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Wesley Electronics Integrated Case Exercise Government Preliminary Price Negotiation Memorandum TEAM MEMBERS: Tiffani Balestrini Carrie Edwards Christopher Fisher Dan Mayer Paul Merritt JoLena Perkin Steven Teves Carmen Washington ACQUISITION SITUATION: In July 2XX6, the Government established a requirement for a very small, lightweight, radio transceiver for both ground and air operations. Wesley Electronics was selected on a sole source basis as the firm capable of producing a quality transceiver at a reasonable price. The RT/ARC 2000 has been produced by Wesley Electronics five different times to meet the needs of the Government. This unit has proven to be extremely effective and reliable. The RT/ARC 2000 units being produced on this contract are identical to those previously produced for the government. The first five contracts were incentive fee based contracts. This contract is Firm Fixed Price (FFP) based on the previous successful performance by the contractor. The RT/ARC 2000 has been produced five times to meet the needs of the Government. The unit has proven to be extremely effective and reliable. Through four incentive contracts, we have never exceeded target cost by more than 3.4 percent. Even that overrun is considered positive in light of the tight delivery schedule and production problems of Lot 1. This record is made even more impressive by their record of on time-deliveries. Through four lots, Wesley has never failed to deliver on schedule, even under the extremely tight Lot 1 schedule. For the last year, they have been delivering seven units each month. 1

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Wesley Electronics Integrated Case ExerciseGovernment Preliminary Price Negotiation Memorandum

TEAM MEMBERS: Tiffani Balestrini Carrie Edwards Christopher Fisher Dan Mayer Paul Merritt JoLena Perkin Steven Teves Carmen Washington

ACQUISITION SITUATION:

In July 2XX6, the Government established a requirement for a very small, lightweight, radio transceiver for both ground and air operations. Wesley Electronics was selected on a sole source basis as the firm capable of producing a quality transceiver at a reasonable price. The RT/ARC 2000 has been produced by Wesley Electronics five different times to meet the needs of the Government. This unit has proven to be extremely effective and reliable. The RT/ARC 2000 units being produced on this contract are identical to those previously produced for the government. The first five contracts were incentive fee based contracts. This contract is Firm Fixed Price (FFP) based on the previous successful performance by the contractor.

The RT/ARC 2000 has been produced five times to meet the needs of the Government. The unit has proven to be extremely effective and reliable. Through four incentive contracts, we have never exceeded target cost by more than 3.4 percent. Even that overrun is considered positive in light of the tight delivery schedule and production problems of Lot 1. This record is made even more impressive by their record of on time-deliveries. Through four lots, Wesley has never failed to deliver on schedule, even under the extremely tight Lot 1 schedule. For the last year, they have been delivering seven units each month.

Pricing HistoryLot Contract Type Target Price Actual Price

1 CPIF $1,450,000 $1,500,000

2 CPIF $3,000,000 $2,660,000

3 FPIF $3,250,000 $3,270,000

4 FPIF $4,700,000 $4,720,000

5 FPIF $3,900,000 Unknown

(Proposed) 6 FFP — —

It is because of this past history that we are proposing a Firm Fixed-Price contract for this effort Lot 6.

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TECHNICAL

Executive Summary

Some issues that need to be discussed would be whether the 60/40 split is fair and reasonable. The scrap & usage rate are different under the Purchase Parts and Commercial items (Modified). The recommended cost of $735,650 needs to be discussed, how was this figured determined.

The RT/ARC 2000 units being produced on the contract are identical to those currently being produced under contract NAS 12344. Therefore, that contract and previous production runs for this item were used as a baseline for this review. While the contractor failed to breakout material acquisition between the years 2XX8 and 2XX9, we believe a 60/40 split is reasonable. The contractor has made significant progress toward a just-in-time inventory method. As a result, a greater portion of materials is projected to be acquired during production rather than acquiring materials well in advance of production needs. The 60/40 split for 2XX8/2XX9 reflects documented progress and internal company management goals.

Cost Analysis Summary

If the Defense Contract Audit Agency (DCAA)’s Audit Report Explanatory Notes, questioned or unsupported a cost, then this was including the data from the 'Wesley Cost Proposal-Government Cost Estimate spreadsheet. When this goes to the negotiations team, these issues should mentioned as part of your portion. Per the report’s notes #4, #7 and #9, these numbers $5,600,000, $7,000,000, $47,000,000 are way too high. The proposed rates for Engineering Overhead, Material Overhead, G&A (respectively) were used and then multiplied to the overhead dollar value. Currently the proposal is $4,778,376 and the Government Cost Estimate is $4,717,702.58.

