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During Cost Analysis in a competitive cost type solicitation, may the Offeror's separate elements of cost (Average Labor Rate @ $36.73 per hour for Offeror A and $32.57 per hour for Offeror "B") be compared to one another similar to comparing price. Another example (G&A of 15% for Offeror A and G&A of 7% for Offeror "B") I don't see in the FAR where cost can be compared.

Thanks

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During Cost Analysis in a competitive cost type solicitation, may the Offeror's separate elements of cost (Average Labor Rate @ $36.73 per hour for Offeror A and $32.57 per hour for Offeror "B") be compared to one another similar to comparing price. Another example (G&A of 15% for Offeror A and G&A of 7% for Offeror "B") I don't see in the FAR where cost can be compared.

Thanks

I can't see why you would want to do that. Each contractor stands alone in terms of its cost accounting practices. For example, assume a G&A expense pool of $1,000. One contractor has a direct labor dollar base of $10,000 and so has a G&A rate of 10%. Another contractor uses a total cost input base of $100,000 and so has a G&A rate of 1%. Same G&A expense, two different and compliant practices, two wildly different rates.

Seems to me like somebody is conflating price and cost analysis, but perhaps I'm simply being naive.

Hope this helps.

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During Cost Analysis in a competitive cost type solicitation, may the Offeror's separate elements of cost (Average Labor Rate @ $36.73 per hour for Offeror A and $32.57 per hour for Offeror "B") be compared to one another similar to comparing price. Another example (G&A of 15% for Offeror A and G&A of 7% for Offeror "B") I don't see in the FAR where cost can be compared.

Thanks

This is in response to your comment that "I don't see in the FAR where cost can be compared." You can request data other than certified cost or pricing data in enough detail to be able to determine the reasonableness of the pricing. You can utilize cost analysis techniques to help evaluate this data. You can compare pricing between competing proposals for cost analysis and/or for analyzing a proposal's price realism.

FAR 15.402 Pricing Policy.

(a) (2) When certified cost or pricing data are not required

(ii) Data other than certified cost or pricing data such as...

(B) cost data to the extent necessary for the contracting officer to determine a fair and reasonable price.

See: "15.402 (a) (3) Obtain the type and quantity of data necessary to establish a fair and reasonable price, but not more data than is necessary. Requesting unnecessary data can lead to increased proposal preparation costs, generally extend acquisition lead time, and consume additional contractor and Government resources. Use techniques such as, but not limited to, price analysis, cost analysis, and/or cost realism analysis to establish a fair and reasonable price. If a fair and reasonable price cannot be established by the contracting officer from the analyses of the data obtained or submitted to date, the contracting officer shall require the submission of additional data sufficient for the contracting officer to support the determination of the fair and reasonable price."

Under FAR 15.403-3 Requiring Data Other Than Certified Cost or Pricing Data.

"(a) 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. 254b(d)(1)) if the contracting officer determines that adequate data from sources other than the offeror are not available. This includes requiring data from an offeror to support a cost realism analysis;"

FAR 15.404-1 Proposal Analysis Techniques

"(a) General ...(4) Cost analysis may also be used to evaluate data other than certified cost or pricing data to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone for commercial or non-commercial items."

(c ) "Cost Analysis" discusses various cost analysis techniques:

"(1) Cost analysis is the review and evaluation of any of the separate cost elements and profit or fee in an offeror?s or contractor?s proposal as needed to determine a fair and reasonable price or to determine cost realism, and the application of judgment to determine how well the proposed costs represent what the cost of the contract should be, assuming reasonable economy and efficiency."

"(2) The Government may use various cost analysis techniques and procedures to ensure a fair and reasonable price, given the circumstances of the acquisition. Such techniques and procedures include the following:"

"...(iii) Comparison of costs proposed by the offeror for individual cost elements with--"

"...(c ) Other cost estimates received in response to the Government?s request."

