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I am being challenged about my interpretation of DFARS 252.215-7002 Cost Estimating System requirements. Wherever I read the word "proposal" in the clause, I'm interpreting it as any and all proposals provided by a contractor. It seems pretty black and white to me. My challenger thinks it only applies to proposals above the TINA threshold. What say you?

Does DFARS 252.215-7002 apply to ALL proposals, or only those which require certified cost or pricing data? Any insight you can provide is greatly appreciated. 

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I don’t think it applies directly to proposals at all.  It seems to me that the clause applies to the company’s processes and procedures for its corporate estimating system whenever the contractor submits proposals (to public and private sector customers) in the expectation of receiving contract awards.  It applies at the back-office or system level.

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Here is the prescription for use of the clause as found in DFARS 215.408 "Use the clause at 252.215-7002, Cost Estimating System Requirements, in all  solicitations and contracts to be awarded on the basis of certified cost or pricing data. "  Further, DFARS 215.407-5 states "The contracting officer shall—(i)  Through use of the clause at 252.215-7002, Cost Estimating System Requirements, apply the disclosure, maintenance, and review requirements to large business contractors meeting the criteria in paragraph (b)(2)(i) of this section;  (ii)  Consider whether to apply the disclosure, maintenance, and review requirements to large business contractors under paragraph (b)(2)(ii) of this section; and (iii)  Not apply the disclosure, maintenance, and review requirements to other than large business contractors.  Thus, it is clear that the clause does not apply to all contractors or all proposals.

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6 hours ago, SSGR Contracts said:

I am being challenged about my interpretation of DFARS 252.215-7002 Cost Estimating System requirements. Wherever I read the word "proposal" in the clause, I'm interpreting it as any and all proposals provided by a contractor. It seems pretty black and white to me. My challenger thinks it only applies to proposals above the TINA threshold. What say you?

Does DFARS 252.215-7002 apply to ALL proposals, or only those which require certified cost or pricing data? Any insight you can provide is greatly appreciated. 

@ji20874 is right.  The clause only uses the word "proposal" (singular) once--at para (d)(4)(xv)--and even there it is clear it is talking about the contractor's estimating system overall.

That said, you still have the question of withholding payments, and under which contracts that can be done.  Obviously the clause is only included in contracts awarded on the basis of certified cost or pricing data.  DFARS 215.408(1).  Say the contractor has some other contract that includes 252.215-7005 and its estimating system was disapproved.  For any contract held by the contractor, if the contract omits the clause at DFARS 252.242-7005 (prescribed at DFARS 252.242-7001), then you wouldn't withhold any payments from that contract. 

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19 hours ago, Jacques said:

For any contract held by the contractor, if the contract omits the clause at DFARS 252.242-7005 (prescribed at DFARS 252.242-7001), then you wouldn't withhold any payments from that contract. 

Jacques, because DFARS 252.242-7005 is based on statute, would it be included in covered contracts by operation of law (the Christian Doctrine)?

Also, is it your position that the requirements in 252.215-7002 apply to proposals submitted by small business concerns?

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On ‎12‎/‎13‎/‎2019 at 11:17 AM, Retreadfed said:

Jacques, because DFARS 252.242-7005 is based on statute, would it be included in covered contracts by operation of law (the Christian Doctrine)?

Also, is it your position that the requirements in 252.215-7002 apply to proposals submitted by small business concerns?

1. I don’t think the test laid out in Christian is whether the clause is based on statute. I haven’t looked at the cases to see whether the doctrine has been applied to the clause. 

2. Para (c) of the clause at DFARS 252.242-7005 spells out when paragraphs (d) and (e) of the clause apply.

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On 12/12/2019 at 4:57 PM, Jacques said:

@ji20874 is right.  The clause only uses the word "proposal" (singular) once--at para (d)(4)(xv)--and even there it is clear it is talking about the contractor's estimating system overall.

That said, you still have the question of withholding payments, and under which contracts that can be done.  Obviously the clause is only included in contracts awarded on the basis of certified cost or pricing data.  DFARS 215.408(1).  Say the contractor has some other contract that includes 252.215-7005 and its estimating system was disapproved.  For any contract held by the contractor, if the contract omits the clause at DFARS 252.242-7005 (prescribed at DFARS 252.242-7001), then you wouldn't withhold any payments from that contract. 

Jacques, not to nitpick or be argumentative, but the clause uses the word "proposal" in the definition of estimating system in section (a), and three other times at (d)(2)(i), (d)(4)(xv), and (d)(4)(xvi). Not only that, but would you agree that "cost estimates" are transferred to the Government via proposals? So in essence, the clause is speaking of proposals by using the explicit language of "proposals" and "cost estimates." 