COST PROPOSAL

Cost Element Wesley ProposalGovernment’s

Pre-Negotiation Position

Paragraph

Reference

Manufacturing Labor $ 500,000 500,000 1

Manufacturing Overhead (Rate 200%) 1,000,000 1,000,000 1

Engineering Labor $ 113,620 110,694 1

Engineering Overhead (Rate 84%) 95,441 1

Manufacturing & Engineering Labor Costs $1,709,061 $92,983

Purchase Parts 1,133,000 1,131,970 2

Commercial Items 858,000 858,000 2

Material Overhead (Rate 2.10%) 41,811 41,789 2

Material Costs $2,032,811 $2,031,759

Other Direct Costs 13,400 0 3

Other Direct Costs $13,400 $0

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COST PROPOSAL

Cost Element Wesley ProposalGovernment’s

Pre-Negotiation Position

Paragraph

Reference

G&A Expense (Rate 5.10%) 191,519 190,507 4

Total Cost $3,946,791 $3,925,943.58

Profit (Rate 17%) 670,954 $670,954.00 5

Cost of Money 6

Manufacturing 105,000 85,636

Engineering 4,545 3,475

Material 39,820 23,962

G&A 11,266 7,732

Total Price $4,778,376 $4,717,702.58 7

Element Discussion/Component Breakout

1. Labor : A comparison of the contractor proposed and the Government objective amounts appear below with a reference to a paragraph providing a detail explanation which immediately follows.

Manufacturing Direct Labor Wesley Proposed Government Objective Reference Paragraph

Manufacturing Labor $ $500,000 $503,809 See belowRate 50,000 hours @ $10 49,393 hours @ $10.20 See belowTotal Manufacturing Direct Labor $500,000 $503,809 See below

Manufacturing Overhead Wesley Proposed Government Objective Ref. Para.Manufacturing Base $500,000 $503,809 See belowRate (%) 200% 166% See belowManufacturing Overhead $1,000,000 $836,322 See below

Manufacturing LaborWesley’s proposal used all available RT/ARC 2000 production history to estimate manufacturing hours. The Audit Report did not review manufacturing hours, but rather deferred to the technical evaluation. The Technical Report recommended that an attempt be made to further define the cost history, and advised that the contractor’s cost accounting data for manufacturing history be split into fabrication hours and assembly hours. Using the supplied data and applying the improvement curve principles resulted in the following:

Fabrication Labor: We recommend a should-cost value of 549.03 hours per unit for a total of 27,452 fabrication hours for Lot 6 based upon analysis of the following contractor information with a slope of 81.01%.

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Assembly Labor: After removing the fabrication history, the assembly history clearly shows a slope of 91.95%. The proposed hours associated with assembly are 438.82 hours per unit x 50 for Lot 6 for a total assembly hours of 21,941.The Audit Report recommended labor rates based on regression analysis of contractor provided historical and projected data. The recommended Manufacturing Labor Rate is $10.20.

For 2xx8 and 2xx9, the contractor proposed a manufacturing overhead rate of 200%, based on a linear trend analysis of overhead rates proposed over the past three years. The auditors obtained the actual overhead expenses for the last four years as verified to the contractor’s accounting records. It was noted that the contractor forecasted its company-wide direct manufacturing labor costs for both 2xx8 and 2xx9 to be approximately equal. The auditors reviewed the contractor’s forecast and supported the 2xx8 forecast but questioned the contractor’s pessimistic forecast in sales for 2xx9. Ultimately, they recommended a direct manufacturing labor expense forecast that was more realistic with anticipated sales.

Engineering Direct Labor Wesley Proposed Government Objective Reference Paragraph

Engineering Labor $ $113,620 $65,142 See belowRate 5,750 hours @ $19.76 3,290 hours @ $19.80 See belowTotal Engineering Direct Labor $113,620 $65,142 See below

Engineering Overhead Wesley Proposed Government Objective Reference Paragraph

Engineering Base $113,620 $65,142 See belowRate (%) 84% 72% See belowEngineering Overhead $95,441 $46,902 See below

Engineering LaborWesley’s proposal for engineering labor is based on historical projections for support of a recurring nature only for this follow-on production effort. Again, the Audit Report did not review engineering hours, but rather deferred to the technical evaluation. The technical report noted that despite the contractor’s insistence on proposing manufacturing liaison as a factor of manufacturing labor, the contractor has historically maintained a dedicated staff to support RT/ARC 2000 production. During production of lots 1 and 2, four people were dedicated to the program while during lots 3, 4, and 5 the contractor has maintained 3 people. While it is our opinion that there is insufficient work to keep 3 people busy at all times, we accept a staffing level of 3 due to the potential extra effort required by recommended changes in the fabrication process.

