joel hoffman

In simple terms, adding a 10% contingency to each high risk is saying that there is a 100% probability that every risk will occur. With risk management and using a Monte Carlo analysis, the analysis can be used to predict probabilities of delays and costs due to one or multiple risks. It’s not a linear cumulative value. Since my experience was almost 20 years ago, I don’t remember all the details but one can look it up and there are knowledgeable practitioners to help you. Here is some sample info on it. https://www.proprofsproject.com/blog/monte-carlo-analysis-in-project-management/#:~:text=The Monte Carlo Analysis is,project cost and project timeline.

Disclaimer: I’m certainly not an expert in risk management and RM estimating, if that is what you are asking about. We don’t know what type of contract or delivery order pricing is involved, e.g., cost reimbursement, FFP, etc. However, your flat rate 10% add on for “high risk” suppliers appears to be a simple contingency. I was on the government side of the early phases of a highly technical cost reimbursement systems IDIQ contract with separate phases for design, construction, process systemization, pilot operations, full scale operations, closure, dismantling… It was a Chemical Weapons Demilitarization plant for assembled chemical weapons as well as various bulk chemical agents using a process that had only been bench tested. The lead firm of the joint venture Prime was one of the two largest US engineering and construction contractors. During the negotiations for design-construct phases, the JV and us identified numerous, various cost and schedule risks, then the SC used a Monte Carlo risk analysis to determine and estimate risk to the schedule and cost. I left the project for other duties before seeing the results, though. DoD purposely slowed down the last two plants in the Chemical Weapons Demilitarization Program by at least 15 years!

I think that this discussion directly pertains to @Atlas STS stated concern with having to provide “certified cost or pricing data” that is accurate, current and complete (in particular, “terror” in relation to “complete”) in of support its proposed Price. And it shows how judgmental data (which isn’t necessarily certified cost or pricing data) can be used when historical (I.e., actual/factual) cost or pricing data is used but needs to be adjusted for the current acquisition to fit the current conditions or circumstances. I realize that @Atlas STS is upset that the KO won’t accept a commercial item exception to single offeror cost or pricing data since Atlas’ firm is a “Nontraditional Defense Contractor” (as are most small business DoD contractors).

Often a price for a non-commercial product or service may be based upon both judgmental cost data (e.g., number of mhrs when not known or firmly established, risk factors, etc.) and factual cost or pricing data (e.g., material quotes, manufacturing means and methods, labor rates, subcontracts, etc.). EDIT: [In other words, cost or pricing data aren’t necessarily historical data. It can also be the non-judgmental cost components of prices developed for the current solicitation.] Sometimes there are historical cost or pricing data that isn’t current and costs will be adjusted (evolve) for the instant acquisition. The basis for adjustment may be judgmental and/or factual. But it is a requirement to explain it in the proposal per the instructions for the default Table 15-2. ** in FAR 15.408. Edit: [And yes, @Fara Fasat. The FFP contract and any line item price obviously includes both costs and profit. I’m only addressing the basis for proposed cost within the proposed price(s) here. Profit is separately identified. If the supporting cost breakdown is only 50% of the proposed price, then that will be or should be apparent - not have to be deduced by the buyer. For single source, negotiated DoD acquisitions of this magnitude, the cost principles in Part 31 apply when cost analysis is used in addition to price analysis.] It’s more than an expectation - it is a specific requirement in the Instructions for default Table 15-2. ** **From the Instructions for Table 15-2 “C. As part of the specific information required, you must submit, with your proposal- (1) Certified cost or pricing data (as defined at FAR 2.101). You must clearly identify on your cover sheet that certified cost or pricing data are included as part of the proposal. (2) Information reasonably required to explain your estimating process, including- (i) The judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data; and (ii) The nature and amount of any contingencies included in the proposed price. D. You must show the relationship between line item prices and the total contract price.You must attach cost-element breakdowns for each proposed line item, using the appropriate format prescribed in the "Formats for Submission of Line Item Summaries" section of this table. You must furnish supporting breakdowns for each cost element, consistent with your cost accounting system.” We would also instruct the offeror or contractor (mods and claims) to designate judgmental data as (J) and actual or otherwise factual data as (F), for instance.

