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Subcontractor Cost or Pricing Data Submission Requirements

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Please help me resolve some confusion on my part with regard to when subcontractor cost or pricing data is required to be submitted with a prime contract proposal. For illustration purposes, the prospective subcontractor would be covered by TINA. I am looking at FAR 15.403-4 and FAR Table 15.2.

FAR 15.403-4 ( c ) states

"Any contractor or subcontractor that is required to submit cost or pricing data also shall obtain and analyze cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the cost or pricing data threshold, unless an exception in 15.403-1( b ) applies to that action.

(1) The contractor shall submit, or cause to be submitted by the subcontractor(s), cost or pricing data to the Government for subcontracts that are the lower of either --

(i) $11.5 million or more; or

(ii) Both more than the pertinent cost or pricing data threshold and more than 10 percent of the prime contractor?s proposed price, unless the contracting officer believes such submission is unnecessary.

(2) The contracting officer may require the contractor or subcontractor to submit to the Government (or cause submission of) subcontractor cost or pricing data below the thresholds in paragraph ( c )(1) of this subsection that the contracting officer considers necessary for adequately pricing the prime contract."

FAR Table 15-2 , para. IIA States

"Conduct price analyses of all subcontractor proposals. Conduct cost analyses for all subcontracts when cost or pricing data are submitted by the subcontractor. Include these analyses as part of your own cost or pricing data submissions for subcontracts expected to exceed the appropriate threshold in FAR 15.403-4. Submit the subcontractor cost or pricing data as part of your own cost or pricing data as required in paragraph IIA(2) of this table.

II(A) (2) All Other. Obtain cost or pricing data from prospective sources for those acquisitions (such as subcontracts, purchase orders, material order, etc.) exceeding the threshold set forth in FAR 15.403-4 and not otherwise exempt, in accordance with FAR 15.403-1( b ) (i.e., adequate price competition, commercial items, prices set by law or regulation or waiver). Also provide data showing the basis for establishing source and reasonableness of price. In addition, provide a summary of your cost analysis and a copy of cost or pricing data submitted by the prospective source in support of each subcontract, or purchase order that is the lower of either $11.5 million or more, or both more than the pertinent cost or pricing data threshold and more than 10 percent of the prime contractor?s proposed price."

My question:

Is Paragraph II(A)(2) of Table 15.2 consistent with 15.403-4 ( c ) in saying that you are only required to submit with your proposal summaries of cost analysis and a copy of cost or pricing data submitted by the prospective source in support of each subcontract, or purchase order that is the lower of either $11.5 million or more, or both more than the pertinent cost or pricing data threshold and more than 10 percent of the prime contractor?s proposed price - and there is not a requirement to submit cost or price analysis for every single subcontractor that is over $650,000 and not otherwise exempt from TINA? (provided that the CO does not require you to submit cost or pricing data below the threshold in 15.403-4 ( c ) (1) as described in 15.403-4 ( c ) (2))

Thanks.

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My question:

Is Paragraph II(A)(2) of Table 15.2 consistent with 15.403-4 ( c ) in saying that you are only required to submit with your proposal summaries of cost analysis and a copy of cost or pricing data submitted by the prospective source in support of each subcontract, or purchase order that is the lower of either $11.5 million or more, or both more than the pertinent cost or pricing data threshold and more than 10 percent of the prime contractor?s proposed price - and there is not a requirement to submit cost or price analysis for every single subcontractor that is over $650,000 and not otherwise exempt from TINA? (provided that the CO does not require you to submit cost or pricing data below the threshold in 15.403-4 ( c ) (1) as described in 15.403-4 ( c ) (2))

Thanks.

I assume you meant FAR 15.404-3( c ). I think that FAR 15.404-3( c ) and FAR Table 15-2 are in synch regarding the submission of subcontractor cost or pricing data to the Government. The prime does not have to submit subcontractor cost or pricing data to the Government for every subcontractor that is required to submit cost or pricing data to the prime.

However, I think that there is a disconnect regarding whether the prime contractor is required to submit a summary of its cost analysis of a subcontract that requires the submission of cost or pricing data to the prime contractor, but not the Government (i.e., a subcontract that requires submission of cost or pricing data but that does not exceed either of the two thresholds for submission to the Government).

If you read FAR 15.404-3( b ), it seems that the prime contractor is always required to submit a summary of its cost analysis of a subcontractor proposal with its proposal (assuming that one was performed):

( b ) 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 ( c ) of this subsection, submit subcontractor cost or pricing data to the Government as part of its own cost or pricing data.

However, if you read the instructions in FAR Table 15-2, it seems that the prime is only required to submit a summary of its cost analysis of a subcontractor's proposal when the submission of subcontractor cost or pricing data to the Government is required. From II.A.(2):

In addition, provide a summary of your cost analysis and a copy of cost or pricing data submitted by the prospective source in support of each subcontract, or purchase order that is the lower of either $11.5 million or more, or both more than the pertinent cost or pricing data threshold and more than 10 percent of the prime contractor's proposed price.

