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Patrick Mathern

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About Patrick Mathern

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    Copper Member

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    Santa Barbara, CA
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    Cost analysis, supplier rate and factor audits, business system reviews, training, consulting, exchanging ideas, networking

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  1. Hi Brian - I can give you my experience in helping primes work with subs. If you're an agency CO, then someone else may be able to provide better information. Document, document, document. 1. Consult your company's policies and procedures. What I have below will still ding you in a CPSR if it's not aligned with your company's P&P's. 2. Make sure your commercial item determination and non-competitive source justifications are ROCK SOLID. At $850K, this is going to set off alarm bells. 3. Assuming you have a solid CID, look again at price analysis. Although this was last purchased in the 90's, are there current versions of the item to which price could be compared? 4. If the answer to 2 is no, proceed from your current position by communicating your findings with the supplier. Show them what you came up with and ask them what you're missing. It's up to them to support the price they're offering. You'll have the most success with this approach if you come to the table with objective, verifiable, fact-based data such as... Rates: Use salary.com or calc.gsa.gov and add a % for overheads and profit Hours: Get expert opinions that break tasks down to the lowest level possible. Use engineers if possible, but regardless of whose opinion it is, provide support for WHY those hours were determined reasonable. You want to give them something to argue against. As they provide additional facts, your price should come up. 5. If you get to the point where you have no other choice but to place the contract and cannot determine the price reasonable, then you need to document your efforts. Include a very thorough negotiation memorandum that clearly shows the effort you put into getting a reasonable price from the supplier. If you're a Prime with a certified procurement system, audit teams are going to scrutinize this package closely, so make sure your documentation is top-notch.
  2. FFP Contract & ODC's

    Could you clarify a bit? What is the real issue here? At first glance, I don't understand why "having an FFP contract" and "large ODC expense" necessarily have impact on one another. Are you saying the large ODC expense was in support of the FFP and you have other Cost Reimbursable contracts this will affect?
  3. I agree with Joel - in certain circumstances this makes sense. Specifically, when the contract includes a direct requirement, then these can be direct charges (think FFP follow-on contracts, for example). See FAR 31.205-18(a) and CAS 9904.402-61(c) for more info. However, your post (and response) actually deal with the purchasing function, not proposal prep. In that case, as Neil notes, you REALLY have to understand the supplier's accounting practices. If they are organized such that purchasing is a direct charge function, there's nothing wrong with that if it's done properly. If they have a Disclosure Statement, start there. If not, run an audit program focused on allocability. I know that at least one of the top 5 defense contractors is organized this way. In general, this isn't an "unallowable" method of collecting and charging for Purchasing labor.
  4. I've seen this before. Let me pose a scenario for you: You have a requirement to buy 100 boxes of Tide detergent. On Amazon, there are 5 sellers of the product you need. They all vary by 1-2% except for Seller 5, who has a price that is 10% lower than everyone else. Your due diligence leads you to question whether this is the same item and you discover that yes, it is. Seller 5 explains that they receive favorable pricing from Tide because they buy it by the truckload. Do you have competition? Let's modify it slightly and say that all sellers 1-5 price the product essentially the same. Does this change the answer? Why? In my book, the punchline here is that if you have an active distribution marketplace for an item, then price is set by the laws of supply and demand. If you notified the bidders that this would be awarded competitively, then they will be motivated to put their best foot forward and meet the requirements of adequate competition. The caveat: I have seen a case where a manufacturer tried to sell through two "distributors" in order to skirt TINA. In this case, there was no "active marketplace" responsible for setting price. Price was dictated by the manufacturer and zero sales had occurred. Distribution model was a sham...didn't qualify as competition.
  5. I have a client that is hiring a sales agent in a foreign country. This agent's territory will likely include contracts subject to FMF rules, sales will be direct commercial. This particular client compensates all of their sales agents with a commission plan. I've never worked with FMF before - it appears that commissions are allowed, but they have to be disclosed, they cannot be in violation of Anti-Kickback regulations, and it appears that commissions may need to be split out and paid by the Purchaser's national funds. My questions: 1. I'd like to wrap my head around this better. What is the purpose of the FMF rules on commissions/contingent fees? 2. What does the last provision (paid by Purchaser's national funds) mean? 3. Where can I find the source document that discusses FMF commission requirements from a contractor's perspective? Thanks in advance! Patrick
  6. Price Analysis - Modifications

