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Hi-

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit and then makes an award to the sub over 750k would the sub be obliged to provide Certified COPD?  I can't see how unless the sub went back and forth with the prime on the pricing. Looking at FAR 15.404 it addresses the requirement for CCOPD before an award over 750k, not a proposal.  Thoughts?

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If price negotiations between the Prime and customer are not yet complete, certification is still required.  However, if the prime has already negotiated and received award, then certification by the sub should not be required.

POST-SUBMITTAL EDIT:  Based on what Vern has posted below, I no longer hold this belief.  If 52.215-12 is included in the Prime flowdowns, cert at the sub level is required regardless of timing.

Edited by Patrick Mathern
Original was misleading

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45 minutes ago, Patrick Mathern said:

If price negotiations between the Prime and customer are not yet complete, certification is still required.  However, if the prime has already negotiated and received award, then certification by the sub should not be required.

Patrick:

Assuming that the prime contract contains FAR 52.215-12, is your answer consistent with that clause? Is it consistent with FAR 15.403-4(a)(1)(ii)?

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Hi Vern -

I think so, but help me walk through this.  That citation references FAR 15.408 which references Table 15-2.  In Table 15-2, it notes that "The requirement for submission of certified cost or pricing data continues up to the time of agreement on price..." Therefore, if the Prime has already agreed to price with the Customer, Certification does not apply.

Since Certification applies between Customer and Prime (then waterfalls through the applicable subs,) alleviating the Cert at the Prime would then alleviate any benefit at the sub level.

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Patrick:

Forget FAR 15.408, Table 15-2. Look at the clause that is (presumably) in the prime contract.

FAR 52.215-12, "Subcontractor Certified Cost or Pricing Data," tells the prime to get certified cost or pricing data from a subcontractor before awarding any subcontract valued in excess of the TINA threshold, unless an exception applies. The clause does not tie that obligation to any agreement between the government and the prime.

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The subcontractor would certify to the prime that any cost or pricing data it provided to the prime were accurate, complete, and current as of the date of agreement on price between the prime and the sub.

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3 hours ago, Looking for Thoughts said:

Hi-

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit ...

I don't know what the prime told the awarding agency in its task order proposal but, depending on what was stated as the BOE for the subcontractor's costs, there may have been a false statement or two involved in this process. Suppose the subK doesn't agree that the price is acceptable ... what then? The prime will have represented that it had the subcontractor on board, which may have influenced the technical eval if nothing else, but then the subK doesn't perform the work. Not good, in my view.

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3 hours ago, Looking for Thoughts said:

Hi-

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit and then makes an award to the sub over 750k would the sub be obliged to provide Certified COPD?  I can't see how unless the sub went back and forth with the prime on the pricing. Looking at FAR 15.404 it addresses the requirement for CCOPD before an award over 750k, not a proposal.  Thoughts?

Would you please clarify at what point the prime and sub agreed on the price of the subcontract? Was it before the task order award or later?  And did the prime represent that the estimated subcontract amount was based upon an actual subcontract proposal? I'm just trying to understand the scenario. Thanks. 

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1 hour ago, Looking for Thoughts said:

But there would be none provided.  They would still execute a cert?

What do you mean, "But there will be none provided"?

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5 hours ago, Looking for Thoughts said:

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit and then makes an award to the sub over 750k would the sub be obliged to provide Certified COPD?

The answer to that question is YES, if the prime is going to award a subcontract for the work. The clause at FAR 52.215-12 requires a prime to obtain certified cost or pricing data from a subcontractor before awarding "any" subcontract valued in excess of the TINA threshold, unless an exception applies, even if the prime negotiated the task order price with the government without getting a proposal from the sub.

The clause is as clear as it can be:

Quote

Before awarding any subcontract expected to exceed the threshold for submission of certified cost or pricing data at  FAR 15.403-4, on the date of agreement on price or the date of award, whichever is later; or before pricing any subcontract modification involving a pricing adjustment expected to exceed the threshold for submission of certified cost or pricing  data at  FAR 15.403-4, the Contractor shall require the  subcontractor to submit certified cost or pricing  data (actually or by specific identification in writing), in accordance with  FAR 15.408, Table 15-2 (to include any  information reasonably required to explain the  subcontractor's estimating process such as the judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data, and the nature and amount of any contingencies included in the price), unless an exception under  FAR 15.403-1 applies.

Emphasis added. If, after being awarded a task order, the prime is going to award a subcontract for performance of part of that task order, and if the subcontract will exceed the threshold, and if no exception applies, then the prime must obtain certified cost or pricing data from the sub before awarding the subcontract. If the prime already has a subcontract for that work and obtained certified cost or pricing data prior to the subcontract award, and will not award a new subcontract for the task, then the prime need not get certified cost or pricing data from the sub again before putting the sub to work.