The following recommended work-hours are based on 1,880 work-hours per year per employee.

3 people 1,880 hrs = 5,640 hrs per year5,640

12 months

= 470 hrs per month

7 months 470 hrs = 3,290 hrs for 2XX9

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+ 1 month 0 hrs = 0 hrs for 2XX8

Total Recommended hrs = 3,290

It should also be noted that this contract should not pay for engineering in 2xx8. During the review, the technical team examined lot 5 history and found that the contractor proposed a staffing level of 3, and the Government, based on the Price Negotiation Memorandum, recognized the cost in the lot 5 price. Since the 2xx8 effort for lot 6 overlaps the end of lot 5, no additional charges to the Government should be recognized.

The Audit Report recommended labor rates based on regression analysis of contractor provided historical and projected data. The recommended Engineering Labor Rate is $19.80.

For 2xx8 and 2xx9, the contractor proposed an engineering overhead rate of 84%, based on a linear trend analysis of overhead rates proposed over the past three years. The auditors obtained the actual overhead expenses for the last four years as verified to the contractor’s accounting records. It was noted that the contractor forecasted its company-wide engineering labor costs for both 2xx8 and 2xx9 to be approximately equal. The auditors reviewed the contractor’s forecast and supported the 2xx8 forecast but questioned the contractor’s pessimistic forecast in sales for 2xx9. Ultimately, the recommended a direct manufacturing labor expense forecast that was more realistic with anticipated sales.

2. Material: A comparison of the contractor proposed and the Government objective amounts appear below with a reference to a paragraph providing a detail explanation which immediately follows.

MaterialWesley

ProposedGovernment

ObjectiveReference Paragraph

Purchase Parts $1,133,000

*1,131,970 ACO Report item # 2 $1000 unsupported material quotes with no satisfactory response. 1

Commercial Item (Modified)

858,000 *800,176ACO Report item 3 Recommended use of regression analysis. The results were used for development of objective. 2 (regression table attached)

Total Material $1,991,000

$1,932,146 Includes uncontested scrape rates of 3% purchase parts and 4% commercial parts

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Material OverheadWesley

ProposedGovernment Objective2xx8 2xx9

Reference Paragraph

Material Base $1,991,000 $1,159,288 $772,858

**Rate (%) 2.10% 2.0 1.9 Audit Report item # 7 Questioned contractors pessimistic sales forecast for 2xx8 and 2xx9.3 Technical report established 60/40 split between 2xx8 and 2xx9 4

Material Overhead $41,811 $23,185 $14,684Total $37,869

The contractors proposed costs are shown in the table above in the column to the right. The column in the middle shows the government objective which represents a fair and reasonable cost adjustment for objective. The column to the right shows the reason for the adjustment. The explanation of the adjustments will be made item by item with the documentation following the explanation.

Purchase Parts: The contractor has some 987 individual purchased parts for this project and prepared a computerized bill of materials. The Government Audit Examined 93 % of the items over $50.00 and except for one verbal $1,000 quote from Herty Gerty Industries for a variety of components all prices were supported by written quotations. The audit report questioned this item. The ACO report allowed the contractor to respond to this questioned item and did not receive a satisfactory answer. (ACO report 1) The government believes it is fair to deduct the questioned $1000.

Commercial Item: The only commercial item proposed by the contractor was the RT/ARC 2000 modified antenna produced by Sooper Antenna. The contractor’s proposed unit price of $16,500.00 is the same as their commercial catalog price. During the past six months, the Government has purchased several similarly modified antennae directly from Sooper Antenna for delivery during October-December 2008. These units are very similar in design and construction to the units being purchased for the RT/ARC 2000. While none of these are exactly the same as the 85 dbm unit to be used in this contract and the use of Government Furnished Property (GFP) is not approved for this contract, the price history may be used as a comparison base. Regression analysis was performed to better analyze the cost. The analysis resulted in a most likely cost per antenna of $15,388. We would be 90% confident that the actual cost of the antenna will be between 14,526 and 16,251. The government objective is $15,388 x 50 = $769,400. The government feels this price is more representative of the actual costs for these parts and feel this price is fair and reasonable as an objective.

