless adequate competition

No allocation method distorting costs

Offerors must identify which items they will
not manufacture or to which they don’t
contribute significant value
15.404-1(f)
Unbalanced Pricing


Line items over/understated as determined by
cost or price analysis
Risk indicators
◦ Startup work, mobilization, first articles/testing
◦ Base and option quantities
◦ Price aggregate of est. quantities on separate line items
All proposals with separate line item pricing
evaluated
 CO considers risk in determining competitive
range and source selection, USG price, and
whether risk acceptable

15-404.1(g)
Data to Support Proposal Analysis

CO requests field pricing assistance when
information available inadequate for FRP
◦ Audit or technical reports, pricing practices, sales
history, offeror’s other customary business practices
Pricing information directly to CO; becomes part of
contract file
 Cognizant audit office assistance – auditor
responsible for scope/depth
 Deficient proposals – data insufficient or offeror
non-cooperative, CO to request data or elevate to
next level

15.404-2
Subcontract Pricing Considerations

CO evaluates
◦ Contractor/sub approved purchasing system?
◦ Contractor analyzed sub’s costs and negotiated
price before submitting proposal?
◦ Separate analysis of prime and subcontractor’s
proposals, including CC/PD

Prime or sub shall
◦ Conduct price or cost analysis to establish
reasonableness
◦ Include results in price proposal
15.404-3
Subcontract Pricing Considerations
(cont.)

If CC/PD required, Contractor or Sub shall
obtain and analyze CC/PD from their
respective subcontractors
◦ Required for subcontracts lower of either
 ≥$12.5M or
 Both >$700K (CC/PD threshold) and >10% of prime
contractor’s proposed price
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
Data must be current and accurate; updated
by Prime during negotiations as necessary
If > one contender for specific scope, submit
only most likely subcontractor’s CC/PD
15.404-3
Profit

Establishing profit or fee portion of
prenegotiation objectives based on cost
analysis
◦ Potential total remuneration > allocable costs
(not net income)
◦ USG estimate of allowable costs to be incurred

Policy: structured approach ensures
relevant factors considered
◦ Noncompetitive awards >$100K totaling
$50M/year must use structured approach,
unless exemption approved
15.404-4(a) and (b)
Profit (cont.)

CO responsibilities:
◦ If negotiation not based on cost analysis, profit
analysis not required
◦ Used structured approach or profit analysis
factors for prenegotiation objectives
◦ Contractor acquired equipment/property and
facilities cost of capital excluded from analysis
◦ Statutory limits
 CPFF experimental or R&D: 15%
 A/E services for public works or utilities: 6%
 CPFF all others: 10%
 (Percentage of estimated costs excluding fee)
15.404-4(c)
Profit (cont.)

Profit-analysis factors
◦ Contractor effort
◦ Contract cost risk
 T&M, Labor Hour, FFP, and LOE term treated as CPFF
contracts by CO for evaluation purposes
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Federal socioeconomic programs
Capital investments
Cost control / past accomplishments
Independent development
Additional factors may be added by agency
15.404(d)
Price Negotiation

Purpose to reach agreement on FRP
◦ If expert recommendations not incorporated,
CO must justify in writing
Overall price USG pays is primary concern
 Greatest incentive for contractor efficiency
 Profit/fee not negotiated without
concurrent negotiation of cost and type of
contract
 If contractor unreasonable, CO refers
contract action to level above CO

15.405
Documentation

Prenegotiation Objectives
◦ Results of CO analysis
◦ Established before negotiating price
◦ Cost analysis – issues, objectives, profit/fee

Certificate of Cost or Pricing Data
◦ When CC/PD required, certificate also required and
part of contract file
◦ Certificate applies to data, not contractor’s judgment
◦ Concurrence on cutoff dates for data
 Submitted with proposal
 Updated as necessary prior to final price negotiations
 Later exception: certificate not submitted, data not certified
15.406-2
Documenting the Negotiation

Price negotiation memorandum
◦ Purpose, acquisition, parties involved, contractor systems
considered
◦ If threshold exceeded, exception for CC/PD
◦ If CC/PD required, how used, whether accurate, whether exception
applied
◦ Proposal summary, field pricing recommendations, USG position
and any variance in final
◦ Prenegotiation objectives – initial and final
◦ Impact of any congressional or agency direction
◦ Prenegotiation objective profit/fee – initial and final position
◦ Documentation of FRP

Field pricing assistance – CO sends copy of
documentation to office providing assistance
15.406-3
Special Cost or Pricing Areas

Defective CC/PD
◦ Before award – notify contractor, corrected, documented
◦ After award – Per contract clauses, USG entitled to price
adjustment including profit/fee
 Offset for understated data up to amount of USG claim of overstated
pricing, if contractor entitled and CC/PD available but not submitted
 Disallowed if data known to be understated, price wouldn’t have increased
 Overpayment exists only if made for accepted supplies or services
 Interest charged for each quarter from time of overpayment to repayment
 Penalty for known defective data submission is equal to amount of
overpayment
 Demand letter issued by CO
15.407-1
Special Cost or Pricing Areas (cont.)

