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We submitted a prime proposal that is exempt from cost or pricing data because it is competitive. However, our suppliers/subcontractors that we included in the prime proposal were not competed, they are single source. With that said, are the suppliers/subcontractors required to submit cost or pricing data because they are single source and over $700K threshold or are they exempt because the prime proposal is competitive?

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Don't know about your company but part of our company's approved purchasing system is a policy that requires certified cost or pricing data from subs in the same circumstances that the Government would require such data from primes.

In your case, how did you determine the subcontract prices fair and reasonable?

See FAR 15.404-3. Interesting that this is not a clause and therefore not within the four corners of a contract, but its paragraph ( b ) requires prime and subcontractors to take specific actions with respect to cost or price analysis. Also note that ( a ) requires contracting officers to analyze subcontractor's cost or pricing data.

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We submitted a prime proposal that is exempt from cost or pricing data because it is competitive. However, our suppliers/subcontractors that we included in the prime proposal were not competed, they are single source. With that said, are the suppliers/subcontractors required to submit cost or pricing data because they are single source and over $700K threshold or are they exempt because the prime proposal is competitive?

The answer is found in FAR 15.403-4:

Quote

15.403-4 -- Requiring Certified Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b).

(a)

(1) The contracting officer shall obtain certified cost or pricing data only if the contracting officer concludes that none of the exceptions in 15.403-1(B) applies. However, if the contracting officer has reason to believe exception circumstances exist and has sufficient data available to determine a fair and reasonable price, then the contracting officer should consider requesting a waiver under the exception at 15.403-1(B)(4). The threshold for obtaining certified cost or pricing data is $700,000. Unless an exception applies, certified cost or pricing data are required before accomplishing any of the following actions expected to exceed the current threshold or, in the case of existing contracts, the threshold specified in the contract:

(i) The award of any negotiated contract (except for undefinitized actions such as letter contracts).

(ii) The award of a subcontract at any tier, if the contractor and each higher-tier subcontractor were required to furnish cost or pricing data (but see waivers at 15.403-1( c )(4)).

Unquote

Per FAR 15.403-4 (a)(1)(ii), the contracting officer obtains cost or pricing data before awarding a subcontract if the prime contractor was required to provide c or p data.

If, as you state, the CO determines that adequate competition exists, then, per FAR 15.403-1(B)(1), he or she shall not require c or p data.

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Assuming that you meant "certified cost or pricing data", no, they are not. They would only be required to submit certified cost or pricing data if you were required to submit certified cost or pricing data and none of the exceptions applied. See FAR 15.403-4(a)(1)(ii).

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Don't know about your company but part of our company's approved purchasing system is a policy that requires certified cost or pricing data from subs in the same circumstances that the Government would require such data from primes.

In your case, how did you determine the subcontract prices fair and reasonable?

See FAR 15.404-3. Interesting that this is not a clause and therefore not within the four corners of a contract, but its paragraph ( b ) requires prime and subcontractors to take specific actions with respect to cost or price analysis. Also note that ( a ) requires contracting officers to analyze subcontractor's cost or pricing data.

What is that all about? How did that response answer the question?

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Seeker, it was all about some basics, and reference to a pertinent piece of the FAR. The question was answered. Here is how:

First, an approved purchasing system was mentioned because if the prime has an approved purchasing system that addresses this, that is what the prime must follow, and that?s the answer.

Second, the original post did not indicate any basis for subcontract price reasonableness, which gave the impression, or at least left open the worrisome possibility, that the prime thought subcontract cost or price analysis was not necessary because the prime contract was to be awarded on a competitive basis. The subcontract file should stand on its own.

Third, reference was made to FAR 15.404-3 because it includes many points that bear on the original question, notably requiring the prime to conduct appropriate cost or price analyses. What is appropriate? Does one get that from 15.404-3( c ), which most people are not familiar with, or from 15.403? Most of my Government customers, rightly or wrongly, would say 15.403, the same way they would handle it.

