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joel hoffman

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    Following God, Family, Sailing, Motorcycling, Hunting, Volleyball; Acquisition, Negotiating, Source Selections, Contract Administration, Construction, Design-Build Construction, mods, claims, TFD, TFC, project controls,

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  1. Yes competitive. I was editing my post to add that while you posted.🤠
  2. I honestly don’t know how much manufacturers normally mark up their products. I do know that a friend of mine is related to a family who still owns one of the original Ford dealers in Montana. FMC would sell the dealer one vehicle per year at a deeply discounted price. The family let my friend buy a new 1997 Ford F-150. The dealer sticker price was about $23,000. He paid $13,000 for it including shipping from the factory. Of course that doesn’t necessarily represent the FMC cost. But the dealer cost at the time would have been much closer to $19,000- $20,000. I can’t speak for the present but in the late 60’s to early 70’s, the Air Force Academy Cadet Store sold everything to Cadets at cost with no markup. The store sold a wide variety of goods like a smaller Base Exchange Store. Most everything cost about 50% of suggested or pre-tagged retail prices. It seemed to me at the time that retail store prices ran about 100% of a store’s cost from a manufacturer or wholesale supply. Of course that also included all of a retail store’s costs plus profit margins. So, yes - I can see that normal retail markups on supplier prices for their internal costs plus profit can be substantial and I don’t have a clue what normal manufacturer markups in a competitive market are. I say competitive because the FAR cites a competitive market in the description of “fair and reasonable price”.
  3. That’s great. Now, please show how a part that allegedly cost $128 to produce and sold for over $7000 is a fair and reasonable price buying it from the manufacturer, not a dealer. I’m assuming that the KO or CS justified the priced based upon historical prices for that item. Perhaps I am assuming too much.
  4. There is another possible view. If a contractor can get away with outrageous prices on sole source acquisitions, KO’s who take the easy route to justify what they are paying and poor negotiators or worse, those that don’t negotiate, why wouldn’t they keep doing it? Nothing compels a firm to sell to the government but I’ll bet that a firm would rather sell products at lower than outrageous prices than sell little or nothing.
  5. I thought it has been explained in the audit report and in at least two examples that relying only on previous sales pricing doesn’t necessarily produce a fair and reasonable price. It covers the KO’s ass to justify why they paid a proposed price.
  6. The proposed legislation appears to be targeted toward a specific contractor.
  7. The proposed legislation was intended to require contractors to provide reasonable, information in response to a request. I don’t know the contextual timeframe of the Congresswoman’s speech . The DoD IG Report was dated in 2019. The proposed FAR change doesn’t go that far. There is no FAR definition of excess profits but when price of a part that cost $128 to make is over $7000, it should stand to reason that the profit is excessive. The company refunded some excessive profits, perhaps similar to the days before TINA when GAO would request refunds of excess pricing.
  8. Contracting Officers must purchase supplies at fair and reasonable prices. When the KO can’t determine reasonableness from price analysis only when negotiating with a sole source, they would need additional data and perform some type of cost analysis. 43 of the 47 different parts manufactured by Transdigm or its subsidiaries were NOT commercial items. The DoD IG report addressed those transactions where certified cost or pricing were not required. “15.403-3 Requiring data other than certified cost or pricing data. (a) (1) In those acquisitions that do not require certified cost or pricing data, the contracting officer shall— (i) Obtain whatever data are available from Government or other secondary sources and use that data in determining a fair and reasonable price; (ii) Require submission of data other than certified cost or pricing data, as defined in 2.101, from the offeror to the extent necessary to determine a fair and reasonable price (10 U.S.C.2306a(d)(1) and 41 U.S.C.3505(a)) if the contracting officer determines that adequate data from sources other than the offeror are not available. (iii) Consider whether cost data are necessary to determine a fair and reasonable price when there is not adequate price competition..” Without quoting the applicability references in Part 31 (mainly because I accidentally deleted them from my notes and didn’t want to recopy them) let’s cut to the chase: “31.201-3 Determining reasonableness. (a) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of specific costs must be examined with particular care in connection with firms or their separate divisions that may not be subject to effective competitive restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the contracting officer or the contracting officer’s representative, the burden of proof shall be upon the contractor to establish that such cost is reasonable.”
  9. I believe that the purpose of the law is to put teeth into FAR 15.403-3 by making it a contractor requirement to provide it not just a KO requirement to “require it”. The context cited is Trandigm and it’s refusal to provide cost and/or other data to justify sole source pricing of its manufactured parts.
