Jump to content

Cost or pricing data threshold value


Recommended Posts

Hello everyone,

I am an engineer-turned-economist. My experience as an engineer includes managing the design of large, private factory projects. Public procurement is a new interest of mine, so please forgive my lack of familiarity.

From you all's experience, is the threshold for when cost or pricing data is required for other than sealed-bid procedures based on (a) the price expected after the bid for the contract in question is received, or (b) the "government estimate" made before the receipt of a bid from a contractor?

For example, 41 U.S.C. Section 3502.a states, "An offeror for a prime contract under this division to be entered into using procedures other than sealed-bid procedures shall be required to submit cost or pricing data before the award of a contract if - in the case of a prime contract entered into after June 30, 2018, the price of the contract to the Federal Government is expected to exceed $2,000,000..."

FAR 15.403-4 states that, "The contracting officer shall obtain certified cost or pricing data only if the contracting officer concludes that none of the exceptions in 15.403-1(b) applies." Barring exceptions or waivers, it continues, "The threshold for obtaining certified cost or pricing data is $750,000 for prime contracts awarded before July 1, 2018, and $2 million for prime contracts awarded on or after July 1, 2018."

My reading of this FAR section makes me believe the answer is (a), above. If I only read the U.S.C. section above however I would think the answer was (b). On a related note, is the government only required to create its own estimates (or even define an "anticipated" value) for construction projects (FAR 36.203)? 

Many thanks for the opportunity to post here!

Link to comment
Share on other sites

In general from my contractor side with respect to offers to the government or offers from subcontractors, certified cost or pricing data threshold applies to offers (including any updates prior to award of a contract), and/or awarded contract price, unless excepted by FAR 15.403-1 (b). Government estimate to me is not relevant but it may drive some government/FAR process applicable to the government. As a practical matter, the contract price would not be contemplated to exceed the offered price.

Link to comment
Share on other sites

https://www.ncmahq.org/news/magazine-details/how-well-do-you-know-the-truthful-cost-or-pricing-data-statute-a.k.a.-tina

Can the contracting officer require cost or pricing data below the dollar threshold?

Yes. The contracting officer is always authorized to take whatever actions are deemed necessary to ensure the government is paying a fair and reasonable price. However, cost or pricing data below the TINA threshold would not have to be certified, thereby substantially reducing the risk on the part of the bidder.”
___________________________

If the government’s estimated value of the contract action will exceed the threshold, the KO can require submission of cost or pricing data for non-competitive acquisitions.

If the proposed cost is less and remains less after negotiations, the data isn’t certified as “certified cost or pricing data”, but is considered “data other than certified cost or pricing data”, even if the format and type of data are the same as certified C or P data. 

The KO can can (“shall”) require submission of data other than cost or pricing data which may be necessary to determine that the price is fair and reasonable.

Here is the Far Part 2 definition of data other than certified cost or pricing data:

“Data other than certified cost or pricing data means pricing data, cost data, and judgmental information necessary for the contracting officer to determine a fair and reasonable price or to determine cost realism. Such data may include the identical types of data as certified cost or pricing data, consistent with Table 15-2 of 15.408, but without the certification. The data may also include, for example, sales data and any information reasonably required to explain the offeror's estimating process, including, but not limited to—

(1) The judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data; and

(2) The nature and amount of any contingencies included in the proposed price.”

Link to comment
Share on other sites

A significant difference between cost or pricing data that is certified and the same data but not certified (thus becoming “other than certified cost or pricing data”) is that there is no administrative remedy for the government to take a price reduction for “defective cost or pricing data” when it isn’t certified.

The government would more or less have to prove fraud or false claims or false statements, etc. for data other than certified cost or pricing data. 

Link to comment
Share on other sites

On 12/16/2020 at 2:26 AM, Gov Researcher said:

On a related note, is the government only required to create its own estimates (or even define an "anticipated" value) for construction projects (FAR 36.203)? 

Note that your first question concerning [EDIT: “certified] cost or pricing data” is relevant to non-competitive, negotiated acquisitions.

Your second question can relate to both competitive and non-competitive, negotiated acquisitions and/or to sealed bid acquisitions.

A Government estimate is required for sole source negotiated, competitively negotiated or sealed bid construction contracts.

See FAR 36.605 for A-E contract independent government estimates (sole source negotiated).

As for service and supply and other types of acquisitions, I don’t see a specific FAR requirement for government estimates; agency supplements might address this. However, depending upon the type and complexity, formal or informal (e.g., “Rough Order of Magnitude”) budgetary estimates  might be necessary as a practical matter for fiscal, budgetary and programmatic management purposes to define “anticipated value” of an action. The government usually manages programs to budgets and appropriations. It would be piss poor practice not to be able to define or anticipate the value of acquisitions. 

