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Fair and reasonable Price Determination

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DPAP just issued a deviation to FAR 8.404(d) : http://www.acq.osd.mil/dpap/policy/policyvault/USA001004-14-DPAP.pdf.

FAR 8.404 (d) tells one to do a price evaluation in accordance with FAR 8.405-2(d). The latter paragraph includes this sentence: "The ordering activity is responsible for considering the level of effort and the mix of labor proposed to perform a specific task being ordered, and for determining that the total price is reasonable."

Given the explicit words in 8.405-2(d), does anyone know why DPAP felt obligated to issue a deviation?

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The deviation adds the requirement for the contracting officer to make a determination of fair and reasonable prices for orders not requiring a statement of work (FAR 8.405-1).

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Those orders not requiring a statement of work list fixed price items with a spec or SOW contained in the schedule. The fixed prices for FAR 8.405-1 tasks or items were subject to competition when GSA awarded the schedule.

If a contracting officer leaves the RFQ open for 30 days, but receives only a single quote, can the CO cite the competition leading to the award of the schedule as a basis for price fairness and reasonableness?

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Those orders not requiring a statement of work list fixed price items with a spec or SOW contained in the schedule. The fixed prices for FAR 8.405-1 tasks or items were subject to competition when GSA awarded the schedule.

If a contracting officer leaves the RFQ open for 30 days, but receives only a single quote, can the CO cite the competition leading to the award of the schedule as a basis for price fairness and reasonableness?

i don't think so, according to the DPAP memo, DFARS 208.404, 215.371and 215.371-5.

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Even though GSA says its FSS pricing is fair and reasonable based on thier evaluation criteria for awarding the FSS contract, but we all know prices vary widely with some contractors giving up to 50% or more discounts when made to compete. So how is that pricing really fair and reasonable. I think DPAP just wants all the COs to not accept the theory that all GSA FSS prices are Fair and actually look at the prices.

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Nap -

In reviewing the subject deviation, my interpretation is that DPAP is adding a requirement that the KO review the schedule rates proposed against each effort, de novo, to determine the rates to be fair and reasonable, applying the techniques at FAR 15.404-1.

FAR 8.404(d), prior to this deviation, allowed ordering activities to rely on the schedule rates as fair and reasonable, subject to the review in 8.405-2(d) (when requiring a statement of work). FAR 8.405-2(d) requires the ordering activity to consider the labor mix and level of effort, and determine the total price to be reasonable. 8.405-2(d) does not require the KO to revisit the reasonableness of the rates (beyond determining that the proposed rates are at or below the contractor's schedule rates); only that he/she determine that the proposed categories (labor mix) and hours (LOE) are reasonable in relation to the SOW, and therefore when multiplied against the schedule rates (already determined fair and reasonable), that the total price of the effort is reasonable.

The effect of this deviation should be a required analysis of the proposed rates, to determine them fair and reasonable without reference to their inclusion in the Federal Supply Schedule. I'm not sure how large of an impact this deviation will have, unless there are activities that rely on GSA's reasonableness determination to support their awards. My experience is that most activities have been performing price analysis of FSS rates based upon historical prices from similar competitive actions, or seeking other than certified cost or pricing data.

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Boof - To answer one of your questions ("So how is that fair and reasonable"), F&R doesn't necessarily mean the lowest price, and in many cases it doesn't. What GSA does is compare the prices offered on Schedule to what that contractor is getting from their most favored customer (MFC). If they get 2% better than their MFC, or in fact get no discount from their MFC, the price is still F&R because it is at a rate that is commercially acceptable, based on the fact that they are being purchased commercially. Each contractor is being looked at individually in the MFC-concept, so Contractor A may charge $100 for a table and Contractor B may charge $120 (a 20% difference in price). That doesn't mean that the $120 table is not F&R, it just means that competition needs to be done against the Schedule contract holders (IAW FAR 8.4).

I guess what I'm trying to say is that there is a distinct difference between F&R and Best Price.

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Adding on to my previous statement, GSA recently (within the last few months) started doing more of a horizontal price analysis with its contractor pricing. It will take a LONG time to get through all the contractors (over 19,000) and their prices, but they are on a path to reduce the amount of discrepancy between the lowest and highest prices available, especially for supplies.

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Harkening back to an earlier discussion, should this deviation have been published in the Federal Register for comment before it was put in place?

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