We have often either required or reserved the right to obtain some type of price breakdown, if necessary to adequately determine the reasonableness of pricing on competitive acquisitions for construction, design-build and some service contracts. We try to not ask for more detail than absolutely necessary.

I absolutely agree with here_2_help that you have to determine and understand the nature and basis of the cost data that you are analyzing and comparing to ensure that you arent looking at apples and oranges. However, you'd would have to do that if you were only comparing a government estimate with a proposal or proposals, too. We normally asked for the details, using some type of standardized format that would illustrate, for example, how the overhead rates were applied to the cost elements in the proposal.

Bottom line in response to DOECPA's original post is that FAR does allow cost analysis of data other than cost or pricing data and it does allow a comparison between cost elements of the various proposals (as well as between a government estimate, where applicable) and the various proposals.

It is hard as heck to follow the paragraph numbering in Part 15 - I gave up on the Blackberry and had to hook up my laptop in the hotel room.

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Guest Vern Edwards
During Cost Analysis in a competitive cost type solicitation, may the Offeror's separate elements of cost (Average Labor Rate @ $36.73 per hour for Offeror A and $32.57 per hour for Offeror "B") be compared to one another similar to comparing price. Another example (G&A of 15% for Offeror A and G&A of 7% for Offeror "B") I don't see in the FAR where cost can be compared.

Thanks

There is no general rule against comparing costs of competing offerors. However, such comparisons must be reasonable.

I see no problem with comparing labor rates for similar types of labor. Average labor rates are probably not validly comparable if different contractors propose different labor mixes based on different approaches to doing the work.

Comparison of G&A rates is probably not valid and should not be done, since different contractors may account for G&A costs differently.

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Comparison of G&A rates is probably not valid and should not be done, since different contractors may account for G&A costs differently.

Direct comparisons between G&A rates are not necessarily meaningful. Such a comparison should be done at a higher level - i.e., as part of an analysis showing how the G&A rates and other indirect markups are applied to other costs.

In a cost contract acquisition, I think that cost realism and/or "should cost" analysis is usually or often done. The price evaluation team should have access to a disclosure statement or similar information or at least information on how the contractor marks up the various costs to arrive at a total estimated cost.

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Comparing separate cost elements which may have been determined to be realistic and reasonable allows the evaluator to see which is more, or less reasonable. If my mission needs experienced engineers wouldn?t my ability to recruit and retain engineers be enhanced by a slightly higher hourly rate? Comparing proposed average engineering rates may be important to cost evaluators and also to technical/,management evaluators.

All direct cost being equal, why would I want to choose a contractor with higher indirect rates, except perhaps Fringes? This is not an allowability issue, but common sense dictates that you only buy what is necessary to perform the job, other than in R&D.

The reason I bring this up is because I have always, after performing Price, Cost, and Cost Realism Analysis, prepared a side by side summary of the Offeror?s various cost elements for Board Presentations, as a supplement to the individual cost reports for each Offeror. Now I am not so sure that my approach complied with the FAR. During Source Selection, do you compare any separate elements of cost between Offerors or is comparison only performed at the Price Level.

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Now I am not so sure that my approach complied with the FAR.

Can you please explain what you mean?

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Comparing separate cost elements which may have been determined to be realistic and reasonable allows the evaluator to see which is more, or less reasonable. If my mission needs experienced engineers wouldn?t my ability to recruit and retain engineers be enhanced by a slightly higher hourly rate? Comparing proposed average engineering rates may be important to cost evaluators and also to technical/,management evaluators.

All direct cost being equal, why would I want to choose a contractor with higher indirect rates, except perhaps Fringes? This is not an allowability issue, but common sense dictates that you only buy what is necessary to perform the job, other than in R&D.

As has been posted by Joel and Vern, you can compare cost elements between offerors. But what is your purpose in doing so?

