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Jamaal,

Your new scenario changes everything, doesn't it?

You no longer have a real price for a real task -- you have a pretend price for a pretend task. Everything I wrote earlier was for a real price for a real task, which I thought was your question. I don't do sample tasks for pretend pricing purposes for IDIQ contracts -- I prefer meaningful evaluations. The approach with pricing a sample task might show how an offeror might price something in the future, but the price is ephemeral. I would not say you have adequate price competition unless you had three quoters proposing firm fixed prices for identical delivery and performance, as you described in your original posting.

Anyway, in your new scenario, you need to carefully study how the offeror built its $150K price, and decide how much confidence you have in it and how likely the pricing approach can be replicated in the future after award. Sounds like a price realism analysis, doesn't it? Do you have words in your solicitation talking about realism or confidence or understanding? With a sample task, you don't get prices -- you get insights into pricing approaches. The GAO has spoken on the matter of using sample tasks for pricing purposes in situations similar to yours -- they are concerned about ephemeral prices, too. I recommend you look into the GAO jurisprudence on this matter.

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Guest Vern Edwards
The approach with pricing a sample task might show how an offeror might price something in the future, but the price is ephemeral.

I wouldn't call sample task prices "ephemeral," which means short-lived. I would call them "artificial," which is the term used by the GAO in C. W. Government Travel, Inc. -- Reconsideration, B-295530.2, July 25, 2005, 2005 CPD ¶ 139, footnote 2:

We have previously acknowledged that prices or costs proposed in the context of hypothetical sample tasks in a solicitation for an ID/IQ contract, while somewhat artificial in nature, may permit the government to assess the probable cost of competing offerors-provided that the solicitation takes into account offerors' differing technical approaches and meaningfully evaluates the costs or prices underlying their proposals. See, e.g., S.J. Thomas, supra, at 5; SCIENTECH, Inc., B–277805, B–277805.2, Jan. 20, 1998, 98–1 CPD Paragraph 33 at 7–8.

Why use sample tasks? Because: (1) the GAO says that CICA requires the evaluation of price or cost to the government in every source selection, (2) the GAO says that labor rates are not service prices and that in order to have a price you must have quantities as well as rates, and (3) sample tasks are supposed to be indicative of the quantities of the various kinds of labor that an offeror will use in performance, and sample task prices are thus indicative of future cost to the government. See R & G Food Service, Inc., d/b/a Port-A-Pit Catering, B-296435.4, Sep. 5, 2005, 2005 CPD ¶ 194.

Given the nature of task order contracts, you have to use sample tasks or a pricing model when conducting a competition for a task order contract. See SCIENTECH, Inc, cited in the quote above:

While we understand that it is somewhat artificial to use hypothetical sample tasks in a solicitation for an indefinite delivery, indefinite quantity contract, where the actual work will be competed through task orders, sample tasks permit the government to assess the probable cost of competing offerors in light of both the offerors' differing technical approaches and their labor rates and fees. As an alternative, an agency may simply multiply offerors' proposed labor rates by estimated quantities of labor hours for each labor category (such estimates may be based, for example, on the agency's recent experience); that method, while simpler, does not take into account differences in offerors' technical approaches.

it appears that most agencies prefer sample tasks to pricing models.

The sample task approach is artificial, but CICA leaves you with no choice if you don't want to use a pricing model. I had this to say in "Postscript: Evaluating Cost To The Government When Quantities Are Unknown," The Nash & Cibinic Report (April 2000):

The policymakers must face the facts: (a) the Government is increasingly dependent on contracts for services that do not include complete specifications of tasks or expected results at the time of award, the use of such contracts is unavoidable in light of the Government's drive to replace Government employees with contractors, and [c] such contracts cannot be priced in the ordinary sense of that term.

In light of these facts, it is not reasonable for statutes or regulations to effectively require agencies to use dubious price evaluation techniques when they conduct source selections for task order contracts and other contracts for long-term, complex service requirements. Nor is it practicable for agencies to evaluate contractor management and labor productivity on a competitive basis. A better policy would be to (1) allow agencies to use an architect-engineer-type of procedure to select sources for such contracts, (2) rely on Contracting Officers to negotiate advance cost agreements regarding direct labor, indirect costs, and profit or fee at the time of contract award, and (3) rely on COs to obtain fair and reasonable prices for services during the course of contract performance. Rules about the obligation of funds can be satisfied in a number of ways.

Of course, none of this has any bearing on the answer to the original question, which was about adequate price competition as a basis for determining price reasonableness.

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I don't understand why the use of an actual, seed task order* wouldn't be another acceptable alternative to a sample task order or to a "pricing model" (?) in the initial competition for award of Single Award or Multiple Award Task Order base contracts (SATOCs or MATOCs). As the first task order award, a seed task order would bind any offeror/proposer to its prices or prices and rates if awarded the seed (first) task order, which is superior, in my opinion, to an artificial, non-binding, hypothetical sample task order. Proposers can promise the moon in non-binding sample task order competitions.

*A seed task order is for a real service or a real design-build or construction project.

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br549dewey:

Can you explain this statement a little further?

It is a construct we go back to because the determination is about getting appropriate consideration "in contract". i.e. can we support accepting this price on behalf of the Government?

I've never read or heard of fair and reasonable determination being linked to appropriate consideration in the manner stated above. What is this statement based on since money is only one form of consideration?

