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MichaelMcLoughlin

Competitive contract award

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As far as I know competitive contract awards are always made at the proposed cost. Is there any legal reason award can not be made at the higher most probable cost.

I assume you are asking about a cost-type contract, is that correct?

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As far as I know competitive contract awards are always made at the proposed cost. Is there any legal reason award can not be made at the higher most probable cost.

I don't think so. I think you can, and probably should, award a cost-reimbursement contract at the most probable cost. Here's an excerpt from Formation of Government Contracts, Third Edition, by Cibinic & Nash (p. 1107-8):

In most competitive procurements, the cost of performance is a significant evaluation factor in the source selection decision. As a result, offerors are motivated to make very optimistic estimates of the costs of performance. Although such estimates are adjusted, through cost realism analysis, for the purpose of selecting the winning contractor, contracting officers have a tendency to award contracts based on the cost estimate submitted by the contractor in the competitive process. This is a questionable procedure because it results in a contract funded at too low a level to permit accomplishment of the work. A much better procedure would be to include an estimated cost at a level representing the contracting officer's appraisal of the realistic cost of performance. However, it appears that only a minority of contracting officers follow this procedure, with the result that many CPFF contracts contain estimated costs that are unreasonably low.

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I don't think so. I think you can, and probably should, award a cost-reimbursement contract at the most probable cost. Here's an excerpt from Formation of Government Contracts, Third Edition, by Cibinic & Nash (p. 1107-8):

I Don't understand our convention to award at the proposed price. It makes sense for a CPFF contract to award at the higher price. For CPIF and CPAF it would be more difficult. I suspect it could be done if the RFP had the appropriate enabling language.

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It would depend on the type of solicitation - if you are using an RFP and the award results from your acceptance of the contractor's proposal then award should be at the proposed (offered) price.

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It would depend on the type of solicitation - if you are using an RFP and the award results from your acceptance of the contractor's proposal then award should be at the proposed (offered) price.

Phillygal,

Why should you award at the offeror's estimated cost? Wouldn't it make more sense to award at the most probable cost? Did you read the citation that I provided?

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It would depend on the type of solicitation - if you are using an RFP and the award results from your acceptance of the contractor's proposal then award should be at the proposed (offered) price.

Phillygal, if you intend to award a cost reimbursement contract, what type of solicitation other than an RFP would you use?

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Guest Vern Edwards

I think the point that Phillygal was trying to make is that a contract is a product of offer and acceptance, with the contractor as the offeror and the government as the offeree. If the contractor makes an offer proposing an estimated cost of $X, the government cannot "award" a contract with a higher estimate without first either (a) making a counter offer and getting the contractor to accept it or (B) getting the contractor to revise its offer to reflect the government estimate of most probable cost. She's right.

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I agree with Vern. My opinion would be this. Why would one unilaterally award a cost contract at a price that you determined to be more realistic than that proposed without first conducting some meangingful discssions with the offeror? There would be no mutual agreement or even understanding of what is required or expected of the contractor let alone any mutual agreement on fee. Criminy, if you don't agree that the proposed cost or price is realistic, conduct discussions, verify that the cost is truely unrealistic, and I'd go with Vern's suggested approach of either a counteroffer or insist on a proposal revision to reflect a realistic price.

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I assume that one could do this without reopening discussions with all offerors by making the source selection based upon use of a realistic, adjusted cost after completion of a cost realism analysis.

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Guest Vern Edwards
I assume that one could do this without reopening discussions with all offerors by making the source selection based upon use of a realistic, adjusted cost after completion of a cost realism analysis.

Cost realism should be discussed during any intial round of discussions. The government should explain its concerns about cost realism, disclose what it considers to be the most probable cost, probe the differences between itself and the offeror, and seek, if not resolution, at least mutual understanding. Both the contractor's estimated cost and the government's estimate of most probable cost are just that--estimates. The parties need not reach precise and full agreement on contract estimated cost prior to contract award. But they each should know the other's thinking and what the other believes and expects. This is acheived through cost proposal preparation, cost proposal analysis, and thorough discussions prior to the request for final proposal revisions. If, upon receipt of the final proposal revision, the government finds that the offeror has not raised its cost to the level of the government's estimate of most probable cost, then the government ought to more or less understand why not. If an offeror whose proposed estimated cost is lower than the governments estimate of most probable cost, but not "dangerously" lower, otherwise looks like the best value, then the government can and should award at the contractor's proposed estimated cost, knowing full well the possibility of cost overrun.

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