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Cost and Pricing Data - A & E
By FormerCO4AF on Tuesday, January 07, 2003 - 03:38 pm:

I am about to negotiate a task order to an A&E IDIQ contract. The proposal is in excess of $1 million.

Reading FAR 36.601-2 this particular IDIQ is considered a competative award.

With this in mind, does FAR 15.403-1(c)(1)(iii) apply as a waiver to cost and prcing data since the basic contract has a pre-established price schedule?

My thought is it would be applicable and no cost and pricing data is required, especially since what we are negotiating is hours and work classifications.

Thoughts.......


By Anonymous on Tuesday, January 07, 2003 - 04:44 pm:

Is your IDIQ contract a multiple award contract?


By FormerCO4AF on Tuesday, January 07, 2003 - 05:25 pm:

Anonymous

We have multiple IDIQ's for particular areas of concern (Geotech, survey, multidiscipline etc...) This task order was sent to one IDIQ holder for a proposal.

The schedule in the basic contract establishes the classifications, hourly rates, overhead, profit etc...


By Anonymous on Tuesday, January 07, 2003 - 06:15 pm:

Were the multiple IDIQ's awarded based on the same solicitation? If yes, the contract would be a multiple award IDIQ and should have provisions that define how each individual task order will be competed or how each awardee will be given a "fair opportunity" to receive awards. (See FAR 16.505(b)). If your contract is a multiple award IDIQ and you did not compete the task order, I'd say you aren't basing your award on competition as defined by your contract. If, on the other hand, your IDIQ contract is a single award contract, I could see why you'd say you did compete the requirements when you went through source selection for the basic award. I'd then rely on the exemption in your original message and not require cost or pricing data from the AE.


By joel hoffman on Wednesday, January 08, 2003 - 06:40 am:

Anon - A-E contracts aren't subject to the FAR 16.5 requirements for ID/IQ competition.

FormerCO4AF, you asked for a proposal and received one. Is there nothing factual to negotiate - only number of estimated hours (judgemental), work classifications (maybe factual) times the contract unit rate (already agreed to)? There may be some factual cost or pricing data to certify, upon completion of negotiations (the work classifications). If so, have the Contractor sign the certificate. If there isn't any factual data to certify, what good is it to have the Contractor certify?

I don't know how the original contract unit rates were established. It isn't legal (Brooks Act) to compete A-E contracts on the basis of price - the selection must be qualifications based. If you followed the law, the unit prices weren't competitively established. However established, they are now part of the contract, thus are not considered cost or pricing data for TINA purposes.

happy sails! joel hoffman


By Anonymous on Wednesday, January 08, 2003 - 10:03 am:

Joel, by what authority are A-E contracts exempt from the requirements of FAR 16.5? I understand you can't compete requirements based on price, but you could still do a best value determination. I couldn't find the exception. I'd appreciate the information.


By FormerCO4AF on Wednesday, January 08, 2003 - 11:21 am:

Anonymous

Look up 41 USC 253 and 259, Brooks Act. It says that A&E firms are selected based on professional abilities only. After selecting the tops firms based on abilities and evaluations forms some of the rates can be negotiated such as profit and hourly rates. We always have an audit done to confirm overhead rates since they can be so high. We have some that are over 170% for overhead.

Joel,

I am interested in hearing your opinion on the applicability of the Brooks Act to task orders. There's a "school of thought" that once the IDIQ's are awarded the Brooks Act has been satisfied and task orders can be now be competed based on price.

This task order I am working on I "competed" between 4 existing IDIQ's. The selection had nothing to do with price, we did a selection based on the proposed team members, their resumes/abilities and experience with Environmental Impact Studies. The task order is written to restricts the contractor's ability to arbitrarily replace team members.


By FormerCO4AF on Wednesday, January 08, 2003 - 11:37 am:

Joel

Forgot to say thanks for the info. Thats the way I was understanding it but just wanted a second opinion.


By Anonymous on Wednesday, January 08, 2003 - 11:50 am:

Thanks for the information. I knew you couldn't compete AE actions based on price, but FAR 16.5 states that if you have multiple award IDIQ contracts for AE work, you have to comply with FAR 36.6 when placing task orders. Sounds like you did that.


By Vern Edwards on Wednesday, January 08, 2003 - 12:36 pm:

FormerCO4AF:

Your question was whether or not the CO could apply the price analysis exception (not "waiver," waiver is something else entirely) in FAR 15.403-1(c)(1)(iii) when negotiating a $1 million task order under an IDIQ contract, because the basic contract has a pre-established price schedule.

The answer depends on what you meant by "pre-established price schedule".