  10. 1. I learned long ago that relying on prices previously paid for something - especially in a non competitive acquisition or mod - is not a reliable indicator of fair and reasonableness. The prices relied upon could be inflated. There is often no context to how those prices were determined to be fair and reasonable. The IG report mentioned that and I am familiar with such situations from my Stateside assignments . It’s obvious, from being a WIFCON participant since it’s beginning, that many acquisition personnel favor and use this technique in non-competitive situations. It’s fast and relatively easy. Relying only on prices previously paid in competitive acquisitions can sometimes also be unreliable. In Germany and some other countries in the late 1980’s (and I expect that nothing has changed), the US Army was not using cost priced negotiated acquisition or estimating methods. In Germany, all US and German government construction contracts used unit priced contracts, based upon standard DIN defined units and estimated quantities. For estimating purposes for new contracts (and mods) The US and German government construction agencies simply collected unit pricing information for estimating and price analysis purposes. My assistant Resident Engineer in the Kaiserslautern Area Office was German. Her fiancé, worked for a higher German State Construction Office that provided oversight of the various German construction offices in the Southwest States in Germany. He told her that German construction contractors working in the K-Town and nearby areas in the Rhineland Pfalz State were colluding during the initial contract competition to divide up awards. In addition, Kaiserslautern area contractors were paying a 3% kickback to certain high level K-Town Area Bauamt design and construction officials for awards of Indirect Construction contracts (the prevalent acquisition method) for the US Forces. Her fiancé’s office was in the investigative/fact finding stage. I was told not to share that information at the time. I returned Stateside in the fall of 1989. About a year later, My German friends who worked for me in K-Town told me that the German Government had indicted and were prosecuting at least the K-Town Bauamt Director and his Design office chief, maybe others and some contractors for corruption. One of the two Bauamt officials died of a heart attack and the other went to prison. The USACE Europe Division, who collected pricing information and used it for estimates and award purposes, and the various Army and Air Force Installations relied upon historical unit pricing for new awards and for pricing mods. I doubt if they knew about any collusion and corruption. In my experience nobody had any expertise in cost based acquisition for sole source acquisition or mods or claims. The above is only to stress that relying only upon previously paid prices for estimates or pricing purposes, while convenient, comparably simple and faster than also using cost based or other methods or other methods, isn’t always a reliable indicator of fair and reasonable pricing - particularly for sole source pricing. Yep - it’s faster and easier, saves work and provides justification for awarded prices. 2. I agree with the proposed legislative measure to require contractor to provide cost or pricing data and other than cost or pricing data if necessary. I wonder how much it would widely be used by the acquisition workforce for other than - maybe - situations similar to Transdigm. 3. Would it fix the problem? Don’t know the context of “the problem”. But it would be available for those acquisition officials who need it and would use it and have some cost based acquisition expertise.
  11. Very interesting case and decision. In addition, During a period in 1982-1983, I worked in a Civil Works construction field office with Paul Perkins, one of Lodge’s claims consultants. He was assigned to one of our Military Construction Area Offices in the early 90’s after I returned from Overseas to an assignment at the District HQ. He left federal service to work as a claims consultant. No comment, except HAH!
  12. Mike, We probably need to get some clarification from you concerning the context of your questions and concerns. Is your proposal for a new contract or an action under an existing one? So, if this is a proposal for a new contract and the PCO “invoked” the DFARS clause for use in a competitive acquisition after only one proposal was received, the PCO (who you apparently haven’t previously worked with) probably notified you that you are the sole proposer and they need you to provide cost and pricing information, more detailed breakdowns and subcontractor cost or pricing and/or breakdowns. So, are you asking if there could be a pre-negotiation conference to establish responsibilities and expectations, I’d say yes, you could request that and I see no reason why the government should not agree to that - but you’d have to ask, since it may not be their usual business practice. A pre-negotiation conference should also certainly help allay suspicions about working with an unfamiliar government team. It can also be useful to clarify scope or requirements questions and explain aspects of your proposal. I used to participate occasionally in pre-proposal and pre-negotiation conferences. As for “partnering”, as practiced By the USACE, that is a voluntary, post award practice. Carl Culham provided a link to the USACE Partnering guidelines. Good luck!
  13. Having participated in Alpha Contracting on a large construction task order on a multibillion dollar, long term CP, IDIQ Systems Contract for design/build/systemization/pilot operations/operations/closure of a plant to demilitarize Chemical weapons, the circumstances you just described don’t appear to be “Alpha Contracting”. However, I would suggest that the parties engage in some type of “partnering process” , if not too late, that might allay your suspicions and concerns. Your above quote is one of the important aspects of the “partnering process” that the Army Corps of Engineers is required to offer as a voluntary, mutual process on all construction contracts. Partnering continues throughout contract performance after the initial expectations and responsibilities are laid out.
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