In general, I appreciate the feedback from everyone. Perhaps I should've worded my question better. Granted my contractor meets the criteria in the prescriptions, during surveillance of their estimating system, do I only focus on those proposals that will require COPD? Is it fair for me to say that all of the proposals produced by their system must comply with the criteria set forth in (d)(4) of the clause? 

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4 hours ago, SSGR Contracts said:

during surveillance of their estimating system,

Isn't DCAA responsible for reviewing contractor estimating systems with final determinations to be made by DCMA?  Are you with either of those organizations?  If not, what assigns you any responsibility for a contractor's estimating system?

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8 hours ago, SSGR Contracts said:

Jacques, not to nitpick or be argumentative, but the clause uses the word "proposal" in the definition of estimating system in section (a), and three other times at (d)(2)(i), (d)(4)(xv), and (d)(4)(xvi). Not only that, but would you agree that "cost estimates" are transferred to the Government via proposals? So in essence, the clause is speaking of proposals by using the explicit language of "proposals" and "cost estimates." 

In general, I appreciate the feedback from everyone. Perhaps I should've worded my question better. Granted my contractor meets the criteria in the prescriptions, during surveillance of their estimating system, do I only focus on those proposals that will require COPD? Is it fair for me to say that all of the proposals produced by their system must comply with the criteria set forth in (d)(4) of the clause? 

Nitpick all you want.  I pulled the Dec 2012 version of the clause from acquisition.gov.  The clause uses the word, "proposal" (singular) once, and "proposals" (plural) three times.

The Government PCO certainly considers what the Government knows about the contractor’s estimating system each time in comes to an objective for fee using weighted guidelines.  See, e.g., DFARS 215.404-71-2(e)(1)(i)(v) (performance risk).  That said, it is the cognizant contracting officer that approves or disapproves the contractor’s estimating system when a review is conducted.  DFARS 215.407-5-70(c)(2)(i).  Unless you are the ACO for the prime, you don't have a meaningful role in evaluating whether a contractor's estimating system is acceptable.  Of course, you can share the factual basis for any concerns you may have about the contractor's estimating system with the cognizant contracting officer, but you won't be the one making the determination.

What exactly do you mean by "surveillance of their estimating system"?

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Just to clarify, I work for SUPSHIP Groton and we are the ACO for this particular contractor. My primary job function is to perform surveillance of the contractor's estimating system per our NAVSEA instruction. We have a local DCAA that performed a full review of the estimating system and we made a final determination on the system last year. We're in the process of closing that audit. 

By surveillance I mean ensuring the contractor's system complies with the DFARS criteria. We accomplish this through proposal reviews, looking at policies and procedures, analyzing forward pricing rates, and a variety of other methods. Again I appreciate the input from everyone.

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5 minutes ago, SSGR Contracts said:

By surveillance I mean ensuring the contractor's system complies with the DFARS criteria. We accomplish this through proposal reviews, looking at policies and procedures, analyzing forward pricing rates, and a variety of other methods. Again I appreciate the input from everyone.

Just out of curiosity, are you dong this in addition to conducting CPSRs? 

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On ‎12‎/‎12‎/‎2019 at 7:42 AM, SSGR Contracts said:

Does DFARS 252.215-7002 apply to ALL proposals, or only those which require certified cost or pricing data? Any insight you can provide is greatly appreciated. 

The Estimating System adequacy criteria (control objectives) apply to all proposals covered by the contractor's estimating system. The required Estimating System Description should identify which proposals are covered and which ones are not. It is likely that some proposals are not covered -- e.g., budgetary estimates/ROMs, direct commercial sales, etc. It is certainly possible that proposals for which certified cost or pricing data are NOT required are excluded from the official DFARS Estimating System process/control activities; however, that raises the question as to which process/control activities would then govern the proposals that are excluded. Again, the required Estimating System Description should clearly answer that question.

Several contractors I know (but not any in Groton) have multiple command media addressing the different tracks that the various types of proposals follow. For example, if no certified cost or pricing data is being required, then several compliance review steps are bypassed.

To summarize: it depends. But the answer should be readily available in the contractor's Estimating System Description. If you can't easily find the answer in that document, then perhaps the System Description may be deficient in some way. What did DCAA say about the Estimating System Description in the recently completed audit?

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On 12/18/2019 at 4:34 PM, here_2_help said:

What did DCAA say about the Estimating System Description in the recently completed audit?

Great question! The most recent DCAA audit was issued in June 2017, and DCAA did not comment on the contractor's system description because (surprise) they didn't have one. We cited the contractor for not having an official system description and they submitted a draft to us last fall (final due this month). They do make distinctions between cost estimates in their SD. Their draft exempts ROMs and other budgetary documents that do not constitute a "proposal" in the narrow sense from the clause requirements because there is "no expectation that these estimates will directly result in contract award." 

