Jump to content
The Wifcon Forums and Blogs

Recommended Posts

On a non-competitive sole source proposal requiring certified cost or pricing data, we submitted a Consolidated Bill of Material (CBOM). For individual elements below the certified cost or pricing data threshold, we did not include a price analysis or cost analysis. DCAA is insisting that we are required to substantiate that each element (in this case, a $42K item) is fair and reasonable. We can't find anything in FAR table 15-2 instructions that validate DCAA's contention. Are we missing something?

Share this post


Link to post
Share on other sites

Steveatus,

I think you need to demonstrate how the estimated cost for each proposed material item was determined. When you buy the item, your buyer will need to document why the price paid is fair and reasonable. You need to perform CAPA on your proposed supplier costs when the FAR says you need to perform CAPA.

A DCAA audit is just an extension of government negotation by other means.

H2H

Share this post


Link to post
Share on other sites

There's a disconnect between FAR 15.404-3( b ) and FAR Table 15-2. FAR 15.404-3( b ) states:

The prime contractor or subcontractor shall --

(1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices;

(2) Include the results of these analyses in the price proposal; and

(3) When required by paragraph © of this subsection, submit subcontractor certified cost or pricing data to the Government as part of its own certified cost or pricing data.

This seems to require the contractor to include the results of the price analysis or cost analysis in the price proposal, regardless of dollar value. However, FAR Table 15-2, Part II.A. states:

Conduct price analyses of all subcontractor proposals. Conduct cost analyses for all subcontracts when certified cost or pricing data are submitted by the subcontractor. Include these analyses as part of your own certified cost or pricing data submissions for subcontracts expected to exceed the appropriate threshold in FAR 15.403-4.

So, your proposal may be compliant with FAR Table 15-2, but DCAA may be expecting more based on FAR 15.404-3( b ).

Share this post


Link to post
Share on other sites

On a non-competitive sole source proposal requiring certified cost or pricing data, we submitted a Consolidated Bill of Material (CBOM). For individual elements below the certified cost or pricing data threshold, we did not include a price analysis or cost analysis. DCAA is insisting that we are required to substantiate that each element (in this case, a $42K item) is fair and reasonable. We can't find anything in FAR table 15-2 instructions that validate DCAA's contention. Are we missing something?

As Don pointed out, Table 15-2 does say to conduct price analyses of all subcontractor proposals. So while Table 15-2 may not require them all to be submitted as a part of the proposal, you definitely should be prepared to provide them as supporting data to the auditor. You need to demonstrate that you're not going to become the source for the next $42,000 hammer (or toilet seat, or whatever).

Share this post


Link to post
Share on other sites

In related news, DCAA has found that subcontracts awarded where insufficient CAPA was performed can generate quite a bit of questioned incurred costs. As KBR learned to its chagrin.

H2H

Share this post


Link to post
Share on other sites

Retreadfed asked how the contract will be priced. This is a Cost type contract action.

My estimating contingent believes there is a distinction between bill of material items and subcontracted items. They believe DFARS Checklist item 17 only applies to item subcontracted (items where a there is an SOW provided to a supplier) versus a bill of material item, which is basically a purchased part number.

Share this post


Link to post
Share on other sites

Steveatus:

In my opinion, you and your colleagues are trying to parse the FAR in a poor and misguided attempt to argue that you can just present materials prices to the government without demonstrating that they are fair and reasonable. I tell you now that if I were the CO and you tried that with me you'd find yourself on the receiving end of a very strong reaction. I'd tell you that it's up to you to prove that your proposed price is fair and reasonable and that it is not up to me to prove that it's not, and that part of your proof is production of your price or cost analysis. I would refuse to make a counter offer on the ground that I consider your proposal to be inadequate in light of your inability or refusal to produce your price or cost analysis, as appropriate per FAR Subpart 15.4. I would attribute any delay in contract award to your conduct, and I would report to my superiors your intransigent refusal to cooperate and ask them to call your superiors to complain. I would elevate the matter as high as I had to in order to get your bosses' attention.

If you would want to begin a new or renewed contractual relationship in that way it would be too bad, but it would be your fault. In my evaluation of your company's performance I would characterize your negotiating behavior as uncooperative, and report it that way to everyone who called me for past performance input. In short, I would do everything in my power as a contracting officer to make you regret what I would consider immature negotiating behavior on your part. I would seriously think about demanding a defective pricing audit by DCAA shortly after contract award, if we got that far.