As a minimum, upon receipt of proposals or quotes, the government must use price analysis evaluation techniques in 15.404-1

 

Edited by joel hoffman
Link to comment
Share on other sites

That second question was  good (thought provoking) by the way.

Depending upon what you are buying, I personally think that it may be stupid if one relies solely on comparison of competing bids, quotes or proposals (per FAR 15.4) to determine whether a price is fair and reasonable, without any independent estimate or  other pricing assistance.

All  or many proposers may have priced based upon misinterpretation, poorly stated spec requirements, latent ambiguity, etc.

Link to comment
Share on other sites

22 hours ago, Gov Researcher said:

From you all's experience, is the threshold for when cost or pricing data is required for other than sealed-bid procedures based on (a) the price expected after the bid for the contract in question is received, or (b) the "government estimate" made before the receipt of a bid from a contractor?

If the contracting officer is "reasonably certain" that certified cost or pricing data will be required, then they are required to insert the provision at FAR 52.215-20, Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data, in the solicitation. That determination can only be made before a proposal is received. However, it could turn out that certified cost or pricing data are not required based on an offeror's response. This could happen if the offeror successfully asserted that an exception applies (see para. (a) of FAR 52.215-20) or proposed a price that did not exceed $2 million (even though the contracting officer thought it would).

Link to comment
Share on other sites

On 12/15/2020 at 11:26 PM, Gov Researcher said:

is the government only required to create its own estimates (or even define an "anticipated" value) for construction projects (FAR 36.203)? 

You might want to visit FAR part 10 as in a full read guidance contained in the part provides that during market research estimating value of a specific acquisition especially those above the simplified acquisition threshold might be necessary and prudent.

Additionally, see FAR part 19 (19.202-6) and discussion and need for an estimate of "fair market price".

Finally and while not specific as to why you have raised the question but also see FAR 13.106-3 where a "independent government estimate" may be required for a Simplified Acquisition.  

All told, and beyond what @joel hoffmanprovides as a common sense approach,  guidance in the FAR by my read does provide emphasis and and in some cases the specific requirement for the government to prepare its own estimates for nearly all acquisitions not just for construction only. 

 

Link to comment
Share on other sites

On 12/15/2020 at 11:26 PM, Gov Researcher said:

On a related note, is the government only required to create its own estimates (or even define an "anticipated" value) for construction projects (FAR 36.203)?

That may be the only express requirement in the FAR for an independent government estimate. However, the Government must have some expectation of the value of an acquisition to be able to, among other reasons, apply many of the rules in the FAR and to ensure that there's adequate funding. This has to be based on some sort of estimate. Agencies typically have rules for creating estimates in financial management regulations--these may not be restated in their procurement regulations. 

Link to comment
Share on other sites

20 hours ago, Don Mansfield said:

That may be the only express requirement in the FAR for an independent government estimate. However, the Government must have some expectation of the value of an acquisition to be able to, among other reasons, apply many of the rules in the FAR and to ensure that there's adequate funding. This has to be based on some sort of estimate. Agencies typically have rules for creating estimates in financial management regulations--these may not be restated in their procurement regulations. 

Agree, Don. FAR 36.605 also expressly requires an IGE for negotiating an A/E contract price. 

Link to comment
Share on other sites

Thanks for the many responses (several quite detailed - all much appreciated)! I learned something from each response. 

On 12/17/2020 at 12:07 AM, Don Mansfield said:

If the contracting officer is "reasonably certain" that certified cost or pricing data will be required, then they are required to insert the provision at FAR 52.215-20, Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data, in the solicitation. That determination can only be made before a proposal is received. However, it could turn out that certified cost or pricing data are not required based on an offeror's response. This could happen if the offeror successfully asserted that an exception applies (see para. (a) of FAR 52.215-20) or proposed a price that did not exceed $2 million (even though the contracting officer thought it would).

Based on Don's response above, it appears that technically the answer to the first question in my original post was (b). Is that correct?