If the basic IDIQ contract includes prices for specific tasks, i.e., firm-fixed-prices for jobs like designing a 1,000 sq. ft. warehouse, then you don't need cost or pricing data when issuing a task order because the price has already been established, thus you don't need to apply the price analysis exception. But if the IDIQ contract includes only hourly rates, which is what it sounds like from your description, then you must price the task order, because hourly rates are just input charges, not output prices. This means that if the anticipated price of the task order exceeds the TINA threshold you must obtain the submission and certification of cost or pricing data before issuing the order, unless an exception applies or the HCA grants a waiver.

In order to use the price analysis exception, the CO must (1) perform a price analysis and (2) determine that the proposed task order price is reasonable "in comparison with current or recent prices for the same or similar" work "under contracts that resulted from adequate price competition." By law, A-E contract prices may not be based upon adequate price competition. Thus, the price analysis exception is not available for the pricing of A-E task orders. You must obtain the submission and certification of cost or pricing data unless you can get a waiver from the HCA.

Also, while IDIQ A-E contracts are not subject to the statutory preference for multiple-awards [see FAR 16.500(d)], I believe that multiple-award IDIQ A-E contracts are subject to the "fair opportunity" requirement of FAR 16.505(b)(1), except that price or cost may not be considered. If I'm wrong about that based on authoritative information to the contrary, I would like to know about it.

Vern


By Vern Edwards on Wednesday, January 08, 2003 - 12:50 pm:

FormerCO4AF:

The Brooks Act does apply to task orders. See FAR 16.500(d). It says the placement of orders under multiple-award IDIQ A-E contracts must be consistent with FAR Subpart 36.6.

Vern


By joel hoffman on Friday, January 10, 2003 - 06:32 am:

I've been TDY since my original response (I was headed out the door to the airport when I saw the question). If I owe anyone further explanation, I'll respond when I get to the office and can take the time to research all the questions and explain. I think Vern provided many of the references. I was originally referring to multiple award ID/IQ price competition when I said that the "A-E contracts aren't subject to the FAR 16.5 requirements for ID/IQ competition", because Anonymous implied that there would be some price competition. I'll research the basic question of whether the "fair opportunity" requirements apply. I think that they do, according to Corps of Engineers guidance (at least for us). However, that wasn't the issue. The original question concerned a price proposal from one selected A-E firm. That's how you negotiate price for A-E task orders - pick the best qualified (generally) firm - THEN negotiate price. You don't use price competition for selection of the A-E firm, therefore can't use it for a TINA exception.

For a sole source price negotation (e.g., you've selected the IDIQ holder to obtain a price proposal from), there can be cost or pricing data, even if the unit prices are pre-established.

I think that the portion of the ($1,000,000) proposal that I may consider to be "cost or pricing data" would be the proposed work classifications (I assume you mean which type and professional level is proposed). This is an area where A-E firms sometimes heavily pad their proposals.

If, for instance, level III architects are primarily proposed, but the A-E actually performs the design using entirely Level I and technicians (draftsmen), there may be something wrong. An A-E firm generally knows what team it will assign to a project. If it later can be shown that the firm had no intention at the time of negotiations of using the mix of professional classifications it proposed, I think you could make a case for defective pricing.

You might consider such data as judgemental, rather than factual. I believe I have some literature on relying on certain judgemental data, which formulate the primary basis for the proposal, back at the office. Nash and Cibinic may cover it in "Formation of Government Contracts" - I know I've seen it and will check.

At any rate, depending upon the circumstances, I might consider the proposed work classifications to be C&P for the above reasons. An instance might be where the A-E insists on the mix, if challenged during negotiations, assuming that I rely on that information. It's not cut and dry - depends on each particular negotiation. happy sails! joel


By joel hoffman on Friday, January 10, 2003 - 07:06 am:

To further clarify - I don't consider the exact mix of proposed classifications to be "cost or pricing data", only the concept of the intent to use certain classifications to accomplish the work. If that concept was intentionally misleading, there should be a basis for defective pricing adjustment. happy sails! joel


By Vern Edwards on Friday, January 10, 2003 - 09:33 am:

Joel:

I'm not sure that I agree with you about "the concept of the intent" being cost or pricing data. I say I'm not sure I agree because I'm not sure what you mean by "the concept of the intent." Cost or pricing data are facts.

Vern


By FormerCO4AF on Friday, January 10, 2003 - 11:11 am:

Joel:

Thanks for the input. Your reference to the classifications and the work are right on target for this particular task order.

