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Breakign down the proposed hourly rate


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As a rookie, I am in the process of breaking down and examining a base plus 4 service proposal and have wanted to know more about the proposed hourly rates. As a Contract Specialist, am I allowed to have the vendor breakdown the hourly rate and show me how much will go towards pay, benefits, profit, etc? Is this something I can legally ask and would they even have to respond? They basically gave a rate of $119.53 for the first year, but didn?t specifically breakdown that amount. Should I inquire deeper?

Any thoughts?

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Guest Vern Edwards

You may ask for whatever info you want. The questions you should ask yourself is whether you need more info to determine if the rate is reasonable and what you will do with the info if they give it to you. Do you know anything about pay and benefits in the industry? Do you have any bases for comparisons?

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You may ask for whatever info you want. The questions you should ask yourself is whether you need more info to determine if the rate is reasonable and what you will do with the info if they give it to you. Do you know anything about pay and benefits in the industry? Do you have any bases for comparisons?

Yes, I have a good idea of the compensation in the industry today and have a few examples that I can use in order to compare or benchmark. I wasn't sure if it was actually legal for me to see the exact $ amount the contractor would be paid without the excess benefits and so forth. I figured that seeing the total rate would only be allowed.

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Since you are asking about cost breakdown now after receipt of proposal, is this a sole source or a solicitation with only one offer received?

If so, you have various ways to determine price reasonableness. One is to construct independenetly a government estimate of the rate using the information available - salary, fringe benefits, overhead, G&A and reasonable profit. Another is comparing rates with those in existing contracts such as GSA Schedule, other agency Multiple Award Contracts (MACs or GWACs), or individual contracts. Has your agency contracted for these services in the past as well?

If none of this works, you likely will need the offeror to submit detailed information.

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Guest Vern Edwards
Yes I am a gov. employee so was wondering if that would have any effect on it as well...

No effect. There is no statute or regulation that prohibits you from asking for a breakdown of the hourly rate.

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  • 3 months later...

Vern, I have a similar situation where I need to determine fair and reasonable pricing for a competitive acquisition on a commercial service. To me, I can only determine that by having the contractor(s) provide me the Indirect Cost (G&A, O/H, etc.) and comparing that to my IGE, which is firmly substantiated. Side note: comparison of public price list, past buys, etc. is not conducive under this requirement as the level of effort (i.e. workload) varies per service provided, not to mention rates have been established under CBA, among other reasons. Certified cost and pricing date was not required -- for obvious reasons... We can deem this as Other and cost or pricing data, but I do remember reading a GAO case where the government requested Other than certified cost and pricing data, but found that it was borderline certified cost and pricing data information that were provided. Thus, the Government was scrutinized by this intent...

Anyways, during discussion I attempted to ask for the percentage on their indirect cost and their response what it was proprietary information... I then held back on the question as I am not sure if I can technically demand them to provide such information for the purpose of the Government to determine price reasonableness -- that is it.

What legal backing do I have to request this information even after they claim it is proprietary information? Can we technically ask for this information without addressing it on our solicitation ? that we may require them to provided a somewhat of a cost breakdown inclusive of the rates and percentages for direct and indirect cost? I am just unsure what boundaries I can and cannot cross when it comes to situations such as this.

Please advice - Anyone?

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Vern, I have a similar situation where I need to determine fair and reasonable pricing for a competitive acquisition on a commercial service. To me, I can only determine that by having the contractor(s) provide me the Indirect Cost (G&A, O/H, etc.) and comparing that to my IGE, which is firmly substantiated. Side note: comparison of public price list, past buys, etc. is not conducive under this requirement as the level of effort (i.e. workload) varies per service provided, not to mention rates have been established under CBA, among other reasons. Certified cost and pricing date was not required -- for obvious reasons... We can deem this as Other and cost or pricing data, but I do remember reading a GAO case where the government requested Other than certified cost and pricing data, but found that it was borderline certified cost and pricing data information that were provided. Thus, the Government was scrutinized by this intent...

Anyways, during discussion I attempted to ask for the percentage on their indirect cost and their response what it was proprietary information... I then held back on the question as I am not sure if I can technically demand them to provide such information for the purpose of the Government to determine price reasonableness -- that is it.

What legal backing do I have to request this information even after they claim it is proprietary information? Can we technically ask for this information without addressing it on our solicitation ? that we may require them to provided a somewhat of a cost breakdown inclusive of the rates and percentages for direct and indirect cost? I am just unsure what boundaries I can and cannot cross when it comes to situations such as this.

Please advice - Anyone?

You said that rates are set by a CBA. Although the cost principles from FAR Part 31 are not controlling in regard to contracts for commercial items, did you consider this policy statement from 31.205-6(B)(1) "If costs of compensation established under ?arm?s length? labor-management agreements negotiated under the terms of the Federal Labor Relations Act or similar state statues are otherwise allowable, the costs are reasonable unless, as applied to work in performing Government contracts, the costs are unwarranted by the character and circumstances of the work or discriminatory against the Government"? There is more to the cost principle that goes to explain the concepts in this sentence.

