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DCChris23

Doing Cost Analysis on Subcontracts at Pre-Award Stage

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Hi All,

Long time reader, first time poster. I'm doing evaluation on a competitive FAR 15 cost-reimbursement contract. Most of the primes have submitted subs providing full cost and pricing detail as required in FAR 15 to determine fair and reasonableness. However, some primes, for some subs, have only submitted T&M loaded rates or in some cases only one amount with no LOE to back it up for what they claim are their commercial subs. During discussions, where additional material was requested in order to determine fair and reasonableness, they claimed that because these subs are proposed as commercial subcontractors, it is not required and pointed to 52.244-6.

I've dealt with commercial sub approval at the post-award stage before, but not at the pre-award. Any suggestions on material I should be requesting and am allowed to request in order to determine fair and reasonable cost? Its a very detailed requirement with different approaches, so price analysis is not really applicable.

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Do you agree with the prime contractors' conclusions that the proposed subcontracts would be commercial? Are the proposed subcontracts for items of supply or services?

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Hi All,

Long time reader, first time poster. I'm doing evaluation on a competitive FAR 15 cost-reimbursement contract. Most of the primes have submitted subs providing full cost and pricing detail as required in FAR 15 to determine fair and reasonableness. However, some primes, for some subs, have only submitted T&M loaded rates or in some cases only one amount with no LOE to back it up for what they claim are their commercial subs. During discussions, where additional material was requested in order to determine fair and reasonableness, they claimed that because these subs are proposed as commercial subcontractors, it is not required and pointed to 52.244-6.

I've dealt with commercial sub approval at the post-award stage before, but not at the pre-award. Any suggestions on material I should be requesting and am allowed to request in order to determine fair and reasonable cost? Its a very detailed requirement with different approaches, so price analysis is not really applicable.

When pricing subcontracts, there's nothing wrong with requesting additional information to determine a fair and reasonable price. The fact that the subcontracts are commercial would prohibit you from obtaining certified cost or pricing data, but not all cost or pricing data. Price the subcontracts the way you would at the postaward stage.

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However, some primes, for some subs, have only submitted T&M loaded rates or in some cases only one amount with no LOE to back it up for what they claim are their commercial subs. During discussions, where additional material was requested in order to determine fair and reasonableness, they claimed that because these subs are proposed as commercial subcontractors, it is not required and pointed to 52.244-6.

Any suggestions on material I should be requesting and am allowed to request in order to determine fair and reasonable cost? Its a very detailed requirement with different approaches, so price analysis is not really applicable.

First, FAR 52.244-6 has absolutely nothing to do with subcontract pricing.

Second, with respect to the subcontracts for which "no LOE" (level of effort?) has been provided, you haven't described the requirements those subs will fulfill, so we can have no idea what kind of pricing info you will need.

As for what you are allowed to request, you can ask for anything you want that isn't certified cost or pricing data. It's up to the offerors to prove to you that the proposed subcontract prices are fair and reasonable. It is not up to you to prove that they aren't. Don't let the offerors b.s. you about that. They're trying to b.s. you because they can tell that you aren't sure of yourself.

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Offeror: I don't have to submit additional information because the subcontracts are for commercial services.

DCChris23: I'm not requesting certified cost or pricing data, which I'm prohibited from obtaining from you for commercial subcontracts. However, I still need to determine the reasonableness/realism of your proposed costs. I am unable to do that with the information that you have provided. Unless I can determine the reasonableness/realism of your proposed costs, the Government will be unable to award you a contract.

Offeror: Thank you for clarifying this, DCChris23. Please let me know what you need and I'll see if we have that information.

DCChris23: Great. Please send me...

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They are for services. I already did request additional information and they are claiming that because its commercial services, they are not required to submit.

I work for a prime contractor. One or more of these offerors may have chosen to go sole/single source with a "commercial" subcontractor. It could be that procurement at the offeror was prevented from competing the subcontract by engineering or the program office. If you are not satisfied with the analysis performed by the offeror's procurement (e.g. no subcontract competition), you may run into a wall with the offeror's procurement. Like Don explained above, you can use your leverage of competition at the prime level to encourage the offeror (i.e. the program office and upper management) to re-consider any sole/single source commercial decisions.

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Next time, just say what you want in the RFP proposal preparation instructions and say that you'll reject the proposal from any offeror who does not give it to you. Along those lines, though not precisely on point, see Equa Solutions, Inc., B-409848, http://www.pubklaw.com/wp-content/uploads/2014/12/GAO-Equa.pdf.

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So if the offeror is claiming that the proposed subcontractors are providing commercial services, it should be able to support that position through what used to be called "information other than cost or pricing data" (not sure if that phrase still exists anymore). I've generally taken that to mean customers, prices, and pertinent terms. Commercial items (services) have a tougher threshold than commercial items (supplies), right? Request the contractor support the assertion of commerciality with specifics.

Just my two cents.

Hope this helps.

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Even if the sub is providing a commercial item, the CO can ask for data other than certified cost or pricing data in accordance with FAR 15.403-3.

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Vern,

I agree with you. The CO can request any information not prohibited by statute or regulation. A smart offeror will work hard to provide the requested information and to make the CO happy.

That being said, in the "real world" of commercial entities that do not regularly contract or subcontract with the Federal government (including those entities that are "non-traditional Defense contractors"), those companies may not have the ability to provide the requested information easily or quickly. I thought it might be a good start to see if the proposed subcontractor actually met the FAR test, for two reasons: (1) most prime contractors do not understand those FAR requirements and, as a result, tend to assert commerciality when they should not, and (2) maybe in the course of supporting commerciality, sufficient information would be provided to the CO to support a determination that the proposed price was fair and reasonable. I thought it would be a good first step; I didn't suggest it would be the entire journey.

Hope this helps

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