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  1. What would you say to a defense contractor who wanted to take the following approach in preparing a sole-source FFP proposal subject to TINA for a DoD customer? Scenario: KTR-A wants to include its sister company KTR-B in a sole-source FFP acquisition by a DoD customer. KTR-A prepares a SOW for a NON-commercial item and issues a RFP to KTR-B and a number of qualified, responsible competitors. It turns out that KTR-B beats everyone else out on performance, schedule, and price (including proposed profit). KTR-A negotiates a "subcontract" [really an inter-organizational transfer (IOT) at price] with KTR-B and includes KTR-B's certified cost or pricing data as part of KTR-A's submission to the DoD customer. KTR-A does not submit a cost or price analysis (PNM) for KTR-B's proposal since it is does not meet the definition of a "subcontract" in FAR 15.401 and would be categorized as a "make item" for FAR 15.407-2. KTR-A discloses in its proposal the profit rate negotiated with KTR-B and states that the subcontract was awarded based on adequate competition. Questions: 1. Does a DCAA auditor have any clear regulatory basis to question KTR-B's proposed profit and KTR-A's proposed profit on top of KTR-B's proposed profit? 2. Does a DCAA auditor have any clear regulatory basis to unsupport KTR-B's proposed profit until being provided additional information on the subcontract competition? 3. Do you consider FAR Part 44 to positively define a subcontract in its normative sense and FAR Part 31 to positively define an IOT in its normative sense? 4. Would you say that a CPSR reviewer should only look at any make or buy documentation for this particular IOT and not expect a PNM to have been written?
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