National Contract Management Association of Boston … · Scrap, spoilage, rework. Page 22 National Contract Management Association of CMA Boston 57th Annual March Workshop Material

National ContractManagement Associationof Boston 57th AnnualMarch Workshop

Pricing and estimatingMarch 7, 2018

Page 1 National Contract Management Association of CMA Boston 57th Annual March Workshop

Agenda

► Introductions► Overview and background of the pricing and estimating process► Certified cost or pricing data► Basis of estimates► Cost elements

► Direct costs (e.g., labor, material, other direct costs (ODCs))► Indirect rates► Additional requirements related to subcontract costs

► Industry practices and trends► Audience participation


Overview and background of the pricing andestimating process


Government pricing policy

► Government shall purchase supplies and services from responsiblesources at fair and reasonable prices.

► Government should only obtain the type and quantity of datanecessary to establish a fair and reasonable price, but not more datathan is necessary.► Certified cost or pricing data (CCoPD) or other than CCoPD as

appropriate.► CCoPD includes current, accurate and complete support for each cost

element (e.g., material, labor, overhead) of a proposal.► Contracting officers will utilize factors such as competition, cost

analysis, price analysis and commercial item determinations todetermine fair and reasonable prices.


DFARS requirements on contractors

► Just as the government will perform cost and price analyses on proposalssubmitted by contractors, contractors must perform cost and price analyseson costs submitted by vendors and subcontractors.

► Defense Federal Acquisition Regulation Supplement (DFARS) estimatingsystem requirements (See Appendix 1):► 17 individual criteria that require contractors achieve, including, but not limited to,

adequate training for estimating individual, appropriate policies and procedures,adequate documentation to support proposals, management review and oversightof process, and internal reviews and audits

► Criteria related to cost/price analysis:► #16: Provide estimating and budgeting practices that consistently generate sound

proposals that are compliant with the provisions of the solicitation and are adequateto serve as a basis to reach a fair and reasonable price

► #11: Integrate information available from other management systems► Purchasing system for vendor/supplier support of fair and reasonable price paid by

the contractor► Accounting system for historical prices and rates


Certified cost or pricing data


Requirements for certified cost orpricing data

► “Certified cost or pricing data” means cost or pricing data that isrequired to be submitted in accordance with Truthful Cost or PricingData (TCoPD) – Formerly the Truth in Negotiations Act (TINA)

► Applicable to a negotiated contract or subcontract exceeding$750,000 (October 1, 2015)► The 2018 National Defense Authorization Act increased the threshold to

$2m for contracts awarded after June 30, 2018.► Applicable to negotiated modification of a contract where aggregate

pricing action is above the threshold – even if the original contractwas competed

► When certified cost or pricing data is required, offeror must submit acertificate of current cost or pricing data

Reminder: Applies to both contracts submitted to United StatesGovernment (USG) and subcontractors’ submissions to prime contractors


Exceptions to the requirement for certifiedcost or pricing data

► Adequate price competition► Prices set by law or regulation► Commercial item acquisition per definition at Federal Acquisition

Regulations (FAR) 2.101► Written waiver has been granted by Head of Contracting Activity► When modifying a contract for a commercial item► Other circumstances not requiring certified cost or pricing data:

► The exercise of an option at the price established at contract awardor initial negotiation does not require submission of certified cost orpricing data.

► Proposals used solely for overrun funding or interim billing priceadjustments.


Data other than certified cost or pricing data

► “Data other than certified cost or pricing data” means pricing or costdata and judgmental information necessary for the contracting officerto determine a fair and reasonable price or to determine cost realism.

► It can be data that is identical types of data as certified cost or pricingdata – but without the certification.

► May include the following:► Sales data► Information required to explain estimating process► Judgmental factors applied and mathematical or other methods employed

to make price estimatesOr

► Nature and amount of any contingencies included in a proposal


Proposal process vulnerabilityContractor submitting proposals to USG

Request forproposalreceived

Proposalsubmitted

AgreementOn pricing

Contractsigned

Workbegins

Fact finding

Risk is a functionof the estimating

process

High riskarea

Low risk area


Submitting a proposal to the government

► On March 28, 2013, the Department of Defense (DoD) updated theDFARS at 215.408 to incorporate a requirement for the ContractingOfficer to include a new solicitation provision, 252.215-7009, ProposalAdequacy Checklist, in certain situations.► The Contracting Officer has the discretion of whether to include the

DFARS Proposal Adequacy Checklist clause in Section L of thesolicitation when proposals require certified cost or pricing data (i.e.,proposals subject to TCoPD).

