ContractPriceAnalyst

I have enjoyed reading all of the posts. I am glad that I gave everyone something to think about. The share ratios are real. The share ratios were recommended by an individual at USD AT&L about a year ago. Rather than an incentive, the arrangement was structured to remove the contractor's incentive to limit expenses in order to pocket additional profit which was a concern at the time when the RFP was issued. The CLIN with the applicable arrangement is an interim development (i.e. completion of PDR, CDR, etc.). Regarding the CPIF math, my personal interpretation had previously matched that of wvanpup because I had believed that the adjustment to the target profit could not be less than zero. Additionally, an FPIF graphing tool from the former chief of our pricing office generated a graph which showed a final cost between target price and ceiling that resulted in the final price equalling the final cost. Based on the conversations here and recent discussions with my current management, I am inclined to believe that I along with the grahing tool were wrong.

Scenario: Target Cost: $60M Target Profit: $7M Target Price: $67M Ceiling: $70M Share Ratio, Under and Over: 100/0; 0/100 The issue surrounds interpretation of FAR 52.216-16(d)(2) and the adjustment for loss if the contractor's share of the over target costs exceeds the target profit. If the actual cost were $68 million, is the final price $67 million or $68 million? In this case, the contractor's share in the adjustment in profit would be $8M, but the target profit is only $7M. Would the calculation of the final price be equal to the actual cost plus a negative $1M of profit or actual cost plus no profit?

Situation: Upon conducting a cost analysis of certified CoPD, it is discovered that the contractor is proposing hours for tasks which NOT contractual requirements. In response, the contractor claims that the task is company policy. I have noticed this in relation to hours to maintain a specified CMMI level that is beyond those required in the SOW or hours to do earned value on a fixed price contract. Question: Please forgive me for my naivety as I am quite familiar with reviewing cost proposals, but I know very little with regard to CAS. I am wondering if it is company policy to perform a task, should that be covered in a contractor's disclosure statement?

Based on FAR 15.306©, I would say that a cost realism assessment needs to be conducted if that is an envaluation factor. I will add that it may not be reasonable to establish a Government Estimate of Most Probable Cost (GEMPC) that does not equal the proposed cost prior to establishment of the competitive range and entering discussions with those offerors that have an opportunity to respond to the applicable Evaluation Notices. Prior to entering discussions, it may be difficult to determine whether the proposed costs are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the technical proposal. With that said, clear documentation is the key.

In response to my previous question/comment in my post, I found a very helpful 21 October 2010 post from Vern: "... under a CPFF/LOE/Term for contract, the stipulation of a level of effort reduces the likelihood of cost overruns, because the contractor is not working toward completion, but only to deliver a stipulated number of hours. An overrun will occur primarily if (1) labor costs more than anticipated and/or (2) indirect costs are higher than anticipated. Quantity of labor is not a source of risk. The main source of risk is the direct labor rate. But labor rates are relatively easy to track and manage, and a competent CO will establish ceilings, so that the contractor will need the CO's approval in order to be compensated for the use of more expensive labor after award. Also, the CO should write a clause to the effect that costs incurred for hours in excess of the level of effort will be unallowable, unless personally approved in advance by the CO. Second, any competent CO writing a CPFF/LOE/Term form contract will include a clause to the effect that if the contractor does not deliver the entire level of effort it will be entitled only to a percentage of the fixed fee that is commensurate with the percentage of the level of effort actually delivered."

KMY, Could you expand upon the following statement from your post to Navy_Contracting_4? "The contractor would be reimbursed their actual expenses plus the fixed fee, assuming that they worked all of the hours specified in the Task Order." Have you considered what you would do if the contractor completes either more or less than the specified level of effort included in each task order within the specified time period (see FAR16.306(d)(2))? If less, would the contact be Terminated for Default? If more, is there an Anti-Deficiency violation? By the way, terminations and anti-deficiencies are not areas of contracting in which I have any experience since I primarily work pricing issues. The question just came to me as I read the post.

