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LadyS_CO

Evaluating Subcontractors Under GSA Quotes

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I am competing a requirement amongst GSA IT Schedul 70 contract holders. The requirement is combination of Firm Fixed Price and Labor Hour. In discussions with one of the other Contracting Officers here, he mentioned to me that I would be required to get subcontractor proposals in order to determine the reasonableness of the Prime Vendor's rates (i.e. determining the prime's profit, etc.). This is not something that I have done before, nor in my time working in private industry have I submitted subcontractor proposals with my GSA quote. I would consider doing this if it were a sole source award, but with competition I dont think I need to do this. Especially, if we are not evaluating the labor categories against actual individuals.

Am I wrong here?

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LadyS_CO, you may want to rephrase your post. You talk about "reasonableness" in a competitive environment, suggesting you should normally be able to determine price reasonableness based on price analysis (one way or the other), ideally through comparison of proposed prices received in response to the solicitation. FAR 15.404-1( b )(2)( i ). (Presumably you are evaluating price reasonableness and looking at rates because you either work for DoD or your agency supplements FAR 8.404(d) like DoD does.) Getting subcontractor proposals sounds on the face of it more like getting other than cost or pricing data, which is more typical of cost analysis than price analysis, especially for the FFP portion of your effort. On the other hand, you talk about a labor-hour contract type, which makes me wonder whether your agency permits blended rates under FAR 16.601(f)(1). Are you sure the other contracting officer believes the "requirement" is derived from the need to determine the prime's price is fair and reasonable?

EDIT: Thanks, Desparado, for your Post #8 below. The language I struck out above was based on my misreading of DFARS 216.601(e), which prescribes the clause at 252.216-7002 Alt A, but, as the name of the clause and the prescription make clear, only for non-commercial items. FSS MAS contracts are solely for commercial items, so the clause, and by extension the prohibition on "blended rates" in the clause, doesn't apply.

Edited by Jacques

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This is not something that I have done before, nor in my time working in private industry have I submitted subcontractor proposals with my GSA quote. I would consider doing this if it were a sole source award, but with competition I dont think I need to do this. Especially, if we are not evaluating the labor categories against actual individuals.

Am I wrong here?

If they want the info, and if you want the job, then submit what they ask for. It's just that simple.

What are you going to do, tell the CO "I don't think I need to," or "I don't have to" or "I haven't had to do that before"?

What are you going to do if she tells you that you won't get the job if you don't submit the required information? Protest? Do you think you'd win?

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Vern, she is the KO or other contracting rep here, not with industry.

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Jacques - Correct, I work with DOD which requires me to make a separate price reasonableness determination. I agree with you that requesting subcontractor information is gathering other than cost or pricing data and putting on the road to a cost analysis, where only a simple price analysis is required.

The other Contracting Officer is very wrapped up in ensuring that the Prime vendors are not including an unreasonable amount of profit on the subcontractor rates. I'm not very concerned by this, since I'm competing a small business set aside and have received multiple quotes and feel confident in making a reasonableness determination using the price analysis techniques in FAR 15.404-1(b ) (2).

As Vern stated, I haven't found anything within the MAS handbook, FAR, or DFARS that would require me to dig any deeper into the rates. Most of my Acquisitions have been much larger ($500 Million +) and under FAR Part 15, so I wanted to stop by here for a sanity check, since I don't use the FSS very often. Thanks everyone! :)

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The other Contracting Officer is very wrapped up in ensuring that the Prime vendors are not including an unreasonable amount of profit on the subcontractor rates.

If the other contracting officer is making competitive buys of commercial items (services), why is he worried about the profit that the contractor is making? He should worry about the rates that he is paying.

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With the GSA Schedules program, the prime/sub is very different from standard contracting. In short, there technically are no "subs" in the traditional sense. The rates are already in the GSA Schedule holders contract and have been determined fair and reasonable and are the only rates that a Schedule contractor can charge. They cannot charge a different price for subs. They cannot charge an administrative fee for subcontractor oversight. Although the rates are already F&R, you will have to make a level of effort F&R determination IAW FAR 8.405-2(d). Please note that if you are with a DoD agency, the DFARS has a deviation in place regarding pricing issues.