This contractor was selected because of the team make-up and the task order required the team to be intact for the work. Thats why they were selected. The proposal arrived, the team was changed (without prior approval of the CO as required) and yes, they padded the proposal by changing the team. Example, the project manager is now identified as the Principle, at the higher rate, so of course his hours went with him. The person as the principle for the selection process doesn't even show up on the proposal. When asked, the contractor said he never took it "literal" that he couldn't adjust the team. Why spend the time writing a task order and doing a selection based on team makeup if your not going to stick to it? Frustrating.

With what you said, compared to what we received in the proposal, I can see where C&P would be advisable for this task order.

Thanks again.


By Anonymous on Friday, January 10, 2003 - 11:22 am:

Joel, I don't believe I implied that there would be price competition in my original message. Part 36.6 describes how the AE firm should be selected, which for all intents and purposes amounts to competition based on technical criteria.


By joel hoffman on Friday, January 10, 2003 - 04:12 pm:

Vern, in my opinion, if the Contractor led me to rely on classifications it had no intention of using, at the time of agreement, it would be considered to be defective cost or pricing data.

The statutory definition of C&P data at 10 USC 2306a(i) and 41 USC 254b(i) "includes all facts that, as of the date of agreement on the price of a contract...a prudent buyer or seller would reasonably expect to affect price negotiations significantly. Such term does not include information that is judgemental, but does include the factual information from which a judgement was derived."

The case law goes back and forth, over what is or isn't "factual".

What I meant by my statement concerning "the concept of intent" was this. The number of forecast hours would probably be considered judgemental. However - in my opinion - the classifications could be considered factual, depending upon the circumstances. If an A-E intentionally misleads the Government negotiator by proposing certain classifications (senior PM, senior engineer, etc.), knowing at the time that they will only use junior engineers, PM's and draftsmen to perform the actual design work - not the higher classifications that they proposed - there is likely grounds for defective pricing.

Under TINA, I wouldn't have to prove intent to defraud. I'd have to establish that the Contractor was aware that the data that I substantially relied on was "incorrect" at the time of negotiations and agreement (not always easy - information sometimes obtained from an internal whistleblower or through casual conversation with an insider, etc.). One reason TINA was passed was to eliminate the need for the Government to prove intent to defraud, false statements, false claims, etc. TINA provides administrative relief, without the need to prove a criminal act occurred. The standard of proof is also much less stringent for TINA than for criminal acts.

There is some good discussion of what constitutes C&P data in Nash and Cibinic's Formation of Government Contracts, beginning on page 1324 of the 3rd Edition. The October 1989 issue of(Formerly) West Publishing's Briefing Papers also has some good discussion of the distinction between factual and judgemental proposal data.

Vern, I don't know whether or not you agree, but does that further clarify the further clarification? A full explanation would require a thesis. That's why Nash and Cibinic and Briefing Papers are published. I'm a practitioner, not a law professor. I have had several successes with TINA and a couple of unsuccessful experiences.

I think that FormerCO4AF understands what I mean. In summary to his/her original question, I think that:

1) the labor classification portion of the proposal can be considered cost or pricing data in some cases.

2) the adequate price competition exemption is inapplicable on an A-E task order.

(i) There shouldn't have been price competition in establishing unit rates.

(ii) The task order isn't being price competed.

(iii) The task order proposal consists of more than just contract unit prices - it includes contractor determined labor classifications.

happy sails! joel


By joel hoffman on Friday, January 10, 2003 - 04:21 pm:

Well, heck - one more clarification - my successes and failures with Defective Pricing are on construction contracts, not A-E contracts. I haven't been involved in an A-E contract defective pricing claim. I doubt if there are many and I'd rather not explain why, here. Suffice it to say that "we are all great, professional buds". happy sails! joel


By Vern Edwards on Friday, January 10, 2003 - 06:35 pm:

Joel:

If a contractor told a the contracting officer during negotiations that it planned to use labor category X when in fact it planned to use labor category Y, then the government might be able to prove defective pricing on the basis of the contractor's failure to disclose the plan to use category Y. The government would have to prove that the plan to use category Y had existed prior to the date of agreement on price.

However, I think that a contractor could argue rather effectively in its own defense that a statement of mere intention to use category X is nothing more than an expression of expectation, an estimate, a judgment, and not a statement of fact. The contractor could simply say that it had changed its mind about what labor category to use, which it has a right to do. Absent a smoking gun, I think the government would have a hard time proving that an different, undisclosed plan had existed prior to agreement on price.

Now, Joel, don't spend a lot of time looking up briefing papers and case law, unless you want to do it for your own purposes. I think we have answered FormerCO4AF's question.

Have a good weekend.

Vern


By joel hoffman on Friday, January 10, 2003 - 07:54 pm:

I agree with your analysis. Have a good one, too.
happy sails! joel

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