Do all those concerns go away simply because the prime was to be awarded on a competitive basis? What if only one bid was received? The prime can?t rely on the weak ?stretch? definition of adequate price competition in 15.403-1( c )(1)(ii) because 15.403-1( b )(1) makes that a judgment call on the part of the contracting officer, who could easily say this isn?t competitive enough and start requiring prime and subcontract cost or pricing data. Should the prime have gotten certified cost or pricing data from the sub, and conducted cost analysis and negotiations? Most of my Government customers, rightly or wrongly, would say yes. As a prime, I would certainly want to mitigate my risk by getting the sub to certify its cost or pricing data.

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What I saw in this thread was a simple question answered straightforwardly by two people, napolik and Don Acquisition, who know what they are talking about.

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Thank you all for your replies. For clarification, we won the contract based on competition at the Prime level, however we did not compete our suppliers. I found the purchasing system comment interesting as this gave me something else to think about. We do have an approved purchasing system and one of the reasons why is because we do perform cost analysis on all procurements meeting the TINA requirements. I think in summary, at the prime, we are exempt from certified cost or pricing data, but are required to obtain certifed cost or pricing data from the suppliers that meet the TINA requirements based on the FAR references in the posts. Any other thoughts?

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I think in summary, at the prime, we are exempt from certified cost or pricing data, but are required to obtain certifed cost or pricing data from the suppliers that meet the TINA requirements based on the FAR references in the posts. Any other thoughts?

That's exactly wrong. Go back and read my post (or napolik's) carefully.

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There is some confusion going on here. This is dkdailey's original inquiry:

We submitted a prime proposal that is exempt from cost or pricing data because it is competitive. However, our suppliers/subcontractors that we included in the prime proposal were not competed, they are single source. With that said, are the suppliers/subcontractors required to submit cost or pricing data because they are single source and over $700K threshold or are they exempt because the prime proposal is competitive?

That question is ambiguous, because it is unclear whether dkdailey was asking about "cost or pricing data" or "certified cost or pricing data." See the definitions in FAR 2.101. FAR 15.403, although entitled, "Obtaining certified cost or pricing data," actually addresses requirements for "certified cost or pricing data" and plain old uncertified "cost or pricing data," i.e., "other than certified cost or pricing data." If the question was about "certified cost or pricing data," then the answer is that the "suppliers/subcontractors" do not have to submit "certified cost or pricing data" because the prime was not required to do so.

napolik appears to have assumed that the question was about "certified cost or pricing data," and his answer is correct if that is what the question was about.

Don was clear that he was talking about "certified cost or pricing data," and his answer is also correct if the question was about "certified cost or pricing data."

Cajuncharlie's posts are ambiguous because it is not clear whether he was talking about "certified cost or pricing data" or plain old "cost or pricing data," and because he was confusingly wordy. I suspect that he was talking about plain old "cost or pricing data" in his posts. If so, then his answers are also correct.

Bottom line: If dkdailey was asking about "certified cost or pricing data," then the answer to his question is that he is not obligated to get it from his subs if the government did not require it from him. napolik and Don have cited the relevant FAR passage. If dkdailey was asking about plain old "cost or pricing data," then the answer is that he should get it if he thinks he needs it to determine price reasonableness.

dkdailey, you are at fault for the confusion, because you did not make yourself clear. Your reference to being "exempt" because your proposal was "competitive" suggested that you were talking about "certified cost or pricing data," but you did not use that term. You could have, and should have, looked this up in FAR yourself. The regulation is clear enough in this case. See FAR 15.403-4.

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There is some confusion going on here. This is dkdailey's original inquiry:

Bottom line: If dkdailey was asking about "certified cost or pricing data," then the answer to his question is that he is not obligated to get it from his subs if the government did not require it from him. napolik and Don have cited the relevant FAR passage. If dkdailey was asking about plain old "cost or pricing data," then the answer is that he should get it if he thinks he needs it to determine price reasonableness.