► The checklist only applies to the cost proposal, not the entire proposalsubmission.

► This is a tool to help offerors provide adequate, compliant proposals.


Proposal adequacy checklist categories

► Checklist categories:► General instructions (Items 1–13)► Cost elements (Items 14–29)

► Materials and services► Subcontracts (purchased materials or services)► Exceptions to certified cost or price data► Interorganizational transfers► Direct labor► Indirect costs► Other costs

► Formats for submission of line item summaries(Items 30–32)

► Other (Items 33–36)


Basis of estimates


Basis of estimates

► Judgment-based estimating methods are least preferred while fact-based estimatingmethods are the most preferred. Follow-on projections based on actuals from priorcontracts/lots have the highest credibility.

► Common elements of a basis of estimate (BOE):► Header identifying the Task Identification and Work Breakdown Structure and period of

performance► Description of tasks being performed and services/products delivered► Estimating methods and rationale used for each element of cost proposed► Identification of historical data used, including source and nature► Explanation and detail of labor resources estimated and evidence of labor time phasing► Details of any adjustments made (i.e., technical complexity)

► At a minimum, a reviewer should be able to understand how the estimate was reached.► Standard BOE templates and required identification of who prepared the estimate and

who reviewed/approved the estimate are common industry practices.


Cost elements


Direct labor


Estimating labor (hours and rates)

► Actual costs of known personnel► Labor rates for homogeneous

categories of labor (Engineer I,II, III or Design Engineer,Mechanical Engineer)

► Labor standards with efficiencyadjustments

► Parametric (e.g., hours as afactor of production)

► Judgmental or engineeringestimates (least favored)

Common categories includethe following:

► Manufacturing or shop labor► Engineering labor► Support or indirect labor► Trade or craft labor (construction

contracts)

Common methods


Estimating labor (hours and rates)

Considerations

► Based on the proven theory thata task is performed moreefficiently after it is learned

► Assumes continual performanceby the same personnel

► Actual individuals versusestimated categories

► Trends in labor rates► Salary increase dates► Union wage agreements► Personnel actions – hiring and

firing► Changes in labor force mix► Multi-shift, holiday and overtime

premiums► Efficiencies

Learning curves


Labor estimating methods

Analogy

Complexity factor

Cost estimating relationship (CER)

Direct estimate/judgment

History

Hours/task

Learning curve

Level of effort

Parametric


Direct material


Estimating material costs

► Sources of information► Cost records for similar contracts► Priced bill of material updated for current supplier quotes► Cost data from a prototype► Prior cost estimates► New firm supplier quotes► Experience factors and ratios (parametric factors)► Operations data► Engineering drawings and associated estimates


Estimating material costs

► Need to consider the following:► Are supplier quotes and PO prices “stale”?► Anticipated material quantities, “minimum buy” quantities► Profit and cost pyramiding (i.e., intercompany sales)► Supplier refunds, volume rebates or discounts► Order consolidation (volume pricing)► Make-or-buy decisions► Subcontractor estimates► Government furnished material► Residual inventory► Scrap, spoilage, rework


Material estimating methods

► Catalog► Competition► CER► Cost/price analysis► Direct estimate/judgment► Interdivision work authorization► Long-term agreement► Parametric► Price negotiation memorandum/negotiation summary► Purchase order (PO) history► Similar-to part number history► Subcontractor/supplier proposal


Other direct costs


Other direct costs

► ODCs include travel, tooling, nonrecurring engineering (NRE), otherODCs, etc.

► Actual analysis techniques used may be a function of risk andmateriality.

► Example: Travel► Travel should have a BOE that states the requirement/necessity for the

travel, which may be assessed by technical evaluator.► Costs need to be supported by logistical information such as number of

days multiplied by government per diem rates for lodging/meal in thelocation of travel.


Indirect rates


Indirect rates

► Rates might include labor overhead, manufacturing overhead,engineering overhead, material burden, general and administrative,fringe rate, cost of money, etc.

