I searched the forums for my question but didn't find anything that would help.  Here's my question: if a prime contract is a commercial item, are subcontracts under that prime also considered commercial items?  Swap out "commercial item" above with "adequate price competition", same result?  In other words, if a prime contract qualifies for the adequate price competition exemption, does the subcontract qualify for the same exemption?  I realize that, if the adequate price competition exemption applied to a prime contract, a subcontractor might want to claim the commercial item exemption (if they can) to further limit flow down clauses.  Any input is greatly appreciated!

1 hour ago, BostonStrong said:

if a prime contract is a commercial item, are subcontracts under that prime also considered commercial items?

Interesting question. My first reaction is to say "no" because the prime would be responsible for making its own CIDs. On the other hand, I don't know what relevant clauses (if any) are in the prime's contract. I would definitely start by reading the prime contract.

 

1 hour ago, BostonStrong said:

Swap out "commercial item" above with "adequate price competition", same result?  In other words, if a prime contract qualifies for the adequate price competition exemption, does the subcontract qualify for the same exemption?  I realize that, if the adequate price competition exemption applied to a prime contract, a subcontractor might want to claim the commercial item exemption (if they can) to further limit flow down clauses. 

If the prime contractor does not have to submit certified cost or pricing data because there is adequate price competition, then neither do the subcontractors under that prime contract. However, that does not relieve the prime from determining that the subcontractors' prices are fair and reasonable, nor does it relieve the prime from complying with the clauses of its prime contract. Obviously, if the prime executed a CID then the subcontractor would be exempt from providing certified cost or pricing information; however, if the item were truly commercial then wouldn't you expect adequate price competition by definition?

1 hour ago, BostonStrong said:

Here's my question: if a prime contract is a commercial item, are subcontracts under that prime also considered commercial items?

It depends.  Remember, a contract for commercial items may require modifications to meet government requirements.  What is used in making those modifications may not be commercial items.  This is just an example of when this could arise.  Also, you did not say for what purposes this determination must be made, e.g., clauses to include in the subcontract.

As for adequate price competition, I agree with H2H.

5 hours ago, BostonStrong said:

In other words, if a prime contract qualifies for the adequate price competition exemption, does the subcontract qualify for the same exemption? 

May I ask why you care about this?  Considering that the government has no privity with a sub, why is this even a concern?  

The prime doesn't 'qualify for the adequate price competition exemption', 'adequate price competition' applies to a procurement action, and is determined by the CO based on the circumstances and outcomes of a competitive procurement.  It's not an 'exemption' to anything.

What we seem to be talking about here is the required submission of C&P data, and there is no normal scenario* I'm aware of whereby a sub would ever be required to submit C&P data and the prime wouldn't.  

 

* Not counting the Vern Edwards' Extraordinary Exception Scenario, which he always seemed to pull out of his bag of tricks at will. 😄

1 hour ago, REA'n Maker said:

there is no normal scenario* I'm aware of whereby a sub would ever be required to submit C&P data and the prime wouldn't.  

I don't know if it is "normal" in the sense that you use the word, however, some prime contractors do require subcontractors to submit certified cost or pricing data in regard to subcontracts although the prime contractor was not required to submit such data.  Although, the statute would not require such submission, nothing prohibits a prime contractor  from doing so.

Boston I think you have two completely separate questions here which i'm not sure why you are tying together.

Starting with the Commercial item question, I would say regardless of whether the prime contract is for a commercial item or not, the sub contracts can be for either.  For example a radio can be classified as a commercial part, but the individual components might not be commercial, especially as you get into commercial items that meet the 3rd Commerciality Definition "Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirement"

With regards to the Adequate Price Competition, H2H covered that perfectly I think.  As the prime is doesn't have to submit due to adequate price competition , then neither do the subcontractors.  While they can request "data other than certified cost or pricing data" to assist with price analysis, they shouldn't even be requesting certified data.

1 hour ago, JPulvino said:

While they can request "data other than certified cost or pricing data" to assist with price analysis, they shouldn't even be requesting certified data.

JPulvino, does the Truthful Cost or Pricing Data statute impose any limitations on the type of data a prime can obtain from a subcontractor?

