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kelly007

Subcontractor Tina threshold when prime issues 2 different RFQ's for 2 differnet part numbers

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the USG has an RFP to a prime contractor where the prime issued 2 different RFQ's to one of its subcontractors.  This sub provides 2 different parts.  One part meets the TINA threshold and the other does not.  The USG is asking for c&p data based on combining the 2 parts together under the primes proposal.  The sub is pushing back and saying not required.

 

Thoughts?

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The threshold applies to individual solicitations, obviously. Whether the prime should have combined the P/Ns seems to be a bit of Monday-morning quarterbacking. The fact is, two individual solicitations were issued. Done.

Now, what happens if the prime decides to cancel its two solicitations and reissue as one combined solicitation? What does the subK do then? That will be an interesting situation.

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Recognizing that there can be valid reasons for the prime to issue to RFQs to the same subcontractor, a fundamental question that needs to be answered is what prohibits a prime contractor from breaking up a subcontract procurement in order to avoid having to submit subcontractor cost or pricing data?

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24 minutes ago, Retreadfed said:

Recognizing that there can be valid reasons for the prime to issue [two] RFQs to the same subcontractor, a fundamental question that needs to be answered is what prohibits a prime contractor from breaking up a subcontract procurement in order to avoid having to submit subcontractor cost or pricing data?

I am unaware of any prohibition that might apply, especially so if the procurement was broken up in order to maximize potential competition. (Doubtful that would apply in this particular case, but still ….)

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52 minutes ago, here_2_help said:

I am unaware of any prohibition that might apply,

Agree.  I should have been clearer and stated that my question was directed toward Kelly.

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But the USG can ask for data other than C or P data for the second part, if deemed to be necessary. 

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1 hour ago, joel hoffman said:

But the USG can ask for data other than C or P data for the second part, if deemed to be necessary. 

What requires the prime to get such data from a sub?

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On 3/19/2020 at 4:54 PM, Retreadfed said:

What requires the prime to get such data from a sub?

“15.403-3   Requiring data other than certified cost or pricing data.

(a)(1) In those acquisitions that do not require certified cost or pricing data, the contracting officer shall—

(i) Obtain whatever data are available from Government or other secondary sources and use that data in determining a fair and reasonable price;

(ii) Require submission of data other than certified cost or pricing data, as defined in 2.101, from the offeror to the extent necessary to determine a fair and reasonable price (10 U.S.C. 2306a(d)(1) and 41 U.S.C. 3505(a)) if the contracting officer determines that adequate data from sources other than the offeror are not available. This includes requiring data from an offeror to support a cost realism analysis;

(iii) Consider whether cost data are necessary to determine a fair and reasonable price when there is not adequate price competition;

(iv) Require that the data submitted by the offeror include, at a minimum, appropriate data on the prices at which the same item or similar items have previously been sold, adequate for determining the reasonableness of the price unless an exception under 15.403-1(b)(1) or (2) applies; and

(v) Consider the guidance in section 3.3, chapter 3, volume I, of the Contract Pricing Reference Guide cited at 15.404-1(a)(7) to determine the data an offeror shall be required to submit.

(2) The contractor's format for submitting the data should be used (see 15.403-5(b)(2)).

(3) The contracting officer shall ensure that data used to support price negotiations are sufficiently current to permit negotiation of a fair and reasonable price. Requests for updated offeror data should be limited to data that affect the adequacy of the proposal for negotiations, such as changes in price lists.

(4) As specified in section 808 of the Strom Thurmond National Defense Act for Fiscal Year 1999 (Pub. L. 105-261), an offeror who does not comply with a requirement to submit data for a contract or subcontract in accordance with paragraph (a)(1) of this subsection is ineligible for award unless the HCA determines that it is in the best interest of the Government to make the award to that offeror, based on consideration of the following:

(i) The effort made to obtain the data.

(ii) The need for the item or service.

(iii) Increased cost or significant harm to the Government if award is not made“

15.404-3   Subcontract pricing considerations.