1. What do you mean by the phrase, "allows the evaluator to see which is more, or less reasonable"? A cost is reasonable or it isn't. There is no "more or less" gradation of reasonableness. If you think there is, provide a FAR citation in support.

2. The phrase, "All direct cost being equal, why would I want to choose a contractor with higher indirect rates ...?" grates on my nerves. It appears to be such a simplistic approach. To answer your rhetorical question, how about because one contractor has a quality assurance function, and a safety function, and a subcontractor management function, and an adequate accounting system, and an adequate billing system, and an adequate purchasing system, and an adequate government property control system, the cost of which is included in its indirect rates, whereas the other contractor has none of those functions/control systems, and thus has a lower indirect cost rate. Which contractor do you think would be more likely to perform the work effectively and efficiently? Which contractor would you expect to be better positioned to comply with contract terms and conditions? Which contractor would you want to select--the one with lower rates? Really?

3. Is the quality of the engineers something that can be judged by the rates paid to employees, or the fringe benefits provided? I would say (from my experience) that the correlation is doubtful. Some engineers--perhaps many--enjoy the challenge of technical work and will work where they get that satisfaction, and do not necessarily work for the employer who will pay them the most.

These points underlie my concern with your question (which I articulated poorly in my first post). It seems one could get carried away with this cost comparison by cost element analysis and end up at a really unreasonable answer.

Vern noted that such comparisons should be reasonable, and Joel noted that you have to understand what you're looking at. Based on what you posted I am concerned that your approach does neither.

H2H

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Thanks and yes,

FAR 15.404-1?(2)(iii) states "Comparison of costs proposed by the offeror for individual cost elements with -

(A) Actual costs previously incurred bt the same offeror;

("B") Previous cost estimates from the offeror or from other offerors for the same or similar items;

( C ) Other cost estimates received in response to the Governments's request;

(D) Independent Government cost estimates by technical personnel; and

(E) Forecasts of planned expenditures.

It does not say I can compare other offerors!

Am I reading too much into this?

In the past, I always thought that cost was the only area where we were allowed to make careful comparisons.

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Thanks and yes,

FAR 15.404-1?(2)(iii) states "Comparison of costs proposed by the offeror for individual cost elements with -

(A) Actual costs previously incurred bt the same offeror;

("B") Previous cost estimates from the offeror or from other offerors for the same or similar items;

( C ) Other cost estimates received in response to the Governments's request;

(D) Independent Government cost estimates by technical personnel; and

(E) Forecasts of planned expenditures.

It does not say I can compare other offerors!

Am I reading too much into this?

In the past, I always thought that cost was the only area where we were allowed to make careful comparisons.

I think that you are reading too much or too little into this.

1. It does not say I CANNOT compare other offers.

2. "C ) Other cost estimates received in response to the Governments's request;" I think that this may be read to allow comparisons between offers.

3. Under 15.403-3 Requiring Data Other Than Certified Cost or Pricing Data see especially the last sentence below:

" (B ) Adequate price competition. When adequate price competition exists (see 15.403-1?(1)), generally no additional data are necessary to determine the reasonableness of price. However, if there are unusual circumstances where it is concluded that additional data are necessary to determine the reasonableness of price, the contracting officer shall, to the maximum extent practicable, obtain the additional data from sources other than the offeror. In addition, the contracting officer should request data to determine the cost realism of competing offers or to evaluate competing approaches."

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Guest Vern Edwards

DOECPA:

You're being thick about this. Where do you think the other cost estimates received in response to the Government's request (for proposals or quotations) are coming from? Eh?

In any case, if FAR does not say that you cannot do something, then you can if it's in the best interests of the Government. See FAR 1.102(d) and 1.102-4(e). You have been told by three people that it's okay to compare the costs of competing offerors in some ways and they have provided decent explanations. So unless you are just enjoying being the temporary center of attention, you should get on with your evaluation. Why come here with questions if you're not going to believe what you're told?

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