2 hours ago, Retreadfed said:

some prime contractors do require subcontractors to submit certified cost or pricing data in regard to subcontracts although the prime contractor was not required to submit such data

If the data were not required to be submitted by the FAR, then they would not be "certified cost or pricing data."

Quote

“Certified cost or pricing data” means “cost or pricing data” that were required to be submitted in accordance with FAR 15.403-4 and 15.403-5 and have been certified, or is required to be certified, in accordance with 15.406-2. This certification states that, to the best of the person’s knowledge and belief, the cost or pricing data is accurate, complete, and current as of a date certain before contract award. Cost or pricing data is required to be certified in certain procurements (10 U.S.C. 2306a and 41 U.S.C. chapter 35).

 

15 hours ago, Don Mansfield said:

If the data were not required to be submitted by the FAR, then they would not be "certified cost or pricing data."

The primes require subcontractors to submit data that meets the definition of cost or pricing data in the FAR and Act.  The primes also require the subcontractors to certify the data using the FAR certificate.  In plain English, this is certified cost or pricing data. 

This brings up the question as to the extent that FAR definitions or descriptions of concepts applies to prime contractors in their relationships with their subs.   As we have discussed several times at this forum, the FAR does not apply to contractors.  What applies to contractors in their relationship with the government are the terms of contracts.  If there is nothing in the prime contract that imposes restrictions on a prime in regard to its relationship with its subs, the prime is generally free to pursue any terms and conditions that are lawful and attach any label to the terms and conditions that they want even if it is not consistent with how the FAR defines or describes similar terms.    Thus, if an RFP does not require a prime contractor to submit certified cost or pricing data, there generally would be no clause in the contract that requires the contractor to obtain certified cost or pricing data, as defined in the FAR, from subcontractors as a precondition to award of the subcontract.    Because there is no FAR clause  that applies to submission of certified cost or pricing data by subcontractors in this situation, the prime can attempt to impose requirements on subs in this regard that satisfy the prime's policy objectives.  (I am not talking about subcontracts that might be awarded as a result of a modification to the contract or modifications to subcontracts following  a modification of the prime contract.)  That includes obtaining what the prime calls certified cost or pricing data from the subcontractors.

22 hours ago, Retreadfed said:

I don't know if it is "normal" in the sense that you use the word, however, some prime contractors do require subcontractors to submit certified cost or pricing data in regard to subcontracts although the prime contractor was not required to submit such data.  Although, the statute would not require such submission, nothing prohibits a prime contractor  from doing so.

My use of the term "required" was in reference to the prime contract terms.  That being said, why would a prime want a sub to submit certified C&P data on something that wasn't required in the prime contract?  What possible business purpose would that serve?

 

 

On 4/10/2019 at 10:30 AM, here_2_help said:

However, that does not relieve the prime from determining that the subcontractors' prices are fair and reasonable

Actually there is no requirement for a prime to 'determine' anything regarding their subs' pricing on  a competitive procurement.  They can pay their sub 110% of the prime contract price if they want.  That's why competition is a good thing, and obviates the need for cost analysis at any level. Learn it. Live it. Love it.

1 hour ago, REA'n Maker said:

My use of the term "required" was in reference to the prime contract terms.  That being said, why would a prime want a sub to submit certified C&P data on something that wasn't required in the prime contract?  What possible business purpose would that serve? 

  

I can't think of a business purpose for doing that. However, in my experience from a prime contractor view, some prime contractors have "automated" procurement systems that are setup to align with the most stringent government contracts for non-commercial end items. As a result, commercial item subcontracts may be defaulted in the process to require things that are not actually required by commercial item prime contract terms and conditions...a form of sloppy system overkill.

Edited April 11, 20196 yr by Neil Roberts
typo

1 hour ago, REA'n Maker said:

why would a prime want a sub to submit certified C&P data on something that wasn't required in the prime contract? 

Maybe the prime wants to try to assure itself that it is not getting hosed by the sub.  If the sub is a sole source for a non-commercial item, the prime may want a way to mitigate the risk that it is overpaying the sub.  Along with this, if the prime can lower its costs to the sub after contract award, the prime may be able to get more profit on the contract.  Also, I'm sure some primes use this as a way of gaining leverage over a subcontractor, particularly if the prime is a major contractor and the sub is a small business.