(a) The contracting officer is responsible for the determination of a fair and reasonable price for the prime contract, including subcontracting costs. The contracting officer should consider whether a contractor or subcontractor has an approved purchasing system, has performed cost or price analysis of proposed subcontractor prices, or has negotiated the subcontract prices before negotiation of the prime contract, in determining the reasonableness of the prime contract price. This does not relieve the contracting officer from the responsibility to analyze the contractor's submission, including subcontractor's certified cost or pricing data.

(b) The prime contractor or subcontractor shall—

(1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices;

(2) Include the results of these analyses in the price proposal; and

(3) When required by paragraph (c) of this subsection, submit subcontractor certified cost or pricing data to the Government as part of its own certified cost or pricing data.

(c) Any contractor or subcontractor that is required to submit certified cost or pricing data also shall obtain and analyze certified cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the certified cost or pricing data threshold, unless an exception in 15.403-1(b) applies to that action.

(1) The contractor shall submit, or cause to be submitted by the subcontractor(s), certified cost or pricing data to the Government for subcontracts that are the lower of either—

(i) $13.5 million or more; or

(ii) Both more than the pertinent certified cost or pricing data threshold and more than 10 percent of the prime contractor's proposed price, unless the contracting officer believes such submission is unnecessary.

2) The contracting officer should require the contractor or subcontractor to submit to the Government (or cause submission of) subcontractor certified cost or pricing data below the thresholds in paragraph (c)(1) of this subsection and data other than certified cost or pricing data that the contracting officer considers necessary for adequately pricing the prime contract.

(3) Subcontractor certified cost or pricing data shall be submitted in the format provided in Table 15-2 of 15.408 or the alternate format specified in the solicitation.

(4) Subcontractor certified cost or pricing data shall be current, accurate, and complete as of the date of price agreement, or, if applicable, an earlier date agreed upon by the parties and specified on the contractor's Certificate of Current Cost or Pricing Data. The contractor shall update subcontractor's data, as appropriate, during source selection and negotiations. 

(5) If there is more than one prospective subcontractor for any given work, the contractor need only submit to the Government certified cost or pricing data for the prospective subcontractor most likely to receive the award.“

(If this is a DoD contract, then also refer to the relevant DFARS and PGI paragraphs.

The contractor is responsible for providing adequate data for the government to determine that the pricing is fair and reasonable whether zero or one hundred percent of the effort is subcontracted. And it made no difference to me whether our primes had already negotiated subcontract pricing in mod or claims actions or for sole source negotiated contracts for that matter.  It’s not up to the KO to justify the contractor’s prices.

As for “What requires” the prime to get such data from a sub, I suppose whatever clause provides for a price adjustment as well as case law that establishes or reinforces principles  that the party seeking a price adjustment ultimately has to justify that the proposed price is fair and reasonable. Those are the standards which expand upon the basic requirement to justify a price adjustment or equitable adjustment, depending upon the action. 

 

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Splitting requirements to avoid cost or pricing thresholds can sometimes be an “indicator” of possible procurement fraud or impropriety by contractors .

Here is an example where DoD required higher levels of scrutiny of a contractor supplying parts to DoD:

https://www.google.com/amp/s/federalnewsnetwork.com/defense-main/2019/06/new-dod-policy-aims-to-crack-down-on-alleged-price-gouging-by-transdigm/amp/

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Of course, if the parts are commercial items then cost or pricing data aren’t required but the KO can require A reasonable amount of other than cost or pricing data if necessary to determine reasonableness of the prices

However in the instant case, the parts being acquired do not appear to be commercial items. The original poster indicated that cost and pricing data were provided for one of the parts and that cost or  pricing data weren’t provided for the second part because the order had been split so that the second part would cost less than the threshold price from the subcontractor.
 

 

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4 hours ago, joel hoffman said:

Of course, if the parts are commercial items then cost or pricing data aren’t required but the KO can require A reasonable amount of other than cost or pricing data if necessary to determine reasonableness of the prices

However in the instant case, the parts being acquired do not appear to be commercial items. The original poster indicated that cost and pricing data were provided for one of the parts and that cost or  pricing data weren’t provided for the second part because the order had been split so that the second part would cost less than the threshold price from the subcontractor.

