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    The solicitation has the CPFF as a NTE amount for materials. The cost of materials will add up to over 10% of the total contract award over the base and four option periods. My question is - Is a Cost Analysis, Cost Realism Analysis and Fee Analysis required even though the CPFF is for materials at a NTE amount? No "other than cost or pricing data" was requested and the thought is that a NTE CPFF is basically a FFP. No we did not provide a list of materials. Not to mention this is a LPTA where price should be very important. Is a cost realism analysis required to determine the Most Probable Cost to the Government? and is that cost used for the basis of award. no indirect rates or escalations were reviewed. Also, is a evaluation of compensation for professional employees as required under 52.222-46 if labor is under a FFP? I'm confused. please advise.


    Answer

    In accordance with FAR 15.404-1(c)(1), cost analysis is NOT required unless obtaining certified cost or pricing data is required.  Per FAR 15.403-1(b)(1), one of the exceptions to the requirement for obtaining certified cost or pricing data is adequate price competition.  Based on the information provided in the question submitted, the acquisition would be considered a competitive source selection utilizing the lowest price technically acceptable (LPTA) method in accordance with FAR 15.101.  As defined in FAR 15.403-1(c) and DFARS 215.403-1(c), the contracting officer must determine if adequate price competition exist for your acquisition.  If it does, then cost analysis would NOT be required.  There are also other exceptions to the requirement for getting certified cost or pricing data and the contracting officer would need to determine applicability as appropriate. 
     
    As far as Cost Realism is concerned, FAR 15.404-1(d) does require cost realism analysis to be performed to determine the probable cost of performance for each offeror when the contract is cost reimbursement (or the contract includes cost reimbursement type CLINS).  Since the acquisition in question has cost type CLINs, cost realism analysis would be required.  Per the Contract Pricing Reference Guide (CPRG) Volume 4, Chapter 8, the purpose of cost realism analysis is to independently review and evaluate specific elements of each offeror's proposed cost estimate to determine if the estimated proposed cost elements are realistic for the work to be performed.  Furthermore, the CPRG and FAR both state the probable cost of contract performance developed in cost realism analysis must be used to determine best value because an award based on an unreasonably low cost proposal would be false economy, which is because what the government pays at the end of the contract (at least for the cost CLINs in the contract) will depend on the final contract cost (i.e. actual final cost) for those cost reimbursement CLINs.  Based on the information provided, it doesn't sound like the solicitation included criteria for cost realism analysis.  According to the CPRG, if it is determined AFTER solicitation release that cost realism analysis will be required, an amendment can be issued to revise the evaluation criteria for contract award and to include a requirement for the offerors to submit cost information needed to perform the cost realism analysis.  The CPRG has additional guidance on how to determine what cost information may be needed to perform cost realism analysis, and emphasizes to limit the data requested from the offerors to only the cost data necessary to determine realism of the specific elements of cost, as required by the solicitation for the offerors to submit in their proposals.
     
    With respect to the second part of the question regarding applicability of FAR provision 52.222-46 to firm-fixed price CLINS, FAR 22.1103 requires the Contracting Officer to insert this provision "in solicitations for negotiated contracts when the contract amount is expected to exceed $700,000 and services are to be provided which will require meaningful numbers of professional employees."  According to FAR 15.001, types of negotiated acquisitions under FAR Part 15 acquisitions include sole source acquisitions and COMPETITIVE acquisitions.  FAR 15.101 goes onto state that "an agency can obtain best value in negotiated acquisitions by using any one or a combination of source selection approaches" and LPTA, of course, is on one end of the continuum of source selection approaches.  Therefore, the acquisition in question, meets the definition of "negotiated acquisition" as defined in FAR Part 15 and also exceeds the $700,000 threshold.  The only other criteria left is to determine if the acquisition in question will require a "meaningful number of professional employees" to perform the contracted effort.  If it will, then the provision applies and the offerors must comply in submitting their proposals and the government source selection team must evaluate the compensation levels proposed by the offerors.
     

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