I believe he meant certified c or p data. See this extract from his last post:

Quote

I think in summary, at the prime, we are exempt from certified cost or pricing data, but are required to obtain certifed cost or pricing data from the suppliers that meet the TINA requirements based on the FAR references in the posts. Any other thoughts?

Unquote

Or, perhaps I am confused, again.

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My references to "cost or pricing data" meant certified; they were not prefaced with "other than". Thought that was clear from my last sentence.

It's important to remember that the primary guidance for a prime's subcontracting activity is found in its own policies and procedures (purchasing system), not portions of the FAR that are not in the prime contract.

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Well, if you meant "certified cost or pricing data," then your posts are difficult to understand. If the prime does not have to submit certified cost or pricing data to the government, how does requiring the sub to certify its cost or pricing data mitigate the prime's risk? What risk? Why should a contractor's purchasing system require that it obtain certified cost or pricing data from a sub when the law does not require that it do so?

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Well, if you meant "certified cost or pricing data," then your posts are difficult to understand. If the prime does not have to submit certified cost or pricing data to the government, how does requiring the sub to certify its cost or pricing data mitigate the prime's risk? What risk? Why should a contractor's purchasing system require that it obtain certified cost or pricing data from a sub when the law does not require that it do so?

Good questions.

First, a look at terminology, about which I always try to be precise. I was taught that "cost or pricing data" always means certified, unless preceded by "information other than." This is consistent with the FAR 2.101 definition, whose second sentence reads, "Cost or pricing data are data reqiring certification in accordance with 15.406-2." If this terminology is incorrect, I am always ready to learn.

The short answers are:

1. The prime's risk is mitigated by using cost analysis techniques, starting with cost or pricing data, rather than simple price analysis. The subcontract file will have stronger price reasonableness documentation. The prime can invoke the "price reduction" clauses if necessary. This assumes greater importance company-wide than in the instant case. There are many practical, on-the-ground reasons for this, with specific examples, that I will not discuss in detail because they touch on proprietary information.

2. As a matter of overall policy and procedure, it reduces the risk of disallowance of incurred cost. In the event that subsequent changes contain or affect cost elements whose costs have been analyzed and the analysis well-documented, definitization will be facilitated with stronger support. Again, more details would be proprietary.

3. The reason appears to be the philosophy that conducting business exactly the way the Government does gives Government auditors and reviewers a level of comfort that often means they don't dig as deep, unless they see something that arouses curiosity. My sense is that some of this also comes from reluctance to push back on auditor suggestions to set up or tighten up procedures on topics of audit interest. There also seems to be a tendency to solve every internal review finding with a new or improved procedure, kind of like thinking more legislation will improve (or reform, streamline, etc.) federal acquisition.

It is important to remember that when subcontracts are managed by the book, the book is not the FAR but the prime contractor's procedures, and are not grounded in the FAR but in the choice of law clause in the subcontract, usually of the state in which the prime is headquartered, always bearing in mind, of course, the clauses in the four corners of the subcontract.

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Cajuncharlie,

The rules changed on October 1, 2010. "Cost or pricing data" is no longer certified by definition. There are two types of cost or pricing data--"certified cost or pricing data" and "data other than certified cost or pricing data", which are both defined in FAR 2.101. "Information other than cost or pricing data" is an obsolete term.

Throw away your hard copy FAR.

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Good questions.

First, a look at terminology, about which I always try to be precise. I was taught that "cost or pricing data" always means certified, unless preceded by "information other than." This is consistent with the FAR 2.101 definition, whose second sentence reads, "Cost or pricing data are data reqiring certification in accordance with 15.406-2." If this terminology is incorrect, I am always ready to learn.

As Don has already pointed out, you seem to have been using the wrong terminology. In order to be "precise" you have to use the most current version of the FAR. There are now separate definitions of "cost or pricing data" and "certified cost or pricing data." The term "information other than cost or pricing data" is no longer in use.