► Consider the following when including indirect rates in proposal:► Comparison to Forward Pricing Rate Agreement (FPRA)► Use of rate trends and final indirect rates agreed to with the government► Detailed analysis of indirect pool accounts, data and calculations,

including comparison to prior years► Industry trends and experience► Budgetary data for current year and out years► Sales forecasts for future and correlation to estimated/budgeted labor

bases for those years


Additional requirements related tosubcontract costs


Additional requirements related tosubcontract costs

► Does the proposal identify all subcontractors?► Cost analysis► Price analysis► Commercial item determinations


Regulatory definition – FAR Part 15

► FAR 15.404-1(c)(1) Cost analysisis the review and evaluation of anyseparate cost elements and profitor fee in an offeror’s or contractor’sproposal, as needed to determine afair and reasonable price or todetermine cost realism, and theapplication of judgment todetermine how well the proposedcosts represent what the cost ofthe contract should be, assumingreasonable economy andefficiency.

► FAR 15.401 “Price” means costplus any fee or profit applicableto the contract type.

► FAR 15.404-1(b)(1) Price analysisis the process of examining andevaluating a proposed pricewithout evaluating its separatecost elements and proposed profit.

Cost analysis Price analysis


Certified cost or pricing data

► “Certified Cost or Pricing Data” means any cost or pricing data thatare required to be certified pursuant to the Truthful Cost or PricingData statute.

► Certification states that to the best of certifier’s knowledge and belief,the cost or pricing data is accurate, complete and current as of thedate of certification.

► When “certified cost or pricingdata” is required

► A price analysis is always done► Required when “certified cost or

pricing data” is not required► Should be performed when doing a

cost analysis

Cost analysis Price analysis


Cost analysis techniques

► When evaluating certified cost or pricing data:► Reasonableness of proposed costs► Projection of trends► Reasonableness of parametric models► Application of audited or negotiated rates► Includes all cost elements:

► Labor► Material► ODCs► Indirect rates

► Evaluate profit using weighted guidelines method (DFARS 215.404-71)


Cost analysis – Assist audits

► Situations where a subcontractor refuses to provide cost information to prime,citing proprietary information

► Similar to a contracting officer being able to request assistance in theevent the cost or pricing data is not sufficient, a prime contractor mayalso request assistance:► FAR 15.404-2 Data to support proposal analysis

(a) Field pricing assistance(1) The contracting officer should request field pricing assistance when the information available at the

buying activity is inadequate to determine a fair and reasonable price. The contracting officer shalltailor requests to reflect the minimum essential supplementary information needed to conduct atechnical or cost or pricing analysis.

(2) The contracting officer shall tailor the type of information and level of detail requested in accordancewith the specialized resources available at the buying activity and the magnitude and complexity ofthe required analysis. Field pricing assistance is generally available to provide:(i) Technical, audit, and special reports associated with the cost elements of a proposal, including

subcontracts(ii) Information on related pricing practices and history(iii) Information to help contracting officers determine commerciality and a fair and reasonable price


Challenges of cost analysis

► Denial of access by supplier► Government assist audits denied or slow

► Inadequate or unavailable supplier data► Not analyzing or addressing all cost elements► Relying on high level analysis (comparable to price analysis)

► Cost elements percentage of total cost► Lack of technical resources

► Technical resources lack of documentation► Procurement file organization► Ongoing monitoring and training not producing improvements► Options and quantity differences


Price analysis

► Price analysis is the process of examining and evaluating aprospective price without evaluating the separate cost elements andprofit.

► Price analysis is used to determine the reasonableness of price, butthe process is subjective: for a given set of information, differentbuyers might reach different conclusions about price reasonableness.

► Price analysis sometimes cannot be performed prior to awarding thecontract.


Price analysis techniques

► Compare proposed prices for each offer received► Competition determines reasonableness

► Compare with previous proposed prices and contract prices withcurrent proposed price for the same or similar items

► Compute parametric estimating methods► For example cost/lb. or dollars/horsepower

► Comparison with competitive published price lists, published marketprices of commodities, similar indexes, and discount or rebatecommitments

► Compare with independent government cost estimate► Review analysis of pricing information provided by the offeror


Price analysis – Published data

► Manufacturer and dealer catalogs► Product brochures and promotional material► Trade journals► Government or independent testing► Source identification publications► Federal supply schedules► Government economic data► Non-government economic data


Price analysis – Other data sources

► Other buyers and industry or commodity experts► Prospective offerors: pre-solicitation conferences,

draft request for proposal, one-on-ones► Trade and professional associations► Chamber of Commerce/Better Business Bureau► State and local watchdog agencies► Internet sources


Challenges of price analysis

► Item or service is not listed in a catalog, federalsupply schedule, online, etc.

