Our program is sole-source to a prime contractor under a Performance Based Logistics (PBL) arrangement in which the prime utilizes many subcontractors for the effort. The prime is also required to utilize the Air Logistics Center (ALC) for certain amount of labor effort. As part of our overall sustainment contract, we also contract smaller retrofit efforts. One of our current retrofit efforts received two subcontract quotes to complete the effort. Typically two quotes from independently competing responsible offers would constitute adequate price competition and therefore the subcontractors would not be required to submit Certified Cost or Pricing Data. However, since one of the subcontractors is the ALC is this still considered adequate price competition?
Since your question pertained to logistics and contracting, this response was developed by DAU faculty from both career fields. The bottom line is that there are no hard and fast rules as to whether a quote from a Government Depot can be considered an independently competing responsible offer and therefore constitute adequate price competition. It should be noted, however, that there is a long-standing policy of the Federal Government that Government entities should not complete with commercial industry for the provision of products and services. This policy and practice has been in place for multiple reasons, the first of which is that Government entities (to include Depots) are not exactly independent, as their prices are not developed in the stresses of a true free-market economy.
Another factor to be considered is that it is probably in the Government’s best interest to obtain the certified cost and pricing data, particularly in other than a truly competitive marketplace. In other words, since there are not a lot of commercial firms competing for this retrofit work, how will you know that your one bid constitutes a “fair and reasonable” price without this data? In addition, this pricing data would be useful downstream in order to evaluate cost improvement in later years, and also would help to understand future bids for the same of similar work.
But be that as it may, determining whether the Air Logistics Center’s (ALC) offer would be considered a competitive subcontract quote would be a judgement call – backed-up with detailed documentation. Be cautious in the path your choose to take, though, as the effort of determining fair prices for sustainment efforts has been getting a lot of scrutiny of late.
One example is the DoD Inspector General (IG) audit of the Air Force’s F-117 engine sustainment support efforts, which were procured though the Globemaster III Integrated Sustainment Program (GISP) contract. This recent investigation concluded in March of 2016, and the DoD IG’s overall findings were as follows:
“Air Force officials awarded the GISP base contract without obtaining sufficient data to determine whether the Air Force purchased the F117 engine sustainment services provided by Pratt & Whitney at fair and reasonable prices. This occurred because the Air Force did not perform key steps needed to implement a successful performance-based logistics (PBL) contract. Specifically, the Air Force:
• entered into a PBL arrangement for sustainment services without establishing technical and cost/pricing baselines; and
• did not establish an effective approach to monitor the impact of any efficiencies made during the performance of the GISP contract or predecessor contract for its engine fleet.”
Further, the redacted report goes on to say that “As a result, the Air Force did not know whether the $XX billion spent on F117 engine sustainment services for the FY 2012 through FY 2014 GISP base contract was a fair and reasonable price.”
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While it is understood that your question pertained to a smaller retrofit effort that is part of a larger PBL effort, the same words of caution apply.
To read this full redacted report, please go to: http://www.dodig.mil/pubs/documents/DODIG-2016-059.pdf.
We hope this response has been helpful. Please advise if you have any follow-on questions, or if any clarification is needed.