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Firm Fixed Price contract RFP proprietary information

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We are providing a firm fixed price proposal to a prime contractor.  The prime contractor who is bidding under their small business wants us, the minor subcontractor, to provide base costs, actual labor rates, indirect rates to them and claiming the reason is to be bid compliant.  Their subcontractor pricing model included tabs to provide details of how the FFP was arrived at, as well as a DCAA tab which provided for a request of base rates, OHD and indirect rates.  We have never had to do this before, nor have any of our subcontractors done this for us.  We are asking to provide a sanitized version to them and to provide our proprietary information directly to the CO as the section L describes.  Their argument is that option is only for MAJOR subcontractors.  They request we send them a sealed envelope which they will pass on.  Well...the government customer did also give them the option to send the bid in electronically.  We have worked with the government customer before and this handling is unlike any past experience; however, the prime is using "risk of non-compliance" as being the reason we have to provide these details.  This seems to come up more and more as a sticky issue with companies claiming it's required and in some cases necessary to show management of the subcontractor.

Do subcontractors have to provide proprietary information which could include actual labor rates, indirect rates, fee, etc to prime contractors when bidding on subcontractors?  Is this one of those areas where there are no hard rules, FARs or protections in the bid process and is up to if your prime asks the CO the right way?

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1 hour ago, CFO said:

Do subcontractors have to provide proprietary information which could include actual labor rates, indirect rates, fee, etc to prime contractors when bidding on subcontractors?

Obviously subcontractors are free to take their business elsewhere and vote with their feet.  I would think your question would be, "Is that anything that prohibits a prime contractor from requiring a subcontractor provide detailed pricing data directly to the prime as a condition to proposing as a subcontractor under these circumstances?"

 

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We have always had and also given the approval to provide the sanitized version to the prime and submit the proprietary unsanitized version to the government directly.  We are not experts at the bid process by any means, so looking for valid options to push back and align the prime with what has been an ordinary process that we have experienced in the past.  However, it seems you are saying "do what you are willing to do".  There isn't necessarily a standard here.   

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CFO, if I were in your shoes, I would try to discuss the issue with the prime.  Does the prime feel the Government's solicitation MANDATES this?  If so, and the solicitation is competitive, consider reaching out to the Government contracting officer to ask how the solicitation is consistent with FAR 15.404-3 & 15.402, given the prime's interpretation of it.  (I'm not expressing an opinion on the topic, I'm encouraging you to try to make the PCO think about it.)  I don't want to suggest it is entirely the Wild West, but I wanted to try to focus the discussion on precisely who has what obligation under the rules.

EDIT:  You mentioned DCAA, so if this is a DoD contract, make sure you look at the DFARS and PGI associated with FAR 15.404-3.

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push back, ask for a reference or citation

 

never believe what a prime tells you the government told them or required them to do until and unless you see it in writing and can verify the letter or email

 

the telephone game (unintentional distortion of the message) is possible

incompetence (misunderstanding of the message) is possible

deceit (straight up lying and twisting of the message) is possible

 

 

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Be careful -- first, ascertain how easily replaceable your firm is as a subcontractor -- you will have less or more negotiation leverage depending on how easily you can be replaced.  

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23 hours ago, CFO said:

We are asking to provide a sanitized version to them and to provide our proprietary information directly to the CO as the section L describes.  Their argument is that option is only for MAJOR subcontractors.

First, please ask them to show you the FAR definition of "major subcontractor."

Second, tell them "no" and proceed as you normally would.

Third, if this is an indication of your future relationship with the prime, terminate any teaming agreement and go find another prime to partner with.

There is no FAR or DFARS requirement that compels you to provide the requested details, nor is there any FAR or DFARS requirement that compels the prime to request it or be deemed to be "non-compliant." In fact, the course of action you propose is the traditional way of handling the matter.

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23 hours ago, CFO said:

We are providing a firm fixed price proposal to a prime contractor.  The prime contractor who is bidding under their small business wants us, the minor subcontractor, to provide base costs, actual labor rates, indirect rates to them and claiming the reason is to be bid compliant.  Their subcontractor pricing model included tabs to provide details of how the FFP was arrived at, as well as a DCAA tab which provided for a request of base rates, OHD and indirect rates.  We have never had to do this before, nor have any of our subcontractors done this for us.  We are asking to provide a sanitized version to them and to provide our proprietary information directly to the CO as the section L describes.  Their argument is that option is only for MAJOR subcontractors. 

Do subcontractors have to provide proprietary information which could include actual labor rates, indirect rates, fee, etc to prime contractors when bidding on subcontractors?  Is this one of those areas where there are no hard rules, FARs or protections in the bid process and is up to if your prime asks the CO the right way?

It sounds like the prime is confusing what it is required to do to be bid compliant with its cost disclosures vs. what the solicitation requires for subcontractors. Sounds like it copied and pasted its requirements and imposed them on subcontractors. That would be over reaching unless it was required to be done by the government solicitation and if so, that might also be over reaching by the Government. For example, if the prime was required to comply with current cost or pricing data because its proposal was over $2M (and not an exception),  it would be over reaching for the prime to required current cost or pricing data for subcontracts under $2M. Does this Section L indicate that subcontractors are required to comply with Section L? Is Section L the required cost and pricing details model/tab? Is your proposal over the threshold dollar amount for current cost or pricing data?  

A subcontractor directly contacting the Government is a good way to create friction with the prime. In any event, I would hope the CO response is that you should discuss it with the prime.  What does "it is up to the prime to ask the CO the right way" mean to you? The right way to do what?  The prime does not need to ask the CO "the right way." The prime is required to comply with its own procedures relative to subcontractors and obtaining proposals from subcontractors to comply with prime contract requirements.

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while other areas in section L refer to only Major subcontractors, which we are not, the following is the section L piece that really baffles me why they are connecting proprietary information to be allowed to be sent to the PCO only if they are a MAJOR.  I would have never interpreted it this way...

We are not a Major sub and section L seems to indicate to me that Major subs have to submit in the same manner and format as the prime.

 

Subcontractor Information: Proposals for all major first tier subcontractors shall be submitted within the prime contractor’s proposal. Major subcontractors are those whose cost equals 15% or more of total cost. Nonprime cost proposals should be submitted through the prime to the PCO. If the subcontractor considers its information proprietary, it may be submitted directly to the PCO by the same date and time the prime contractor’s proposal is due. The prime proposal shall uniquely identify major subcontractor costs within the supporting cost documentation. Subcontractor cost documentation shall be submitted at the same level of detail and in the same format as the prime’s cost proposal. Prime contractor cost detail must clearly identify portions of the proposal where supporting detail is provided by the subcontractor. The prime contractor is responsible for the consistency of the cost data between the prime contractor’s submission and any subcontractor data submitted directly to the PCO.

The bid is well over $2mil and our component is over $2mil and we are not 15% of the total submission.  It also allows for the prime to make changes to a subs pricing and to explain to the CO the changes and how the prime plans to negotiate or obtain discounts to a subs pricing.  I do believe one members comment on this post that the prime could be confusing cost disclosure among other things to be valid.  It is becoming hard to determine the prime's responsibilities in managing subcontractors and validating their bids with what is reasonable to request under competition.

 

 

 

 

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Thank you all for your feedback.  It has been helpful and informative as this just doesn't seem acceptable given we have worked with this government customer before and have not had any issues submitting pricing of our subcontract, or a subcontract of ours, directly to the PCO.  This has been incredibly helpful to determine appropriate pushback to the prime and the PCO and has taught me the importance of how to structure questions and receive information when there is a go between.

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