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Hi Vern -

Thanks for setting me straight!  We have used this approach for over ten years but based on the straightforward text in 52.215-12, I'm changing my tune (and process).  Very helpful discussion!

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What I think is happening with the OP is that the prime is negotiating a task order with the government, has already negotiated an agreement on hourly T&M labor rates with a "subcontractor," and used those rates in combination with its own estimate of the number of hours the sub would need to complete its work under the task order when submitting a price to the government.

The question is: under that circumstance, does the prime have to get certified cost or pricing data from the "subcontractor."

The answer turns on whether the prime actually has a subcontract with the "subcontractor" for performance of the work under the task order or just an agreement on rates. If the prime has only an agreement on hourly labor rates and must enter into a contract with the subcontractor, or issue an order, for performance, then the answer is yes, the prime must get certified cost or pricing data.

An agreement on hourly T&M labor rates might not, in fact, be a subcontract. Is the subcontractor legally bound to perform? If not, and if a subcontract must be formed in order to bind the sub, then the requirement for certified cost or pricing data applies. Moreover, an agreement on T&M rates does not constitute a price for the subcontract work without an agreement on the number of hours the sub will need to complete its part of the job. That's because, as described in the FAR, a T&M contract is not complete until the parties have established a ceiling price for the work to be done, i.e., rates X hours. Thus, the CO must require the prime to require the sub to submit certified cost or pricing data in connection with the negotiation of a ceiling price for the subcontract awarded or order issued to the sub. See FAR 16.505(b)(3).

One might argue that a subcontract, being a private agreement, need not have a ceiling price, and thus the prime and its sub need not negotiate an agreement on a ceiling price in order to complete their subcontract. I think that's a good argument if you can get the CO to buy it. 

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3 minutes ago, Vern Edwards said:

What I think is happening with the OP is that the prime is negotiating a task order with the government. The prime has already negotiated hourly T&M labor rates with a "subcontractor" and, when submitting a price to the government, used those rates in combination with its own estimate of the number of hours the sub would need to complete its work under the task order. The question is: Does the prime have to get certified cost or pricing data from the 'subcontractor."

The answer turns on whether the prime actually has a subcontract with the "subcontractor" for performance of the work under the task order or just an agreement on rates. If the prime has only an agreement on hourly labor rates and must enter into a contract with the subcontractor, or issue an order, for performance, or give the sub an order, then the answer is yes, the prime must get certified cost or pricing data.

An agreement on hourly T&M labor rates might not, in fact, be a subcontract. Is the subcontractor legally bound to perform? If not, and if a subcontract must be formed in order to bind the sub, then the requirement for certified cost or pricing data applies. Moreover, an agreement on T&M rates does not constitute a price for the subcontract work without an agreement on the number of hours the sub will need to complete its part of the job. That's because, as described in the FAR, a T&M contract is not complete until the parties have established a ceiling price for the work to be done, i.e., rates X hours. Thus, the CO must require the prime to require the sub to submit certified cost or pricing data in connection with the negotiation of a ceiling price for the subcontract awarded or order issued to the sub. See FAR 16.505(b)(3).

One might argue that a subcontract, being a private agreement, need not have a ceiling price, and thus the prime and its sub need not negotiate an agreement on a ceiling price in order to complete their subcontract. I think that's a good argument if you can get the CO to buy it. 

Or perhaps there is an actual subcontract in place ("the IDQ") that sets out "contractual rates" under the terms of which the prime may issue unilateral orders for specified numbers of hours of various labor categories, and the sub is bound to perform.  In that circumstance, I don't think certified cost or pricing data would be required.

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Hi All- thanks for the great convo-

This is all "hypothetical" at this point.  The Prime IDIQ contract from the Gov't contains teammates rates.  When RFP's for DO's go out they are often very quick turn around so suppose the prime uses the contract rates and estimates hours and plugs in profit for various tasks.  When the DO is awarded the prime then parcels out work to various teammates. The ones that go over the CCPD threshold are problematical as no proposal was requested or received but I have found no exception for CCPD and was curious because in reality there was no proposal to certify to.  Does this help explain the scenario?