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Guest Vern Edwards

You can demand the information pursuant to FAR 15.403-3, but you cannot force them to give it to you. The most you could do is withhold award, which would be risky if the only reason for doing so would be their refusal. Are you sure that you really need to know their indirect cost rates?

What are you pricing? Hourly rates? A contract firm-fixed price?

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You can demand the information pursuant to FAR 15.403-3, but you cannot force them to give it to you. The most you could do is withhold award, which would be risky if the only reason for doing so would be their refusal. Are you sure that you really need to know their indirect cost rates?

What are you pricing? Hourly rates? A contract firm-fixed price?

The evaluation boils down to Price by two vendors. One is high the other is low from the basis of the IGE. This is a FFP - Requirement type contract - Competitive acquisition - Performance Base - LPTA (Vern, you may say just award to the lowest if they are found Technically Acceptable - and Past Performance is low risk... - but it is not as simple as that...). There are CLINs for Hourly rates and some are Monthly - which are derivatives of the hourly rates x a 12 month time frame to evenly measure the workload on a monthly basis.

I have pretty much broken down the IGE in accordance with the CBA rates and ODC. The only thing I had generated is the other indirect cost/rates/percentages which are the G&A, Profit, O/H. I had used nominal values based on average rates from a business stand point, BLIS, and other.

My guess is they have an exorbitantly high number on G&A, O/H, or Profit. - Hence why I need to know rates to be able to identify where the difference are between contractor's proposal and the IGE.

The lowest is significantly low to the point that we question if they can perform the job without risking their financial standing (i.e., would eventually not be able to perform as a result of cost constraints, among other reasons attributed to their low proposal).

Mind you we did not anticipate that it would turn out this way -- evaluating Price to the depth of finding out what factors were inclusive of the price... Based on Market Research and contacting numerous vendors who claim they can meet our requirement - we could simply determine Price reasonableness base on Competitive pricings. However, when you only have two; one being the incumbent the other, a new yet credible vendor with a significantly low price proposal... it is difficult to find a good justification for price reasonableness if awarded to the lowest bidder...

I am intentionally leaving a few more details out as I know it may open up other scrutiny or questions.... I basically want to know if I can or cannot demand such information if it is not formally asked for? Vern from what you are telling me -- it basically falls on how you would want the acquisition to turn out ? what are the risk?.

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The evaluation boils down to Price by two vendors. One is high the other is low from the basis of the IGE. This is a FFP - Requirement type contract - Competitive acquisition - Performance Base - LPTA (Vern, you may say just award to the lowest if they are found Technically Acceptable - and Past Performance is low risk... - but it is not as simple as that...). There are CLINs for Hourly rates and some are Monthly - which are derivatives of the hourly rates x a 12 month time frame to evenly measure the workload on a monthly basis.

My guess is they have an exorbitantly high number on G&A, O/H, or Profit. - Hence why I need to know rates to be able to identify where the difference are between contractor's proposal and the IGE.

The lowest is significantly low to the point that we question if they can perform the job without risking their financial standing (i.e., would eventually not be able to perform as a result of cost constraints, among other reasons attributed to their low proposal).

You said that this is a competitive acquisition. Are you contemplating conducting discussions? If so, do you intend to explore or otherwise discuss your concerns with the two firms?

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Ipod24: I'd be careful about tossing out the low guy solely on his low price if your solicitation didn't state you were going to perform cost realism analysis.

Exactlly hence why I am asking if I can ask for such information for the purpose of determining price reasonableness - obviously I would have to go into discussions which we have already.

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Exactlly hence why I am asking if I can ask for such information for the purpose of determining price reasonableness - obviously I would have to go into discussions which we have already.

Good. I don't necessarily agree that you must conduct discussions if you ask for additional pricing information, though. The solicitation could reserve the right to request such information, if necessary to determine whether the prices are fair and reasonable or to help evaluate the offeror's understanding of the scope, etc. The offerors aren't allowed to revise their price proposals. We've done that for many years.

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Guest Vern Edwards
(Vern, you may say just award to the lowest if they are found Technically Acceptable - and Past Performance is low risk... - but it is not as simple as that...).

First, don't insult me by trying to anticipate what I would say. I would have said no such thing on the basis of the information that you have provided.

My advice is to conduct more discussions. (My understanding is that you have already conducted some discussions.) During the discussions disclose the government estimate to both offerors. Tell the high guy that you think his price is too high based on comparison to the government estimate and tell him that he must convince you that he is not. Tell the low guy that you think his price is unrealistically low and tell him that he must convince you that he's not. Give them a chance to talk about it with you. Then ask for final proposal revisions.

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First, don't insult me by trying to anticipate what I would say. I would have said no such thing on the basis of the information that you have provided.

My advice is to conduct more discussions. (My understanding is that you have already conducted some discussions.) During the discussions disclose the government estimate to both offerors. Tell the high guy that you think his price is too high based on comparison to the government estimate and tell him that he must convince you that he is not. Tell the low guy that you think his price is unrealistically low and tell him that he must convince you that he's not. Give them a chance to talk about it with you. Then ask for final proposal revisions.

Absolutely, put the responsibility on the competitors to justify their pricing!

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