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Unidentified supplier in certified cost or pricing data

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You are evaluating a proposal for non-commercial items in a sole source environment.

Non-commercial equipment to be purchased by the prime from a supplier exceeds the Truthful Cost or Pricing Data threshold in total value.

However, the apparent successful equipment source/supplier is unidentified by the prime. In fact, all of the prospective suppliers are unidentified within the prime's evaluation of equipment quotes documented within their proposal.

In this case, would you deem the prime's proposal as inadequate?

If adequate, should the Government refuse to accept a COPD cert until the prime's equipment supplier is identified?

 

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16 minutes ago, ji20874 said:

It will be very easy to ask the offeror to identify the supplier.

And if they refuse to? Would the proposal be inadequate? Would you accept the COPD cert?

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The sole source supplier of the non-commercial item exceeding the threshold for cost or pricing data must also submit cost or pricing data.  The government has the right to know who they are and has the right to audit their proposal. How can anyone audit an unknown supplier? The proposal is inadequate and less than full disclosure. 

EDIT: I may have misunderstood the scenario. Even if the suppliers are competing rather than sole source, this isn’t a secret acquisition. 

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3 hours ago, Sunstrider said:

You are evaluating a proposal for non-commercial items in a sole source environment.

Non-commercial equipment to be purchased by the prime from a supplier exceeds the Truthful Cost or Pricing Data threshold in total value. 

However, the apparent successful equipment source/supplier is unidentified by the prime. In fact, all of the prospective suppliers are unidentified within the prime's evaluation of equipment quotes documented within their proposal.

I

 

Facts are not that clear to me. Is this post from a prime contractor or the Government? Which is the sole source...the prime contractor or the subcontractor? Did the prime propose a listing of equipment to be purchased only from one source at one time or is it a time phased purchase to match the funding profile such that none of the contemplated purchases exceed TINA ? How is it known what supplier is "the apparent successful...supplier? In many situations, prime contractors have not yet evaluated, made a source decision or awarded an subcontract at the time of a proposal to the Government. Could the post please clarify who is who here? Thanks.

Edited by Neil Roberts
typos syntax

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53 minutes ago, Neil Roberts said:

Facts are not that clear to me. Is this post from a prime contractor or the Government? Which is the sole source...the prime contractor or the subcontractor? Did the prime propose a listing of equipment to be purchased only from one source at one time or is it a time phased purchase to match the funding profile such that none of the contemplated purchases exceed TINA ? How is it known what supplier is "the apparent successful...supplier? In many situations, prime contractors have not yet evaluated, made a source decision or awarded an subcontract at the time of a proposal to the Government. Could the post please clarify who is who here? Thanks.

The prime contractor is the sole source. The prime will provide non-commercial equipment to the Government, which they will have purchased all via a single supplier. The equipment does not have to be purchased from a single supplier; however this is what the prime has proposed.

Additionally, worthy of note is that the total value of these equipment items exceeds Truth in Cost or Pricing Data threshold.

The prime's proposal purchase attempts to show adequate price competition, where there is a crude analysis of all supplier quotes. However, my concern is that the only information really provided is each supplier's bottom line price and whether that supplier comprised the "best value" or not. Imagine reviewing a heavily redacted "streamlined PNM" or brief pricing memo as the basis for all of prime's equipment costs. Not a single supplier is identified, especially not from whom they will purchase.

 

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Is the prime contract cost-type or FFP? Is the proposed subK cost-type or FFP?

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**Audit them...

EDIT- ADDED: In addition, for your own ability to review and verify the vendors’ proposals, see Table 15-2 Instructions at 15.408

“A. Materials and services. Provide a consolidated priced summary of individual material quantities included in the various tasks, orders, or line items being proposed and the basis for pricing (vendor quotes, invoice prices, etc.). Include raw materials, parts, components, assemblies, and services to be produced or performed by others. For all items proposed, identify the item and show the source, quantity, and price.”