Question for you, do you have a citation for your comment "all proposals covered by the contractor's estimating system"? The only reason I ask is because that gets to the heart of my original question (and you alluded to it as well). Does the contractor have the latitude to pick and choose which proposals must comply with the clause criteria? My assumption is that by default all of them do, otherwise there is no standard.

Am I thinking this one through? The clause is invoked on the contract, and there are no alternatives or qualifiers, so my conclusion is they must comply. What would give them the freedom to exempt some proposals from the requirements? Thanks for all the input.

 

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22 hours ago, SSGR Contracts said:

Great question! The most recent DCAA audit was issued in June 2017, and DCAA did not comment on the contractor's system description because (surprise) they didn't have one. We cited the contractor for not having an official system description and they submitted a draft to us last fall (final due this month). They do make distinctions between cost estimates in their SD. Their draft exempts ROMs and other budgetary documents that do not constitute a "proposal" in the narrow sense from the clause requirements because there is "no expectation that these estimates will directly result in contract award." 

Question for you, do you have a citation for your comment "all proposals covered by the contractor's estimating system"? The only reason I ask is because that gets to the heart of my original question (and you alluded to it as well). Does the contractor have the latitude to pick and choose which proposals must comply with the clause criteria? My assumption is that by default all of them do, otherwise there is no standard.

Am I thinking this one through? The clause is invoked on the contract, and there are no alternatives or qualifiers, so my conclusion is they must comply. What would give them the freedom to exempt some proposals from the requirements? Thanks for all the input.

 

Do I have a citation? No. 

The clause requires the contractor to have a system description. The description should describe what is covered. The Government determines whether the system and its description is adequate. Thus the Government determines whether it agrees with system coverage. 

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57 minutes ago, here_2_help said:

Do I have a citation? No. 

The clause requires the contractor to have a system description. The description should describe what is covered. The Government determines whether the system and its description is adequate. Thus the Government determines whether it agrees with system coverage. 

And it is clear to me that the estimating system must 
                    “(vi)  Provide for consistent application of estimating and budgeting techniques.”

And...

” (a)  Definitions 

   “Acceptable estimating system” means an estimating system that complies with the system criteria in paragraph (d) of this clause, and provides for a system that—

 (1)  Is maintained, reliable, and consistently applied;

(2)  Produces verifiable, supportable, documented, and timely cost estimates that are an acceptable basis for negotiation of fair and reasonable prices;

(3)  Is consistent with and integrated with the Contractor’s related management systems; and

(4)  Is subject to applicable financial control systems.” 

It is a big stretch to me to have different methods for different estimates or proposals for the purpose of negotiating prices.

Rough Order of Magnitude type estimates are not for the purpose of negotiating prices..

 

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Joel,

While I'm not disagreeing with you, I also believe you are missing a nuance or two. Yes, I would expect the requirement you quoted is important to the government's decision as to whether or not the contractor's system description is adequate. The key word is "consistently".

However, there is nothing inconsistent in having different controls and different process flows for proposals subject to differing requirements. Thus, I think it's possible for a contractor to say that proposals submitted in response to solicitations that contain 52.215-10 or 52.215-12 will be subject to different treatment than proposals submitted in response to solicitations that do not contain those provisions, or that proposals for items for which a Commercial Item Determination have been agreed upon will be treated differently than proposals for which there is no agreed-upon CID. You could (I think) argue that only proposals submitted to the DOD are subject to the process steps and controls required by the DFARS clause; and there are different process steps and controls for proposals that are not submitted to DOD. I mean: you could make that argument. I don't recommend it, but it seems that a reasonable argument could be constructed.

Had the USG intended to make the DFARS estimating system clause adequacy criteria applicable to all proposals submitted by the contractor, then the clause would be a FAR clause not a DFARS clause. Further, the clause prescription states that the clause is only to be included when awarding contracts on the basis of certified cost or pricing data--so one could argue that the DAR Council did not intend the clause's requirements to pertain to proposals that did not contain certified cost or pricing data. I'm not making that argument; but I see that one might reasonably do so.

In my view the point still remains that the contractor is responsible for explaining to the government (and to its own employees) what the expectations are for the differing proposals. What are the process steps? What are the controls to prevent errors and omissions? What are the appropriate levels of review and approval? Most importantly: what differentiates the proposals that go through the differing process flows and controls?

To me, a good (adequate) estimating system description will be clear regarding what proposals are covered by the DFARS-required estimating system clause requirements and which are not so covered, and then what command media covers the proposals that are not covered by the DFARS estimating system clause requirements.

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