3 hours ago, REA'n Maker said:

 

Actually there is no requirement for a prime to 'determine' anything regarding their subs' pricing on  a competitive procurement.  They can pay their sub 110% of the prime contract price if they want.  That's why competition is a good thing, and obviates the need for cost analysis at any level. Learn it. Live it. Love it.

Yeah, no. It's called "price analysis" and it's how the prime determines the price it is paying is fair & reasonable. CPSRs, you know.

On 4/10/2019 at 2:45 PM, REA'n Maker said:

May I ask why you care about this?  Considering that the government has no privity with a sub, why is this even a concern?  

The prime doesn't 'qualify for the adequate price competition exemption', 'adequate price competition' applies to a procurement action, and is determined by the CO based on the circumstances and outcomes of a competitive procurement.  It's not an 'exemption' to anything.

What we seem to be talking about here is the required submission of C&P data, and there is no normal scenario* I'm aware of whereby a sub would ever be required to submit C&P data and the prime wouldn't.  

 

* Not counting the Vern Edwards' Extraordinary Exception Scenario, which he always seemed to pull out of his bag of tricks at will. 😄

I care because prime contractors (more specifically, the folks responsible for letting subcontracts) tend to default to a cost-based procurement when dealing with subcontractors even when the prime contract qualified for the adequate price competition / commercial item exemptions.  I'm much more interested in a scenario where the prime is a commercial item because that's our immediate situation.  I threw in the adequate price competition scenario but maybe should have limited it to a commercial item scenario to be a more targeted question.  So...ideally...it would be very helpful if there was a line of logic that we could use to inform the prime contractor that, because their contract is a commercial item, so are any subcontracts.  And, that means we don't have to do the cost/pricing dance with them.  I'm wondering about this because how can a commercial item for a prime contract have subcontracts for parts that are not commercial item?

16 hours ago, Neil Roberts said:

I can't think of a business purpose for doing that. However, in my experience from a prime contractor view, some prime contractors have "automated" procurement systems that are setup to align with the most stringent government contracts for non-commercial end items. As a result, commercial item subcontracts may be defaulted in the process to require things that are not actually required by commercial item prime contract terms and conditions...a form of sloppy system overkill.

Exactly Neil.  Many times, a subcontractor has to advocate for itself and educate the prime that what they're asking for is not required or needed.  Of course, it needs to be done in a healthy client-focused way.  But that's why I'm asking the question.  My first objective is to inform our team that this is not a requirement and then we try to figure out how to approach a potential customer with a good reason why they don't need cost or pricing data.  Many of the folks we deal with are not subscribed to Wifcon so they are flying in the dark, lol.

On 4/10/2019 at 7:58 AM, BostonStrong said:

I searched the forums for my question but didn't find anything that would help.  Here's my question: if a prime contract is a commercial item, are subcontracts under that prime also considered commercial items?  Swap out "commercial item" above with "adequate price competition", same result?  In other words, if a prime contract qualifies for the adequate price competition exemption, does the subcontract qualify for the same exemption?  I realize that, if the adequate price competition exemption applied to a prime contract, a subcontractor might want to claim the commercial item exemption (if they can) to further limit flow down clauses.  Any input is greatly appreciated!

If a prime is seeking a subcontract to manufacture or modify a commercial item or component,  they may have a need to negotiate with their subs/suppliers.  For that matter, they might just be negotiating or even bid shopping. 

I may have overlooked the context and  whether this situation would affect the prime contract price (e.g., cost reimbursement or FFP prime contract, preaward pricing of the prime contract, or prime contractor post award buying out the job with suppliers and subcontracts, etc.). 

I agree with H2H, too. 

18 minutes ago, BostonStrong said:

I care because prime contractors (more specifically, the folks responsible for letting subcontracts) tend to default to a cost-based procurement when dealing with subcontractors even when the prime contract qualified for the adequate price competition / commercial item exemptions.  I'm much more interested in a scenario where the prime is a commercial item because that's our immediate situation.  I threw in the adequate price competition scenario but maybe should have limited it to a commercial item scenario to be a more targeted question.  So...ideally...it would be very helpful if there was a line of logic that we could use to inform the prime contractor that, because their contract is a commercial item, so are any subcontracts.  And, that means we don't have to do the cost/pricing dance with them.  I'm wondering about this because how can a commercial item for a prime contract have subcontracts for parts that are not commercial item?