Tell, not ask, them to identify the sources and provide the vendor quotes to be able to verify their basis of pricing the subcontracts.  You have the right to verify that the supplier quotes support/match their proposal/ PNM narratives, etc.  “Trust, but verify” or when doubtful, due to less than reasonable disclosure, “Verify to build trust”.***

In addition, Table 15-2 Instructions also state:

“(1) Adequate Price Competition. Provide data showing the degree of competition and the basis for establishing the source and reasonableness of price for those acquisitions (such as subcontracts, purchase orders, material order, etc.) exceeding, or expected to exceed, the appropriate threshold set forth at FAR 15.403-4 priced on the basis of adequate price competition. For interorganizational transfers priced at other than the cost of comparable competitive commercial work of the division, subsidiary, or affiliate of the contractor, explain the pricing method (see FAR 31.205-26(e)). “

** If this is a major Defense (or various other Agencies) Contractor, there are usually DCAA or other auditors assigned to provide audit services or simply field pricing support, short of a formal audit.  If necessary, you can hire an auditor to do a limited audit to review and verify the subcontract vendor quotes. But you shouldn’t have to do that if the prime is up and up. 

***There were valid reasons for calling the original Statute the “TRUTH in Negotiations ACT”.

 

 

Edited by joel hoffman

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Thanks for the clarification, Sunstrider.  

I assume this is a negotiated procurement and you will be receiving certified cost or pricing data from the prime contractor. You may eventually have post award justification to request an audit. In the meantime, since the prime is a sole source, suggest the best interest of the Government is for you to use your negotiation skills to request additional support for any questionable subcontractor pricing information/analysis. You do not have any other source of supply available to support the schedule at this time. Not sure why your focus is on subcontractor TINA requirements. If that subcontractor is already the lowest priced bidder and meets the requirements, what are your additional expectations? Communicate them to the prime. The prime may assert that there is adequate price competition, which eliminates TINA requirements for the subcontractor. 

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I tend to agree with Neil Roberts on this one.

The government wants to negotiate a sole-source FFP prime contract. As part of its proposal, the prime has submitted a proposed price for a subcontractor. The prime determined the price to be fair and reasonable based on obtaining adequate competition. The prime has provided the source evaluation and selection notes to the government as part of its cost or pricing data. The government is concerned that the source evaluation or selection notes are not robust. In particular, the apparent winning subcontractor is not identified by name.

The issue is not compliance with TINA as the prime has obtained adequate price competition (or asserts that it has done so). The issue is whether or not the proposed price for the subK is fair and reasonable. This is a matter for negotiation. Perhaps start by saying that you will accept the low bid rather than the one the prime has chosen to support its price (assuming the chosen subK is other than lowest price). See what the prime does in response.

As Neil Roberts noted, the government will have post-award audit rights to see whether or not the proposal was defectively priced because the prime didn't include all cost or pricing information. I agree that the government should use those rights. In the meantime, negotiate hard using the lack of information as the basis for mitigating the government's risks.

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Its not a subcontractor TINA issue. It’s a prime contractor TINA issue. The government has the right to not only know who the competing suppliers- plural - are, it can also see the quotes or proposals to verify that what the prime SAYS the proposal is, is in fact what it is. 

Based upon personal experience, that isn’t always the case. 

If this prime wont even reveal who the selected sub or other quoters are,  I have no basis to trust anything else that it says in a redacted summary.  

It’s not the auditor’s responsibility to dig for data in a post-audit review that the contractor should have provided to facilitate an effective proposal evaluation and negotiations. 

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Joel, would you agree that if the prime had adequate price competition, it could use price analysis to determine that the proposed subcontractor's price was fair and reasonable. Assuming that was the case, what else does the government need to know? What other information could reasonably be expected to affect price negotiations significantly? Please identify which cost or pricing data the prime has not provided with respect to its proposed subcontractor cost.