► Item or service has not been previously sold incomparable quantity, variant, locations, etc.

► Seller did not identify price impact of selling item orservice across multiple contracts or programs.


Commercial item determinations – Update onfinal ruling


► Commercial items are an exception to Cost or Pricing Datarequirements

► On January 31, 2018, DoD issued a final rule amending the DFARS toimplement sections of the National Defense Authorization Acts for2018 relating to commercial item acquisitions.

► This rule provides guidance to contracting officers for making pricereasonableness determinations, promotes consistency in makingcommercial item determinations and expands opportunities fornontraditional defense contractors to do business with DoD.

Commercial items


DFARS case 2016-D006 – Procurement ofcommercial items

► The final ruling promotes consistency in making commercial itemdeterminations► DoD has establish a cadre of experts within the Defense Contract

Management Agency (DCMA) to provide advice to Contracting Officers(COs)

► DCMA is also facilitating collaboration with contractors throughcommercial item memorandums of agreement


► The language at DFARS 212.102(a)(ii) has been revised to state thata contracting officer may presume that a prior commercial itemdetermination, or a determination that overturned a prior commercialitem determination, made by a military department, a defense agencyor another component of DoD shall serve as a determination forsubsequent procurements of such item.

► The language at DFARS 212.209(b) and 215.404-1(b)(ii) wasamended to add the word “and” to allow contracting officers toconsider recent purchase prices paid by both the Government “and”commercial customers for the same or similar commercial items

DFARS case 2016-D006 – Procurement ofcommercial items


Industry practices and trends


Industry practices

► Maximizing competition► Proposal cost structure in line with actual structure► Contemplating your counterpart’s perspective

► Can a user pick up the proposal and understand how it was compiled?► Are you prepared to provide supporting documentation for the rates,

material and labor estimates?► Creating an effective and competitive organizational and rate

structure► Effective sweep process


Industry trends

► Increased focus on commerciality► Use of specialists or third parties for cost analyses► Organization of procurement departments► Interactive training and workshops► Procurement quality metrics► Self-assessments► Use of templates and guides


Additional resources


► Contract Pricing Proposal Adequacy Checklist► http://www.dcaa.mil/home/ContractPricingProposal

► Defense Contract Audit Agency (DCAA) Information for Contractors► http://www.dcaa.mil/Home/AuditProcessOverview?title=Introductory%20information

%20on%20the%20government%20auditing%20process%20and%20specific%20information%20for%20Small%20Business%20Contractors

► DCAA Estimating System Audit Program► http://www.dcaa.mil/Content/Documents/sap/24010_AP_Estimating_System_Audit.

pdf► DoD Guidebooks for Acquiring Commercial items

► https://www.acq.osd.mil/dpap/cpic/cp/commercial_item_guide.html

Additional resources


Questions?


PresentersFrom EY’s Government Contract Services practice

Jack GayExecutive ContractorEmail: [email protected]: +1 857 205 5371

Kristen BerquistSeniorEmail: [email protected]: +1 972 567 4383


Appendix 1


DFARS backgroundFinal rule

► DoD issued a final rule effective February 24, 2012, which mandatedwithholding a percentage of payments when a contractor’s business systemhas one or more significant deficiencies.

Business systemclause Applicability per DFARS

252.242-7005ContractorBusiness Systems

► Use in solicitations and contracts (other than in contracts with educationalinstitutions, federally funded research and development centers or universityassociated research centers operated by educational institutions) when:► The resulting contract will be a covered contract as defined in 242.7000(a) – Covered

by cost accounting standards (CAS)► The solicitation or contract includes any of the following clauses:

(1) 252.215-7002, Cost Estimating System Requirements

(2) 252.234-7002, Earned Value Management System

(3) 252.242-7004, Material Management and Accounting System

(4) 252.242-7006, Accounting System Administration

(5) 252.244-7001, Contractor Purchasing System Administration

(6) 252.245-7003, Contractor Property Management System Administration


DFARS business system ruleEstimating system

► “Estimating system” is a term used to describe a contractor’s policies,procedures and practices for generating cost estimates, whichforecast costs based on information available at the time.► Allows a contractor to estimate costs for bids and proposals► Allows contractors to better estimate “ETC” or estimate to complete