Prime contractors--especially the big ones--have their own purchasing rules and procedures that are often divorced from Gov't requirements (and more stringent, in order to shift risk to subs). Depending on the Buyer you're working with, they might want you to open your books to them regardless of prime or subcontract type, because that's what the procedure says and they aren't willing to negotiate. You'll need to move up the chain and speak to their management if you're hitting a wall there.

Simply because the prime contract is a commercial item though, does not mean that each of its components (subcontracts) are necessarily commercial items as well. But that being said, the Government's interest in price ends at the prime contract for commercial items. Because the Government knows what its paying and that the price it's paying is fair and reasonable (theoretically). What happens down stream is between two commercial companies, and back to my first paragraph, many companies want to ensure they are also getting fair and reasonable pricing from their subs. It's no longer a "best interest of the taxpayer" situation anymore, but rather a "best interest of the shareholder" situation. So they can't use Government authority to look at your books or justify your pricing, but they can use their own authority as the company buying your goods. "You didn't have to, so I don't have to" is not a strong argument by itself, but it's a good starting point for why you should feel OK with pushing back and justifying why you shouldn't need to provide business-sensitive data.

11 minutes ago, kevlar51 said:

Prime contractors--especially the big ones--have their own purchasing rules and procedures that are often divorced from Gov't requirements (and more stringent, in order to shift risk to subs). Depending on the Buyer you're working with, they might want you to open your books to them regardless of prime or subcontract type, because that's what the procedure says and they aren't willing to negotiate. You'll need to move up the chain and speak to their management if you're hitting a wall there.

Simply because the prime contract is a commercial item though, does not mean that each of its components (subcontracts) are necessarily commercial items as well. But that being said, the Government's interest in price ends at the prime contract for commercial items. Because the Government knows what its paying and that the price it's paying is fair and reasonable (theoretically). What happens down stream is between two commercial companies, and back to my first paragraph, many companies want to ensure they are also getting fair and reasonable pricing from their subs. It's no longer a "best interest of the taxpayer" situation anymore, but rather a "best interest of the shareholder" situation. So they can't use Government authority to look at your books or justify your pricing, but they can use their own authority as the company buying your goods. "You didn't have to, so I don't have to" is not a strong argument by itself, but it's a good starting point for why you should feel OK with pushing back and justifying why you shouldn't need to provide business-sensitive data.

Valid points, too. 

 

5 hours ago, kevlar51 said:

 

I very much appreciate all the input.  It helps.

On 4/11/2019 at 5:34 PM, here_2_help said:

Yeah, no. It's called "price analysis" and it's how the prime determines the price it is paying is fair & reasonable. CPSRs, you know.

Certified C&P data is a FAR-defined term, and is not synonymous with "price analysis".  What you meant by "it's called price analysis" when I stated that competition "..obviates the need for cost analysis", I have no idea.  

On 4/12/2019 at 7:44 AM, BostonStrong said:

I care because prime contractors (more specifically, the folks responsible for letting subcontracts) tend to default to a cost-based procurement when dealing with subcontractors even when the prime contract qualified for the adequate price competition / commercial item exemptions. 

I think you are conflating price analysis with a FAR requirement on the prime contractor to provide (literally) certified C&P data.  Sounds like "you want the subcontract, give us visibility into your costs".  Because the prime/sub agreement is commercial, they can do whatever they want.

On 4/12/2019 at 8:16 AM, kevlar51 said:

they can use their own authority as the company buying your goods

Exactly. Don't worry about FAR Part 32 or whatever.  Find out what your prime wants, and if possible, give it to them. 

I think there might also be a terminology/semantics issue in play here.  Only the Government can be provided with certified C&P data because the purpose of that is to provide an avenue for remedies like Price Reductions for Defective C&P Data, etc.  Maybe that's what you need to educate the prime on.  Ask them if FAR 52.215-12 is in their prime contract (it shouldn't be in the scenario you described) and go from there.

Capitalism is a harsh mistress!