Joel, I didn't get that the "order had been split" to avoid the threshold. Not sure where you got that in the OP. Instead, I thought the prime had issued two solicitations for two parts -- one valued over the threshold and one under. Not sure why "splitting" would make sense since one part was over the threshold even after the "split." Now, if both parts had been individually under but, when combined, they were over, then I might go along with your speculation. But not as originally posted. Just doesn't make sense to me.

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On 3/18/2020 at 5:27 AM, kelly007 said:

Thoughts?

My thought is that a business minded prime and subcontractor would honor the USG request if the parts do not qualify as an exception to certified cost or pricing data. Also, I would expect a business minded prime would look into the matter to determine how this situation happened, present it to the subcontractor, and be prepared to explain it to the USG. Finally, if the subcontractor still was pushing back after the explanation (assuming there is no reasonable basis for the prime to resist) , I would cancel the solicitation and find other sources.

Edited by Neil Roberts
added potion of sentence in parenthesis

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8 hours ago, here_2_help said:

Joel, I didn't get that the "order had been split" to avoid the threshold. Not sure where you got that in the OP. Instead, I thought the prime had issued two solicitations for two parts -- one valued over the threshold and one under. Not sure why "splitting" would make sense since one part was over the threshold even after the "split." Now, if both parts had been individually under but, when combined, they were over, then I might go along with your speculation. But not as originally posted. Just doesn't make sense to me.

Perhaps. At any rate, I mentioned that the USG can obtain other than cost or pricing data for the other part.

It is true that we don’t know why the prime split the order. 

This action was a single RFP, so there seemingly shouldn’t have been a reason why the Prime would split the order for two parts. But we don’t know all the facts. I agree with Neil that the KO should ask the Prime why the single RFP has been split into two RFQ’s from the one sub. It may be that the second RFQ could have been the result of competition. But that wasn’t mentioned. 

EDIT: By the actions of the USG, it appears that the KO views the Contractor’s action as splitting one contract action into two separate RFQ’s from one sub/supplier. 

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On 3/18/2020 at 6:57 PM, here_2_help said:

The threshold applies to individual solicitations, obviously. Whether the prime should have combined the P/Ns seems to be a bit of Monday-morning quarterbacking. The fact is, two individual solicitations were issued. Done.

Now, what happens if the prime decides to cancel its two solicitations and reissue as one combined solicitation? What does the subK do then? That will be an interesting situation.

 

On 3/19/2020 at 8:59 AM, Retreadfed said:

Recognizing that there can be valid reasons for the prime to issue to RFQs to the same subcontractor, a fundamental question that needs to be answered is what prohibits a prime contractor from breaking up a subcontract procurement in order to avoid having to submit subcontractor cost or pricing data?

 

On 3/19/2020 at 9:26 AM, here_2_help said:

I am unaware of any prohibition that might apply, especially so if the procurement was broken up in order to maximize potential competition. (Doubtful that would apply in this particular case, but still ….)

H2H didn’t limit lack of awareness of any prohibition to only a procurement broken up to maximize Potential competition.

If the price for the second part was competed with the expectation of maximized competition, it could Reasonably be solicited separately from the first part.

Retreadfed stated that the challenge was directed to the OP:

On 3/19/2020 at 10:19 AM, Retreadfed said:

Agree.  I should have been clearer and stated that my question was directed toward Kelly.

Then Retreadfed challenged me to justify what requires a prime to require other than cost or pricing data to support a subs price.

17 hours ago, Retreadfed said:

What requires the prime to get such data from a sub?

The facts remain: This is one contract action. The Prime Issued two separate RFQ’s to one sub.

The prime can be required to justify why this has been done or is necessary - for a single contract action.

The government can - at the least- require the contractor to provide Data other than C or P if necessary to determine the reasonableness of the price of the second part

In addition, the prime is required to evaluate the reasonableness of the subs quote.

Both the OP and I were challenged to justify our posts.

The two of you seem to feel that nothing prohibits a contractor from splitting an order to avoid submitting some or all C or P data In response to an RFP for a single contract action .

I don’t agree with those opinions. 

A fact is that it could have the appearance of a split order to avoid cost or pricing feor the second part. You both hinted at that. 

The DoD appears to be concerned about such tactics.  I found an instance and shared it. 