If CO learns of defective data, can request audit
◦ If defective, CO gives contractor opportunity to
respond; FAPIIS updated if final determination changed
◦ Right to reduced price whether subcontract a cost
estimate or firm agreement
◦ Defective subcontract data adjustment limited to ∆
between price used for prime and actual subcontract
or actual cost to contractor, if no subcontract awarded
◦ CR/FP except FFP and FP with economic price
adjustment: disallowance or non-recognition of costs
15.407-1
Make-or-buy Programs
Contractor ensures lowest cost and risk to
USG
 USG may reserve right to review/agree
 Acquisitions requiring make-or-buy

◦ CC/PD required and value >$12.5M, except
R&D or no follow-on production
◦ Under $12.5M – if CO determines info
necessary, reasons documented
◦ Solicitation must include requirement and
evaluation factors
15.407-2(a),(b),(c),(d)
Make-or-buy Programs (cont.)

Program requirements in proposal
 Items and work included, categorized by ‘make’ or ‘buy’;
 Production location, whether near labor surplus area;
 Identification of subcontractors, location, size
 Whether make-or-buy decision should be deferred

Evaluation, negotiation
 Before contract award; no ‘make items’ if otherwise
available unless lower cost to USG
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Incorporation in contracts for major systems
or other supplies/services if cost reimbursable
or contractor cost share <25%
15.407-2(e),(f),(g)
Forward Pricing Rate Agreements
Any FPRA must be identified in proposal
and latest cost or pricing data updated
regularly
 Negotiated with CO
 If changed condition affects agreement,
FPRA revised
 Certification of FPRA not required unless
used to price agreement requiring CC/PD
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15.407-3
Should-cost Review
 Form
of cost analysis which doesn’t
assume historical costs reflect efficiency
 Promotes improvements to reduce cost
 Program review
 Evaluate significant elements of direct costs
 Separate audit required
 CO determines which operations have greatest
cost savings potential
 Team report required
 Identified in acquisition plan and solicitation

Estimating Systems – cognizant audit agency
◦ Auditor provides corrective action recommendations
15.407-4
Should-cost Review
Overhead review
◦ Evaluate and negotiate FPRA
◦ Separate audit report required
◦ Evaluate significant indirect cost elements in
depth
◦ Identify, recommend corrective actions for
inefficient practices
◦ No separate report required if performed with
program should-cost review
◦ Follow-up plan to monitor corrections
15.407-4(c)
Table 15-2 – Instructions for
submitting CC/PD
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Requirement met when all reasonably available data
submitted
Requirement for submission continues until price
negotiated or earlier date established
Include index of all certified data and information
accompanying proposal, annotate future revisions
Explain estimating process, identify contingencies,
include cost element breakdown
Identify preaward costs incurred
Include FPRA, if negotiated
Submit Certificate of Current Cost or Pricing Data
15.408 - Table 15-2
Table 15-2

Cost Elements
◦ Materials & services
 Subcontractor cost analyses, if threshold exceeded;
prime responsible for updating subcontractor data
 Adequate price competition (subs, purchase orders,
materials, etc.)
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◦
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Direct Labor
Indirect Costs
Other costs
Royalties, if >$1500
Facilities Capital Cost of Money, if claimed
Preaward, Award, and Postaward
Notifications, Protests and Mistakes
Applies to competitive proposals
 Notifications to unsuccessful offerors
 Preaward Notices

◦ Notice of exclusion from competitive range; basis for
determination, proposal revision not considered
◦ Small business programs:
 Notified prior to award, after completion of negotiations, type
of small business selected
 Identify successful offeror, no subsequent revisions considered; no
response required unless SBC status of apparent awardee
challenged
 Notice not required if urgency necessitates award, or contract is
under 8(a) program
15.503(a)
Postaward Notices

