Proposal Prep Costs for IDIQ Task Order proposals

[JustBlameMe]

Good morning, 

I'm working through an issue here.  

Background:  Single vendor DOD IDIQ.  Majority of work is non COTS stuff and majority of the TOs are CPFF, with occasional FFP and CPIF/CPAF.  We issue RFPs to the vendor, who in turn submit us cost estimates (most are over TINA threshold) and we provide support to many organizations from all the DOD departments. Anyhow, We get our tech evals in, analyze all their costs, run our weighted guidelines and factors for fee objectives. develop our prenegotiation object and move out with negotiations and award as needed.   The issue I am having is not new. I have voiced for a couple of years now to my entire team, but now that I am the contracting officer and I want to do something about it.  In the previous IDIQ, the KTR would charge all of their proposal prep B&P to G&A.  On this new IDIQ, the new contractor (same company as the previous one), updated their disclosure statement changing this direct.  They start it as a G&A charge account and then roll over the actuals when the TO is awarded. If the RFP gets cancelled they leave it in G&A.  It went through DCAA who opined that it was out of compliance with the fundamental requirements under FAR 31.202, FAR 31.203, 48 CFR 9904.402, and 48 CFR 9904.420.  The contractor's response was vague and, I guess the ACO was too busy to be bothered by it and approved their disclosure.  Here's the real issue:  This KTR is proposing these as fee/profit bearing and It looks like it's a UCA or CPPC when it comes time award the TO.  Some of these requirements are very complex in nature and require a lot of RFIs and Alpha sessions with my IPTs and there is no way for me to control the costs from growing out of control.  Basically the KTR is being incentivized indirectly to charge up as much B&P costs as possible.  There is nothing in the IDIQ or PWS that mentions this other than they propose to our RFPs within a certain amount of days.  I wish they would move it back to G&A and deal with DCMA on rates like they always do, FPRP, FPRR, FPRA, etc.  Leadership says the have my back but I'm going it alone for now.  Anyone ever dealt with an issue like this?  How to I control the costs?  Going the status quo makes me very uncomfortable.  I could have a proposal where just the cost of these hours are over a million bucks because of all the meetings and RFIs.  The contractor assumes no risk submitting a cost proposal...we've always covered their cost, but it was in their rates.  I've read through sim to posts on here, but nothing that really hits this to a tee.

Thanks and don't forget to just blame me

[Vern Edwards]

The contract is a single-award IDIQ. Is that right?

If that's right, do you ask only for estimated cost and fee and proposed price proposals, or do you also require "technical" proposals?

[JustBlameMe]

Thank you for replying Vern - It is indeed a single award IDIQ.    We ask for them to develop a basis for their estimate (BOE), draft PWS based off a SOO we provide them with the RFP, thus the technical part is very minimal and usually a regurgitation of the SOO.  They also send any subcontracting quotes and price analyses as they have an approved purchasing system and we receive their pricing reports where I can look under the hood at their rates, hours and such (my favorite part as I'm an Excel junky).  I want to note that all of the overhead burden pools needed for the requirement, including G&A are applied before fee or profit.  So they do get fee on their G&A....it's just all of our customers get to share covering that cost across all of our task orders as the entire IDIQ has approved rates, which change once or twice a year.

[JustBlameMe]

They also give us an IMS. I also want to note the IDIQ is performed at a GOCO location.

[Don Mansfield]

What do you mean by "fee-bearing"? Have you agreed to pay fee as a percentage of their proposal costs?

[JustBlameMe]

6 minutes ago, Don Mansfield said:

What do you mean by "fee-bearing"? Have you agreed to pay fee as a percentage of their proposal costs?

Yes and no...when we get their proposal, there is WBS section in the BOE which also is in their pricing spreadsheet called Proposal Preparation Costs.  They basically roll all the actual hours and resources that were charged/incurred during their estimating period into them and add the profit or fee akin to all the other costs (the forward scope stuff they want us to award).   The no part:  I have not agreed to paying them any fee on proposal prep costs, but our office has set precedent by allowing it for a good while now.  I also want to note their approved disclosure statement only mentions cost...no mention of fee or profit.

[Don Mansfield]

You don't have to agree to the proposed fee. You can break precedent. New sheriff in town.

[JustBlameMe]

Thank you Don!  That's exactly what I plan to do.  If I have to create a LH task order for this contractor for proposal prep I will.  Of course I will have to get all of my customers to fund a CLIN...LOL!!!! Ugh!!!  It would make more sense for the contractor to just do it in their G&A pools like they did on the previous IDIQ, but I will explore other options if I have to.

[Vern Edwards]

I suspect that the contractor thinks that the task order proposal preparation is costly and they don't want to put that burden into their G&A pool.

Task order proposal preparation is a direct cost of the IDIQ contract and they want you to bear that cost, not spread it among all of their customers.

And it's work, so they want fee.

I don't blame them. Why should they put that cost in G&A and let you off part of the hook for what you require them to spend?

Maybe you should make your proposal process a little less costly. Assembling certified cost or pricing data for submission to the government is risky and can be expensive. Government people don't always understand what's involved. Preparing a real PWS from a SOO can also be expensive, especially if you are requiring a real PWS. Most government people are unable to do it. Putting it on the contractor is a dodge, and a potentially costly one.

