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  • Question

    If a split procurement is intended to mitigate schedule risk, but 2 supppliers can each perform proposed scope, can competition be asserted without requirement for cost analysis?


    Answer

    1. The FAR references quoted below in pertinent part are applicable to this response.

    FAR 15.404-1 – Proposal analysis techniques
    (a) General. The objective of proposal analysis is to ensure that the final agreed-to price is fair and reasonable.
      (3) Cost analysis shall be used to evaluate the reasonableness of individual cost elements when certified cost or pricing data are required. Price analysis should be used to verify that the overall price offered is fair and reasonable

    FAR 15.403-1 – Prohibition on obtaining certified cost or pricing data
    (b) Exceptions to certified cost or pricing data requirements. … certified cost or pricing data [is not required] to support any action (contracts, subcontracts, or modifications)—
      (1) When … prices agreed upon are based on adequate price competition (see standards in paragraph (c)(1) of this subsection);
      (2) When … prices agreed upon are based on prices set by law or regulation;
      (3) When a commercial item is being acquired;
      (4) When a waiver has been granted (see standards in paragraph (c)(4) of this subsection); or
      (5) When modifying a contract or subcontract for commercial items.

    (c) Standards for exceptions from certified cost or pricing data requirements—
    (1) Adequate price competition. A price is based on adequate price competition if— (i) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement and if—
      (A) Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a substantial factor in source selection; and
      (B) There is no finding that the price of the otherwise successful offeror is unreasonable. Any finding that the price is unreasonable must be supported by a statement of the facts and approved at a level above the contracting officer

    FAR 15.403-4 – Requiring certified cost or pricing data
    (a)(1) … certified cost or pricing data [shall be obtained if] none of the exceptions in 15.403-1(b) applies. However, if the contracting officer has reason to believe exceptional circumstances exist and has sufficient data available to determine a fair and reasonable price, then the contracting officer should consider requesting a waiver under the exception at 15.403-1(b)(4). The threshold for obtaining certified cost or pricing data is $700,000. Unless an exception applies, certified cost or pricing data are required before accomplishing any of the following actions expected to exceed the current threshold or, in the case of existing contracts, the threshold specified in the contract:
      (i) The award of any negotiated contract.
      (ii) The award of a subcontract at any tier, if the contractor and each higher-tier subcontractor were required to furnish certified cost or pricing data.

    2. In accordance with FAR 15.403-1(b)(1), adequate price competition does constitute an exception to requirement set forth in FAR 15.403-4 (a)(1)(ii) to obtain certified cost or pricing data before accomplishing the award of a subcontract with a value in excess of $700,000.  However, pursuant to the standard specified in FAR 15.403-1(c)(1), a price is based on adequate price competition only if two or more responsible suppliers, competing independently, submit priced offers that satisfy the requirement and award will be made to the supplier whose proposal represents the best value where price is a substantial factor in the source selection, and there is no finding that the price of the otherwise successful offeror is unreasonable.

    3. In our opinion, a “split-award” between two firms in order to reduce schedule or other risk based solely on the premise that both firms can fully perform the same scope of work does not meet the standard for adequate price competition as set forth in FAR 15.403-1(c)(1). In fact, we believe that this procurement approach would actually represent two sole source awards. Therefore, assuming that the value of each award will exceed $700,000, we believe that certified cost or pricing must be obtained from each supplier pursuant to FAR 15.403-4(a)(1)(ii), and that a cost analysis must be performed on each supplier’s cost proposal pursuant to FAR 15.404-1(a)(3) in order to assure that fair and reasonable prices are negotiated.


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