Scrape: The contractors scrape rates are not contested by any of the audits performed. The scrap rates are not shown in the prices in the above table. The table below shows how the prices were calculated.

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Total proposed material costs are as follows:

Material CategoryProposed BaseMaterial Cost

Scrap & UsageFactor

Proposed Category Total Costs

Purchased Parts $1,100,000 $33,000 3% $1,133,000

Commercial Items $825,000 $33,000 4% $858,000

Total Proposed Material Costs $1,991,000

*Total adjusted Government objective material costs with scrape rate are as follows:

Material CategoryAdjusted BaseMaterial Cost

Scrap & Usage Factor

Adjusted Category Total Costs

Purchased Parts $1,099,000 $32,970 3% $1,131,970

Commercial Items $769,400 $30,776 4% $800,176

Total Proposed Material Costs $1,932,146

Material Overhead: The contractor proposed a material overhead rate of 2.1%, based on a linear trend analysis of overhead rates proposed over the past three years. The contractor is forecasting its company-wide material costs for both 2XX8 and 2XX9 to be approximately $7,000,000. The audit review questioned the contractor’s pessimistic forecast in sales for years 2xx8 and 2xx9. They recommended a forecast that is more realistic with anticipated sales and projects $7,200,000 for 2XX8 and $7,700,000 for 2XX9 in material expenses. The contractor has made significant progress toward a just-in-time inventory method. As a result, a greater portion of materials is projected to be acquired during production rather than acquiring materials well in advance of production needs. The 60/40 split for 2XX8/2XX9 reflects documented progress and internal company management goals. The government feels the following table better reflects the reasonable material overhead rates.

Material OverheadProposed

2XX8Forward

Recommended 2XX8

Recommended2XX9

Projected Material Dollars (Base) $7,000,000 $7,200,000 $7,700,000**Material Overhead Rate 2.1% 2.0% 1.9%Material Overhead Dollars $147,000 $147,000 $147,000

REPORT REFERENCES

ACO Report

2. Wesley Electronics failed to respond satisfactorily to our query about the $1,000 unsupported quote noted in the audit report; hence, it should not be included in your determination of the government objective. 1

3. The estimate for the unit cost of the Sooper antenna contained in the Technical Report is based on a simple average. This is a rather crude technique; recommend that you use regression analysis to determine the government objective for this cost element. 2

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Audit Report

7. Wesley does not have an existing FPRA at this time. The contractor proposed indirect rates based on its forward pricing rate proposal. The audit of the FPRP is still in process; however, provided below is information for your consideration for each of the proposed indirect rates.

8. For 2XX8 and 2XX9, the contractor proposed a material overhead rate of 2.1%, based on a linear trend analysis of overhead rates proposed over the past three years. We obtained the actual overhead expenses for the last four years as verified to the contractor’s accounting records and have provided the data in appendix 4 attached. Please note that the contractor is forecasting its company-wide material costs for both 2XX8 and 2XX9 to be approximately $7,000,000. We reviewed the contractor’s forecast for 2XX8 and 2XX9. We question the contractor’s pessimistic forecast in sales for both years. We recommend a forecast that is more realistic with anticipated sales and projects $7,200,000 for 2XX8 and $7,700,000 for 2XX9 in material expenses. 3

TECHNICAL REPORT

2. General: The RT/ARC 2000 units being produced on the contract are identical to those currently being produced under contract NAS 12344. Therefore, that contract and previous production runs for this item were used as a baseline for this review. While the contractor failed to breakout material acquisition between the years 2XX8 and 2XX9, we believe a 60/40 split is reasonable. The contractor has made significant progress toward a just-in-time inventory method. As a result, a greater portion of materials is projected to be acquired during production rather than acquiring materials well in advance of production needs. The 60/40 split for 2XX8/2XX9 reflects documented progress and internal company management goals. 4

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3. Other Direct Costs: A comparison of the contractor proposed and the Government objective amounts appear below with a reference to a paragraph providing a detail explanation which immediately follows.

