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ANPRM - Evaluating IRAD Project Costs

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On today's WIFCON home page, Bob provides a link to a DFARS Advance Notice of Proposed Rulemaking (ANPRM) that discusses DoD's intent to change the way in which proposed prices are evaluated, to take into account the cost of contractors' IRAD projects. Apparently DoD doesn't like the way in which certain contractors can lower their proposed prices by carving out certain contract-related tasks and performing them on IRAD, which distributes the cost to all contracts via G&A expense allocation.

The ANPRM states:

DoD is considering a proposed approach whereby solicitations would require offerors to describe in detail the nature and value of prospective IR&D projects on which the offeror would rely to perform the resultant contract. Then, as a standard approach, DoD would evaluate proposals in a manner that would take into account that reliance by adjusting to the total evaluated price to the Government, for evaluation purposes only, to include the value of related future IR&D projects.

As a bean-counter, I can see several obvious problems with the proposed evaluation approach. However, maybe I'm overreacting. So I'd like to hear from those government employees who actually perform price evaluations.

Does a requirement to take into account the future costs of certain (but not all) contractor IR&D projects, and then use that calculated value to adjust the total evaluated proposed price seem as difficult to you as it seems to me? Or not?

Thanks

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help:

I used to be a Tri-Services Contracting Officer and negotiated IR&D/B&P ceilings with the big contractors. They used to send annual IR&D "proposals" that the services would review to look for allocations to IR&D of the cost of work required by contracts. Remember? Contractors sometimes tried to allocate contract cost overruns to IR&D.

It's an old problem. See Unisys Corp., ASBCA 41135, 94-2 BCA ¶ 26894 (Apr. 26, 1994) and Lockheed Martin Corp., ASBCA 57525, 12-1 BCA ¶ 35017 (Mar. 28, 2012).

Sometimes, government program managers were complicit.

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Vern,

I know it's and old -- and still prevalent problem. I participated in strategizing several of those "carve-outs" myself!

And yes, Government PMs were "complicit" (if that's the right term) because we could drop prices into a range they could afford. As I recall, it was mentioned in the briefs for the ATK Thiokol case that this is a long-standing practice, from which the government has derived considerable benefit.

For those interested, a more recent on-point discussion of the problem might be found in the Federal Circuit's discussion of the Northrop Grumman/Lockheed Martin protest of a contract award to Raytheon. The Circuit's decision was dated 10/23/2015. (Sorry but I'm not allowed to post links from my work computer.)

I'd still like to hear from you and others regarding the soundness of the proposed approach. I have concerns, but (as I stated) I may be overreacting.

Thanks

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