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16 hours ago, joel hoffman said:

As for “What requires” the prime to get such data from a sub, I suppose whatever clause provides for a price adjustment 

The government is not entitled to a price adjustment if data other than certified cost or pricing data is defective.  Such an adjustment is permitted only if certified cost or pricing data are defective.  The requirement for submission of certified cost or pricing data for a new contract is found in the solicitation provision FAR 52.215-20.  That provision states that if an exception to the submission of certified cost or pricing data does not apply, "The offeror shall prepare and submit certified cost or pricing data, data other than certified cost or pricing data, and supporting attachments in accordance with the instructions contained in Table  15-2 of FAR 15.408, "  Table 14-2 directs offerors to "Submit the subcontractor certified cost or pricing data and data other than certified cost or pricing data as part of your own certified cost or pricing data as required in paragraph IIA(2) of this table."  It goes on to state "You must also submit any data other than certified cost or pricing data obtained from a subcontractor, either actually or by specific identification, along with the results of any analysis performed on that data."  These are the only references to submission of data other than certified cost or pricing data in 15-2.  Nothing in 15-2 or 52.215-20 requires a prime contractor to obtain other than certified cost or pricing data from subcontractors.

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48 minutes ago, Retreadfed said:

Nothing in 15-2 or 52.215-20 requires a prime contractor to obtain other than certified cost or pricing data from subcontractors.

The CO could use Alternate IV of FAR 52.215-20 to require submission of such data.

 

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5 hours ago, joel hoffman said:

This action was a single RFP, so there seemingly shouldn’t have been a reason why the Prime would split the order for two parts. But we don’t know all the facts. I agree with Neil that the KO should ask the Prime why the single RFP has been split into two RFQ’s from the one sub. It may be that the second RFQ could have been the result of competition. But that wasn’t mentioned.

My experience is these kinds of situations can happen when procurement requests may be routed to different procurement representatives based on part type, physical location, program or other. They do not talk to each other or even know whether the same subcontractor is being solicited.

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1 hour ago, Don Mansfield said:

The CO could use Alternate IV of FAR 52.215-20 to require submission of such data.

If the criteria for such use are met.  FAR 15.408 says "Replace the basic clause with its Alternate IV if certified cost or pricing data are not expected to be required because an exception may apply, but data other than certified cost or pricing data will be required ."   Even if Alt IV is used, the contracting officer would have to specifically state that the contractor is required to get similar data from subcontractors.  My point is there is no standard FAR provision or clause that specifically requires contractors to get other than certified cost or pricing data from subcontractors.  

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6 hours ago, Retreadfed said:

The government is not entitled to a price adjustment if data other than certified cost or pricing data is defective.  Such an adjustment is permitted only if certified cost or pricing data are defective.  The requirement for submission of certified cost or pricing data for a new contract is found in the solicitation provision FAR 52.215-20.  That provision states that if an exception to the submission of certified cost or pricing data does not apply, "The offeror shall prepare and submit certified cost or pricing data, data other than certified cost or pricing data, and supporting attachments in accordance with the instructions contained in Table  15-2 of FAR 15.408, "  Table 14-2 directs offerors to "Submit the subcontractor certified cost or pricing data and data other than certified cost or pricing data as part of your own certified cost or pricing data as required in paragraph IIA(2) of this table."  It goes on to state "You must also submit any data other than certified cost or pricing data obtained from a subcontractor, either actually or by specific identification, along with the results of any analysis performed on that data."  These are the only references to submission of data other than certified cost or pricing data in 15-2.  Nothing in 15-2 or 52.215-20 requires a prime contractor to obtain other than certified cost or pricing data from subcontractors.

Huh?? I wasn’t referring to a price adjustment for defective pricing. You asked me what requires a contractor to obtain other than cost or pricing data. I was referring to whatever clause would provide a price adjustment to the contract, such as the changes clause or a differing site condition. Both of those clauses provide for an equitable adjustment , based upon the cost impact to the contractor due to the changed condition or change. Between the applicable clause, FAR subpart 15.4, subpart 31.2, agency supplements, caselaw etc. the contractor would have to provide adequate detail for the contracting officer to determine the reasonableness of the cost adjustment.

