Don Mansfield

My point is that the acquisition bureaucracy is guilty of forcing the world into existing drawers instead of creating new ones. Whether there should be more than one drawer for "evaluation of cost-reimbursement proposals" is beside the point, but worthy of a separate discussion.

I recently finished reading Nexus: A Brief History of Information Networks from the Stone Age to AI by Yuval Noah Harari of Sapiens fame. There's a passage in a section titled "Bureaucracy and the Search for Truth" that I found insightful: I see instances of this in acquisition policy: 1. We need a drawer for "service requirements description," but we instead try to force that into the "supply requirements description" drawer. The result is performance-based contracting (i.e., buying services as if they were supplies). 2. We need a drawer for "evaluating competitive proposals for IDIQ contracts" that recognizes that price competition at the contract level is unnecessary if there will be price competition at the order level. The result is fictional price competitions at the contract level just to check a box. 3. We need a drawer for "software acquisition," but we only have supply drawers and service drawers, so there are debates over which drawer to use. 4. We need a drawer for "evaluation of competitive cost-reimbursement proposals" that recognizes that we are not dealing with fixed prices, but we instead hold cost estimate competitions and make tradeoff decisions as if the Government's determination of probable cost is what the Government will actually pay (without ever validating the accuracy of the probable cost). Questions: 1. Do you see what I see? 2. If so, are there other examples you can think of?

I don't think that what we are seeing are FAR part 13 BPAs as contemplated in the FAR. The Government is not establishing "charge accounts", making calls, maintaining call logs, receiving "delivery tickets", receiving summary monthly invoices, etc. Now that agencies can use SAP up to $7.5 million (or $15 million in emergencies), there's a need for something like an IDIQ for simplified acquisitions. I think the type of agreements we are seeing are more BOAs than BPAs.

I think it's reasonable to consider what the cost to the Government is likely to be before awarding a cost-reimbursement contract. However, I don't think the Government does that. In practice, I think the Government is merely coming up with a point estimate that it deems realistic and uses it to make decisions as if it were a fixed price. I can see a contracting officer making an award to Offeror A in the original scenario and claiming that the Government would save $5 million. However, you can't credibly make that claim without mentioning the probability of that happening. I think the Government has come up with a technique that seems reasonable to lawyers but would seem deficient to a professional cost estimator. If the Government is going to do a cost realism analysis, I think they need expertise in risk and uncertainty analysis to evaluate cost estimates. Contracting officers typically don't have that expertise, nor do price/cost analysts. DoD trains its cost estimating community in risk and uncertainty analysis, but I haven't heard of them ever assisting in cost realism analysis. Alternatively, maybe we shouldn't have offerors compete on cost estimates.

This is not a quiz with a right answer. I really am interested in how people react to the scenario. I think it’s a matter of judgment. I suspect that knowing the most probable cost of each offeror would be enough for most people. I'd like to know if I'm wrong about that. @C CulhamI didn't mean to criticize your request for the relative importance of factors. I told you that you are free to make an assumption about what the relative importance was when answering.

1. Assume Offeror A's adjustment was due to a few dollars apiece over to various labor rates over five years and Offeror B's adjustment is due to a single cost element critical to performance that they forgot to account for. Now what is your answer? 2. If you assume the opposite, does your answer change?

I love the comics. They summarize the topics well. Great design overall. Strangely, the words "realism" and "realistic" only appear in the title. It's more like a cost analysis handbook.

I don't agree, but let's not get sidetracked. I'm saying feel free to condition your answer with "Assuming nonprice factors are more important than cost..." or something similar.

Thank you for your response

I don't follow. If B's direct costs were lower, wouldn't their indirect costs be higher? Indirect costs = Total costs - Direct Costs

That's the question (in other words). Assume no distinction between offerors. Ignore fees in this problem.

I don't see how that would be relevant at this point, but you can make an assumption if you'd like.

There's no distinction between the offerors on nonprice factors. The best value decision comes down to cost. I ask that you sit this one out.

Scenario: A contracting officer is evaluating competitive proposals for a cost-reimbursement contract. As part of the evaluation, they will have to perform a cost realism analysis of the offerors' cost proposals. The solicitation did not specify that the Government would use any particular method of cost realism analysis--it just said that the Government would conduct cost realism and may adjust proposed costs for purposes of evaluation. The solicitation stated that the Government would use the tradeoff process to determine best value. The contracting officer receives two offers and determines the most probable cost for each. The results of their cost realism analysis are as follows: Proposed Cost Most Probable Cost Offeror A $100 million $105 million Offeror B $103 million $110 million The offerors are equal concerning nonprice factors, so the award decision comes down to cost. Questions: 1. Assuming the contracting officer's determination of the most probable cost is flawless, do they have enough information to determine the best value? 2. If not, what additional information should they consider? I'm not interested in challenges to the hypothetical or critiques of the problem. If you think you need more information just ask.

Ok, thanks