The request for your price or cost analysis is not unreasonable, for I would not expect any company to pony up $42,000 for an item of material without making some reasonable effort to determine if the price were right, and I would not trust any company that did not make such an effort. So my recommendation to you is to cut the crap and produce some price or cost analyses post haste, which is what I would expect from mature business people.

Share this post


Link to post
Share on other sites

I found this definition of a subcontract that Vern posted in the Subcontracts area a while back. It is pretty close to how we distinguish between a subcontracted item and a material or BOM item.

"Except as otherwise defined by applicable statute or regulation, or by contract, a subcontract is a contract entered into for the sole purpose of performance of a part of the work of a specific contract that this company is obligated to perform. The term does not include contracts for materials. The term also does not include contracts for parts, components, or services that are not manufactured or rendered especially for a specific contract of this company. A subcontractor is a firm that is performing a subcontract for this company or is performing a subcontract for one of our subcontractors"

Share this post


Link to post
Share on other sites

Steveatus,

If you complied with FAR Table 15-2, your proposal included the following statement:

This proposal reflects our estimates and/or actual costs as of this date and conforms with the instructions in FAR 15.403-5( b )(1) and Table 15-2. By submitting this proposal, we grant the Contracting Officer and authorized representative(s) the right to examine, at any time before award, those records, which include books, documents, accounting procedures and practices, and other data, regardless of type and form or whether such supporting information is specifically referenced or included in the proposal as the basis for pricing, that will permit an adequate evaluation of the proposed price.

Even if you didn't submit the price analysis with your proposal, you agreed to let DCAA examine it.

Share this post


Link to post
Share on other sites

From FAR 52.244-2, "Subcontracts," paragraph (a):

"Subcontract" means any contract, as defined in FAR Subpart 2.1, entered into by a subcontractor to furnish supplies or services for the performance of the prime contract or a subcontract. It includes, but is not limited to, purchase orders, and changes and modifications to purchase orders. (Bold added)

Granted, that definition is "As used in this clause..." but in my experience this definition is a clear indication of Government expectations in all situations, and (sticking my neck out a little bit here) as far as I know, is consistent with the rest of the FAR. It has been my rule of thumb for years.

But trying to make a distinction between and subcontract and a purchase order is not the point. The point is that every purchase above the micropurchase threshold needs some form of written price analysis (see FAR 15.404-1( a )( 2 ) and - ( 3 )), and the Government is entitled to see it upon request for the reasons noted in previous posts.

If this is in support of an equitable adjustment, for a DoD customer, also see DFARS 252.243-7002( c )( 2 ).

Share this post


Link to post
Share on other sites

Cajun, if we accept that FAR Part 15 only provides guidance to contracting officers and that contractors are only required to comply with the terms of solicitations and contracts, where is the requirement for a contractor to perform a cost or price analysis of a subcontractor's proposal?

Share this post


Link to post
Share on other sites

Retreadfed, here, here! I thought I was something of a renegade for believing that the only pieces of the FAR that I, as a contractor, had to comply with, were the pieces within the four corners of the solicitation I was bidding or the contract I signed. Glad to see I'm not alone. My philosophy is that the Government should be happy for contractors to use best commercial practices and FAR principles, allowing them to perform more efficiently than the Government can.

I also recognize that Government expectations include contractor compliance with the whole FAR. including Part 15. What contractors actually must comply with are the contractors' own purchasing policies and procedures. In my admittedly limited but lengthy experience, it's hard to get purchasing system approval without including more of the FAR than contractors ought to, imho. Many contractors seem to accede to DCAA pressure and include more and more of the FAR in their policies and procedures, until contractors are almost as hamstrung as the Government in their procurement processes. And here I thought one of the reasons they hired us contractors was because we can perform more efficiently -- silly me.

The trend to require contractors to comply with the whole FAR and DFARS has been formalized in DFARS 252.244-7001, "Contractor Purchasing System Administration," whose paragraph ( c ) begins, "System criteria. The Contractor's purchasing system shall -- (1) Have an adequate system description including policies, procedures, and purchasing practices that comply with the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS); ..." (Bold added) How in the world did that ever get published? Will it ever be literally and fully implemented? Can it be?

