far 15: contracting by negotiation
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FAR 15: Contracting by Negotiation. 15.4Contract Pricing 15.5 PreAward , Award, and Postaward Notification, Protest and Mistakes 15.6Unsolicited Proposals. Contract Pricing. Scope - PowerPoint PPT PresentationTRANSCRIPT
FAR 15: Contracting by Negotiation
15.4 Contract Pricing
15.5 PreAward, Award, and Postaward Notification,
Protest and Mistakes
15.6 Unsolicited Proposals
15.400-15.401
Contract PricingScope
◦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
15.402
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
15.403-1, 15.403-2
Prohibition on Obtaining CC/PDNot obtained for contracts≤ SATExceptions – 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 itemsOther circumstances
◦ Exercise of option at price established at contract award
◦ Overrun funding or interim billing price adjustments
Requiring Data Other Than CC/PDObtain 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 USGCommercial items
◦ Price analysis required◦ Requests for sales data - limit to relevant time frame
15.403-3
15.403-4
Requiring CC/PDRequired if CO determines no exceptions applyThreshold: $700,000CC/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
15.403-5
Instructions for SubmissionCO 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
Proposal Analysis TechniquesPurpose: ensure final, agreed-to price is
fair and reasonableTechniques
◦ 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)
15.404-1(c)
Cost AnalysisPerformed when CC/PD required
◦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 make-or-buy program reviews
Cost Realism AnalysisIndependently 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)
15.404-1(e)
Technical AnalysisDetermines need for and
reasonableness of resourcesPerformed by specialists at CO
requestAt 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(f)
Unit PricesReflect 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
Unbalanced PricingLine items over/understated as
determined by cost or price analysisRisk indicators
◦ Startup work, mobilization, first articles/testing◦ Base and option quantities◦ Price aggregate of est. quantities on separate
line itemsAll proposals with separate line item
pricing evaluatedCO considers risk in determining
competitive range and source selection, USG price, and whether risk acceptable
15-404.1(g)
15.404-2
Data to Support Proposal AnalysisCO 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
15.404-3
Subcontract Pricing ConsiderationsCO 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 priceData 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
15.404-4(a) and (b)
ProfitEstablishing 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
incurredPolicy: structured approach
ensures relevant factors considered◦Noncompetitive awards >$100K
totaling $50M/year must use structured approach, unless exemption approved
15.404-4(c)
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(d)
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
◦Federal socioeconomic programs◦Capital investments◦Cost control / past accomplishments◦Independent development◦Additional factors may be added by
agency
15.405
Price NegotiationPurpose 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
15.406-2
DocumentationPrenegotiation 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
15.406-3
Documenting the NegotiationPrice 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 FRPField pricing assistance – CO sends copy of documentation to office providing assistance
15.407-1
Special Cost or Pricing AreasDefective 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
15.407-2(a),(b),(c),(d)
Make-or-buy ProgramsContractor ensures lowest cost
and risk to USGUSG may reserve right to
review/agreeAcquisitions 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(e),(f),(g)
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 USGIncorporation in contracts for major
systems or other supplies/services if cost reimbursable or contractor cost share <25%
15.407-3
Forward Pricing Rate AgreementsAny FPRA must be identified in
proposal and latest cost or pricing data updated regularly
Negotiated with COIf changed condition affects
agreement, FPRA revisedCertification of FPRA not required
unless used to price agreement requiring CC/PD
15.407-4
Should-cost ReviewForm 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(c)
Should-cost ReviewOverhead 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
15.408 - Table 15-2
Table 15-2 – Instructions for submitting CC/PDRequirement met when all reasonably
available data submittedRequirement for submission continues until
price negotiated or earlier date establishedInclude index of all certified data and
information accompanying proposal, annotate future revisions
Explain estimating process, identify contingencies, include cost element breakdown
Identify preaward costs incurredInclude FPRA, if negotiatedSubmit Certificate of Current Cost or
Pricing Data
Table 15-2Cost Elements
◦Materials & services Subcontractor cost analyses, if threshold
exceeded; prime responsible for updating subcontractor data
Adequate price competition (subs, purchase orders, materials, etc.)
◦Direct Labor◦Indirect Costs◦Other costs◦Royalties, if >$1500◦Facilities Capital Cost of Money, if claimed
15.503(a)
Preaward, Award, and Postaward Notifications, Protests and MistakesApplies to competitive proposalsNotifications to unsuccessful offerorsPreaward 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(b)
Postaward Notices3 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
15.504
Award to Successful OfferorIf 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
15.505
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
CO should debrief in timely manner, but may refuse if in USG’s best interest
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
15.506
Postaward Debriefing of OfferorsAgency 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
15.507
Protests Against Award, MistakesHandled per Part 33If protest causes agency within one
year of award:◦Issue new solicitation
All offerors receive debriefing and other non-proprietary 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.
15.601-15.603
Unsolicited ProposalsResponses encouraged to to BAA,
SBIR, STTR, or Program R&D announcements or any government-initiated solicitation or program
Results in contract for R&DSuch proposals must be
◦Unique and innovative, independently developed
◦Sufficiently detailed to evaluate agency benefit
◦Evaluated for energy-savings performance
15.604
Agency Points of ContactAgency 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
15.605
Content of Unsolicited ProposalsBasic information
◦Contact information, date, signature, other agencies, proprietary data identification
Technical information◦Title and abstract, objectives, key
personnel, agency support neededSupporting information
◦Price or total estimated costs, period and duration, type of preferred contract, organizational description, agency personnel contacted
15.606
Agency ProceduresAgency must control receipt,
evaluation, disposition of proposalsEstablish agency points of contactReceipt and initial review
◦Is proposal valid, suitable, relevant, sufficient to evaluate merit, properly approved, proper marking requirements
◦If rejected, agency POC notifies offerorEvaluation
◦Methods, merit, contribution, capabilities, key personnel skills, realistic cost
15.607, 15.608
Criteria for Acceptance and Negotiation - Unsolicited ProposalReturn 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
15.609
Limited Use of DataOfferor 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