Six business systems under the rule1. Estimating system 4. Accounting system2. Earned value management

system5. Material management and

accounting system3. Purchasing system 6. Property management system


Regulations, guidance and applicability

Business system Cost estimating systemImplementing guidance DFARS (PGI) 215.407-5

FAR/DFARS contract clauseguidance

DFARS 252.215-7002

Threshold level and attributes Large businesses who in preceding fiscal year received DoD primecontracts and subcontracts of at least $50m for which cost and pricingdata were required or contractors having awards of at least $10m (butless than $50m) where procuring contracting officer and administrativecontracting officer determine audit to be in Government’s best interest(e.g., significant estimating problems believed to exist)

Exemptions Sales of commercial items; competitively awarded fixed-price contracts;small businesses, educational institutions, or other nonprofitorganizations

Cognizant audit/reviewauthority

Defense Contract Management Agency/DCAA/Contracting Office

Frequency Every three years


DFARS cost estimating system criteria(DFARS 252.215-7002)

1. Establish clear responsibility for preparation, review, and approval of cost estimates and budgets.

2. Provide a written description of the organization and duties of the personnel responsible forpreparing, reviewing, and approving cost estimates and budgets.

3. Ensure that relevant personnel have sufficient training, experience, and guidance to performestimating and budgeting tasks in accordance with the Contractor’s established procedures.

4. Identify and document the sources of data and the estimating methods and rationale used indeveloping cost estimates and budgets.

5. Provide for adequate supervision throughout the estimating and budgeting process.

6. Provide for consistent application of estimating and budgeting techniques.

7. Provide for detection and timely correction of errors.

8. Protect against cost duplication and omissions.

9. Provide for the use of historical experience, including historical vendor pricing information, whereappropriate.

10. Require use of appropriate analytical methods.


DFARS cost estimating system criteria(DFARS 252.215-7002)

11. Integrate information available from other management systems.

12. Require management review, including verification of compliance with the company’s estimatingand budgeting policies, procedures, and practices.

13. Provide for internal review of, and accountability for, the acceptability of the estimating system,including the budgetary data supporting indirect cost estimates and comparisons of projectedresults to actual results, and an analysis of any differences.

14. Provide procedures to update cost estimates and notify the Contracting Officer in a timely mannerthroughout the negotiation process.

15. Provide procedures that ensure subcontract prices are reasonable based on a documented reviewand analysis provided with the prime proposal, when practicable.

16. Provide estimating and budgeting practices that consistently generate sound proposals that arecompliant with the provisions of the solicitation and are adequate to serve as a basis to reach a fairand reasonable price.

17. Have an adequate system description, including policies, procedures, and estimating andbudgeting practices, that comply with the Federal Acquisition Regulation and Defense FederalAcquisition Regulation Supplement.


Appendix 2 – Proposal adequacy checklist


Purpose of the proposal adequacy checklist

► On March 28, 2013, the DoD updated the DFARS at 215.408 toincorporate a requirement for the Contracting Officer to include a newsolicitation provision, 252.215-7009, Proposal Adequacy Checklist, incertain situations.► Purpose is to facilitate submission by offerors of thorough, accurate and

complete proposals.► The Contracting Officer has the discretion of whether to include the

DFARS Proposal Adequacy Checklist clause in Section L of thesolicitation when proposals require certified cost or pricing data(i.e., proposals subject to TCoPD).

► If included, contractors are required to prepare and submit the checklist,although use of the checklist is not mandatory when the clause is notincluded in the solicitations.


Purpose of the proposal adequacy checklist

► The checklist only applies to the cost proposal, not the entire proposalsubmission.

► Based on historical data from FY2008–FY2010, there were anaverage of 905 proposal actions per year where the proposaladequacy checklist could be utilized. On average, 421 of those werewith small business concerns.

► The checklist will be used by contracting officials when reviewingproposals.

► Contractors complete this checklist along with their proposals,ultimately streamlining the DoD evaluation process by providingreferences, details and location of specific information to facilitate theproposal review by agency personnel.


DoD intentions of proposal adequacychecklist

► Does not add new requirements; compiles and organizes existingrequirements

► Not intended to be punitive, but rather a tool to help offerors provideadequate, compliant proposals

► Increase the efficiency and standardization of the proposal evaluationprocess for agency personnel

► Streamline proposal preparation process for offerors► Result in cost and time savings by improving initial proposal

submissions


Checklist steps for contractors

► The offeror is to provide the location of each of the 36items in the proposal.► If an item in the checklist is not included in the proposal,

the offeror is required to provide an explanation for why itis not included.