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12 minutes ago, Looking for Thoughts said:

Hi All- thanks for the great convo-

This is all "hypothetical" at this point.  The Prime IDIQ contract from the Gov't contains teammates rates.  When RFP's for DO's go out they are often very quick turn around so suppose the prime uses the contract rates and estimates hours and plugs in profit for various tasks.  When the DO is awarded the prime then parcels out work to various teammates. The ones that go over the CCPD threshold are problematical as no proposal was requested or received but I have found no exception for CCPD and was curious because in reality there was no proposal to certify to.  Does this help explain the scenario?

Do the teammates have binding subcontracts under which they must accept orders for labor at specified rates?

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1 hour ago, Vern Edwards said:

What I think is happening with the OP is that the prime is negotiating a task order with the government, has already negotiated an agreement on hourly T&M labor rates with a "subcontractor," and used those rates in combination with its own estimate of the number of hours the sub would need to complete its work under the task order when submitting a price to the government.

The question is: under that circumstance, does the prime have to get certified cost or pricing data from the "subcontractor."

The answer turns on whether the prime actually has a subcontract with the "subcontractor" for performance of the work under the task order or just an agreement on rates. If the prime has only an agreement on hourly labor rates and must enter into a contract with the subcontractor, or issue an order, for performance, then the answer is yes, the prime must get certified cost or pricing data.

An agreement on hourly T&M labor rates might not, in fact, be a subcontract. Is the subcontractor legally bound to perform? If not, and if a subcontract must be formed in order to bind the sub, then the requirement for certified cost or pricing data applies. Moreover, an agreement on T&M rates does not constitute a price for the subcontract work without an agreement on the number of hours the sub will need to complete its part of the job. That's because, as described in the FAR, a T&M contract is not complete until the parties have established a ceiling price for the work to be done, i.e., rates X hours. Thus, the CO must require the prime to require the sub to submit certified cost or pricing data in connection with the negotiation of a ceiling price for the subcontract awarded or order issued to the sub. See FAR 16.505(b)(3).

One might argue that a subcontract, being a private agreement, need not have a ceiling price, and thus the prime and its sub need not negotiate an agreement on a ceiling price in order to complete their subcontract. I think that's a good argument if you can get the CO to buy it. 

The award to the sub would be FFP, not T&M.   The plot sickens....

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32 minutes ago, Looking for Thoughts said:

Nope- Just BOA's with the rates...

Then I think we're stuck with FAR !5.404-3(c), which says 

Quote

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

as well as FAR 15.404-3(b)(3):

Quote

(b) The prime contractor or subcontractor shall—

...(3) When required by paragraph (c) of this subsection, submit subcontractor certified cost or pricing data to the Government as part of its own certified cost or pricing data.

 

 

So  it sounds to me like the subcontractor in your scenario is required by 15.404-3(c) to submit certified cost or pricing data, and thus the prime is required  by 15.404-3(b)(3) to obtain it from the sub and submit it "as part of its own certified cost or pricing data."

...unless an exception in 15.403-1(b) applies.

 

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4 hours ago, Looking for Thoughts said:

When the DO is awarded the prime then parcels out work to various teammates. The ones that go over the CCPD threshold are problematical as no proposal was requested or received but I have found no exception for CCPD and was curious because in reality there was no proposal to certify to.  Does this help explain the scenario?

No. It does not help explain.

What does "parcels out" mean? What's a "teammate"? 

What kind of legal relationship exists or is created between the prime and the firm you call a "teammate"? If by "parcels out" you mean awarding a subcontract or issuing an order to the teammate, then parceling out creates a contractual relationship and the prime has to get cost or pricing data from the "teammate" if FAR 52.215-12 is in the prime contract. The prime has to get it even if the prime didn't have a proposal when it negotiated with the government.

Since you say that what you have in place is a basic ordering agreement, not a subcontract, you have to get certified cost or pricing data when you order the "teammate" to perform.

These kinds of questions must be answered through formal definition and legal analysis. If you think in terms like "parcels out" and "teammates," you can't get to an answer until your translate them into professional/regulatory language.

Looking for Thoughts, are you new to government contracting?

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4 hours ago, Navy_Contracting_4 said:

Or perhaps there is an actual subcontract in place ("the IDQ") that sets out "contractual rates" under the terms of which the prime may issue unilateral orders for specified numbers of hours of various labor categories, and the sub is bound to perform.  In that circumstance, I don't think certified cost or pricing data would be required.

Navy, what do you mean "I don't think"? Do you know?

Even if an IDIQ contract is in place between a prime and a subcontractor, the issuance of a T&M task order by the prime to the sub creates a newly priced subcontract, because hourly rates are only part of the equation, and the prime must obtain certified cost or pricing data from the subcontractor for the completion of the pricing. The same would not be true of a delivery order for a fixed-price item of supply, which is already fully priced.

Edited by Vern Edwards

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