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1 hour ago, here_2_help said:

Joel, would you agree that if the prime had adequate price competition, it could use price analysis to determine that the proposed subcontractor's price was fair and reasonable. Assuming that was the case, what else does the government need to know? What other information could reasonably be expected to affect price negotiations significantly? Please identify which cost or pricing data the prime has not provided with respect to its proposed subcontractor cost.

H2H, I would need to know who the sub is before I would agree to the price for award. There may be a reason to object to the sub.

I would need to verify what the actual quotes were. If I had separate price information, for example, knowledge of a lower priced source or that one of the sources in the competition would, could or has offered a lower price or recently sold the same items for lower price(s),  then I would want to be in a position to bargain for better prices. There are many scenarios possible. 

Therefore, NO. I don’t automatically take it for granted that the proposed Subcontractor’s price is fair and reasonable, especially if I can’t verify that the actual quote is what is being offered or who is offering it, what the other prices are and who offered them. 

For that matter, they could all be high for some reasons, such as misunderstanding the requirement, a contingency or other cause for unusually high or low pricing. 

I’ve experienced instances where , upon investigation, all competing prospective subcontract suppliers had included significant contingencies, which we were able to mitigate, resulting in vastly reduced prices (over $2 million in one instance).

We have discovered ambiguous, faulty or unnecessary aspects in our specs or statement of work that caused high pricing for all competitors, whether primes and/or subs.

We’ve found alternate sources which, were significantly lower in price for major items ($3 million in one case). We saved the three million plus the difference in markup. We had to know who the firms were getting pricing from and how much the quotes were for. 

We’ve occasionally experienced instances where the prime was less than truthful about the amount of the actual subcontract proposal.

Honestly, I am not intending to brag here. My purpose is to emphasize why it is important to be thorough. I am attempting  to share some reasons, learned through experience,  why government negotiators and KO’s should use sound business judgement. Don’t take it for granted that merely having competition, by definition,  will assure that prices are fair and reasonable.

Think about this. What motivation does a sole source, FFP prime contractor have to save the government money by proposing lower prices? Why would it perform more than a cursory mandatory price analysis of subcontractor quotes? Why would it dig into subs’ prices? Why should it bargain with proposed subs (before the award of the prime contract action)?  Why would it want to provide the government with more than a bare minimum amount proposal detail, etc.?

Does the FAR mention that reality in its default assumption that “adequate” competition at some level will assure fair and reasonable pricing?  What is “adequate” competition anyway? 

The reality is that there is one heck of a lot of difference between the effort a sole source prime contractor will devote to pricing it’s subcontracts before and after awarded the contract action.

I’m not going to ask and don’t need to know why  but suspect that there are some pretty good reasons why Sunstrider asked the questions here...

 

Edited by joel hoffman
Sorry for the extensive edits.

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15 hours ago, here_2_help said:

I tend to agree with Neil Roberts on this one.

The government wants to negotiate a sole-source FFP prime contract. As part of its proposal, the prime has submitted a proposed price for a subcontractor. The prime determined the price to be fair and reasonable based on obtaining adequate competition. The prime has provided the source evaluation and selection notes to the government as part of its cost or pricing data. The government is concerned that the source evaluation or selection notes are not robust. In particular, the apparent winning subcontractor is not identified by name.

The issue is not compliance with TINA as the prime has obtained adequate price competition (or asserts that it has done so). The issue is whether or not the proposed price for the subK is fair and reasonable. This is a matter for negotiation. Perhaps start by saying that you will accept the low bid rather than the one the prime has chosen to support its price (assuming the chosen subK is other than lowest price). See what the prime does in response.

As Neil Roberts noted, the government will have post-award audit rights to see whether or not the proposal was defectively priced because the prime didn't include all cost or pricing information. I agree that the government should use those rights. In the meantime, negotiate hard using the lack of information as the basis for mitigating the government's risks.

Yes, the chosen supplier is other than lowest price.

