Just as with my Quick Hitters on the FAR and GSAR, my Quick Hitter series on the DFARS is meant to simplify contracting business with the government. This time with DoD.
DFARS 215.402 Pricing Policy
PGI 215.402 Pricing Policy
This 17 page digital document houses what DoD is recognized and applauded for worldwide. It’s just one of the aspects that makes them arguably the most respected contracting entity on the entire globe.
COs must purchase goods and services from reputable sources. In accordance with FAR 15.403, COs must require certified cost and pricing data if the buy meets the appropriate threshold ($750k before 7.1.2018 & $2M after 7.1.2018). In short, the CO possesses authority to obtain any data to support the rationale of fair and reasonable pricing. Such information gathering is absolutely necessary when completing a sole source buy.
Exceptions To Cost And Certified Pricing Data
Even if an exception occurs, the CO still must obtain data to ensure their rationale of fair and reasonable pricing even if the data would be considered certified in other circumstances. Examples may be a commercial price list, profit and loss statements, tax returns, information concerning closest competitors and so forth.
Waivers
The HCA must authorize a waiver, and the decision and contents of the waiver must be documented in the contract file. An example may be a sole source buy where the vendor knows there is no other competition. A waiver may be used in an attempt to obtain certified data. Waivers will not be the way moving forward. DoD will attempt to find a second source, find an alternative source or simply produce the need within the agency in the future. A waiver on a buy with a value of $100M or more must be co-authorized by the SES. Waivers can be whole or in part concerning a proposal. Unpriced supplies and services do not apply to waivers.
Achieving Price Reasonableness
Historical sales within the commercial and federal sectors are necessary in the pursuit of price reasonableness for a current buy. Specifications and quantity must be equal or proportioned, validate the recency of historical trends, ensure the pricing, terms and conditions are comparable and discuss historical sales with vendors. All findings are placed in the contract file.
Canadian Commercial Corporation
Contract regulations devised by Canada take precedent when dealing with the CCC. They are endorsed by DoD and meet the requirements of FAR 15.404. Sole source buys still require a DNF. The CO still has the authority to request pertinent and necessary data and document all findings.
PGI 215.404 Proposal Analysis
General
The CO should be clear in their request as to receive appropriately formatted data from the vendor. The CO has the ability to elevate the issue if the vendor refuses to comply with a request for certified or non-certified data concerning the proposal (management > HCA). Correspondence must be documented. Future planning to avoid a lack of response must also be filed. A rating in PPIRS must be placed.
Price Analysis
COs utilize historical data and current trends within the commercial and federal spheres as well as up-to-date mathematical and scientific analysis to gauge price reasonableness. They must obtain and document that historical data is an equal comparison to be considered valid market research.
Cost Analysis
When a price analysis is unable to be performed due to insufficient data, a cost analysis must be conducted in its stead. Again, the CO must request the appropriate data from the vendor (the same vendor(s) who failed to comply with the previous request for a price analysis). Although, the vendor’s submission for a cost analysis is much easier to comply with as the vendor’s submission must be accepted as supplied so long as the requested contents are easily visible. This analysis synopsizes the cost of production. A quick and dirty profit analysis for the vendor is easily obtained by subtracting the total of the cost analysis from any inference of a pricing analysis if one can be found. Whereas if it cost a company $.50 to produce a widget and they sold it for two dollars on Amazon then the quick profit would be $1.50 for the vendor. Please keep in mind such is not a hard profit because they have yet to compensate their employees and pay for their overhead. However, the Contracting Officer may be able to use this information in their negotiations with the vendor.
It is customary for the assigned Contracting officer to appeal to field pricing support for assistance. Such is a primary advantage of being employed as a CO within DoD as they possess proprietary software to perform a super analysis as to pricing as well as cost pertaining to any vendor on the radar of a project.
Technical Analysis
Requesting technical assistance can be a vital weapon in the arsenal of any CO when purchasing products or services both of a commercial or custom nature. A CO possesses the authority to assign a technical representative (COTR) or create a board of multiple COTRs. This person or group of people are considered to be subject matter experts concerning the goods or services being procured by the government. When gathering information to purchase goods, they most likely are a past or present engineer. For services, they are most likely a past or present provider of the specific service being solicited.
Review & Justification Of Pass-Through Contracts
A pass-through contract begins with a claim by the prime contractor to recoup monies on behalf of the subcontractor due to government action or inaction (usually delays or changes). Because the subcontractor and the government are not contractually bound. This relationship is governed by The Severin Doctrine. The pass/through contract is the actual agreement between the prime contractor and the subcontractor as to what expenses will and will not be recouped by the prime contractor to pass to the subcontractor.
The CO must take into consideration the responsibility and reputation of the awardee, the contract value, how the subcontracts relate to FAR 52.215-22, whether or not the subcontractor is a prime contractor on a schedule, FSS contract or GWAC, the cost savings of a direct business relationship with the proposed contractor, the possibility of a single source contract or present competition for the subcontracted effort(s), whether or not abiding by the prime contractor’s request would harm future business on schedule or within the DoD program, the risk of eliminating oversight by the prime contractor and the subcontractor’s past performance on a similar scope. Internal and external reviews may be required.
Field Pricing Assistance
The following are routine in a request by the CO for external assistance; fixed-priced buys that exceed $2M, cost-type projects exceeding $2M with deficiencies and satisfactory cost-type proposals amassing a value greater than $10M. Such are prerequisites for assistance. Not knowing or vendor error will not be accepted as reasonable requests. DCAA possesses more stringent requirements. Subcontractors must be notified of any audit, and subcontracts can be audited.
Significant disagreements may arise between the CO and the specified auditing service. The CO must document such disagreements and synopsize them within appropriate contract documentation. A disagreement is defined as the CO taking an approach which is at least 25% less than the price established by the auditing service. DCAA has three (3) days to appeal to the CO or to their chain of command.
Cost Estimates
An analysis takes into account project expectations and contractor past performance in accompaniment with their submitted proposal. A certificate of cost and certified pricing data must be secured before negotiations and execution of modifications. Letter contracts being the exception. This certificate locks in the IGE baseline. Further data may be distributed to the government after, but does not have to be used until after award (Sweeps).
Evaluation, Negotiation & Agreement On Make Or Buy Projects
The CO must assess past performance, subcontractor management, make or buy history for good or service within the agency compared to the contractor’s history, agency processes compared to the contractor’s, existing sources, capacity to produce or perform, adequacy of the contractor’s workplace, management and financial plan and the contractor’s capability to produce uncommon outcomes. A program and overhead review may be conducted. This is one of the significant advantages that DoD has over its perspective contractors. The agency possesses the capability to sustain itself through production of goods and providing a various services from internal personnel. If DoD requires construction of a weapon or training on how to use that weapon then they can just as easily, in most cases, provide themselves with what they need. If a contractor is used then auditing of the entire process from start to finish may occur whether a good or service is procured.
DoD has not only masterfully conducted a perfect way to analyze price reasonableness. It has constructed a perfect way to train its personnel on how to analyze price reasonableness.
Perspective in current contractors who desire to either submit a proposal to the agency or initiate contract. Actions within the agency must take similar steps b prior to submission.
Market research is included in my rates.
If you think I can help you then email nicholas.s.robertson@outlook.com for your introductory email and free consultation. 
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