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In Section 5.2 of the Defense Contract Pricing Reference Guide it states... "If the contractor requests a copy of the price negotiation memorandum (PNM), most agencies authorize contracting officer release of pertinent portions. However, you should consult your agency legal counsel to determine your authority for release and any conditions required for release." I recall that Eleanor Spector, as Director of Defense Procurement Policy, put out a memo authorizing/encouraging PCOs to release MNMs to contractors defending defective pricing allegations. Is this memo still effective? I am trying to find support for an AF PCO that the PNM should be provided.
What would you say to a defense contractor who wanted to take the following approach in preparing a sole-source FFP proposal subject to TINA for a DoD customer? Scenario: KTR-A wants to include its sister company KTR-B in a sole-source FFP acquisition by a DoD customer. KTR-A prepares a SOW for a NON-commercial item and issues a RFP to KTR-B and a number of qualified, responsible competitors. It turns out that KTR-B beats everyone else out on performance, schedule, and price (including proposed profit). KTR-A negotiates a "subcontract" [really an inter-organizational transfer (IOT) at price] with KTR-B and includes KTR-B's certified cost or pricing data as part of KTR-A's submission to the DoD customer. KTR-A does not submit a cost or price analysis (PNM) for KTR-B's proposal since it is does not meet the definition of a "subcontract" in FAR 15.401 and would be categorized as a "make item" for FAR 15.407-2. KTR-A discloses in its proposal the profit rate negotiated with KTR-B and states that the subcontract was awarded based on adequate competition. Questions: 1. Does a DCAA auditor have any clear regulatory basis to question KTR-B's proposed profit and KTR-A's proposed profit on top of KTR-B's proposed profit? 2. Does a DCAA auditor have any clear regulatory basis to unsupport KTR-B's proposed profit until being provided additional information on the subcontract competition? 3. Do you consider FAR Part 44 to positively define a subcontract in its normative sense and FAR Part 31 to positively define an IOT in its normative sense? 4. Would you say that a CPSR reviewer should only look at any make or buy documentation for this particular IOT and not expect a PNM to have been written?