This is one of the things that is supposed to make the GSA Schedules program easier to use, although it creates headaches for the Schedule holders.

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Slight correction... They can charge lower than the Schedule rates, just not higher. So technically it is not the "only" rate that can be charged.

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The requirement is combination of Firm Fixed Price and Labor Hour.

Are there fixed price line items in the GSA schedule holder's schedule? Does that still matter?

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Apsofacto,

Since many government agencies require Firm-fixed pricing, what a GSA Schedule holder can do is create a FFP quote based upon their already agreed upon FFP rates. If/when the GSA OIG goes to look at the contractor's records they will require that the company breakdown the FFP pricing to ensure that the contractor didn't overcharge when putting together their FFP quote. However, there is no requirement that a government CO do the same thing when purchasing off of the Schedules. There are some that will, but it is not required.

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However, there is no requirement that a government CO do the same thing when purchasing off of the Schedules. There are some that will, but it is not required.

Desparado, do you think that GAO would sustain a protest where the agency awarded a Task Order with unit prices higher than the GSA FSS contract price? Do you consider the GSA FSS contract's scope to include the prices on the contract? Under Tarheel Specialties, Inc., GAO held:

"Where an agency announces its intention to order from an existing FSS contractor, all items quoted and ordered are required to be within the scope of the vendor's FSS contract" (Tarheel Specialties, Inc., B‑298197.2, July 17, 2006).

Personally, I consider the rate of those fixed price labor line items as one element that constitutes the scope of a contract.

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Metteec - Although I can't profess to know how GAO would think, considering that a contractor charging more than what is on their FSS contract would be a violation of that contract, I would think that GAO might sustain a protest. However, GAO rarely looks at FSS task orders unless the value exceeds $10M or there is a claim that the government did not evaluate in accordance with their solicitation.

I do not agree that the fixed labor line items are an element that constitutes scope, or if so it is a very minor one. The scope of an FSS contract is fuzzy at best and the scope is really defined at the task order level. The Special Item Numbers (SINs) that GSA uses to define scope are very broad and in some cases knowing exactly what is and what is not within scope is difficult to determine. Now, if it absurd happens (like a contractor uses custodial worker labor to be a computer programmer), then that would be another story.

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OK- Thanks Desparado.

I was worried using GSA unit rates to fix price a specific piece of work would render that line item an open market item. I trolled through some GAO decisions, but did not turn up a result which supported that notion, so I should re-think.

I assume the schedule holder reimburses if there was an underrun on the actual hours incurred- is that correct? If the OIG detects that more labor hours were consumed in performing the work, does the Government owe the schedule holder more money?

I think I'd rather write a D&F to use T&M rather than interact with my OIG in any way, but I was a little skeptical of the T&M=EV&L formulation. T&M=riskier, but not evil and therefore prohibited. Probably unfit for service now . . .

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From Original Post --"The requirement is combination of Firm Fixed Price and Labor Hour. In discussions with one of the other Contracting Officers here, he mentioned to me that I would be required to get subcontractor proposals in order to determine the reasonableness of the Prime Vendor's rates (i.e. determining the prime's profit, etc.)."

From Vern's Post #7 --"If the other contracting officer is making competitive buys of commercial items (services), why is he worried about the profit that the contractor is making? He should worry about the rates that he is paying."

From Desparado's Post #8 --"With the GSA Schedules program, the prime/sub is very different from standard contracting. In short, there technically are no 'subs' in the traditional sense. The rates are already in the GSA Schedule holders contract and have been determined fair and reasonable and are the only rates that a Schedule contractor can charge."

To sum up, the rates up to (but not in excess of) the GSA Schedule rates have already been determined to be fair and reasonable, and there is no requirement to perform cost analysis on offers/bids that use those GSA Schedule rates, so it would be wasteful to request contractors to provide subcontractor proposals in order to evaluate any profit that the contractors may be making.

Did I correctly synthesize the answer? If not, please let me know. (As if I could stop you.)

If I'm correct, then the question has been answered.

H2H

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