    If you work for a contractor rather than the government, check your procurement policies and procedures. May be there rather than the FAR.
  7. Subcontracting with CPFF

    Hi Jennifer - You will get a far more complete answer from some of the other folks in this forum, I focus my efforts on cost and price analysis. From that perspective, you will want to determine whether what you're buying qualifies as a commercial item/service (as defined in FAR 2.101). If it does prove to be commercial, it will simplify your flowdowns and possibly the cost/price analysis requirements. If it's not commercial, you'll want to know if your subcontract will be >$750K. This will have implications for cost vs. price analysis. Questions to you then: does this qualify as a commercial item/service and is it >$750K? Patrick
  8. Award with a Proposal

    Hi Vern - Thanks for setting me straight! We have used this approach for over ten years but based on the straightforward text in 52.215-12, I'm changing my tune (and process). Very helpful discussion!
  9. Award with a Proposal

    Hi Vern - I think so, but help me walk through this. That citation references FAR 15.408 which references Table 15-2. In Table 15-2, it notes that "The requirement for submission of certified cost or pricing data continues up to the time of agreement on price..." Therefore, if the Prime has already agreed to price with the Customer, Certification does not apply. Since Certification applies between Customer and Prime (then waterfalls through the applicable subs,) alleviating the Cert at the Prime would then alleviate any benefit at the sub level.
  10. Award with a Proposal

    If price negotiations between the Prime and customer are not yet complete, certification is still required. However, if the prime has already negotiated and received award, then certification by the sub should not be required. POST-SUBMITTAL EDIT: Based on what Vern has posted below, I no longer hold this belief. If 52.215-12 is included in the Prime flowdowns, cert at the sub level is required regardless of timing.
  11. Subcontractor fee evaluation

    Absolutely - here's the deal with profit/fee (as long as you're calculating as a % of cost, we're basically talking about the same thing): It's the one area of a subcontractor's proposal that doesn't require any support or substantiation. A sub can propose an exorbitant profit/fee rate and there's no requirement that they explain it to you. Same goes between the Prime and the government. Where things get sticky is when the Prime sets forth an opinion of reasonableness in a cost/price analysis. If that opinion is not supported with a systematic method of evaluation, then it's going to be subject to challenge. In other words, you can analyze and support profit in any way you see fit. It requires no additional information from the sub and there's no requirement that you have to use the Weighted Guidelines. It just so happens that the Weighted Guidelines is a systematic approach that is generally accepted in the industry. I echo Neil's question above - what is your role? Is this a TCOPD (formerly "TINA") procurement?
  12. Subcontractor fee evaluation

    We use the weighted guidelines for all of our subcontract cost analysis reports. There's no requirement to use it, but CO's, the DCMA, and DCAA generally like seeing it since it's familiar to them. In fifteen years of providing cost analysis reports on behalf of large primes, this approach has never been challenged.
  13. FAR 13 fair and reasonable

    I've done this before and here's what we advise our clients when this comes up: If the offerors were notified in the solicitation that it was a competitive procurement, and if bidders acted independently, and if there was nothing that otherwise suggested an invalid competition (i.e. competitive range considerations) then the competition can be accepted as valid. Based upon the criteria stated, one can be reasonably assured that market forces are present which result in reasonable pricing. While admittedly a special case, competing among distributors does not in and of itself invalidate a competition.
  14. International Suppliers

    Hello - I have connections at a company called IPT (Integrated Procurement Technologies) that specializes in this type of procurement. Here's their website: http://www.iptsb.com/. Take a look and then private message me with your contact information if you'd like an introduction. Patrick
  15. Cost/Price Risk

    The issue that you run into when you assess risk using these types of categories is in how to fold that into scoring to come up with a fair award. Typically, it's possible to quantify risk (cost, schedule, and technical) in terms of dollars one way or another, which results in a more objective award summary, or at least one that can be discussed in objective terms. Pushing forth with the above approach is great, but that you'll get better results by pairing it with a corresponding quantified adjustment to offered price.