Again, not every contract contains this clause, but it clearly indicates the Government's attitude and expectations.

In looking back at Retread's question, I thought this topic was about a prime and the Government, not about a sub and a prime. Did I miss something? Wouldn't be the first time.

To get back to the topic at hand, as a contractor you can antagonize the Government by arguing and risk getting the kind of treatment that Vern described, or at worst losing the work, or at best delaying the approval until you give the Government what it wants; or you can cooperate by providing all the supporting documentation that the Government wants. In previous incarnations I have had similar differences of opinion with our estimators, and have always taken the attitude of making our initial submittal as easy as possible for the Government to digest and approve, and then providing whatever further backup is requested. The estimators eventually came around. It avoids a lot of friction, costs less in the long run, and makes for better customer relations, which is important for future business.

I believe contractors should pick their battles with the Government, and know how to disagree without being disagreeable. Maintaining a level of business courtesy and practicing good manners is important. At the end of a contract, not only do I want to perform well and make my financial goals; and even if there were some tough issues we had to work through, I also want to be the kind of contractor that leaves the client with a favorable impression.

Share this post


Link to post
Share on other sites

Cajun, I feel your pain regarding CPSRs. I have had to deal with one where the ACO insisted that the contractor's policies had to include a discussion of all the exemptions from full and open competition in FAR subpart 6.3 and another where the ACO dinged the contractor for not including appropriate flow down clauses in an inventory buy, i.e., a purchase of material that would be placed in inventory for use on various future contracts that could be priced in any way.

In regard to DFARS 252.244-7001 incorporating the entire FAR and DFARS, here is an extract from the May 18, 2011 Federal Register concerning that topic

Comment: DFARS 252.244-7001 requires purchasing policies that
``comply with the Federal Acquisition Regulation (FAR) and the Defense
FAR Supplement (DFARS).'' The respondent requested that the rule
clarify that requirements being imposed on contractors are done via
contract clauses.
Response: All contractual requirements are identified and
accomplished through contract clauses. There is no need to issue such a
clarifying statement in this rule.

Based on this, I do not see that this clause incorporates the entire FAR or DFARS.

Share this post


Link to post
Share on other sites

Cajun, if we accept that FAR Part 15 only provides guidance to contracting officers and that contractors are only required to comply with the terms of solicitations and contracts, where is the requirement for a contractor to perform a cost or price analysis of a subcontractor's proposal?

It comes from the basic versions of FAR 52.215-20 and -21, which instruct the offeror/contractor to prepare a proposal IAW FAR Table 15-2. FAR Table 15-2, Part II.A. requires price analysis and cost analysis (if applicable). See my post #4.

Share this post


Link to post
Share on other sites

All Govies,

As a Cost/Price Analyst for a Government Contractor, I would love to perform Cost of Price Analysis on all subcontracts at any value, and provide the results to the Government on every proposal we prepare. Unfortunately, we do not have unlimited budget and unlimited resources to perform all this work on proposals we may never win, and never place any actual "subcontracts".

I suggest we all use some common sense and concentrate on the cost drivers, not the $42k widgets. The checklist at DFARS 252.215-7009 seems to recognize this fact. I think Steveatus has a logical and sensible approach to this requirement.

Share this post


Link to post
Share on other sites

DC, please bear in mind that the OP was about a non-competitive sole source proposal. In that situation, there is a big difference between a contractor's view of what is logical and sensible, and compliant. See the compliance requirement in post # 12 above.

For competitive proposals, you would usually not owe the Government a proposal formatted IAW Table 15-2, and therefore not owe them the statement of conformity with FAR 15.403( b )( 1 ), so as a general rule you would be good to go with your logical and sensible approach.

Share this post


Link to post
Share on other sites

Dan,

You may want to check if your contracts contain DFARS 252.244-7001, Contractor Purchasing System Administration. One of the system criteria is that the contractor's purchasing system shall:

(10) Perform timely and adequate cost or price analysis and technical evaluation for each subcontractor and supplier proposal or quote to ensure fair and reasonable subcontract prices;...

If you're not doing your price analysis on the $42K widgets, you are risking payment withholding.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.

×