► Offerors are not required but may choose to have theirprospective subcontractors use the same or similarchecklist, if appropriate.


Proposal adequacy checklist categories

► Checklist categories:► General instructions (Items 1–13)► Cost elements (Items 14–29)

► Materials and services► Subcontracts (purchased materials or services)► Exceptions to certified cost or price data► Interorganizational transfers► Direct labor► Indirect costs► Other costs

► Formats for submission of line item summaries (Items 30–32)► Other (Items 33–36)


Proposal adequacy checklistGeneral instructions

► Compliance with FAR 15.408, Table 15-2 Requirements► Item 1 – Is Table 15-2 presented?► Item 2 – Does proposal include Government furnished materials?► Item 3 – Does proposal identify and explain noncompliances with

CAS? Any proposal inconsistencies with Cost Accounting StandardsBoard Disclosure Statement or established accounting and pricingpractices?

► Item 4 – Does proposal disclose known activities that could materiallyimpact the cost?



► Item 4 (continued) – Compliance with FAR 2.101 – Cost or pricingdata – identify► Vendor quotations► Nonrecurring costs► Information on changes in production methods and in production or

purchasing volume► Data supporting projections of business prospects and objectives and related

operations costs► Unit-cost trends such as those associated with labor efficiency► Make-or-buy decisions► Estimated resources to attain business goals► Information on management decisions that could have a significant bearing on

costs

► Item 5 – Is index of all certified cost or pricing data provided includedand appropriately referenced?



► Item 6 – Compliance with FAR 15.403 – Exceptions to cost or pricingdata requirements► Identification of whether there are any exceptions to submission of

certified cost or pricing data.► If exceptions identified, supporting documentation included in proposal

should be referenced.► Item 7 – FAR 15.408, Table 15-2

► Does proposal disclose the judgmental factors applied and themathematical or other methods used in the estimate, including those usedin projecting from known data?

► Item 8 – FAR 15.408, Table 15-2► Does the proposal disclose the nature and amount of any contingencies

included in the proposed price?► Item 9 – FAR 15.408, Table 15-2

► Does the proposal explain the basis of all cost estimating relationships(labor hours or materials) proposed on other than a discrete basis?



► Item 10 – FAR 15.408 – Table 15-2► Summary of total cost by element of cost cross-referenced to supporting

cost or pricing data► Breakdown for each cost element consistent with your own cost

accounting system, by year► Item 11 – FAR 15.408 – Table 15-2

► Summary of total cost by line item (when necessary)► With summary total covering all items for each element of cost cross

referenced to supporting cost or pricing data► Item 12 – FAR 15.408 – Table 15-2

► Does proposal identify any incurred costs for work performed prior tosubmission of proposal



► Item 13 – FAR 15.408 – Table 15-2► If there is a Government FPRA, offeror shall identify submittal.► If no FPRA, does proposal include all indirect rates and factors by year

that are utilized in development of the proposal and basis for those ratesand factors?


Proposal adequacy checklistCost elements – materials and services

► Item 14 – FAR 15.408 – Table 15-2 – Instructions for SubmittingCost/Price Proposals when Cost or Pricing Data are Required► Does proposal include a “consolidated summary of individual material and

services”, otherwise known as a Consolidated Bill of Material (CBOM) withthe basis for pricing, including:► Raw materials► Parts► Components► Assemblies► Subcontracts and services

► CBOM must identify at a minimum the item, source, quantity and price.


Proposal adequacy checklistSubcontracts

► Items 15, 16 and 17 – FAR 15.404-3 – Subcontract pricingconsiderations► Is the subcontractor’s certified cost or pricing data included?► Has offeror identified subcontract proposals for which CO will need to

request field pricing analysis? (DFARS 215.404-3)► Is there a price/cost analysis establishing the reasonableness of each of

the proposed subcontracts included with the proposal?► If price/cost analysis not provided, is there a matrix identifying dates for

receipt of:► Subcontractor proposal► Completion of fact finding for purposes of price/cost analysis► Submission of the price/cost analysis

