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    When you have a contingency buy under SAT and you are awarding to a sole source vendor and you cannot determine the price fair and reasonable after lenghty negotiations. It is detemined that there is no other source available, no surplus and no other means of getting this item. How should it be documented and should a "cannot be determined fair and reasonable be signed off by the HCA?


    Answer

    The simple answer to your question can be found at FAR 15.405(d) which states:
    “If, however, the contractor insists on a price or demands a profit or fee that the contracting officer considers unreasonable, and the contracting officer has taken all authorized actions (including determining the feasibility of developing an alternative source) without success, the contracting officer shall refer the contract action to a level above the contracting officer.  Disposition of the action should be documented.”  FAR 15.406-3 (a)(8)(11) discusses documentation requirements.

    That said, we find it difficult to comprehend the guidance and recommended techniques found at
    FAR 13.106-3, 15.403, 15.404, 15.405 and the DFARS PGI do not provide enough information to develop an objective and negotiate a fair and reasonable price, regardless of whether the SAT you are following is standard or elevated because of a declared contingency.

    A technique you could try is value analysis [see
    FAR 15.404-1 (b) (4)], FAR 15.406-3 (a)(8)(11) discusses documentation requirements.

    Volume 1, Chapter 6 of the CPRG (https://acc.dau.mil/cprg) offers some guidance on value analysis:
    A value analysis estimate results from a specialized analysis of the function of a product and its related price. It may literally involve taking the item apart to determine how it is made and why it costs what it does.
    Special Considerations for Using Value Analysis.  You may apply the techniques of value analysis to any product, regardless of its complexity. However, generally consider only those products offering potential cost reductions that merit the time and cost of the analysis required.

    Value analysis provides information on product value in comparison with possible substitutes. It is particularly useful when:
    ·  The Independent Government Estimate is the only price analysis technique base available; or
    ·  The product does not seem to be worth the price quoted.
    To be effective, value analysis must be performed by individuals familiar with the product, or product material differences, and its use by the Government. Actual analysis should follow a 5-step process:
    1.  Determine acquisition costs based on current proposal or other estimates.
    2.  Assure Government requirement documents reflect the minimum needs of the Government.
    3.  Identify alternative products or methods of meeting the minimum needs of the Government. This is typically the key step in the analysis. The following are examples of questions you should consider:
    §  Can any part of the product be eliminated?
    §  Can a standard part replace a special part?
    §  Can a lower cost material or method be used?
    §  Can paperwork requirements be reduced?
    §  Can the product be packaged more economically?
    4.  Estimate the costs associated with alternative products or methods that would meet the minimum needs of the Government.
    5.  Document the reasonableness of the current prices or recommend appropriate changes. Assure that the process and results of the value analysis are clearly documented and include a copy of the documentation in the contract file. When you are satisfied that the value received supports the offered price, use that information to support your determination of price reasonableness. When you are not satisfied, use the information to document efforts to bring price in line with perceived value.
    For example: Suppose you are purchasing a pair of shoes. Shoes are used to walk in, to protect the feet, to keep the feet warm, and to enhance appearance. If shoes are to be attractive, they must be made of certain types and quality of material. If appearance is not important to the Government, a less attractive, less expensive, but possibly more durable material can be used. By changing the quality of material required, price will change.

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