A few questions for everyone related to Don's response above:

(1) If the contracting officer is not "reasonably certain" the proposed price will be above the certified cost or pricing data threshold, but it turns out all of the bids come in above the threshold, should the contracting officer still require certified cost or pricing data from each bidder per FAR (perhaps by re-soliciting with the provision at FAR 52.215-20 inserted, re-bidding, etc.)? 
(2) If the answer to (1) above is yes, then does that mean that effectively the answer to the first question in my original post is (a) in practice, since (barring exceptions in FAR or waivers) anytime the cost is expected to exceed the threshold, the contracting officer should require certified cost or pricing data in the end?
(3) Is there a generally accepted definition or interpretation for "reasonably certain", as used in FAR 52.215-20 for example (such as > 70% probability, > 50% probability, etc.)?
(4) Do KO's tend to err on the side of requiring certified cost or pricing data if the bids are likely to be near the threshold in your experience?

Link to comment
Share on other sites

56 minutes ago, Gov Researcher said:

Thanks for the many responses (several quite detailed - all much appreciated)! I learned something from each response. 

Based on Don's response above, it appears that technically the answer to the first question in my original post was (b). Is that correct?

A few questions for everyone related to Don's response above:

(1) If the contracting officer is not "reasonably certain" the proposed price will be above the certified cost or pricing data threshold, but it turns out all of the bids come in above the threshold, should the contracting officer still require certified cost or pricing data from each bidder per FAR (perhaps by re-soliciting with the provision at FAR 52.215-20 inserted, re-bidding, etc.)? 
(2) If the answer to (1) above is yes, then does that mean that effectively the answer to the first question in my original post is (a) in practice, since (barring exceptions in FAR or waivers) anytime the cost is expected to exceed the threshold, the contracting officer should require certified cost or pricing data in the end?
(3) Is there a generally accepted definition or interpretation for "reasonably certain", as used in FAR 52.215-20 for example (such as > 70% probability, > 50% probability, etc.)?
(4) Do KO's tend to err on the side of requiring certified cost or pricing data if the bids are likely to be near the threshold in your experience?

I assume that you are not referring to sealed bids (Part 14) but to a competitively negotiated acquisition method. If so, the KO cannot require certified cost or pricing data.

FAR 15.403-1   Prohibition on obtaining certified cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. chapter 35).

“(b) Exceptions to certified cost or pricing data requirements. The contracting officer shall not require certified cost or pricing data to support any action (contracts, subcontracts, or modifications) (but may require data other than certified cost or pricing data as defined in FAR 2.101 to support a determination of a fair and reasonable price or cost realism)—

(1) When the contracting officer determines that prices agreed upon are based on adequate price competition (see standards in paragraph (c)(1) of this subsection);”

Link to comment
Share on other sites

On 12/16/2020 at 2:23 PM, joel hoffman said:

Note that your first question concerning “cost or pricing data” is relevant to non-competitive, negotiated acquisitions.

For competitively negotiated acquisitions, the KO can require data other than certified cost or pricing data, as stated in my above and earlier posts. 

Link to comment
Share on other sites

Quote

4) Do KO's tend to err on the side of requiring certified cost or pricing data if the bids are likely to be near the threshold in your experience?

That depends largely on agency/office culture and policy.  The regulations give COs a lot of discretion in deciding to require the data and if so, whether it must be certified.  Many COs utilize lots of other means to justify fair and reasonable pricing.  Other places emphasize and almost insist on requiring certified data when it’s for other than commercial type items.  The sad thing is they don’t use the certified data other than include it in the file - no audit, no detailed cost analysis, no discussions covering the data, etc.

Link to comment
Share on other sites

9 hours ago, joel hoffman said:

I assume that you are not referring to sealed bids (Part 14) but to a competitively negotiated acquisition method. If so, the KO cannot require certified cost or pricing data.

Joel, thank you for pointing out my mistake. It sounded like I am asking about competitively negotiated situations, when I am interested in scenarios in which cost or pricing data is required (i.e. other than sealed bid procedures where the exceptions do not apply). My question should have read as follows:

(1) If the contracting officer is not "reasonably certain" the proposed price will be above the certified cost or pricing data threshold, but it turns out the bid (or negotiated price) does come in above the threshold, should the contracting officer still require certified cost or pricing data from the contractor per FAR (when no exceptions apply)?

Essentially I am curious whether the KO should always require certified cost or pricing data above the threshold when the exceptions are not met, regardless of the KO's "anticipated value" of the contract beforehand. 

Link to comment
Share on other sites

3 hours ago, Gov Researcher said:

(1) If the contracting officer is not "reasonably certain" the proposed price will be above the certified cost or pricing data threshold, but it turns out the bid (or negotiated price) does come in above the threshold, should the contracting officer still require certified cost or pricing data from the contractor per FAR (when no exceptions apply)?

Yes. See FAR 15.403-4(a)(1):

Quote

The contracting officer shall obtain certified cost or pricing data only if the contracting officer concludes that none of the exceptions in 15.403-1(b) applies.