► FAR 15.408 – Table 15-2 – Instructions for Submitting Cost/PriceProposals when Cost or Pricing Data are Required► Price/cost analysis of proposed subcontracts


Proposal adequacy checklistExceptions to cost or pricing data

► Item 18 – FAR 52.215-20 and FAR 2.101 – Requirements for cost or pricingdata or information other than cost or pricing data or commercial items► Is there a prime or subcontract commercial item exemption from C or P data,

including basis for the claim► Modified commercial item exemption

And/or► Technical description for commercial items “Of a Type” or “Evolved” or Modified

► Differences between the proposed item and comparison item(s)

► Items 19 and 20 – FAR 15.408 – Instructions for Submitting Cost/PriceProposals when Cost or Pricing Data are Required► Does proposal support the degree of competition for subcontract/purchase order► Source and basis for price reasonableness for subcontracts/purchase orders priced

competitively in excess of the certified cost or pricing data threshold


Proposal adequacy checklistInterorganizational transfers

► Items 21 and 22 – FAR 15.408 – Table 15-2 – Instructions forSubmitting Cost/Price Proposals when Cost or Pricing Data areRequired► Does proposal include a complete cost proposal for interorganizational

transfers proposed at cost?► If interorganizational transfers are proposed at a price, is analysis

included that supports the exemption from certified cost or pricing data?► Item 22 (continued) – FAR 31.205-26(e) – Material costs

► Interorganizational transfers are required to be proposed at cost exceptwhen the price is:► Established catalog or market price of commercial items sold to the general

public► Result of adequate price competition► Price is not in excess of current sale price to most favored customer► Not determined to be unreasonable by the Contracting Officer


Proposal adequacy checklistDirect labor

► Items 23 and 24 – FAR 15.408 – Table 15-2 – Instructions forSubmitting Cost/Price Proposals when Cost or Pricing Data areRequired► Time-phased (i.e., monthly, quarterly) breakdown of labor hours, rates and

costs by category► If labor is the allocation base for indirect costs, summarized so that the

applicable overhead rate can be applied► For labor BOEs: labor categories, labor hours and task descriptions

► Item 25 – FAR 22.10 – Service Contract Act (the Act)► Compliance with Service Contract Labor Standards. Reference where

rates in proposal comply with minimum rates specified in the Act


Proposal adequacy checklistIndirect and other costs

► Items 26 and 27 – FAR 15.408 – Table 15-2 – Instructions forSubmitting Cost/Price Proposals when Cost or Pricing Data areRequired► Indirect costs:

► Basis of estimate for indirect costs► Other direct costs:

► Travel cost details► Royalties greater than $1,500► Facilities capital cost of money


Proposal adequacy checklistSubmission of line item summaries

► Items 30 and 31 – FAR 15.408 – Table 15-2 – Instructions forSubmitting Cost/Price Proposals when Cost or Pricing Data areRequired► Applicable format for cost element breakdowns per FAR 15-2► For modifications or change orders, cost of work deleted (credits) and

added (debits)► Price revisions/redeterminations must comply with FAR 15-2.III.C


Proposal adequacy checklistOther

► Item 33 – FAR 16.4 – Incentive Contracts► Proposed target cost, profit or fee, share ratio, min/max fee, ceiling price

► Item 34 – FAR 16.203-4 – Fixed Price Contracts► Rationale and application of economic price adjustment

► Item 35 – FAR 52.232-28 – Invitation to Propose Performance-BasedPayment► Compliance with terms and conditions included in FAR 52.232-28

► Item 36 – FAR 52.215-22/23 – Limitations on Pass-Through Charges► Excessive pass-through charges – identification of subcontract effort

greater than 70% of total cost

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisoryservices. The insights and quality services we deliver help build trustand confidence in the capital markets and in economies the worldover. We develop outstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing, we play a critical rolein building a better working world for our people, for our clients andfor our communities.

EY refers to the global organization, and may refer to oneor more, of the member firms of Ernst & Young Global Limited, eachof which is a separate legal entity. Ernst & YoungGlobal Limited, a UK company limited by guarantee, does notprovide services to clients. For more information about ourorganization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm ofErnst & Young Global Limited operating in the US.

© 2018 Ernst & Young LLP.All Rights Reserved.

1802-2585887ED None

This material has been prepared for general informational purposesonly and is not intended to be relied upon as accounting, tax or otherprofessional advice. Please refer to your advisors for specific advice.

ey.com