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Sunstrider, my question to you is this. Do you have enough information to either 1) agree that the proposed price and subcontract amount are “fair and reasonable” for preparation for negotiations and for negotiation purposes or 2) if not certain that they are, do you have enough information to conduct an intelligent proposal analysis, prepare a pre-negotiation objective, and negotiate with the contractor? 

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1 hour ago, Retreadfed said:

Sunstrider, can you state in what way you believe the prime contractor has failed to comply with FAR 15.404-3?

Did you mean 15.403-5 and 15.408? 

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19 minutes ago, joel hoffman said:

Did you mean 15.403-5 and 15.408? 

No, I correctly identified the section I had in mind.

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2 hours ago, Retreadfed said:

No, I correctly identified the section I had in mind.

Oh yes, I see.

 So part of your question would relate to whether the contractor provided adequate subcontractor information for the contracting officer to analyze the subcontractor information provided by the contractor (per 15.404-3). Makes sense. 

Regarding other aspects of 15.404-3,  I think that Sunstrider already indicated what he/she thought about the adequacy of the prime contractor review and cursory price analysis. If it had been adequate, Why do you think Sunstrider initiated this thread? The sole source contractor has little incentive to do more than the bare minimum concerning pricing a subcontract.

Which makes it all the more necessary for the KO to analyze the subcontractor data. 

What data is there to analyze? Also, we don’t even know any of the firms’ names.

But that’s only my opinion. 

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20 minutes ago, joel hoffman said:

Also, we don’t even know any of the firms’ names.

That seems to have been Sunstrider's biggest issue.  However, my question is whether the identify of a subcontractor is cost or pricing data that must be certified?  It certainly would be relevant in granting consent to subcontract post-award.

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EDITED: Is the identity of the selected subcontractor cost or pricing data for the prime?  I think so. That should be evident. Some firm has proposed a price, which has been allegedly used as a basis for the overall proposed price. Who the firm is and its price would be factual rather than judgemental data. The other proposers’ (the “competitors”) identities and prices are also factual data which are part of the proposal. 

 

Edited by joel hoffman
Misunderstood the question. Sorry.

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Quote
“Cost or pricing data” (10 U.S.C.2306a(h)(1) and 41 U.S.C. chapter 35) means all facts that, as of the date of price agreement, or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price, prudent buyers and sellers would reasonably expect to affect price negotiations significantly. 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. Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include, but are not limited to, such factors as-

 (1) Vendor quotations;

(2) Nonrecurring costs;

(3) Information on changes in production methods and in production or purchasing volume;

(4) Data supporting projections of business prospects and objectives and related operations costs;

(5) Unit-cost trends such as those associated with labor efficiency;

(6) Make-or-buy decisions;

(7) Estimated resources to attain business goals; and

(8) Information on management decisions that could have a significant bearing on costs.

Emphasis added.

Please show me where in the FAR definition of "cost or pricing data" suppliers' names are included. Certainly the suppliers' names are facts, but I contend that suppliers' names are not any kind of facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Therefore the names do not meet the definition of "cost or pricing data" and do not need to be disclosed for TINA compliance purposes.

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8 minutes ago, here_2_help said:

I contend that suppliers' names are not any kind of facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly

I tend to agree with H2H unless there is something more such as the selected subcontractor being debarred or suspended.

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“Vendor quotations”, which is considered cost or pricing data per H2H’s quoted reference,  would identify the vendor. Get real here fellows!  This is unbelievable

You would apparently advocate the buyer not having the right to know who will produce or provide the product or who the competitors were and their prices and other criteria that was considered in the selection.  

This was a “best value” selection by the prime, involving quality of the product or supplier in addition to price. 

And the government couldn’t determine whether the sub is suspended or debarred before award. 

The idea of a prime proposing and justifying secret subcontracting is one of the more ridiculous arguments I’ve ever heard of. 

I’d expect to see the vendor quotations. 

 

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