Perfect timing. Thanks Joel!

Gboyle, do you know the background that resulted in the inclusion of the "special term"? It doesn't make sense.

https://dap.dau.mil/policy/Lists/Policy%20Documents/Attachments/3252/Improving%20Competition%20In%20Defense%20Procurements%20%2024%20Nov%202010%20USA006629-10-DPAP.pdf

Our agency received a single offer in response to a competitive solicitation so it is not "effective competition". The issue is that it is going to take time for the contractor to provide Certified Cost and Pricing and for the Govt to evaluate, yet, there is pressure from the PEO to get this awarded quickly. The RFP includes development and multiple options and variable quantity sub options for productions which results in approximately 300 separately priced items requiring CoPD. To simplify the evaluation and time needed for the contractor to provide the CoPD, I was thinking of recommending that the PCO only get Certified CoPD for development. Could the PCO put the option CLINs for production on contract with an NTE based on the prices included in the competitive proposal. Can a PCO then later get the required Certified CoPD to firm up the NTE option price prior to exercising the option so as to not create a UCA? Would this approach comply with the DPAP memo and acquisition regulations? Thanks to everyone in advance for their time in preparing a reply.

I heard that a PCO was planning on issuing an RFP for a production item in which one CLIN is FFP for the labor portion of the production, and the materials/ODC will be on a separate CLIN as cost reimbursable without fee. From the perspective of a Government employee, I foresee potential issues with this arrangement during execution. This plan appears to be counter to FAR 16.202 in which the contractor has full responsiblity for all costs and resulting profit or loss. I don't see how the Government receive the benefit of the requirement for completion of a product on the FFP basis if the contractor does not have complete control. It seems to me that a single FPIF contract type for the price to make widget x is better than a FFP CLIN for widget x without material and a CR CLIN for material associated with widget x when material is essential to performance of producing widget x. Is it possible that I am missing something? Thanks in advance for your suggestions.

Don, thanks for pointing out that FAR reference!

Infoseeker, you did read too much into my post. The information within the Basis of Estimates did identify top-level task descriptions; what was missing was supporting data that is both factual and verifiable. The Government was fully aware of what they were buying. My question pertained to the ability to sustain a defective pricing case if the cost proposal clearly states that the estimates were based on judgment.

Clarification: I am a Government civil servant who normally provides pricing advice/support to Contracting Officers for actions exceeding a certain dollar threshold. In this case, the PCO requested and was granted a waiver for pricing support. When the PrePNM was completed, another staff reviewer requested my assistance in reviewing the file. During that review, I noticed that the BOEs were unsupported. Unfortunately for the Government, the contracting officer was planning on negotiating/accepting the proposed price this past weekend despite my concerns with regard to his determination of reasonableness of the FFP amount. I would say that the contracting officers is awarding a contract in which defective data (i.e. not complete) has been submitted. I cannot speak to the contracting officer's knowledge of its defectiveness. Based upon the comments, it appears that it is unclear as to whether or not the Government could sustain a defective pricing case should a post award audit be performed. Thanks for the input. I learn a lot from WIFCON.

I am looking for some clarification regarding the Government's rights under TINA when the Government did not perform due diligence in its review of the cost proposal and subsequent negotiation. Scenario: The basis of estimates (BOEs) included in a $30M+ cost proposal do not contain any factual data supporting the estimate. The rationale included in the BOEs is essentially engineering judgment. For example, one BOE for a task that is estimated to take 2,756 hours states that the rationale for the estimated hours is "Subject matter staffing assessment based on closeout experience with other programs". That same BOE states "no specific data source". The PCO did not ask for the underlying data supporting that estimate nor did the PCO chose to request an audit by DCAA. Question: The PCO claims that the Government is protected under TINA because the contractor will be submitting a Certificate of Current Cost or Pricing Data. If the PCO relied upon estimates that were based on judgment without requiring disclosure of the underlying facts behind that estimate, would the Government be able to sustain a defective pricing claim?