That’s all I meant. 

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4 hours ago, Retreadfed said:

If the criteria for such use are met.  FAR 15.408 says "Replace the basic clause with its Alternate IV if certified cost or pricing data are not expected to be required because an exception may apply, but data other than certified cost or pricing data will be required ."   Even if Alt IV is used, the contracting officer would have to specifically state that the contractor is required to get similar data from subcontractors.  My point is there is no standard FAR provision or clause that specifically requires contractors to get other than certified cost or pricing data from subcontractors.  

You are correct. The FAR clauses don’t literally state every single element of the modification process. For instance, the FAR Changes clause doesn’t even cover a change that isn’t ordered until the parties pre-price it. It doesn’t cover RFP’s for proposed changes. That has been discussed in the Nash and Cibinic Report and Vern Edwards has mentioned it in this Forum too. Those are but a few examples. I’m not sure if Unabsorbed home office overhead is covered in FAR, certainly not in FAR clauses. But it and the conditions necessary to establish it were formed and defined in caselaw. 

The FAR itself  may cover stuff not in a clause. Established caselaw may define requirements also. Caselaw defines principles of contract interpretation.

Caselaw holds that the party seeking an adjustment must reasonably justify the amounts otherwise due. Etc., Etc.

Many requirements of FAR part 15.4 are not stated in the contract but are generally consistent with Statutes and caselaw. Many of the principles of fair and reasonableness are outlined in Subpart 31.2, which is often or usually applicable by reference.

It would take books six feet thick to cover every requirement by reference.

One can’t rely solely on a literal reading of contract clauses. 

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19 hours ago, joel hoffman said:

I wasn’t referring to a price adjustment for defective pricing. You asked me what requires a contractor to obtain other than cost or pricing data. I was referring to whatever clause would provide a price adjustment to the contract, such as the changes clause or a differing site condition.

Why bring this up?  The OP indicated a new contract was being issued.  I do not see any reference to a modification to an existing contract.

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4 hours ago, Retreadfed said:

Why bring this up?  The OP indicated a new contract was being issued.  I do not see any reference to a modification to an existing contract.

kelly007

“the USG has an RFP to a prime contractor where the prime issued 2 different RFQ's to one of its subcontractors.”
 
I must have misread this post to think that “a prime contractor “ is a contractor under a Government contract and that it has a “subcontractor”. 

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I just checked Kelly’s profile and he/she has only one post. It didn’t mention any negotiation of or issuance of a new contract. Pretty darned sure that “a prime contractor” is what I think it is and that “one of his subcontractors” is a sub under the prime contract.

But if it is for a proposed contract, I included applicable references for that too, including this Statutory reference, which you may have overlooked earlier:

15.403-3   Requiring data other than certified cost or pricing data...

...(a)(4) As specified in section 808 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Pub. L. 105-261), an offeror who does not comply with a requirement to submit data for a contract or subcontract in accordance with paragraph (a)(1) of this subsection is ineligible for award unless the HCA determines that it is in the best interest of the Government to make the award to that offeror...”

 

 

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On 3/19/2020 at 5:51 PM, joel hoffman said:

2) The contracting officer should require the contractor or subcontractor to submit to the Government (or cause submission of) subcontractor certified cost or pricing data below the thresholds in paragraph (c)(1) of this subsection and data other than certified cost or pricing data that the contracting officer considers necessary for adequately pricing the prime contract.

This would actually answer the original question regarding requiring c or p data for both parts. 

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19 hours ago, joel hoffman said:

a)(4) As specified in section 808 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Pub. L. 105-261), an offeror who does not comply with a requirement to submit data for a contract or subcontract in accordance with paragraph (a)(1) of this subsection is ineligible for award unless the HCA determines that it is in the best interest of the Government to make the award to that offeror...”

Notice that this paragraph references paragraph (a)(1).  Paragraph (a)(1) begins by stating "In those acquisitions that do not require certified cost or pricing data, the contracting officer shall."  However, it appears that in Kelly's case, that cost or pricing data are required at the prime level.  Therefore, I do not see that (a)(4) is applicable.

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