[JustBlameMe]

Thank you Vern - I'm sure you are correct and I absolutely want to be fair to the contractor with regard to fee/profit, but I have to find another another way than the status quo.  It's a blank check right now.  I appreciate you pointing me to the obvious about how costly our proposal process is.  There's a lot I can influence in this area and I intend to.  I'm also willing to collaborate with the contractor at finding a different approach to how we can structure this that benefits both parties, but with limitations and clear ground rules.  This IDIQ is a fast moving train, but change takes time and work.  I love your comment about a real PWS.  I can't stop laughing about it.  It rings so true.  I'm certain my CORS/RAs would be more than happy for one of my contracting specialists or me to write them. HA! I'll proof read them and advise, but that's not going to happen.  Thank you everyone.  I have to get my thinking cap and pencils out on this one and do the hard work. 

[Vel]

Interesting discussion.  I was wondering if you had seen the DPAP Memo on Direct and Indirect Charging of Contractor Proposal Preparation and Negotiation Support Costs, from 2011.  You can find it here: https://www.acq.osd.mil/dpap/policy/policyvault/usa002866-11-dpap.pdf  The next to last paragraph may give you some ideas on controlling the costs.

[JustBlameMe]

Morning Vel - I did indeed.  It was one of first things I found when I started researching this issue.  I zeroed in on the last paragraph as well and those options.  Problem I'm facing is the Prime IDIQ has no funding on it for this, just ceiling costs by CLIN.  The funds are added when we award the TOs. We issue the RFPs and the contractor proposes accordingly.  Of course we require assurance of funds from our RAs signed by their comptrollers before we will submit RFPs to the contractor, so we don't just become a repository for people to use us for market research or building IGCEs for requirements they intend to source elsewhere (been down that road on the previous IDIQ).  I could issue instructions in the RFP with verbiage placing placing limitations such as NTEs with regard to hours (that's all they are), but I'm not sure how much teeth that really has.  The RAs are indifferent to the entire concept other than sticker shock from time to time and, although we have plenty of historical data on the actuals the contractor has incurred estimating  proposals (we can validate running a labor verification in our shared system), they are not including them in their IGCEs - that's something I can influence change on.  Simple thing I can think is I have to issue an RFP just for proposal prep, award a funded FFP TO and then do another RFP for the actual requirement where the contractor charges to other TO for proposal preparation.  I guess a 2-step process.  I could likely pull that off with one of the largest platforms I support, but getting buy in from the others will be a challenge.  Actually it will be a challenge all around right now with a CR in place. Of course that's going to slow down the entire process and our RAs are used to getting things on TO on the quick.  They'd much rather tap into our vehicle and MIPR money if they can get something on contract within a month or so versus 18+ months going through their local contracting offices.    

[here_2_help]

If you require proposals in order to issue a TO, you should be prepared to pay for them. Having the ktr put the proposal prep costs in G&A shifts the costs to other customers who get no benefit from your ID/IQ. Also see CAS 402, Interpretation No. 1, quoted below:

 

Quote

9904.402-61 Interpretation.

(a) 9904.402, Cost Accounting Standard - Consistency in Allocating Costs Incurred for the Same Purpose, provides, in 9904.402-40, that “ * * * no final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included in any indirect cost pool to be allocated to that or any other final cost objective.”

(b) This interpretation deals with the way 9904.402 applies to the treatment of costs incurred in preparing, submitting, and supporting proposals. In essence, it is addressed to whether or not, under the Standard, all such costs are incurred for the same purpose, in like circumstances.

(c) Under 9904.402, costs incurred in preparing, submitting, and supporting proposals pursuant to a specific requirement of an existing contract are considered to have been incurred in different circumstances from the circumstances under which costs are incurred in preparing proposals which do not result from such specific requirement. The circumstances are different because the costs of preparing proposals specifically required by the provisions of an existing contract relate only to that contract while other proposal costs relate to all work of the contractor.

(d) This interpretation does not preclude the allocation, as indirect costs, of costs incurred in preparing all proposals. The cost accounting practices used by the contractor, however, must be followed consistently and the method used to reallocate such costs, of course, must provide an equitable distribution to all final cost objectives.

(Emphasis added, obviously.)

[Retreadfed]

In addition to what H2H provided, the definition of B&P from FAR 31.205-18 excludes costs "required" in the performance of a contract.  "Required" is an ambiguous term as it can mean that there is a specific requirement in a contract for the contractor to submit a proposal, or it can mean that submitting a proposal is necessary for performance of a contract although there is no specific requirement in the contract for submission of a proposal.  Thus, to me, it seems your first task is to determine whether you are dealing with B&P costs or some other type of cost.

 

 

[Don Mansfield]

On 11/15/2022 at 10:05 AM, JustBlameMe said:

They basically roll all the actual hours and resources that were charged/incurred during their estimating period into them and add the profit or fee akin to all the other costs (the forward scope stuff they want us to award). 

One other thought. You may already be doing this, but when you are doing the weighted guidelines you can assign below normal value for contract type risk if some or all of the costs have already been incurred (like proposal prep costs). 

[Vern Edwards]

9 hours ago, JustBlameMe said:

I appreciate you pointing me to the obvious about how costly our proposal process is. 

@JustBlameMeI wrote the following in an article published in 1995:

Quote

One can easily imagine requests for proposed task order “performance” plans or “management” plans, especially for task orders of significant dollar value. One can also imagine requests for extensive cost breakdowns, certified cost or pricing data, and proposal audits. If too complex and demanding, such procedures would significantly increase an agency's administrative costs, extend the lead time associated with task order issuance, and force awardees to incur significant costs in the preparation and negotiation of task order proposals.

 

[JustBlameMe]

I want to thank everyone for chiming in.  A lot of good information and things for me to chew on and places to research.  I also appreciate the humor.  I will try to remember to post back and give some things I accomplished and lessons learned as I work through this issue.

Kind Regards