Other Direct CostQuality Assurance Rep

WesleyProposed

GovernmentObjective

Reference Paragraph

Labor days 30 day @ $200 per day $6,000 0 See Audit Explanatory Note # 8Per Diem 30 days @ $130 per day 3,900 0 See Audit Explanatory Note # 8Estimated Air Fare 3,500 0 See Audit Explanatory Note # 8Total Other Direct Costs $13,400 0 See Audit Explanatory Note # 8

The contractor originally proposed “Other Direct Costs” in the amount of $13,400. The government audit revealed the contractor no longer planed the subcontracted quality assurance support that constituted the entire amount proposed for other direct costs. If the contractor needs field quality assurance inspections the work will be performed by in-house quality assurance personnel, charging to manufacturing overhead. The government‘s objective position is the entire amount for other direct costs is reduced to $0. In the light of the audit report explanatory note #8 1 the government feels this is fair and reasonable.

Audit Report No. 99999999-03-8-999

EXPLANATORY NOTES

8. The entire amount of Other Direct Cost for contracted quality assurance support is questioned. During our review, it was discovered that the contractor had disconnected plans for an aggressive field quality assurance inspection program. In the unlikely event that field quality assurance inspections are needed, they will be performed by in-house quality assurance personnel, charging to manufacturing overhead. The contractor contends that the inclusion of this proposed cost was an error in the part of the estimator who neglected to correct the proposal to reflect the management decision to not contract for services as originally intended. 1

4. General & Administrative (G&A) Expense : The contractor’s proposed and the

Government objective for the G&A base, rate, and expenses are provided below.

G & A Expense

Wesley Proposed Government Objective Reference Paragraph

G&A Base $3,755,272 Need information from material before this can be determined

See below

Rate (%) 5.10% 5.3% See below

G&A Expense $191,519 Need information from material before this can be determined

See below

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For 2xx8 and 2xx9, the contractor proposed a G&A rate of 5.1%, based on a linear trend analysis of overhead rates proposed over the past three years. The auditors obtained the actual overhead expenses for the last four years as verified to the contractor’s accounting records. It was noted that the contractor forecasted its company-wide direct manufacturing labor costs for both 2xx8 and 2xx9 to be approximately equal. The auditors reviewed the contractor’s forecast and questioned both the 2xx8 and 2xx9 total costs. Ultimately, they recommended a direct manufacturing labor expense forecast that was more realistic with anticipated sales.

5. Profit:

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ITEM #:

21. Technical Technical (item 21) and Management Control (item 22) must be added together and equal 100 for assigned weighting, in this example Technical is 20%.

Assigned Value Range 3-7% Assigned Value 5.5% Rational: Per ACO report, the normal values from the standard weight range

for technical will be used.

22. Management ControlManagement Control (item 22) and Technical (item 21) must be added together and equal 100 for assigned weighting, in this example Management Control is 80%

Assigned value Range 3-7% Assigned Value 5% Rational, falls within normal range

23. Performance Risk Range 3-7% Assigned 5.1% Rational, falls within normal range

24. Contract Type Risk Range 2-4% Assigned 3% Rational, falls within normal range

25. Working CapitalCost Financed

Length Factor of 0.9 Rational: number is a set number based upon the actual term of the contract

which is this case is 28-33 months

26. Land, NA

27. Building, NA

28. Equipment Range 10-25% Assigned 17% Rational, falls within normal range

29. Cost Efficiency Factor Range 0-4% Assigned 0.0% with base line item of item 20

WRITE UP:

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Material acquisition – The material category consists of all purchased parts and modified commercial items. Additionally, a scrape rate of 3% was applied to purchased parts and 4% on commercial parts. A weight of 2.1% is assigned.

Direct labor – Per the Audit Report, The following recommended labor rates are based on regression analysis of contractor provided historical and projected data. The Audit Report has recommended the following rates, using the contractors provided data as they present a more accurate projection of the contractors estimated costs.

LABOR RATE RECOMMENDATIONSEngineering 2XX8 $18.68

2XX9 $19.80Manufacturing 2XX8 $9.80

2XX9 $10.20

Overhead – Subsequent to the issuing of the subject proposal, Wesley Electronics submitted a labor and overhead rate proposal for negotiation of forward pricing rates. While the formal audit report has not been issued to the Administrative Contracting Officer, this office, based on our preliminary review, has developed preliminary recommended labor rates for your use. The audit of the FPRP for overhead rates is still in process; however this office is providing a review of their sales forecast for 2XX8 and 2XX9.

G&A – For 2xx8 and 2xx9, the contractor proposed a G&A rate of 5.1%, based on a linear trend analysis of overhead rates proposed over the past three years. The auditors obtained the actual overhead expenses for the last four years as verified to the contractor’s accounting records. It was noted that the contractor forecasted its company-wide direct manufacturing labor costs for both 2xx8 and 2xx9 to be approximately equal. The auditors reviewed the contractor’s forecast and questioned both the 2xx8 and 2xx9 total costs. Ultimately, they recommended a direct manufacturing labor expense forecast that was more realistic with anticipated sales.