The contracting officer's expectation before receiving a proposal is irrelevant to the requirement to ultimately obtain certified cost or pricing data.

14 hours ago, Gov Researcher said:

(2) If the answer to (1) above is yes, then does that mean that effectively the answer to the first question in my original post is (a) in practice, since (barring exceptions in FAR or waivers) anytime the cost is expected to exceed the threshold, the contracting officer should require certified cost or pricing data in the end?

No, I would say that it would be unusual to request certified cost or pricing data after receiving a proposal. It would be rare to be in a situation where you wouldn't know whether the contract price would exceed $2 million. The CO would typically request certified cost or pricing data with the proposal. See the instructions for submitting proposals requiring certified cost or pricing data at FAR Table 15-2. 

14 hours ago, Gov Researcher said:

(3) Is there a generally accepted definition or interpretation for "reasonably certain", as used in FAR 52.215-20 for example (such as > 70% probability, > 50% probability, etc.)?

 Not that I know of.

14 hours ago, Gov Researcher said:

(4) Do KO's tend to err on the side of requiring certified cost or pricing data if the bids are likely to be near the threshold in your experience?

Can't say generally.

 

Link to comment
Share on other sites

On 12/21/2020 at 1:46 PM, Gov Researcher said:

Essentially I am curious whether the KO should always require certified cost or pricing data above the threshold when the exceptions are not met, regardless of the KO's "anticipated value" of the contract beforehand. 

15.403-1

“...(b)(4) Waivers. The head of the contracting activity (HCA) may, without power of delegation, waive the requirement for submission of certified cost or pricing data in exceptional cases. The authorization for the waiver and the supporting rationale shall be in writing. The HCA may consider waiving the requirement if the price can be determined to be fair and reasonable without submission of certified cost or pricing data. For example, if certified cost or pricing data were furnished on previous production buys and the contracting officer determines such data are sufficient, when combined with updated data, a waiver may be granted. If the HCA has waived the requirement for submission of certified cost or pricing data, the contractor or higher-tier subcontractor to whom the waiver relates shall be considered as having been required to provide certified cost or pricing data. Consequently, award of any lower-tier subcontract expected to exceed the certified cost or pricing data threshold requires the submission of certified cost or pricing data unless—

(i) An exception otherwise applies to the subcontract; or

(ii) The waiver specifically includes the subcontract and the rationale supporting the waiver for that subcontract.

[62 FR 51230, Sept. 30, 1997]

Editorial Note: For Federal Register citations affecting section 15.403-1, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.”

Link to comment
Share on other sites

I was once chief of an office responsible for negotiated acquisitions (sole source and competitive), among other contract admin policy and oversight duties.

Our request for proposals for the sole source acquisitions provided instructions for submission, including identifying the threshold for submission of cost or price data.  The RFP included the associated provisions, which identified the threshold and exceptions. The provisions and clauses are self-operating.

For competitively negotiated (construction contract) acquisitions, we generally would ask for data other than cost or pricing in the RFP. We provided a format asking for higher, summary level breakdowns by line item. Categories identified the major trades and/or features broken out by labor, materials, equipment, subcontracts, overall indirect and other markups, etc. The purpose was to be able to correlate pricing between proposers and between proposers and the government’s estimate.

Aberrations were often useful indicators of areas to explore in discussions if such would be necessary to achieve award within the budget.

We were often able to identify industry or market (e.g., subcontractor and/or supplier) concerns with various design features, design errors, wasteful or extravagant requirements that could be modified or consider alternatives, etc.

The industry didn’t complain, as long as we provided the format and allowed the proposers time to separately tabulate and provide the information within a short but reasonable timeframe after the proposal deadline (competitively negotiated acquisitions).

Link to comment
Share on other sites

As a clarification, we modified our approach for competitively negotiated source selections to provide the format for submission of the pricing data with the RFP.  But instead of requiring the price breakdowns every time, we reserved the right to require submission if necessary. We didn’t need to discuss pricing in every competition, so no need to cause industry to unnecessarily expend the resources and time to capture and organize the data.

I forgot to mention that. Industry still didn’t object when I would ask for feedback on our process. Their only complaint was if we didn’t provide the format for breakdowns ahead of time.

Link to comment
Share on other sites

  • 2 weeks later...
36 minutes ago, Don Mansfield said:

You're welcome, @Gov Researcher. You asked very thoughtful questions--those are my favorite type.

Your welcome, Gov and I agree with Don.

They were thoughtful and thought provoking questions, indeed. 

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...