@USGCO, I like the question concerning the customer’s reasoning for requesting a “spend plan” for (an assumed) fully funded FFP (supply?) contract. 1. Can you explain the basis/reasons for customer’s concerns or needs? 2. Also, why was this type of financing chosen for the acquisition? 3. Can we assume that regular progress reporting, independent of progress payments, is a contract requirement? 4. One more question. Was this a competitively awarded contract or was it a sole source negotiated contract? Thanks, in advance for clarifying… P.S., if your question has been answered and you don’t want to publicize the details, that’s ok but please confirm if it has been answered. I noticed that you last signed in last Friday morning when you posed the question.

No. Not under the Progress Payments clause at 52.232-16, which begins with: “The Government will make progress payments to the Contractor when requested as work progresses, but not more frequently than monthly, in amounts of $2,500 or more approved by the Contracting Officer, under the following conditions…” I don’t think that it would be within the scope of the Changes clause to unilaterally change the payment terms of the contract from voluntarily requested progress payments, to mandatory progress payments. It will likely increase the contractor’s costs to administer and prepare regular invoices.

The base fee is generally fixed, unless the there is a change to the scope of work or other circumstance providing for an adjustment (not due to cost growth/overruns/etc.).

Let me finally (hopefully) add that the instructions for providing cost or pricing data require contractor to summarize all costs and separately show profit. It’s not the government’s responsibility to interpret the differences between raw cost or pricing data and/or data other than cost or pricing data and the proposed contract or line item costs which may evolve from the raw data, to determine the amount of profit proposed.

Are you referring to post award review or discovery or to pre-award proposal review and negotiation (proposal adequacy)? I will address proposal adequacy here. The proposed DoD contractor in the situation of only one offer received must provide breakdowns of all costs (EDIT: not addressing commercial products or services or other exceptions to certified cost or pricing here) in its proposal in enough detail for the KO to determine price reasonableness, per the numerous FAR and DFARS provisions and 15.4/215.4 references. This is not restricted to cost or pricing data. It also includes appropriate data other than cost or pricing data, if necessary. FAR 15.408, Table 15-2, Section I Paragraph C(2)(i) requires that the proposal disclose the judgmental factors applied and the mathematical or other methods used in the estimate. EDIT: BTW, this paragraph includes disclosing those methods used in projecting from known data - such as disclosing differences between known data and the current situation. Don’t merely disclose historical cost or pricing data, then change the pricing without disclosing how the current pricing varies or evolved from the historical data. This may include judgmental and/or factual differences. The “contractor’s duty in regard to cost or pricing data [does NOT end] when it disclosed all the data it had”, then left it up to the government how it interprets the disclosed cost or pricing data. EDIT: The prime must perform and document price analyses for all proposed subcontracts per the Table 15-2 instructions at Ii A., in accordance with FAR 15.408 and the applicable Provision(s) for submission of current cost or pricing data. For those subcontracts based upon adequate price competition, this would include information concerning the competition, comparison of prices and the judgmental basis and rationale for selection of the source and price. And yes, you include the cost of the sub you intend to use in the proposal breakdown. Thus, the price analysis obviously should address comparisons with the other prices, including the lower priced proposal. Also - the cost principles in FAR 31 are applicable to negotiated FFP contracts when cost analysis is applicable, per 31.103. Subcontracts are “costs” to the prime. Per FAR 31.201-3 (Determining Reasonableness): “A [prime contractor] Cost is reasonable, if in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business…No presumption of of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the [KO or COR], the burden of proof shall be upon the contractor to establish that such cost is reasonable.” In my opinion, reasonableness of subcontractor competitive selection should be based upon the standard as though there is competition at the prime contract level. To assert adequate competition as the basis for subcontract pricing, the contractor should justify why a higher priced subcontractor proposal is necessary. Assuming that the prime actually used the higher priced subcontract without explaining it in its price analysis, I don’t know if there would be “defective pricing”. But it would appear to be an inadequate proposal (withholding required information) for the government to determine the reasonableness of the proposed price. EDIT: If the KO becomes aware of the lower offer without price analysis or justification before award, the KO should require the prime proposer to justify why it selected the higher price subcontract proposal, before awarding the contract. If the prime didn’t reveal that there was/were lower priced offer or offers before award, I think that there could be a truthfulness issue. The government might have been able to negotiate a lower price… If the prime awards to the lower priced subcontractor after negotiations concluded and effective date of the certification of current cost or pricing, but still included the higher price in its final proposal, there may be defective pricing. I saw that situation occur in one of my Districts. EDIT: I didn’t discuss the requirement for the prime to also conduct cost analysis of subcontract proposals, when applicicable. Here, I am responding to a specific scenario where a subcontract price is based upon adequate competition.