Hi. I am referring to the price existing in a dynamic contractual setting. The price is established within a context that includes, but is not limited to related factors, such as time for delivery, means of delivery, time and method of inspection, quality control requirements, and on and on... So, a price might seem to be fair and reasonable, until we look further at other terms of the contract that impact price. If you have ever negotiated with Cost as an Independent Variable (CAIV), you have seen how related factors can be negotiated until a "price" is reached. Price does not exist in a vacuum. Note that when we point out flaws in our G.E.s, we almost always see how the G.E. overstated or understated these related factors - e.g.cost of testing and samples, time to access the base, the cost of QC reports, and so forth. - Dewey

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Guest Vern Edwards
I don't understand why the use of an actual, seed task order* wouldn't be another acceptable alternative to a sample task order or to a "pricing model" (?) in the initial competition for award of Single Award or Multiple Award Task Order base contracts (SATOCs or MATOCs).

You can use a "seed" task as a sample task order. However, a proposal in response is actual pricing only for the chosen seed order. The seed is still just a sample. It is artificial for other future orders. You can argue that it's better than a fictional order, because the contractor is actually bound, but that argument is open to several objections. The seed task may not be representative of other future orders. Once under contract, the contractor might adopt a different pricing strategy. Etc.

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You can use a "seed" task as a sample task order. However, a proposal in response is actual pricing only for the chosen seed order. The seed is still just a sample. It is artificial for other future orders. You can argue that it's better than a fictional order, because the contractor is actually bound, but that argument is open to several objections. The seed task may not be representative of other future orders. Once under contract, the contractor might adopt a different pricing strategy. Etc.

True enough, especially for SATOC's which I would not recommend for construction or design-build product lines. For MATOC's, one must rely on competition and the ability to negotiate in a competitive situation to obtain reasonable prices for follow on orders. Establishing some unit pricing might be useful but I generally advocate caution in locking in long term unit prices or elements of cost or pricing for construction ID/IQ contracts due to so many variables and the volatility of the market (labor, materials, subs, suppliers, type of construction, location, local site conditions, risks, etc.).

My earlier post was in response to the point that the GAO said only "sample tasks" or "pricing models" are allowable price evaluation methods for the initial ID/IQ competition. I have never considered a real FFP task order to be a "sample task". To me, comparing sample tasks to real tasks are like comparing the business development or marketing part of a business to the engineering, production or other unit that actually executes the task order.

I was taught almost 40 years ago as a consulting engineer not to rely on the statements, promotions or even certifications of manufacturing or construction company marketing departments. My boss demanded that the heads of engineering, product manufacturing or other production/execution certify whatever certifications or representations that we would have review and approval authority over. And since that time I've learned that proposers generally propose and someone else executes the project. This isn't always true. There were certain firms, like Peter Kiewit, where the actual project team had to prepare the proposals or bid, then execute it. Our most successful projects were often where this type of arrangement was evident.

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A couple of things I have not seen mentioned:

1.) While I recognize this isn't answering the question, if you get quotes that differ wildly from the IGCE, it might be prudent to examine the basis for the IGCE. Did they cut and paste something from the past? Did they pencil whip it just to meet the requirements of the contracting office?

2.) The FAR's language leaves the door open, IMO, for a specialist to do additional analysis above and beyond the existence of adequate price competition. I tell the specialists that work for me that if they are uncomfortable with a price being fair and reasonable, they should attempt to do additional analysis to gain another data point or points. There are seven total examples of price analysis in 15.404(B )(2). Can one of those additional methods be utilized to gain further insight?

Eventually, you'll have to make a recomendation to your CO. That means you'll need to exercise some discretion and business judgment. I think this thread is a good start.

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A couple of things I have not seen mentioned: 1.) While I recognize this isn't answering the question, if you get quotes that differ wildly from the IGCE, it might be prudent to examine the basis for the IGCE. Did they cut and paste something from the past? Did they pencil whip it just to meet the requirements of the contracting office?

Keith, I disagree with your statement that examining the basis of the government's estimate hasn't been mentioned. At least two posts here by separate responders discussed that. I do agree with your recommendation.

2.) The FAR's language leaves the door open, IMO, for a specialist to do additional analysis above and beyond the existence of adequate price competition. I tell the specialists that work for me that if they are uncomfortable with a price being fair and reasonable, they should attempt to do additional analysis to gain another data point or points. There are seven total examples of price analysis in 15.404(B )(2). Can one of those additional methods be utilized to gain further insight?

Not sure who your question is directed to but yes, one or more of those additional techniques described in 15.404-1( b )(2) may be used to gain further insight. Doing so might well validate the recommendations made to examine the basis of the government's estimate and to communicate with one or more of the firms that furnished quotes to ensure that both the government (including both the requirements drafter(s) and the estimator(s) understand the requirements. And doing so might validate that the lowest quoted price or that two or more quoted prices received are fair and reasonable.

Thanks for your input.

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Just noticed an old thread this morning that offers another perspective when a price might appear to be "too good to be true". See it at http://www.wifcon.com/discussion/index.php?/topic/164-too-good-to-be-true/

By the way, dwgerard mentioned a fishing boat named "Change Order". I saw a forty something foot sport fisher by that name docked next to the sailboat we rented for a week in Key West several years ago. There was a hired crew staying on it, polishing,etc. I was so mad that I wanted to drill a hole in it and sink it...but I managed to get over it. 😊

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