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Cost Analysis cloaked as Price Analysis.


ArrieS

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I've been conducting proposal analysis for Task Orders issued against single award IDIQs.

They've all been under the certified cost and pricing data threshold. These are unique none commercial services. I.E. Modification to planes with experimental equipment to be installed and tested.

For my fair and reasonable justifications I've been using and citing the various methods under 15.404-1(c) Cost analysis and making the determination using Cost analysis. I was doing this because I was relying on the other than certified cost and pricing data. My thought pattern was, evaluated cost data for the determination, I am doing cost analysis.

However, after a discussion with another Contract Specialist I think I was wrong.

15.404-1(a)(2) Price analysis shall be used when certified cost or pricing data are not required (see paragraph (b) of this subsection and 15.404-3).

Because the FAR states price analysis shall be used when certified cost or pricing data are not required I should have cited 15.404-1(b)(vii) Analysis of data other than certified cost or pricing data (as defined at 2.101) provided by the offeror.

Which seems I'm really doing Cost Analysis but just call it Price Analysis.

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“15.404-1 (a) (4) Cost analysis may also be used to evaluate data other than certified cost or price data to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone for commercial or non-commercial items.”

What price analysis techniques do you have available for these unique tasks? You probably can look at prices of portions or specific activities within a task order but it “sounds” like you don’t have overall comparisons available. 

I have an example of a situation where cost analysis appeared to show reasonable pricing but price analysis revealed that it just didn’t make sense.

We had a user requested change from our Saudi Arabian Army customer to add thousands of deadbolts to doors in the family living quarters that we built at a new Military Academy. Our Korean construction contractor provided a proposal that detailed every single step in the process of drilling and installing the locks. The Koreans had cheap labor rates but the trades used very labor intensive methods and hand tools rather than the latest power tools and methods. For instance, they would use a two man crew to drill the holes in the doors with small hand drills with perhaps 20 drill holes to make a circular 2 1/2” hole  and estimated the number of minutes for every drill hole, every screw, every piece of the lock set, etc.

i couldn’t argue the reasonableness of each step but it turned out that each crew would take something like three hours to install one deadbolt!  

My technical and price analyses indicated that we could procure circular hole saws, power drills, power screw drivers, etc. to drastically lower the labor quantity. I suspected that was what they would actually do. But my QA guys told me that no - the labor force actually used the archaic methods when they installed the original hardware, etc. 

The Korean Site manager confirmed and insisted that the labor force didn’t have the skills that I took for granted...

One can get mired in the weeds and miss the big picture when only using cost analysis or price analysis without the other.

i followed up after we settled the change and - yes - they were true to their proposed methods. 

My problem with price analysis alone is that you sometimes can’t tell whether historical or contemporary price comparisons are really reasonable - They only tell you what is being paid or what has been paid in the past. 

For instance, in Germany, we only had unit price comparisons for construction available, based upon data gathering techniques that were captured and used in the estimating guides. 

The American Government didn’t know that there was a long running collusion and price fixing/bid rigging conspiracy  going on between the German construction companies and at least one regional German Government agency that was awarding most of the DoD construction contracts during the huge Reagan era military buildup in the NATO countries. The contractor’s would have to provide certain G. Government officials at least a three percent kickback on every contract. This was discovered about 2 or 3 years after I left Germany. There were indictments and convictions of numerous contractors and government officials. 

My assistant chief, who was German, had told me that her boyfriend, who worked at a higher level oversight agency, was aware of the conspiracy, but they were in the investigative stage at the time.  I couldn’t do or say anything at the time, due to the investigation. Plus I had no confidence in the competence of our HQ leadership in Frankfurt to detect, see the corruption or doing anything about it and they would have tipped off the perps.

As I said, the only way that Europe Division had to perform construction estimates was to collect and rely upon historic unit prices for every contract line item. The German Government used the same parametric estimating methods, so the perps could get away with it for years. 

I am convinced that the widely used sole reliance on FAR price analysis techniques hides similar schemes. 

I think that Shay Assad might agree and am certain that the late Admiral Hyman Rickover would have agreed with me. 

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