6. Facilities Capital Cost of Money (FCCOM) : The contractor’s proposed and the Government objective for the G&A base, rate, and expenses are provided below.

FCCOM Contractor ProposedGovernment

ObjectiveManufacturing $105,000

$85,636Engineering $4,545 $3,476Material $39,820 $23,962G & A Expense $11,266 $7,732FCCOM Expense $160,631 $120,806

Please reference the attached DD1861 for the FCCOM breakout.

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The Government is applying $1,510,063 for FCCOM based on attached DD1861 ($120,806/8%).

Using the Government objective for Cost of Money at 8% interest (which was stated on Appendix 4 in the Audit Report)

The $1,510,063 is being applied against Land, Buildings, and Equipment as follows:

Land 20.6% $ 311,073

Buildings 36.3% $ 548,153

Equipment 43.1% $ 650,837

Total 00.0% $1,510,063

7. Total Estimated Cost: Below is a comparison table of each contractor proposed and Government objective for estimated cost elements. We believe the Government position to be fair and reasonable based on a comprehensive cost analysis and that we relied fully on the information provided by the contractor in developing the Government objective position.

COST PROPOSAL

Cost ElementWesley Proposal

Government’s

Pre-Negotiation Position

Paragraph

Reference

Manufacturing Labor $ 500,000 $503,809 1

Manufacturing OH (Rate 200%) (166% Gov’t)

1,000,000 836,322 1

Engineering Labor $ 113,620 65,142 1

Engineering OH (Rate 84%) (72% Gov’t) 95,441 46,902 1

Manufacturing & Engineering Labor Costs

$1,709,061 $1,452,175

Purchase Parts 1,133,000 1,131,970 2

Commercial Items 858,000 800,176 2

Material OH (Rate 2.10%) (2.0%/1.9% Gov’t)

41,811 37,869 2

Material Costs $2,032,811 $1,970,015

Other Direct Costs 13,400 0 3

Other Direct Costs $13,400 $0

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COST PROPOSAL

Cost ElementWesley Proposal

Government’s

Pre-Negotiation Position

Paragraph

Reference

G&A Expense (Rate 5.1%) (5.3% Gov’t) 191,519 181,376 4

Total Cost $3,946,791 $3,603,566

Profit (Rate 17%) (9% Gov’t) 670,954 319,690 5

Cost of Money 6

Manufacturing 105,000 85,636

Engineering 4,545 3,476

Material 39,820 23,962

G&A 11,266 7,732

Total Price $4,778,376 $4,044,062 7

8. Cost and Pricing Data :

In compliance with the Truth in Negotiation Act (TINA) the offeror is required to: 1) submit cost and pricing data showing the facts and judgments used to arrive at their proposed price; and 2) certify that the data are current, accurate, and complete at the time agreement is reached in price.

Cost or pricing data do not indicate the accuracy of the of the offeror’s judgment about estimated future costs or projections, however, they do include the data forming the basis for that judgment. The offeror’s submitted proposal did include all the facts that initially can be reasonably expected to contribute to the soundness of estimates of future costs.

In conducting cost analysis, the Government did have to request/obtain additional offeror cost information to support a decision on price reasonableness:

Actual manufacturing overhead expenses for the last four years Actual engineering overhead expenses for the last four years Referenced purchase parts records Actual material overhead expenses for the last four years Actual G&A overhead expenses for the last four years Offeror failed to respond satisfactorily to query about $1,000 purchase part quote

Since we are still in negotiations in regards to price agreement, a Certificate of Current Cost or Pricing Data has not been submitted by the offeror. The conclusion paragraph in the Government Audit Report, stating the acceptance of the offeror’s proposal as a basis for negotiation of price should not be interpreted to mean that the data are necessarily accurate, complete and current in all respects in accordance with Public Law 87-653

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(TINA), has been taken into consideration and has been addressed through analysis conducted by the negotiation team and included in this PNM. The results of this analysis have formed the Government cost objectives referenced in this PNM, which will be utilized in final agreement of price.

All elements of cost or pricing data format prescribed in FAR 15.408, Table 15-2, were addressed in the offeror’s submitted proposal.

Under FAR 15.403-5(a)(2) the contractor must submit a request for exception from the requirement to submit cost or pricing data; no waiver was requested from the contractor.

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