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Notwithstanding the language, "The prime contractor or subcontractor shall..." in FAR 15.404-3(B), FAR is not directive upon contractors or subcontractors, except to the extent that it has been incorporated into a solicitation or contract. FAR tells COs what they must obtain from offerors and contractors.

When a CO wants cost or pricing data with a proposal, he or she must ask for it. A CO "may" (see FAR 15.408(l)) do that by using the solicitation provision at FAR 52.215-20, which, unless used with its alternate, requires offerors to comply with Table 15-2. The CO may also use the provision at FAR 52.215-21, which also directs offerors to comply with Table 15-2. (See FAR 15.408(m).) If a CO does not use either of those provisions, he or she must write instructions for the RFP. None of the defective pricing or cost or pricing data clauses in FAR 52.215 mention Table 15-2; however, it is mentioned in other clauses, see, e.g., FAR 52.216-6.

When must a contractor or subcontractor submit its analysis of a subcontractor's proposal with its own proposal? More important to the answer than either FAR 15.404-3 or Table 15-2, is the question of whether a contractor's or subcontractor's analysis of a subcontractor's proposal is itself cost or pricing data which must be submitted. The answer turns on whether such a cost analysis is fact or judgment. That is not always clear. The definition of cost or pricing data in FAR 2.101 says:

Cost or pricing data are factual, not judgmental; and are verifiable. While they do not indicate the accuracy of the prospective contractor’s judgment about estimated future costs or projections, they do include the data forming the basis for that judgment.

According to Bodenheimer and Morrison, in Defective Pricing (Federal Publications, 2007), pp. 49-50:

The impact of the statutory definition of cost or pricing data adopted by the 1986 Amendments and further “clarified” by the 1987 Amendments, and particularly the glosses on the meaning of the law contained in the legislative histories to those amendments, may not yet have been fully felt. To date, however, the term “cost or pricing data” has been broadly construed. It has included not only a contractor's historical costs, but also in some instances:

- judgments,

- projections, and/or

- estimates

either as facts in and of themselves and/or with respect to their factual content.

And pp. 50-51:

In Grumman Aerospace Corp., ASBCA No. 27476, 86-3 BCA ? 19,091, the Board held that the draft narrative portion of a prime contractor's report analyzing a subcontractor's quote was cost or pricing data, despite elements of judgment in the narrative, because the narrative added meaning to the prime's numerical assessment, which was disclosed.

And on p. 124:

Contractors are also required to submit their own price analyses, cost analyses, and historical pricing data respecting prospective subcontractors, to the extent such data are cost or pricing data of the prime contractor.

Emphasis added. The DCAA Audit Manual says:

d. A subcontractor or a prospective subcontractor must submit cost or pricing data to the prime contractor or higher-tier subcontractor. The prime contractor or higher-tier subcontractor is responsible for conducting price or cost analysis of the subcontract (see FAR 15.404-3(B)). The results of this analysis are furnished to the Government as part of its cost or pricing data submission up to the date of price agreement. Therefore, defective cost or pricing data of a subcontract cost or item may be attributable to the prime contractor or higher-tier contractor, subcontractor, or both.

Emphasis added. That appears to say that DCAA thinks the cost analysis is cost or pricing data, although I am not sure that is the intention.

If I were submitting a proposal and was also submitting cost or pricing data, and if I had conducted an analysis of a prospective subcontractor's proposal, I would submit that analysis to the CO no matter what FAR says or whether the CO asked for it or not. That is best practice, in my opinion. I would not worry about the language in FAR 15.404-3 and Table 15-2. A contractor does not have much to lose by submitting the analysis, but it might have a lot to lose by not submitting it. You can argue later about what is and is not cost or pricing data and what had to be accurate, complete, and current as of the time of price agreement.

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Interesting. The instructions in FAR Table 15-2 don't seem to recognize the reality of the situation.

Vern,

Excellent post. One correction, though. FAR 52.215-21 is a clause, not a provision.

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Post Script, 2014.

Both Don and Vern were correct with their responses above, at the time they responded. Since then, some things have changed:

First, Vern sated "None of the defective pricing or cost or pricing data clauses in FAR 52.215 mention Table 15-2". This was changed in October 2010, when FAR 52.215-12 was revised to include reference to FAR 15.408, Table 15-2.

Second, in Janurary 2014, DFARS added 252.215-7009 Proposal Adequacy Checklist (JAN 2014). Item 17 on this checklist asks "Is there a price/cost analysis establishing the reasonableness of each of the proposed subcontracts included with the proposal? If the offeror’s price/cost analyses are not provided with the proposal, does the proposal include a matrix identifying dates for receipt of subcontractor proposal, completion of fact finding for purposes of price/cost analysis, and submission of the price/cost analysis?".

Dan

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Good update, but please bear in mind that not all who read or post here work under DFARS. Also it is prudent for contractors (and subs) to make it as easy as possible for the Government (or a sub's prime customer) to digest and approve a proposal, as indicated in Vern's last paragraph of post #3 as a best practice.

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