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  • Question

    Would I adjust the fixed fee portion from $60,000.00 to $84,000.00, or would it remain at $60,000.00 since it has been proposed as fixed, and any resultant award from the source selection would be at the proposed cost of $1,060,000.00 and not the evaluated cost.


    Answer

    What is put on contract is the offeror's cost and fee, not an evaluated cost and fee.  The FAR states:
    FAR 15.404-1(d) Cost realism analysis.
      (1) Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.
      (2) Cost realism analyses shall be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror.
      (i) The probable cost may differ from the proposed cost and should reflect the Government’s best estimate of the cost of any contract that is most likely to result from the offeror’s proposal. The probable cost shall be used for purposes of evaluation to determine the best value.
      (ii) The probable cost is determined by adjusting each offeror’s proposed cost, and fee when appropriate, to reflect any additions or reductions in cost elements to realistic levels based on the results of the cost realism analysis. 
     
    FAR 15.404-1(d)(2)(i) is focused on cost.  FAR 15.404-1(d)(2)(ii) notes the fee may be adjusted when appropriate.  In your example, if the team realizes the offeror is using unrealistic rates (below DOL wage determination, out-of-date FPRA, etc.), then we know we will be paying more and we could also adjust the fee.  If we believe it will cost more, but it is more of a judgment, then fee need not be adjusted.  In any event, the analysis and application must be consistent on all offerors within the source selection.

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