3 days after date of contract award, CO
issues written notification to those in
competitive range not selected or not
previously notified
◦ Notice also made on request for proposals
under simplified acquisition procedures
◦ Information in notice:
 Number of offers solicited and proposals received
 Name and address of award recipients, including
offered items/quantity/unit prices
 Reason proposal not accepted
 No confidential business information revealed
15.503(b)
Award to Successful Offeror
If award includes information different from
proposal, both parties sign
 If award for less than all possible items,
notice states USG may make subsequent
awards within proposal acceptance period
 If USG forms OF 307, SF 26, or SF 33 not
used, USG acceptance statement must be
included with CO name, signature, date;
likewise, contractor must sign if award
contains different information than proposal

15.504
Preaward Debriefing of Offerors

May request debriefing within 3 days of notice if excluded from
competitive range
◦ May be delayed until after award, but can affect protest timliness
◦ No more than one debriefing per proposal
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CO should debrief in timely manner, but may refuse if in USG’s
best interest
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Debriefings chaired by CO and include
◦ Evaluation of significant elements, rationale for elimination,
reasonable responses to questions
◦ Do not disclose number or identity of other offerors, content,
ranking, evaluation or other prohibited information
15.505
Postaward Debriefing of Offerors

Agency should receive request for debriefing
within 3d of unsuccessful offeror’s receipt of
notice
◦ Debrief occurs within 5 days of receipt of request
◦ If late, not entitled to debrief
◦ Delayed debriefing or untimely request doesn’t
automatically extend protest deadline

Debrief format determined by CO
◦ Evaluation of weaknesses, cost or price, technical rating;
offerors’ ranking; rationale for award, make/model of items
supplied; responses to questions
◦ Excludes specific comparisons, business confidential
information
15.506
Protests Against Award, Mistakes


Handled per Part 33
If protest causes agency within one year of
award:
◦ Issue new solicitation
 All offerors receive debriefing and other nonproprietary information given to original offerors
◦ Request revised proposals
 Copy of debriefing and other non-proprietary
information provided to offerors in the competitive
range of the original proposal

If mistakes disclosed after award, process at
14.407-4 followed.
15.507
Unsolicited Proposals
Responses encouraged to to BAA, SBIR,
STTR, or Program R&D announcements or
any government-initiated solicitation or
program
 Results in contract for R&D
 Such proposals must be

◦ Unique and innovative, independently developed
◦ Sufficiently detailed to evaluate agency benefit
◦ Evaluated for energy-savings performance
15.601-15.603
Agency Points of Contact

Agency POC must make following available:
◦ Definition and content for acceptability
◦ Requirements for responsibility (9.1) and
organizational COI (9.2)
◦ Preferred methods and procedures for submittal
◦ Names of agency POCs
◦ Information sources
◦ Instructions for marking proprietary info
◦ Only cognizant CO has authority to bind USG
15.604
Content of Unsolicited Proposals

Basic information
◦ Contact information, date, signature, other
agencies, proprietary data identification
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Technical information
◦ Title and abstract, objectives, key personnel,
agency support needed
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Supporting information
◦ Price or total estimated costs, period and
duration, type of preferred contract,
organizational description, agency personnel
contacted
15.605
Agency Procedures
Agency must control receipt, evaluation,
disposition of proposals
 Establish agency points of contact
 Receipt and initial review

◦ Is proposal valid, suitable, relevant, sufficient to
evaluate merit, properly approved, proper
marking requirements
◦ If rejected, agency POC notifies offeror

Evaluation
◦ Methods, merit, contribution, capabilities, key
personnel skills, realistic cost
15.606
Criteria for Acceptance and
Negotiation - Unsolicited Proposal

Return if
◦ Available elsewhere without restriction,
resembles pending competitive acquisition,
not relevant to mission or not innovative

Negotiate sole source if
◦ Favorably evaluated, justification approved,
agency funds, CO complied with synopsis
requirements

USG prohibited from
◦ using proposal as basis for any solicitation w/o
permission or from disclosing restrictively
marked information
15.607, 15.608
Limited Use of Data
Offeror may restrict use if marked appropriately,
otherwise proposal will be returned
 Agency POC routes with restriction unless
offeror specifically states no restrictions imposed
 If unrestricted and evaluation outside USG
necessary, proposal data may not be disclosed to
others

◦ If restricted, offeror must agree to external review
◦ If not an educational/non-profit institution, written
permission required before release for evaluation
◦ Written concurrence from non-USG evaluator not to
disclose
15.609