Formerfed, your initial statement is so obvious, I overlooked it. The government can certainly ask for relevant information in the technical proposal.

Probably so. So it shouldn’t be a problem for them to identify the sources of the equipment and services they are certifying about. .

Yet all prospective providers of covered telecommunications equipment or services must certify whether or not any sources are affiliates of one or more of the dirty five excluded sources? Apparently neither the government nor the industry has access to a list of excluded affiliates of the dirty five! This is even more reason why a contracting officer may not (should not) simply rely upon a simple “no” certification.

ji, FAR 4.2103 says that the contracting officer “may rely” on the representations. It doesn’t say “shall rely”. “If the contracting officer has a reason to question the representation, the contracting officer shall follow agency procedures.” I don’t know what the agency procedures are. But I wouldn’t rely on a simple all encompassing certification unless there were some substantiation concerning the source company. I described my possible procedure. It doesn’t involve any more research by the industry than what the certification requires. If a KO wants to spot check or totally check behind the offeror, they can search SAM for the identified source themselves (or have it searched by someone). There is no need to require an offeror to provide all the information in the paragraph at 52.204-24 if they reviewed the SAM list and the entity wasn't listed or they otherwise determined that the source of the equipment or services is not an affiliate of the dirty five.. EDIT: Well it seems that Fara Fasat has discovered that SAM doesn’t list affiliates of the excluded dirty five after all. In fact there is apparently no 889 list of affiliates. What a joke this whole thing is if a proposing firm can’t even find affiliates after being required to search SAM for affiliates of the “dirty five”!! Bureaucracy!!

Yes, you are confused. Im proposing that the bidder/offeror/proposer provide substantiation beyond simply a certification X’d/checked box. That’s not verifiable. They are already required to review SAM for each proposed source or supplier. To me then it should be no more onerous to identity/list them in their proposal and confirm that they specifically reviewed SAM. I wrote performance specs during my career. Performance specifying should always include means of “substantiation” (verification). The same concept would seem prudent here - particularly since this is an important NATIONAL Cybersecurity issue. Fara Fasat has raised real concerns… However, I don’t know any reasonable or practical way for either the company or the government to verify that the firm doesn’t have any prohibited sourced items or services in their own company operations.

To attempt to effectively comply with the Section 889 ban, It would seem that solicitations for telecommunications equipment or services should also require the proposers to identify all sources and specifically check SAM and specifically affirm that each source is not a disqualified firm in SAM. The ban includes using any banned sources of equipment, services or systems/programs in a firm’s own business operations. I think it’s an unrealistic (unstated) expectation for a (all) prospective federal bidder, offeror, contractor to inventory every service or telecommunications device, then search SAM to determine compliance, then certify compliance with the ban. If the Section 889 ban is truly an Nationally important imperative, then similar to a performance specification, two simple certification check boxes don’t really make any sense without some substantiation requirement to verify that the proposer has actually cross-checked SAM for each equipment or service source . As President Ronald Reagan learned, then proclaimed: “Trust but Verify”. * *The Russian proverb “doveryai, no proveryai (доверяй, но проверяй)” means 'trust, but verify'. https://en.m.wikipedia.org/wiki/Trust,_but_verify#:~:text=Soviet–American relations,-1985 Reagan–Gorbachev&text=Suzanne Massie%2C an American scholar,'trust%2C but verify'.

@Don Mansfield, I’m on @Fara Fasat’s side! I commend him/her for his/her concerns and efforts. I probably would have done something similar if I was still working - especially concerning cybersecurity in today’s world situation. I learned from my boss 45 years ago not to rely on or trust certifications. It’s the system here that sucks. I don’t agree with a statement that relying on a certification** concerning cybersecurity is “entirely reasonable”. You go, Fara!!! **especially from the business (sales) side of a firm. My consulting firm owner would NEVER accept a certification from the business side of a firm.

