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KeepLearning

Fair and Reasonable Subk, Under 2M, won't budge

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Here's my question: If I go through the Proposal Analysis techniques in FAR 15.404-1(a)(2), (3), or (4) can I find the price to be fair and reasonable?

 

(a)(1) says the objective of the proposal analysis is that the final price be fair and reasonable and then goes on to say that the techniques in 2-4 "may be used" to ensure the final price is fair and reasonable. 

 

So let's say we only have 1 bidder who is sole sourced and will not change their price (under 2M). You used a price analysis to create a negotiation position and a target, you're not within your target because they refuse to lower price. They gave other than certified data, you tried to negotiate again, and they still wouldn't lower price. This was taken to the next level manager (director) and they agreed to proceed since we needed the parts. We cannot send this elsewhere as it would cost more money and we'd have to wait 10 years to get cost savings (longer than the prime contract).

 

Can this price be found to be fair and reasonable? This is the final agreed to price after negotiation using all techniques and FAR says we don't have to agree on all elements or even be within my original target.

 

Second question,  the Price Analysis/Cost Analysis/Cost Realism themselves don't find things to be fair and reasonable, they provide negotiation positions and the recording of a "fair and reasonable" price is within the Negotiation Memo, does that mean that result of the negotiation, aka the final agreed-to price, is what find something fair and reasonable? So, as long as you follow FAR 15.404-1(a)(1-4), exhaust your options, and negotiate, your price HAS to be fair and reasonable for that procurement given these set of circumstances?

 

 

(My position is represented if you follow 15.404-1 then you're allowed to find it fair and reasonable. Compliance dept disagrees, says negotiation does not lead to a fair and reasonable price... help me learn!)

Many thanks!

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Keep, in the caption to this topic, you indicate that your questions relate to a subcontractor.  However, you do not mention whether you are dealing with a subcontractor in your write-up.  For clarification, are you with a prime contractor and are asking your questions in regard to the award of a subcontract?  If so, can you provide more information such as how the prime contract was priced, whether it is for commercial items, whether consent to subcontract is required, etc.?

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Hopefully it's not going to end up like TransDigm Group, Inc.

During this testimony I heard the term best obtainable price ... it was used in conjunction with fair and reasonable. 

 

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4 hours ago, Retreadfed said:

Keep, in the caption to this topic, you indicate that your questions relate to a subcontractor.  However, you do not mention whether you are dealing with a subcontractor in your write-up.  For clarification, are you with a prime contractor and are asking your questions in regard to the award of a subcontract?  If so, can you provide more information such as how the prime contract was priced, whether it is for commercial items, whether consent to subcontract is required, etc.?

We are a subcontractor to a huge company like a Boeing. We're large ourselves, we have a CPSR approved system, and our subcontractors are large and small. We're talking about awarding to a subcontractor through and proving a fair and reasonable price before proceeding. 

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Keep, so you are a subcontractor in the process of awarding a lower tier subcontract.  To whom are you trying to demonstrate that the price of the subcontract is fair and reasonable and why do you feel you have to do this?  In this regard, you have not stated how the prime contract is priced or how your subcontract is priced.  These are key pieces of information.  Also, has your subcontract from the prime been awarded?

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You should ask your compliance organization what exactly they want you to do.

Are you attempting to justify the transaction on the basis of the so called "one bid" rule based on FAR 15.403-1(c)(1)(ii) definition of adequate price competition? That "rule" does not appear to be applicable because you were unable to seek other bids due to the source nature. Suggest you ask whether you can justify the transaction based on documenting the cost for re-qualifying the part and cost of schedule delay. 

Edited by Neil Roberts
incomplete sentence/citation

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On 5/15/2019 at 1:49 PM, KeepLearning said:

So lets say we only have 1 bidder who is sole sourced and will not change their price (under 2M).

The date of the prime contract award either being before or after July 1, 2018 may determine whether the TINA threshold is $750k or $2M threshold for subcontracts awarded thereunder. What is the date of your subcontract from the prime, the date of the prime contract award to you? 

Edited by Neil Roberts
clarify last sentence

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On ‎5‎/‎16‎/‎2019 at 4:47 PM, Jamaal Valentine said:

Hopefully it's not going to end up like TransDigm Group, Inc.

During this testimony I heard the term best obtainable price ... it was used in conjunction with fair and reasonable. 

 

I've only made it through the first hour but his is interesting testimony.  Thank you for sharing and please forgive if this is thread shift.  My initial reaction is that none of these politicians own a BMW car because they obviously have never been to the BMW parts counter.   Also, did I hear the IG lady say that profit margins over 15% are unreasonable?  

Spare parts buying is very difficult as the decision to put the buyer in a sole source situation was as part of the system acquisition or as part of the decision to extend the life of a system.  As a former buyer for Hughes Aircraft we were put in this situation from our suppliers every time we received an order for AWG9 spares; that radar system had vacuum tubes in it and was extended by the F-14B upgrade well into the 90's.  

That a VC company has developed their business model out of exploiting DOD's (and Boeing) reliance on these spares is rather disgusting on its face, it's also perfectly legal.  I doubt TransDigm has the authority to compel the DOD buyers into signing their purchase at these egregious prices.

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