The short answers are:

1. The prime's risk is mitigated by using cost analysis techniques, starting with cost or pricing data, rather than simple price analysis. The subcontract file will have stronger price reasonableness documentation. The prime can invoke the "price reduction" clauses if necessary. This assumes greater importance company-wide than in the instant case. There are many practical, on-the-ground reasons for this, with specific examples, that I will not discuss in detail because they touch on proprietary information.

You don't need certified cost or pricing data in order to perform cost analysis, and I don't see how obtaining certification of cost or pricing data would, in and of itself, strengthen a price reasonableness determination. Additionally, a prime would have to enforce the price reduction clause in state court or in a federal district court. Good luck with that. It's hard enough before the boards of contract appeals and the Court of Federal Claims. The last two sentences of your paragraph do not make your position clearer. All they say is that you have reasons you will not disclose.

2. As a matter of overall policy and procedure, it reduces the risk of disallowance of incurred cost. In the event that subsequent changes contain or affect cost elements whose costs have been analyzed and the analysis well-documented, definitization will be facilitated with stronger support. Again, more details would be proprietary.

How will certification of cost or pricing data reduce the risk of cost disallowance if certification had not been required?

3. The reason appears to be the philosophy that conducting business exactly the way the Government does gives Government auditors and reviewers a level of comfort that often means they don't dig as deep, unless they see something that arouses curiosity. My sense is that some of this also comes from reluctance to push back on auditor suggestions to set up or tighten up procedures on topics of audit interest. There also seems to be a tendency to solve every internal review finding with a new or improved procedure, kind of like thinking more legislation will improve (or reform, streamline, etc.) federal acquisition.

I agree that doing business the way that the government does probably increases the likelihood of getting approval of a purchasing system. But why would doing business like the government require that a contractor get certified cost or pricing data when certified cost or pricing data are not required by regulation or contract clause? How would asking for certified cost or pricing data in situations in which the government is prohibited from doing so be doing business like the government?

It is important to remember that when subcontracts are managed by the book, the book is not the FAR but the prime contractor's procedures, and are not grounded in the FAR but in the choice of law clause in the subcontract, usually of the state in which the prime is headquartered, always bearing in mind, of course, the clauses in the four corners of the subcontract.

What? Why would a contractor purchasing system require certified cost or pricing data from subcontractors when the FAR does not? (Is your company's purchasing system based on the current terminology?) And what does a choice of law clause have to do with this?

I cannot see how, based on what you have said, it would be to a prime's advantage to require the submission of certified cost or pricing data by subcontractors when the FAR clauses in its contract do not require it to do so. And I cannot see how it would be in a contractor's interests to write its purchasing rules to require certified cost or pricing data when certified cost or pricing data are not required by regulation or contract clause. Your explanation does not make your reasoning any clearer to me.

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Cajuncharlie,

The rules changed on October 1, 2010. "Cost or pricing data" is no longer certified by definition. There are two types of cost or pricing data--"certified cost or pricing data" and "data other than certified cost or pricing data", which are both defined in FAR 2.101. "Information other than cost or pricing data" is an obsolete term.

Throw away your hard copy FAR.

Can't throw it away yet, but soon. Our company has become rather parsimoninous and will no longer buy or reimburse hard copy FAR or DFARS, advising us to use on-line versions. There is nothing like having the book, though. How do I put sticky notes on related pages while researching something? How do I leave them in place where I can find them next time, complete with memory-jogging scribbled notes? So I have ordered myself a set for $192 (last time I had to do this it was only $165), and the closest I can get to recovering the cost is itemize the expense on this year's taxes.

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Vern,

Not trying to defend our company's policies and procedures, just make the best of them, such as they are. Apparently they are difficult to change, seeming to require months of critical scrutiny by various government folks.

One thing I do know, there is a very different perspective in the field than in a corporate headquarters or in a high level government office. In the field we do the best we can with what we have.

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