Relying on self-certification is hollow, bureaucratic B.S. in these circumstances (Cybersecurity). It’s a gaping security hole. I wonder what the new US Cyber Command would think of relying on contractor self-certification concerning their sources - especially when everyday government offices can’t even find a database of affiliates of the “big five”. My opinion. Maybe we need to rely more on ARTIFICIAL intelligence (AI) to seek out and maintain a current list of affiliates of banned companies if it is too much trouble for a government employee to do it.

And entirely stupid. ji, I was fully aware of the GAO case. I quoted from it. If the US is truly, deeply concerned about “Cybersecurity”, they wouldn’t rely upon self-certification by anybody, which apparently means that they don’t know who the constantly changing subsidiaries of the five listed firms are. Fara Fasat rightfully wonders and is reasonably concerned where or if the US is tracking and/or listing subsidiaries. Cybersecurity is critical, not to be trifled with. Bureaucracy at its lowest. My opinion.

Relying upon an offeror’s self certification is like burying your head in the sand. ”Our Office has repeatedly explained that where an agency has no information prior to award that would lead to the conclusion that the vendor, or the product or service to be provided, fails to comply with the solicitation’s eligibility requirements, the agency can reasonably rely upon a vendor’s representation/certification of compliance. See, e.g., Kipper Tool Co., B-409585.2, B‑409585.3, June 19, 2014, 2014 CPD ¶ 184 at 5 (denying protest that agency could not reasonably rely on representations regarding compliance with the Trade Agreements Act); KNAPP Logistics Automation, Inc.,” How is an offeror supposed to know if a company is or isn’t a subsidiary of a prohibited source? By relying upon a certification by that company? When I was a consulting engineer in the late 1970’s, my boss repeatedly derided the entire idea of self “certications” by vendors and contractors. We avoided reliance upon certifications to the maximum possible extent.

If you are wondering about forms for project owner references, in our organization, we developed standardized questionnaires for project owner references to respond to. You could contact some organizations to ask for a copy of what they use.

Having worked with DBA wage rates dating back to the 1970’s, I sense that this reversion was made to favor Union wage scales. The major controversy back in the pre 1983 revision by the Reagan Administration was that the prevailing wage rates were essentially the local trade union rates. This was to protect and promote union share of construction work, even if union share of the workforce was a small minority (apparently 30%). Im certain that this is a Biden Administration union serving initiative, cloaked by other narrative rationale. I will say that the quality of work on union projects in my experience is usually exceptional. However, union labor practices, such as feather bedding and other restrictions on what each trade can perform on a job, should still result in effective competition for construction project contract awards by non-union construction contractors. One of the worst examples that I personally witnessed was on a highly technical Chemical Weapons Disposal processing plant construction project. Three union electricians would carry 10’ and 20’ PVC, small diameter electrical conduits, grinning as they walked past us. I will also say that, in many areas, the prevailing wage rates, even for non-union contractors often exceed the DBA wage decision rates, due to competition for trade labor.

Moved comment a conversation. I won’t bore everyone with the details. Bob’s Blog articles are fascinating and I can personally relate to them.

Retreadfed, we’re out of state this weekend on family business. I will respond next week. Have a good weekend!

Example 1: if it is “apparent that the per unit cost for later procured items is less than the disclosed, average unit cost computed using the actual [historical] labor costs” then the disclosed cost or pricing data used to price the contract isn’t “accurate, current or complete.” - to me it would be considered defective cost or pricing data. You are aware that the current cost will be lower than the disclosed cost. It isn’t Truthful. Example 2: “The way I understand Joel's position, Y would be required to base its proposal on the new and lower quote although Y does not intend on using that vendor.” That is not my position. As long as you explain the circumstances and disclose that you aren’t going to use the lower priced vendor in your second example , that is not defective pricing. You disclosed the vendor’s pricing that you intend to purchase and why you didn’t use the lower price.

Why do you have to provide data that is inapplicable to your price? You could mention it then say that it isn’t applicable because…